HC Deb 21 June 1926 vol 197 cc138-54

"Section twenty-one of the Finance Act, 1922, is hereby repealed."—[Mr. Radford.]

Brought up, and read the First time.

Mr. RADFORD

I beg to move, "That the Clause be read a Second time."

On the Second Reading of this Bill I drew attention to weaknesses in the law relating to Super-tax, which resulted in great inequalities and in large amounts properly liable to Super-tax escaping taxation. In the course of my remarks I asked the Government to consider seriously the introduction of legislation strengthening the provisions of Section 21 of the Finance Act, 1922, upon which the legislature principally relied for preventing the avoidance of Super-tax payment. The Financial Secretary was good enough to suggest that on the Committee stage of the Bill I might possibly put forward any proposals which I had to make for the consideration of the Government. Accordingly, my hon. Friends who are associated with me in this proposed new Clause and I put down this and the succeeding Amendment on the Paper. This Clause proposes to repeal Section 21 of the Finance Act, 1922, and our second proposal is that there should be substituted for it a fresh Clause, free from the objectionable features of the Section which we desire to repeal. I understand, however, that our second proposed new Clause, which is consequential on the first, is out of order.

The CHAIRMAN

Yes, it is out of order, as it would increase the charge.

Mr. RADFORD

Despite that fact, my hon. Friends, and I still desire to move our first New Clause because we feel that if we carry the repeal of this Section, the Government may, on the Report stage of the Bill, adopt the New Clause which we are now debarred from moving, or some other Clause having an equal effect. I go back to the period when Super-tax was first imposed in the Budget of 1909–1910. From that moment there was a distinct inequality between the treatment meted out to incomes derived from dividends of limited liability companies, and the treatment of incomes of persons who are either sole proprietors of or partners in private businesses, professional men, salaried officials, or owners of land and buildings. The dice were loaded in favour of those whose incomes were derived from limited liability companies. This was unintentional, no doubt, but at the very outset, before any action had been taken by any person or persons to avoid Super-tax, they were a privileged class as compared with others whose incomes reached the Super-tax figure, which was then £5,000 a year. Those whose incomes were derived from dividends from limited liability companies paid Super-tax on the cash dividends actually received by them while those in the second category paid on the whole of their share of the profits or gains of the private business or profession in which they were interested, and in the case of owners of land and buildings, they had to pay on the net Schedule A value thereof, which was frequently far in excess of the actual income which the owners derived therefrom.

I would like to give one clear example of the incidence of the tax as regards two wealthy, and equally wealthy, men. A was the proprietor of a prosperous and old-established business making an annual profit of £20,000. [An HON. MEMBER: "Oh!"] There are such evil men who, many of them, are possessed of old businesses, built up in the last 50 or 100 years, which have been of incalculable benefit to the working classes as well as to themselves. This man A, in addition, had an income of £5,000 a year from the accumulated savings of his family and himself in outside investments. That made his income clearly £25,000 a year B was the owner of an identical business, but instead of owning it himself, he owned all the shares, save one, of a private limited company owning the Businesses. This company was making £20,000 a year profit, the same as A, and this man B also had £5,000 from other sources. It was perfectly plain that A and B were equally wealthy men, as regards both capital and income. Each of them, because they came probably of thrifty forebears, whose thrift in the past had enabled these big businesses to be built up, limited his annual expenditure to the £5,000 which he derived from his outside investments. A allowed his-profit in this old business to accumulate, enabling the business to be extended as and when required, and B similarly allowed the profit of the limited company of which he was the proprietor to accumulate in the hands of the limited company.

They were obviously equally wealthy, but for Super-tax purposes the income of A was returnable as £25,000, namely, £20,000, profits of a business of which he was proprietor, and £5,000, income derived from outside investments. B only had to return as his income for Super-tax purposes £5,000, namely, the income that he received from his outside investments; he received no cash dividends from the company of which he was the proprietor and, therefore, was not liable to include them. There was no dishonesty or blame for evasion on the part of B. The only blame was upon the way in which the Super-tax law was drawn, and I submit that if a man is the proprietor of the whole of the shares of a limited company, he is saving money equally if the company is allowed to accumulate it as if it was accumulating in his own hands and in his own name. I have taken that extreme ease to make the inequality the more clear. It was naturally not long before business men and others, for example, those owning investments and landed estates, began to appreciate the saving hey could effect in their Super-tax by forming limited liability companies to take over their businesses or their investments or their estates, and, in common with those already owning limited companies, to abstain from the declaration of cash dividends, or at any rate to limit the same strictly to an amount absolutely needed by the proprietor for his current needs.

It was decided that the capitalisation of undistributed profits by way of bonus shares did not make the recipient of those shares liable to Super-tax, and the Legislature has gone even further, as in February this year a decision of the House of Lords, in the case of the Commissioners of Inland Revenue versus the Executors of the Right Reverend G. C. Fisher, decided that the receipt of bonus debentures did not make the recipient, thereof liable to Super-tax. It is argued by those who consider the law at present satisfactory that the issue of bonus shares, or even of bonus debentures, is not income, but seeing that bonus shares and debentures can easily be converted into cash, I do not think the argument holds water. It is held that bonus shares are generally those of private companies, which are not readily saleable, but there is another method by which the recipients of bonus shares in a private limited company, who are anxious that outsiders should not become shareholders, and who, therefore, do not care to sell, can turn them into cash. As the bonus shares are issued to wipe out the profits available for distribution, the cash in hand of the company accumulates, and in due course the company can pass resolutions declaring that its capital is greater than its current needs. By passing the necessary resolutions for a reduction of capital and a repayment of a certain amount of shares to the shareholders, when confirmed by the Court, it is possible to redeem, say, 10s. in the £ of the original and bonus shares, reducing the shares from £1 shares fully-paid to 10s. shares fully-paid.The 10s. then goes in the form of cash into the hands of the shareholders, but it is exempt from any liability for Super-tax thereon.

So the game went on till the Budget of 1922 when the right hon. Member for Hillhead (Sir R. Horne) was Chancellor of the Exchequer, and he introduced into his Budget a Clause to deal with these legal abuses, a Clause which, in emasculated form, ultimately became Section 21 of the Finance Act, 1922, the Section whose repeal I am now moving. In intro-clueing his Budget and explaining this Clause to the House, the right, hon. Gentleman said: I wish also to direct the attention of the Committee to certain instances of legal avoidance of Income Tax and Super-tax, which have recently become so prevalent as to produce, until they are corrected, startling inequalities in the incidence of taxation as between different taxpayers."—[OFFICIAL REPORT, 1st May, 3922; col. 1033, Vol. 153.] In the course of the Debate, he said: We do not presume to say what is the amount which actually should be put to reserve. It is only the extreme cases that are being struck at, and we do not wish to strike at any case where there may be varying opinions as to how much should be put to reserve. It is only the case, which are perfectly apparent on the face of them, the class of ease which leaps to the eye, which will be inquired into. We should not presume to sit as authorities on the precise amount which any company shall put to reserve, but what we propose to do in the egregious cases is to say You really have acted in bad faith in this matter, and accordingly your penalty shall be that yon shall pay tax as a private firm.' Those last words are rather noteworthy, showing that the right lion. Gentleman at that date recognised the absolute inequality of the law as between a private firm and a limited company. This Section 21 of the Finance Act, 1922, which reached the Statute Book considerably weakened as compared with the Clause introduced by the right hon. Gentleman in his Budget, commences as follows: With a view to preventing the avoidance of the payment of Super-tax through the withholding from distribution of income of a company which would otherwise be distributed, it is hereby enacted as follows: (1) Where it appears to the Special Commissioners that any company to which this Section applies has not, within a reasonable time after the end of any year or other period ending on any date subsequent to the fifth day of April, nineteen hundred and twenty-two, for which accounts have been made up, distributed to its members in such manner as to render the amount distributed liable to be included in the statements to be made by the members of the company of their total income for the purposes of Super-tax, a reasonable part of its actual income from all sources for the said year or other period, the Commissioners may, by notice in writing to the company, direct that for purposes of assessment to Super-tax, the said income of the company shall, for the year or other period specified in the notice, be deemed to be the income of the members, and the amount thereof shall be apportioned among the members. So far so good. But the weakness of this Section is that, having started off so well—remembering, I would remind the Committee these words at the beginning of this Section Any company to which this Section applies. That is to say, Sub-section (6) of that Section actually, in fact, takes away with the other hand that which was given by the first hand. (6) "This Section shall apply to any company—

  1. (a) which has, since the 5th of April, 1914, been registered under the Companies Acts, 1908 to 1917; and
  2. (b) in which the number of shareholders computed as hereinafter provided is not more than 50; and
  3. (c) which has not issued any of shares as a result of a public invitation to subscribe for shares; and
  4. (d) which is under the control of not more than five persons."
I would first draw the attention ofthe Committee to the fact that the word "and" is inserted between each of these four provisos. Therefore, to enable the company to be clear of the operation of this Section all that is necessary is that it should not comply with one out of the four. Even if the company complies with the other three, if they can manage to keep clear of Number 4 they can keep out of the provisions of the Section. In the Amendment. which my hon. Friends and I have put down on the Paper, and which we are debarred from moving, and to which I should be out of order, no doubt, in drawing the attention of the Committee, we have practically, at least Mr. Hope—it was our intention had we been permitted—

The CHAIRMAN

The hon. Gentleman can point out that he desires to apply a remedy but is debarred from doing so.

Mr. RADFORD

My hon. Friends and I had hoped we might apply a remedy, but unfortunately we have been debarred. I want to point out to the Government the practical objections, not theoretical ones, to any one, at any rate of the first three of these four provisos being in such a Section. The first one is that it only applies to a company registered since 5th of April, 1914. I would like to ask what equity is there in allowing those people who happen to have had either their businesses or their estates formed into companies prior to the 5th April 1914 to be differentially treated from those who happened to be registered on the 6th of April? People are too enterprising and energetic in these days to be absolutely debarred under this first proviso if they wish to form their company at the present time. They are not to he debarred by a email matter like this. I have here an advertisement inserted in January, 1926, in the "Accountant," which is the leading paper of the profession. It runs to this effect: Advertiser is desirous of purchasing the registration of a company formed before 5th of April, 1914. Must have wide powers of holding and dealing in real and personal estate. Apply Box 565, Gee and Co., Publishers, Ltd., London, E.C. This is not a solitary, not an orphan advertisement. I have seen others. Assuming that any person is unable to secure a derelict company such as this advertiser requires, there is no difficulty whatever in evading the provisions of Sub-section (6) of Section 21. Let me read the second proviso: In which the number of shareholders computed as hereinafter provided is not more than 50. It is true that a wealthy man forming a company to take over his investments, his landed estate or business, does not wish to have outsiders holding the shares which rank with his own, but it is perfectly easy, in addition to the ordinary shares which will be held by him and his family, to have a preference issue with no rights of voting or attending meetings, with preference dividends limited to 5 per cent. I am quite sure that, equally, there would be no difficulty in such a man finding the 50 people who will be willing to have, at any rate, some of these fully paid-up shares. For the purposes of this Section they must be beneficial owners of the snares, the mere holding as nominees for the principal shareholder is not sufficient. But they are still beneficial shareholders if they have been presented as a free gift, and thus enable the company to get outside the provisions of this Section. I put it to hon. Members that some men, quite honourable men, who own businesses, may say: "I am anxious to have a few outside shareholders in my company and I propose to give So-and-So or his children five or 10 fully paid preference shares of £1 each." There will be no difficulty, so far as I know my countrymen, in getting 50 shareholders on these terms, and the donor knows that the giving away of £500 worth of shares will save him thousands a year in Super-tax. The next point is the third proviso. The company must also be one which has not issued any of its shares as a result of a public invitation to subscribe for shares. Only a few months ago I saw the details of the registration of a limited company with a capital of something like £1,000,000 in ordinary shares issued to a large landowner. He and his son were having all the ordinary shares and becoming governing directors for life. Simultaneously they made an offer to the public of the comparatively paltry number of 5,000 preference shares. It was perfectly obvious that this public issue of 5,000 preference shares was riot made for what I might call a legitimate purpose taking into account the expense of advertising, etc., connected therewith. The preference shareholders' rights were strictly limited as regards dividends, absence of voting power, etc. Read in conjunction with the provisions of this Section, I think it is perfectly plain what the motive was in making that small issue with the circumstances connected with it. I do submit that with all these provisoes necessary, and every one of them necessary to make any company come within the operation of this Section, the Section is absolutely useless. It is just about as effective for achieving its purpose as a sieve would be effective as a container of liquid.

My hon. Friends and myself are moving the repeal of this Section, when we know that we are not to be allowed to move a new Clause to take its place, because we are convinced that so long as this Section remains on the Statute Book so long will not only the Committee, but the Government themselves, delude themselves that all that can reasonably be done to prevent evasion of the Super-tax has been done. This is not in any way a party question. Nevertheless let me remind the Committee what was said by the right hon. Gentleman the Member for Colne Valley (Mr. Snowden) on the Second Reading of the Finance Bill, referring to the speech I had made on the subject: This question has often been raised in the House of Commons, and the House of Commons— know what I am talking about— with that impressive wave of the hand that he adopts on these particular occasions— and the reason why successive Governments have not proposed to the House of Commons more drastic means of cleating with tax evasion, has been because of the opposition with which even moderate proposals of that character have always been made by the party opposite."—[OFFICIAL REPORT, 20th May, 1926; col. 473, Vol. 196.] When I heard the right hon. Gentleman say that, as I had made up my mind to put something down in the nature of these Amendments, I went to the trouble of looking to see what attempt he had made to deal with the matter when he was Chancellor of the Exchequer. To my surprise I found he did not make the least reference to it, either in his Budget speech—I am glad the right hon. Gentleman has now come in—or in the subsequent Debates on the various stages of the Finance Bill. If the right hon. Gentleman was sincere in what he said, that this question had often been raised in the House, that it was, obviously, present to the minds of all financial experts, like himself, and that, the reason why successive Governments had not proposed more drastic means was because they were afraid of Conservative opposition, I am astounded that he, who always has the courage of his convictions, should have been deterred from bringing in proposals by the knowledge that they would meet with opposition. Possibly, that was what deterred him. I have looked up last year's Budget Debates to see what he said about it then, as it was so present in his mind, but I find he made no reference to it whatever; and if his motive in not referring to it in his own Budget speech was, shall I say, a weak one, not a worthy one, no doubt in last year's Budget Debate he was actuated by the much more worthy motive of not desiring to embarrass the Government, in view of the opposition which he knew would come from Members on this side.

I have kept the Committee much longer than I had intended to do, but, in conclusion, I would like to remind them, with reference to limited liability companies, that the expression "limited liability" was intended to refer to a limit of the liability of individual shareholders up to the amount of the shares they hold; I do not think that by any extraordinary power of divination or foresight it was intended to indicate a limited liability to Super-tax. We are all agreed about the old principle that the broadest backs should bear the heaviest burdens, and equity demands that equally broad backs should bear equally heavy loads. The great majority of people with incomes of more than £2,000 a year loyally and honourably bear the burden of Super-tax to which they are subject, and it is for the purpose of insuring that the minority who are at present not doing so shall be compelled to bear their rightful share of taxation that I have introduced this Amendment.

Mr. McNEILL

I think my hon. Friend was conscious of the difficulty in which he finds himself with these two Amendments, but he did not explicitly state what the effect would be if the Amendment which lie has now moved were accepted by the Committee. He has told us how Super-tax is or may be, and, according to his experience, has been, evaded in spite of the Act passed in 1922.That Act was passed for the very purpose of stopping holes allowing of evasion of Super-tax. My hon. Friend, following up the very interesting and able speech which he made on the Second Reading of the Finance Bill, has pointed out that the Section of the Act of 1922 which was intended to stop this evasion has been ineffective for the purpose, and he has indicated where, he thinks, the weakness of the Section lies. But, unfortunately for him, the second Amendment standing in his name is out of Order, and if he were to succeed in inducing the Committee to accept this Amendment, then instead of strengthening the law for stopping evasion he would destroy the only legislation for that purpose which is in existence. I agree that it is my hon. Friend's misfortune

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that that should be so, but that being the state of affairs I think I may take it that it is not really his intention to ask the Committee to accept the present Amendment, and that he has served his purpose by stating the case as to the evasion of Super-tax.

Mr. RADFORD

I am aware that if the Committee accepted this Amendment the position would be that certain persons —not those who are in any way setting out to evade the Super-tax, but those who have from perfectly bona fide motives formed themselves into limited liability companies—would evade the Supertax which they incur even under this weak Section the repeal of which I moved. But I do feel that as long as this weak Section remains on the Statute Book, so long will a complacent air be adopted by the Government—I am not talking of this Government alone, for, in the words of the right hon. Gentleman the Member for Colne Valley (Mr. Snowden), successive Governments have been alive to this difficulty—and the Inland Revenue authorities will think that all is well. To repeal Section 21 of the Act of 1922 will, if I may use the expression, bring the thing to an issue, and force the Government and the Inland Revenue authorities to take steps to stop these leakages. Everyone of these successful evasions of liability throws a heavier load on the shoulders of other people, and I submit that it will be better to rid the Statute Book of a Section which is differentiating between classes of taxpayers and penalising those who are not seeking to evade it.

Mr. McNEILL

I think I have given my hon. Friend the opportunity of making a second speech, but I do not want to complain. I cannot agree with the attitude he has taken up, because although I agree that the existing Section is not as strong for its intended purpose as it ought to be, and as I should like to see it made, I think he is exaggerating when he says it has been entirely useless. That is not my information. It may quite well be that a certain number of evasive fishes have managed to get through a too-wide mesh, but it does not follow that some have not been caught.

Mr. RADFORD

The biggest fish get through.

Mr. McNElLL

I think the Section has not been so completely useless as my hon. Friend suggests, and it would be a great misfortune if we were to cut it out of the Statute Book altogether, for the mere sake of a demonstration without putting anything in its place.

I am precluded, of course, from going into the merits of the other Amendment which my hon. Friend put down, but, having looked at it, I am able to say that if the Committee were to strike out the existing Section they would not find it so easy and simple a matter as my hon. Friend thinks to construct a satisfactory Clause to put in its place. As I am quite satisfied that my hon. Friend, who has a great grasp of this subject, has in his Amendment gone perhaps as near as most people are likely to get to a satisfactory substitute, I feel that is the best proof of the very great difficulty with which anyone is confronted who would draw up such a Clause. This is not merely conjecture. My hon. Friend is quite mistaken if he thinks that hitherto there has been no attempt to strengthen this Clause. I am quite conscious of the fact that the Section he has attacked is not by any means perfect, and I quite agree that the limitations in it require strengthening, if we could do it in a satisfactory manner. The point received consideration long before I had any responsibility in connection with the matter, for the Inland Revenue Authorities and the Treasury are continually trying to strengthen existing legislation if experience shows that it is not proving completely satisfactory for its purpose. So with this particular Clause. I am not able for that very reason to give a definite pledge as to what we will do.

I would like to refer for a moment to what was said about the speech of the right hon. Gentleman the Member for Colne Valley. I do not know upon what grounds the right hon. Gentleman was making that statement, but so far as my researches go I cannot find the smallest foundation for the right hon. Gentleman's statement that this reform had been consistently opposed by members of the party on this side of the House. So far as I know, we are all anxious to have a thoroughly efficient taxing machine and to prevent evasion. For the reasons I have given I cannot give any definite pledge as to whether in the next Finance Bill we shall be able to find a satisfactory substitute for this Section, because I really do not know. We shall, however, continue to do our best to find a way of preventing evasion without at the same time doing something which may have quite an unintended effect in other directions, and which might inflict a very great injury on commerce and trade. Those are the considerations which we have in view, and which we shall continue to have in view. For these reasons I cannot accept the Amendment as it stands, because it would get rid of the only safeguard we have and which, however imperfect, is better than none at all.

Mr. W. GRAHAM

On this side of the Committee we are in full sympathy with the efforts of the hon. Member opposite in putting forward this most drastic proposal to prevent evasion of taxation in this country. In point of fact so far from not having taken an interest in this matter, we on these benches, in nearly every Finance Bill since 1918, have urged the importance of this question. Very great emphasis has been laid upon the campaign which followed the publication of the Report of the Royal Commission in 1919. The hon. Member who moved this Amendment. referred to a speech made in a previous Debate by the ex-Chancellor of the Exchequer. I think the Committee will agree with me that my right hon. Friend the Member for Colne Valley (Mr. Snowden) does not require any defence at my hands but that part of his speech referred to opposition raised in this House at the time to the proposals of the Revenue Bill. Certain suggestions put forward by the Royal Commission were in the Revenue Bill, and the object of that Bill was partly to deal with a problem of this kind by altering the whole structure of the Income Tax in this country. Unfortunately, those objects were lost sight of in the campaign against the bureaucracy in the Civil Service and Inland Revenue Departments, which was warmly supported by numerous hon. Members opposite, and very largely owing to that opposition the Revenue Bill was withdrawn.

Mr. McNEILL

The right hon. Gentleman knows very well that the opposition to the Revenue Bill of that year had nothing whatever to do with the evasion of the tax.

Mr. GRAHAM

Not directly, but the opposition was offered to the extra powers being given to the Inland Revenue authorities. Until you get the drastic powers recommended by the Royal Commission, you cannot deal effectively with the evasion of the Income Tax, the Super-tax, or anything else. You must, therefore, have those powers to which the strongest opposition was shown during the lifetime of the Coalition Government. That was what we had in mind when the words of the passage in the speech quoted by the hon. Member opposite were uttered. Therefore, that part of the complaint of the hon. Member who moved this Amendment completely disappears.

One word about the actual merits of this Clause. The Financial Secretary was perfectly correct in saying that, if the proposal of the hon. Member were adopted, you would merely wipe out the Section of the Act, and the hon. Member cannot move his New Clause because he cannot increase the charge; and, therefore, we should be led into a position infinitely weaker than that in which we are now placed. I think that was a very thin argument to come from a Government which has power to deal with almost any question. They have had four years experience of the operation of this Section and we are in complete agreement with the hon. Member that the restrictions and conditions imposed in 1922 are such that they can only have a very limited effect in regard to the evasion of Super-tax at the present time. Therefore, I think we are entitled to have a more definite reply than that from the Financial Secretary. Here is a Government, with a large majority which can give effect to anything the Government likes to propose. Millions are lost every year by tax evasion, and a fair amount of that sum is attributable to the kind of conditions described by the hon. Member opposite. We are sorry that the hon. Member opposite will not have an opportunity of moving his new Clause, and while we are taking an objection to a certain part of his speech we are at one with him in the end he seeks.

Mr. McNEILL

I want to make two observations on the speech to which we have just listened. I should like to say with how much satisfaction I heard the elaborate explanation of the, speech made by the ex-Chancellor of the Exchequer, because it is quite evident that we were under the gravest misapprehension as to what he had intended to say. I should not accuse the right hon. Gentleman the Member for Colne Valley (Mr. Snowden) of habitual obscurity, but I understood him to say and the OFFICIAL REPORT confirms my view, that on a question of the evasion of a tax, the sort of question which my ho:, Friends raised in the Second Reading Debate, the right hon. Gentleman had found himself confronted with habitual opposition from this side of the House.

That was the impression that his speech gave. We now know that he meant something quite different. The Revenue Bill was not in any sense the responsibility of hon. Gentlemen on this side of the House at all. It was not a Conservative Bill, but a Coalition Bill. No doubt a great many individual Conservatives were involved in it, and there were also Labour men and Liberals involved. [HON. MEMBERS: "No!") Anyhow, it was not a Conservative Bill. The second point was that, except very indirectly, it had nothing whatever to do with tax evasion, which was the subject that was discussed on the Second Reading. The opposition to that Bill arose mainly on account of the suggested change in regard to the position of the Commissioners of Income Tax, to which the right hon. Gentleman referred as a question of bureaucracy. Of course, it would be out of order to go into the merits of these questions; it is sufficient for my purpose to recall that that Bill, for which we had no responsibility, had nothing whatever to do with tax evasion. I am very glad to find that the fulminations of the right hon. Gentleman were as harmless as they now turn out to be.

The second observation that I want to make is in regard to what the right hon. Gentleman said to the effect that, although it would be out of order for my hon. Friend the Member for South Salford (Mr. Radford) to move the Clause which stands in his name later on the. Paper, the Government could propose it if they liked, and, consequently, that it was a very feeble reply that I gave when I referred to the fact that we could not move it. The right hon. Gentleman said that he was entirely at one with my hon. Friend the Member for South Salford. The right hon. Gentleman occupies a position of responsibility, and, therefore, I suppose I may take it from that that the Clause in question, which it would be out of order to refer to in particular, is endorsed by him. He has been at the Treasury, and he is sitting beside the ex-Chancellor of the Exchequer. I take it, therefore, that it is a natural inference from his speech, he having stated that he thinks that this Clause would be the proper way of dealing with the question—

The CHAIRMAN

The right hon. Gentleman seems now to be on the verge of discussing the Clause himself.

Mr. McNEILL

I am, very nearly. I do not wish to go any nearer to it than that. The fact that I cannot go nearer than that only shows how little justification there was for the right hon. Gentleman's attack upon me for not having gone further. The Government, of course, can make proposals, not necessarily on the lines of those of my hon. Friend, for dealing with the general question of tax evasion, and I have intimated that the Government, the moment they see two things—first, that evasion is certainly going on to a substantial extent, and, secondly, that there is any practicable method of dealing with that evasion—will not be slow to take action. That time, however, has not yet arrived, and, therefore, for me to go at any length into the case which my hon. Friend has made, and with which I am in entire agreement, would appear to me to be entirely out of place in the circumstances.

Mr. DUNCAN

This Debate has certainly opened up a very extraordinary position. The Financial Secretary suggested that, if the Government could be satisfied that there was evasion, and that they could find a Clause which would meet the case, they would no doubt he prepared to deal with it. The astounding thing to me is that there should be the slightest doubt in the mind of the Financial Secretary that a very considerable amount of evasion is going on—that the amount is really an enormous one, considering the days in which we are living, the scarcity of money, and the various ways in which the Chancellor of the Exchequer has to raise that money. The worst thing of all, however, to my mind, is that, in such necessitous times, when the Government, as the Financial Secretary has admitted, know that evasion is going on, they arc actually unable to find a set of words that will enable them in their legislation to meet the particular and specific case which is here raised. That is a wonderful admission to make. Some people say that the Conservative party is the stupid party. I do not know whether the right hon. Gentleman is desirous of giving us an illustration of that stupidity, but certainly it is a very great admission to make in this House. I would not have thought so much about it but for the fact that the whole matter is being raised by a member of the Conservative party, from their own benches, to whose speech I listened with very real interest. Personally, I think he has made an excellent ease, and I think the answer that, has been given to it is about the weakest I have ever heard during the 16 years I have been in this House. I certainly think the. Government ought to give a little mare consideration to an important matter like this, and ought not to depend upon their docile majority to carry anything through the House of Commons. Surely, £10,000,000 of evasion is something that is worth the attention of the Chancellor of the Exchequer.

Question, "That the Clause be read a Second time," put, and negatived.