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C . ( 5 2 ) 135
28th A P R I L , 1952.
CABINET
PURCHASE
TAX
M e m o r a n d u m b y the C h a n c e l l o r of t h e E x c h e q u e r
We a r e n o w under p r e s s u r e in r e g a r d to P u r c h a s e T a x f r o m two
entirely distinct quarters.
2.
First, and m u c h t h e m o s t important, is the m o v e m e n t to withdraw
P u r c h a s e T a x a l t o g e t h e r f r o m t e x t i l e s i n v i e w of t h e r e c e s s i o n i n t h a t i n d u s t r y .
This is l a r g e l y psychological. A s I stated in the Second Reading Debate on
the F i n a n c e Bill t h e r e a r e s t r o n g r e a s o n s for b e l i e v i n g that" such a s t e p
However, p r e s s u r e for
would have little a p p r e c i a b l e effect on the position.
complete withdrawal still continues from L a n c a s h i r e and Yorkshire, with support
of M e m b e r s o n b o t h s i d e s of t h e H o u s e .
3.
We a r e a l s o -under p r e s s u r e f r o m quite a different a n d l e s s i m p o r t a n t
direction to r a i s e the D levels for s e v e r a l s e c o n d a r y t r a d e s which a r e on the
f r i n g e of t h e t e x t i l e i n d u s t r y , e . g . f o o t w e a r , g l o v e s a n d f u r s .
Here there are
a n u m b e r of f a c t o r s t o b e c o n s i d e r e d .
(a) It m u s t b e r e m e m b e r e d t h a t t h e s o l e j u s t i f i c a t i o n f o r t h e D S c h e m e
i n p r e f e r e n c e t o a n o v e r a l l f l a t r a t e of t a x . w a s t h e n e e d t o m a i n t a i n
the t e n y e a r old exemption which the lower i n c o m e g r o u p s h a d
e n j o y e d o n t h e m o r e e s s e n t i a l a r t i c l e s of c l o t h i n g e t c . T h e D l i s t
provides this.
T h e r e have b e e n v i r t u a l l y no c o m p l a i n t s a g a i n s t it
from the consumer angle.
(b) T h e r e h a s b e e n n o p r e s s u r e of a n y i m p o r t a n c e t o a l t e r t h e D l i s t
from the textile t r a d e s ' p r o p e r a s distinct f r o m the s e c o n d a r y allied
T h e v i e w is r i g h t l y t a k e n t h a t it w o u l d o n l y c a u s e c o n f u s i o n a n d
trades.
create uncertainty as to the future.
E v e n with furnishing fabrics where
the D is r a t h e r low owing to their having to be grouped for technical
r e a s o n s with cheaper fabrics, the r e m e d y p r e f e r r e d is withdrawal
of t h e t a x o r t h e r e d u c t i o n of t h e r a t e r a t h e r t h a n i n t e r f e r i n g w i t h
the D list.
(c) W i t h falling p r i c e s t h e D l e v e l s a r e a u t o m a t i c a l l y r i s i n g b y
t h e m e r e p a s s a g e of t i m e .
This is a situation which m a y have to be
r e v i e w e d in the a u t u m n , and this would be m a d e still m o r e difficult
if t h e D ' s w e r e r a i s e d n o w .
(d) E v e n w i t h f u r g l o v e s a n d f u r g a r m e n t s w h e r e t h e r e i s p e r h a p s
a c a s e for r e l i e f f r o m the t r a d e a n g l e , it would be b e t t e r t o m e e t
t h i s b y a r e d u c t i o n of t h e r a t e s of t a x r a t h e r t h a n b y i n c r e a s i n g t h e
D levels.
\%1
(e) L a s t , b u t n o t l e a s t , t o g i v e r e l i e f t o t h e s e s e c o n d a r y i n d u s t r i e s ,
w h i l e r e f u s i n g a n y r e d u c t i o n t o t h e g r e a t i n d u s t r i e s of L a n c a s h i r e
and Y o r k s h i r e where the r e c e s s i o n is m o r e s e r i o u s , would only
aggravate their grievances,
4.
F o r all these r e a s o n s I consider that the p r o p e r c o u r s e is to
o p p o s e the v a r i o u s a m e n d m e n t s which a r e down for h i g h e r D ' s .
(They are
the only a m e n d m e n t s w h i c h would be in o r d e r : an a m e n d m e n t f r o m p r i v a t e
M e m b e r s t o r e p e a l t h e t a x o r r e d u c e t h e r a t e s o n t e x t i l e s w o u l d b e o u t of
order).
O n t h e o t h e r h a n d , t h e s e a m e n d m e n t s h a v e a c o n s i d e r a b l e m e a s u r e of
s u p p o r t on t h e G o v e r n m e n t b e n c h e s ; and I f e e l t h a t s o m e c o n c e s s i o n m a y
well have to be m a d e .
T h i s , I t h i n k , s h o u l d t a k e t h e f o r m of a g e n e r a l
r e d u c t i o n i n t h e r a t e s of t a x b y a q u a r t e r o v e r t h e w h o l e D f i e l d .
T h e c o s t in a full y e a r w o u l d b e £ 1 8 m i l l i o n s .
I n t h e g e n e r a l i n t e r e s t s of t h e B u d g e t t h i s i s a s f a r a s I s h o u l d b e p r e p a r e d
t o g o . M o r e o v e r a l a r g e r r e d u c t i o n w o u l d r a i s e t h e p r o b l e m of r e t a i l s t o c k s
in an acute f o r m .
It w o u l d b e a s t e p i n t h e d i r e c t i o n of r e d u c i n g t h e b u r d e n
of P u r c h a s e T a x a s a w h o l e , w h i c h a s a m a t t e r of p o l i c y i s g r e a t l y t o b e
p r e f e r r e d t o m a k i n g d i s c r i m i n a t o r y c o n c e s s i o n s t o i n d i v i d u a l s e c t i o n s of
t h e t r a d e a t t h e e x p e n s e of t h e p r i n c i p l e s u p o n w h i c h t h e w h o l e s c h e m e of t h e
P u r c h a s e T a x is founded.
I t w o u l d b e a g e s t u r e o f g o o d w i l l t o (he t e x t i l e
i n d u s t r y a n d it s h o u l d h e l p m a t e r i a l l y w i t h t h e m o r e e x p e n s i v e f u r n i s h i n g
f a b r i c s w h e r e t h e p r e s e n t r a t e i s 66^-% o n t h e v a l u e i n e x c e s s of D i s t o o h i g h .
It s h o u l d a l s o go a long w a y t o m e e t the g r i e v a n c e s in r e g a r d to f o o t w e a r , g l o v e s
and furs.
5.
T h e r e a r e two other P u r c h a s e Tax g r i e v a n c e s which can be m e t .
Two C l a u s e s have b e e n put down on r e t a i l stocks and valuation, which would
have to be opposed.
R a t h e r t h a n i n c u r t h e o d i u m of d o i n g s o o n o u r o w n
r e s p o n s i b i l i t y , I a m p r o p o s i n g to offer to r e f e r both t h e s e subjects to be
impartially examined by an independent Committee.
In t h i s w e s h o u l d a t
least be showing willing and I should hope to avoid what otherwise m i g h t be
two e m b a r r a s s i n g divisions for m a n y G o v e r n m e n t s u p p o r t e r s .
R.A.B.
Treasury Chambers,
S.W.I.
28th A P R I L , 1952,
-2­