The media
The Vatman cometh?
Paul Johnson
Ts the late Mr Gladstone threatening to 1.turn in his grave? Or worse still, rise from it to haunt Nigel Lawson, the Chan- cellor of the Exchequer? Such a spectre has been conjured up by rumours that Lawson is seriously considering imposing VAT on books and newspapers in next year's budget. Traditionally, using the printed word as a source of revenue has always been regarded as a form of political obscur- antism in Britain and denounced as a 'tax on knowledge'. In the 18th century, news- papers had to pay stamp duty, and the decision of the Liverpool government in 1819 to raise it sharply was seen as a move to prevent the circulation of seditious literature among working-class readers.
The duty was reduced to a penny by the Whigs in 1835 and finally abolished in 1855, thus (as it happens) undermining the quasi-monopoly of the Times and giving rise to the Daily Telegraph, the first nation- al newspaper to sell successfully at a penny. But duties on paper remained, and when Mr Gladstone proposed to abolish them in his 1860 budget, as an alternative to abolishing income tax — spacious days — he provoked a constitutional crisis. The Prime Minister, Lord Palmerston, ob- jected strongly to ending the paper-duties, and while unable to get his way in cabinet, wrote secretly to the Queen informing her that he felt 'bound in Duty to Say' that the House of Lords would 'perform a good Public Service' if they threw the Bill out. In those days, each tax was embodied in a separate Bill, so the Lords could kill the paper-duty repeal Bill without rejecting the budget as a whole, and they duly did so. Even so, it was the first time in 200
years the Lords had meddled with finance. Gladstone, incensed, returned to the attack in the next budget, and this time he amalgamated the tax changes in a single, comprehensive Finance Bill. The Lords did not dare to reject the entire budget, so the 'tax on knowledge' was finally scrapped. Gladstone claimed that his action had opened a new epoch in the lives of the poor and helped to attach them to their coun- try's institutions by bringing about what he termed their 'moral enfranchisement'.
Untaxed paper undoubtedly helped to create cheap books and, a generation later, to promote the mass-circulation newspap- er, led by Northcliffe's Daily Mail. But Gladstone's majestic arguments look a bit strange in the hobgoblin year 1984. 'What', sneer august voices in the Treasury, 'has the notion of a tax on knowledge to do with the Page Three Nude? A tax on tits is more to the point.' The latest phase in the Fleet Street bingo battle, under the noisy impul- sion of Robert Maxwell — not the Treas- ury's favourite tycoon — has strengthened the arguments of the iconoclasts. Then too, Lawson sees himself as a reforming Chan- cellor, pledged to eliminate areas of special tax privilege, with the object of reducing the burden on the general taxpayer. His first budget made a brilliant start and was exceptionally well received.
There are strong logical arguments for ending the zero-rating of books, magazines and newspapers for VAT purposes. Britain is the only EEC country which grants this exemption. Even the Republic of Ireland has broken away from us in this respect. Most forms of entertainment pay VAT. The West End theatre does so and, despite
its predictions of imminent collapse in consequence, continues to flourish mighti- ly. Where is the logical distinction between stage and screen entertainment, and news- papers which sell on sex and gambling? The Times, the journal of record itself, has undermined the 'knowledge' case by using Portfolio to overtake the Guardian, itself about to embark (so it is said) on a game of chance. It may be argued that books are a different case: the September 8 list of hardback bestsellers in the Bookseller show dictionaries occupying seven of the top 15 places. But it's hard to deny the appellation of entertainment to a world of books where Barbara Cartland is queen and Adrian Mole crown prince. The Mad on Sunday has recently underlined the essential homogeneity of the publishing world by using the latest Jeffrey Archer to boost its sales by 100,000. At any rate, the various trades involved are scared. It is not, of course, the first time they have been threatened with VAT. Pressure from the EEC to bring Britain into line with Continental practice has been exerted before, notably in 1982, when the National Federation of Retail Newsa- gents mounted a successful campaign to preserve the status quo. Its secretary, Ken Peters, got a letter from the then Chancel- lor, Geoffrey Howe, saying there was no intention to impose VAT; and later Law- son restated Howe's views. But Peters admits: 'I think we got away with not having VAT put on us in the last budget by the skin of our teeth.' VAT, he says, 'would be a disaster for the industry'. But then he would say that, wouldn't he? A working committee of the Booksellers Association and the Publishers Association has already collected £65,000 to mount a lobby campaign, and the president of the BA, Grant Paton, is using the Gladstone argument for all it's worth. Like Peters, he. claims VAT would be 'a disaster for the trade'. But hard-nosed Treasury men point out that publishing, emerging leaner and fitter from the recession, is now making handsome profits. So are newspapers, as the latest figures from Fleet Holdings show. Murdoch is coining money, with even the Times expected to break into profit next year. All the same, Lawson would be well advised to leave books and newspapers alone. The amount of money he could hope to raise by taxing these trades is trivial compared with the odium he would incur. The yield might be less than he thinks anyway, because VAT on newspap- ers, for instance, would give a boost to the free sheets. The notion that he could reduce the protests by distinguishing be- tween tween 'knowledge' and 'entertainment' products in books and newspaper produc- tion is absurd. But the main reason for rejecting the plan is quite simply political. The Chancellor and the government re- sponsible for reintroducing print taxes would never be forgiven and would be treated by journalists and authors alike as deadly enemies.
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