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Commons Chamber

Volume 847: debated on Tuesday 5 December 1972

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House Of Commons

Tuesday 5th December 1972

The House met at half-past Two o'clock

Prayers

[Mr. SPEAKER in the Chair]

Private Business

Glamorgan County Council Bill Lords (By Order)

Order for Second Reading read.

To be read a Second time upon Tuesday next.

Oral Answers To Questions

Employment

Unemployment (Study)

1.

asked the Secretary of State for Employment if he will instruct the working group, to be set up to study unemployment, to make a special study of that section of the unemployed, which in May 1972 amounted to 158,000 people, who receive neither unemployment benefit nor supplementary allowance.

Yes, Sir.

I thank my hon. Friend for his reply. Does he agree that most of the people included in that figure are retired and are merely registered as unemployed to avoid paying for the national insurance stamp? Does he also agree that it would be better if means could be found to exempt them from this payment rather than inflating the unemployment figures?

Although the exact terms of reference of the membership of the working group to study the characteristics of people of this category have not been determined, I think that what my hon. Friend raised in the first part of this question comes within its remit.

Will the Minister say what powers the working group is likely to have? Will he inform the House whether he is prepared to fix a time limit to its studies and tell us when he expects a paper or the record of its work to be published?

It is purely a statistical survey at this stage and it is not subjective in any way. As I have said, the terms of reference and its membership have not yet been exactly determined.

Rotherham, Maltby And Dinnington

2.

asked the Secretary of State for Employment if he will state the male unemployment rate in the Rotherham, Maltby and Dinnington exchange areas at the latest available date and in the same period two years earlier.

At November 1972 the provisional percentage rates of unemployment for males were 6·8 for Rotherham, 8·3 for Maltby and 9·9 for Dinnington. The corresponding figures for November 1970 were 4·0, 7·1 and 5·2. The unemployment figures used in all these calculations exclude the temporarily stopped.

Does the Under-Secretary of State agree that his answer provides grounds for grave anxiety and disappointment? Does he agree that his answer shows the Government's optimism, which was expressed two years ago, to be gravely misplaced? What further steps will be taken to see that the geographical and social advantages of the area will not be further ignored?

I do not think we have ever pretended that this is other than a difficult area. It is true that unemployment has risen since November, 1970. But there has been a reduction of about 480 since November of last year, so the trend is in the right direction. As I have told the hon. Gentleman before, the best hope for the area lies in an expanding national economy, which is now being achieved.

Industrial Relations Act

3.

asked the Secretary of State for Employment what plans he now has to amend the Industrial Relations Act.

23.

asked the Secretary of State for Employment what discussions he has arranged with unions and employers about the operation of the Industrial Relations Act; and if he will make a statement.

As I told the hon. Member for Fife, West (Mr. William Hamilton) on 7th November, I have no immediate plans for amending the Act but I am fully prepared to discuss with unions, employers or any other responsible bodies constructive proposals for improving its operation.—[Vol. 845, c. 108.]

Was the Act introduced, among other things, with the idea of curing strikes? Is it the case that this country, which once held a low position in the international strike league, has gradually been creeping up that league since the Act was introduced and is now reaching one of the top positions as one of the countries with a higher number of strikes? In the circumstances, is it not the case that there is no cure for this situation other than to repeal the Act?

I do not accept the hon. Gentleman's deduction that the increase in the number of days lost through strikes is due to the Act. It is very largely due to the miners' strike, which happened before the Act came into operation, and the building dispute, which added to the total number of days lost. The trend of the number of disputes is downwards.

Is it not irresponsible of certain unions not to make use of those parts of the Act which everybody would agree are in the interests of their members—namely, the provisions which grant compensation for unfair dismissal?

I am happy to say that despite the reluctance of some unions to use those parts of the Act which benefit the individual, the industrial tribunals and the National Industrial Relations Court in dealing with appeals from tribunals have succeeded in helping a large number of individual workpeople.

Is it not clear that redundancy payments and unfair dismissal could equally well have been dealt with in a separate Act? There was no necessity to have the Industrial Relations Act as a whole. As the trade union movement will not accept the whole of the Act and as even Eric Jacobs of the Sunday Times, who is not renowned for his complete support of the trade union movement, is now saying that the time has come to get rid of the Act, is it not clear that the Government should wake up and get rid of it and bring in a small Act to deal purely with redundancy payments and unfair dismissal?

The Government will continue their position of saying that industrial relations is not a matter which can be conducted by law. Like other types of human relations, however, it has to be conducted within a framework of law. It is that framework of law which the Industrial Relations Act provides. It is right hon. and hon. Members on the Opposition side who have denied that, both when in government and in their words in opposition, and it is their surrender to the concept that industrial relations can be conducted outside the principles of law that has caused a good deal of our present difficulties.

Sheltered Workshop (Hackney)

4.

asked the Secretary of State for Employment what consultations he has had with the London Borough of Hackney concerning the provision of a sheltered workshop for the disabled; and if he will make a statement.

My Department has been in close touch with the borough on this matter; and as I said in my reply on 17th November it expects to begin building a sheltered workshop by the spring of 1974.

I thank the hon. Gentleman for that reply. Is he aware that there is no certainty, even at this time, that the local authority will be able to obtain a site for this valuable project? Is he also aware that the great difficulty is finding a site at a reasonable cost and that this issue demonstrates fairly conclusively that the scandal of rising land prices in London is hitting very hard at projects such as sheltered workshops?

I do not wish to go into the question of land prices; there is a good and adequate answer on that. However, I agree with the hon. Gentleman that there are difficulties in London which are greater than those elsewhere concerning the provision of sheltered workshops. It is really the responsibility of the borough to find somewhere. In this case a compulsory purchase order may be required. But certainly if another site could be found in advance of this it would be proceeded with before 1974.

Industrial Safety And Health

5.

asked the Secretary of State for Employment what progress has been made on his consultations with interested persons about the Robens Report on industrial safety.

19.

asked the Secretary of State for Employment what progress has been made in the consultations with interested bodies about the recommendations of the Robens Report on Safety and Health at Work.

20.

asked the Secretary of State for Employment what progress has been made in his consultations with interested parties about the Robens Report on Safety and Health at Work.

69.

asked the Secretary of State for Employment what consultations have been held between the Government, the Confederation of British Industry and the Trades Union Congress and others concerned with the implementation of the Robens Report on Safety and Health at Work.

In my statement in the House on publication of the Robens Report, I promised to consult the CBI, TUC, local authorities and other interested bodies to obtain their broad reactions to the proposals. Over 80 organisations have submitted comments or discussed the proposals with us.

Does the right hon. Gentleman appreciate that any consultations on this matter are constantly being overtaken by newer proposals, such as that arising from the discussions on thalidomide? As the revision of the Factories Act has been under discussion since 1967, will the right hon. Gentleman undertake that necessary medium-term proposals arising from the report, such as statutory provision for workplace safety consultation, will not be delayed until everything there is to be said on safety has been finally said?

The whole concept of the approach contained in Lord Robens' report is that it will be possible to bring forward relatively quickly enabling legislation setting up the type of body which is now under discussion with the unions and employers and within the Government, in order to prevent the sort of delay to which the hon. and learned Gentleman refers.

Is my right hon. Friend aware that the Alkali and Clean Air Inspectorate has very distinct and technical responsibilities, and as it has fairly close affiliations with the Department of the Environment, will be concede that this is an argument for keeping it as a separate entity and away from the unified inspectorate which is recommended by the Robens Committee?

The problem of accepting that type of argument, which has recently been shown in one or two practical cases, is that there is a danger that one inspectorate may say that a poisonous substance must be pumped out of a factory in order to protect the workpeople and another inspectorate quite properly may say that, in order to protect the environment, the poisonous substance must not be pumped out of the factory.

It is to avoid that sort of anomalous situation that the Robens Committee suggested unifying all the measures of protecting both safety and health at work. While I fully accept the responsibility of my right hon. and learned Friend the Secretary of State for the Environment for the protection of the environment, it could be probably better considered in the light of a joint authority rather than try to separate the two in a way which could continue the previous anomalies.

Is the right hon. Gentleman aware that one of the most controversial aspects of the Robens Report is the encouragement given to the substitution of codes of practice for mandatory provisions and statutory orders concerning safety? There will be a good deal of opinion, from the Opposition and no doubt from the Government side of the House, which will query these factors. We find it very difficult to enforce, for example, in the building regulations, the safety precautions which already have a statutory and mandatory basis. Any tendency to substitute the sort of codes of practice that have become so notorious in the Ministry of Agriculture concerning animal welfare will be very critically considered by many hon. Members, including myself.

I have discussed this matter with various representatives of the unions. The hon. Gentleman's criticism rests very largely on a misunderstanding of the nature of the so-called voluntary codes of practice suggested in Lord Robens' report. I think that what Lord Robens was suggesting is non-statutory codes which would be worked out by unions and employers together and which would be backed by statutory sanctions.—[Interruption.] I am grateful for the correction of my pronunciation, if not of my principles. These codes, which would be worked out to suit each industry concerned, would have sanctions which would be legal in nature.

When the time comes for drafting the promised comprehensive safety legislation, will my right hon. Friend bear in mind the need not only to establish properly qualified industrial safety engineers in all situations where that is economic but also to give positive support and stimulus to training in accident prevention on a much broader basis in terms appropriate to each industry?

Yes, indeed. The emphasis which Lord Robens and his Committee have put in their report was mainly on prevention and on using a joint approach to prevention. That is the importance of the joint safety committee and other proposals contained in the more detailed parts of the report.

Will the Secretary of State recognise that the question asked by my hon. Friend the Member for Westhoughton (Mr. J. T. Price) represents the anxieties of a large number of people? There is concern that in changing over to the kind of pattern suggested in the Robens Report there might be some weakening of statutory protection for certain groups of workers, which course we should all avoid. Further, in view of all the discussions taking place between the right hon. Gentleman's Department and all the organisations he has mentioned, will he recognise that there ought to be an early debate in the House and that it should be in Government time, because the Robens Report was made to the Government? Will the right hon. Gentleman consult the Leader of the House about this matter in order that we may have a debate at a fairly early stage?

I assure the right hon. Gentleman that there is absolutely no intention, in either Lord Robens' proposals or the Government's interpretation of them, of weakening the statutory safety regulations. As for a debate, that is a matter for my right hon. Friend and I shall talk to him about it.

11.

asked the Secretary of State for Employment if he will seek to encourage firms to award safety prizes in the interest of promoting safety consciousness at work.

This is a matter for individual firms to decide. Safety prizes may produce marginal benefits in some cases, but only as part of a properly conceived and executed safety programme, which my Department is naturally concerned to encourage.

Surely the test of the hon. Gentleman's Department is the concern it shows for safety by trying to encourage firms and employees to be safety-conscious. What does he think, for example, about the fact that the Inland Revenue has decided to tax a man's safety prize? Is not this a classic example of a Government taking leave of their senses?

I do not have detailed knowledge about that but I would be happy to look into it. The hon. Gentleman will appreciate that this is a matter of having an effective safety policy. While prizes may be one strand of that policy, a lot of other back-up work is needed as well. We try to encourage as many firms as possible to have a sensible and cohesive safety council.

The National Coal Board and the National Union of Mineworkers have had a lot to do with safety drives and competitions and it is ludicrous that the Inland Revenue should tax these prizes. Will the hon. Gentleman, although it is not his Department's responsibility, press this matter on the Treasury so that in the next budget it gets rid of this ludicrous situation?

I cannot undertake to press the matter but, as promised, I will look into it. I echo the hon. Gentleman's words about the National Coal Board because the safety performance of the mining industry is extremely good and very commendable.

14.

asked the Secretary of State for Employment if he will take steps to ensure the standardisation of industrial safety signs.

Steps are already being taken to standardise the symbols used to identify dangerous substances. My Department has no evidence that differences in other types of sign give rise to significant risks, but the matter will be kept under review.

Will my hon. Friend do a little more than that? Is he aware that several different systems are in use? May I as a former teacher give him a little visual aid lesson and show him three different signs for a fragile roof? Will he look at this again?

If my hon. Friend likes to have a word with me afterwards I will certainly undertake to look into that matter. Most industrial safety signs include simple words, and differences in the pictures are unlikely to cause confusion. But if my hon. Friend has specific cases in mind we will investigate and see whether we can get an improvement.

Unemployment Statistics

6.

asked the Secretary of State for Employment if the monthly unemployment figures published by his Department will henceforth differentiate between the various reasons for, and kinds of, unemployment.

9.

asked the Secretary of State for Employment if he will review the basis on which unemployment figures are compiled in the light of the recent census report.

12.

asked the Secretary of State for Employment what steps he is taking to review and improve the accuracy of the unemployment statistics.

18.

asked the Secretary of State for Employment whether he is satisfied with the accuracy of unemployment statistics; and if he will make a statement.

45.

asked the Secretary of State for Employment if he will order a re-examination of the method of collecting unemployment data, in view of the findings of the 1971 census.

53.

asked the Secretary of State for Employment if he will make a statement about the White Paper on unemployment statistics.

56.

asked the Secretary of State for Employment what changes he proposes to make in the procedure for the monthly enumeration of the unemployed.

The report of the Working Party on Unemployment Statistics was published on 20th November as a White Paper, Command 5157. The working party made a very thorough review of the existing statistics, it took into account information from the 1971 Census of Population and made a number of recommendations for improving and simplifying the presentation of the statistics and for supplementing them. The Government have accepted the recommendations of the working party. I am satisfied that the statistics provide the best available indicators of monthly changes in unemployment at national and local levels.

I am grateful for that reply but does my right hon. Friend agree that the overall figures will become increasingly meaningless unless they can be broken down to indicate the ages of the unemployed, the time they have been unemployed, differentiating between long-term unemployment and the inevitable short-term turnover, and the type of employment—for example, unemployment caused by redundancy where compensation has been paid and where people therefore expend the financial means they have received while necessarily taking their time before seeking re-employment?

There is always room for improvement in most sets of figures but the difficulty comes in breaking them down into too much detail. There are problems of collecting the figures on a regular basis when broken down in that fashion. That is why we are setting up the sample surveys to see what information can be gained and how best it can be regularly gained in order to analyse the nature of unemployment as well as the numbers.

A great deal of the information which my hon. Friend suggested should be acquired and published is contained in the Department of Employment Gazette. It is not published, of course, in the monthly figures and in the Press notice because the monthly publication of such detail would considerably delay publication of figures and would not be assimilable by the public.

Does the Secretary of State agree that the advanced analysis of the 1971 census does not invalidate some of the current unemployment statistics? Does he maintain that the numbers out of work, both male and female, are not under-estimated to a disturbing extent, and is there not a grave danger of unemployment statistics among teenagers, particularly coloured teenagers, being distorted?

I must remind the hon. Member that the census was not an advanced analysis; it was the subject of a reply to a particular question. It is an objective analysis of the specialist matters that the hon. Member raised concerning the damage of unemployment and the need to improve the figures as an indicator of the reserve of manpower and as an indicator of social distress.

Will the Secretary of State agree that however the figures are "cooked" they show the worst unemployment statistics for 40 years? [HON. MEMBERS: "No."] Indeed, yes. Will the right hon. Gentleman make sure that when he publishes the index in subsequent months or quarters he will compare like with like? Will he explain why he did not come to the House and make a special statement about why he was altering the format of the figures?

I am surprised at the hon. Member continuing the absurd suggestion that the figures were "cooked". [Interruption.] The figures which were published in the last Press statement were precisely the same as those available in the previous Press statement. The figures for the temporarily stopped were published separately and were not included within the total of unemployed in order to achieve greater accuracy about the reserve of manpower, which is something that Labour Members have been seeking. Those who are temporarily stopped are not unemployed in the sense that they are seeking further work. [HON. MEMBERS: "What are they?"]. They are people who have registered as unemployed for the purpose of drawing unemployment benefit until they go back to their previous job. They are not seeking work, nor are they unemployed in the sense that Labour Members have sought to suggest. The marked improvement shown by the unemployment figures last month would have been greater had those who were temporarily stopped been included. As it is, it is the first time that there has been a fall of unemployment in this month since 1950.

Is not the main point of unemployment figures to show where there is an unemployment problem with people who are genuinely and anxiously seeking work? Is it not important from an economic point of view that we should know where the hard core problems lie, and are we not moving towards that with the new system of publication of the figures?

That is the point of trying to break down the figures as we are now doing in the Department of Employment Gazette and in the monthly unemployment figures and the Press release. Students, for example, constitute part of the labour reserve only during vacations. They are therefore separately identified in the unemployment figures. There were 30,000 of them on the unemployment register in August, 1972 and in November, 1972 there are clearly none. It is difficult to make a further breakdown without the additional work which will be done by the working group in their more detailed studies of the characteristics of unemployment.

The Secretary of State looks as though he is imitating one of his distinguished ancestors who is said to have dreamed that he was addressing the House of Commons and then woke up to find that he was. Does he not realise that the effective standard for measuring unemployment is those who have no work on the day the survey is taken? In view of the widespread discrepancy in the November figures between those seeking work and those registered as unemployed, will the Secretary of State look once again at the suggestion of my right hon. Friend the Leader of the Opposition that we should have an all-party Select Committee to look at the compilation of these figures?

I do not accept that the situation is in any way different from what it has been in the past. The figures enumerate those who are on the unemployment register. There is a discrepancy in 1971 as there was in 1966 when the Labour Government did not even notice it or think to do anything about it in their period of office. We are trying to make the figures more accurate both as an index of the reserve of manpower and as an index of social distress. A Select Committee would be a matter for my right hon. Friend the Leader of the House.

Does my right hon. Friend agree that the recent figures reveal the first fall in unemployment in the month of October for 22 years and that this, coupled with the dramatic increase in the number of situations vacant, points hopefully to the future?

Those two facts show that the Government's policies for reflating the economy and for improving the unemployment situation are working and I have no doubt that that is precisely why the Opposition are making such a storm in a teacup about the relatively small change in the method of presentation.

The rapidity with which the Secretary of State accepted the working party's report and the speed with which he put it into operation have sown the seeds of suspicion in the public mind. Would it not have been better to allow time to debate the working party's report before altering the method of calculating or ascertaining the statistics about unemployment?

If there was any question of altering the method of calculation or of changing the figures in the monthly presentation, the hon. Member might have had a point. But there has been no change. We have added a line for those who are unemployed for four weeks or less, who are some 20 per cent.-plus of the total, and we have removed from one table the temporarily stopped and shown that figure separately. We have emphasised once again that the figure which has always been in the report and which has always been considered the most important indicator—the seasonally-adjusted figure—is precisely the same as it was before. It would seem unnecessary to have a debate on such a small change as that.

For those who believe that the age when a person becomes entitled to a retirement pension should be reduced, can the figures indicate the proportion of the over-60s who are unemployed?

Yes, I think it would be possible to improve the analysis by age as well as by the length of time that people have been unemployed. I must warn my hon. Friend, however, that it is a complicated matter and that there is a limit to the amount of information which can be collected under this particular method. We shall have to examine more carefully the methods of survey sampling and so on.

Is the right hon. Gentleman aware that to the Opposition any person who is able and willing to work but is denied the opportunity to do so is unemployed and that no dodging around with figures will obscure the fact that at Christmas over 800,000 people will be unemployed and looking for work as a consequence of the Government's policies? Is it not clear that the census, which was taken from every household in the country, showed a yawning gap between what the Secretary of State's officials have produced in their White Paper and the census figures? Ought there not to have been, before the right hon. Gentleman clutched at his straw, a thorough investigation so that we could have analysed the discrepancy between the figures? The hon. Member for Birmingham, Handsworth (Mr. Sydney Chapman) asked for more detailed information. Will the right hon. Gentleman tell us, therefore, why he has altered the presentation of the numbers of young people unemployed, which used to give a detailed breakdown but is no longer shown as such in the Press notice?

The census of population provides information about the number of persons who described themselves as either seeking work or waiting to take a job in April 1971. The hon. Gentleman asked why we did not break down the analysis any further. We are breaking it down. The figures include many who were sick; the exact numbers are not yet available. In addition, probably about 100,000 men and up to about 300,000 women described themselves as waiting for or seeking work but were not registered as unemployed. These include many people, especially women, who would accept work only on certain conditions—convenient hours, travel and so on. In the 1966 census about half the people in this category were waiting to take up jobs or were not seeking to take up work at all. The corresponding figure for 1971 is very likely to be much the same. Therefore, there is no difference between the situations in 1971 and 1966. We have not in any way sought to confuse the issue or to reduce the amount of information in the Press notice. Rather have we increased it.

School Leavers (Derby)

7.

asked the Secretary of State for Employment how many school leavers in Derby are still unemployed; and what steps the Government intend to take to alleviate the position.

Sixty-eight school leavers were registered as unemployed in Derby in November. Careers officers are doing all they can to help them and it is expected that most will find work within the next month or two.

Is not the hon. Gentleman aware that his figures do not include, for example, 40 school leavers who are forced to remain at school because no jobs are available for them? In addition, some of the 68 school leavers mentioned by the hon. Gentleman have been without work for periods of up to six months. Is not this a disgrace? Will the Government now take action to alleviate the position? I suggest that the hon. Gentleman should write to industry, not only in Derby but throughout the country, asking it to take on some of these youngsters supernumerary to establishment in order to alleviate the position.

The situation is not nearly as bad as the hon. Gentleman makes out. The November total of unemployed school leavers was 39 less than in October. There has been a marked improvement in the employment position of young people in his area. The situation generally in Derby is improving and its unemployment percentage of 3·1 is now below the national average. But of course we shall continue to do what we can to help those young people who are unemployed.

Young Persons (Training)

8.

asked the Secretary of State for Employment whether he has now considered the proposals regarding training courses for young people made to him by the Teesside Youth Employment Committee; and if he will make a statement.

Various proposals on the training of young people have been made by the Teesside Youth Employment Committee. Those relating to the provision of further industrial training board award schemes and to the continued provision of limited skill courses for young people have been accepted for the current academic year; others have been rejected and some are still under consideration.

But thousands of teenagers are still suffering enforced idleness in the North. How long will my hon. Friend take to deal with the situation in terms of providing industrial training courses for these young people? How long will he take to act upon the very constructive proposals put up more recently by the Chairman of the Northern Economic Planning Council?

My hon. Friend would be very prepared to see a deputation from those who have put up various proposals in that area. As far as training is concerned, the Department is again meeting half the cost of special industrial training board award schemes. Five boards are running schemes and over 4,000 first-year training places have been made available, a number of them on Teesside. We are taking various other training places and, of course, the area is benefiting from community industry schemes as well.

Will the hon. Gentleman bear in mind that in the Government training centres alone considerable numbers of places are not taken up? In my constituency, just north of the Tees, 72 men and boys are wholly out of work for every vacancy registered, and this is a measure of the intensity of the problem. Will the hon. Gentleman therefore give an assurance that he will enter into pertinent discussion with me and other hon. Members representing that region to see whether the Government can do much more than they are doing?

There is obvious concern about Teesside. I accept the hon. Gentleman's concern. But the number of vacancies has improved. There may be places in Government training centres which have not been taken up in certain skills. That depends on the economic activity in the particular trade at the time. But this is an aspect which we keep and will continue to keep carefully under review. If the hon. Gentleman wants to come and talk to me about these matters I shall be glad to welcome him.

West Midlands

10.

asked the Secretary of State for Employment what decline in unemployment has occurred in the West Midlands, including Birmingham and Coventry, during the eight months from April to November, 1972.

During this period unemployment in the West Midlands fell provisionally by 20,092, a drop of over 22 per cent.

I congratulate my hon. Friend in these excellent figures, but will he tell us what the particular reference is to the motor industry and the conditions of the motor market in the New Year?

The motor market is not within my responsibility, but I assure my hon. Friend that the motor car industry's situation is improving. Austin-Morris at Long-bridge is recruiting because of increased production and I read yesterday that Chrysler at Coventry is also recruiting. Like my hon. Friend, I have a great interest in the prosperity of the West Midlands. The situation is far more satisfactory than it was a year ago. It gives cause for genuine optimism. We have always known that this was a strong and well-diversified base, and so it is proving through Government policy.

While there has been an appreciable drop in unemployment in the West Midlands, nevertheless there is still a deplorably high level of unemployment among young people and school leavers in particular. What action does the hon. Gentleman intend to take to ensure that young people, when they leave school, instead of going into the dole queue get decent jobs?

There is a later Question on this point, but I can tell the hon. Gentleman now that the situation for young people is improving. Unemployment has fallen steadily since August and the November total of 1,422 was 680 less than in October. This is a trend in the right direction and I wish that the hon. Gentleman would cheer up about it.

Industrial Subversion

13.

asked the Secretary of State for Employment what steps he proposes to take to curb industrial subversion.

My right hon. Friend is aware of the general concern over subversive activities by a small minority in industry. The most effective safeguard is active participation by the great bulk of trade unionists in the affairs of their union.

I appreciate my hon. Friend's reticence about going into this matter in detail at the moment, but does not he recognise that the recent intimidation we have seen in a small number of strikes by a very small number of people is a threat both to the rule of law and to good industrial relations.

I would not wish to play down the contribution that subversive elements make towards the course of disruption, but at the same time it can be easy to exaggerate their influence. There is an important distinction between militancy and subversion. Where the law of the land has been transgressed, action must lie in the courts. Where it has not been transgressed, we need to walk warily with regard to our democratic freedoms because that is a necessary price that we pay for our free way of life, and admittedly it can sometimes be a very high price.

Does the hon. Gentleman agree that one of the most dangerous forms of industrial subversion lies in throwing hundreds of people out of work for the sake of short-term profit?

Scotland

15.

asked the Secretary of State for Employment what plans he has for cutting unemployment in Scotland and Coatbridge and Airdrie, respectively.

The hon. Member's constituency together with other parts of Scotland should continue to benefit from the extensive measures we introduced to encourage industrial expansion especially in the development areas.

Is the Minister aware that, in spite of these so-called extensive measures, Scotland has nearly twice and Coatbridge and Airdrie nearly three times the national average of unemployment? Is it not time that this grave situation was acknowledged and the Minister took action to pressurise the spending Ministries to place more orders for firms in this part of the country to provide thousands of immediate jobs and help to alleviate unemployment?

I know the hon. Gentleman's concern about his district. Unemployment is still too high in Scotland, but it is encouraging to see that the Scottish seasonally adjusted rate has dropped by 0·8 per cent. since April, and that drop represents 15,200 people. That is is a trend in the right direction and it is being maintained.

Monarchy (Minister's Speech)

Q1.

asked the Prime Minister whether the public statement of the Chancellor of the Duchy of Lancaster, at Exeter on 18th November, on the subject of the monarchy and the European Economic Community, represents the policy of Her Majesty's Government.

My right hon. Friend's remarks about the monarchy were in response to a question. He did not make any statement of policy.

May I take it that the Prime Minister repudiates his right hon. Friend's inane suggestion that it would be a splendid idea for the Queen of England to become the constitutional monarch of Europe? Does he agree that the suggestion that the Queen should be imposed as a super-monarch over the monarchs of Belgium, Holland and Denmark is a gross insult to them? What consultations has he had with President Pompidou about the restoration of the monarchy in France?

I do not think the hon. Gentleman can have read the Press reports. My right hon. Friend is reported as having said that a great many people would like to see this happen and that, if it were the wish of the countries of Europe that this should be so, he would be perfectly happy about it.

Minister For Trade And Consumer Affairs

Q2.

asked the Prime Minister if he will define the responsibilities of the Minister for Trade and Consumer Affairs.

My right hon. and learned Friend is responsible for overseas trade matters, commercial policy in the United Kingdom, prices policy and competition and consumer policy. On the last he will work closely with other Ministers responsible for particular consumer matters to develop and co-ordinate the Government's policies in relation to the consumer.

What will be the new Minister's responsibilities on the introduction of value added tax? Is the Prime Minister aware that already companies are suggesting to wholesalers and retailers just how much they can increase profits when VAT is introduced? Will he urge the Minister to keep a watch for people who attempt to fleece consumers when VAT is introduced?

Value added tax is, of course, a matter for my right hon. Friend the Chancellor of the Exchequer, and the House is to debate it fully later this afternoon. The point which the hon. Gentleman has made is a very important one, and action will be taken in this respect.

Does the Prime Minister realise that it will not exactly fill the public with confidence in the new Minister's ability to resist the inbuilt pressures and lobbies that will inevitably result from his being wrongly placed within the major industrial sponsoring Department of his Government when they realise that he has already bowed to his own professional lobbies by excluding legal services from outside scrutiny—in other words, the new Bill?

This is an arguable point in the structure of government and I do not accept the view put forward by the hon. Gentleman. It has sometimes been argued in the past that it would be better to separate the industrial matters in government from the trading matters because each is likely to influence the other. On the other hand, all Prime Ministers have taken the view, learning from the experience of other countries, that it is better to have trade and industry together because that system works to prevent industry becoming protectionist. The same applies to having consumer protection inside the Department of Trade and Industry, because it can bring the necessary pressure to bear on industry.

Law Reform

Q3.

asked the Prime Minister if he is satisfied with the coordination of the Home Department, the Lord Chancellor's Department and the Department of the Environment concerning questions of law reform; and if he will make a statement.

Q8.

asked the Prime Minister whether he is satisfied with the co-ordination between the Lord Chancellor, the Secretary of State for the Home Department and the Secretary of State for the Environment relating to questions of law reform; and if he will make a statement.

Yes, Sir. There is full consultation on law reform matters between my right hon. Friends.

Is the Prime Minister aware that it has been reported in the Press that certain discussions have taken place between these Departments concerning proposals to eliminate the right of trial by jury in connection with certain petty thefts and serious driving offences? Is that right? If it is right, is the right hon. Gentleman aware that these proposals would be regarded by many sections of the public and by a large section of the legal profession as being a serious erosion of the liberty of the individual?

As I think the hon. Gentleman knows, the burden on the higher courts increased sharply during the first nine months of this year. From January to October 1972 the number of committals for trial was 20 per cent. higher than during the corresponding period of 1971. The Lord Chancellor and those who are concerned with servicing the Crown Courts have been examining possible ways of dealing with this additional burden. As the House knows, the number of courts has been considerably increased, and that programme is continuing. It is, therefore, right that these matters should be looked at. If the Government were to come to the conclusion that any particular method should be adopted they would have to come to the House.

Has not a great deal of useful law reform been carried out in recent years, and have not the reports of the Law Commission received prompt consideration by Parliament?

Yes, Sir, that is so. A great deal of excellent work has been done, and the House has been willing to implement as speedily as possible the recommendations of the Law Commission. There have been other recommendations on the reform of the law which have been more controversial, particularly in the recent report of the Criminal Law Revision Committee, on which we have said that we do not intend to legislate this Session, so that there will be time for full public discussion.

Does the Prime Minister agree that the right to trial by jury, with proper financial provision for representation and with such traditional rights as the caution and the right to silence, are important practical safeguards of individual liberty and worth the price we pay for them, particularly to the less affluent and the less articulate? If any inroads arc to be made on these principles, will the Prime Minister undertake that it will be after proper debate in the House and not by way of a measure introduced in a telescoped form and debated in the bleak hours of the morning?

Yes, the right to trial by jury is an important aspect of our legal system. It does not extend to all offences and it is right that this matter should be examined. If recommendations are made which the Government decide to implement, legislation would of course have to come to the House.

Is my right hon. Friend aware that spokesmen from all these Departments join the Magistrates' Associations and others in their universal concern about some aspects of the way in which the Children and Young Persons Act is working? Can he hold out any hope of an early reform of that law?

I should like to consider that matter. I do not think I can hold out early hope but I am certainly prepared to discuss it with my right hon. Friends.

In the law reform discussions, have the Government taken a decision on the Franks Report, with particular reference to Section 2 of the Official Secrets Act? As the Department of the Environment is mentioned, does the right hon. Gentleman recall the exchanges in the House during business questions last week about the raid on a newspaper office and the document that was alleged to have come from the Department of the Environment? Will he give an assurance that there will be no question of legal proceedings for the holding of a document in which the copyright is elsewhere, which arises out of a legal decision by the late Mr. Justice Ungoed-Thomas?

My right hon. Friend the Leader of the House has been in contact with the right hon. Gentleman since business questions last week, and I have seen the correspondence he has had with the right hon. Gentleman. I would not like to give the right hon. Gentleman an undertaking on the matter because it is somewhat controversial, but I am quite prepared to examine it further and write to him.

Heavy Lorries

Q4.

asked the Prime Minister if he is satisfied with the coordination between the Secretary of State for the Environment and the Secretary of State for Foreign and Commonwealth Affairs over the proposals of the European Community concerning the weight of heavy lorries; and if he will make a statement.

Yes, Sir. My right hon. Friends have made very clear to the Six the strength of our opposition to the present proposals.

As, by accepting the motion last Wednesday, the Government have acknowledged that they will veto any proposal to increase the permitted size or weight of heavy lorries, will the Prime Minister ensure that our representative at Brussels follows implicitly the instructions of this Parliament and does not yield to any compromise solution without coming back to the House for permission to do so?

My right hon. Friend in winding up the debate made the position quite clear. We have asked that this matter should not be dealt with until the three new members accede to the Community on 1st January. Then it will be our objective, and the objective of all the new members, to reach agreement.

Will the Prime Minister take this opportunity to state what authority this Parliament will have after 1st January 1973 on the questions that he has answered?

I do not think that accession to the EEC would have affected any of my answers today.

Leicester

Q6.

asked the Prime Minister whether he will pay a further official visit to the city of Leicester.

Is the Prime Minister aware that more than 800 children are awaiting school places in Leicester, which also has a considerable housing and unemployment problem? Is he also aware of the grave anxiety and anger within the city at the Government's failure to take generous, immediate and long-term steps to enable the city to cope with the current influx of refugees?

I have myself looked into this matter very carefully because I saw the report in the local newspaper about what the hon. and learned Gentleman said on these matters. I find that Leicester has been generously treated in many ways, and it is eligible for the grants which can be made by the Uganda Resettlement Board. If the hon. and learned Gentleman's point is that Leicester has not so far received the money, I am assured that Leicester has applied for grants for two schemes and grants for one scheme have already been approved, and the resettlement board is ready to arrange payment as soon as Leicester requests it.

Is the Prime Minister aware that many of us sympathise with his reluctance to visit Leicester as the road traffic conditions there are just as bad as they are in Westminster?

If the hon. Gentleman looks carefully at the Question, he will see that it asks me to pay a further official visit to Leicester. I have only just been to Leicester.

If my right hon. Friend goes to Leicester, on his way there will he call on my constituency and allow me to accompany him round some of our ancient primary schools which are urgently in need of replacement?

Yes, Sir, I am quite prepared to do that. I think, however, that my hon. Friend will acknowledge that the present Government, since coming to office, have given the highest priority in education to the replacement of old primary schools, and we should have the credit for it.

Since the Prime Minister cannot go to Leicester and the House is, unfortunately, procedurally not able to learn whether he would have been prepared to go to Uxbridge, will he compromise and either in an unofficial capacity before polling day or in an official capacity after polling day go to Sutton and Cheam to see why a blue chip Tory area has been captured by the Liberals?

Perhaps the right hon. Gentleman might be wise to wait for a day or two.

Scotland

Q7.

asked the Prime Minister whether he will seek an early meeting with the Scottish Council (Development and Industry) and the Scottish Trades Union Congress.

I have at present no plans for such meetings but my right hon. Friend the Secretary of State for Trade and Industry met both bodies on 1st December; and my right hon. Friend the Secretary of State for Scotland has arranged to meet both bodies on 8th December. I shall be receiving full reports of these meetings.

If that is so, the Prime Minister must know that both those bodies agree that if the Government's plan for a 5 per cent. annual growth is to be met there will have to be a substantial increase in steel production in Scotland, and I hope that this will be taken into account when the statement is made on the future of the steel industry before Christmas. Will the Prime Minister make sure that consultations take place on the discovery and exploitation of North Sea oil and its effect on the coal industry?

Yes, I give the hon. Gentleman an assurance that these matters will be taken into account. I have discussed them on several occasions with the Scottish TUC and other Scottish bodies.

Will the Prime Minister reconsider that decision and agree to meet the Scottish TUC to explain why, when unemployment begins to fall, it falls much faster in the Midlands and South-East of England than it does in Scotland and the North-East and North-West of England?

It is an historical fact that when the trade cycle moves and reflationary forces begin to work the Midlands and the North-West show the impact more quickly than does Scotland. The only effective answer is a regional policy which will get sufficient industry to Scotland so that in future it will be able to expand at the same rate. This Government have produced the best regional policy of any Government.

When the talks eventually take place, will the Prime Minister explain why he has allowed the National Industrial Relations Court to continue without the existence of the Commission for Industrial Relations about which the former Solicitor-General said that the court should not continue if the commission were allowed to go out of existence?

The hon. Gentleman is on the wrong Question. This is a Question about the Scottish Council (Development and Industry) and the Scottish TUC. It is not Question 8, which I shall come to later.

Will my right hon. Friend acknowledge the pleasure it gave us on the North-East coast when he came last Friday and went round—

Has the Prime Minister considered the views of the STUC and the Scottish Council for Development and Industry on the recent decision to stop paying the Government grant towards the productivity councils which have rendered such excellent work, especially in Lanarkshire?

This is not a matter which has been raised with me, but I am prepared to discuss it.

May I raise a point of order, Mr. Speaker, about that last Question to the Prime Minister? Will you explain why it is that if there is a Question on the Order Paper relating to an English matter, Scotsmen are allowed to participate, whereas apparently there is now a ruling that English Members cannot intervene in the course of a Scottish Question to raise matters applicable to both Scotland and England?

The selection of those hon. Members who ask supplementary questions is a matter for the discretion of the Chair.

William Timpsons (Take-Over Bids)

I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,

"the Government decision to refer the takeover by Sears Holdings of William Timpsons, the footwear retailers, to the Monopolies Commission, allowing the United Drapery Stores to proceed with their offer."
Since giving you notice, Mr. Speaker, of my intention to move this Motion, I believe that the Charles Clore undertaking, Sears Holdings, has withdrawn its offer. But that does not minimise the importance of this subject and the urgent necessity to deal with it.

For the first time in the history of this House the Department of Trade and Industry has allowed one party in a two-way take-over to be referred to the Monopolies Commission, leaving the United Drapery Stores free to move in. During the past few weeks we have witnessed the unsavoury spectacle of a battle in the City involving £50 million or £60 million at a time when workers are being lectured for asking for wage increases of very small amounts. This take-over battle to which I have referred has resulted in profit making on a vast scale in the City and on the Stock Exchange.

The debate which is to follow is extremely important. For that reason, I shall not continue with the argument. However, I think I have proved that this is a matter which is both specific and important. It requires urgent attention, and in my view we ought to have an early debate on it.

I have the hon. Gentleman's notice of Motion. He was kind enough to send it to me in writing. I have considered the matter. The decision that I have to make is not concerned with the merits, but whether I should give it precedence over other business. I cannot grant the hon. Gentleman's application.

Chrysler Corporation (British Company)

On a point of order, Mr. Speaker. This morning I contacted both the Department of Trade and Industry and your office to see how one could raise the question of the Chrysler Corporation seeking to acquire a 100 per cent. holding in the British company. At that time you felt that the Private Notice Question that I had requested should be refused. I do not question that, but it would be helpful to have an indication whether, when dealing with such a situation in which a previous multinational company is now becoming a mono-national company in the hands of another nation, this is a subject which should be dealt with either by a Private Notice Question or by a statement from the responsible Minister. I seek your guidance on how these matters should be looked at in future.

Further to that point of order, Mr. Speaker. I, too, sought to raise this matter. I felt that unless the matter was dealt with urgently it would be an accomplished fact and there would be no redress for this House in what is a matter of great importance to a very large number of workers in my constituency and elsewhere.

May I ask the criteria upon which your decisions are made where there is a case of urgency which, unless it is debated, will be overtaken by events?

According to the custom of the House, that is precisely what the hon. Member for Coventry, North (Mr. Edelman) cannot do. It is an accepted convention of the House that Mr. Speaker's discretion in these matters cannot be raised by way of a point of order or in any other way. It is a matter for my discretion, and other ways have to be found of raising the matter. I have no doubt however that the hon. Gentleman's point will have been noted.

Further to that point of order, Mr. Speaker. While accepting your ruling that Mr. Speaker's decisions about Private Notice Questions cannot be challenged by hon. Members, let me put the facts of this case before you.

When Chrysler originally acquired a holding in Rootes a statement was made in the House by the then Chancellor of the Exchequer and on 29th July, 1964, an exchange of letters was published in the OFFICIAL REPORT constituting an agreement between Chrysler and the British Government. In January 1967 when these arrangements were varied I made a statement in the House and announced the conditions which had been arrived at between the company and the British Government. These were solemn undertakings.

In the case in question, the company has issued a Press release indicating that the Government have varied these conditions without choosing to make a statement in the House.

The urgency of this matter is that if it goes through there will be no opportunity for hon. Members to question Ministers by tabling Questions or even by raising the matter on the Adjournment. Therefore, without questioning your ruling, Mr. Speaker, I put it to you that the House must be able to review a unilateral change of policy by the Government in a matter of such importance where Ministers have not thought it right, as they should have done, to make a statement.

I take that intervention by the right hon. Member for Bristol, South-East (Mr. Benn) as not being a breach of the convention about challenging my discretion. On the question of a statement, I have no doubt that those in authority will have noted what he said.

Further to that point of order, Mr. Speaker. The Leader of the House is present, and I have no doubt that the whole House would be grateful if he would indicate whether the Secretary of State for Trade and Industry proposes to make an early statement about this very serious problem.

The Lord President of the Council and Leader of the House of Commons
(Mr. James Prior)

I have listened to the exchanges. I should like to consider what right hon. and hon. Gentlemen have said, including the right hon. Member for Bristol, South-East (Mr. Benn). I shall report this matter to my right hon. Friend the Secretary of State for Trade and Industry. Whether he will then consider it right to make a statement will have to be decided.

Orders Of The Day

Supply

[2ND ALLOTTED DAY],— considered.

Value Added Tax

3.39 p.m.

I beg to move,

That this House calls on Her Majesty's Government to defer the introduction of value added tax for 12 months from 1st April, 1973.
I believe that this motion reflects a groundswell of public opinion affecting people of all parties and none which will be a tidal wave by 1st April next year. But this is the last moment in which the Government have an opportunity of bowing to the will of the British people on this matter without causing intolerable dislocation to business and trading operations.

The House will recall that it is now nearly eight months since the Chancellor of the Exchequer first announced his intention of introducing the value added tax on 1st April next year. As he made clear, it is designed, at a rate of 10 per cent., to collect the same amount in tax as the purchase tax and the selective employment tax that it is replacing, but to collect that money from a very much wider range of goods and services. Every man, woman and child in the country will be affected by value added tax as consumers of those goods and services, and some 2 million persons will also be affected as collectors. Half a million will have to fill in hundreds of invoices every year without, in the end, paying or collecting any tax. Another half million will have to decide whether they wish to be exempt for the sake of avoiding the administrative disadvantages of being included in the tax or whether to opt for inclusion in the tax so as to recover the inputs on the goods and services on which they themselves pay tax.

The Government made it clear last spring that this will be an inordinately expensive tax to collect. The Government themselves have decided to increase the size of the Customs and Excise by a third to collect it. That will mean some ORDERS OF THE DAY 6,000 additional civil servants from a Government which came into office on a pledge to reduce the number of civil servants.

A great deal more serious in terms of its impact on the nation is the administrative costs to the individuals who have to collect the tax for the Government. I notice that a leading export organisation has talked of having to produce mountains of paper in order to collect it. Trade and industry as a whole is likely to have to employ at least 50,000 more individuals for administrative and accounting purposes than it does today. Tens of thousands of firms will have to buy new office machinery to be able to operate the tax, and a reasonable estimate of the total additional burden falling on the country from the collection of the tax by Government and the taxable persons themselves is of the order of £300 million a year. In the end, all this money will be collected from the taxpayer or from the consumer unless the individuals concerned are to accept the risk of bankruptcy from their additional expenditures.

Despite these terrifying administrative costs, all incurred to collect the same amount of money as that collected cheaply and simply through purchase tax and selective employment tax, the Customs and Excise has made it clear to the Government that it will not be able to collect the tax efficiently unless the courts are given power to convict men of offences against the VAT without knowing the time, the place or the details of an offence—a provision in the Finance Act which has been rightly castigated by the Bar Council as being totally contrary to the principles of British justice.

We also had the threat from Sir Louis Petch on behalf of the Customs and Excise the other day that he would have to use unorthodox methods to collect the tax, although he gave no indication on that occasion of what those methods will be.

Even so, the country can have no confidence that the tax will be collected effectively. The French Government lost £1,000 million last year, 1971, which it should have collected in VAT, through widespread evasion. The Belgian Government last year is said to have lost £125 million. The Chancellor, whose Europeanism is a little discriminatory from time to time, told us that we are not like the continentals, that we have a much higher standard of honesty, just as we were told on another occasion by the Chancellor that the Italians have not been able to introduce the tax, although they have been in the Common Market for 14 years, because of their administrative incompetence. But the plain fact is that a tax of this nature, collected as it must be from nearly 30 times as many people as the tax it replaces, by a Customs and Excise which has been increased by one one-third to collect it, is bound to lead to the most widespread inefficiency and evasion.

I think that most hon. Members have accepted that the tax is socially unjust. It involves taxing a large range of goods and services which are not subject to tax now, and most of those goods and services are required by the poorer sections of our population. For example, children's clothes have never been taxed; and 40 per cent. of families with more than four children are earning under £20 a week, and 60 per cent. of families with more than three children are also earning £20 a week or less. If a tax imposing for the first time in our history a levy on children's clothes—and, so far as we know, children's shoes—is not regressive, I should like the Chancellor to give us the adjective that he thinks is more suitable to describe it.

There is also a wide range of other goods that are not taxed now but are to be taxed, things such as safety equipment and equipment for disabled people, which we on this side sought unsuccessfully in Committee to relieve from the tax. The tax involves reintroducing the old entertainments tax, a tax on theatres, and a tax on canteen meals, affecting the overwhelming majority of manual workers.

In addition, there is an enormous range, particularly of household goods, now attracting the lowest rate of purchase tax—11¼ per cent.—which will be 3 per cent. more expensive from next April, because 11¼ per cent. purchase tax on wholesale value is, as the Chief Secretary told us last week, equivalent to only 7 per cent. on retail value, on which the value added tax is levied. This increase in the tax on the range of goods attracting the lowest purchase tax today will in itself load an extra £160 million tax burden overwhelmingly on the poorer sections of our population.

On the other hand, many goods which are luxuries or which, to say the least, are not essentials, will come down significantly in price. Mink coats, tape recorders, radios and so on, now attracting 25 per cent. purchase tax, equivalent to 18 per cent. value added tax, will come down. But I warn Conservative Members, before they cheer at that statement, that as the profit margins on such goods are much higher than those on lower-priced goods the final reduction in price will be much less than they might expect from those figures.

We have been told in no uncertain terms by a large range of worthy interests that the tax will be fatal or crippling for them. The Football Association has described it as a killer tax, because the increase in gate money will force many of the smaller clubs out of business.

We shall be interested to explore the views of the hon. Member for Cornwall, North (Mr. Pardoe) later in the debate, if he is fortunate enough to catch the eye of the Chair. We shall be interested to hear why he is now in favour of postponing a tax which he defended earlier in the year, when the inflationary situation was no less grave than it is today. The hon. Gentleman said, "It would, would it not?" The Football Association has every right to say it. Hon. Members on both sides will discover, if the tax is introduced next April, that not only football clubs but many of the smaller theatres are forced out of activity by its operation.

Can the right hon. Gentleman instance one case in which any interest affected by any tax every introduced in this country or any other has not screamed in precisely the same way?

Most of us in the House regard ourselves as competent to distinguish between a sound argument and a silly argument, and the hon. Gentleman gives us plenty of practice in his type of discrimination. The plain fact is that no representative of the Government has given any answer to the numerous arguments advanced by the theatres, the football clubs, the charities, the churches, the osteopaths and the tourist industry, who have demonstrated by argument and illustration precisely what a damaging effect the tax will have on them.

I should like to give the hon. Gentleman a chance to catch your eye later, Mr. Speaker, and I fear that he might forfeit it if I gave way to him now.

The Government's attitude to the protests of some of those interests has astonished us, at least on this side. The very same week as the Government made a concession to the bookies, which cost them £2½ million, they refused to make a concession to the churches which would have cost them only £1½ million. They have relieved the abortionist, even the private abortionist, from tax, but they have subjected the osteopath to tax. Although the Chief Secretary, the Chancellor and other Government spokesmen have tried to refute what has been said by representatives of the tourist industry, I ask them to reflect on the fact, which was quoted by the Chief Economist to the National Tourist Board the other day, that the imposition of value added tax on restaurants in Holland forced 30 per cent. out of business within a year, and compelled the Government at the end of that year to offer relief to the tourist industry.

I should be interested to discover from Conservative Members who represent so many resorts on the south coast of England what is the attitude of the landladies of the many boarding houses in their resorts, the backbone of their vote for so many years, to the imminence of a tax that is likely to force many of them out of existence.

One of the excuses the Government gave the House for introducing the tax was that it would end the ludicrous anomalies involved in the purchase tax. I shall not weary the House by repeating the saga of the fish and chips, of the Chinese food to take away. But hardly a week passes without a new anomaly forcing itself on our attention. For example, there is the fact that cows, pigs, sheep and even oysters for human consumption are zero-rated, but rabbits and pigeons for human consumption attract a value added tax of 10 per cent.; there is the fact than an hon. Member can go into a butcher's shop for a bag of offal which will be free of tax unless the butcher has the foresight, or the customer the unwisdom, to have the bag labelled—I quote the Customs and Excise—"Pussy Pieces".

A previous Conservative Government recognised these implications of introducing the value added tax. I am glad to say that the right hon. Member for Barnet (Mr. Maudling), whose absence is a tactful gesture towards the leaders of his party and the Government to which he used to belong, accepted all these arguments against the value added tax when they were put to him by a commission set up by the then Conservative Government, a commission under the leadership of a distinguished banker who has just been appointed by the Secretary of State for Trade and Industry as the head of his Department's new Economic Development Organisation.

But the present Chancellor decided otherwise, and he will not hear anything said against the principle of a value added tax. Indeed, as he has told us repeatedly, he wanted to introduce it whether we joined the Common Market or not. In his view it is a good tax, and he is sticking to it. But in that case we appeal to him—and I suspect that our appeal may have a great deal of sympathy on the Conservative benches—at least to give himself and the country time to make better sense of it. As has been pointed out to him again and again, decimalisation was given between three and five years for people to familiarise themselves with its problems. Even so, it led to an unjustified increase in prices.

The right hon. Gentleman's Government introduced it.

But at least the administrative difficulties did not arise on the scale on which they are likely to arise on the vastly more complicated value added tax.

The Government have already had to change their mind since the Act was passed on a number of issues which were raised in Committee and on which they then refused to budge, like purchase-tax-paid stocks. There are hundreds of other issues still to be decided by the Government, with only four months to go, as hon. Members will have seen from an interesting and fairly comprehensive article in the Financial Times only today.

Why did the right hon. Gentleman's Government introduce selective employment tax and bring it into effect within four months of its being published if it is so important to allow a long time for the introduction of a new tax? Why was that complicated, offensive and tiresome tax given only four months?

Whatever hon. Members may think about the selective employment tax—and the attitude of those responsible for paying it is already changing rapidly as they compare it with the value added tax—it was probably of all taxes ever introduced in this country the simplest to collect, and the cheapest, as the hon. Gentleman will know, because he was a Minister while it was in operation.

Let me take two obvious and urgent cases. First, there is the problem of the small grocer, who has been threatened with a surcharge of one-eighth on his value added tax, although he should have a relief of one-eighth on the tax. I gather from the newspapers, although the House has not been told, that the Government at last have a concession in mind for the small grocer. I hope very much that the Chancellor will tell us what it is, and specifically how he proposes to define a small grocer for the purposes of the Act.

Then there is the saga of children's shoes. In order to prevent defeat when we discussed this matter on the Floor of the House last summer the Government announced the setting up of a committee to look into the problem of the tax on children's shoes, but six months have passed, and the country wants to know what the decision is.

Apart from all these undecided issues, I ask the Chancellor to face the fact that the strain being imposed on Customs and Excise by the introduction of this tax at such speed could lead to mutiny unless he is prepared to take more seriously the administrative problems facing Customs and Excise. A few days ago Customs and Excise told us that one out of every eight forms that it had received filled in had been wrongly completed and had had to be returned.

I confess that it is difficult to blame the small shopkeeper, or, for that matter, the small manufacturer, for failing to understand precisely what he is being asked to do if one reads the simple advice which the Government themselves give the small trader. Let me quote the situation in which the Government imagine the small trader will find himself. The first question in their VAT bulletin of October of this year is:
"Assuming that a retailer who wishes to use scheme 1 can distinguish his standard rate and zero-rate supplies at the point of sale, can he obtain the necessary record of his daily gross takings for standard rate sales either by using a separate till for his standard rate supplies or by means of a multi-total cash register with an identifying prefix for standard rate items?"
I ask you, Mr. Speaker—though needless to say I do not expect you to reply—whether the ordinary trader, the woman running a newsagent's shop on the corner. can be expected to understand questions which are couched in that sort of language? The whole administrative machine of Customs and Excise is likely to break down unless the Government give it more time to implement the tax.

I know from an article in The Times today that Mr. George Smith the Customs and Excise Project Director for the computer system concerned said:
"We're geared up to cope with this, and I'm reasonably confident that the computer will manage."
He admits, however, that the time scale to implement the system is less than ideal, and a senior consultant in the computer industry agreed yesterday that the time scale is very short.

"Yes—it is going to be a disaster, I would have thought' he opined equably."
Everybody concerned with the administration of the tax knows that it will be a shambles, that it will be a disaster for at least the first six months on the scale of the Dunkirk disaster of 1940—[Laughter.] Before hon. Gentlemen opposite roar their heads off, let them remember that this tax affects between 1½ million and 2 million people as collectors, and the impact on the consumer is something which should make the Chancellor pause if he is still a member of the Government team which is seeking to deal with the problems of inflation because, quite apart from the administrative shambles into which the Government have propelled Customs and Excise and the country, the effect of the tax at the rate which the Chancellor seems to be proposing of 10 per cent. is certain to be highly inflationary.

The economist employed by the NEDC organisation told the CBI and the TUC in the talks last September that it was likely to lead to an increase in the cost of living of just over 1 per cent., and the same figure was reached by an independent calculation of the National Institute for Economic and Social Research, but those estimates were not based on a projection of how the thing was going to work out in practice for the individual, as distinct from the statistical average of an abstract model.

Let me say at the outset that VAT will not increase food prices overall. If the Chancellor were going to spend a lot of his time this afternoon dealing with food prices, he need not do so. The point about food prices is that other measures which the Government are taking—such as accepting the CAP, and world prices as the Chief Secretary told us at Question Time last week—will force up the price of food. The Government had a wonderful chance to bring the price down by zero-rating those foods now subject to purchase tax, but VAT in itself will not force food prices up. It is other aspects of Government policy that will force up food prices next year.

The right hon. Gentleman is being very generous with the House in admitting that VAT will not increase the price of food. Will he confirm that the substitution of VAT for purchase tax will reduce the tax burden on food by £45 million to £50 million, and that the ending of SET will remove another £25 million, which will reduce the price of food overall?

If the hon. Gentleman believes that grocers—grocers, of all people—will cut the price of food because of a reduction in SET, let me tell him that he has another think coming. What is certainly true, as the Chief Secretary and the Chancellor both argued, is that if traders played the game there could be some reduction in the price of food by virtue of the reduction in tax, but it will be easy for grocers and others to evade the tax because the price of food will in any case go up for other reasons, and it will be impossible for the poor housewife, who is the only person in a position, under the machinery which the Government have failed to set up, to check food prices, to tell whether an increase in price is produced by a grain famine in the Soviet Union, by entry into the Common Market, by the imposition of a food levy, or by a failure of the grocer to cut the tax on the commodity, which is what he should have done if he were honest.

The grocer and the trader have been encouraged by the Government and by Customs and Excise to put prices up rather than down if there is a chance, because they have been instructed, believe it or not, to work down to the nearest halfpenny unless this causes the tax payable to become nil, in which case they must work up to the nearest halfpenny. Thus, on an article priced at 2p, plus 10 per cent. tax, total 2·2p a trader may not price down to 2p with nil tax. He must price up to 2·5p, which means charging the customer 25 per cent. extra on a 2p commodity, and that will happen on thousands of small objects bought by ordinary people from small shops.

It will affect the price of tea sold from vending machines in canteens. It is not possible for a vending machine to accept a 0·2p piece. Such a coin does not exist. The price of tea will have to go up by the full 25 per cent., in the same way that the price of other small commodities will be increased. The Sunday Times this weekend carried an article about Wall's, the ice-cream manufacturers, advising traders to profiteer out of VAT. This is a positive feast for fiddlers. This tax is bound to be exploited by them. It is bound to lead to a quite unjustified increase in the cost of living.

Nobody has been franker in admitting that in recent days than the leaders of the Conservative Party. At the weekend the noble Lord, Lord Carrington, the Chairman of the Conservative Party said:
"We"
—I doubt whether he was addressing himself, or, for that matter, his colleagues in the Cabinet—
"must stand up to selfish commercial groups who try to diddle us over VAT."
A speech by the hon. Member for Leek (Mr. Knox), reported in today's newspapers, warns us against VAT confidence tricks by twisters, but what are the Government doing about this? The answer is, absolutely nothing at all.

We had the mumbling menace of the Minister for Trade and Consumer Affairs, the right hon. and learned Gentleman the Member for Reigate (Sir G. Howe), explaining yesterday the steps he has taken to deal with breaches of the freeze. We heard about the 40,000-odd complaints made. We heard that some had been investigated. We had neither a single fact nor a figure concerning anything which had been done about it. All we are ever told is that appropriate action will be considered. In the end it is the Prime Minister who comes out, addresses the housewives of Britain, and tells them to give the profiteer short shrift, as if she is capable of demonstrating to the shopkeeper that his cash margin has been exceeded. What sort of world do right hon. Gentlemen opposite think they are living in?

Let me quote, as a Yorkshire man, some very intelligent and pointed questions put this weekend by the chairman of the Pudsey Constituency Conservative Association, Mr. P. R. Simms, to the hon. Member for Rushcliffe (Mr. Kenneth Clarke), a Government Whip. The chairman of the Pudsey Conservative Association said,
"Businessmen would not knock purchase tax off their prices when VAT was introduced. Unless a statutory policy was introduced at the changeover there would be the highest price rises ever."
Mr. Simms asked the hon. Member for Rushcliffe,
"Will the Government guarantee that shops will cut purchase tax, or will it be like other countries, where both purchase tax and VAT have been added to prices?"
The hon. Member for Rushcliffe replied, no doubt reading his Government brief, that there would be legal snags in enforcing a statutory policy.
"The best defence was to inform the public about what should happen to prices and use the customers to police price increases."
What the chairman of the Pudsey Conservative Association said on Friday is being said in every constituency in the country by anyone belonging to any party who knows anything about the way in which the retail system works in Britain.

The Government are doing nothing to protect the consumer against the exploitation of this incompetent and ludicrous tax by those selfish commercial groups to which the chairman of the Conservative Association referred, who were out to diddle the consumer by "con" tricks, as the hon. Member for Leek pointed out. The worst effect, even if the Chancellor has no moral feeling one way or the other, of this sort of deceit from the trader will be on the low paid whom it is the Government's interest and duty to protect.

The Government, and many economists who comment on these problems, take far too little account that what feeds the fires of inflation is not the statistical average of price increases over the country as a whole but swingeing price increases falling on vulnerable or vocal sections of the population which may be far in excess of the average increase to which the country as a whole, as a statistical concept, is subjected. For example, the cost of children's clothes will hit overwhelmingly the low paid who have the larger families and who will have to pay the tax. The same applies to the 3 per cent. increase in the cost of household goods. Those sections of the population are already wrestling with the food prices which the Government have promised will go up next year, with the rent increases which the Chancellor has promised he will reintroduce next April, and with the house prices increases which, according to the housing figures published today, will rocket even faster next year than this year. Even the Government's own bodies are announcing increases. The offices of electricity boards in every town and village of the country have posters in their windows saying, "Beat VAT, buy now".

There is no doubt it is in this Government's economic and party interest to accept this motion. VAT is due to come into force either during the present pay and prices freeze or at the start of a new statutory or voluntary policy. To introduce VAT on 1st April next year will wreck any chance of controlling inflation in advance.

The Liberal Party seeks to bridge the gulf between the known unpopularity of VAT and its long-held conviction that VAT is a good thing by suggesting that it should be reduced to 7½ per cent. this year so as to introduce it quietly, and to increase it enormously in the following years. That is what The Guardian suggests in its leading article and what the hon. Member suggests on behalf of his sixth of the Liberal Party.

I apologise to the hon. Member but I had the impression that one hon. Member of the Liberal Party in Parliament voted against VAT.

To reduce the rate this year to 7½ per cent., although it would theoretically nullify the statistical effect on the cost of living, would not affect the behaviour of the twisters and diddlers about whom hon. and right hon. Members opposite have been so vocal in recent days. It would not save the football clubs. It would not save the taximen who are threatened with annihilation by the tax. It would make an even greater administrative nonsense of the whole affair than a 10 per cent. rate because it would cut the yield of the tax to £300 million below that of the taxes which it is replacing. Yet we would still need the 6,000 extra civil servants and the 50,000-odd extra administrators in trade and business to operate it.

There is one answer to this problem. The Government must give themselves time to think again. This is not a party issue. Nothing would suit the Labour Party than to see VAT introduced on 1st April 1973 because all over the country today people are saying, "VAT,—Vote Anti-Tory". I can see from the thoughtful faces opposite that there are many hon. Members there who know what will hit them when VAT is introduced. Some of them, including the right hon. Member for Stafford and Stone (Mr. Hugh Fraser), I know will have the courage to express their views later in the debate.

It is in the Government's own party interest to delay the introduction of this tax. I do not expect the Government to accept advice from me on how to run their party affairs. But I expect the Government to take some notice of this tidal wave of opinion which is building up, above all among their own tradi- tional voters, the landladies, the small shopkeepers, the small manufacturers, against a tax which is administrative idiocy and ludicrous beyond belief in the way in which it will operate as well as being highly inflationary and socially unjust. I appeal to hon. Members opposite, if they have any interest in the troubles which will cluster around the heads of their constituents from 1st April 1973 to have the courage, at 10 o'clock tonight, to support this motion.

I should inform the House that I have not selected either of the amendments on the Order Paper.

4.19 p.m.

The truest words spoken by the right hon. Member for Leeds, East (Mr. Healey) were these: "This House is competent to distinguish between a sound argument and a silly argument". On 1st April next, purchase tax, which has been with us for 32 years, and selective employment tax, which has been with us for six years, will both be completely abolished and replaced by VAT. There will be only one rate of VAT and that rate, the figure fixed in this year's Finance Act, of 10 per cent. is the lowest standard rate of any VAT in Europe.

Furthermore, the yield of VAT at that rate—in other words what the British people will pay in tax—will be broadly the same as the yield for purchase tax and selective employment tax together. The right hon. Gentleman seemed to complain about that. I can only tell him that my right hon. and hon. Friends are delighted that the yield will be some £700 million less than at the rates of purchase tax and SET left by the Labour Government.

For reasons which will soon become clear to the House, the case put today by the right hon. Gentleman was a farrago of hypocrisy, but what is far more serious than that is this: I shall show the House, and I shall show the House with chapter and verse, just how the Labour Party has deliberately set out to make the British housewife believe that there will be price increases, in food, for instance, where there will be none and how the Labour party, by its attempt to "con" the housewife, is thereby giving active encouragement to that very small proportion of shopkeepers who might be tempted to cheat.

The Labour Party, as the country well remembers, are past masters at introducing changes which put up prices. I am not just referring to the way in which, again and again, they increased purchase tax and selective employment tax and so, deliberately, at a stroke, increased prices right across the board, including food prices. The right hon. Gentleman today had the nerve to refer to his own Government's decision on decimalisation. The people of Britain recall all too vividly that it was the Labour Government, against the opposition of Conservative Members, who made a gross misjudgement and insisted on a form of decimalisation which most people thought was bound to put up prices. Every housewife in the country will testify that in her opinion the system they chose did put up the cost of living. So one thing is clear—whoever else is entitled to criticise a British Government on the score of taxation and change, it is not the Labour Party.

In April of next year, three long-overdue and fundamental reforms of our taxation system will come into operation—the unification of income tax and surtax, the new scheme of company taxation and the complete reform of indirect taxation, involving the abolition of purchase tax and SET and their replacement by VAT.

The introduction of VAT is in full accord with what we said in our election manifesto:
"We will abolish the selective employment tax as part of a wider reform of indirect taxation, possibly involving the replacement of purchase tax by a value added tax. The value added tax, already widely adopted in Western Europe and Scandinavia, is in effect a general sales tax operated in a way which allows for desirable exemptions—for example, exports. It could help to make our system of taxation on spending more broadly-based, less discriminatory and fairer in its impact on different types of industry and service. It would not apply to food, except for those few items already subject to purchase tax, it would not apply to normal farming activities, nor to very small businesses; and special arrangements would be made for housing. No Opposition could commit itself finally in advance of an election to a major new tax of this kind, which would need detailed consultation with the civil service."
The arrangements which I have made since I became Chancellor fulfil those undertakings, as I was determined they should, both in the spirit and in the letter.

During the early months of this Parliament we carried out that consultation, as we said we would. We asked Customs and Excise to visit countries already operating a VAT, and this they did. In my Budget of 1971, I announced that purchase tax and SET were to go in April, 1973, as they will, and that they would be replaced by VAT. That decision was taken on its merits.

Incidentally, in answer to the right hon. Member for Leeds, East, I will repeat once again today, as I have done many times—I know that he will accept this from me as my word—that that decision was not taken because of our application to join the EEC—

—or rather, the application put in by the previous Government, which we continued.

In March 1971 I published the Green Paper on VAT and said then that two years would elapse before the change was made. There then started the period of consultation with trade and professional bodies. Never before has there been such detailed consultation with trade and industry about a new tax. In the period between the Green Paper and the publication of the White Paper on VAT in March of this year, Customs and Excise have held meetings with over 300 trade bodies. Their teams have also visited most of the countries operating VAT to study their systems, to get the benefit of their experience and to select those procedures which seem to offer the best way of dealing with the circumstances of this country.

These consultations have not stopped since the Finance Bill became law. Discussions about the detailed operation of the tax are continuing, and up to the present time Customs and Excise have seen over 600 trade and professional bodies on various aspects of the tax.

These two years of detailed planning will enable us to bring in one of the fairest VAT systems in Europe and one which has the lowest rate of tax. There is no case for the delay proposed in this motion.

Is the right hon. Gentleman aware that, as one who has been present at some of these discussions with Customs and Excise, I can tell him that the atmosphere is one of gloom and despair on both sides, that the Customs and Excise are very reluctant to introduce this measure, are doubtful of their ability to do so, but are of course loyally intending to carry out the Government's purpose so far as they can? But there is no doubt for anyone who has been with them that they have grave doubts about their ability to put the thing into effect.

The hon. Member does not smile very much himself. That is certainly not the impression that I have been given by others to whom I have talked. They have been very grateful and have paid tribute in public to the way in which the Customs and Excise have carried out these discussions.

I have referred to what we said in our election manifesto and to what we have done. I have done so for two reasons—first, to remind the House that we stated to the electorate openly and unequivocally what we intended to do about indirect taxation, and, second, because I want the House and the country to note the contrast between the way in which we are proceeding in abolishing purchase tax and SET and bringing in VAT and the unforgivable way in which the nation was deceived by the previous Government over SET.

Let me remind the House. Within only five weeks of the general election of March 1966 the Labour Government announced the selective employment tax, to be paid in respect of every one of eight million people employed in the service and construction industries, a tax which had never even been hinted at in the general election of only five weeks before, a tax specifically designed to stimulate employers to cut down their labour force. It is inconceivable that the Labour Government did not know at the time of that election that they intended, only five weeks later, to bring in the new tax—but they chose to conceal their intentions.

Therefore, whatever may be the views of himself and his right hon. and hon. Friends on the merits of VAT, the right hon. Gentleman knows that in making this change we are acting in accordance with what we told the electorate.

So, in April next year, SET will be abolished for ever. Let all those who have spoken against it over the years note that it is the Labour Party alone who want to retain it. As for why purchase tax will also be abolished for ever next April, let me quote last Saturday's Economist:
"For three decades, consumer demand in this country has been distorted by the incidence of purchase tax on some forms of spending and not on others. The relative rates at which purchase tax was levied on different goods were decided by war-time priorities, and continued unchallenged and unamended throughout 25 years of peace."
That is the tax which the Labour Party wants to perpetuate. For the Opposition, as in so many things, what was good enough for the 1940s is good enough for today. Their whole approach to the reform of the taxation system is that because change involves transitional problems, it is best to shy away from it. For them there is no question of following one country after another which is modernising its tax system. In other words, what was good enough for Cripps and Dalton is, for them, good enough for today.

We reject the idea, which is inherent in purchase tax, that the State should deliberately set out to determine in detail what are luxuries and what are necessities. It is a nonsense to pretend, as does the right hon. Member for Leeds, East, that the definitions of necessities and luxuries made for purchase tax in the 1940s have any relevance to the 1970s. The whole idea that the State knows best is today not only repugnant but ridiculous. Everyone knows that the discrimination in the purchase tax schedules are a nonsense.

Does it make sense to go on taxing the old persons' electric or gas fires, or their television sets, at a rate which the right hon. Gentleman's Government left at 36⅔ per cent., which is now 25 per cent., and yet to tax Persian carpets and Paris fashions at a mere 13¼ per cent., which is now reduced to 11¼ per cent.?

If it makes no sense to tax television sets for old people, what sense does it make to reduce the tax on the television set, which they buy once in a lifetime, and to impose instead a new value added tax on their telephone, which they use every day of their life?

The hon. Gentleman is very interested in sport. [HON. MEMBERS: "Answer."] Yes, I will indeed. A great many elderly people watch sport on television.—[HON. MEMBERS: "Answer."] The hon. Gentleman was talking about television. How does the hon. Gentleman justify a system—[Interruption.] If an old person bought a television set it was taxed at 36 per cent. under his Government, but if he went to the cinema it was nil. As I have said many times before, VAT is a broadly based tax. We have excluded certain broad categories of expenditure, which I will mention later. But what we are not prepared to do is to have a whole variety of individual detailed items which at the end of the day would end up with the sort of thing which we have in these 100 pages of nonsensical purchase tax schedules which have grown up over the years.

How does the hon. Gentleman justify his Government's preferred system where one man who went to watch a football match paid no tax, but another man who preferred to buy a football paid 55 per cent. tax? How do the Opposition justify their system where a man who bought a yacht paid no tax but the man who bought a cricket bat—as the hon. Gentleman is so interested in sport—paid 55 per cent.? The whole thing is an absolute nonsense, and the Opposition know it.

VAT is a better and fairer tax than purchase tax and SET. The more the Opposition pretend otherwise, the more they will be shown after next April to have misrepresented it. The essence of the change to VAT—[HON. MEMBERS: "Explain."] I have explained to the hon. Gentleman. [Interruption.] I have plenty of time. I will repeat it. The essence of VAT is that there should be a tax which is broadly based with a limited number of broad categories, to which I will refer in a few moments, which are either exempt or zero rated. I repeat again for the benefit of the hon. Gentleman that we are not prepared to have a whole series of detailed exemptions, which would make a nonsense of any form of indirect taxation. That is my answer to the hon. Gentleman.

The whole essence of the change to VAT is, as I have said, to give the consumer an unbiassed and effective choice. Apart from the broad areas where relief is specifically given, there will be far less discrimination between spending on one thing and on another.

Because VAT covers a wide area of goods and services we are able to bring it in at the lowest standard rate in Europe—10 per cent. I shall return in a moment to the advantages of the change for the consumer. But VAT will also have considerable advantages for industry, which is the source of the nation's prosperity.

First, VAT will not enter into industrial costs in the way that purchase tax and SET did. Secondly, unlike purchase tax and SET, VAT will be wholly rebated on exports. Third, with VAT replacing SET, British industry will no longer have to make a forced loan to the Government. Fourthly, because of the broader base of VAT, gone forever will be those big and sudden changes in rate which so often damaged particular industries.

Before I come to the advantages for the retailer—I shall list them in a moment—I should point out to the Opposition that the Customs and Excise reported to me the experience of countries which had changed to a VAT system similar to our own. I was told that once the problems associated with transition were over, the retailers—large and small—in those countries found no difficulty with VAT. [HON. MEMBERS: "Mention them."] I will mention some countries in a moment if hon. Gentlemen wish me to do so. Apparently the view of the Labour Party is that British retailers are less intelligent than their counterparts. For example, in Norway—[HON. MEMBERS: "Oh."] I was asked to mention countries. In Norway, Sweden and Denmark—[Interruption.] Why do the Opposition suppose, if the Danish, Swedish and Norwegian shopkeepers find no difficulty in operating the tax, that it will somehow be beyond the wit of the British shopkeeper? That is just another instance of the customary approach of the Opposition, which always assumes that British management and British workers are second rate in comparison with their European counterparts. It always assumes that Britain is bound to lose out. It always assumes that Britain cannot cope as well as other countries. That is why we are always told that all hell will be let loose in British industry when it has to compete on equal terms with the Europeans, because the Opposition have no confidence in British industry and commerce.

I said that I would come to the advantages of VAT for the retailer. The advantages are considerable. First, under VAT traders will no longer have to finance a tax burden on their stocks as they have had to do with purchase tax. All stocks will be effectively held free of tax. Incidentally, there will be an average period of credit of 2½ months. Secondly, it follows that under VAT retailers will no longer have to bear losses on their stocks when the tax rate is reduced, as they did when purchase tax was reduced. That is a problem which never confronted the Labour Government.

Thirdly, if retailers reduce prices to clear old stock, as they do, for instance, at sale time, the tax burden will be correspondingly reduced because VAT follows the price. So both the retailer and the customer will benefit.

Fourthly, because of the changes I have made at the request of the retail trade, under the new transitional arrangements, all purchase tax paid on traders' stock for resale will be refunded in full. I should add that the £5,000 exemption for small traders is far higher than in most other countries.

What about the retailers who give credit and lose money on bad debts? Is the right hon. Gentleman prepared to give relief for them?

We have been over this matter during the discussions on the Finance Act, but there can be no doubt that the points I have just made represent real advantages to the retailers of this country. Bad debts was a matter we discussed on the Finance Act, and the hon. Gentleman knows perfectly well what are the problems involved as they were discussed at length then. I do not intend to repeat them in what else I have to say because I want to deal with the right hon. Gentleman and I have a lot more to say.

Before I come to the effect of the change-over on prices I must mention one other assertion of the right hon. Gentleman which is wholly without foundation. There is no truth in the suggestion that the abolition of purchase tax and SET and their replacement by VAT will bear more hardly on the poor than on the well-to-do. The reason is, quite simply, that the coverage of VAT was so designed, and deliberately designed, to ensure that the tax did not fall relatively more heavily on the poor than on the better off. Most food, as the House knows, has been zero-rated. So has domestic fuel—coal, gas and electricity—and bus fares and railway fares. Housing has also been relieved of the tax. Because of the abolition of SET the burden of tax on food will be less.

I turn next to the effect on prices of the abolition of purchase tax and SET and their replacement by VAT. I want, first, to say this: unlike decimalisation, where the general public as well as the business community had to cope with a whole new system of coins, the actual system of VAT will no more have to be understood by the general public than the actual system of purchase tax with its 100 or more pages of detailed schedules. In both cases, VAT or purchase tax, the actual system will be operated, by the business community.

But what is absolutely essential is that before next April the man in the street should know how the change will affect him. The Government will, therefore, be taking steps to ensure that the general public fully understand how the abolition of purchase tax and SET and the introduction of VAT will affect their daily purchases of goods and services. I hope that at the appropriate time all those organisations such as trade unions, consumer groups and so on, which are concerned with the effect of the tax change on their members, will support the Government's efforts to increase the public's knowledge and awareness of the true effect of the change.

I have no doubt that we shall have the full support of the retailing organisations and of the overwhelming majority of retailers. But I should add this clear warning to those few who might be tempted otherwise.

Against the background of the legislation which will be introduced to implement the second phase of the Government's prices and incomes policy, we shall take steps to ensure that following the change-over to VAT the benefits of tax reductions are passed on in lower prices to the consumer and that prices are not increased by more than is strictly warranted after making full allowance for the abolition of SET and purchase tax.

Not at the moment, because this is an important matter and I wish to complete it. The House will appreciate that in this important respect the situation will be quite different from the introduction of decimalisation.

I am grateful to the right hon. Gentleman for that interesting statement. Can the Chancellor say how this will be policed? He will be well aware, from the exchanges in the House yesterday, that there is no machinery whatever for policing even the maintenance of the freeze and prices at present. All that is being offered by the Government is the right of the housewife, if she can calculate accurately cash margins and so on, to protest to a Ministry which is under no obligation to take any action and, so far as we know, has not taken action which has led to price reductions in stated cases. Can the right hon. Gentleman say how the Government propose to police a system which will in many cases lead to some price rises, whether he likes it or not, because this is involved in the nature of the Act?

I have told the right hon. Gentleman the steps we shall be taking and I have no doubt, from the preliminary discussions which I have had with some members of the retailing organisations, that we shall receive from the retailing organisations—this is essential and I have no doubt that we shall get it—full support and co-operation to ensure that what I have said takes place.

I have a great deal more to say. I have given way to the right hon. Gentleman and I do not want to hold up the debate unduly. I come now to the extraordinary antics of the Opposition and the right hon. Gentleman. Here I must warn the country—I shall match my words with chapter and verse—that the Labour Party is engaged in a wholly irresponsible campaign to alarm the public—[HON. MEMBERS: "Oh."] Wait for it. Hon. Members should not laugh too soon. The Labour Party is conducting a campaign which, if it continues it, will give comfort and encouragement to the cheat and to the spiv. The fact is that right hon. and hon. Gentlemen of the Opposition do not really care two hoots for the housewife provided that they can continue to score their party points. I should add that what they have said and are still saying about VAT is in marked contrast with the responsible approach of the TUC which, in the tripartite talks, asked that before VAT comes in the true facts should be made known.

I start with the right hon. Gentleman, the Shadow Chancellor of the Exchequer. Before any decision had been taken on the rate, the right hon. Gentleman stated, flatly and without qualification, that VAT would be levelled at a rate of 20 per cent. In fact, the figure in the Finance Act is 10 per cent.

The right hon. Gentleman stated, again without qualification, that VAT would be levied on coal, on gas, on electricity, on bus fares and on rail fares. There was no substance whatever in what he said—like so much of what the right hon. Gentleman says.

I am very grateful to the right hon. Gentleman. He is quoting what was said by me before the 1970 General Election on the basis of the Conservative policy as then stated. The Conservatives committed themselves—[Interruption.]. Is it not the case that the Conservatives committed themselves to introduce a tax which in all the other countries where it had been introduced involved a rate of 18 per cent. to 20 per cent. covering these commodities, and that the Government are still committed, in relation to their colleagues in the Common Market, to harmonise rates and coverages with countries which already operate those rates and coverages?

I do not think that was very good.—[Laughter.]. I will answer the right hon. Gentleman. I am not surprised that he has been described by one who knows him very well indeed as having "a sharp, analytical Marxist mind". That was said by Mrs. Marcia Williams. But let us give the right hon. Gentleman the benefit of the doubt and assume that he just did not know but, as it were, blinkered by his own bombast, he inadvertently caused the nation to be deceived at the time of the General Election. But why should the nation any more believe what he says? He referred in his speech today to the Civil Service, but only two days ago, on Sunday, the right hon. Gentleman said on the BBC that because of VAT the Customs and Excise staff

"are just about on the edge of mutiny".
There is no truth whatsoever in that—[Interruption.] He clearly does not believe it.

Let me tell him what I am authorised to say by the Chairman of the Board of Customs and Excise. When I saw what the right hon. Gentleman said I inquired about the matter, and the Chairman told me that it was certainly not the case. I hope, therefore, that the right hon. Gentleman, in deference to the staff associations, who have been helpful and cooperative in these matters, will not pursue that line of argument again. But, of course, the Labour Party campaign goes on.

On a point of order. Has the Chancellor not quoted from a document submitted by the Chairman of the Board of Customs and Excise? Should he not lay that document on the Table?

That was not my understanding. The Chancellor of the Exchequer.

On a point of order. Is it not the case that the Chancellor was authorised to make a statement which had been passed to him by a leading civil servant, an action for which, incidentally, there is to my knowledge no precedent except for the decision of the then Secretary of State for Defence in 1964 to quote advice given to him by the chiefs of staff? Quite apart from the fact that to quote a civil servant on a matter of this nature is totally contrary to the practice not only of the House but of the constitution, is it not the case that the Chancellor is obligated to present the full statement made to him by Sir Louis Petch so that the House may judge the context in which it was made?

I apologise. I thought that the hon. Gentleman expected a document, but I understand that it does not exist.

On a point of order. In order to settle the matter, would it not be better if we could also have the document on which the right hon. Member for Leeds, East (Mr. Healey) based his remarks about civil servants, so that we could make an objective decision?

I thought that the Chancellor was about to help the House, and it may be that he intends to lay it on the Table if it is a document.

I have quoted from some notes I made, and on the same page the only other item that I was intending to take up the time of the House by quoting was something that I wrote as the right hon. Gentleman was speaking. It reads:

"It is as ridiculous as the suggestion that industry and commerce will need to employ an extra 50,000 staff."

Further to the point of order. Could it be explained to the House what "it" refers to? And is it in order that the document should be laid before the House in this form?

Further to that point of order. It is important to the House, if the Government spokesman or the Opposition spokesman, but particularly the Government spokesman, quotes from a document, that that document should be laid before the House. I am asking you, Mr. Deputy Speaker, to reconsider the tolerance you have shown to the Chancellor—[HON. MEMBERS: "And to you."] I was here when those fools were not and I shall be here after they have gone. As the Chancellor now admits that he was quoting from a document, will you, Mr. Deputy Speaker, instruct him to lay the document in accordance with the practice of the House?

My understanding is, as I originally thought, that a document was not being quoted but that the Chancellor has said that he was quoting from his own notes. The Chair may be mistaken in that, but if it is correct, there is little that the Chair can do. The Chancellor of the Exchequer.

Further to that point of order. [HON. MEMBERS: "No."] Is it not a well-known tradition of the House that Ministers shall not quote civil servants on matters of political controversy and shall not quote the advice they have received naming the person responsible? I cannot recall whether you were in the House at the time, Mr. Deputy Speaker, but if you were you will remember that this was an issue of great controversy when a similar breach of procedure was committed by the then Secretary of State for Defence, now Lord Thorneycroft. Perhaps it will assist the House to know that the statement that I made was based on an article describing morale in the civil service in the Financial Times on 2nd August this year, which said:

"VAT has brought with it the first genuine threat of industrial action that Customs and Excise has faced since its inception nearly 301 years ago."

I appreciate the right hon. Gentleman's concern, but that is not a matter for the Chair.

Perhaps I may continue by referring to the deplorable campaign being conducted by the Labour Party. Why did the hon. Member for Eton and Slough (Miss Lestor) say in the House over a fortnight ago that, as a result of VAT, packaged food will go up in price? It will not. Why only last Tuesday did the hon. Member for Ealing, North (Mr. Molloy)—[Interruption.] The Labour Party will take this, and there is more to come. I shall not be deterred. Why only last Tuesday did the hon. Member say,

"What will really happen is that ordinary working folk will find their food bills increasing dramatically."?
The right hon. Member for Leeds, East says, "Hear, hear" and that means that he endorses it. There is not a shred of truth in that allegation. It is sheer rubbish. The very reverse will apply after the change-over of tax. When purchase tax and SET are abolished and VAT is introduced, the burden of tax on food will be cut once again and it will amount to £100 million less than it was when the right hon. Gentleman and his Government left office. Similarly there will be some £40 million less of a tax burden on housing.

It is inherent in any switch to a more broadly based tax that some prices will go up, but whatever the Opposition may say now, the public will see when VAT comes in that taxation will be cut on a whole variety of goods which are bought by the ordinary citizen. They will include soap and toothpaste, electric and gas fires, pet food, toys, sports equipment, bicycles, watches and clocks, gramophone records, radios and television sets, washing machines, vacuum cleaners, refrigerators and sweets. That is only some of the list which, of course, will include food and housing. I know that the dear old Labour Party still considers that lipstick and cosmetics are the height of luxury which is no doubt why the Labour Government increased the purchase tax on them to 55 per cent. Here the price will come down with a 10 per cent. VAT.

I have already told the House that the yield of taxation from VAT will be broadly the same as from the purchase tax and the SET we are abolishing. I do not accept that when a change is made there will be any significant change, over all in the cost of living.

The right hon. Gentleman said that a year ago, and it has since gone up 20 per cent.

Even if we were to assume, like last week's Economist, that, while many items will go down in price, over all, as the Economist concluded, there will be an increase in the cost of living of one penny in the £, who are the Opposition to criticise? The last Labour Government put up taxation again and again. They put it up again and again on almost everything they could lay their hands on. They increased purchase tax three times; tobacco duty three times; beer duty three times; the spirits duty four times; the wine duty five times; and the petrol duty six times. In addition, they also introduced—and then twice increased it—the selective employment tax, virtually doubling it in the process. The total effect of their calculated increases in taxation was to put the cost of living up not by the 1 per cent. to which the Economist referred but certainly by more than 6 per cent.

When VAT comes in next April and purchase tax and SET go for ever, the burden of taxation on goods and services will be £700 million less than it would have been if the present Government had clung to the rates of taxation left by the Labour Government. This Government came to office to reform and to cut taxation, and that is precisely what we have done.

On a point of order, Mr. Deputy Speaker. When the Chancellor of the Exchequer was attempting to get up during the previous points of order, some of us imagined that he was going to offer some kind of explanation as to the document he had produced. I think that this is a matter for the House of Commons because some of us are far from clear whether it is a document from the Chairman of the Inland Revenue in a personal capacity or a document from the Chairman of the Inland Revenue supported, as the right hon. Gentleman seemed to imply at one stage, by the staff association. Can we clear up the matter whether the document from which the right hon. Gentleman read had the support of the staff association or whether it had not?

The hon. Gentleman will understand that that is not a matter for the Chair.

Further to that point of order. When the Chancellor is deliberately talking to the Deputy Patronage Secretary it is a matter of some discourtesy. Could one ask him directly, when the House has his attention, whether the document from which he read was given by the Chairman of the Inland Revenue in his personal capacity, or whether this was a document from the Chairman which was endorsed and seen by the staff association, as the right hon. Gentleman seemed to imply at one point, although not at another, in his speech?

Further to that point of order. I should make it clear for the benefit of the hon. Member for West Lothian (Mr. Dalyell) that I was reading from my notes, which I wrote as a result of an inquiry which I made of the Chairman of the Board of Customs and Excise. I thought it right to do that in view of what the right hon. Member for Leeds, East had said. I thought it right to do so in view of the talk by the right hon. Gentleman about "mutiny in the ranks". The Customs and Excise staff responsible for value added tax have co-operated magnificently in the challenge which has been set them.

Further to that point of order. Is it in order for the Chancellor to imply, as he has just done, that I suggested that the staff were not cooperating in the exercise? That was not the point. The question related to the strain on the staff. There has been the threat of industrial action for the first time in 135 years. The right hon. Gentleman will find chapter and verse in today's Financial Times article by Kelsey van Musschenbrock. I well understand that the question whether it is proper constitutionally, or, indeed, from any other point of view, for a Minister to quote selected remarks made by a civil servant in order to strengthen his position in this House is one of controversy. Do I understand that it is perfectly in order for any hon. Member to make any statement attributed to a civil servant if he thinks that it will assist him in deploying his case? This would be an introduction of very novel procedure into the House and of course it might well apply to the Opposition as well as to the Government benches.

I think that the right hon. Member for Leeds, East (Mr. Healey) tried to make the same point before. I replied that it was not a matter of order. But perhaps I could go so far as to suggest that it may be a matter of etiquette for the House. It is not a matter of order for the Chair.

Further to that point of order. It is within the recollection of everyone who heard him that my right hon. Friend the Chancellor of the Exchequer made it clear that he was quoting from his own notes, and it is also clear to everyone that the Opposition are whining because they have been badly mauled by my right hon. Friend.

Further to that point of order. I am sorry to pursue the matter, Mr. Deputy Speaker, but while we accept your ruling on the question of the documents, nevertheless, arising from these exchanges, I submit that there is a point of very considerable constitutional importance. [HON. MEMBERS: "Nonsense."] It is not nonsense. It is not open to hon. Members to ask questions of the Government as to the advice they receive from the Civil Service. In these circumstances, it cannot possibly be good enough for the Chancellor of the Exchequer to come here and tell us the advice he has received without telling us also the questions he asked in order to secure that advice and without telling us the circumstances in which the conversation took place and when it took place, and allowing us the opportunity to ask the relevant questions about the matter.

We certainly would not wish to put you in an impossible position, Mr. Deputy Speaker, but this situation is unprecedented. I do not think that it has ever happened before. [Laughter.] I wish the Chancellor would not laugh, because this is a very serious matter. If a Minister is entitled to give statements to the House, we are entitled to cross-examine him about them and about the circumstances in which they were made. Is it possible for you, Mr. Deputy Speaker, or Mr. Speaker himself, to consider the position in which the House has been put?

The Chair has made its position clear. What the hon. Gentleman is now trying to do is to relate a matter which has arisen in debate to a matter of questions which is not quite the same thing.

Further to that point of order. The point raised by my hon. Friend the Member for Birmingham, Small Heath (Mr. Dennis Howell) is very important indeed. We have always understood till now that it is not open to us in this House to ask the questions about advice given by civil servants. Many of us would have liked to ask what Sir Louis Petch said to the Chancellor about the proposal to introduce VAT in the first place. If it is in order for a Minister to quote advice from a civil servant, it is in order for hon. Members to ask questions about that advice.

The Chair has sought to give no such idea. The right hon. Gentleman will appreciate the position of the Chair in this matter.

Further to that point of order. I have tomorrow a very suitable Consolidated Fund debate on which I will raise this very question.

5.9 p.m.

The Chancellor of the Exchequer has clearly revealed the anxiety of the Government about the forthcoming by-elections. I am sure that many hon. Members will share my view that his speech was directed principally to the voters in those by-elections. He kept on repeating and bragging about the fact that he was introducing on 1st April next the lowest rate of value added tax in Europe. Do we regard it as a firm guarantee from the Government that at no time in the future will they increase that 10 per cent. to a higher figure? As I understand it, value added tax has to be harmonised throughout the EEC by 1974. If that is the case, then obviously the 10 per cent. will automatically be increased in the near future.

The Chancellor made great play this afternoon of SET, implying that as soon as SET is abolished it will be reflected in reduction in prices in the shops. Is he aware of the fact that when SET was introduced, many manufacturers increased the price of their products far beyond the element of SET, because they insisted that they were going to take advantage of this new imposte in order to boost their own profits? Does the Chancellor ask the House to believe that some statutory powers will be obtained and imposed to ensure that the proportion of VAT on any product will be so reflected that that element will lead to a reduction in the price? My own forecast is that when 1st April comes round there will be no appreciable difference—if any difference—in the prices operating because inflation will have taken good care of the changes that will have to be made.

The Financial Secretary to the Treasury, speaking on 20th January to the London Chamber of Commerce and Industry, said:
"VAT will require more civil servants to administer it than purchase tax and SET do now. Many traders who do not know how to account for indirect taxes will in future have to do so, and this will inevitably impose some administrative burdens on them. There will be particular problems at retail level which have not had to be faced before."
I should like to take the Financial Secretary on a similar tour to that which I made of my constituency. I would be quite willing to go with him to any industrial area to do what I did in my own constituency. I consulted 43 small traders engaged as grocers, general stores, tobacconists and confectioners, hairdressers, drapers and fancy goods retailers. I discussed with them the forthcoming imposition of value added tax. The average turnover of these 43 traders was £20,000 per annum—not a very big turnover at present-day prices—with an average number of employees of five. Of the 43, in fact 38 said that if value added tax were introduced they would try to dispose of their business or close down completely. When I asked them why they would do this, having been in business for a good number of years, they said that although they had five employees they had no full-time clerical staff. All their book work had to be done in the evening.

It would be an interesting exercise to have listed to us all the returns they have to make at the present time without value added tax. They told me that they have a constant turnover of staff, involving regular changes in pay-as-you-earn, with returns of P45s and other documents. They have to collect graduated pensions. They have to make returns of the tax collected. They have to deal with contracts of employment. They have to deal with the question of levies from the Industrial Training Board. There must be other things that some trades have to deal with. Therefore, if they were now to be called upon to deal with the imposition of the new value added tax it would hardly be worth the time.

When we come to the traders who will be exempted, those with a turnover of £5,000 a year or less, the Chancellor bragged that we were the lowest in Europe as far as exemptions were concerned.

Sorry, the highest number of exemptions. A turnover of £5,000 a year means £100 a week. What sort of a business is £100 a week today in a small store, where it is invariably the husband assisted by his wife, meeting the needs of the people in the housing schemes or in other small housing pockets where supermarkets do not exist? With rising inflation, very soon that trader doing the same volume of business will find that his sales total £6,000. He then becomes liable to make a return under value added tax. How will he face up to the problem of making these returns? It requires a Philadelphia lawyer to unravel some of these provisions! I doubt whether he even knows where to apply to register or how to answer the questions correctly.

It would be interesting to know how many people concerned with pay-as-you-earn returns do them correctly. There must be thousands and thousands of small people with a small number of employees who do not know how it ends up at the end of the day. I would not dare to guess at the figure. How is this small trader, if his turnover increases to £6,000, to cope with all this added homework? He would be far better off working for someone else so that when he finishes work at night he is finished for the day.

I have one cinema in my constituency of 50,000 people. I have a letter from the owner of that cinema telling me that if value added tax is introduced the cinema will have to close because they already pay a levy and value added tax will merely be an imposition on a tax which is already levied. They say categorically in their letter that the cinema will close. The State Cinema is the only cinema in my constituency and it will close in the near future. They think that cinemas should be exempted from VAT.

There are half a million people on the level of £5,000 turnover who will be exempt from value added tax. Everyone who is just below £5,000 now will soon be just above it. There will be no extra clerical people available to deal with these half a million people becoming liable for value added tax.

I disagree with the Chancellor when he says that the Labour Party were trying to make out that everyone in this country is either a cheat or a spiv. These people to whom I talked are honest people who are afraid that their inability to cope with all the returns they will be asked to make without any clerical assistance will turn them into criminals. They are genuinely afraid of that. This is all because they feel that they cannot cope.

It is true that they can go to a chartered accountant. I do not say that chartered accountants are ungenerous people, but they will charge for this service, and it is obvious that that little shopkeeper will have to add the fees of the chartered accountant to his overheads. Those who said they would continue in business, said they would engage a chartered accountant to present their books four times a year to the Customs and Excise. They were all genuine people who were afraid that they might be caught out. It is remarkable that Cmnd. 4929 recognises that there will be problems because draft Clause 31 says:
"Where a taxable person has failed to make any returns required under this Part of this Act or to keep any documents and afford the facilities necessary to verify such returns or where it appears to the Commissioners that such returns are incomplete or incorrect they may assess the amount of tax due from him to the best of their judgment and notify it to him."
There can be no clearer recognition of the fact that by seeking the powers under draft Clause 31 they admit that these thousands upon thousands of small traders will never be able to cope accurately with the reurns due. One of the things which appalled me when I read this was that people could be searched. That is covered by draft Clause 37(c)
"search or cause to be searched any person found on the premises whom he"—
that is the Customs and Excise officer—
"has reasonable cause to believe to have committed or be about to commit such an offence or to be in possession of any such document or other things; ".
The Chancellor prides himself on his reasonableness, and this subsection is reasonable because it goes on
"but no woman or girl shall be searched except by a woman."
Every hon. and right hon. Member of this House should do as I have done and go round and find out exactly what the reaction of the average trader is. It is all very well to talk to Chambers of Commerce or to big retail organisations. The mass of these small traders with turnovers of up to £5,000 are not members of these Associations and are not likely to become members. They are struggling along to make the best of it in an honest and decent way.

Belgium and Italy initially asked for a postponement of the introduction of VAT. Italy, after 40 years, has not yet adopted VAT, for whatever reasons they choose. Certainly if it is good enough for them it is good enough for us. In Belgium there was a strike of small shopkeepers in protest against the amount of book work in which they would be involved as a result of value added tax.

I was in Brussels on the day of that strike, and it is important to make the point that the strike was not only concerned with value added tax but also the social security system. The aspect of VAT which upset them was that the Government should ask for one month's VAT in advance. The British system will allow VAT three months in arrears.

That illustrates how a Government can juggle about with tax. If our Government juggle about with it in that way there may be a similar protest here. I understood that the objection was to the suffering that had been caused by the operation of the tax and the consequent homework and book work that had to be done.

The Financial Secretary to the Treasury said:
"It is certainly important for individual traders to understand just how VAT works. For if they misunderstand it they may miscalculate …"
Of course, they are liable to the penalties mentioned in the Act if they misunderstand it.
"… and seek to pass on to the consumer an element of the tax on their sales ".
In the Financial Secretary's words, if they misunderstand it they may add an element of the tax to their prices, but the Financial Secretary says that there is a safety valve:
"The continental experience suggests that if this happens competitors who have misunderstood the tax will be able to undercut them."
Is that the solution to the problem?

The suggestion is that if a man does not understand the tax and miscalculates his prices they will be higher than they should be and people will transfer their trade to someone who has understood the tax and has not miscalculated. That does not work out in practice, just as the freeze does not work out in practice, because there is no check on it.

I will not enter into the merits or demerits of SET, but the people to whom I have been referring regarded it as a simple tax. All they had to do was to buy a stamp of higher value and stick it on a card. This tax is a different proposition. I am opposed to VAT, but if the Government are determined to introduce it, in the light of what the Financial Secretary said, surely it is not too much to ask for another year during which small traders can become more aware of how it operates. Customs and Excise staff have been visiting the small shopkeepers and I have been told by some shopkeepers that they were as clear about the operation of VAT after being visited by Customs and Excise men as they were before. They know that they will be in trouble with it. No matter what papers the Government produce, green papers, yellow papers or papers any colour of the rainbow, these small traders will still be in trouble.

The people to whom I have been referring represent a strong cross-section of the trading community. They play an important role in the lives of people who live in housing estates who, when VAT is introduced, will no longer be able to buy at the local shops but will have instead to go to the supermarkets which will probably spring up on the outskirts of the cities. The people from the housing estates will have difficulty in getting to the supermarkets because they have no cars.

I appeal to the Government to give the small traders time to get to know more about how the tax will operate and to receive tuition. At the end of the day I am sure that there will still be mistakes and irregularities. These small traders are no less intelligent than anyone else, but they already have many problems. Even if they could get clerical staff to help them they would not be able to pay for it. I appeal to the Government to postpone the operation of VAT for a year, by which time I hope that they will have the sense to abolish the whole process.

5.30 p.m.

I congratulate the hon. Member for Glasgow, Shettleston (Sir M. Galpern) on his well-informed and genuine speech. I, too, welcome the debate and I am sorry to see that it is not well attended except by those who are attempting to make political capital out of pending by-elections. This is an interim debate, because when we investigate the policing operations described by my right hon. Friend the Chancellor of the Exchequer we shall return to this subject between now and the bringing in of VAT.

The speech made by my right hon. Friend, for all his brilliance as a Chancellor of the Exchequer, scarcely gave credit to some of the dangers in the tax. Since the principle of the tax was accepted in June, there has been a complete change in Government policy and in the conditions of the country and the problems which face us. A distinguished and anonymous Minister has said that any Conservative who is now against VAT is standing on his head. When I look at some of my right hon. Friends on the Front Bench, I wonder whether they have any heads left to stand on. We have seen a change in economic policy as remarkable as that which must have astonished the Politburo in 1922, when Lenin said, "Communism does not work after all, we must try something else".

I should like to make a few remarks about the problems of VAT that face us and will face us in the years to come. I am sorry that my amendment has not been selected. It suggests a delay not for one year but for a considerable number of years, until the regressive aspect of VAT can be counterbalanced by the introduction of the admirable concept of a negative income tax adumbrated by my right hon. Friend.

I divide my thoughts on VAT into three areas. First, the fiscal area, secondly Government logic, and thirdly politics, all of which have relevance to the issue before us.

In the fiscal area I question whether the Government are showing wisdom in introducing a flat rate of 10 per cent. over the whole range. I say that on grounds of social justice. Some of my hon. Friends are mistaken when they say that there is no difference between tax due on a mink coat and tax due on children's clothing. I believe that 98 per cent. of the people of the country share my view that there is an element of social justice which should apply and that there is such a thing as a regressive tax. Therefore, the Government are mistaken, and not ingenious as they pride themselves on being, in producing a flat rate tax.

Whatever the Chancellor of the Exchequer and some of my colleagues may say, the burden of the tax falls more heavily on the poor than on the rich, for the simple reason that the necessities and near necessities of life which are taxed at the lowest rate of purchase tax will have to bear a higher rate of tax. The first error which has been made, and which should be corrected, is that we have not pursued, as other countries have, two, three or even four rates of VAT as a matter of social justice. That is what the Irish did—[Laughter.] Honourable Members may laugh, but the Irish will have more success with their tax than we shall. The Irish tax is working now. The Irish introduced precisely the same rates for VAT as for the previous purchase tax. In Europe there are two, three and four rates.

I turn to the more important fiscal point, which is my fear that by bringing in and boasting about the lowest rate of VAT in Europe we are dangerously restricting our base for the collection of indirect taxation. Let us suppose that for some reason it is necessary for the Government of the day to raise more funds. If they push up the 10 per cent. flat rate tax to too high a rate, social discriminations will immediately arise which will be politically intolerable. In that case the Government will have to extend the area of tax to those items which hitherto have been excluded.

Let us take two areas in which that is not unlikely to occur. First, there is the Government's policy of pushing out an enormous number of subsidies on trains, planes, butter, rates and so on. In June last we were all hopefully talking about a 7½ per cent. tax but it is clear now that there will have to be a 10 percent. rate of VAT. Secondly, there is the further possibility that looms large in Europe not of the harmonisation of VAT by the European Governments but the mounting pressure for the harmonisation of excise duties on beer, wine and alcohol. If these excise duties were to be harmonised and become EEC law, we should be faced with a loss of £720 million. Britannia cannot go on waiving the rules all the time when she gets into Europe. She cannot waive the rules on lorries, steel and taxes—

The organisation may find it difficult to accept a member who will not play. Of course, to a Liberal it would not matter. I will not pay attention to the running dogs on this issue, which is what the Liberal Party are, as they will be voting with the Labour Party tonight.

I thank the hon. Gentleman for his witty compliment. Let us suppose that £720 million had to be found, that because of European policy £720 million was lost to the Chancellor of the Exchequer because of cuts in excise duties throughout Europe. Where would it be found? Would it be found by putting up the rate on VAT until we had a 17 or an 18 per cent. rate on children's shoes so as to subsidise my drinking whisky in the bar? It is just not politically practicable. Therefore I say that the first fiscal error has been to have only a single rate.

The next point that I want to deal with, having exposed the fiscal dangers of this tax, is to question the logic of Government policy. At the moment all Government policy is directed to only one objective which is to make a success of the wage and price freeze and the prices and incomes policy. I cannot believe that it will be wise, when in the spring this tottering dam is shaking, to explode underneath it the charge of VAT with all the effects that it is bound to have on that policy. There can be no doubt that what has been said by right hon. and hon. Members on all sides of the House is true. It is not the total rate of inflation which is the worry. It is the impact on individual sections which could push wages higher. Whether they be right or wrong, the Government have maintained throughout the struggle with inflation that the key has been wage inflation and the cost-push inflation flowing from that wage inflation. There are many who have a different view. But why at this stage are the Government proposing to make for themselves a rod in pickle for their own policy? Why do my right hon. and hon. Friends meticulously forge a rod with which to beat their own backs?

Finally I turn to the political issue which is uppermost in all our thoughts. The Labour Opposition are at least being logical. But let us admit and let them admit secretly that they want this Government to introduce this tax. They want VAT to be a Conservative ticket. They want to be able to go round the country saying, "Voting Tory means voting for VAT." As for the Liberals, they are just trying to get in on the act for the purposes of the by-elections.

I cannot support motions which are purely opportunist on the part of the Opposition, both Labour and Liberal. But I warn my colleagues that what the hon. Member for Shettleston said is true. There is great anxiety, there is misunderstanding and there is fear that what we have seen happening in Holland where there is a much higher rate of VAT than that now proposed here could be repeated in this country. To describe what has happened in European political language, in Belgium and Holland we have seen the prolectarianisation of the bourgeoisie because of this tax. We have seen small shopkeepers going out of business and bringing themselves to do manual work. I have seen it because I have some business connections in Holland. A Conservative Government can scarcely want to be responsible for the same in this country. A Conservative Government can scarcely want to make every entrepreneur a worried man.

References to the Battle of Britain, to Dunkirk or to Trafalgar made by the right hon. Gentleman the Member for Leeds, East (Mr. Healey) are exaggerated. Nevertheless unless we are careful and unless this tax is taken back and thought out again we are in danger of imposing a tax which, if it goes as I have shown it may, could be as unpopular as ship money, as pervasively hated as the window tax and even more damaging than that on selective employment.

5.45 p.m.

I wish to cross swords with the right hon. Member for Stafford and Stone (Mr. Hugh Fraser) only very briefly. He is an extremely fortunate politician to be able to assert that 98 per cent. of the people agree with any one of his opinions. I do not know whether any other hon. Member could be so certain of his rectitude and righteousness.

The right hon. Gentleman also said that he would not join with the running dogs. Clearly he meant those who intended to support the Opposition motion. I do not know whether I shall vote for the motion. We have had a quarter of an assurance from the Government on one half of the Liberal amendment which has not been selected. It is possible that the spokesman for the Government who is to wind up the debate will be able to announce the 7½ per cent. rate which we suggest in our amendment and a very tough consumer board to police the danger of price increases when the tax is introduced.

I also remind the right hon. Member for Stafford and Stone that his amendment is incorrect when it refers to a negative income tax. His Government do not plan to introduce a negative income tax, and I am very glad about that. It is their intention to introduce a credit income tax. There is the world of difference, as the right hon. Gentleman had better understand if he wants to win the votes of his constituents at the next election. The first would be highly unpopular. The second is an act of social justice which may even win votes.

I do not retract a single word that I and my party have said in the past in support for the principle of a value added tax. We have said this irrespective of our support for entry into Europe. Our support for VAT is independent of our support for our entry into Europe. We came to the conclusion back in the early 1960s that the British tax system was a shambles and that it desperately needed reform. We said that more than any other reform needed was that of a broadly based efficient revenue raiser and that it had to be consumer orientated.

What stopped the Labour Party introducing a great number of its social reforms was the sheer unpopularity of the tax burden that it was felt necessary to impose on the British people through income tax. Whether we like it or not—and many of us on this side of the House agree that we do not like it—income tax which many of us feel to be a more just and a fairer tax than purchase taxes and consumer taxes is a great deal more unpopular, even among the lower income groups. It is sad for radical politicians to have to accept it, but it is true.

Let me destroy the myth of the re-distributive element in the income taxes. Over the years income taxes have been thought to be redistributive of income. Yet as Professor Titmus was the first to point out in a closely argued book in the early 1960s, the ability with which the rich can minimise their taxable income by means of fringe benefits such as mortgage interest and the car on the firm has meant that the real redistribution of income which has taken place as the result of a quarter of a century of highly progressive income taxation has not taken place at all. This is also pointed out in greater detail than I should dream of attempting today in the Fabian book "Labour and Inequality".

One of the reasons why our taxation system, which is supposedly based on progressive income taxes, is inegalitarian is that the taxes on beer and tobacco and national insurance contributions represent such a high proportion of the incomes of the lower paid that they outweigh the progressiveness of the income taxes. It means that the low income groups are paying a higher proportion of their incomes in tax than the middle income groups. Members of the Labour Party can find this documented clearly in that Fabian publication. It has also been argued in articles by Robin Marris in the New Statesman.

The right hon. Member for Leeds, East (Mr. Healey) says that VAT is an unjust tax and that its unjustness is accepted on all sides—

Before the hon. Gentleman leaves that last point, does he agree that none of those who have criticised the fact that the income tax system is not sufficiently progressive have suggested that the situation could be made better by the substitution of a form of indirect taxation?

They have usually argued for what I spent the last four years of the Labour Government arguing for, namely that we should right the balance in favour of the lower income groups by means of a massive redistribution through family welfare benefits. The reason why the Labour Government could not do that was that they could not impose the taxation needed to redistribute through family allowances and so on.

To return to the speech of the right hon. Member for Leeds, East and his remarks about VAT being unjust, if he is so concerned with justice I should like to hear him argue for the harmonisation of taxes between ourselves and the Common Market on such commodities as beer. If we harmonised our beer tax, there would be 4p off a pint. If we harmonised our tobacco tax there would be 13p off 20 cigarettes.

In the context of redistribution, I prefer to refer the right hon. Member for Leeds, East to an exchange which took place in the House last week in the course of the debate on the Social Security Bill. The right hon. Gentleman will find it in columns 264 and 265 of HANSARD for 28th November, 1972. The hon. Member for Rotherham (Mr. O'Malley), leading for the Opposition, argued against the Government's proposal in their new pensions Bill to pay for flat rate pensions by means of earnings-related contributions. I cannot think of anything more redistributive than that and, as I indicated at the time, I thought that it was extraordinary that the Labour Pary should oppose it. Therefore if the right hon. Member for Leeds, East argues in favour of redistribution and social justice in the tax system, he must look more closely at his party's proposals for national insurance and the contributions which have to be levied.

My difficulty in this situation is that when my party advocated VAT it was part of a wholesale reform of the taxation system. Today we are discussing only one part of that reform. The reform in total would have added greatly to the redistribution of income and to the justice and fairness of British society. VAT is only one part of that. It will have an impact on the lower paid, and that impact must be compensated for by means of a redistribution of income through higher family allowances or by means of what the right hon. Member for Stafford and Stone includes in his amendment—what I call a credit income tax—which again we have supported and indeed which we initiated.

Of course, the tax will have an impact on low-paid families. There will be new taxes for them to pay on such goods as children's clothing and children's shoes. I do not think that the impact will be very great, but it will be politically if not economically significant. That is important to those of us who want to introduce VAT.

The best way to make up for that is by increased family welfare allowances. If they are not prepared to accept the amendment of the right hon. Member for Stafford and Stone, which I would totally accept, that we should wait until a credit income tax is introduced, the Government must accept the arguments enshrined in figures that I shall now give. Family allowances were introduced in August, 1946, when a family of three children could expect to receive a weekly allowance of 10s. or 50p in decimal currency. In 1972 the figure is £1·90, but that is worth 2p less than the 50p in 1946. Its purchasing power is the equivalent of 48p in those days, because of inflation. Therefore, we should compensate the low-paid families with substantially increased allowances, an argument I have put to both Labour and Conservative Governments.

Our amendment is in two parts. Obviously, I cannot speak to it in detail as it has not been selected, but I am desperately concerned, as are many hon. Members on both sides, with the impact VAT will have on prices. The first part of my argument is that the rate should be not 10 per cent. but 7½ per cent. One reason for choosing that figure is that the legislation allows for any rate between 7½ per cent. and 12½ per cent., and therefore we should not need new legislation. I might well have preferred to argue for 7 per cent. on the ground that the Chief Secretary argued last week, as reported at column 217 of HANSARD for 28th November, that the 11¼ per cent. rate of purchase tax is the equivalent of a 7 per cent. rate of VAT.

But I do not argue purely in those terms at this stage. I make my argument in terms of macro-economics. The revenue from SET is now running at about £200 million a year, and that from purchase tax at about £1,275 million, making a total of £1,475 million for the two taxes that are to be replaced. We are to replace them by a tax on cars yielding about £125 million and VAT yielding £1,475 million, making a total of £1,600 million. Therefore, a 2½ per cent. reduction of VAT would cost about £370 million, by my calculation. The right hon. Gentleman may be able to do his own. The difference between the two totals is 0·3 per cent. of consumer spending. Therefore, there is no reason why the cost of living need rise by more than 0·3 per cent. of the total. But we all know that it will rise rather more than that.

The right hon. Member for Leeds, East said that a 2½ per cent. reduction would bring the tax yield £300 million below that of the taxes it replaces. I beg to differ; it would do no such thing. A tax of £1,600 million would replace a total tax of £1,475 million, which means an increase of £125 million. If we reduced it by 2½ per cent., or £370 million, it would mean a reduction of £245 million instead of the £300 million of which the right hon. Gentleman spoke. It is as well to get our mathematics right at this stage. The TUC has argued for a 2½ per cent. reduction on the grounds that it would reduce the retail price index, at one stroke, by 0·9 per cent.

I should like briefly to deal with the detailed effect on individual prices. Although the total macro-effect on prices of introducing VAT should not be great, we all know that it will have a major effect because of the psychological effect. Expectations will rise. That is one of the major factors in increasing inflation. Unfortunately too, many interests will be waiting to use VAT as an excuse to increase prices unjustifiably.

Therefore, when the Government say, as their spokesmen have implied in the past, that a price increase will be cancelled by a reduction elsewhere, we are all entitled to ask, "But will it? Will prices come down for those goods for which VAT is lower at present than purchase tax?" The problem is that there will be a confusing variety of price changes, which will make it easy for those who wish to take the public for a ride to make unjustified price changes. I remind the Chief Secretary of the instance in Germany, where the tax was introduced to take effect from 1st January, 1968, but hotel prices to take account of it went up a week before Christmas, before the hotels were being charged the tax. We must stamp out that kind of abuse of the system before we even go any further along the road.

Let us take the range of goods—about £4,000-million-worth—where purchase tax is now 11£ per cent. On wholesale value, according to the Chief Secretary, that is equivalent to 7 per cent., but according to the Economist it is equivalent to 10 per cent. VAT, which only adds confusion to confusion. The purchase tax covers clothing and footwear but not children's clothes or children's shoes. It includes floor coverings and most furniture, domestic hardware and tableware. But how can we tell these items from those now charged at 20 per cent., such items as confectionery, soft drinks, icecream and pet foods? Their prices should come down, but will they? How will individual consumers know which should come down, which should go up and which should stay the same? The Government can no longer say "They can shop around", or, "Competition will do the trick", because by introducing the Fair Trading Bill, so-called, they have admitted that competition is no longer the archetypal protector of the consumer that it was deemed to be in the days of Selsdon.

There is considerable confusion in consumer durables. Some are charged at 25 per cent., but not all. A 25 per cent. rate of purchase tax is equivalent to about a 20 per cent. rate of VAT. That is the Economist's estimate. The Chief Secretary may well have a different calculation. Going by that figure, we see that prices should fall by about 10 per cent., but purchase tax is not comprehensive in that range, so some prices should go up and some should go down. A small freezer costing £50 today should fall to £46, but a large freezer costing £71 should rise to £78.

So much for the confusions of purchase tax and VAT. What about SET? Service firms now pay SET, but rarely pay anything like as much as 10 per cent. on their turnover. I doubt whether any service firm pays that amount. Therefore, the cost of most services will rise, but it is impossible to calculate by how much they should rise. For example, if I query with a service operator the price he is charging me he may say one of two things. He may say "SET was a negligible part of my turnover. Therefore, I must put the price up by the full 10 per cent.", or "Yes, SET has been removed, but its removal is not immediately effective from 1st April." Therefore, even a well-informed consumer could be taken for a ride and find himself hitting his head against a brick wall.

What will happen where hotels and restaurants have charged a special SET surcharge on their bills, usually far in excess of the SET they have paid? Will it now be absorbed into the basic price with VAT charged on top, or will it be replaced by a VAT surcharge?

In trying to forestall these objections, the Chancellor said today that the Government would take steps to tell consumers how VAT would affect prices. But what effective steps will he take to protect the housewife in the extraordinary confusion that will inevitably arise? He promised some rather vague machinery as part of the policy for going beyond the 90 days' freeze. What I want to know in far more detail from the Government tonight is how that will work. If the Government told us that the rate would be 7½ per cent. and that they would set up an effective consumer board to ensure the prevention of what happened after the introduction of decimal currency and of SET, when the changes were used as an excuse for unjustified price increases, I should have no hesitation in voting, and recommending my hon. Friends to vote, in favour of the imposition of VAT from 1st April next year.

Can a rate of 7½ per cent. be afforded? I believe that it can. In 1960 taxation was about 14 per cent. of total personal income. By the end of the decade it had risen to 20 per cent., and it is now back to 18 per cent. But with the natural buoyancy of the Budget, with the effect inflation has had on taxes on lower incomes, bringing many of those who were taken out of the taxation range by the last Budget back into it again, we are getting very near to 20 per cent. The Government can easily afford the £370 million that it would cost to reduce the rate of VAT to 7½ per cent. from 10 per cent.

It is no good for the Government to tell us that they must introduce the tax on 1st April because it is part of our commitment to our entry into Europe. The right hon. Member for Stafford and Stone said that we could not go into Europe making exceptions all over the place. I do not see why not. We do not have to dot every "i" or cross every "t" of all European policy. The Italians have delayed the introduction of the tax for 14 years, and the French are constantly asking for exceptions to the rules. There is no reason why we should not do so.

The real date that worries the Government is not 1st April 1973 or even 1st January 1973. It is the date of the next General Election. They do not want to defer the introduction of the tax, because it would then come into effect far too close to the General Election, with all the short-term consequences and the short-term unpopularity.

It is not my job to worry about the Government's problems at the next General Election. I have no intention of voting in such a way as to ensure that those problems are minimised. The Government are free to have our support tonight if they wish. They may decide that they do not want it. But as the Parliamentary Liberal Party is due to be increased in size by at least one on Thursday they might start taking it into account as a numerical factor in their calculations. To gain our support, they will have to accept the two parts of our amendment which has not been selected for discussion.

6.9 p.m.

This has been a most intriguing debate. The right hon. Member for Leeds, East (Mr. Healey), who led for the Opposition, and the hon. Member for Cornwall, North (Mr. Pardoe) were very kind to the Government Front Bench, suggesting that they were only trying to be helpful in seeking to defer the introduction of VAT for 12 months. We all grinned wryly, because the quicker we get the tax into action, the quicker the bugs will be out of it and the whole thing will vanish from the public consciousness—[Laughter.] It is no laughing matter. We should be foolhardy to act in any other way.

What surprises me about this debate is that hon. Members have again zeroed in on retailers and paid no attention to wholesalers or manufacturers. Everyone seems to be concerned about what he regards as the crisis to come in the retail trade. No one here seems to believe that manufacturers will be VAT-able. Manufacturers will have to deal with inputs and outputs of VAT. I am sure that many hon. Members still have not found out just how the tax will work, and that is what gives the Opposition a chance to indulge in scare-mongering.

The right hon. Member for Leeds, East indulged in scare-mongering this afternoon, and he was scare-mongering on Friday. He sat next to me in a television studio, and on the other side of me was the Chairman of the Liberal Party. This was in a television studio in Leeds. I tried to interrupt my right hon. Friend the Chancellor of the Exchequer this afternoon. The right hon. Member for Leeds, East was accused of saying that VAT would be 20 per cent. and would be imposed on dozens of other goods. The right hon. Gentleman immediately jumped up and said that he had never said that, and that if he had it was before 1970 when he did not know the Government's proposals.

Lo and behold, the right hon. Gentleman said it last Friday when sitting next to me in a television studio, and it amazed me that today he denied it. He made his statement on 1st December 1972 in Leeds, and there is a video recording of that interview should anyone want to check it. He said that it would go on to food and at 20 per cent.

Perhaps it might help the House if I quote the words of the right hon. Member for Leeds, East (Mr. Healey). He said:

"What the Government plans to do is to double the rate of VAT to 20 per cent. to apply to food."

I thank my hon. Friend for that intervention. It was most interesting to see the situation that developed in the House over that kind of argument. Quite frankly, I believe that the people who set up television programmes know very little indeed about how VAT works.

There was an incredible incident on the "The Money Programme' on BBC2. A chemist who appeared on the programme said that VAT would ruin him, that it was terrible and that his prices would go up. If he reads the Economist of last week he will find it reported that some prices in chemists' shops will go down even if the rate is 10 per cent. Scare-mongering will continue from now until 1st April, but it will evaporate when retailers and the public find out more about it. I am delighted that the Government have decided not to put off this tax. It would be an incredible act of political folly to do so after the greatest preparation that any tax has ever had.

The Liberal Party says, as it did this afternoon and as its spokesman said in the studio, that VAT will be a fairer tax—and I believe that it will—but that this is not the time to introduce it. If it is a fair tax, the right time to introduce it must be as soon as possible.

Let us consider our economy. It is moving further and further towards the point where the man in the street will buy more and more services. The food part of his housekeeping bill is gradually becoming a smaller proportion of his income. The figures are there for anybody to see, and what is happening is within everybody's experience. To suggest that we can continue with indirect taxes when we are moving rapidly towards greater service-buying without putting a tax on service is ridiculous and wrong, and to pretend that SET was introduced to put a tax on service is also incorrect, because it represents a tiny proportion—about one new farthing—on the food bill of the average housewife, and on other services it is too small.

I regard it as urgently necessary for the Government—or the Opposition if they happen to take office—to put a tax on the widest range of services. If anyone has any doubt about whether the tax will hit the poor or the rich, he has only to look at what happens in everyday life. It is obvious that the richer a man gets, the more service he buys. It is simple logic. There is nothing clever about it. It is not necessary to be an economist to discover that.

Hon. Members have a totally and completely false impression of life because of the weird lives they lead as Members.

I am following with interest the hon. Gentleman's view about the method of levying taxes and about the rich paying more for service. That is true if one looks at it only in absolute terms, without considering relative terms. Poor persons can spend a higher proportion of their wages on services, or, for that matter, on essential goods, and if those are taxed they are hit even harder. That is why it is regressive.

That is completely, absolutely and utterly wrong. If a man earns £16 a week, only 40 per cent. of his income will be VAT-able, whereas if a man earns £40 a week he will find that 60 per cent. of his income is subject to VAT. That is not regressive. It never can be and it never will be. Those are two simplest figures that one can quote.

I was about to refer to the weird life that we lead as Members of Parliament. During the last two weeks I have had only three meals a week at home, and that is normal for a Member. We are buying service all the time, be it at our works canteen or in taxis. Wherever we go we find ourselves in tippable never mind VAT-able situations, and we buy more service than the average man in the street, with the result that our point of view is somewhat distorted. It is pretty obvious that the richer a man is, the more service he buys. It is as simple as that.

Let us consider purchase tax and the confusion that that caused. Football is said to be the poor man's sport, but I understand that in Scotland the poor man's sport is golf, yet golf clubs are subject to purchase tax. It seems that one man's leisure should be taxed while another's should not. It is incredible to suggest that our society is so impoverished that ordinary people do not take photographs, the price of which will come down through VAT. They do all these things and more, and if the Opposition do not know that it is about time they went canvassing in Uxbridge to find out how people live.

It has been suggested that an enormous burden will be placed on the shopkeeper. Last week he had to carry the can to make sure that food prices were frozen, and he will do. As a Conservative it disappoints me that the shopkeeper should feel this way, but that is how the retailer feels. During the war and during the Socialist Administration which followed it shopkeepers had to carry the burden of food rationing, and an incredible burden it was.

VAT as it has been conceived is simple, as will be seen when the penny drops in the shopkeeper's mind, when he finds out the jargon of the business about imput and output. I came across a rather intriguing example of this, again in a television studio. Thora Hird, the television star, was there and she said "Isn't this VAT dead simple? I was frightened of it until it was explained by my accountant". Once people find out how it works, they realise it is simple.

I am sorry that my right hon. Friend the Member for Stafford and Stone (Mr. Hugh Fraser) is not present. He suggested that we should do what the Irish and the Dutch have done. He asked the Chancellor of the Exchequer for four rates of VAT. Having said that having one rate will be difficult for the shopkeeper—I thought he knew a lot about how VAT worked—he then asked for four rates, which proved that he did not have an essential grasp of the simplicity of the method that is being used. In some respects the House is a very bad judge of what happens in shopkeeping.

I remember the resale price maintenance debates, when we got down to a majority of one vote though the Government had a majority of 98. Some of the stuff that was said in those debates was incredibly inaccurate. Resale price maintenance has gone except on about two items. Only last week the Financial Times talked about how well newsagents, tobacconists and confectioners were doing, yet they were the people who made the greatest protest at the time. They would certainly do that through their trade organisations.

The retailer should go to his trade organisation and do the simplest thing. He should obtain the pamphlets from the Distributive Industry Training Board. They are excellent, they are cheap and they will tell him exactly his choices of methods. If any Member has retailers asking him about this I counsel him to do that, because he will help his constituent by obtaining the right pamphlets. The pamphlets put out by the Department of Customs and Excise are confusing. They have to be technically and legalistically accurate, but they have managed to confuse the issue.

I would say to every retailer that he should not buy a fancy cash register until he has found out how the system works. I have heard of three people who have purchased these machines. If anything is a "con" job, that is it. It is unnecessary for retailers to buy cash registers with two totals. I think of what my right hon. Friend the Member for Stafford and Stone said. He wanted four levels of VAT. That means that the cash register salesman will go round saying that retailers need cash registers with four totals. All hon. Members should counsel their retailer constituents to find out the facts before going to the expense of buying fancy, unnecessary cash registers.

A lot has been said about prices. The most amazing thing said in this Chamber today came from the Shadow Chancellor. He said that in the electricity and gas board showrooms, those very holy nationalised organisations, there were notices saying "Beat VAT, Buy Now". The only item sold in such showrooms which will go up in price when VAT commences is an oven. Everything else will go down. If that is not conning the public, I do not know what is. Hon. Members opposite always believe that nationalised industries are as pure as the driven snow. I do not believe that. This is a glaring instance of where they are misleading the public.

The Economist, which has been quoted extensively during this debate, blew the gaff. Going through the list published by the Economist it is incredible how many things will be reduced in price even with a 10 per cent. rate of VAT. Food will come down by 0·6 per cent., drink by 0·5 per cent., tobacco by 0·8 per cent., fuel by 0·1 per cent., furniture by 0·4 per cent., radios and electrical goods by 0·3 per cent., books and papers by 0·4 per cent and chemist's goods by 5·3 per cent. Last week on television a chemist said that his goods will go up in price. I hope the gentleman concerned reads the OFFICIAL REPORT. He will find he was telling an untruth. He must have misunderstood the whole situation.

My mind goes back to June, 1970 when we were told: "The Tory Party will cut prices at a stroke; food prices will come down; prices will fall." Last week I heard that food prices had risen by 22 per cent. Can the hon. Member wonder that the general public do not believe the promises made, whether coming from the front or back benches?

I am glad of that interruption. If the hon. Member was a retailer he would know a lot more about what has been happening to prices. He knows that his party has suffered from this. If there is a world rise in commodity prices we cannot protect the man in the street from those prices.

I agree. This is what the Labour Party said prior to June, 1970. In June, 1970 the Prime Minister said that the Tories would cut prices at a stroke and that food prices would be reduced. He knew then that world prices had an effect on food prices—or did he not?

The expression "Cut prices at a stroke" is a political football. We had been winning a war on prices until wage demands got out of hand. There has been a colossal teach-in during the last three months. Some years ago the hon. Member's leader said "One man's wage increase is another man's price increase". That is the most honest thing he ever said. Wages are pushing up prices.

One fact has escaped the attention of the House. There will be a 20 per cent. tariff cut on 1st January. I am amazed that the hon. Member who spoke on behalf of the Liberal Party made no remark about that. Surely a Liberal should make remarks about that subject.

Many hon. Members, and certainly the man in the street, do not know that purchase tax goes on after the import duty is added. If an item comes in at £100 and there is a 20 per cent. import duty, the purchase tax goes on the £120, not the £100. The same will apply to VAT. By the time we arrive at 1st April, and 1st January as regards manufactured goods, manufacturers will be forced to keep down the prices of goods manufactured in this country, since many Continental designs are good, at reasonable and competitive prices.

Hon. Members think that shopkeepers will not keep prices up. There is no price ring amongst retailers. There is no secret society among them. Vigorous young men who are coming up will trade hard. If hon. Members do not believe me, I guarantee that on 1st April advertisements will appear in newspapers from Tesco, Curry's, ASDA, in the North, and Comet Discount Warehouses with headlines saying that consumer durables have been cut in price, and they will demonstrate by how much. If Comet does so, the rest will have to follow. It is simple. That is how competition works in the high street. The customer will be made aware of it.

In New York, when retail price maintenance was abolished there were enormous advertisements giving notice of reductions. That is why there is no risk of price cuts not being passed on to the consumers.

One must look at the whole of the economy. When one looks at purchase tax and at the way politicians have fooled around with it since the war, it is crazy. Value added tax will not mess factories about.

Hon. Members speak of unemployment in their constituencies. It amazes me that they never connect this with the imposition of purchase tax, the chopping and changing, where the sales of a particular product are knocked sideways. With a 10 per cent. VAT rate levied on a wide range of goods, even if we go in for Keynesian economics, jacking up the rate of levy, it will not deflect from what is happening in the market place. The choice for the consumer will be far better.

Finally I would like to say something I have had in my mind for some time. I rarely believe everything of what economists say about the price of food. I make up my own mind about some things. I am prepared to stick my neck out. After seven years we shall reach the food prices obtaining in the Common Market. We know what is to come. The price of our food will be 5 per cent. cheaper than that in France because our distribution system is better. Having read the Government White Paper, and understanding what is happening in Brussels, it seems that we could have at least a plateau in food prices.

Five million fewer farmers in Europe must mean more productivity, and I have never seen a rise in productivity yet which was not eventually shared out in the community in which it occurred. Those concerned might be able to hold it for a while, but it is eventually shared out. The White Paper said that agricultural production in this country was going up by 8 per cent. I believe that the White Paper was wrong and that our farmers will increase production by more than 10 per cent.

With fewer workers on the farms, because our farms are very mechanised, and with the way in which farms in the Common Market are being modernised, I am convinced that in seven years we in Europe have an incredible chance of having level food prices for quite a few years. Then we will see the benefits which flow from our entry of Europe.

6.30 p.m.

The hon. Member for Brighouse and Spenborough (Mr. Proudfoot) is always optimistic. In spite of his experience at the hands of his own Government, who have presided for two years over rising prices, he believes that further doses of the same medicine will make everything lovely at some future date. He even believes that the addition of VAT, which every economist agrees will have a disastrous effect on the cost of living, will magically bring it down.

If ever the hon. Member tells us that we are wrong, it gives us great encouragement because it proves that we are not. He is a great believer in the simple creed of the Conservative Party. He would probably have carried great conviction in 1908, when the doctrine of ferocious competition was believed and to some extent was workable, before the advent of huge monopolies. But those days are past, and the hon. Member's idea that by some means which he does not spell out the consequences of this tax will be that prices, far from increasing, will go down, carries very little weight.

But one thing that the hon. Member said is perfectly true. He paid a long overdue tribute to the selective employment tax. I was one of the very few backbenchers who supported that tax at the time of its inception. It is time that that tribute was paid. The hon. Member said that the effect of selective employment tax upon food was minute. So it was.

I am not greatly in favour of indirect taxation. The socially just form of taxation—I accept the view of the hon. Member for Cornwall, North (Mr. Pardoe)—is not popular. When something is not popular, sometimes it is one's duty to explain it and try to make it popular. Direct taxation is for most people the best and most just form.

But if we are to have a spread between direct and indirect taxation, selective employment tax is the most socially just form of indirect taxation that this country has yet seen. I very much regret that the Government have seen fit to adopt this very bad form of taxation—value added tax—in its place. I have no axe to grind for purchase tax except to say that it is also selective and is mainly imposed upon luxury articles and not upon the necessities of life.

Not only have the government gravely depreciated our currency: they have also depreciated the value of words. When they describe anything as a reform, we begin to shudder because we know that what they mean by reform is making things worse. This is particularly true of this measure, which they have described as taxation reform. What they mean is that they will take away taxes which are selective and therefore just and substitute taxes which are unselective and therefore unjust. So injustice becomes justice in the mouths of the Government and fairness becomes unfairness.

The value of political debate is also gravely depreciated when it is impossible to find common ground about what words mean. This makes it very difficult to discuss these issues in terms which can be comprehended outside the House, since we are using words to denote opposite concepts.

The right hon. Member for Stafford and Stone (Mr. Hugh Fraser) said that value added tax is regressive. There can be no doubt that this is so. I would have supported the hon. Member's amendment if it had been called. I am sorry that he is not here to hear me say that. However, if I see him I shall tell him that, since we would have supported his amendment; and since the objects are very similar I can see no reason why he should not support our motion, which seeks to defer the impact of the tax.

I have said enough to show that I do not think much of this tax, which is bad and complicated. Putting that on one side, however, I should like to address myself to the proposition that, whatever we think about the tax, its application should be deferred. Much has been said about the Civil Service and the Customs and Excise, but one thing which would be generally agreed—not even the Financial Secretary would disagree about this—is that even if the hon. Member for Brighouse and Spenborough can persuade himself that this is a simple tax, not many people will believe him.

The Customs and Excise does not believe it to be simple. As the hon. Member said, in its leaflets it has done its best to explain it simply but has been unable to suggest that it is easy to operate. The Customs and Excise itself finds it complicated.

Since the opinions of civil servants have been bandied about in this debate, perhaps I might say that the Customs and Excise would certainly be in favour of this motion. It would be very glad to have a few extra months so that it can be seen whether there are any more technical imperfections in this proposal and whether changes should be made. If the tax goes through as the Government propose—I believe that they want to get it on the Statute Book quickly and that they will discover their mistakes later—this will put a great strain on the administrative machine and the tax will be very unpopular.

From the political point of view, there is something to be said for this. The tax will make the Government unpopular and, politically speaking, that would be a good thing for us. But the reason why we are asking them to put off the tax for a year is that we are conscious of the consequences for those we represent. Therefore the political advantage must be put on one side because of the practical consequences.

The Chancellor tried to suggest that this was a mere substitution of one sort of tax for another. At no point in his speech did he mention that value added tax will be imposed in areas which have hitherto borne no tax. This is one point which has been completely glossed over by hon. Members on the Government side. The Chancellor made a passing reference to the point but he tossed it on one side, suggesting that it was of little importance.

It has been said—the hon. Member for Brighouse and Spenborough made much of the point—that we on this side are scare-mongering, that we are making the tax out to be far more difficult and complicated than it is. In fact, there is some evidence about it. The Arts Council engaged a notable firm of accountants, Peat Marwick Mitchell and Co., to examine the application of VAT to the theatre, and it made a thorough study of the impact of the tax in this area.

I went to a conference in Birmingham at which a young representative of that distinguished firm of accountants sought to explain to the assembled group of theatre managers what the consequences of the tax would be for them. He explained the matter in detail. He explained it lucidly, with slides and cards, expounding the matter with skill and not entirely without humour—so much so that he had them laughing at the consequences of trying to operate value added tax in the theatre world. But then one manager pulled them us sharply, saying "You are laughing now, but you will have to try to do it in practice, and some of you who are laughing here may well be out of business, with your theatres closed, this time next year or, at the most, the year after".

Since the war the theatre has been freed of tax by successive Governments. The entertainment tax has been removed, and both sides of the House have, over the years, recognised the theatre as unsuitable for this type of taxation. It is an area in which the impact of purchase tax and SET has been very small. Therefore, VAT will be a new tax imposed upon an activity hitherto free.

The Chancellor tries to deceive the House, it seems to me, if he gives the impression that VAT is unimportant and can be carried easily. It cannot be carried easily. But the right hon. Gentleman then says "I shall give the Arts Council extra money if it can be shown that, as a consequence of the imposition of value added tax upon the theatre, the operations of this or that company are prejudiced or put at risk". But the duty of allocating any extra money which, apparently, the Chancellor is willing to find will be handed over to the Arts Council. The Arts Council will have to decide in what circumstances a company has been put at risk by value added tax. It will be an almost impossible task.

How can it be proved, if a company runs into difficulties, that it is the result of VAT? It might be the consequence of bad choice of plays, of bad production, of bad acting, of a disinclination on the part of people in the area to go to the theatre, and so on. There are all sorts of possibilities. But apparently the onus of proof will be on the company to show that its financial difficulties are the result of value added tax, and only then will the Chancellor be prepared to put his hand in his pocket and find money to bail it out and keep it in business.

What about the commercial theatre, which still occupies about half the total area of the theatre world? The Chancellor has no sympathy there. There will be no extra money. If companies go out of business, they go out of business and that will be that. Part of the commercial theatre in the West End of London can cope very well, I have no doubt. A prosperous show in the West End can handle value added tax without trouble. But where companies are surviving with difficulty, mainly outside London, the imposition of VAT will have the gravest effect and could make all the difference between a company being able to carry on or having to close.

Thus, what the Chancellor is doing illustrates the unfair nature of value added tax. He is penalising those who are in difficulty whereas the prosperous will be able to shrug it off. This is further illustration of the way in which, in principle, it is a bad tax.

No doubt it would be most unusual if the Government were to accept the motion, but I urge them to think again. Let them note what the Opposition say. Let them consider the possibility of giving the Customs and Excise more time. Let them give themselves more time to consider whether they have gone about it in the right way. Let them consider again the case which has been put to them by those who have made representations for exceptions in one industry or another. It is possible for the Government to think again. It would be unusual, perhaps, if they accepted the sense of the motion, but it would be very wise on their part if they did.

6.46 p.m.

I agree with hon. Members on the Opposition side to the extent that, on the basis of completely objective studies which have been made by academics, the introduction of value added tax will probably raise prices by a small amount. The right hon. Member for Leeds, East (Mr. Healey) quoted the figures given by the National Institute of Economic and Social Research, and the figure of 1·1 per cent. to which he referred has, I agree, a certain academic validity. But, as so often happens, hon. Members opposite are inclined to choose the figure which suits their argument best, and what the right hon. Gentleman failed to point out was that the calculation made by the National Institute took a number of assumptions into account.

One assumption was that retailers would make sure that they retained to their own advantage some of the SET which they had been paying in previous days. I was delighted to hear the robust phrases used by my right hon. Friend the Chancellor, and I have no doubt that next spring the Government will be extremely effective, particularly in legislation which they are bringing in outside the value added tax system, in ensuring that the whole of the SET saving is recouped by the consumer.

We are all delighted when we hear the Chancellor making robust noises, but is not the hon. Gentleman aware that, at the Chequers and Downing Street meetings, which the Chancellor attended, the estimate put forward, with Government endorsement of the cost of introducing VAT at 10 per cent. would be an increase in the cost of living of about 1 per cent.?

Yes, "about" 1 per cent., but I was quoting entirely non-partisan figures, and the right hon. Gentleman could say, perhaps, that the figure to which he refers is a Conservative figure. I was about to explain that the 1·1 per cent. has to be qualified. If one accepts, as I do, that the retailer will be compelled by the Government to play fair with the public, the increase will be nearer 0·8 per cent.

There is a further qualification, that the consumer makes no change in the pattern of his consumption, Inevitably, however, there will be a marginal change in the pattern of consumption, so that the figure is likely to be nearer 0·7 per cent. The right hon. Gentleman speaks of 1 per cent., but I am asking him not always to choose figures which make one's political argument appear stronger. The figure is more likely to be 0·7 per cent. or 0·8 per cent.

In any event we are talking about fairly small amounts. I think it important that responsible and senior political figures on both sides should not make alarmist statements to the effect that prices will rocket as a result of the introduction of value added tax next spring.

The other matter on which I find the attitude of the Opposition not entirely correct is their insistence that value added tax is a regressive tax. That was referred to by the hon. Member for Putney (Mr. Hugh Jenkins) and my right hon. Friend the Member for Stafford and Stone (Mr. Hugh Fraser). It appears to be believed almost as an act of faith by some hon. Members, without looking at the figures, that value added tax as proposed is a regressive tax.

I am not arguing whether indirect taxes are regressive or progressive. It can be argued that indirect taxes in certain cases are regressive. What we are discussing is whether the move from purchase tax and SET to value added tax as proposed is, of itself, more regressive or less regressive. I hope I can demonstrate by a few simple figures that that is not the case.

Before the hon. Gentleman quotes his figures, perhaps he will accept that the case which he is about to prove is not one which I was arguing. I was not making a comparison between the two forms of indirect taxation. Neither, I believe, was his right hon. Friend the Member for Stafford and Stone (Mr. Hugh Fraser).

The system which we are proposing to remove is the system which we inherited from the previous Government. It is a system which that Government evidently felt was acceptable to them. All I wish to argue is that the new system of indirect taxation, far from being regressive, is on balance progressive.

It is convenient to isolate specific items, and such examples have been produced from both sides of the House. But I should like to consider the broader picture and take three or four broad items of expenditure. For the man in the street the principal feature of the change from a combination of purchase tax and selective employment tax to value added tax is, first—I believe that these figures are not disputed by hon. Members on either side of the House—that the cost of food will fall by about 1 per cent. That can be put another way. It can be said that the cost of food will rise 1 per cent. less than it would otherwise have risen. I hope that is fair. However, we are not discussing inflation but the mechanics of VAT.

I think the right hon. Gentleman will agree with my second and amended statement that the introduction of VAT will mean that the price of food will rise 1 per cent. less than it otherwise would have risen.

That is the finding of the National Institute of Economic and Social Research, with which the right hon. Gentleman appears publicly to have so much sympathy when the figures suit him. However, I believe that to be the correct figure.

I hate to interrupt the hon. Gentleman again as he is putting his points so charmingly. I said that the estimate given by the National Institute of Economic and Social Research understated the rise because it assumed that businessmen and traders would honour their obligation to cut their prices in relation to the cut in purchase tax and SET, and some of the other factors, such as the Government's advice that traders should increase their prices to the nearest halfpenny above if going to the nearest halfpenny below would mean no tax. But it did not know that that instruction was to be given. If I thought that all traders would fully reflect in their prices the savings they made with the disappearance of purchase tax and SET, I should be going against all the experience of the first cut which we had in SET last year.

The right hon. Gentleman and I are agreed that there is the figure of 1 per cent. However, he qualifies it by the fact that he has not got such a straightforward interpretation as perhaps I have of the basic honesty of the British retailer.

The man in the street will face no change in his rent and fuel bills. Two other important features, taking a broad realm of consumer expenditure, are clothing and motoring. I will not deny that clothing is likely to rise by about 2 per cent. and motor cars by about 3½ per cent.

So food will go down and rents and fuel will remain the same.

We are isolating the discussion to value added tax. Clothing and motor cars will go up in price. What does that mean in terms of regression and progression in the fiscal sense? I should like to give two simple sets of figures, taking households with incomes of less than £10 a week and households of more than £80 in order to exaggerate the argument. However, the figures in between run up in a straight line.

Families with a £10 a week income spend 30 per cent.—[Interruption.] I agree that £10 is a low figure but we are discussing the academic provisions of the tax. Such families spend 30 per cent. of their weekly income on food. People who earn £80 a week spend 20 per cent. of their income every week on food. Who can possibly suggest that in those terms value added tax is a regressive tax? On the contrary there will be a reduction in taxation on the item which accounts for a very much larger proportion of the poor man's budget than of the rich man's budget.

The same figures can be applied to rents and fuel. A man earning £10 a week spends 20 per cent. of his weekly income on rent. The rich man spends only 9 per cent. The poor man pays 13 per cent. of his weekly earnings on fuel and the rich man spends only 4 per cent. How can anyone by any remotely logical argument suggest that value added tax is a regressive tax?

I will now deal with clothing and motor cars. There has been a lot of discussion in the House about value added tax increasing the price of clothing. I do not deny that. But one cannot discuss these items in isolation. The significant fact which the right hon. Gentleman must recognise is that in the poor man's budget clothing accounts for only 5 per cent. of his total weekly spending, whereas for the rich man it is 10 per cent. If the price of clothing is increased, does that mean that value added tax is a regressive tax? It may be a bad tax but it cannot be argued that it is regressive.

If the cost of buying and running a motor car rises significantly as a result of the introduction of value added tax, that may be a bad thing but it is not regressive, because the poor man spends virtually nothing of his weekly income on running a motor car while the rich man spends approximately 13 per cent. These examples are exaggerations but one can argue from exaggerations much more conveniently—

What all these calculations leave out of consideration is the total amount of a man's income which is spent and the total amount which is saved. The totality of the poor man's income is spent every week but the bulk of the rich man's income is put on one side. That makes a great deal of difference.

The hon. Gentleman is returning to the general discussion on whether indirect taxes are regressive compared with direct taxes. That is an arguable point. However, I have demonstrated quite simply that we are changing one method of indirect taxation for another method of indirect taxation, and that that change of itself is not regressive.

The simple final figure is that a man earning £10 per week will find that 65 per cent. of his weekly consumption will be either zero-rated or exempt; the man earning £80 per week will find that only 30 per cent. of his weekly expenditure is either zero-rated or exempt. Who could possibly argue that this transition from one method of indirect taxation to another is a regressive move?

On that basis everyone will want to be on £10 a week and to give up his £80 a week.

7.0 p.m.

I am grateful for the opportunity of intervening in the debate, mainly On the question of the effect of VAT upon sport, but also, speaking as the president of a trade union, I must say to the hon. Member for Truro (Mr. Dixon) that I thought that in the last sentence of his speech the ludicrous nature of his argument was exposed when he spoke of people living on £10 a week. Which man in Britain at present lives on £10 a week, and therefore, would be eligible, in the terms of the hon. Gentleman's argument, for a nil increase in the amount of taxation he is paying? Perhaps the hon. Gentleman was referring to old-age pensioners.

I was deliberately discussing extremes. There are relatively small numbers of households which have an income of less than £10 per week—that being partly due to the changes which have come about since the Con- servative Party came to power; either through increased old-age pensions or, possibly, through inflation. Equally, not many people in this country have incomes of more than £80 a week. I was illustrating from those two extremes the general pattern of consumption. If one examined the cases of households with incomes of £20, £30 and £40, the whole way along the line, one would find that the pattern went up and down as I have indicated.

The hon. Gentleman is obviously capable of quoting anything from his own statistics and influencing himself in any direction. I shall return to the main burden of that argument.

The other small point I take up with the hon. Gentleman—it was also made by the Chancellor—is about the honesty of retail traders. I have no reason to think that, on the whole, retail traders are dishonest. I do not know them sufficiently well. But I fail to see how we can equate the two arguments which the hon. Gentleman and the Chancellor are using. On the one hand, they say that when decimalisation was introduced there was a gross abuse of the system, which put up the prices of our foodstuffs. That was the Chancellor's argument. It was the Opposition who were to be blamed for that. But now the Chancellor and the hon. Gentleman tell us that the same people who, presumably abused decimalisation are suddenly transformed characters who can be relied upon not to repeat the process when it comes to VAT.

That argument is absolute nonsense. I wish that the Government and Conservative lion. Members would get together and think out what it is they want us to believe: either that traders are honest men and will not abuse VAT and, therefore, did not abuse decimalisation; or that they are dishonest men who abused decimalisation and, therefore, can be relied upon to repeat the process on this occasion. Hon. Members on the Government side of the House are taking up an illogical position.

In the middle of the Chancellors interesting party-political speech this afternoon there was an extraordinary Freudian moment. I interrupted him in the middle of his discourse upon how old-age pensioners would benefit as a result of the abolition of purchase tax on television sets. I asked the right hon. Gentleman how he equated that—as he was talking in terms of justice for old people—with the fact that he was about to impose, for the first time, a 10 per cent. tax on the use of their telephones. I was trying to make the point that such people buy television sets once in a lifetime, almost, and usually before they retire, whereas they buy telephone calls almost daily. We had an extraordinary Freudian situation when, although I asked that question, I got a reply about sport, which question I had not asked. I do not know whether it is within the rules of order to say that I asked about telephone calls and got the answer "balls"—albeit the Chancellor was talking about footballs, which he said were subject to 55 per cent. purchase tax. Undoubtedly the Chancellor's reply was Freudian because he knows that the whole of sport is up in arms about the prospect of VAT.

The hon. Gentleman says that I am wrong, but I can speak about sport. The whole of sport is up in arms about the prospect of VAT. The Financial Secretary shakes his head. Perhaps he would care to say which part of sport is not up in arms about the prospects of VAT. The hon. Gentleman does not accept my invitation to intervene.

It is true that there is an element in sport which is getting a lot of publicity and is upset about the prospects. However, I give the hon. Gentleman an example from a sport which my hon. Friend the Financial Secretary and I took part in, and that is athletics. In athletics, every competing athlete stands to save between £2 and £3 a year on his kit and the total loss to the Amateur Athletic Association will be approximately £1,500. There are about 20,000 practising athletes who will save about £60,000 and the AAA will lose £1,500.

I shall come to athletics shortly. But those figures are quite ludicrous. No athletes in this country spend any-think like that amount on their kit in order that when their savings are evaluated they have a saving of £3. I challenge the hon. Gentleman or the Financial Secretary, who has had the distinction of representing Britain at athletics, to say so. I am not surprised that it was a reserve team that had to come to the House to deal with this matter and not the first eleven.

I must return to the question of balls because they are very important. I do not intend to move away from the subject of the 55 per cent. purchase tax on them. Football clubs such as Aston Villa, Leicester City—

—Liverpool, and West Ham, are all objecting about this matter. According to the estimates, VAT will cost Aston Villa £35,000, Leicester £30,000, and Liverpool £50,000. This is a serious matter for the clubs, all of which happen to be in the First or Second Division. For Third or Fourth Division clubs it would be an even more serious matter.

I take the Chancellor's point that footballs are taxed at 55 per cent. Most football clubs buy about 30 footballs a year. Assuming that the Chancellor is right, that they will make a saving of £3 on each football, which is quite a lot, the net saving from the abolition of purchase tax on footballs for these great football clubs is about £100 a year. They will have to set that saving against the £50,000 they will pay in VAT. The comparison is quite ludicrous and I am surprised that the Chancellor of the Exchequer trotted out that sort of figure. That brings me directly to the Financial Secretary of the Treasury because last Saturday week he said on a sports programme that the campaign being conducted by the football clubs was grossly exaggerating the case. He said in the broadcast that the VAT would be 10 per cent. He complained about the "outrageous" attitude of the football authorities in their campaign and he had the nerve to say that the Football League increased its prices last year by one-third in order to offset the effects of VAT.

I should like to know on whose authority he said this, since on the Saturday before on the Leicester City programme, which I have already referred to, the club, which is the club of the President of the Football League, was making it quite clear that it did not increase its prices to take account of VAT. The club could not have done so because it had decided its prices in the early summer and VAT does not come into effect until next April. Perhaps if the Financial Secretary is to wind up he will explain what he meant. If I have misrepresented what he said it is because reports that I read were inaccurate. I have tried to get an accurate copy of what he said from the Library but there is no transcript there.

Having had the good fortune to hear the Financial Secretary in his broadcast to the nation I can say that it would not be unfair to suggest that he appeared to be flummoxed when the question was put to him, at least as much as one could gather from a radio interview about the position of football clubs in the Second, Third and Fourth Divisions.

I can imagine that the Financial Secretary would be under considerable difficulty in trying to tell us how football clubs will survive with this additional impost upon them. I wish to widen the argument beyond what the Financial Secretary said. I have tremendous sympathy for the Football League clubs. Football probably has the greatest spectator following of any sport, particularly in view of the numbers who watch it on television in the evenings, and therefore the health of professional football is of profound importance. It is not, however, the only sport which is affected and we shall be making a very grave mistake if we confine the argument about the ill effects of the tax to professional football.

If the Financial Secretary were accurately reported when he said that the Football League clubs had put up their prices in anticipation of VAT—an allegation I do not accept and one which, when I put it to the directors of two clubs in a club boardroom last Saturday, was greeted with howls of derision—he must explain what would be the position of football clubs which are not covered by the Football League.

Certainly like Enfield and including leading amateur clubs all of whom presumably will be affected. I do not believe that they will get exemption under the £5,000 limit and I believe that they will find themselves in considerable difficulty.

The governing bodies of 16 sports, including athletics, have now combined to campaign that sport should be excluded from VAT. There is growing evidence of the very difficult situation into which the sports will be put.

Perhaps I might continue the relay team which my hon. Friend the Member for Enfield, West (Mr. Parkinson) started. I am glad to have the endorsement of the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) of the statement that it is not justifiable for any football club to say that it has had to put up its prices because of VAT already. I hope that he will also agree, because there have been exaggerated statements, that no increase greater than 10 per cent. and, indeed not as great as 10 per cent. would be justified because of VAT.

I certainly agree that no increase greater than 10 per cent. would be justified. If it is of any comfort to the Financial Secretary, I am prepared to agree to that and I know of no one who has said anything to the contrary. Our case is that the 10 per cent. tax is the reimposition of the entertainment tax which both sides of the House agreed to abolish a long time ago and this will be the last straw for many clubs.

A club could pass on a 10 per cent. increase on the gate if there were thousands of people outside clamouring to come in. There will be no problem about increasing the cost of the Cup Final tickets by 10 per cent. but clubs like Darlington, Barrow, Halifax and Walsall, all of which have tremendous financial problems at the moment, will not be able to pass on the 10 per cent. Their experience in putting up their prices this year has been to see a considerable reduction in their gates. Another 10 per cent. will be the last straw. The majority of the football league clubs fear the effects of the tax and that fear is certainly felt by the non-league clubs and the amateur clubs for whom we should be showing concern.

Is this not the very argument we had during the Finance Bill debates before the clubs put up their prices by a great deal more than 10 per cent.?

No. They put their prices up by much more than 10 per cent. before because of the effects of inflation. If I quote the Financial Secretary accurately from his broadcast he said that they had put up their prices by one-third.

They put their prices up from 30p to 40p which was what was recommended, I understand.

I believe that the Chief Secretary is correct and that the clubs put their prices up by one-third. I am not suggesting that the extra 10 per cent. will cause a club like Liverpool to go out of existence, even though it will have to pay about £50,000, but the effect on small clubs will be considerable. British sport is based on the breadth of the sport, on the number of clubs and because it is the breadth of the sport which matters the football clubs fear the damage that the tax will do to football.

I am interested in the hon. Gentleman's argument on the ball situation. It appears clubs will save on the purchase tax on balls. The hon. Gentleman is arguing about the 10p on admission charges. Many of the clubs are finding that other things will go up such as things which they have to buy, repairs and decoration, and the upkeep of the ground. All those things will be affected as far as their costs are concerned.

The Financial Secretary, in leading the previous debate, spent a lot of time discussing with me the question of the offsets or inputs. I tried to follow this carefully. We have tried to analyse what the right hon. Gentleman said in the last debate. Although he says we have not got it right, I think we are nearer the mark than he is, if he does not my mind my saying so, because although it is perfectly true that there will be some offsets against VAT they amount to nothing like the amount of VAT which has to be paid by football clubs on the admission charges. That is the considered view of everybody in football.

I do not want to get involved in the problems of the transfer fee but it reveals the ludicrous nature of this tax when we are told that what is to happen with the transfer fee is that when club A buys a player from club B it will pay 10 per cent. of his transfer fee in VAT, but it will then be allowed to offset that 10 per cent. against the VAT it takes at the gate which means that it becomes a book-keeping error. Everybody in football thinks this is rather a ludicrous procedure. It will certainly cause more employment for accountants and people of that sort.

However, it happens to be the case that a large number of clubs—especially with directors who arc financing football out of their own pockets—will have to pay 10 per cent. more on the transfer fee. If they buy one of the better players in the country and have to pay a considerable amount of tax, they will not be able to offset that amount of VAT against what they take at the gate. Certainly in the case of our Third and Fourth Division clubs, which have been supported financially by their directors, there will be an additional burden on the directors.

I want to move on to a few other sports for a minute or two because I said that there were 16 different sports which have come together on this question of VAT. They include not only the professional sports, but also a large number of amateur sports. Taking athletics and swimming as examples, those sports will be gravely handicapped. They will not be eliminated by the £5,000 bottom limit. Generally speaking, they take more than that at their championships, and it does not seem to them that they will be liable for exemption in that category. These are sports which do not get a considerable hand-out from the Government.

If the Chancellor wishes to redeem himself a little with sport, perhaps he could comment on what Government support for sport there will be in the future. If the Financial Secretary talks to us about the inputs, and so on, then we are entitled to ask him what sport will get in return for the considerable amount of money it will provide for the Exchequer.

In many of the Common Market countries amateur sport is often exempted or zero-rated. Even where in some of the countries VAT is charged on its full amount, as for example in West Germany, the Government's help to sport is £65 million a year, or thereabouts. Our sporting friends say, quite rightly, that if they have to pay 10 per cent. VAT on sport, that is a bitter pill, but perhaps they could swallow it if they were told that it was the intention of the Government to provide financial assistance of that magnitude for sport in this country, and especially for football.

What we did in starting the Ministry of Sport in my day was only scratching the surface. My successor is now not doing much more. He is doing what I did plus a bit of an increase to cover the cost of inflation in the meantime. Incidentally, out of what he is now getting he is having to pay for the administration of all the schemes, which was a cost not previously imposed upon me because the cost of the civil servants who administered the scheme was borne on the votes of the various Departments concerned. There is considerable misgiving about the effect that this tax will have on the whole question of sport.

I want now to turn to the second part of my argument.—[Laughter.] I do not know why that should cause hilarity from hon. Members opposite, but I am glad to be able to amuse them in the long hours of this night.

I want to turn to another remark made by the Chancellor of the Exchequer which was the effect on trade unions of this tax. He was trying to contrast the attitude of the Opposition with the attitude of the TUC. That was the short point he tried to make. Apart from being a sportsman, I happen also to be a member of a trade union in this country, APEX, which voted by over five to one to support our entry into the Common Market. Therefore, it is a trade union, as far the the Government is concerned, with impeccable qualifications.

Nevertheless, I would like the Chancellor to consider the situation which the executives of my union are in as a result of all the measures which the Government have imposed upon us. I am bound to tell him that in our consideration of what attitude we should take on the Government's present policies, the imposition of VAT and other Government impositions were foremost in our minds. Notwithstanding our general support for entry into Europe, we are totally opposed to the principle of VAT. Indeed, we see its continuing imposition in the present economic climate as positively harmful to the Government's own declared policies. This is where I come back to what the hon. Member for Truro was saying when someone interjected to ask him to talk about rents. The words he used were that he did not wish rents to be isolated during the course of this discussion.

That is a convenient argument for Government supporters to use, but it is not an argument that any trade union leader can possibly accept. What a trade union leader is faced with in deciding his attitude to the Government's economic policies, and especially the imposition of a wage freeze, is the totality of the Government's economic policies. He has to take them all together because it is the total effect of those policies upon the life of his members that causes him concern. Therefore, no trade union leader can say that he will leave out of account the effect upon his members of massive rent increases, such as many of our members have already had, and the further increases to which we are told we have to look forward in the very near future. Incidentally, nor can any trade union leader isolate his membership—in my own case they are mostly clerical, technical, administrative and computer staff, people of that sort—from his thinking about the effect of increased mortgage charges upon our members, which is very considerable indeed. One cannot isolate them from the other charges affecting food prices, which are increasing also because of the Government's change in food support policy.

In this connection VAT, even if it produced only a 1 per cent. increase in the cost of living—which seems to be the figure agreed on both sides of the House—is yet an additional reason why it is impossible for us to accept the Government's policy for prices and incomes, although we believe in a prices and incomes policy. It is grossly unfair of the Government to add an additional burden to the cost of living at the same time that they are trying to get the trade unions to work out with them some form of new prices and incomes policy. The Chancellor gave a long list of consumer durables which he said would go down in price. But if one analyses that list and has regard to the overall average of 1 per cent. increase, one is driven inescapably to the conclusion that there will be a shift of emphasis away from the more luxury articles, if one can use that term—and I do not regard television sets and cars and so on as luxury articles—to more essential day-to-day commodities. This will put up the cost of living for the lower paid, particularly in the kind of area I represent, by much more than 1 per cent.

In the circumstances of their present economic policy, and in the context of their own ideal of evolving a voluntary incomes policy and trying to control inflation—I agree with the ideal although I disagree with the means they are using to try to achieve it—the Government are doing a great disservice by proceeding with the imposition of value added tax, which is unfair and will be unpopular and quite unacceptable to the trade union movement.

7.32 p.m.

The hon. Member for Birmingham, Small Heath (Mr. Denis Howell) has rightly pointed out from his long experience of sport that professional football will suffer considerably from the changeover to value added tax. Whenever one has a change from one form of indirect tax to another, some people pay more and some less. We know that in this case some items will be considerably cheaper. I am concerned solely with the general effect of the changeover from purchase tax and selective employment tax to VAT. My right hon. Friend the Chancellor rightly said that there is to be no general increase in the tax burden. If one can get that across to the public, it will be of benefit in helping people to protest against any general increases in prices. When a changeover of this sort will result in some confusion, all possible steps should we taken to minimise the effects.

A great deal has been said in the debate in support of VAT as a form of taxation. The Richardson Committee, which was the only independent committee to look into the straight proposition of a change from purchase tax to VAT, concluded that the purchase tax system afforded a more logical, efficient and economical means of consumer taxation than value added tax. Again, the report of the NEDC in 1971, when it was specifically asked to look into the consequences of VAT, concluded that there would be a considerable additional burden of administration, both for the Government and for traders.

Whether VAT be a good or bad tax, it is obvious that entry into the Common Market makes it necessary for us to have it whether we light it or not. In these circumstances it is crucial to take all possible steps to limit price rises which stem from it. I was reassured to hear my right hon. Friend say that positive steps would be taken to give all possible information to shoppers and housewives about the changes which should take place. I was even more reassured to hear what he said about phase two of the prices and incomes policy.

I have specific questions to put to my right hon. Friend. We know that there should be no general rise in prices, but will that be the case? In the transfer to decimalisation, there should have been no general rise in prices but the confusion created an opportunity for prices to slip up. It was not just the retailer who was responsible, but the manufacturer and the wholesaler—everyone was in it. For price increases which are always difficult to put across, the changeover to decimalisation was the ideal opportunity.

To what extent does my hon. Friend think that cost inflation was putting up prices anyway? He refers to a change like decimalisation, metrication or possibly value added tax as a point where people put up prices, but would they not have had to do so even if these changes had not been made? Is my hon. Friend satisfied that the increases were due to decimalisation and not to inflationary pressures?

In any situation it is impossible to isolate one factor and say that it caused particular prices to rise. Football clubs have their problems, for example. If some clubs close down next year it will be impossible to say that VAT was the cause or even that it had anything to do with it. We do not know. It is impossible to isolate any one factor.

If my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) reads the Catering Times for this week, he will see a four-page supplement in which the splendid ice cream firm of Wall's gives general guidance to retailers on what they should do about prices. We have been told by hon. Members on the Opposition side of the dangers from spivs or twisters, but they would not put Unilever in that category. It is a fine and reputable firm which makes good ice cream. This is its advice to the people who sell its ice cream:
"Add 10% to all your menu prices—that means ice cream prices stay on a level with all other sweets on your menu. But then, because of the special ice cream rating, the profit margins on ice cream go up by around 10%, which can't be bad. So again ice cream is more profitable to you."
When challenged, an official of Unilever said:
"We are merely giving caterers advice on how they can best operate VAT."
Sweets are purchase-taxed at 25 per cent. whereas ice cream is purchase-taxed at 18 per cent. Obviously, therefore, if we have a general adjustment in all prices there will be greater profit in ice cream.

Surely what my hon. Friend has said is a classic example of the opportunity to buy someone else's ice cream, certainly if other people have not put up their prices. That is exactly what will happen. Wall's will be undercut if its caterers carry out those suggestions.

That might be true in an ideal world in which we were relying solely on competition and other movements of the market to redistribute prices and to ensure that not too much profit was made by increased prices. But we have passed the Counter-Inflation (Temporary Provisions) Act and we are about to consider the Fair Trading Bill. Whether we think them good or bad, the general consensus of feeling is that it is not possible, particularly in times of confusion, to reply solely on the forces of competition to ensure that prices arrive at their correct level. The examples I have quoted—and there are others—show the opportunity for price rises of a general nature simply because of customer confusion. My right hon. Friend said rightly that he would endeavour to ensure that full information was given to shoppers about the changes that take place. What kind of general guidance is to be given?

Of course, no Minister or board can do a housewife's shopping for her. It would be ludicrous to try it, and we do not even want to be in a situation where the Government fix all prices. On the other hand it would be extremely helpful if, through newspaper advertising and on television, guidance could be given to shoppers that certain ranges of prices should be reduced and certain ranges increased, although not above a certain percentage. That would be helpful to the consumers.

We cannot rely on the housewife to do the job herself. I am not saying that she does not know how to shop—she knows how to do it a great deal better than I do. But all sorts of complications are involved in this changeover. Let us take the case of a housewife next April setting out to buy four items—soap, ice cream from Wall's, and a pair of shoes each for herself and a child. If there has been an alteration of some sort in the prices over a period, how is she meant to do the job?

On soap, there is a 25 per cent. purchase tax on wholesale value. To make an adjustment, she will need to know the retail profit margin. She will therefore have to ask the shopkeeper. She will have to make allowance for selective employment tax but possibly in that shop there is one full-time employee, a part-time employee under 65 and another part-time employee over 65. In that case no selective employment tax is paid on the employee over 65. The housewife will have to assess the increase on weekly turnover. Then she has to make allowance for 10 per cent. VAT and allow for the administration of VAT, which is not a constant factor. She will also have to find out whether the shop is selling a large number of zero-rated goods or wholly-taxed goods. She will have to make all these calculations on her soap. If it goes up by one penny she will have to consider whether it is justifiable.

The housewife will have to apply the same sort of equation to ice cream, which carries a purchase tax of 18 per cent. It may be that Unilever will not be prepared to tell the shopper the wholesale price. But she has to allow for that and also again for SET. When it comes to the shoes, she cannot work out the calculations for both pairs together. Her shoes carry purchase tax at 11¾ per cent. on the wholesale price. The shoes for her child do not carry purchase tax, so that will involve a nil transaction.

When the changeover takes place, we cannot rely on the ordinary general guidance which housewives get themselves from looking at prices. The changes will be fundamental and unlike previous changes, which have been perhaps just a reduction of purchase tax of, say, 5 per cent. of a more or less general nature. We will have to give guidance to housewives. I ask for at least an assurance that such guidance will be given in newspapers and on television showing the changes of a general nature which should be taking place in various ranges of goods.

Secondly, what is the relevance of the prices and incomes policy? We are operating under the Counter-Inflation (Temporary Provisions) Act, Section 2 of which says—that no one is allowed to increase a price greater than what it was on 6th November 1972. It is possible that this may still be in operation at the time VAT is introduced. On the other hand, we may be in phase two of the policy. Will my right hon. Friend give an assurance that, before that time or when phase two is reached, an amendment of Section 2 of the Act will be made?

Clearly, simply to say that at the time of the new tax no one should increase prices for reasons other than taxation will be inadequate. It might be, for example, that someone who keeps his prices steady will be guilty of blatant profiteering if there is removal of the 25 per cent. purchase tax and the introducing of 10 per cent. VAT. In those circumstances, if he keeps his prices steady and does not reduce them, he is as guilty of blatant profiteering as someone who has increased prices when there has been no tax change at all.

If there is still legislation to the effect that prices must remain stable or perhaps be only nominally increased, provision must be made for the enforcement of price reductions where they are appropriate as a direct consequence of alterations in the tax system.

My final question is on the guidance to be given to housewives through the legislation which the Government are bringing forward. For the enforcement of the Counter-Inflation (Temporary Provisions) Act, we rely on individual housewives to telephone to Government offices. Are we to continue that kind of price supervision on the changeover of the tax system? Would not the job be done much more effectively by the trading standards departments of local authorities rather than by a Government Department?

Consumers come up against so many problems that I believe it would be infinitely better to have a consumer advice centre in each locality and a consumer arbitration service to sort out grievances. Whether or not we have this arrangement, the monitoring of prices which must be done on the changeover in the tax system would be infinitely better done in the local office of the local authority using the expertise of weights and measures and trading standards inspectors.

I should be grateful for answers to these questions. I am unhappy about the introduction of VAT; I do not like it, but I accept that it is inevitable. There has been more preparation for the introduction of VAT than for any other tax. The Government have done all they reasonably can to let traders know what are the problems and how they can be overcome. The one great question is, what will be the effect on the general range of prices? My right hon. Friend will know that although we greatly appreciate the assurances he has given today, we want to ensure that we shall not have the problems of decimalisation all over again.

7.46 p.m.

I entirely agree with the hon. Member for Glasgow, Cathcart (Mr. Edward Taylor) that the Government, as a matter of urgency, must do much more to inform housewives about the application of VAT from 1st April and just what it will mean. The Government may have to provide guide notes.

The hon. Member for Brighouse and Spenborough (Mr. Proudfoot) referred to a television programme put out by Yorkshire Television at the weekend in which he appeared with my right hon. Friend the Member for Leeds, East (Mr. Healey). Their exchanges followed a trailer which showed people on the streets of Leeds being interviewed about VAT. Had the Chancellor of the Exchequer seen the broadcast, as I did, he could not but have been depressed by the lamentable level of ignorance about VAT shown by that sample of the public in Leeds. Not one of the many people who were interviewed in the short time available had a working knowledge of VAT, and some did not know anything about it.

In Committee on the Finance Bill the Opposition urged on the Government the need to undertake a publicity campaign. I do not doubt that the Chancellor of the Exchequer and the Financial Secretary believe that they have done their best. I know that some problems have proved very difficult, one being the help and guidance given to traders. I cannot agree with the hon. Member for Cathcart that the Government have been especially helpful to traders. The last 10 months has been a nightmare period for trade associations because of the way things have been handled by Customs and Excise.

Twelve months ago discussion papers were circulated and the recipients, who included the trade associations, were invited to submit their views. All this was done with the best will in the world, and frequent assurances were given that close co-operation would be maintained. I have not the slightest doubt that that was intended, but there occurred a long period of uncertainty. For instance, the National Federation of Retail Newsagents discovered, purely by chance, the existence of Customs and Excise proposals as long as two months after their limited issue to other sections of industry. These groups were not only in competition with the newsagents but were also in the privileged position of being able to submit counter-proposals to their own advantage and to the disadvantage of the newsagents, about which the newsagents knew nothing. Of haw many other retailers and similar groupings has this been true?

Customs and Excise were unprepared for the tremendous volume of representations which resulted from the initial distribution of discussion papers. To make progress they had inevitably but arbitrarily to cut down the distribution of subsequent documentation without appreciating that the voice of big business was not necessarily the voice of small business. More important, the generalisation by Customs and Excise of trade as a whole was not practical, especially with a complicated tax introduction such as VAT represented.

The Customs and Excise officers, both at national and local level, were also, inevitably, raw—I am trying to make every allowance. The effect has been that contradictory answers have been given to identical questions raised with different officers. I recognise the difficulties of Customs and Excise in having to recruit at short notice. I also recognise that the Department was handicapped by constantly changing personnel. Delays of a month and even more in correspondence have been common.

Generally speaking, I think that the outline idea of VAT has now got through to the ordinary trader. Unfortunately, there is a wide gap between the big boys and the small boys. To the big boys the amount of work involved is small. To traders of any class, be they manufacturers, wholesalers or retailers, the amount of work involved in the actual recording is not large. But, whereas the big firms have sophisticated methods of accountancy and can always get the figures to balance, the small men will have to maintain a completely new set of records, which will mean extra work which they themselves will have to do in their spare time. The difficulties involved in this work and achieving the all-important balance for the "corner shop" proprietor will be immense.

Customs and Excise Officers have been visiting businesses, presumably in alphabetical order, just as the registrations are being carried out. In my area of South Yorkshire last week Customs and Excise men were visiting the "Bs" and "Cs". Does that mean that they are already behind schedule? They are also demanding to see the records at present being kept, which have no relation to those which will have to be kept for VAT. Is this necessary? Is not there a risk of them confusing, and even bemusing, the small retailer? After all, they are Customs and Excise men and not accountants. Should not they be concentrating on registration when 1st April is only just over three months away?

A further difficulty soon to be encountered is that other than the facsimile contained in the general information book, no one has yet seen the quarterly return which will have to be submitted. It is a little difficult to instruct someone on the nature of the necessary records if the point of keeping them is the completion of a form which cannot yet be seen. When can the issue of that form be expected? Will enough time before completion and return be provided to ensure familiarisation on the part of the retailer and instruction on the part of his accountant?

I wonder whether Customs and Excise and even the Chancellor of the Exchequer fully appreciate the problems of bookkeeping that VAT will present to the small businessman. The maintenance of purchase day books and the recording of sales of standard rate goods and zero-rated goods will test them severely. For some it will prove too daunting a task. Already I know of some who are seriously considering the disposal of their business, and one or two who have already taken the first step.

It will be too much to expect the kind of traders that I have in mind—be they motor mechanics, farmers, joiners, newsagents, painters, fish and chip shop proprietors and whatever—and they will not all fall below the £5,000 turnover exemption—to understand immediately from 1st April, 1973 the use and significance of purchase day books, VAT invoices, sales day books, quarterly returns and annual returns and, furthermore, to do it all in their own time and to do it well. We must bear in mind the further compulsion to which they will be subject, about which they will soon know if they do not already know, that Customs and Excise men have the power to compare their accounts with the revenue accounts. I know that they should be the same, but considerable allowance must be made if they are not. Customs and Excise will be well advised to handle such people with the greatest care in the early stages.

I pay tribute to the Financial Secretary to the Treasury for the work he has done during the past year in Committee for the accessibility he has provided to those of his colleagues in the House who wish to raise problems with him and for his general availability. For all those qualities he has my unstinted admiration. I should like him to say a word, if he is able to do so, about the ⅛ levy that has been proposed under Scheme 2 because of the uncertainty that it is causing among retailers. I urge on the Chancellor of the Exchequer that the first year of VAT must be a teaching year for both sides.

The Chancellor recognised in his speech that there will be difficulties in the transitional period. I recognise that it will be a difficult period for Customs and Excise as well. I am making allowances all the way along the line for Customs and Excise, but it has the power of the State at its back. I do not say that in a sinister sense but I am trying to see things from the point of view of the small trader who feels very much alone when he is confronted by representatives of Customs and Excise. I hope, therefore, that Customs and Excise, in all its dealings with the small retailer, will try to see the position so far as it can from his point of view and will handle him with great care and discretion.

I urge upon the Chancellor of the Exchequer first the recognition that however welcome any alteration in the rate of VAT may be, the Chancellor will bear in mind that the sooner that the small retailer and his accountant, who has the great responsibility of advising and counselling him and of keeping him on the right lines know what the rate will be, the simpler it will be in the first year.

I understand the right hon. Gentleman's difficulty and that this is a budgetary matter. However, ironically, there is a growing feeling among small retailers, who perhaps in the early stages will feel VAT most since they will be having to handle it, that it is important for them to know as soon as possible what the rate is to be in the first year. I know that that is a very difficult, perhaps an impossible need for the right hon. Gentleman to satisfy, but it is important that he should know the feeling among both small retailers and accountants that the sooner that the rate is known the less difficult will be the transitional period.

Secondly, I urge on the Chancellor the convincing argument of the hon. Member for Glasgow, Cathcart for more information to be made available to the public. On this score, the right hon. Gentleman might consult Yorkshire Television. I am sure that he is well aware of the programme that I have in mind. It is called "Calendar Sunday". He will appreciate its quality and the very real job that Yorkshire Television tries to do through this political programme. The right hon. Gentleman will accept, as I do, that the sample which Yorkshire Television put forward on Sunday was a representative one, yet it showed an abysmally low level of knowledge of VAT on the part of the Leeds public.

Thirdly, I hope that more information will be given about what the Customs and Excise expects from small traders, especially the small corner shop proprietor, other than mere registration. Incidentally, the Department will not even issue a duplicate of the quarterly return to the trader who makes the return. That is a simple requirement. The small trader can see the value of it and would welcome it.

Lastly, I hope that the Chancellor of the Exchequer will provide for the greatest measure of co-operation during the first year between Customs and Excise and the small trader and with business generally in order to see that the system makes as little work as possible for business men, especially for the small corner shop proprietor.

8.3 p.m.

I want to comment on one point raised by the hon. Member for Sheffield, Attercliffe (Mr. Duffy). While I appreciate that he voiced his genuine concern for the problems of the small shopkeeper, if any shopkeepers known to him are thinking that they may go out of business because of VAT I can only suggest that it is because they cannot have grasped fully what is required. The object of the various schemes is to reduce the administrative work to a minimum, and I hope and believe that the hon. Gentleman's fears on those grounds will prove to be unfounded.

I want to return to the precise terms of the motion upon which we shall be asked to vote. It calls upon Her Majesty's Government to defer the introduction of VAT for 12 months from 1st April, 1973. If the Opposition are consistent with the logic of that motion it seems to me that this is a considerable capitulation. Despite a great deal of synthetic indignation, especially from the Opposition Front Bench, the Labour Party is now prepared apparently to accept VAT in principle and is only asking that its introduction should be deferred by one year. Presumably if right hon. Gentlemen opposite are faithful to the logic of their motion their opposition to the tax will dwindle until eventually it disappears by 1st April, 1974, which is the date by which they will be prepared to introduce the tax.

During the passage of the Finance Bill and again today the Opposition failed to advance substantial evidence in support of their claims that VAT is regressive and inflationary. By definition a regressive tax is one which bears more harshly on poor families than on well-to-do families. But the facts based on the 1970 family expenditure survey are that for the average household 40 per cent. of its budget will escape VAT and that the percentage will rise to over 60 for the poorest. By no stretch of the imagination can the tax be called regressive.

On the claim that the tax is inflationary, even the right hon. Member for Leeds, East (Mr. Healey) admitted on 7th November and again today that statistically a 10 per cent. VAT will have little effect on the cost of living compared with purchase tax and selective employment tax which it replaces. Therefore, it is difficult to understand on what grounds the Opposition seek the deferment of VAT for one year and what they hope to achieve by it.

As I understand it, the Opposition's argument can be divided into two parts. First, they suggest that the public and the business world are not ready to face the complexity of the tax. Secondly, they argue that shopkeepers will take advantage of the tax to raise their prices.

On the first argument concerning the complexity of the tax and its administrative consequences, if there are transitional problems—and I believe that they are greatly exaggerated—the sooner that we face them the better. It is not as though VAT has been dreamt up overnight. By April, 1973 we shall have had two years in which to consider it and its effect on various businesses. No tax has ever been the subject of so much consultation and discussion. Indeed, one reason why the Opposition's attack on VAT during the passage of the Finance Bill never got off the ground was that during that long consultation many of its potential snags were ironed out. British business is as ready as it ever will be to face VAT and I can see no case for postponing its introduction. I go further. I believe that for many businesses who have geared themselves to the introduction of the tax in 1973 postponement would cause a great deal of confusion.

On the second argument that shopkeepers will put up their prices and take advantage of VAT to put them up, there is nothing in the European experience to suggest that that will happen, with the possible exception of one country which is Holland. There it is true that in the first year after the introduction of VAT prices rose by 7 per cent. However, in Holland there were a number of exceptional inflationary pressures which came at the same time. There had been a steady erosion of profits over a number of years. There had been wage increases in excess of productivity. The West Germans had recently imposed an export tax which affected many Dutch businesses. The cost of some public services had gone up. All those factors combined at the beginning of 1969 when VAT was introduced to produce a high rate of inflation. But even opponents of VAT in Holland admit that the effect of VAT was comparatively small.

In Germany prices rose by 0·9 per cent. in the first six months after the introduction of VAT. In France prices rose by 1·15 per cent. in the first three months. In Norway and Denmark price increases were higher because VAT represented an addition to indirect taxation as opposed to a substitution for existing taxes as in Britain, but in both countries the increases were expected and calculated, and they caused no problems. So there is no basis on the European experience for fearing that the introduction of VAT will be inflationary.

Some right hon. and hon. Members opposite claim that British shopkeepers will dishonestly take advantage of the introduction of the tax to push up their prices. The Opposition must make up their minds about their attitude to retailers. On the one hand they express concern about the administrative problems facing shopkeepers arising from the introduction of the tax. On the other hand they denounce them as people who will push up their prices. British shopkeepers cannot be both the victims and the villains of VAT. It is insulting to them to take this attitude.

It may be that some shopkeepers will be tempted to push up prices, but the tendency can be countered easily, and a number of suggestions have been made of how this can be done. My right hon. Friend the Chancellor of the Exchequer envisaged how any tendency to force up prices could be countered. The first method is publicity. The Government must make it clear what exactly will happen when VAT is introduced, explaining which prices ought to come down and which will probably rise.

Then there must be some form of monitoring. My hon. Friend the Member for Glasgow, Cathcart (Mr. Edward Taylor) made it clear that monitoring by the Government and local authorities was desirable. But we should not overlook the extent to which the aid of the retail trade can be enlisted in monitoring increases. During the Downing Street talks the retail trade came up with some constructive proposals for themselves monitoring their price increases. I believe that something along those lines would be both appropriate and effective for the introduction of VAT.

Nothing will be achieved by postponing the introduction of VAT. We must make it clear that postponement means postponing the abolition of purchase tax and selective employment tax which have been found in practice to be unfair, anomalous and unsatisfactory.

There is one important fiscal point in favour of VAT which has not been made. Purchase tax, because it is levied on a restricted number of items which each succeeding year form a progressively smaller proportion of total consumer expenditure, has a shrinking tax base. It is a fact that even allowing for changes in the rate the yield from purchase tax has increased less fast than the increase in consumer expenditure. In order to maintain the yield from purchase tax or the combination of purchase tax and selective employment tax which the Opposition favour, it is only possible to do one of three things. The first is to increase the rate of purchase tax. The second is to increase the coverage of purchase tax. The third is not to change purchase tax but to increase the rate of SET. Logically that is all that can be done to maintain the revenue yield from a combination of purchase tax and SET.

With VAT the position is quite different. VAT covers everything except the necessities of life. Because the necessities of life in a society which is becoming more affluent represent an increasingly small proportion of total consumer expenditure, the tax base of VAT is increasing progressively and yielding proportionately more revenue than the increase in consumer expenditure. In other words, it is providing a useful reserve of revenue for Chancellors of the Exchequer to consider making cuts in taxation. That is a point worth bearing in mind.

I want to comment briefly on the attitude of the Liberal Party to VAT—[HON. MEMBERS: "Where are they?"] I am sorry to have to make these remarks in the absence of the Liberal Party. It seems that right hon. and hon. Gentlemen on the Liberal Bench approve of VAT in principle. They approve of its introduction on 1st April, 1973. But they would like the rate to be lower. In this connection we must remember that there have been reductions in indirect taxation of £700 million since 1970. Were it not for those reductions the rate of VAT would have to be 15 and not 10 per cent. But large as those reductions in indirect taxation are, they are a small proportion of total tax reductions of £3,000 million since June 1970. In the light of those figures it is simply not realistic to ask for a further reduction in the rate of VAT which is already the lowest rate in Europe and which it is acknowledged by both sides of the House statistically to have very little effect on the cost of living.

There is nothing to be gained by postponing the tax. In the absence of unforeseen economic circumstances, there is nothing to be gained by lowering the rate. I hope that the House will decisively reject the motion.

8.15 p.m.

I am particularly pleased to follow my hon. Friend the Member for Dartford (Mr. Trew), especially as we are colleagues as joint secretaries of the Conservative Back-Bench Finance Committee.

I am astonished that on an important motion of censure of the Government the Opposition appear to have run out of speakers. [HON. MEMBERS: "Where are the Conservative Members?"] There are very few Labour Members present, and it is their motion of censure. That indicates clearly the lack of real feeling among the Opposition in favour of the motion.

I was grateful to the right hon. Member for Leeds, East (Mr. Healey) for his references to my speech last night. Naturally, his quotations were selective. I do not complain, because that is one of the tricks of the trade. I would point out, however, that the twisters to whom I referred were a very small minority of traders. I made that very clear in my speech, and it is only right that it should be put on record here as well.

The right hon. Gentleman appealed for more time to think about value added tax. More time may well be something that he requires, but I do not think that the rest of us need it. My right hon. Friend the Chancellor dealt with this point very satisfactorily but a number of hon. Members have since taken up the issue again, so perhaps I may say something about it. I find it extraordinary that a plea for more time should come from the Opposition, because I can see no advantage in the postponement of VAT.

It is not as if the Government have hurried over the matter. In the Budget of 1971 they announced their intention to introduce the tax. The Green Paper was pulished as a basis for consultation with trade and professional associations and any other interested parties. The Customs and Excise received more than 700 representations and has discussed the Green Paper with more than 300 groups, sometimes more than once. The length and detail of the consultations was unprecedented. They were widely welcomed by those concerned and have resulted in a much better law than we should otherwise have had. The provisions were introduced in this year's Finance Act. They are not to become effective until 1st April next year, giving everyone 12 months in which to make detailed preparations.

Let us compare that situation with SET, which was announced on 3rd May, 1966, and became effective on 5th September, 1966, a mere four months later. People were allowed four months to prepare for SET. They have been allowed two years to prepare for value added tax.

I turn to the effect on prices which it is alleged the introduction of VAT will cause and which is one of the arguments put forward today to justify its postponement. I should like to look at that in more detail than some hon. Members have done. A great deal of nonsense is being talked about price increases consequent upon VAT. It is irresponsible nonsense because it may well encourage some people to try to exploit the changeover and because it is causing unnecessary alarm among some of the poorer sections of the community in particular.

A provisional rate of VAT at 10 per cent. has been fixed by my right hon. Friend the Chancellor. At that rate it will bring in roughly the same revenue as purchase tax and SET. In a static situation there is no reason for an overall upward movement in the price level following the abolition of SET and purchase tax and the introduction of VAT, for the simple reason that the total amount of taxation will be the same.

Of course it is as well to remember that there may well be price increases for other reasons. The year 1973–74 would be remarkable, and unique in post-war Britain, if there was no rise in the general level of prices for other reasons. But VAT at 10 per cent. will not in itself induce an overall rise in the cost of living. A comprehensive tax at one rate such as VAT, covering some things that have been taxed at a higher rate before and others that have been taxed at a lower rate, must have an effect on individual prices. Some prices will go up, and others will come down.

Some of the goods, whose price will fall when VAT has been introduced have been mentioned today. They include vacuum cleaners, sewing machines, refrigerators, radio and television sets. It is remarkable that an Opposition Member should suggest that a radio was a luxury item today. That shows how remote the Opposition are from the real world in which we live.

A few minutes ago I suggested that there would be no upward movement in the general level of prices when VAT was introduced, with the proviso "in a static situation". But when we consider the question in more detail we find strong reasons to expect a slight downward movement in prices. First, the situation in which VAT will be introduced is not static but dynamic. VAT is a tax on the value added, a tax on costs plus profits. Each person or firm adding to costs or taking profits knows that the selling price of the article or service will bear not just the costs and profit added but an additional percentage of tax based on the total of costs and profits. That will be clearly identified at each stage of production in a way in which it is not identified under purchase tax, which is levied at one stage only, the wholesale stage, when value added is generally small.

Under VAT there will therefore be an extra incentive to traders to cut costs and profits, because in so far as they succeed in doing so their contribution to any article or service will be cheaper not just by the reduction in their costs and profits but by the lower VAT that will be payable. Therefore, it seems reasonable to conclude that VAT provides a greater incentive than purchase tax to cut costs and profits and that consequently it may well result in marginal reductions in prices.

Other factors will work in that direction as well. First, because the input tax on all goods bought is recoverable at the end of the three-month accounting period in which the goods are bought, retailers will not have to pay tax on stock which they hold for any length of time. That means that under VAT stocks are held tax-free, so that retailers will not have money tied up in tax as it is with purchase tax, which they cannot recover until they sell the goods. There will be, therefore, a small reduction in the interest they have to pay on the money that is released.

Secondly, under purchase tax when there has been a cut in the tax—not something that happens when the Labour Party is in power, but something that has happened under the present and the previous Conservative Governments—retailers have normally incurred the loss themselves. Under VAT, however, that cannot happen because retailers will always be able to reclaim whatever input tax they have paid on stocks. Therefore, any cut in VAT will mean that they can sell their stocks at the lower prices without incurring loss. In so far as that has an effect, it will have a marginal downward effect on prices, though it will happen only from time to time.

Thirdly, the abolition of SET consequent upon the introduction of VAT will mean that many traders will no longer have to make forced loans to the Government. Such forced loans cost firms money in the form of interest. Therefore, it is reasonable to assume that the abolition of SET and its replacement by VAT will save such firms interest charges, and this may have a marginal downward effect on prices.

Fourthly, the net tax payments under VAT are made at the end of a quarter. By that time firms should have received most of the money for their sales in that quarter. They are being taxed on money received and not, as with purchase tax and SET, before it is received, and again there should be a marginal downward trend in prices as a result.

My conclusion is that there is a fair possibility that the replacement of purchase tax and selective employment tax by VAT is more likely to bring about an admittedly small but real reduction in the general level of prices than an increase. If that is so, the Opposition's motion is even more absurd than it looks.

In any event, who are the Opposition to attack the present or any Government about the effect of indirect taxation on the cost of living? When they were in office they increased indirect taxation enormously. They introduced SET and raised the top rate of purchase tax from 25 per cent. to 55 per cent. They increased many other indirect taxes as well. On their own admission, they pushed up the cost of living by 7 per cent. by raising indirect taxes.

So far the present Government have slashed indirect taxation by £700 million. They have halved SET and reduced the top rate of purchase tax from 55 per cent. to 25 per cent. Such has been their success that if the 1970 rates of purchase tax and selective employment tax still prevailed it would have been necessary to have a VAT rate of 15 per cent. on 1st April and not the 10 per cent. that the Government have provisionally fixed. I am sure that there is no chance of the rate being higher than 10 per cent. My hope is that it will be lower. I realise that my hon. Friend the Chief Secretary cannot say anything about this today, but I hope that the Chancellor of the Exchequer will use his powers to alter the rate to the full extent that he is entitled and that he will start with a 7½ per cent. rate next year.

That, to my way of thinking, would bring three main benefits. First, it would mean a further cut in indirect taxation, which would be helpful in the fight against inflation. Secondly, it would mean that the revenue from indirect taxation at Tory rates would be about half what it would have been at regressive Labour rates. Thirdly, fixing the figure at 7½ per cent. would have a useful reflationary effect.

My hon. Friend the Member for Dart-ford dealt with whether VAT was regressive. I do not believe that it is, and I do not believe that there is any evidence to show that it is. The items which form the biggest part of poorer people's budgets have been relieved of VAT. This point has been made again and again from these benches today, but it is worth repeating for the benefit of Opposition Members what those items are.

Most foodstocks will not be subject to VAT. Fuel and lighting will not be subject to VAT. Coal, gas and electricity will not be subject to VAT, nor will rents, passenger fares or housing. All those items are relieved of VAT, and rightly so, because, as the 1970 Family Expenditure Survey showed—that is the most recent survey I have seen—for those with a weekly income of between £10 and £15, over 60 per cent. of their budgets is spent on items that will escape VAT. For those with weekly incomes of between £20 and £25, over 50 per cent. of their budgets is spent on items that will escape VAT. For the average family, more than 40 per cent. of their budgets is spent on items that will escape VAT.

On top of that it should be remembered—and again this is a point that has been made from these benches today—that although most foodstuffs will be zero-rated under VAT the replacement of purchase tax and SET by VAT will result in a reduction in the tax on foodstuffs: first because of the removal of £50 million of SET on food and, secondly, because for those foodstuffs at present subject to purchase tax the rate is 18 per cent., which is equivalent to a VAT rate of about 11 per cent., and the provisional rate for VAT is 10 per cent.

There is one further point that I should like to make about prices. There have been rumours—and they have been referred to today—about some prices rising by 30 per cent. as a result of VAT. This is just not true. There is no reason for that to happen, because the maximum that any price should rise is by the percentage rate of the tax that is eventually decided upon. Taking into consideration the abolition of purchase tax and SET, there are not many goods or services which should be subject even to this maximum rate.

Scare stories have been circulating. They come about for two main reasons. The first is a complete misunderstanding of the tax and the fallacious belief in some quarters that it is a cascade tax. It is not. Double taxation is not possible under the system of VAT that is being introduced. Because input tax is deducted from output tax by each taxable person, double taxation cannot occur, and it is as well to remind ourselves that double taxation takes place now under our systems of purchase tax and SET.

The other reason why the scares are going around today is that there is a small number of swindlers and twisters who are trying to take advantage of the introduction of this tax. Such people should be exposed, and I can think of no one better to do this than the British housewife who will give them short shrift.

VAT is a fair tax and a better tax than either of the two taxes that it replaces. I hope that the Opposition motion will be rejected, because in my view there is no case at all for putting off the date when old-fashioned, irrelevant, unfair and bad taxes such as purchase tax and SET are abolished and replaced by something which I think is very much better.

8.33 p.m.

I confess that I have not been present throughout the debate. I was present, as many hon. Members were, to listen to my right hon. Friend the Member for Leeds, East (Mr. Healey) and to the right hon. Gentleman the Chancellor of the Ex- chequer. I then left to have a meeting, and after dinner I returned to the Chamber. Frankly, I was astonished—and hon. Gentlemen opposite have no cause to cheer at this—to find that for a debate of this nature the benches were so empty that I could come into it at this late stage. I do not like taking part in a debate unless I have sat here throughout it. It was not my intention to come in and speak at this late stage, but I think it reflects little credit on either side of the House, and none on the Liberal Party, that so few Members, other than my hon. Friends and hon. Gentlemen on the Front Benches on both sides, should attend such an important debate as this.

My right hon. Friend the Member for Leeds, East attacked the date for the introduction of the tax on two grounds—one, its inflationary effects; the other, which I thought he made clear, the administrative muddle the Government are in. They are dragging all the traders—not only the grocers but almost every trader in the country—into an administrative muddle because they have not thought through clearly the full effects of the tax they are introducing. People do not understand what they have to do, as tax collectors for the Government, from 1st April 1973.

The hon. Member for Leek (Mr. Knox) referred to foodstuffs. He said—as his right hon. and hon. Friends on the Front Bench have said many times during the debate on the Finance Bill—that those items of foodstuffs at present bearing purchase tax will be subject to VAT. Many times hon. Members on this side, and some hon. Members opposite, have said to the Government, "But why?" Crisps are foodstuffs. Salted nuts are foodstuffs. Ice cream is a foodstuff. Why should hon. Gentlemen opposite decide that those few items of food, although they will pay less tax under VAT than they did under purchase tax, should pay tax at all? Why not abolish tax on foodstuffs altogether? My right hon. Friend made it clear that a bag of crisps costs 3p and therefore the tax will be 0·3p. Since there is no 0·3p coin in existence, that means a charge of ½p and could mean 1p. Or one may juggle about with the number of crisps in the bag. That is the muddle one gets into when one starts to tax foodstuffs the selling price of which is very low.

The problem created by taxing certain items of foodstuffs is great for the distributor of the food, the grocer, the publican, the small shopkeeper. If they sell some items which are subject to tax and other items which are zero rated as regards tax, because they are in the ordinary sense of the word foodstuffs, they must—this is difficult for shopkeepers—make a calculation on the amount of goods they have sold which is subject to tax and those items which are not subject to tax. Hon. Members on the Front and Treasury Benches have accountancy minds. The job of the ordinary shopkeeper, although he can keep his books, is to sell to the public. His job is not to sit night after night working out how many bags of crisps and salted peanuts he has sold, because they are subject to tax, and how many other foodstuffs which are not so subject.

Representations have been made by the trade many times with regard to the foodstuffs which are subject to tax. Here is one instance of a muddle, an unnecessary muddle, where some items are undoubtedly food. For instance 8 per cent. of the potato crop in this country goes to the making of potato crisps, which constitute a foodstuff. I ask the Government to delay this tax so that they can sort out the muddle they are in with regard to charging tax on certain items of food, a muddle which, if not tackled by the Government, will have to be sorted out by the shopkeeper.

Hon. Members opposite must encounter the same problems encountered by my hon. Friends. One is asked particularly by a publican whether beer and cigarettes will be subject to VAT, in addition to the ordinary excise duty. They are in a muddle on this. I am not speaking with particular reference to 1st April 1973 but about the future. The people affected do not know. They want to know. They are in a state of doubt and confusion now.

This is an instance where the Government would do no harm by stating, "Apart from the inflationary effects of this tax we consider that the country as a whole is ill prepared for it. We have not sufficiently prepared either the consumer or the supplier or the shopkeeper as to the true effects of this tax. Therefore, from their point of view, there should be a delay of at least 12 months". Nothing can be worse than a tax which is not understood. As my right hon. Friend said, this situation could be a fiddlers' paradise.

Only a fortnight ago, traffic in London was put in complete confusion by a demonstration of taxi drivers. On that occasion, the Prime Minister was not abroad so he did not have to walk and he may not have noticed it. The taxi drivers of London are in equal confusion over this tax. If a driver is self-employed and his takings are less than £5,000 a year, he does not have to charge 10 per cent. on the fare. But if that taxi is owned by a company whose profits, obviously, will be greatly in excess of £5,000, the customer will be charged 10 per cent.

I can foresee endless arguments between taxi drivers and passengers because the passenger cannot know whether the driver is self-employed or works for a firm. And, as my right hon. Friend said, there is nothing to stop the dishonest taxi driver who is self-employed from charging the 10 per cent. tax. How is the passenger to know whether he is telling the truth? Taxi drivers are aware of the problem which this will create for them and they have demonstrated loudly and clearly in every possible way, asking the House and the Government to sort out this muddle before the tax comes in.

When we talk of taxis, we tend to think of London taxis. The House should remember that a taxi service can be, for many people, like the old or the disabled and those in country districts, just as essential a service as trains or buses. Let us remember the provincial taxis—not taxis in the sense of the London cab, plying for hire, but to take people to church on a Sunday morning or to see their relatives in hospital, because they are old or disabled and there is not a sufficient passenger transport system.

They will have to pay this 10 per cent., because most provincial taxis are owned by firms. These people have no alternative but to travel by taxi. The bus or train service is tax-free but there is an overwhelming case, if any form of transport is to be tax-free, for it all to be tax-free. For many people, taxis are not a luxury.

One of the most glaring anomalies of this tax, purely because of the meanness of this Government, is something on which I have had considerable correspondence with the Financial Secretary—the shocking treatment of the Youth Hostels Association. Youth Hostels provide an educational youth service. They allow people from towns to get out into the country—the very thing which we believe would discourage vandalism among children with too little to do. The Youth Hostels Association provides a service for hundred of thousands of young people in this country and from abroad, giving them the benefits of seeing and learning about the countryside and meeting other people in good, healthy, outdoor pursuits.

The Government say that these hostels, which are self-catering and where people make their own beds, are hotels and must pay the tax. That attitude is unique to this country. I understand from the Association that youth hostels almost identical to ours—although ours was the parent organisation—exist in Germany, France, Italy and Luxembourg. Quite rightly, in those countries, for VAT they are treated as youth clubs and educational establishments. In not one country in Europe is a youth hostel treated as a hotel for tax purposes. They are tax-exempt in every European country except this.

The Government ought to reconsider that matter before introducing the tax. Otherwise, they could put the youth hostel service in this country out of existence, making it more expensive for young people, with little money but a good deal of initiative, to travel about the country. This is a clear instance where the Government could do something, but out of meanness and pettiness they have not.

A delay of 12 months would give the Government an opportunity to meet the Youth Hostels Association, to find out what goes on in other European countries, and to bring our youth hostels service into line with what is done in the European countries which we are to join.

Incidentally, it should not be forgotten that, when the question of grants for the provision of hotels was under considera- tion under earlier legislation, the Youth Hostels Association was sharply told, "You are not a hotel service. Yours are self-catering hostels". Now, however, when taxation is in issue, they have suddenly become hotels and, although self-catering, will have to carry a 10 per cent. tax.

There are hundreds of anomalies similar to the four or five which I have mentioned. The Treasury Board know of them, because representations are constantly being made about them. Quite apart from the inflationary effects of VAT, which were so clearly outlined by my right hon. Friend the Member for Leeds, East, the country is an utter muddle as to what the effects of the tax will be. People do not understand it either as consumers or as tax collectors, which is what the Government will be making nearly 2 million people become. For the sake of clarity and a scrupulously fair tax system in this country, although they regard VAT as a good system—which I certainly do not—they should delay the introduction of this insidious tax for 12 months to sort out for themselves as well as for the rest of the country just what it will mean.

8.47 p.m.

The hon. Member for Widnes (Mr. Oakes) delivered himself of a thoroughly competent speech, considering that he was press-ganged only a short time ago to add some reality to the Opposition's motion of censure.

I was not press-ganged. I apologised to the House for not being present at the beginning of the debate. When I came in, I could hardly believe my good fortune in being called and having a chance to take part. No one press-ganged me to intervene.

The hon. Gentleman will recall that two of my hon. Friends were called one after the other. It should not be forgotten that this is a motion of censure on the Government. In the circumstances it is a little curious that the fulminating fury which the Opposition are trying to present cannot be kept up for a full day's debate.

However, as I say, I congratulate the hon. Gentleman on making a powerful speech at such short notice. He did very well and what I said was not meant to be critical of him. He invoked the European systems of value added tax, saying that if we applied the same logic we could, for example, exempt youth hostels from the tax. I wonder whether the hon. Gentleman has noticed that most of the European systems cover food. If he is advocating adoption of the European system for VAT, perhaps he will take that point on board.

I am glad that the Government have introduced their own version of the tax, which is particularly suited to our conditions. It can, no doubt, be adapted in the light of experience. Anomalies can be removed, as they have had to be with the selective employment tax, and I see no reason why this tax should not proceed as planned on and from 1st April.

I had intended to dispense with the usual incivilities about the speech of the right hon. Member for Leeds, East (Mr. Healey). I am sorry that he is not here at the moment, because I must make an exception tonight and say that I thought his speech thoroughly unscrupulous and not at all up to the standard which a Front Bench spokesman should maintain. The right hon. Gentleman seemed to believe that the Customs and Excise were going to mutiny. He seemed to forget that the tax has been debated and discussed and that my right hon. and hon. Friends have taken great trouble to ensure that all representations have been heard and met. He seemed to be reluctant to admit that it is a myth that it will put up the price of food. It was only when he was interrupted that he came clean and said that it will put down the price of food, other things being equal at the time. Apparently he was not thinking about value added tax when talking about food prices. He was thinking about joining the Common Market, the levy system and a few other things.

That is getting extremely near to deception. I do not believe that a man who aspires to be Chancellor of the Exchequer should be allowed to exploit the transitional problems, to create fears and to make accusations which are not well founded in trying to whip up opposition to a tax for political reasons.

Perhaps the worst of his failures was failing to admit that the postponement of value added tax by one year would have meant the continuation of SET by one year. That is the tax which has been the most hated and detested—including the window tax—in the history of these islands. It is a tax which the Government pledged themselves to do away with. The country wish the Government to implement that pledge as soon as possible, and certainly by 1st April.

There have today been two lines of argument. One has been about the level of tax, whether it should be 7½ per cent., 10 per cent. or at whatever level, and, secondly, about the qualities and virtues or difficulties and disadvantages of VAT itself. It is wrong that we should attempt to say now whether it should be 10 per cent., 7½ per cent. or any other level. It must be part of the Budget judgment as to the level at which it is to be fixed. We are not in possession of the full estimates, facts and figures. Only my right hon. Friend the Chancellor of the Exchequer will ever be in that position before the decision has to be taken.

Those hon. Members who have argued that the tax should be kept low—for example, 7½ per cent.—based their argument on the curious ground that a low rate would be good for defeating inflation. It must be pointed out, however unpalatable it is, that the reverse is true. The lower the tax the more inflationary it will be and the higher the tax the more deflationary it will be.

Therefore, it is wrong for us to suggest that to bring in a 7½ per cent. rate as opposed to 10 per cent. would be a contribution to defeating inflation. It would be a contribution to increasing inflation because money not spent on paying the tax at the lower level would be available for spending on other things. We should not debate the level of the tax, although it has been right for the House to debate the form that it should take.

This is the first speech which I have made in the Chamber about VAT. I have complete faith that it is the right tax for us to adopt. I will give a new reason—which is perhaps a little unfashionable but for which I make no apology—in addition to the other reasons which many of my hon. Friends have given today. Value added tax is the tax adopted by the European Economic Community. I have always been unashamedly in favour of joining the Community. I have been in favour of tax harmonisation within the Community. If the European countries are to adopt value added tax, it seems right and proper that we should do the same thing. Not only does the tax possess its own merits, which it certainly has, but it seems wrong to neglect the fact that one of the consequences of joining the Community is that we must adopt the tax. So let us do so with a happy smile instead of the misery and gloom which we have had from the Opposition.

The hon. Gentleman says that he is in favour of the tax harmonisation policies of the European Community. Does that mean that he is in favour of this country eventually imposing VAT on food?

We must wait and see whether the Community comes to that conclusion. It is thought to be sacrilegious to suggest that it is possible ever to think of taxing food. That is what half of the debate has been about. But let us briefly analyse why that should be said.

As a country gets more affluent and its people become better off, as they can afford to pay for their food, I do not see why it is necessarily in perpetuity wrong to tax food. After all, food does not form as large a part of people's budgets now as it did 10 years ago. In 10 years' time it may form a smaller part. It does not seem an impossible concept that we should accept a tax on food. But I am sure that it is much fairer to have a VAT.

The anomalies pointed out today are nothing compared with the anomalies in purchase tax pointed out year after year by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro). Credit should be paid to him where credit is due. Over his many years in the House he made that tax look ridiculous. That purchase tax is to pass away on 1st April seems to be something we can all be pleased about.

Finally, on the subject of prices, I was slightly shocked to hear my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward Taylor) say that he believed we had to take stern measures to prevent shopkeepers fiddling upon the introduction of VAT. Many hon. Members have said that there will be dishonest shopkeepers who keep their prices high when they could reduce them as a result of the introduction of VAT. I do not think we should use the word "dishonest". If anyone is entitled legally to make a profit, it is not dishonest. It may be objectionable to hon. Members on the Opposition side but it is certainly not dishonest. It is wrong to suggest that people who maximise their opportunities in life are in some way dishonest.

But luckily we have checks. The shopkeepers are not fools. They know very well that they cannot sell at much higher prices than their competitors along the street or in different corners of the town. Not only are there a lot of little shopkeepers. We now have supermarkets, which have had the most dramatic effect on retail competition over the last few years; and, if my right hon. and learned Friend the Secretary of State for the Environment will be liberal enough to license out-of-town shopping centres, we shall have another element of competition where the economies of scale also will be presented.

I am convinced that the retail trade is highly competitive. Anyone who persists in trying to charge more than his competitors for the goods he sells will find that he lacks business. I am disappointed that many of my hon. Friends seem to believe that, apart from a few isolated examples, the retail trade is free to charge what it likes, irrespective of competition. I do not believe that is so. I am certain that if only one shopkeeper in a town reduces the price of foodstuffs which are relieved of purchase tax and SET and not charged to VAT, he will take the custom in his street or town and the others will have to reduce their prices with him.

The same thing applies with decimalisation. This is the only point on which I disagree slightly with my right hon. Friend the Chancellor, who seemed to believe that the introduction of decimal currency had in some way enabled people to make, I was going to say "a dishonest profit". I think that prices were going up due to inflation and that the incidence of decimalisation was the moment the traders chose to put up their prices. If there had not been decimalisation they would have had to put up their prices just the same at some stage because of the fairly serious inflation from which we are suffering. Such inflation causes people to put up their prices, and if there is an event like decimalisation, metrication or the introduction of VAT, that may be the moment at which people put up their prices. But it is not used as a dishonest or dishonourable way of making money which would not otherwise have been made, because competition would prevent that from happening.

We should not be frightened at the introduction of the tax. No doubt there will be teething troubles and difficulties for traders with isolated examples of abuse, but let us rely upon the good sense of the British public and the good sense of British retailers to handle this vital and reforming transition from an old-fashioned outmoded form of indirect taxation to a far simpler, more sensible form. The right hon. Member for Leeds East should not seek to exploit this issue in the way that he did this afternoon. He should help people to accept what is a necessary and proper reform of the indirect taxation system.

9.2 p.m.

The trouble with the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is that he is unaware of what he is voting for with his Government. They do not trust what is called the honest shopkeeper and that is why they have instituted a freeze. That is also why there will be a second stage to the statutory policy. The debate is not about the Common Market because whether one is pro- or anti-Common Market, VAT remains an administrative monstrosity. There is nothing in the Common Market rules that requires us to bring the tax in now or in this form, and the Chancellor has been honest enough to say that the Government would have brought it in regardless of whether we join the Community.

I shall summarise the case for postponement of VAT. First, traders are not prepared. Secondly, the Customs and Excise is not prepared. Thirdly, there are the anomalies and the fact that they have not been sufficiently clarified. Finally, VAT will add to inflation and it will add to the inflationary expectation, which is, if anything, probably worse.

Large companies are to a considerable extent able to cope with something like VAT and have perhaps already made their arrangements, but as we saw from the article in The Times today even they are having difficulties. They cannot obtain the answers to queries in their own trades. The substantial problems, however, are to be found where VAT actually bites—that is, at the level where it hits the consumer. To retail outlets and to most small retailers VAT remains a mystery. They fear its consequences and they are worried about its implications. Anyone who imagines that the bulk of retail trade is done by the supermarkets and the multiple stores, should read the census figures which indicate that of 504,412 retail outlets, 403,876 are in the hands of independents. Some 56·4 per cent. of trade is done by the small independent retailers.

The Chancellor today read extracts from the Conservative manifesto which, he said, promised to exclude small businessmen. I wonder whether he remembers what his hon. Friend the Minister of State gave as his idea of a small businessmen. The Minister of State described him as a wholesaler doing £5,000 worth of business a year. But the Chancellor knows that the only small businessman who can possibly do less than £5,000 worth of trade a year must be in the service sector because no one who is engaged in selling can possibly make a living on anything less than £5,000 turnover a year.

I can tell the Chancellor that when the VAT envelope is received by the retailer, generally he will not even open it; he will send it unopened to his accountant. In many of the small firms of accountants it will remain unopened, because many small firms of accountants will be totally unable to cope with this additional burden.

When the form has been completed, it will be sent back to the firm for signature. The firm has to include on the form the bank sorting code number and the account number. I wonder how many hon. Members could answer questions on those numbers even if they had their cheque books in front of them. The result will be that something like 90 per cent. of the people sending the forms back will invariably get the numbers wrong. Very often the accountants will see from the numbers put on the form that they are wrong and will send them back once again. Eventually they will be submitted to the Customs and Excise. There will obviously be an enormous number of errors and omissions. I put down a Question which should have been answered today. I have the feeling that it was not answered because the Department is somewhat behind in its work and has not been able to give me the answer concerning the number of errors and omissions.

Let us assume that everyone has registered by 31st March—and that is a fairly rash assumption. If completion of the form is difficult, it is simplicity itself compared with what will then hit the small retailer. First, he will have the problem of obtaining a credit for stocks. I am obliged to the Chancellor in this respect. He did not accept my proposal but at least he accepted my idea of giving a credit for stocks. I entirely agree with him that this is better than his original idea which would have meant double taxation and a danger to the economy. I imagine that the Chancellor eventually changed his mind because he saw what was happening.

When I put forward the idea I assumed that there would be a simple method of allowing a credit for stocks, possibly an average of the last three years or a percentage of sales. This would have meant a loss to most retailers who tend to have the habit even though they are honest, as we have been told, of slightly reducing their stocks. Therefore, that simple method would have had the effect of their losing a little money, but it would have been much simpler than the method now suggested by the right hon. Gentleman of a physical stock-taking and having all the purchase invoices available to be checked at a later stage some years hence by the Customs and Excise. Many of the invoices are, of course, tax-inclusive from unregistered wholesalers, and so the purchase tax is not known. All this is after many traders have made elaborate arrangements on a sale or return basis because of what the right hon. Gentleman refused to do when we pressed him to do it during the course of our Budget debates.

The hon. Gentleman has made an important point. He said earlier that anybody with a turnover of less than £5,000, or a wholesaler, could not make a profit. He knows well that the people who are not registered as wholesalers are those people whom he said did not exist because they could not make the profit.

I would be interested to hear from the hon. Gentleman of a wholesaler selling £5,000 worth of goods a year. I wonder what kind of gross profit margin such a man would make, what his overheads are, and what his net profit is at the end of it all. I am sure that the hon. Gentleman will at some stage write us a paper on it.

When one overcomes the hurdle of stocks, the normal, everyday problems of VAT will be immense. There are a variety of special schemes which have been arranged. We have a special scheme for the growing number of cash-and-carry wholesalers. I see that they will have to mark their stocks in red, white and blue. They have to mark the standard rate goods in red, the zero rate goods in white, and, if it so happens that they have the second basic standard rate, that will be in blue. The colour code on the ticket may, we are told, be its ground colour or appear as a stripe or edging.

That is one of the simple schemes for those running cash and carry discount businesses. It is nothing compared to what hundreds of thousands of small retailers will have to cope with. In notice 707 of the Customs and Excise we have the statement that Scheme No. 2 is the most suitable for retailers. I would like the House to be aware of what it says:
"For each of the first three tax periods from the start of using this scheme, the retailer must split his gross takings over the period in proportion to the total amounts, including any VAT payable by him to the suppliers for zero rated goods which he may have in stock or which have been used since for retailing."
If that is not enough, he has to collect one-eleventh of that amount, and when he has got that far he has to add one-eighth. But that generally will not be enough because many small retailers will be using trading stamps. If they use trading stamps the amount paid for the stamps but not the amount of the service charge included in the price of the stamps should be deducted from the gross takings in calculating the output tax.

Last Tuesday the Minister of State told my hon. Friend the Member for Eton and Slough (Miss Lestor) that she had got it wrong. He said that what she must do is constantly repeat to herself that she must remember to deduct the input. But he got it wrong. He should have told her to deduct the inputs but to remember that she occasionally has not to deduct the inputs or remember to deduct certain of the inputs from the outputs. That is the simplest scheme.

The Chancellor said that it was ridiculous to imagine that there would need to be 50,000 extra staff employed by traders to deal with this tax. If he knows that 50,000 is a ridiculous figure, presumably he has made a calculation and knows, for example, that the figure will be considerably less than 49,000. If he thinks that 50,000 is a ridiculous figure, what is the figure that he has in mind? He is chuntering into the Chief Secretary's ear, so perhaps the Chief Secretary will tell us when he replies. I doubt whether I am over-stating it when I say that small traders are not only not ready but that they simply do not understand the facts. They are at least entitled to much more time to learn and prepare for it.

There has been some dispute about the Customs and Excise. If the traders are not ready, one would hope that the Customs and Excise is ready. But my information is that it is being swamped with inquiries, that it cannot cope and that the answers it gives can vary between offices. Frequently, the information is not available and certainly not through a simple telephone call. I will give an example. An accountant in the Manchester area asked about the special scheme for chemists. He was told it was not available. But his chemist client, who no doubt was not feeling happy with him, told him, "I have the scheme now from my association". Yet the local office of the Customs and Excise was not able to give it to the accountant

The cash and carry scheme is so complicated, as anyone knows from looking at the document, that it needs individual advice, and each client is going to need detailed information from an individual Customs and Excise office. Heaven knows when the Customs and Excise will be able to get round to that.

There is the case also of the antique dealers. I was told about a major antique dealer in Manchester who wanted to know how the scheme would work. There has been a broad statement but no details of it were available in his local office. Second-hand car dealers are still awaiting details of the scheme. Garage owners want to know how it works. No documents are available in the local office.

In fairness to the 6,000 additional civil servants, I emphasise that I am not blaming them, and I am sure that my right hon. Friend the Member for Leeds, East (Mr. Healey) was not. They have been given an impossible task. Today. The Times says that much is going to depend on the computer. Anyone who has had any experience of the conversion of mechanised or non-mechanised books through a computer system will have an idea of the sort of chaos that is caused in the first instance. I imagine that the same sort of thing is happening in Customs and Excise offices.

The Chancellor repeated that this was a broad based tax. He did not quite use the phraseology which the Financial Secretary has used—"broad based", "comprehensive" and the rest—but he called it "broad based" and said that this was why there were no individual exceptions. If that means anything, it means that there is no case for exempting children's shoes and that he was utterly dishonest when he asked his hon. Friends, in the debate a few months ago, to support him because he was looking at whether children's shoes could be zero rated, or it was a major breach in the sacred principle of a broad based tax. Which was it?

We spent a long time in Standing Committee considering the value added tax and one would have thought that many of the anomalies would by now have been cleared up. But if anything the position is worse. Before, only those taking part in those proceedings were aware of some of the anomalies. Since then, many more people have had an opportunity to look at the tax. They have found from their scrutiny still further anomalies. When we heard that meat was to be free of VAT, how many of us imagined that the little bits, if they were marked "Pussy's pieces", would not be free of VAT, but that is so—in the words of Customs of Excise.

The building industry is in a state of confusion. It does not know whether a black bath, a pink bath or any other coloured bath is free from VAT. As for taxi drivers, I wonder what will happen after 1st April when they are asked for an invoice showing the amount of VAT. As the Minister of State said, every output is an input, and people will need that invoice from the taxi driver to get it allowed as an input. We shall be entitled to ask the taxi driver for an invoice. I do not welcome the prospect. I recently had a fracas with a taxi driver. If at the end of my ride I had asked him for an invoice, I shudder to think what might have happened.

The famous fish and chip shop situation has been clarified. We now understand that the owner of the shop will be able to make his own assessment of the number of chips eaten at the counter and the number eaten outside his shop. We were told by an hon. Gentleman that fish and chip shop owners are very honest and will make an honest estimate, but I must warn them, in case they should show a tendency not to be quite so honest, that they are liable to spot checks from the famous inspectors. Nevertheless, the anomaly has been removed.

Where we thought the tax was absolutely clear, as with exempt industries, we find that it is nothing of the sort. For example, burials are exempt. On page 75 of Notice No. 701 it can be seen that the burial plot, the provision of a hearse and grave digging are exempt, but the coffin and the shroud are subject to tax. On that sombre note I turn to inflation.

In his constituency at the weekend the Chancellor of the Exchequer said that we should bang the drum and say that everything is marvellous, and that it is only the wicked Labour Members of Parliament who are painting everything black. I ask him to remember the right hon. Gentleman who in 1969 when the trade figures first started to improve could not accept it. He wanted to paint the picture so black that he was prepared to fiddle the figures. I wonder who he was? He was the present Chancellor of the Exchequer whose arguments were utterly and completely demolished by the then Chancellor of the Exchequer.

If the Chancellor of the Exchequer is saying that everything is fine, why is he reversing a major pledge in his manifesto that he would utterly reject the philosophy of wage control? Surely he would only do that in the most dire circumstances—

That is what the £ is worth today. If we are in dire circumstances, would it not be better for the Chancellor to say so? To tell the public on one day that everything is marvellous and on another day that things are so bad that we must have a statutory policy which is contrary to everything the Chancellor and his right hon. Friends have ever said only puts the public in a state of confusion.

The Chancellor says that inflation is our most serious problem. The Prime Minister tells us constantly that it is top priority. It is a strang priority when the Government on one hand freeze prices at a stroke and on the other hand introduce a policy which will deliberately put up prices and reintroduce inflationary expectations which will kill the freeze. It is hard to believe that anyone thinks that VAT will not increase prices, but there are some hon. Gentlemen, including the Chancellor of the Exchequer, who still believe this to be so.

The Government say that purchase tax plus SET equals VAT, so there is no increase. I have always thought that a Conservative Government of businessmen understood traders. The Chancellor of the Exchequer told us today that in the second phase of the Government's policies no increases will be allowed in VAT unless they properly should be allowed. He did not tell us how the policing was to be done. The Liberal bench—if the hon. Member for Cornwall, North (Mr. Pardoe) will forgive me for using that term—asked the Chief Secretary to tell us how prices will be policed. I thought that competition was to do that—but that was in 1970. Now we are to have policing.

Does anyone imagine that the cut in SET will be passed on to the consumer? No doubt there will be headlines reporting one or two public-spirited or publicity-conscious companies which make one or two cuts because of the removal of SET, but overall the reduction will not be passed on. Excuses will be made about increasing costs and many of them will be valid excuses.

Many items which did not previously bear purchase tax will bear VAT. Restaurants, children's clothing, holidays at home, sports—all these will bear VAT. Whereas purchase tax was at a higher figure on the wholesale price, VAT is on the retail price, thus, even where the changeover should mean a reduction, it does not.

For example, in the clothing business value added tax at 10 per cent. compared to purchase tax at 11¼ per cent. will in the main mean a considerable increase. I am not concerned about the Chancellor's statistics or anybody else's. I know that most clothing retailers' profit margins are from 70 per cent. to 100 per cent., and in the case of mail order companies up to 150 per cent. The introduction of the tax will inevitably mean a massive increase in prices. The profit margin is calculated not only on cost. It is calculated on cost plus purchase tax to obtain for the retailer the return on sales. The retailer is supposed to take his margin on his cost excluding VAT, which will be an input, but many retailers will simply take the same calculation as before and pocket the input. One reason is to make the extra profit that one Conservative Member told us was not dishonest but was a perfectly natural thing to do.

It is possible that the Government will be able to check all the price increases. I know of one manufacturer who recently wanted to make a price increase because of a substantial increase in the cost of cloth. Without such an increase he would have sold every garment at a loss, so he asked the prices unit if he could make the increase. He received a reply in which he was asked 12 questions. One asked for
"Full information on the reasons for the proposed increase, eg increased costs of new material, bought-in components etc.…"
Another question asked for the
"Present level of production at annual rates ….".
Yet another asked for
"A statement of company's total annual turnover and of the company's earnings (before tax), for each of the last three years, and also some form of management accounts …".
That is a small company with an annual turnover of £500,000. It does not have management accounts. It decided that its choice was to wait until it had supplied all the information and received a reply, meanwhile continuing to sell at a loss, or to increase the price and sell at a profit. It decided to take the latter course, and I do not blame it. It is possible that at some stage the Chancellor will issue an order against the firm, but it is most likely that he will do nothing of the sort. Therefore, some companies will ignore the prices unit and use VAT as an excuse for increasing prices.

If all that is not enough, what about the cheaper items? What about the school kids' penny lolly? How does one impose a 10 per cent. increase on that? It is more likely that it will turn into a twopenny lolly.

What about parking fees? We read that in Chatham they are to rise to counteract the effect of value added tax. From next April corporation car parks will charge a minimum of 5p compared with the present 3p.

The Prime Minister has told us that the main battle is against inflation, and he is right. It is the greatest single danger today, a great danger to our very democratic structure. At such a time it is absurd to add to an already dangerously inflationary situation. VAT could be the last straw. Why on earth are the Government introducing it now? As the Chancellor himself said, it has nothing to do with the Common Market. It cannot be to collect the same or even less revenue. It certainly cannot be to simplify the tax system. It looks very much to me like sheer obstinacy.

By its votes on greater weights and sizes for lorries and on immigration, the House has recently shown a refreshing independence. It has shown that the Government take things for granted at their peril. I hope that tonight the House will retain its independence and vote for the motion to postpone the introduction of VAT, which also has the virtue of being supported by the public, traders and consumers alike.

9.30 p.m.

The Opposition have shown a refreshing independence by failing to turn up for their Supply Day debate. For most of the day it has been very difficult to remember that we have been on a Supply Day debating an Opposition motion attacking the Government. For almost the whole debate the Opposition benches have been virtually empty—

The hon. Gentleman may not like it, but he will get it.

Halfway through the winding-up speech of the hon. Member for Heywood and Royton (Mr. Joel Barnett) there were only 20 Labour Members present. At once stage during the debate Mr. Deputy Speaker was obliged to call two of my hon. Friends in succession—[Interruption.]—It is the Opposition's motion, not ours.

I can tell the right hon. Member for Leeds, East (Mr. Healey) that the next time he asks the Shadow Cabinet for a Supply Day he will have some pretty pointed questions to answer from his Chief Whip.—[Interruption.]—Opposition Members should realise that if they choose a whole parliamentary day for a Supply Day debate and cannot keep then-own side going they have put up a very poor show.

The debate has been about the demand for the postponement of value added tax. My right hon. Friend the Chancellor of the Exchequer made it clear this afternoon, and I make it clear again tonight, that we have no intention of delaying the end of selective employment tax and of purchase tax and the introduction of value added tax. There is no reason for such a step.

The truth is that despite all we have heard, despite the cries of woe from the hon. Member for Heywood and Royton and others, the preparations for the changeover are well advanced. I mean not only the preparations by Customs and Excise but the preparations by businessmen. There have been nearly two years to get ready for VAT. There was the Green Paper last year, followed by perhaps the most intensive consultations with professions, industry and commerce than have ever been conducted in this country before a change in the tax system. Then in March of this year there was the draft legislation and the VAT White Paper describing the proposed system in some detail. In July, after the Finance Bill became law, Customs and Excise issued more than 2 million explanatory leaflets primarily for small traders. In August the VAT Information Pack was distributed to about 1½ million probable VAT traders, and it was followed by a number of other specialised notices.

Many firms have made or are making their preparations. They are adapting their accounting procedures, re-programming their computers, ordering new stationery and training their staff. Few now want the starting date to be postponed. Nothing would cause more confusion than that.

Staff from the local VAT offices are visiting traders to advise them on the tax and how to maintain their records. I can tell the hon. Member for Sheffield, Attercliffe (Mr. Duffy) that it is not being done in alphabetical order. The visits are up to schedule. VAT staff have taken part in almost 2,000 meetings with trade associations, chambers of commerce and other gatherings and there have been many conferences, seminars and training courses run by industry and others.

After a slow start registration is now improving steadily. The VAT computer centre was installed in July and is already in operation processing registration forms and issuing registration certificates.

The Opposition suggest that all this should be put into reverse. We see no reason whatever to postpone the benefits that the end of SET and purchase tax will bring or to delay the advantage of the better and fairer system which VAT represents. We need to go ahead and to get on with the job. Let us hear no more talk about delaying or postponing.

There have been a number of speeches about the anxieties of retailers. The hon. Member for Glasgow, Shettleston (Sir M. Galpern) gave us the benefit of his experience in his constituency. I recognise that even with the £5,000 exemption limit the great majority of retailers will need to operate the tax. Perhaps I ought to say this about it. In all the representations made to us after the Green Paper was issued one message shone out above all others. It was, "For goodness sake keep the structure simple." It went on to tell us that the biggest single step that we could take was to go for a single positive rate of tax. That we have done.

No one has welcomed the single positive rate more than the retailing organisations. After the budget the Retail Consortium said:
"We welcome the comparative simplicity of the VAT system chosen by the Chancellor and the non-inflationary level of the rate he has selected."
The Wholesale Grocers' Federation said:
"We are extremely pleased that our two main submissions—a single rate of VAT plus zero-rating for food—have been accepted."
Nevertheless I do not deny that for the retailer who has never before been concerned with the mechanics of indirect taxation VAT does take a bit of getting used to—[Interruption.] It is all very well for right hon. and hon. Gentlemen opposite to wave all the VAT leaflets. They do not all apply to every trader.

I find as I go about my constituency—and a number of right hon and hon. Members have made this point—that those retailers who have come to grips with the problem, who have studied the Customs pamphlets or who have discussed their problems with the local VAT office have few fears. But there are those who give the impression that they hope somehow that it will all go away and never happen. I can only urge upon the latter group not to leave it too late. VAT will not go away. Its introduction will not be postponed. Those traders will serve their customers better and help themselves and their businesses if they make the effort to come to grips with the details now rather than leave it to the last moment.

The hon. Member for Sheffield, Atter-cliffe asked one or two detailed questions and perhaps I may answer them now. He said that the VAT return form was not yet available to traders apart from the facsimile in the General Guide. But we recognise that it would be helpful for traders to have advance notice of the notes on the return form. They will be published in the January edition of the VAT Bulletin.

The hon. Gentleman asked about the failure to consult the National Federation of Retail Newsagents. Here there was a most unfortunate omission to send one version of a discussion paper to that body. It was later rectified and it has most recently had most full consultation with Customs, the last one being on 22nd November. We apologise for the earlier lapse.

Most of the debate has centred on the problem of prices and it is naturally in this area that most of the anxieties about VAT are felt. My hon. Friend the Member for Glasgow, Cathcart (Mr. Edward Taylor) made a most constructive speech to which I shall return later. In the course of it he made many helpful points and careful note has been taken of them.

I must deal with the Labour Party and prices. It is interesting to see what shifts there have been in the Labour Party's scare campaign about VAT and prices. Before the General Election the air was thick with the cries of alarm. Speaking at Birmingham on 3rd June 1970 the right hon. Member for Huyton (Mr. Harold Wilson) said:
"Four shillings in the pound more on your bus and rail fares, for these would be subject to the tax; four shillings in the pound more on your gas, electricity and coal bills; and four shillings in the pound more on children's clothing, books and newspapers "—
[HON. MEMBERS: "That is true, anyway."] Yes, the right hon. Gentleman scores one out of 10.

Then we come to the right hon. Member for Leeds, East. In his election address, writing about my right hon. and hon. Friends, he said:
"Their whole budget policy would depend on levying four shillings in the pound on the essential goods, which under Labour, are not taxed at all."
I would simply interpose that the right hon. Gentleman has yet to convince anyone on either side that he knows anything about forming a Budget policy.

We had not heard much about 4s. in the £ for some time, until last weekend. My hon. Friend the Member for Brig-house and Spenborough (Mr. Proudfoot) drew it to the attention of the House that, in a television debate in the Leeds studio on Sunday, the right hon. Gentleman returned to the subject—a sort of echo from the past, a piece of deja vu:
"What the Government plans to do is to double the rate of VAT to 20 per cent. to apply to food."
He is at it again. He actually said it.

Their second line was different. Even at 10 per cent., they argued, VAT would be bound to put prices up because it would tax many things which are not now taxed at all. Furthermore, they claimed, it would be bound to be regressive, hitting the poor more than the rich. But this line did not long survive the Budget. No-one was more surprised than the Opposition Front Bench when my right hon. Friend spelled out his plans to protect the lower income groups. By zero-rating most food, coal, gas, electricity, fares, new housing and prescriptions, by exempting rents, health services, postage and so on, we are making sure that the tax will not be regressive. This is a conclusion which has not been seriously challenged by any reputable commentator.

On the contrary, not only will the change to VAT not lead to any significant general increase in prices—a view shared by the National Institute among others—it is now abundantly clear that the lower income groups will be protected. My hon. Friend the Member for Leek (Mr. Knox) gave the figures. Whereas items relieved from VAT account for perhaps little more than 40 per cent. of the budgets of families on average earnings, that proportion rises to 60 per cent. for families on low incomes.

My right hon. Friend the Member for Stafford and Stone (Mr. Hugh Fraser) still argued that, nevertheless, it was regressive. I must assert, as firmly as I can, that that simply is not true. One has to take the effect on the individual family of the tax as a whole, of all the changes, and on that basis it is not regressive.

So the argument has shifted again, and in the last few weeks. Instead of saying that VAT will raise prices, the argument is that any change in the system of in direct taxation will raise prices. According to their demonology, it is not VAT which is the villain but change itself—

The hon. Gentleman is shifting his own argument every few seconds, but the fact is that the Opposition have consistently maintained, for the same reasons as the right hon. Member for Stafford and Stone, that the tax will be regressive, and we have given case after case tonight to prove it. The Minister has not attempted to reply and he is now attributing to the official Opposition a remark which, so far as I can recall, has been made on only one occasion, and then by the Chairman of the Liberal Party.

Perhaps the best argument is that right hon. Gentlemen opposite have had consistently to reinforce their case by going in for totally unreasonable scares. They have been helped by some statements outside this House, whether ignorant or mischievous I know not, by those who ought to know better. For instance, spokesmen of the hotel and restaurant trade have talked wildly of 20 and 30 per cent. price increases. That is pure fantasy.

We have had the same from the theatre and sports worlds. I got the impression that both the hon. Member for Putney (Mr. Hugh Jenkins) and the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) have been somewhat embarrassed by some of the statements of those whom they claim to represent.

We have even had some of these scares from hon. Members. At Question time last week, the hon. Member for Ealing, North (Mr. Molloy), talking about VAT—it is clear that that is what he was talking about—said that "folk would find their food bills increasing dramatically". How can it have this effect?

Will the hon. Gentleman answer the points which have been made in the debate? Let us take one point. A case was made that as regards the theatre VAT will constitute a tax in an area in which there is no tax. Therefore, in this area it is a new tax placed where there is now very little tax. Will the hon. Gentleman answer that point?

The tax will not put up prices by up to 20 per cent. or 30 per cent., as theatre managers have tried to indicate. They should go up by less than a full 10 per cent. because there will be other inputs which will be relieved. But I agree that the prices will go up.

The right hon. Member for Leeds, East at last admitted that VAT will not increase food prices overall.

The hon. Gentleman persists in attributing to me—and he has had to withdraw once this evening—statements I have never made. Will he please give an example of when, referring to the VAT legislation, which has been in existence for the last four months, I have ever suggested that food prices would go up as a result? While he is about it, will the hon. Gentleman tell us whether in his view the Churches Commission on Charities, the YMCA and Oxfam are telling lies in stating that the application of VAT to charities and churches will cripple many of their most important and charitable activities?

I am not surprised that the right hon. Gentleman changed the subject halfway through. I shall read it again.

On television on Sunday the right hon. Gentleman said
"What the Government plan to do is to double the rate of VAT to 20 per cent. to apply to food."

Is the right hon. Gentleman aware that consistently in the House of Commons we have attempted to get the Government to deny that they will extend the coverage of VAT to food and that they have failed to do so? We have consistently attempted to get them to deny that they will increase the rate of VAT and they have refused to do so. In the light of the Government's betrayal of all their election pledges in this area so far, can the House and the country be told whether they have any excuse for not drawing the conclusion which I drew?

The right hon. Gentleman's discomfort is plain. My hon. Friends tempt me to elaborate but they can read the speeches in the OFFICIAL REPORT tomorrow.

The position is clear. There will be £45 million less tax charged on food next April than there is now, and £100 million less tax than would have been charged if the rates in force at the last election had been in force now. Accusations that VAT will increase the price of food are sheer bunkum and should be exposed for the irresponsible scare-mongering they are.

Today we have heard a lot about the problem of purchase tax on foods. The astonishing thing is that the right hon. Member for Leeds, East seems to have discovered for the first time that a range of foodstuffs—soft drinks, ice cream, confectionery—has been charged to purchase tax for a good many years. He has only just discovered that fact. For six years his party ran a purchase tax system with exactly the same boundary lines, between the purchase-tax foods and the rest of the foods, as will apply to VAT.

All that we have heard about "pussy pieces" and that sort of thing is sheer hypocrisy, because the right hon. Gentleman is merely commenting on a system which his Government ran for six years.

Serious points concerning prices have been raised during the debate. My hon. Friend the Member for Cathcart and the hon. Member for Cornwall, North (Mr. Pardoe) asked a serious point about prices. I shall do my best to answer. They put the argument. Perhaps I may summarise it in these words: "Yes, I accept that the tax should not lead to any significant general increase in prices; I accept that it should not be regressive; I accept that there should be less tax on food, on housing, on the distribution of fuel, and so on. But all this depends on traders passing on to the public the whole, or substantially the whole, of the effects of the abolition of purchase tax and SET".

How, they asked, were the Government going to make sure that happened? This, I recognise, is a serious question, and I shall try to give it a serious answer. First, we must all recognise the importance of ensuring that the scare stories do not become self-fulfilling prophecies. Those who prophesy massive price increases must recognise that they are helping to make them come true. We welcome responsible criticism of our arrangements, but all will condemn the irresponsible scare-mongering.

Secondly, it is essential that traders should understand how the tax works and what its effects should be. I believe that some of the fears undoubtedly stem from a belief that VAT is a cascade tax. It is not, and this should be understood. Thirdly, I remind the House that there will be full relief for purchase tax paid on stocks held by retailers for sale at the time of the changeover. There will now be no excuse for putting up prices on account of double taxation.

Fourthly, and perhaps this is as important as any, businessmen must make sure that when they price their goods they take full account of the end of purchase tax and SET. My hon. Friend the Member for Dartford (Mr. Trew) suggested that the retail trade may help to monitor the changeover, and this is something which my right hon. Friend will undoubtedly be exploring with it.

Fifthly, it is important that we should ensure that customers know what the effects of VAT should be on the prices of goods and services they buy, and we are giving a great deal of attention to this vital factor. We shall be providing information nearer the date of the introduction of VAT about the effects of the changeover on many of the everyday goods and services bought by ordinary people.

We fully recognise the fears—fears which have undoubtedly been fanned by the experience of decimalisation—that shoppers will, as it were, lose their way and be taken for a ride without realising what is happening. Here I have little doubt that knowledge and information will be important weapons, but that is not all. It seems probable that VAT will be introduced at a time and in circumstances where the Government will have brought in legislation to give effect to Phase II of their prices and incomes policy. The House will not expect me to discuss the precise timing of this legislation tonight, nor can I go into any detail about its contents, but what I can say is that the changeover from the present system of taxation to VAT will take place against the background of a new legislative framework affecting the determination of both pay and prices.

In due course the Government will be announcing how this framework will operate in the field of prices to the consumer, but I give this warning to traders who may feel tempted to take advantage of the changeover: the Government will be ready to use all the powers at their command to ensure that shoppers are protected from those who attempt to profiteer by failing to take full account of the ending of purchase tax and SET.

I am grateful to the hon. Gentleman for the way in which he has tried to answer the point that I made. Can he spell out what powers are available to the Government at present, and what powers will be available to them at the end of the 90-day period to ensure that his words come true?

The hon. Gentleman will recognise that I cannot at this stage talk about the powers that will exist under Phase II, and I am sure he realises the reasons for that.

A lot of the debate has been about the general merits of VAT. To hear the right hon. Member for Leeds, East talking one would think that the Labour Party had never recognised the advantages of VAT, yet we know that it did, and if the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) were still Chancellor of the Exchequer it is possible that he would be standing at this Dispatch Box defending VAT. [HON. MEMBERS: "NO."] What did the right hon. Gentleman say in 1969 when he was Chancellor of the Exchequer? Speaking at Aberystwyth on 28th June, 1969, he said:

"I would not argue for a moment that the whole idea of a value added tax should be strangled at birth. Quite a reasonable case can be made out for it. A value added tax deserves serious and informed debate."
He said that against the background of the assumption that it would apply to basic foods such as bread, butter, sugar and milk, and also to books, newspapers, coal, coke, electricity, gas, public transport, and so on. Indeed, his noble Friend Lord George-Brown said on the radio only two months ago:
"I happen to be one of those—and I say it very firmly—who believe that a switch from the present system of taxation to this thing called value added tax is the right way to go in a modern society."
Although right hon. and hon. Members Opposite failed signally to support their motion by their presence, the debate has served a useful purpose. It has allowed us to state yet again the great advantages of VAT over the taxes which it will replace. It has enabled us to demonstrate once again that many of the scare stories stem either from ignorance as to how the tax will work or from an attempt to win cheap political cheers. As my hon. Friend the Member for Brig-house and Spenborough said, that will backfire when the facts become known.

The debate has enabled us to answer some of the genuine anxieties which are inevitably felt about any new tax. I hope that, in particular, what my right hon. Friend and I have said about prices may have gone some way to reassure those who have spoken on this subject during the debate.

The debate, therefore, has not been a waste of time. The motion, however, on which we are invited to vote, is a piece of ridiculous nonsense. We all know why right hon. and hon. Members opposite are asking us to postpone the tax. Postponing decisions is the only way they can paper over the cracks in their party unity. That is why they are postponing the decision to send representatives to the European Parliament at Strasbourg. That is why they are postponing the Lincoln by-election. That is why they want to postpone the VAT.

But why should they expect us to follow them in their timid backward-looking fearful hesitations? Why do they expect us to follow them in their ostrich posture, refusing to face reality? They

Division No. 29.]

AYES

[10.0 p.m.

Abse, LeoBishop, E. S.Carter-Jones, Lewis (Eccles)
Albu, AustenBlenkinsop, ArthurCastle, Rt. Hn. Barbara
Allaun, Frank (Salford, E.)Boardman, H. (Leigh)Clark, David (Colne Valley)
Allen, ScholefieldBooth, AlbertCocks, Michael (Bristol, S.)
Archer, Peter (Rowley Regis)Bradley, TomCohen, Stanley
Armstrong, ErnestBroughton, Sir AlfredConcannon, J. D.
Ashley, JackBrown, Robert C. (N'c'tle-u-Tyne,W.)Conlan, Bernard
Ashton, JoeBrown, Hugh D. (G'gow, Provan)Corbet, Mrs. Freda
Atkinson, NormanBrown, Ronald(Shoreditch & F'bury)Cox, Thomas (Wandsworth, C.)
Bagier, Gordon A. T.Buchan, NormanCrawshaw, Richard
Barnes, MichaelBuchanan, Richard (G'gow, Sp'burn)Cronin, John
Barnett, Guy (Greenwich)Butler, Mrs. Joyce (Wood Green)Crosland, Rt. Hn. Anthony
Barnett, Joel (Heywood and Roy ton)Callaghan, Rt. Hn. JamesCrossman, Rt. Hn. Richard
Baxter, WilliamCampbell, I. (Dunbartonshire, W.)Cunningham, G. (Islington, S.W.)
Beaney, AlanCant, R. B.Cunningham, Dr. J. A. (Whitehaven)
Benn, Rt. Hn. Anthony WedgwoodCarmichael, NeilDalyell, Tam
Bennett, James (Glasgow, Bridgeton)Carter, Ray (Birmingh'm, Northfield)Davidson, Arthur

may be incapable of coming to terms with the decisions taken by the House, but why should they expect us to copy them? These are the fears of men who are always looking over their shoulders.

The motion is the motion of "Yesterday's men". Even if the Opposition cannot see its futility, even if they do not see it as a ridiculous gambit upon which they have embarked, if they cannot even now recognise the sense of proceeding with the laws which have already been passed by the House, and if they are determined to divide on the motion, I must ask my right hon. and hon. Friends to reject it in the Lobby.

If the Minister is so convinced—[Interruption.]—that traders will treat the public properly—[Interruption.]

If the Minister is so convinced that traders will play fair with the public, will he explain why the item which used to be put at the bottom of a bill for selective employment tax was embodied in the bill some months ago, if not to milk the customer for SET and VAT after 1st April?

Question put:

The House divided: Ayes 255, Noes 286.

Davies, Denzil (Llanelly)Johnson, Carol (Lewisham, S.)Paisley, Rev. Ian
Davies, G. Elfed (Rhondda, E.)Johnson, James (K'ston-on-Hull, W.)Palmer, Arthur
Davies, Ifor (Gower)Johnson, Walter (Derby, S.)Pannell, Rt. Hn. Charles
Davis, Clinton (Hackney, C.)Johnston, Russell (Inverness)Pardoe, John
Davis, Terry (Bromsgrove)Jones, Dan (Burnley)Parker, John (Dagenham)
Deakins, EricJones, Rt. Hn. Sir Elwyn (W. Ham, S.)Parry, Robert (Liverpool, Exchange)
de Freitas, Rt. Hn. Sir GeoffreyJones, Gwynoro (Carmarthen)Pavitt, Laurie
Delargy, HughJones, T. Alec (Rhondda, W.)Perry, Ernest G.
Dempsey, JamesKaufman, GeraldPrescott, John
Doig, PeterKelley, RichardPrice, J. T. (Westhoughton)
Dormand, J. D.Kerr, RussellPrice, William (Rugby)
Douglas, Dick (Stirlingshire, E.)Kinnock, NeilProbert, Arthur
Douglas-Mann, BruceLambie, DavidReed, D. (Sedgefield)
Duffy, A. E. P.Lamborn, HarryRichard, Ivor
Dunnett, JackLamond, JamesRoberts, Albert (Normanton)
Eadie, AlexLatham, ArthurRoberts, Rt. Hn. Goronwy (Caernarvon)
Edelman, MauriceLawson, GeorgeRobertson, John (Paisley)
Edwards, Robert (Bilston)Leadbitter, TedRoderick, Caerwyn E.(Brc'n & R'dnor)
Edwards, William (Merioneth)Lee, Rt. Hn. FrederickRodgers, William (Stockton-on-Tees)
Ellis, TomLeonard, DickRoper, John
English, MichaelLestor, Miss JoanRose, Paul B.
Evans, FredLewis, Arthur (W. Ham, N.)Ross, Rt. Hn. William (Kilmarnock)
Ewing, HarryLewis, Ron (Carlisle)Rowlands, Ted
Faulds, AndrewLipton, MarcusSheldon, Robert (Ashton-under-Lyne)
Fitch, Alan (Wigan)Lomas, KennethShore, Rt. Hn. Peter (Stepney)
Fletcher, Ted (Darlington)Loughlin, CharlesShort, Rt. Hn. Edward (N'c'tle-u-Tyne)
Foley, MauriceLyon, Alexander W. (York)Short, Mrs. Renée (W'hampton, N.E.)
Foot, MichaelLyons, Edward (Bradford, E.)Silkin, Rt. Hn. John (Deptford)
Ford, BenMabon, Dr. J. DicksonSilkin, Hn. S. C. (Dulwich)
Forrester, JohnMcBride, NeilSillars, James
Fraser, John (Norwood)McCartney, HughSilverman, Julius
Freeson, ReginaldMcElhone, FrankSkinner, Dennis
Galpern, Sir MyerMcGuire, MichaelSmith, John (Lanarkshire, N.)
Garrett, W. E.Mackenzie, GregorSpearing, Nigel
Gilbert, Dr. JohnMackie, JohnSpriggs, Leslie
Ginsburg, David (Dewsbury)Maclennan, RobertStallard, A. W.
Golding, JohnMcMillan, Tom (Glasgow, C.)Steel, David
Gourlay, HarryMcNamara, J. KevinStoddart, David (Swindon)
Grant, George (Morpeth)Mahon, Simon (Bootle)Stonehouse, Rt. Hn. John
Grant, John D. (Islington, E.)Mallalieu, J. P. W. (Huddersfield, E.)Strang, Gavin
Griffiths, Eddie (Brightside)Marks, KennethStrauss, Rt. Hn. G. R.
Griffiths, Will (Exchange)Marsden, F.Summerskill, Hn. Dr. Shirley
Grimond, Rt. Hn. J.Marshall, Dr. EdmundSwain, Thomas
Hamilton, James (Bothwell)Mason, Rt. Hn. RoyThomas, Rt. Hn. George (Cardiff, W.)
Hamilton, William (Fife, W.)Mayhew, ChristopherThomas, Jeffrey (Abertillery)
Hamling, WilliamMeacher, MichaelThorpe, Rt. Hn Jeremy
Hannan, William (G'gow, Maryhill)Mellish, Rt. Hn. RobertTinn, James
Hardy, PeterMendelson, JohnTuck, Raphael
Harper, JosephMikardo, IanUrwin, T. W.
Harrison, Walter (Wakefield)Millan, BruceVarley, Eric G.
Hart, Rt. Hn. JudithMiller, Dr. M. S.Wainwright, Edwin
Milne, EdwardWalden, Brian (B'm'ham, All Saints)
Hattersley, RoyMitchell, R. C. (S'hampton, Itchen)Walker, Harold (Doncaster)
Healey, Rt. Hn. DenisMorgan, Elystan (Cardiganshire)Weitzman, David
Heffer, Eric S.Morris, Alfred (Wythenshawe)Wells, William (Walsall, N.)
Horam, JohnMorris, Charles R. (Openshaw)White, James (Glasgow, Pollok)
Houghton, Rt. Hn. DouglasMorris, Rt. Hn. John (Aberavon)Whitehead, Phillip
Howell, Denis (Small Heath)Moyle, RolandWhitlock, William
Huckfield, LeslieMulley, Rt. Hn. FrederickWilley, Rt. Hn. Frederick
Hughes, Rt. Hn. Cledwyn (Anglesey)Murray, Ronald KingWilliams, Alan (Swansea, W.)
Hughes, Mark (Durham)Oakes, GordonWilliams, Mrs. Shirley (Hitchin)
Hughes, Robert (Aberdeen, N.)Ogden, EricWilliams, W. T. (Warrington)
Hughes, Roy (Newport)O'Halloran, MichaelWilson, Alexander (Hamilton)
Hunter, AdamO'Malley, BrianWilson, Rt. Hn. Harold (Huyton)
Irvine, Rt. Hn. Sir Arthur (Edge Hill)Orbach, Maurice
Janner, GrevilleOrme, StanleyTELLERS FOR THE AYES:
Jay, Rt. Hn. DouglasOswald, Thomas
Jeger, Mrs. LenaOwen, Dr. David (Plymouth, Sutton)Mr. James A. Dunn and
Jenkins, Hugh (Putney)Padley, WalterMr. Tom Pendry.
John, BrynmorPaget, R. T.

NOES

Adley, RobertBeamish, Col. Sir TuftonBraine, Sir Bernard
Alison, Michael (Barkston Ash)Bell, RonaldBray, Ronald
Allason, James (Hemel Hempstead)Bennett, Sir Frederic (Torquay)Brewis, John
Amery, Rt. Hn. JulianBennett, Dr. Reginald (Gosport)Brinton, Sir Tatton
Archer, Jeffrey (Louth)Benyon, W.Brown, Sir Edward (Bath)
Astor, JohnBerry, Hn. AnthonyBruce-Gardyne, J.
Atkins, HumphreyBiggs-Davison, JohnBryan, Sir Paul
Awdry, DanielBlaker, PeterBuchanan-Smith, Alick(Angus, N & M)
Baker, Kenneth (St. Marylebone)Boardman, Tom (Leicester, S.W.)Buck, Antony
Baker, W. H. K. (Banff)Body, RichardBullus, Sir Eric
Balniel, Rt. Hon. LordBoscawen, Hn. RobertBurden, F. A.
Barber, Rt. Hn. AnthonyBossom, Sir CliveButler, Adam (Bosworth)
Batsford, BrianBowden, AndrewCampbell, Rt. Hn. G. (Moray & Nairn)

Carlisle, MarkHolland, PhilipParkinson, Cecil
Carr, Rt. Hn. RobertHolt, Miss MaryPercival, Ian
Cary, Sir RobertHordern, PeterPeyton, Rt. Hn. John
Channon, PaulHornby, RichardPike, Miss Mervyn
Chapman, SydneyHornsby-Smith, Rt. Hn. Dame PatriciaPounder, Rafton
Chataway, Rt. Hn. ChristopherHowe, Rt. Hn. Sir GeoffreyPrice, David (Eastleigh)
Chichester-Clark, R.Howell, David (Gulldford)Prior, Rt. Hn. J. M. L.
Churchill, W. S.Howell, Ralph (Norfolk, N.)Proudfoot, Wilfred
Clark, William (Surrey, E.)Hutchison, Michael ClarkPym, Rt. Hn. Francis
Clarke, Kenneth (Rushcliffe)Iremonger, T. L.Quennell, Miss J. M.
Cockeram, EricIrvine, Bryant Godman (Rye)Raison, Timothy
Cooke, RobertJames, DavidRamsden, Rt. Hn. James
Coombs, DerekJenkin, Patrick (Woodford)Rawlinson, Rt. Hn. Sir Peter
Cooper, A. E.Jessel, TobyRedmond, Robert
Cordle, JohnJohnson Smith, G. (E. Grinstead)Reed, Laurance (Bolton, E.)
Corfield, Rt. Hn. Sir FrederickJopling, MichaelRees, Peter (Dover)
Cormack, PatrickJoseph, Rt. Hn. Sir KeithRees-Davies, W. R.
Costain, A. P.Kaberry, Sir DonaldRenton, Rt. Hn. Sir David
Crouch, DavidKellett-Bowman, Mrs. ElaineRidley, Hn. Nicholas
Davies, Rt. Hn. John (Knutsford)Kershaw, AnthonyRidsdale, Julian
d'Avigdor-Goldsmid, Sir HenryKimball, MarcusRippon, Rt. Hn. Geoffrey
d'Avigdor-Goldsmid. Maj.-Gen. JackKing, Evelyn (Dorset, S.)Roberts, Michael (Cardiff, N.)
Dean, PaulKing, Tom (Bridgwater)Roberts, Wyn (Conway)
Dixon, PiersKirk, PeterRossi, Hugh (Hornsey)
Douglas-Home, Rt. Hn. Sir AlecKnight, Mrs. JillRost, Peter
Drayson, G. B.Knox, DavidRoyle, Anthony
du Cann, Rt. Hn. EdwardLambton, LordRussell, Sir Ronald
Dykes, HughLamont, NormanSt. John-Stevas, Norman
Eden, Rt. Hn. Sir JohnLane, DavidScott, Nicholas
Edwards, Nicholas (Pembroke)Langford-Holt, Sir JohnShaw, Michael (Sc'b'gh & Whitby)
Elliot, Capt, Walter (Carshalton)Le Marchant, SpencerShelton, William (Clapham)
Elliott, R. W. (N'c'tle-upon-Tyne, N.)Lewis, Kenneth (Rutland)Simeons, Charles
Emery, PeterLloyd, Rt. Hn. Geoffrey (Sut'nC'field)Skeet, T. H. H.
Eyre, ReginaldLongden, Sir GilbertSmith, Dudley (W'wick & L'mington)
Farr, JohnLoveridge, JohnSoref, Harold
Fall, AnthonyLuce, R. N.Speed, Keith
Fenner, Mrs. PeggyMcAdden, Sir StephenSpence, John
Fidler, MichaelMacArthur, IanSproat, Iain
Finsberg, Geoffrey (Hampstead)McLaren, MartinStainton, Keith
Fisher, Nigel (Surbiton)Maclean, Sir FitzroyStanbrook, Ivor
Fletcher-Cooke, CharlesMcMaster, StanleyStewart-Smith, Geoffrey (Belper)
Fookes, Miss JanetMacmillan, Rt. Hn. Maurice (Farnham)Stodart, Anthony (Edinburgh, W.)
Fortescue, TimMcNair-Wilson, MichaelStoddart-Scott, Col. Sir M.
Foster, Sir JohnMcNair-Wilson, Patrick (New Forest)Stokes, John
Fowler, NormanMaddan, MartinSutcliffe, John
Fox, MarcusMadel, DavidTapsell, Peter
Fry, PeterMaginnis, John E.Taylor, Sir Charles (Eastbourne)
Galbraith, Hn. T. G. D.Marples, Rt. Hn. ErnestTaylor, Edward M.(G'gow, Cathcart)
Gardner, EdwardMarten, NeilTaylor, Frank (Moss Side)
Gibson-Watt, DavidMather, CarolTebbit, Norman
Gilmour, Ian (Norfolk, C.)Maude, AngusTemple, John M.
Glimour, Sir John (Fife, E.)Maudling, Rt. Hn. ReginaldThatcher, Rt. Hn. Mrs. Margaret
Mawby, RayThomas, John Stradling (Monmouth)
Glyn, Dr. AlanMaxwell-Hyslop, R. J.Thomas, Rt. Hn. Peter (Hendon, S.)
Godber, Rt. Hn. J. B.Meyer, Sir AnthonyThompson, Sir Richard (Croydon,S.)
Goodhart, PhilipMills, Peter (Torrington)Tilney, John
Goodhew, VictorMills, Stratton (Belfast, N.)Trafford, Dr. Anthony
Gorst, JohnMiscampbell, NormanTrew, Peter
Grant, Anthony (Harrow, C.)Mitchell, Lt.-Col.C.(Aberdeenshire,W)Tugendhat, Christopher
Gray, HamishMitchell, David (Basingstoke)Turton, Rt. Hn. Sir Robin
Green, AlanMoate, Rogervan Straubenzee, W. R.
Griffiths, Eldon (Bury St. Edmunds)Molyneaux, JamesVaughan, Dr Gerard
Grylls, MichaelMoney, ErnieWaddington, David
Gummer, J. SelwynMonks, Mrs. ConnieWalker, Rt. Hn. Peter (Worcester)
Gurden, HaroldMonro, HectorWalker-Smith, Rt. Hn. Sir Derek
Hall, Miss Joan (Keighley)Montgomery, FergusWall, Patrick
Hall, John (Wycombe)More, JasperWard, Dame Irene
Hall-Davis, A. G. F.Morgan-Giles, Rear-Adm.Warren, Kenneth
Hamilton, Michael (Salisbury)Morrison, CharlesWells, John (Maidstone)
Hannam, John (Exeter)Mudd, DavidWhite, Roger (Gravesend)
Harrison, Brian (Maidon)Murton, OscarWiggin, Jerry
Harrison, Col. Sir Harwood (Eye)Nabarro, Sir GeraldWilkinson, John
Haselhurst, AlanNeave, AireyWinterton, Nicholas
Hastings, StephenNicholls, Sir HarmarWolrige-Gordon, Patrick
Havers, Sir MichaelNoble, Rt. Hn. MichaelWood, Rt. Hn. Richard
Hawkins, PaulNormanton, TomWoodhouse, Hn. Christopher
Hay, JohnNott, JohnWoodnutt, Mark
Hayhoe, BarneyOnslow, CranleyWorsley, Marcus
Heath, Rt. Hn. EdwardOppenheim, Mrs. SallyWylie, Rt. Hn. N. R.
Heseltine, MichaelOrr, Capt. L. P. S.Younger, Hn. George
Hicks, RobertOsborn, John
Higgins, Terence L.Owen, Idris (Stockport, N.)TELLERS FOR THE NOES:
Hiley, JosephPage, Rt. Hn. Graham (Crosby)Mr. Walter Clegg and
Hill, James (Southampton, Test)Page, John (Harrow, W.)Mr. Bernard Weatherill.

Question accordingly negatived.

Northern Ireland (Tourism)

10.15 p.m.

I beg to move,

That the Development of Tourist Traffic (Northern Ireland) Order 1972, a draft of which was laid before this House on 16th November, be approved.
The order before the House tonight seeks to provide constructively for the build-up of Northern Ireland's tourist industry. As in most countries, tourism is an industry which has developed steadily since the war, and dramatically in the last decade or so. Substantial progress had been made in Northern Ireland until 1969 when a downturn began to appear reflecting the emerging troubles. At the time of the prorogation of Stormont a Bill had been prepared and was about to be published to extend the duration of an existing system of hotel grants and to extend and define the powers of local authorities, the Northern Ireland Tourist Board, and the Ministry of Commerce in order to match the increasing pace of tourist activity and organisational change such as the reorganisation of local government.

Most people are agreed that Ireland has great potential as a major holiday centre, and once normal conditions return the industry will undoubtedly find its customers returning, both old and new. Although the timing of this piece of legislation may strike the casual observer oddly if he allows his attention to be monopolised by the present strife, I believe it is right and responsible for the Government now to come forward with these constructive proposals for an industry which has made a large contribution in the past, and which will undoubtedly make an even larger one in the future.

The order principally does three things: first it extends, with some alteration, a scheme of hotel grants which has operated since 1963. The final date for applications under the former scheme was the 4th October 1971. In fact, as I shall come to later, the order would allow the retrospective granting of applications for grants following that date. Second, the order before the House gives the Minis- try of Commerce powers to promote and manage tourist amenities and to give grants to local authorities for the maintenance of tourist amenities. Finally, it extends the powers and duties of the Northern Ireland Tourist Board and local authorities, in relation to their promotion and general encouragement of tourism in Northern Ireland.

The original scheme of capital grants for hotels was introduced under the Development of Tourist Traffic (Amendment) Act (Northern Ireland) 1963. This provided for the Ministry of Commerce to make grants of up to 25 per cent. of the cost of improvements to existing hotels, guest houses and boarding houses or of capital expenditure incurred in the provision of new hotels and accommodation. In 1966 this scheme was extended without amendment for a further two years; in 1968 it was continued for a further three-year period and the maximum rate of grant was raised from 25 per cent. to 33⅓ per cent.

The continuing aim of the scheme has been to raise both the number of beds available and the general standard of the industry's accommodation throughout Northern Ireland. Grants have therefore been confined to premises which are registered with the Northern Ireland Tourist Board and which provide overnight accommodation. Non-residential restaurants, cafés and public houses have not been eligible for grant assistance.

Since the introduction of the first scheme in 1963 applications have been received from 600 establishments; offers of grant totalling £3,800,000 have been made and the remaining schemes which are still under consideration would attract grant of £3,200,000 if all were approved. In total these projects include the provision of an additional 4,000 bedrooms, 540 bathrooms and 2,600 additional private bathrooms. Much has therefore been accomplished, but there still remains a lot to be done.

Obviously—and it would be surprising if it were otherwise—ground has been lost as a result of the troubles and accommodation has been destroyed or damaged as a result, as we have all sadly seen. Hotels have in the past been a target for the bomber, but it would be wrong to exaggerate the success of this particular terror campaign. As someone who spends a large part of his life in hotels in Northern Ireland, I can assure the House that very many fine hotels are still in business.

The order provides for a flexible scheme of grants related to the capital works of construction, extension, modernisation or improvements of hotels, guest houses and boarding houses registered by the Northern Ireland Tourist Board. As before, non-residential premises will be excluded from the scope of the scheme. The Ministry will set out full details of the precise types of works which will be considered for grant in an explanatory leaflet for the information of applicants. The details will not differ materially from the conditions under the 1963 regulations, but it is not thought desirable to describe them in the order. This ensures the necessary flexibility.

Rates of grant are also not stated in the order but the intention is to provide a three-tier system of grants with rates of 20 per cent. in the Belfast urban area, 25 per cent. in the Belfast region—that is the area within easy reach of Belfast—and 35 per cent. in the rest of Northern Ireland. This is a departure from the previous grant schemes, where a uniform rate of grant, latterly at 33⅓ per cent., applied throughout Northern Ireland.

While there is still a need for further development in the Belfast area which should attract grant assistance, we have nevertheless thought it right that the highest rate should be allocated to the country districts and areas outside the centre, where inevitably it is difficult to attract development and employment-generating enterprises. It is intended that grants will be available in respect of approved capital expenditure incurred since 4th October 1971, which was the closing date for applications under the old scheme.

Those are the most important provisions of the order but there are other aspects to which I should like to refer. The order will also permit the Ministry of Commerce itself to carry out tourist-orientated projects or to provide tourist amenities. In this sense, it is taking new powers, which largely lay with local authorities, and therefore it has also been considered right for the new district councils, which will succeed the old local authorities when the reorganisation becomes a fact, to retain the existing powers of local authorities.

The order also deals with the aspect of the Northern Ireland Tourist Board. I take this opportunity to pay tribute to the board, which had been increasingly successful in popularising Northern Ire-land until the troubles began to work against its efforts. The board will now be able to develop sites and to construct premises which have a contribution to make to the tourist facilities on offer to visitors. It is not the intention of the board to enter into the operation of developments of this kind, but it will have power to act as a trail blazer where appropriate in the development of the kind of facilities which market surveys have demonstrated to be needed. That is one aspect that I thought I should touch on.

There is a further provision in the order which will enable the Ministry of Commerce or a local authority to transfer a tourist amenity or land acquired for tourist development purposes to the National Trust. Every transfer of this kind will be subject to the consent of the Ministry of Finance for Northern Ireland, and I should make that clear. The power will enable the Ministry of Commerce or a local authority to cooperate in what I believe will be a practical manner with the National Trust in the occasional provision by the Trust of a project with a worthwhile tourist content. This also is an important provision.

My purpose in introducing the order is not to be lengthy, because I expect hon. Members with interests in the tourism potential of Northern Ireland will wish to raise issues. But I emphasise that we are here concerned with the means for continuing the development of an industry which even now currently employs about 20,000 people and which earned over £28 million from visitors to Northern Ireland in 1968. So this is not small stuff.

One is well aware of the apparent incongruity of talking now about increasing tourism in Northern Ireland. The man in the street is sadly aware of the destructive elements that have been at work and which have to some extent, but not totally, succeeded in blighting Ireland's image and tourist potential. I am convinced that there will be rapid recovery of the lost ground, and that there will be new achievements in tourist activities in Ireland once a peaceful settlement is reached. Government at all levels, the Tourist Board, and the industry itself must be ready to respond to future progress. The opportunity now exists to take stock and to prepare for future plans. It would be foolish to let that opportunity to slip by. It is for these reasons that I commend the order to the House.

10.26 p.m.

It would appear that the Northern Ireland syndrome is meeting once again this evening—the small selective group who meet to discuss the important orders affecting Northern Ireland. This is the eighteenth order to be made under the Northern Ireland (Temporary Provisions) Act 1972, and the twenty-first piece of legislation to be considered by the House since direct rule. That is a considerable amount of legislation and it illustrates the speedy consideration of political solutions to return to Northern Ireland some of the facilities which it has had in the past. The order is non-controversial; nevertheless, we cannot amend it in any way. We have to accept it as it is introduced to the House.

As the Minister said, this may be a bizarre subject to discuss with the present political and military situation in Northern Ireland. It would be easy to make sick jokes about it. But we are all aware that when conditions return to normal tourism will be a vital factor in Northern Ireland's economy.

It is not only Northern Ireland that has suffered from the reduction in tourism since 1969. The Republic has suffered a 46 per cent. reduction in tourism during the last 12 months. It is therefore in the interests of all the people of Ireland that normal conditions return as quickly as possible.

The order has been welcomed by the Tourist Board and the Opposition have no hesitation in welcoming it. The measures are modest but costly, and are in the general interests of the tourist industry.

During 1968, the peak year, it is estimated that visitors from all sources brought about £28 million into the revenue and over 1 million people visited Northern Ireland, spending about £35 million. Those figures have been dramatically reduced in recent times. For instance, the number of beds available has been reduced by about 30 per cent. because of the bombing activities.

Article 3(1) is the key article. The new hotels grant scheme will be on a three-tier basis. I welcome this, because it will help a number of areas. For example, the area of the hon. Member for Antrim, North (Rev. Ian Paisley) will be assisted considerably, as will the areas west of the River Bann, where there will be need for fresh development in the very near future.

There is not a large increase in the differentials, but they are important. I notice that it is intended that there should be a possibility of a 5 per cent. grant above the top rate for particularly worthwhile projects. We should welcome clarification of the type of project that might attract that level of assistance.

Article 3(1) provides that there may be repayment of the grant
"in specified circumstances".
Perhaps the Minister will tell us in what sort of circumstances that provision will apply.

Article 11 provides that money will be appropriated to meet the expenditure provided for by Articles 3 and 8. What sum is it estimated will be spent under those provisions in the financial year 1972–73? Has it been provided for in one of the three appropriation orders previously brought before the House?

We know from experience that there has been co-operation between the Republic and Northern Ireland in regard to tourism, particularly at a senior level. Anybody who has talked to the tourist people in the Republic and in Northern Ireland knows their anxiety to co-operate. The very way in which maps are printed and published in Ireland shows that there is no attempt to create difficulties where they could easily be created. Has the Minister had any discussions with the Tourist Board in the Republic? Has his right hon. Friend the Secretary of State considered an all-Ireland institution which could be established to co-ordinate and develop such functions as tourism? We shall be looking in the White Paper for positive proposals. This is only one aspect. There are others where co-operation could be sought.

The Northern Ireland Tourist Board in some of its excellent publications has produced a five-year plan designed to come into operation in the first year when things return to normal in the Province. The plan envisages an increase in the number of high-standard bedrooms of about 3,000 at a cost between £17 million and £18 million. The projected expansion in the industry would mean that in the fifth and final year of the plan revenue would be up by 40 per cent. and employment in the industry would be increased by 50 per cent.

The tourist industry is labour-intensive, and vital for employment. I have figures on employment. In Northern Ireland, the industry still employs about 20,000 people. If that figure were increased by 50 per cent. it would mean a considerable increase in employment. I am sorry that the hon. Member for Belfast, East (Mr. McMaster) is not here, because the figure of 20,000 is twice the number employed in the shipbuilding industry in Northern Ireland, which we have spent a good deal of time considering, and the importance of which has been emphasised. The tourist industry is labour-intensive, and every encouragement is needed.

We welcome the order. We recognise the difficulties. We cannot put them out of our mind, but we are trying to examine what expansion will mean. Having witnessed and tasted what tourism can offer in Ireland, I believe that there is a great opportunity for a tremendous expansion in tourism in the near future. Allowing for the political and military difficulties, I consider that the order in its limited way is to be welcomed.

On the political side, we re-emphasise to the Minister that urgent need to press ahead with the political reforms, of which I am sure he is fully aware, and which we await in a White Paper in the very near future.

10.36 p.m.

I apologise for the condition of my voice, which has almost gone. That is one of the occupational risks that politicians in all parts of the United Kingdom suffer.

I warmly welcome the order. As the hon. Member for Salford, West (Mr. Orme) said, Northern Ireland tourism has an enormous potential. But, as he and the Minister emphasised, it is substantially under-developed.

I spent my family holidays in the constituency of the hon. Member for Antrim, North (Rev. Ian Paisley) and on Lough Erne. Both are first-class areas, but I feel that the area of Lough Erne particularly—I say this with no offence to the hon. Gentleman—has the potential to become one of the great tourist areas of the United Kingdom. Valiant steps have been taken to get it off the ground, but it has been knocked back by the IRA bombing campaign. It is sad to see the number of hotels in the area that have been obliterated by mindless terrorists. But I am sure that it has great potential.

To appreciate the background of the order we must consider the two areas of competition that Northern Ireland tourism must face. The first is Southern Ireland. Since the early 1960s it has been spending a big budget, of which about half goes towards providing superior hotels, eating houses, tourist amenities and entertainment. Because of that, it has been able to leap ahead. The other competition is from the cheap package holidays which bring Western Europe within easy and cheap reach of the English and Scottish tourist.

Both Front Benches have emphasised the importance of tourism to Northern Ireland, with 20,000 people employed and a £20 million income even today. It was £28 million in 1968. What would it be now if we had peace in Northern Ireland? The potential is there, and I am convinced that it is very great. I believe that within six to 12 months of the end of our troubles we shall see a massive flood of tourists coming to Northern Ireland.

I know that the situation in Israel is different, but I was struck by the fact that immediately after the Six-Day War a vast number of people went to Israel because it was in the news. I am convinced that when we can convince people that there is peace in Northern Ireland there will be a big influx of tourists.

But beautiful countryside and beautiful loughs and shores are not enough. That is why the provision of what the Northern Ireland Tourist Board calls tourist hardware is essential. The term includes hotels, eating places, entertainment for tourists and general amenities. That is why I particularly welcome the order.

The order is especially necessary, as 35 hotels have been bombed and between a quarter and a third of tourist rooms have been destroyed by mindless bombers. In addition, many of our hotels are out of date, and there has been a fairly low investment over the years in tourism by private investors. It is to assist a tourist industry which is in need of re-equipment and to give a boost because of the problems faced by those concerned in it from terrorists that the order is to be welcomed. It will help restore the shattered tourist trade and get it prepared for the forthcoming tourist advance.

If we do not make these powers available now, so that people can get on with their planning and preparation, when the flood of tourists comes there will not be enough rooms and amenities for them and we shall have missed a very important opportunity.

I was glad that both Front Benches paid tribute to the Northern Ireland Tourist Board—to its members, its staff, and its chief executive, Bob Hall, and his team. It is now very professional. It has been radically re-organised in recent years and can now compete effectively. It is working to prepare the ground for better times so that it can expand rapidly when they come.

I end by again warmly welcoming the order.

10.42 p.m.

I must first apologise for intervening in a debate on Northern Ireland, but I could not help being struck by the fact that in the 2½ years that I have been a Member of this House this is the first opportunity that the Government have provided for a discussion on tourism.

My hon. Friend the Minister of State has produced an excellent order. I would remind that in a conversation that he and I had over dinner a year ago, before he was involved in Northern Ireland affairs, I asked him what he thought we should be discussing 10 years hence, and he said, by no means flippantly, "The growth of tourism to China." It is significant that in the absence of legislation of this kind for England, Scotland and Wales, his Department has produced a first-class order which, when the troubles are over, should have the effect of developing tourist traffic to Northern Ireland.

I commend to the House the fact that the order is using tourism as an instrument of regional policy. My hon. Friend pointed out the different regional balances and levels of grants available to various areas. I was glad to hear him stress the importance of the additional advantages to some rural areas and areas away from main centres of population. I should like to see the same extended to other parts of the United Kingdom.

Two questions relating specifically to the order occur to me. Article 5 appears to give very wide powers to the Ministry. It says:
"The Ministry may, with the approval of the Ministry of Finance, provide or secure the provision of, and maintain, any tourist amenity…".
May we be assured that there is no intention that any United Kingdom Government should go into the hotel business?

Article 11 also seems to provide very wide and sweeping powers. It says:
"…any increase in the expenses of the Ministry attributable to this Order may be paid out of moneys hereafter appropriated…."
We all recognise the difficulties through which Northern Ireland is passing, but I ask my hon. Friend whether he is satisfied that there is no possibility of any of the powers in the order being abused.

Perhaps I should declare an interest in tourism in England but not, unfortunately, in Northern Ireland. I see opportunities for anyone with an adventurous spirit to take advantage of what is on offer here.

Will the Fire Precautions Act be applied in Northern Ireland, and is it the intention to link the assistance being provided under this order with the restrictions to which hotelkeepers in Britain are subject under that Act?

I speak with the support of my hon. Friends the Members for Torquay (Sir F. Bennett), Bodmin (Mr. Hicks) and Exeter (Mr. John Hannan). I hope that my hon. Friend will take the opportunity to commend to his hon. Friends in the Department of Trade and Industry the great advantages which this order offers to Northern Ireland—opportunities which are totally lacking throughout the rest of the United Kingdom. Is my hon. Friend aware that the Development of Tourism Act 1969 becomes ineffective in March of next year? Is he further aware that the Government, by ending the assistance available under the local employment Acts in the rest of Britain, have removed from the British tourist industry much of the advantage which this order seeks to give to the industry in Ulster?

My hon. Friend said that 28,000 jobs were involved in the tourist industry in Northern Ireland. Is he aware that the number employed in the hotel and catering industry in England, Wales and Scotland is well over 1·2 million? I ask my hon. Friend to do whatever he can to commend this piece of legislation to his British colleagues.

10.46 p.m.

Like those hon. Members who have preceded me, I give a warm welcome to this order, and I should like to concentrate my remarks basically on Article 5 which deals with tourist amenities.

My hon. Friend the Member for Belfast, North (Mr. Stratton Mills) rightly spoke about the charms of Lough Erne. I am convinced that fishing, golfing. sailing, mountaineering and all manner of tourist activities can be developed and assisted by Government action without having the undesirable effect of creating a monstrosity that ruins the whole countryside.

One of the publications issued by the Northern Ireland Tourist Board—the one that the hon. Member for Salford, West (Mr. Orme) has—describes Northern Ireland as a thousand-hole golf course with farms and villages scattered through it. That is the sort of punch-line that one very much welcomes in tourist literature. For far too long, because of the small budget given to the board, publicity has not been given sufficient emphasis or attention.

I presume that one of the main purposes of granting financial assistance to what the board calls the hardware of beds and accommodation is to emphasise the need for hotel accommodation of international standard, rather than to provide assistance to unlicensed guest and boarding houses. Although they fulfil an important role in Northern Ireland's tourist trade by providing accommodation, the English pattern shows that the popularity of these establishments is falling off, and presumably the same will happen in Northern Ireland.

I welcome my hon. Friend's statement the flexibility that will run through the provision of the hotel grant. This is tremendously important, and perhaps in winding up the debate my hon. Friend will give some indication of the kind of projects that will be at the top end of the assistance scale.

One thing that I find very interesting—I had not realised this until I started doing my homework in connection with the order—is that Northern Ireland requires virtually to double its present hotel bedroom capacity between now and 1976, and that apparently the cost will be between £17 million and £18 million on current prices. Hotels cannot be built and tourism developed overnight, and even though it is at present incongruous to think in terms of re-attracting tourists to Northern Ireland, nevertheless, now is the time when we should be concentrating all our thoughts and attention towards doing so. For some curious reason manufacturing industry is always regarded favourably and service industries are somehow second-class industries. I have never been able fully to understand that.

Is my hon. Friend aware that in the last 2½ years we have spent 48½ hours on the floor of the House discussing coalmining and 2 hours discussing tourism, mostly on the adjournment.

I was not aware of those facts. I am grateful to my hon. Friend for providing them.

When one has spoken in terms of the number of people employed in the tourist trade in Northern Ireland and the income it has brought it is clear that another point has to be borne in mind. It costs roughly £4,000 to create every job in manufacturing industry but considerably less than half that for the provision of employment in the tourist trade. I understand that the figure is about £1,450. This is of the utmost importance.

In Northern Ireland we have the basic raw material, the scenery. It is up to local developers, guided and assisted by the Government, to make the industry the flourishing entity which I am firmly convinced it shortly can become.

The mobile tourist doing one-night stands in attractive areas will not wish to stay in a rather unsightly boarding house, or in a place which is a long way from the scenery he came to see. We must start again, in a sense, and build accommodation and amenities in the places visited by the tourist. This order will enable that to be done.

I wonder whether, during his winding-up speech, my hon. Friend can give the House any indication of the extent to which private enterprise money is coming into Northern Ireland tourist development? For a long time it was very sluggish. In the light of the present political situation I assume that it is the same, but I should he grateful for any advice and guidance that my hon. Friend can give on this point.

We have a tremendous tourist potential. The Northern Ireland Tourist Board is doing a very good job. I echo the comments of my hon. Friend the Member for Belfast, North, in paying tribute to its members and their work.

I support the order, and wish the Northern Ireland tourist trade the good fortune that it deserves.

10.53 p.m.

I re-echo the words of the spokesman on the Opposition Front Bench about the way in which legislation for Northern Ireland is brought before the House of Commons.

Today we are discussing a very important piece of legislation, and yet it is not possible for us to put forward amendments or alter it in any way. I do not think any Government would claim that their legislation is of such a nature that it does not need the scrutiny of the parliamentary institution, and cannot be amended for the betterment of the people whom it is intended to cover. I do not suppose that the hon. Gentleman claims the infallibility of another person in a different field altogether.

This evening we have to deal with matters as they are. Many strange voices are being heard in Northern Ireland today. Last night the Northern Ireland people received a lecture from a Professor Lindsay, who told his audience that the House of Commons was an illegal regime so far as Northern Ireland is concerned; that the Government of Northern Ireland is illegal, and that the people could take what steps they liked to establish their own way of living. On behalf of the people whom I represent I say that we utterly repudiate such a thesis. We believe that this Parliament is the sovereign Parliament of the United Kingdom and that in this Chamber there is registered the right and the power to legislate for Northern Ireland. We are not like other people who come to this House only to speak on various aspects of life in Northern Ireland; we want to take part in those debates which will help the ordinary men, women and children of Northern Ireland to a better way of life.

The subject with which we are dealing tonight is of great importance for my constituency. I represent one of the most beautiful parts not just of Northern Ireland but of the whole of Ireland. The Antrim coast road is one of the most beautiful in the whole of the United Kingdom. But in North Antrim we have suffered from the sorry tale of the IRA campaign of violence and terrorism, and the effect that it has had on the tourist trade.

I warmly welcome the order because it is a piece of legislation which expresses hope for Northern Ireland. We must not forget the terrible circumstances that exist in Northern Ireland today, but none of us must think that they will endure for ever. We hope that a better day is coming, and in this order we are looking to the future. The people of Northern Ireland should recognise that fact, and realise that the Government and the House of Commons are looking to better days, when the tourist trade must be so equipped and geared as to be able to cater for all those who want to come to Northern Ireland to enjoy its scenery and the society that it can offer.

How far out of Belfast does urban Belfast extend? The Minister told us that there would be a 20 per cent. grant for Belfast, a 25 per cent. grant for urban Belfast, and a 35 per cent. grant for the rest of Northern Ireland. Will he assure me that the whole of my constituency is outside urban Belfast? I remind him that North Antrim starts at Larne and runs up to Portrush, and, on the other side, starts at the borders of Randalstown, running up the Bann almost to the mouth of the river, and then going over into Portrush. If the hon. Gentleman assures me that my constituency is outside urban Belfast it will be an encouragement to the people of my area, whose tourist trade has suffered from the campaign of terrorism.

I draw attention to Article 3(7) of the order which refers to
"any hotel registered in the register of hotels maintained under section 10 of the principal Act;
(b) any guest house…"
I emphasise the reference to guest houses. Will that cover farm houses which go in for catering in the summer? Many farmers in these areas have been cashing in on the tourist trade—and rightly so; they have improved their accommodation and have been taking overnight visitors in addition to people staying for longer periods. As the Minister knows, there are many smallholdings in Northern Ireland, and it is valuable to their owners if, in the summer, they can augment their income in that way. What grant will be available for those people?

It may seem strange to some, but many people in Northern Ireland do not wish to stay in licensed premises. This is one of the facts of life in Northern Ireland. Certain owners of hotels that are not licensed have told me that because their premises are not licensed they do not receive the same grant as would come to them if they went into the licensed business.

There is a large section of people in Northern Ireland who, when they choose a place to stay for their holiday—this may not apply to those who come into the country, but a good many Northern Ireland people stay in Northern Ireland for their holidays—deliberately choose non-licensed premises. Will there be any difference between a licensed hotel and a non-licensed hotel for the purpose of grant?

I also point out to the Minister that there is a great scarcity of staff for hotels and guest houses in Northern Ireland. I think particularly of those on the coast of my constituency, running from Larne and including Glenarm, Waterfoot, Carnlough, Cushendun and Cushendall. They find great difficulty in getting staff. What training courses are available for catering staff in Northern Ireland? This is important, because if we are to extend bed accommodation we must have staff available to give proper service in those hotels and guest houses.

If the tourist industry is to be extended, for instance, in Portrush—an important tourist and seaside resort—other tourist amenities must be available. In Port-rush a tremendous controversy exists at present about the down-grading of the crown post office to a sub-post office. This means that the people of Portrush will not have the same facilities, and when the town is crowded with visitors, as we hope it will be in the summer, the desired post office facilities will not be available.

I know that this is not the Minister's department, but it is part and parcel of the matter. I draw his attention to the fact that the council, the post office staff and the whole town have signed a memorial about the matter. I have made representation, but a deaf ear has been turned to it, and we are told that we can have only a sub-post office. I make a plea to the Minister to look into this and see that Portrush has all the necessary post office facilities.

There is another part of Northern Ireland about which I agree with the hon. Member for Belfast, North (Mr. Stratton Mills). I do not say that the coast road is more beautiful than Lough Erne. Facilities at Lough Erne are being developed, but not as speedily as they should be.

There is great potential in Lough Neagh. What action is to be taken on the report of the working party of Lough Neagh, about developing the tourist facilities there? I ask the Minister whether the Government are giving serious consideration to this. When can we have a statement on this matter? It is of the utmost importance.

I welcome the order, and I hope that the Government will continue to bear in mind the needs of the future. I pay my tribute to the tourist board and its work, but the Northern Ireland board could take a leaf from the book of the South of Ireland board in respect of advertising, especially in the United States of America, where the Southern Irish board—I cannot pronounce its Gaelic name—is doing tremendous work in advertising the attractions of the South of Ireland.

Our board should advertise the attractions of the North of Ireland. If people go to the South, let them realise that the north is also worth visiting, and that they should see it. It is not the "black" North at all. The people there are most hospitable, as hon. Members have found—even those with differing political views. The people are prepared to receive them socially.

The Northern Ireland Tourist Board has an advertising job to take in hand. I trust that the Minister will keep that matter in mind.

Does not the hon. Gentleman agree that in the past there has been a degree of co-operation in tourism between the Republic and the Six Counties, and that this is at least one subject on which both bodies should get together to exploit the value and beauty of Ireland as a whole?

As long as they exploit it fairly and not to the detriment of Northern Ireland, certainly; but that proviso is very important. At certain airports in the United States the only pictures of Ireland that one sees are of the lakes of Killarney. If the Americans saw pictures of the Giant's Causeway they might wish to visit that area as well.

Paragraph 3 of Schedule 2 refers to:
"The power to make bye-laws for the purpose of regulating the use of the tourist amenity and preserving order within the area of the tourist amenity."
Will the Minister enlarge a little on that, and say what powers the local council will have in regard to the preservation of order? It is a very important matter. Law and order must be preserved in the places to which people resort in the summer.

11.6 p.m.

I am grateful to hon. Members for their comments on the order and for the welcome they have given to it. I should like to answer as many of their questions as I can.

The hon. Member for Salford, West (Mr. Orme) spoke of the general tourist potential for the future, and rightly emphasised the possibilities, particularly for employment. He asked specifically about the 5 per cent. additional grant that would be allocated in certain cases. The Ministry will rely on advice from the Tourist Board on what might be regarded as top priority tourist development. The sort of things generally, in mind which will attract the additional 5 per cent. boost are major hotel developments in remote areas.

The potential of the upper and lower Lough Erne area was mentioned. There is no doubt that if we can get major hotel development going in this remote area, these are the kind of things to which we should expect the Tourist Board to give priority, and the kind of things which will attract the 5 per cent. additional grant.

The hon. Member for Salford, West referred to the specified circumstances for repayment, mentioned at the end of Article 3, subsection (1). This refers to situations in which grant is given for certain specified plans and designs and there is a failure to meet those specified plans and designs and something is built other than that for which grant was given. In that case, powers are taken to foreclose and to retrieve the public money concerned.

Provision for the sums involved has been made in the appropriations for the current financial year. Obviously the amount involved depends to some extent on take-up. On past experience, however—this must of necessity be a rather rough guide—we would expect the take-up of grants for capital investment in hotel expansion to be about £750,000 in the current year, and we would expect the expenditure involved in amenity development by the Ministry of Commerce and by local authorities—but probably mainly by the Ministry of Commerce—to be about £500,000.

The hon. Member for Salford, West, and several other hon. Members mentioned the question of co-operation with the Republic on the development of tourism. This obviously makes a lot of sense. There is already a lot of cross-border co-operation in tourism, and we see no reason why this should not increase vigorously in the future.

Hon. Members may be interested to have on the record some examples of the co-operation which goes on now. They include hotel grading, tourist research projects for the future, joint reception of overseas travel agents, the development of package holidays featuring hotels in the North and the South, co-operative literature production—particularly for the Continental and North American markets—and joint film production. I recognise the force of the points made by hon. Members that there is clearly room for further co-operation in the development of tourism by both North and South.

I am grateful to my hon. Friend the Member for Belfast, North (Mr. Stratton Mills) for overcoming his sore throat and giving a welcome to the order. My hon. Friend the Member for Bristol, North-East (Mr. Adley) also intervened in our debate. We welcome fresh comment from outside on these matters, which tend to attract comment only from those immediately concerned with the development of Ulster or those who follow the affairs of Northern Ireland with close interest and sympathy. My hon. Friend will not be surprised that the broader matters he raised on tourist development in England, Wales and Scotland are matters for my right hon. Friends and it would be improper for me to go into them tonight. He referred to Article 5 (1) which provides that the Ministry of Commerce
"may, with the approval of the Ministry of Finance, provide, or secure the provision of, and maintain, any tourist amenity".
He asked if that meant that the Government would go into the hotel business. I presume that he was referring to the ownership of hotels. The term "amenity" does not include hotels. My hon. Friend also asked about the Fire Precautions Act. The provisions which apply in Northern Ireland also apply in Great Britain, and similar requirements are made before grant can be given for hotel developments.

My hon. Friend the Member for Belfast, South (Mr. Pounder) rightly empha- sired a theme which we shall no doubt hear more of—the increasing importance of the service sector in the economy. It was in that spirit that he welcomed the support that will be given by the order, if it is approved, for one of the major service industries. Help given will be mainly in the form of capital investment in hotels and tourist amenities or parks, and special provision for tourist attractions, and so on.

In addition, a number of schemes of general assistance to the service sector should not be forgotten. They include the refund—in the second half of 1972—of selective employment tax and the special grants for security costs, which may be a difficult burden in the troubled circumstances in Northern Ireland. They include rate relief and the new employment grants recently announced for city centre traders to maintain services and the life of the city centre—a matter which we regard as of great importance. So the city centre is getting attention. It may not be as much as the hon. Member would like, or in precisely the way that the hon. Member would like, but we recognise the importance of the city centre as a part of a lively and modern economy.

My hon. Friend asked about private enterprise money going into Northern Ireland tourist development. There is a little, but clearly the only answer that I can give with my present responsibilities, is to say that I would welcome more. I believe that in future—and, as the hon. Member for Antrim, North (Rev. Ian Paisley) said, we are looking into the future with the order—the possibilities for private investment and enterprise in the tourist development areas, working in partnership with the kind of schemes the Ministry of Commerce will be able to operate, promise greatly for the future of tourism.

The hon. Member for Antrim, North raised a number of specific points. He will be half glad and half sorry with my answer on the question of rates of grants for areas within his constituency. I am advised that Larne would get only the 25 per cent. grant, being within easy reach of Belfast—the middle belt—but the very beautiful areas in the rest of his constituency, including the Antrim coast, which I have visited many times, will attract the full 35 per cent. grant.

The hon. Gentleman asked about farm boarding houses. Unless they become registered hotels, they will not necessarily come under the scheme. A different scheme is run by the tourist board for assistance for farm houses and boarding houses of this kind which are not on the register. It provides assistance of certain kinds. I will be happy to write to the hon. Gentleman and give him full details of the assistance available to farms which offer board and lodging for tourists who like that kind of holiday, as many people do.

The hon. Gentleman also asked whether there would be different rates as between licensed and unlicensed hotels. There is no such provision and there has been no request for one on whether a hotel should be licensed or unlicensed before receiving grant. The hon. Gentleman also referred to staffing. This is always a problem in the organisation of any hotel. We recognise the difficulty in Northern Ireland. Obviously, we want to help. The remission of selective employment tax to hotels will help. That is one move in the right direction. Anything else we can do to help hotels overcome their staffing problems we shall be glad to do, and we are happy to listen to ideas. My hon. Friend, who has responsibility for training and that kind of thing in Northern Ireland, will be happy to consider proposals for overcoming this problem.

I will gladly look into the problem of the Portrush post office, and will write to the hon. Gentleman when I have done so. The report on the development of Lough Neagh has been completed and presented to the Government, and is being studied. I agree that there are great possibilities here, and we are anxious to see the possible conclusions that can be drawn from the study. This great natural lake is a very important part of tourist development in the heart of Northern Ireland. Having flown over it and walked round part of the area, I realise that the possibilities are enormous.

The truth of the matter is that the tourist possibilities throughout Northern Ireland—that beautiful country—are very great indeed. The provisions in the order will help reinforce them and help to build a better future for Northern Ireland.

Question put and agreed to.

Resolved,

That the Development of Tourist Traffic (Northern Ireland) Order 1972, a draft of which was laid before this House on 16th November, be approved.

Adjournment

Motion made, and Question proposed, That this House do now adjourn. —[ Mr. Gray.]

Local Government Advisory Committee (Scotland)

11.18 p.m.

I welcome the opportunity to discuss a matter that is causing some concern in Scotland—the manner in which the Advisory Committee on Local Government Boundaries has handled its business. The committee was established by the Secretary of State for Scotland to give him independent advice on ward boundaries for the first elections in 1974 following the passage of the Local Government (Scotland) Bill, which is now before the House.

In the confusion and apprehension that exists amongst many local councillors who find difficulty in perceiving what their future rôle is to be, I realise that the judgment of Solomon may be required to help and satisfy all shades of opinion. Indeed, I accept that in some measure the advisory council might well have an impossible task. I do not think that that weakens my case; in fact, it strengthens my view that the committee has approached its work in a ham-fisted way.

I do not attack the integrity of the individuals serving on the committee; I have no doubt that they were chosen from people removed from a day-to-day involvement in Scottish political life. In some ways they failed to avoid the pitfalls that are inevitable when dealing with the highly sensitive question of ward boundaries because of their innocence; one is almost tempted to say because of their naiveté.

Because the subject of the review is the subject of legislation it would be improper and out of order for me to discuss the detail of the council's proposals, but I shall in general refer to the manner in which the proposals for the Aberdeen district of the North-West Region were approached.

On 22nd February 1972 the Scottish Home and Health Department wrote to the County Clerk of Aberdeenshire, the Town Clerk of Aberdeen and the Clerk to the Aberdeen District Council about local government reform in the first elections. Enclosed were draft electoral proposals on which comments were invited. The letter contained a significant comment:
"The primary objective of these proposals is to achieve parity of representation on the basis of existing electoral boundaries."
The letter went on to say:
"It may also be possible to devise a different pattern of representation which will provide improved parity for the indicated number of original and district councillors without the creation of new boundaries."
It is important to note that in the letter the word "without" is underlined. The emphasis, therefore, is strictly on the retention of existing electoral boundaries. Furthermore, the letter is clearly aimed at local authorities and councillors. Nowhere in the letter is there any mention of outside bodies to be consulted.

The local authorities consulted their officials. I have the greatest regard for the work done by officials of local councils, who give unstinting application to the needs of their areas. The proposals received the unanimous approval of Aberdeen Town Council. The town council was, therefore, astonished to receive a letter dated 1st August 1972, again from the Scottish Home and Health Department, an abstract of which reads as follows:
"The Committee also considered warding proposals for the city which had been submitted to the Department by the Scottish Conservative and Unionist Central Office. The Committee favoured the proposals submitted by the SCUCO as they produced a better division of the electorate than the proposals submitted by the Corporation."
Aberdeen Town Council at that stage registered its protest at this. Discussion of the relative merits of the submissions must await another time, but the relevance to the present discussion is that this is the first time that a political party comes into the picture. One can well imagine the suspicions that aroused. It transformed a relatively tranquil official investigation into the setting of ward boundaries into a highly charged political matter.

Immediately I was apprised of the situation I made extensive inquiries to determine which, if any, other political parties had made submissions and which, if any, had been invited to make proposals. I found none, but what I did find was very great resentment at the intervention, indeed the interference, in Aberdeen's affairs by the Scottish Conservative and Unionist Central Office. This was particularly marked because its proposals contravene the injunction that existing boundaries should be retained. This happened in several cases.

On 21st October 1972 I wrote to the Secretary of State, having allowed time to pass to enable me to make a thorough investigation of the position. When I contacted the Secretary of the Scottish Labour Party—Mr. Peter Allison—he was astounded that no invitation had been sent to him to submit the Labour Party's analysis of the electoral position. He wrote to Mr. Middlemiss, the signatory of the various communications from the Scottish Home and Health Department, to protest about the lack of consultation. The reply that I received from the Under-Secretary of State for Scotland and the reply that Mr. Allison received from the secretary to the advisory committee were virtually identical.

The Secretary of State's defence is that copies of the draft proposals—which are the initial proposals of 22nd February—were sent to the Scottish Office of the Labour Party, and this was passed on in a communication dated 8th March 1972. Mr. Allison, however, is quite certain that having received this communication he telephoned Edinburgh and was told that the views of political parties were not required until the local authority had submitted its views. In fact, since August—when we had the latest proposal from the advisory committee—there has been no communication with the Scottish Labour Party, although the local authorities have been advised that the SCUCO proposals had been submitted. The only contact with the Labour Party has been on the question of lack of consultation raised by the Scottish Labour Party.

In a letter to me dated 20th November 1972 Mr. Allison made it clear that the correspondence of 8th March had no covering letter with it. All previous correspondence on local government reform had enclosed specific invitations to submit the views of the Scottish Council of the Labour Party. Clearly the impression was given that the material sent was for information only.

Frankly, this cavalier treatment is not good enough. If political parties have to be brought into discussions on local government reform, all should be treated equally. Once a political party became involved centrally—especially one supporting the Government of the day—special and particular care should have been taken to see that other opposition parties were made explicitly aware of their rights and of the possibility that they could submit their own solutions. Otherwise, piecemeal suggestions and piecemeal proposals can only lead to piecemeal solutions, and these will fail to achieve satisfaction and will leave a bad taste behind them.

I can think of no better way of concluding my speech than by reading the final paragraph in my letter to the Secretary of State of 21st October, which says:
"Presumably the Advisory Committee was set up to avoid possible charges of gerrymandering in the setting up of boundaries for local government seats. Clearly this charge can now he made, and I urge you to decline to accept the advice of the Advisory Committee until all interested bodies have had an opportunity to study the problem and make their own analysis."
It is disappointing that the advisory committee should have handled this issue so badly. The Secretary of State must now make strenuous efforts to repair the damage and restore confidence.

11.28 p.m.

The Under-Secretary of State for Home Affairs and Agriculture, Scottish Office
(Mr. Alick Buchanan-Smith)

I congratulate the hon. Member on taking this opportunity to raise the question of the operation of the advisory committee on local government electoral boundaries in Scotland. I am glad that he has taken the opportunity because there have been—and this has come through in his speech—certain misunderstandings about the functions of this committee and the way in which the whole matter has been approached.

I welcome this opportunity to try to put some of the record straight. I refute at once the remarks of the hon. Gentleman in relation to any suggestions of gerrymandering on the part of this com- mittee. I can assure him that those are totally unfounded and unwarranted. The House will appreciate this when I explain the background. I apologise for going into the background in considerable detail because it is important for those who read the report of the debate outside to understand precisely what has taken place.

I should like first to clarify the purposes and functions of the advisory committee. It was appointed earlier this year by my right hon. Friend the Secretary of State to give him impartial and independent advice on the electoral areas that will be required for the purpose of the first local government elections to be held in 1974 after the Local Government (Scotland) Bill has been passed. It was agreed in our earlier consultations with local authority associations that because of the limited time available before these elections are held it would be necessary for the Secretary of State to fix the new electoral areas at his own hand after consultation with the existing authorities. The alternative, which could have been followed, was to defer the first elections till the new Local Government Boundary Commission had carried out a comprehensive review of every district and islands area and had submitted recommendations to the Secretary of State. Clearly, because of the time factor, that was unacceptable.

The hon. Gentleman was right to draw attention to the fact that we are dealing with a matter of great sensitivity. Simply because of that, and the fact that it does give rise to political controversy, the Secretary of State concluded that it would be essential to appoint an independent committee, which could consider quite impartially not only the draft proposals worked out by the Department in consultation with the local authorities concerned but also any relevant observations or alternative proposals received by the Department. It was important to ensure that the membership of the committee reflected not only impartiality but also at the same time experience in local government.

I completely refute what the hon. Gentleman said about the "innocence" of those who formed the advisory committee. It was a totally unwarranted slur on their characters and experience. I remind the House of the membership of the committee. The chairman was a distinguished member of the Bar—Mr. C. K. Davidson, Q.C. As members of the committee we had a retired town clerk—Mr. R. F. Pollock—and also a retired electoral registration officer—Mr. Peter McKechnie—both men of considerable integrity in local government affairs and of considerable experience of the matters they were discussing. It is wrong to describe them as "pure innocents".

The task of the committee was essentially to consider proposals for the new electoral areas on their merits and having regard to certain criteria which I shall mention in a moment—and, after that, to make recommendations to the Secretary of State.

I move on to describe the way in which the committee approached its task. It tackled it in two stages. The first, which is just completed, consisted in considering any draft schemes submitted to it by the Department in respect of each proposed district and islands area—a very large task, because it involved about 50 schemes. The committee has had a series of meetings and has given the most careful and detailed consideration to the proposals before it. Where the Department has received alternative suggestions—and this is important—these also have been taken into consideration as being relevant to the whole exercise.

The stage now reached is that revised draft schemes giving effect to the committee's recommendations have been prepared in the Department and will very shortly be sent out to local authorities, which will be asked to make them available, with illustrative maps, for local inspection. At that stage it will, of course, be open to any interested person or organisation to submit objections or observations to the Department. Sufficient time will be allowed to enable everyone concerned to study the draft proposals and to put in any observations.

I wonder whether, at this stage, the hon. Gentleman can tell us whether the report mentions that the committee submitted proposals from any outside body, particularly a political party, against the wishes of the local authorities.

At the moment I am not in a position to say, because the proposals of the committee have not been published and it would be premature for me to do so, but they will be published very shortly and the hon. Member and others will then be able to see them.

The advisory committee will then have to tackle the second stage of its task, namely, to re-examine the draft schemes in the light of any relevant observations received by the Department and to submit final recommendations to the Secretary of State, whose decision on each scheme will be intimated as soon as possible after the Bill has received Royal Assent, and implemented in directions under Schedule 2 (2) of the Bill. I apologise for going through this procedure in so much detail but I think it important to put it in perspective.

I turn to a point the hon. Gentleman made in relation to the criteria used by the advisory committee in considering draft schemes. It was important that certain criteria for determining the electoral areas should be established at the outset and applied both in consultations between the Department and the existing local authorities and subsequently by the advisory committee. Those criteria were the subject of discussion by the local authority associations and were outlined in the letter that the hon. Gentleman quoted and that was issued by the Department to individual authorities in February 1972.

I want to mention two of the criteria that are important and that arise in the context of this debate. The first is parity of representation. It was made absolutely clear to the local authorities that the Secretary of State attached overriding importance to this criterion. The second was that the new electoral areas should be defined with due regard to local community interests and, wherever possible, by reference to existing administrative or electoral boundaries.

I accept at once that in some instances it has proved impossible—this will be clear to the hon. Gentleman when he sees the schemes for the whole of Scotland, but I am sure that with his experience of local government he already realises it—to satisfy all the criteria, because they are not always compatible. But my right hon. Friend has made it clear that he attaches particular importance to achieving a reasonable measure of parity. It is important if each member of a council is to represent approximately the same number of electors—and that is naturally the aim that one must have in mind.

I turn to the practicalities of the Aberdeen situation and to the consideration that the advisory committee has given to the alternative proposals submitted to it for electoral areas in other districts. Although the Secretary of State has been informed of the progress made by the advisory committee in carrying through this first stage of its task he has at no time in any way sought to influence the committee's deliberations. It is important that that fact should be realised. Of course, it would be improper for him to do so in any way. The committee must be left—and it has been left—to consider independently the proposals submitted to it and it has been free from any kind of pressure, politically motivated or otherwise.

Looking to the future; the Secretary of State will come into the procedure when the committee submits its final recommendations to him in the summer of next year. I cannot emphasise that too much. If that were not the case there would be no purpose in setting up the advisory committee. My right hon. Friend has strictly observed the independence of the committee that he appointed.

Secondly, while it is true that the letter sent to all political parties and organisations on 8th March stated that the draft proposals enclosed were being made available to the organisations as a source of information and for reference, it is also true that no party organisation was specifically invited to comment on the proposals at that stage. Equally, it is untrue—and it was unwarranted of the hon. Member to have said it—that in the instance of the Aberdeen proposals this was the first time that the political parties had been brought into the picture.

They were brought into the picture equally at that early stage, on 8th March, when the draft proposals were sent to all the political parties in Scotland, and not only the Labour Party and the Conservative Party. They were all brought into the picture at that stage without any difference among them.

However, in the event a considerable number of observations and counter-pro- posals were made by local party organisations. The hon. Gentleman mentioned the Scottish Conservative and Unionist Party Central Office. In fact, the observations which came in were from the local constituency associations in Aberdeen, and they made proposals and comments in relation to Aberdeen. Certain observations were received from the hon. Gentleman's party in relation to West Aberdeenshire, and other observations related to other parts of Scotland. In addition, my Department also received observations from minority groups on local councils, community associations, and even private individuals.

There was nothing unique about the situation alleged by the hon. Gentleman. He implied that it might have applied to Aberdeen alone. Observations were drawn from other areas and from other sources than simply that of the Conservative Party, which might have been the impression left by the hon Gentleman—

I accept the hon. Gentleman's statement of fact, but the proposals emanating originally from local Conservative constituency associations were submitted through the central office. That suggests a degree of co-ordination, with the central office asking for comments. Once that became known to the advisory committee it should have made sure that there was no misunderstanding on the part of the other parties.

There was no misunderstanding. Indeed, the Labour Central Office in Scotland sent in formal objections to what was happening on behalf of Aberdeen. I see no difference in analogy between the two cases. The hon. Gentleman complains about the fact that something may have come through the Conservative Central Office. Through its own central office the Labour Party made representations about Aberdeen. There was nothing unique in what happened.

As I said earlier, the views expressed from all these different sources were laid before the advisory committee, so that it should be informed of any observations received in the Department which had a bearing on the draft schemes under consideration. In this respect, views submitted by local constituency associations of the Conservative Party in Scotland were treated in exactly the same way as were any other comments received in the Department; they were simply passed on to the advisory committee.

The third point to make is that the advisory committee's conclusions in this case will not be made known until the revised draft schemes are issued to local authorities later this month. It would be premature for me to anticipate this intimation tonight. However, I can assure the hon. Gentleman that in reaching its decision the committee took fully into account the representations made by Aberdeen Corporation in support of its own proposals and in criticism of the alternative proposals submitted on behalf of the local constituency associations of the Conservative Party. The members of the committee were equipped to evaluate the two sets of proposals fairly and with due regard to the practical considerations involved.

I mention finally the fact that we have reached only the half-way stage. Once the revised proposals have been issued to local authorities and advertised locally, there will be a further opportunity for all the interests concerned to consider the problem and submit their views or counter-proposals. The draft schemes will later be re-examined in detail by the advisory committee in the light of all the comments received before final recommendations are submitted to the Secretary of State.

I hope that the hon. Gentleman will accept that the advisory committee has a difficult task to carry out in the limited time available and that it is doing so impartially and without regard to political considerations of any kind. Its task is merely to evaluate the proposals placed before it and to recommend to the Secretary of State those proposals which appear to it to satisfy the criteria laid down, the most important of which is parity of representation.

I suggest that the hon. Gentleman should now await the publication of the draft schemes later this month. He will then have an opportunity to submit observations to the Department and these will be referred to the advisory committee for its consideration, together with any other relevant comments that are received at that stage. Aberdeen Corporation, too, will have an opportunity to take any further action that it desires and to make representations.

I refute again any allegations of gerrymandering. I believe that this committee has carried out its task in an entirely proper and correct way. There has been no interference by the Secretary of State in the working of the committee. I assure the hon. Gentleman that proposals from the local Conservative Party association are treated in the same way as are proposals from the Labour Party. There can be no charge of malpractice in the operation of this advisory committee.

Question put and agreed to.

Adjourned accordingly at fourteen minutes to Twelve o'clock.