FINANCE BILL

HC Deb 28 June 1963 vol 679 cc1845-90

Order for Third Reading read.

11.5 a.m.

The Chancellor of the Exchequer (Mr. Reginald Maudling)

I beg to move, That the Bill be now read the Third time.

The difficulty with this particular stage of the Finance Bill is the usual one, namely, that broadly speaking we are confined to what is contained in the Bill and that the contents of the Bill have been thrashed out in detail more than once in the course of the last few weeks. Perhaps I could start by saying a word or two about the course of the Bill to this stage. It is a large Bill, a substantial, thick document, and there is great detail in it, making some very large changes in the taxation law. I think it a good thing that it passed so smoothly and in very reasonable time.

I must apologise for the variety and number of Amendments we had to place on the Notice Paper earlier. That was because we were taking the closest possible account of the various representations made to us while the Bill was passing through. I should like to thank the Opposition for the courtesy and restraint of hon. Members opposite throughout the passage of the Bill. This has not stopped them from making some pretty trenchant criticisms at various hours of the day and night on features of the Bill of which they disapproved.

As the entire work of carrying the Bill through Committee and Report fell on the other Treasury Ministers, I pay tribute to them for all the work they have done. I particularly commend the work done by the Financial Secretary, the Economic Secretary and the Solicitor-General. They served the House well, and I appreciate their great courtesy and diligence and am most grateful for what they have done.

The main contents of the Bill fall under two heads. One is the abolition of Schedule A, a major change in the tax structure, to which I shall not refer again as it has been discussed many times in the course of the last few weeks. For the rest, the Bill had the theme, which I have tried to follow both in the Budget and in the Finance Bill, of assisting, in practice, towards a more rapid and more steady rate of expansion. The Income Tax reliefs, capital allowances, the new system of free depreciation in development districts and stamp duty changes were all designed to stimulate demand in the economy, but to do it in such a way as to increase efficiency and promote a steady rate of expansion.

It is, of course, too soon to see any of the effects of this Finance Bill because, broadly speaking, none of the release of purchasing power involved has begun to take effect. The Income Tax reductions will not take effect until early next month and, as for the change in capital allowances, they will take some time to show an effect in revenue or company accounts, but changes both in the psychology in industry and in investment by businessmen are already becoming visibie. This naturally is a slow process. The movement and trend of private manufacturing investment must be a fairly slow process. It is not something which is rapid or should be rapid or erratic. We must expect to see fairly slow movements but, one would hope, fairly steady movements.

On the other hand, the economy is clearly reacting to earlier measures. After the very substantial increase in unemployment during the winter, we have had in the last two months a very sharp fall indeed in the level of unemployment, which, I think, now stands out clearly as a structural problem—not a general problem, but a problem confined to certain areas of the country, for instance Scotland, Ulster, the North-East and Merseyside, where it is still important. That is why I think I was justified in concentrating help on regions of high unemployment.

So far the new system of free depreciation, coupled with the new standard grants which arise from another Bill—the combination of these two—has already produced a very keen interest among businessmen in the prospects of investment in the development districts. I am sure it is the wish of the whole House that this keen awakening interest should soon show itself in factories being erected and jobs being created.

I conclude, in commending the Bill to the House, by saying that we are now seeing an expansion of the economy; and our essential task must be to ensure that the expansion is as rapid as is consistent with an avoidance of a return to inflation and with maintaining a rate of growth in the steadiness of which business men can have confidence.

The Finance Bill and the Budget range over the human, physical and financial factors in a growth policy, and, as the House knows, the work of the National Economic Development Council and the discussions we have had on that body are reflected quite considerably in the structure of this year's Budget.

For the future, I have no doubt that things are entirely in our own hands. We have the ability as a country to establish and maintain a more rapid rate of growth. The national conditions are such that this can certainly be done, provided that we are prepared to match enterprise with restraint.

11.10 a.m.

Mr. James Callaghan (Cardiff, South-East)

The Chancellor made his speech very cogently and succinctly. Last year, I congratulated the then Chancellor on what he had done. I think that I had better beware. A week after my congratulations, on 4th July, he was out of office. I do not know whether any words of mine will have any effect on the Chancellor's position this year. Of course, he need not necessarily be out of office. I suppose that there could be other changes. Anyhow, I forbear from congratulating him, and I would not wish to influence any internal deliberations at all.

The Financial Secretary has been most diligent, painstaking and courteous in everything he has said. As for the Economic Secretary—I do not see him in his place; no doubt, he is recovering from his weary vigil or, perhaps, planning and plotting more evil schemes somewhere in the bowels of the Treasury—I have never met anyone who was more resolutely determined to find swans in other people's geese. He has bemused us all by his desperate attempts to find good where most of us could see only mediocrity. The Solicitor-General has been urbane and courteous. The Chief Secretary has been himself.

As for my hon. Friends, I must say that my hon. and learned Friend the Member for Kettering (Mr. Mitchison) has performed his usual feat. I said last year that, if he ever gave up drafting Amendments, I was not sure what would happen to the British constitution. What I say this year, after a further 12 months' experience of him, is that I know of no greater expert in Parliamentary draftsmanship in the House. He has, over the last 10 years, won for himself a reputation which is acknowledged in all quarters of the House. It is a saying among us, when we want to find some obscure way of getting round the Government's intention, "Give it to Dick". He has performed most valiantly again on this occasion.

My hon. Friend the Member for Sowerby (Mr. Houghton) combines pugnacity with a passion for purity in public taxation. It is a combination which is most refreshing to everyone. My hon. Friend the Member for Gloucester (Mr. Diamond) has, of course, a deep knowledge of the City. My hon. Friend the Member for Grimsby (Mr. Crosland), who also has helped us on this occasion, is not here today because he is finding out in Japan how the Japanese manage to succeed in stimulating a much faster rate of growth than the Tory Government have ever done although faced with rather similar problems. No doubt, he will come back with some proposals about the way in which we should go about it.

This has not been an exciting Bill. I think that most of us would say that it has been a very dull Bill, despite attempts to engender heat at various times. Probably, the main effect has been to undo a lot of the damage which was done last year. Last year, we added another £289 million to the nation's burdens by the Finance Bill. This year, we are relieving the nation of £260 million through the medium of this Bill. We are, so to speak, "as you were". We have gone back to where we were more than a year ago.

I agree with the Chancellor when he says that we cannot expect to see any quick results from the increased capital allowances and free depreciation in development districts. This is all the more reason for regretting that the Amendments were not accepted when we moved them 12 months ago. We might then have seen the delayed effect coming in now, instead of having to wait a further period. The Chancellor has resisted a further Amendment this year which we moved in connection with these allowances, which, I am willing to warrant, stands a pretty good chance of being proposed next year, together with certain other Amendments.

I am glad that the Chancellor has adopted the system of discrimination in allowances. By themselves, as I think he will agree, the allowances will not achieve a great deal. They must be resolutely applied in conjunction with other Government Measures and executive actions, but they are a very useful addition to the nation's armoury in handling our situation. Anomalies will crop up, no doubt, but I do not think that we need fear them. We can look at them as they come along.

Now, Schedule A. It took us 19 Clauses and 7 Schedules to get rid of it. It was unloved by owner-occupiers, abused by accountants, and mourned only, I think, by my hon. Friend the Member for Sowerby and, perhaps—let us be fair—by those who regard the British tax machine as one of the best fashioned instruments of taxation in the world, although it is getting rather old-fashioned and out of date. The fact that some part of the tax base has been eroded has undoubtedly caused a certain amount of perturbation among those who regard the taxation instrument for its own sake.

The abolition of Schedule A will cause anomalies for those who rent accommodation, either because they cannot afford to buy or because they do not choose to buy because their occupation requires them frequently to move about, or whatever it may be, and I wonder whether we shall, as a result of the abolition, have the growth of demands for allowances in respect of rent. On grounds of logic, I think that it would be extremely difficult to deny them. Whether any Chancellor will feel able to take such a step, I do not know. If we do start to give allowances in respect of rent, there will soon be no limit to the number of things in respect of which we shall be pressed to give allowances—railway fares and everything else which bears heavily on the citizen.

Although there is no doubt that the Chancellor has done it for political reasons—or his predecessor announced it for political reasons and it was spatch-cocked into the Budget—there is a lesson here. When one does these things purely for a political purpose, one does not necessarily reap the reward in respect of votes. I have not seen any marked intention on the part of the electorate to rush to the Conservative Party because Schedule A has been abolished.

What I regret is that the decision to abolish Schedule A has not been the occasion for further reforms. I am a resolute tax reformer. I believe that the British tax system, well designed though it was originally, has become outdated and needs radical reform in many aspects, on the earnings side, on the capital side, on the profits side and on the Estate Duty and inheritance side. We have heard in the past from the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd)—he is not in his place now—of his proposals for tax reform, but we have not seen or heard anything about it, as far as I can remember, from the present Chancellor. One of the best things we could do in in this connection would be to embark upon a large-scale reform of the tax system, and I should like to see a determined effort made in that direction.

I welcome the increase in personal allowances. The £15-a-week married man with one child will have about 5s. a week extra pocket money. Of course, he will have to pay more for National Insurance. He has already had his bill for increased rates. Motor car insurance premiums are to go up by 30 per cent, in the autumn. I have a suspicion that there will not be much left out of his extra 5s.a week spending money by the time the autumn comes. And, of course, prices are going up. If there is any general criticism I make of the Finance Bill, it is that it does nothing, or very little, on balance to help the ordinary family man. Such increase in spending money as he has been given, which is, as I say, minute—the ordinary family man has been given a minute increase in the amount of his spending money—has already been mortgaged by prospective increases in the price of insurance premiums and other dues which will fall upon him. Therefore, it has done little to improve the standard of life or the condition of the great mass of the people.

Of course, it has done something to help to improve the condition of life of those, represented here again on the back benches, who were so vocal at 3 o'clock the other morning on the subject of the repeal of the Stamp Duty. They will benefit to the tune—not them personally, but those on whose behalf they speak—of some £25 million. Well, as I say, we have to choose our own sense of values and to decide what we think most important. Frankly, I do not believe that it is very important to relieve the Stock Exchange of £25 million when there are a great many other things which need doing more urgently. But the Chancellor has chosen to do this and, in doing so, has revealed his approach to these problems. The other day I read—I am sure that the Chancellor did not say this—that he was a little worried because he had no enemies. He need not worry. He has plenty of enemies on this side of the House. We shall fight him as hard as we can and do our best to expose the policies being followed by the Conservative Party and by the Government at the present time.

I doubt whether the Government have much more time left ahead of them. For the sake of Britain I hope that they have not. I agree with the right hon. Gentleman that, were we able to unleash the energies of the British people, there are no heights of which we are not capable. I believe that this country could be transformed in 10 years with a good Government and I regret that we have wasted the last 12 years and that we have been left in a position where we have the Chancellor making an oration of this sort and telling us what we can do in the future. The British people would be inclined to ask why he has not done it in the past.

11.22 a.m.

Sir Henry d'Avigdor-Goldsmid (Walsall, South)

Generally speaking, I think it more agreeable to discuss these matters at the pleasant hour of 11 a.m. rather than 3 o'clock in the morning. At 3 o'clock in the morning the hon. Member for Cardiff, South-East (Mr. Callaghan) had lost some of the geniality which we find such an agreeable feature in the daylight hours. I wish particularly to address myself first to a few of the hon. Gentleman's remarks at 3 o'clock in the morning. He said two things to which I wish to draw attention. He referred to the City of London and said: Undoubtedly, the City of London can on occasions operate against the interests of British industry."—[Official Report, 27th June, 1963; Vol. 679, c. 1577.] I suspect that the hon. Gentleman was thinking in terms of a return to the gold standard of 1926 which in fact caused great unhappiness, great deflation, but was not, I think, done on the lines to which the hon. Gentleman was referring.

I should like to ask the hon. Gentleman whether he thinks that any action taken since the deflationary Bank of England was carpeted by the Treasury—which was after the nationalisation of the Bank of England—shows that this particular antithesis had been reached. My own feeling is that he will find it difficult to prove that since the Bank of England ceased to be an independent entity the City of London has taken any action other than of a helpful sort towards British industry. If we are going back to such ancient history as 1926, I wonder whether much useful purpose is served—if any at all—by making it a debating point at 3 o'clock in the morning in the year 1963.

Mr. Callaghan

Would the hon. Gentleman like me to answer that now?

Sir H. d'Avigdor-Goldsmid

Does the hon. Gentleman wish to interrupt me?

Mr. Callaghan

I shall be glad to take up that point immediately. During the 1950s, whenever we ran into monetary troubles it was the interests of the City of London which were placed ahead of the interests of British industry. That was the whole foundation of the stop-go policies. I refer specifically to 1957. I think there is no doubt that what took place in 1957 meant that the interests of British industry were being subordinated to an out-dated monetary policy, basically in the interests of the City of London. I think that modern methods adopted over the last 18 months have proved of assistance, but I do not have to go back to 1924.

Sir H. d'Avigdor-Goldsmid

I still do not know of any action taken in 1957 which was not designed to be beneficial to British industry. I am absolutely convinced about that.

The other point which the hon. Member made, and on which he animadverted, was that some of my hon. Friends had addressed themselves with particular interest to the question of Stamp Duty. My hon. Friends are capable of defending their own interests, and they are well known as diligent industrialists. I do not see why the hon. Gentleman should have said in reference to my hon. Friend the Member for Halifax (Mr. Maurice Macmillan): The hon. Gentleman shakes his head, but it is the only matter on which he has bothered to speak."—[Official Report, 27th June, 1963; Vol. 679, c. 1574.] Over the last five, six or seven years, I have sat through a great many of the debates on all stages of the discussions on the various Finance Bills. I value Finance Bills in inverse ratio to the number of interventions which I make. That is to say, the better the Bill the less need there is for me to talk about it. In respect of this Bill, were I to work out an equation showing the ratio between my Finance Bill "Chamber hours" and my "intervention minutes," I think I should find that I had the highest average of anybody of the time I spent sitting on my bottom compared with the time when I stood on my feet. The hon. Gentleman may think that I have a due appreciation of my own limitations. But I prefer to think that it is generally recognised that we have had a good Finance Bill; and the fact that my hon. Friends did not find it necessary to speak more than on a few occasions is an additional recognition that the Bill was so well drafted that it carried out the intentions of my right hon. Friend the Chancellor.

There is one point upon which I should like to join issue with my right hon. Friend, and that refers to the question of Schedule A. Last year my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) indicated that he had intentions with regard to Schedule A to be implemented in 1963. I should have thought that this would have given the Inland Revenue a whole 12 months in which to work on this undoubtedly complicated problem. Yet, when it came to the point, we found that we had a volume of Amendments relating to Schedule A which we had to face at very short notice. With a very few exceptions, I do not think that hon. Members on the back benches are capable of absorbing this kind of detail in the time afforded to us to do so.

I make no objection of any sort to the changes which were made resulting from arguments raised during the Committee stage discussions. But I think that the entire redrafting of very large Schedules is something which an ordinary back bench Member cannot deal with in that way. I put it to my right hon. and hon. Friends that most of the lustre which they gained in our eyes because of their clear and lucid presentation of the arguments was slightly dimmed by the fact that, with the best will in the world and having done a fair amount of homework, it was quite impossible to follow all the arguments which were raised. We spent a lot of time in Committee, and I wonder why we could not have had sufficient time to digest the Amendment on Report. Year after year there is something about which we grumble. This year, I think we had something over the odds about which to grumble, particularly in relation to the Schedule A matter.

We have had a sound Finance Bill following a good Budget. I cannot understand how the hon. Member for Cardiff, South-East can be prepared to say that all the benefits which have been added to the purchasing power of the individual, who has gained so widely from my right hon. Friend's tax reliefs, will be lost in the future rise in prices. If he is referring to his own intended return to power, that is one justification I can see for any future impending rise.

If the hon. Member for Cardiff, South-East becomes the Chancellor, I believe that we shall see that rise. If he does not, then the interests of this country will be extremely well served by this Government and this Bill; and special credit for this must go not only to my right hon. Friend the Chancellor but to my hon. and right hon. Friends who have supported him. Whatever the hon. Member for Cardiff, South-East meant by his references to the Chief Secretary, for my part I have valued my right hon. Friend's speeches on the Bill and I prize the efforts of the Chief Secretary, the Economic Secretary and the Financial Secretary in (having made valuable contributions to the Bill and having eased its passage substantially.

11.31 a.m.

Mr. Harold Lever (Manchester, Cheetham)

I am not in a position to make the claim of the hon. Baronet the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) as to the ratio of sitting and speaking time. However, I can assure both my hon. Friends and hon. Members opposite that their remarks do not escape my diligent perusal, even though I may not always be physically present in the House. Since the hon. Baronet's remarks in this connection seemed to be acceptable to the House, perhaps I might be allowed to say that in my case it is simply that I am rather more slow witted than the average hon. Member and that it takes me a great deal of time to absorb what is said on certain—particularly the one he discussed—subjects.

It is reassuring to some hon. Members to learn that having attacked the father, the hon. Baronet defended the son. Although I do not wish to emulate myhon. Friend the Member for Cardiff, South-East (Mr. Callaghan) by entering the cauldron of discussion on Conservative Party politics, it is somewhat reassuring to learn that the hon. Baronet finds something good in at any rate one right hon. Member of the Cabinet and his doings. I wish that I could share his view.

I wish today to protest briefly about three aspects of the Budget which disturbed me greatly. The first is Schedule A, which I have examined in more detail at an earlier stage. The abolition of Schedule A is to be deplored as an act of irresponsible Poujadism designed to appeal to the owner-occupier elector at the expense of the general taxpayer. Much as I value the presence of the hon. Member for Orpington (Mr. Lubbock) in the Chamber, this alteration in our tax law was too high a price to pay for his arrival here because it represents a re- versal of the decision of the electors of Orpington; and we are witnessing that rather than a rational alteration in tax policy.

I would gently chide myhon. Friend the Member for Cardiff, South-East by reminding him that the only distinguished mourner of this part of our tax law is my hon. Friend the Member for Sowerby (Mr. Houghton). It is lamentable that a perfectly sound principle of our tax law—which attempted to produce some equalisation between the owner-occupier and the concessions available to him by way of tax reliefs and the tenant—should be disappearing. This part of the law did produce at least some remedy. It was not an exact remedy and it by no means achieved perfect equity, but it was a rough and ready method of getting some equality. My hon. Friend the Member for Cardiff, South-East is now compelled to examine the bringing into being of another equaliser because this one has been abolished. My hon. Friend may have to think of a less satisfactory type of equaliser, perhaps the question of subsidising tenants in some manner in a general sort of way. As I say, it is a pity that the Government have taken this action, for it is not only indefensible but, in principle, it is distasteful.

Anyone is able to show in about 10 minutes that our present tax system is manifestly unfair in its impact on the owner-occupier, who is allowed tax relief on the money he borrows to buy his house, and the tenant, who gets no relief for the rent he pays. The complacent way in which these anomalies are accepted is deplorable and I cannot share the belief that there is something sound and logical in our tax system.

It rather resembles a mid-nineteenth century locomotive trundling along, parts having been taken out of it and replaced by others, there being a general muddle as a result of the thing being interfered with. The machine is encrusted with new devices so that it does not have the reputable simplicity it had in its original form. Instead it clanks along, a museum piece, and in every part of it there is a clanking of apparatus. It is high time that we had a more modern machine.

I wish also to lament a similar indefensible piece of legislation concerning luxury cars. The Government should make up their mind whether they wish to penalise those who buy cars in excess of £2,000 simply because they cost more than £2,000 or whether they wish to amend the rule that expenditure in a business shall be allowable for tax purposes if it is reasonable. Or do the Government prefer to institute some new rule where there is a fixed flat limit, above which anything is luxurious?

The Government originally fixed such a rule and said that a tax allowance would not be given on a vehicle costing over £2,000, whether rented or purchased. They now appear to be trying to climb back to the original, more logical tax principle but, unfortunately, they are doing it in a half-hearted way. The result is neither a Government of austerity nor one of logic. It is lamentable that the Government should manoeuvre their tax rules not in the fiscal interests of the nation but because of the electoral fortunes of the time.

I must return to the question of Schedule A to make it clear that I appreciate that the Chancellor had no choice of action. He was committed by his predecessor, the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), who took the extraordinary step of promising, before Parliament had even considered the matter, let alone pronounced in favour of its abolition, to make the change. The former Chancellor promised that a change would be made and thereby committed the future Chancellor to changing it without being able to consider the matter on its merits or how it would fit into the Budget.

I listened with interest to the comments that have been made about the City and Stamp Duty. I do not react with a hostile reflex to either the City or the Bank of England. I do not dissent from what my hon. Friend the Member for Cardiff, South-East said about the Bank of England's policy in the past. There is no evidence to show that the Bank of England is now behind the Treasury in its economic thinking. If anything, it is rather in advance of it under its latest governor and it now seems to be a modern City institution. The way in which the Government have handled their disastrous stop-go policies may be better known to my hon. Friend the Member for Cardiff, South-East and hon. Members opposite than to me. I do not know what advice they get, but the lamentable economic policies of the Government cannot be supported in any part of the House today.

Some of my hon. Friends are in error in supposing that the Stamp Duty is a sort of useful compromise between having an effective capital gains tax and not having one. I do not believe Stamp Duty to be a satisfactory substitute for an efficient and effective Capital Gains Tax. If Parliament introduced such a gain tax, and not a demagogic one, a more satisfactory situation would be created, for I do not believe that it is to the advantage of any community to make the transfer of assets between one citizen and another a very costly process.

A free market in assets is to the advantage of the community and the amelioration in the Stamp Duty is to be welcomed. It makes these assets more easily exchangeable and helps those who own and want to own such securities. However, this is not one of the great issues of the Bill. To my mind, the great issue is the measures that have been taken for the distressed areas. I do not intend to go into laborious detail on this subject, but I wish to register my firm protest at the ill-thought-out plans for dealing with the ills of the distressed areas. The Government's plan represents a tax concession which goes to make them areas of tax holiday. Such actions are no substitute for the creation of a buoyant economy which might absorb these marginal areas of high unemployment.

It is utterly wrong in principle that we should try to solve the problem of the distressed areas by creating industries in areas where they enjoy fiscal privileges not enjoyed by the rest of the country. I do not think that it will achieve the purpose of the Government or the purpose that we have on this side of the House in wishing to stimulate and help industry in those areas. The truth of the matter is plain. If we have areas where people will not go because it is not particularly profitable to go there, the wrong approach is to stimulate the economy of those areas by relieving them of Income Tax on profits which they will not be able to make. If they could have made profits reasonably well in those areas, people would have gone there. The Economic Secretary, to whose courtesy, perseverance and general help to the House I must also pay tribute, ventured to say that, even if a firm could not earn profits in the development districts, a firm earning profits elsewhere could start in the development districts, knowing that it could get tax relief on its losses in the development districts.

It is an extraordinary inducement to say to a man, "If you go into a development district, you will not make any profits out of it, but you will pay less on the profits that you are making in other areas". That is hardly a logical argument. It does nothing to tackle the real economic problems, individually and locally, on the one hand, and the general economic probem, on the other. The general economic problem is tackled by the general buoyancy of the national economy. Individual and local problems are not tackled in this manner, because the greater part of the tax concession, since it is shown by way of tax on profits, inevitably and logically must go to those already making profits in those areas.

The greater part of the £46 million, or whatever it is going to cost that we are voting, will not go to the "new chaps" who come into the areas. When we come to review this next year, it will be painfully obvious that of the £46 million no more than a fraction can possibly have gone to new entrants in these areas.

A general tax concession, geographically limited, must inevitably go to those who are already making the bulk of the profits in those areas. We are making a needless and irrelevant tax concession to profitable businesses already established in those areas.

For reasons that have been given before, this may have an adverse effect on employment, because we are really encouraging firms to be more capital intensive in already profitable industries in those areas. They will economise labour by buying expensive machinery, at an artificially supported and unrealistic price financed by the Government, and, far from helping those areas, I think that on balance we shall be doing an injury to them. It is a matter of great regret that this ill-thought-out novelty has been introduced which is inevitably bound to fail in achieving the object that we all have in mind.

I therefore register my protest at these three anomalies.

I want to say a final word about the point raised by the hon. Member for Walsall, South about the difficulty which hon. Members have in following the Bill. I think that it is high time that the Government, instead of indulging in this annual orgy of professional incomprehensibility, took some pains in the case of the Finance Bill to inform hon. Members what it is that they are debating. I must confess that some of it is Greek to me, and I am not altogether inexperienced in disentangling some of this legislation. What it must be for some hon. Members without experience to battle with this, I do not know. It is high time that the Government brought in a Finance Bill with a detailed, authoritative, explanatory memorandum so that hon. Members on both sides would know what was happening. I do not dare to say too much about this, but I think that one of the benefits would be that the Ministers would know what it was that they were advocating. It was painfully obvious on more than one occasion that they did not. I am not referring to anyone now sitting on the Treasury Bench.

I shall not say anything more about the general economic policy, which has been more than adequately dealt with by my hon. Friends on the Front Bench, with those remarks I sometimes wholeheartedly agreed. On the question of fiscal policy, I find the Bill a lamentable one in three respects: the abolition of Schedule A; the indefensible attitude in respect of the more expensive motor cars, which can neither be defended on the grounds of austerity, on the one hand, nor logic, on the other; and, above all, I protest against the strangely unwarranted novelty of the creation of areas of fiscal privilege where people pay a lower rate of tax than they do in other areas.

11.46 a.m.

Mr. Maurice Macmillan (Halifax)

I can at least thank the hon. Member for Manchester, Cheetham (Mr. H. Lever) for not joining in the general condemnation of the Stamp Duty. I, too, should not like to let this occasion pass without thanking my right hon. Friend the Chancellor of the Exchequer for making this concession at last. I am quite unrepentant about this, despite the spirited attack made by the hon. Member for Cardiff, South-East (Mr. Callaghan) in his imitation, if I may call it that, of William Jennings Brown. I am not convinced that this concession is in either content or results a sop to the City, and I am grateful to my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) for the defence which he made just now.

My hon. Friend knows that I do not by any means agree in every respect with his ideas of the relative importance of various sections of our economy. In the contributions that I have made to this and other Finance Bills, including an Amendment which I was not fortunate enough to have selected, I have always made an attempt to suggest alterations in our tax system which would improve the position of the earner and the owner vis-à-visthe trader and the dealer. I am on record as being not altogether unsympathetic to some variations of the wealth tax advocated by the hon. Member for Cardiff, South-East.

I would congratulate the Chancellor on the steps he has taken towards a tax reform, although I should be out of order if I regretted that more had not been done in this way. I am grateful to the hon. Member for Cardiff, South-East for encouraging me to express more of my views and to take up more time in Committee in putting my personal ideas on economic problems, and I assure him that I shall in future take full advantage of his advice. Perhaps I should express it as a formal warning to the Treasury Bench. I think that his assessment of the effect on the City of our economic policy and relationship between the demands of the City and the demands of industry was extremely superficial and that it masked the general conflict in our economy between our position as bankers of the sterling area and a trading and exporting country. What he really means is that the burden of financing world trade is becoming increasingly harsh on dollars as well as on sterling. I think that the Leader of the Opposition, in an even more spirited imitation of William Jennings Brown, in New York not long ago made a more accurate and less superficial assessment of the situation than the hon. Member gave very early in the morning the other day and repeated to some extent today.

Mr. Callaghan

If I had gone into the details then, or even this morning, I should have been very much out of order. I shall be delighted to send the hon. Member other comments I have made on this subject at other times.

Mr. Macmillan

I appreciate the hon. Gentleman not wanting to go into more details, but by not doing so he gave a misleading impression to the House of the real criminals in the case.

The Chancellor's greatest contribution in the Budget and the Finance Bill is the admission, as far as I know for the first time, by the Treasury that our expansion should be geared not to the limitations of our current liquid resources but, as in any other ordinary business concern, to our capacity to borrow on our assets. Perhaps he, too, has been reading the speeches of William Jennings Brown.

11.50 a.m.

Mr. Eric Lubbock (Orpington)

The hon. Member for Manchester, Cheetham (Mr. H. Lever) said that it would be very helpful if we had some indication of the meaning of these complicated Clauses which we have been discussing. We have not been very much in the picture when it comes to their meaning. This is particularly true of Case VIII. The hon. Member for Sowerby (Mr. Houghton) said yesterday morning that a booklet should be published under the title, "Case VIII for Tiny Tots". It would be a good thing if such a booklet had been issued before we came to the Finance Bill.

The hon. Member for Hendon, South (Sir H. Lucas-Tooth) raised a question yesterday morning which does not seem to have occurred to anyone until a late stage. It is the effect of Case VIII on local authorities which have a surplus on their housing accounts from time to time. The hon. Member explained that Hitherto, local authorities have been charged Income Tax in respect of excess rental income for their council estates under Case VI of Schedule D. They have also been charged under the same case of Schedule D in respect of other activities, such as the provision of amenities—tennis courts, football and cricket pitches, bathing pools, bowl- ing greens and things of that kind."—[Official Report, 26th June, 1963; Vol. 679, c. 1602.] Up to the present Finance Bill they have been able to offset losses made on games fees against profits on which they were assessed for excess rents.

In reply, the Solicitor-General agreed that the local authorities would lose this concession, which has been worth as much as £40,000 a year to the Borough of Hendon and which has also been extremely important for Orpington Urban District Council. I believe that £150,000 has been saved over the years in Orpington as a result of this concession.

If the Solicitor-General had looked carefully at Clause 15, I think that he would have agreed that the point made by the hon. Member for Hendon, South was valid, because that Clause defines the kind of income which will be assessable under Case VIII as: other receipts arising to a person from, or by virtue of his ownership of an estate or interest in or right over such land or any incorporeal hereditament or incorporeal heritable subject in the United Kingdom… Then paragraph 13 of Schedule 4, which refers to deductions from other payments, says that … where the sum to which a person becomes entitled in the year of assessment is a sum other than the rent payable under a lease there shall be deducted from that sum such amounts (if any) as are expressed to be deductible under the following sub-paragraph… and it goes on to say what type of expenditure can be deducted under Case VIII.

I contend that the lettings of public parks for games purposes fall under this heading. Therefore, the loss on providing these facilities should be allowed to be offset against the excess rentals. It all turns on the question whether fees charged for games facilities come under the heading of payments for the use of land. There is a strong case for contending that they do. If this happens, the loss on games fees can be included in the global Case VIII calculations. Local authorities would then obtain some relief, as they have done hitherto.

It would seem logical that games fees ought to fall under this heading. They are the type of transaction envisaged when Case VIII was originally thought of, and I am sure that it was no one's intention, when doing away with Schedule A, to put a burden on well-managed authorities, as this will do. The facilities offered by local authorities for games are facilities which they are able to offer by reason of their ownership of the land. Therefore, I hope that on reconsideration it will be agreed that both excess rents and games lettings will fall under the new Case VIII and that local authorities will obtain some benefit, as they have done previously.

I should like to ask the Economic Secretary to deal with this point in winding up and also to say whether he does not consider that income from cemeteries should also fall under Case VIII, being income, as it is, derived from the use of land. This is an extremely important matter for the local authorities concerned. I hope that further consideration will be given to the reply which was given to the hon. Member for Hendon, South yesterday morning.

11.56 a.m.

Mr. F. M. Bennett (Torquay)

The most interesting feature of speeches made so far today from the Opposition benches is the apparent unhappiness about the removal of Schedule A. This unhappiness was not found in the earlier stages of the debate. It is true that I have been absent abroad on business during some part of the proceedings on the Finance Bill but I do not remember an occasion when the Opposition went into the Lobby against Schedule A. We on this side of the House will be intrigued to think that it is becoming the official policy of the Labour Party to restore Schedule A. I hope that this will become increasingly clear as the months go by.

Like my hon. Friends, I want to return to the charge about the halving of the Stamp Duty, with particular reference to the debate in the early hours of yesterday morning. Two of my hon. Friends have already made their position clear. I should like to do the same and perhaps give a more concise explanation of why I am wholeheartedly in favour of this reform than it was possible to give early yesterday.

One or two excerpts from the speech of the hon. Member for Cardiff, South-East (Mr. Callaghan) have already been made. I should like to make one more. The hon. Member said: This complaint stems from a small group opposite. … "—[Official Report, 26th June, 1963; Vol. 679, c. 1573.]

Mr. Callaghan

I have no objection to the hon. Member giving more publicity to my remarks, but is it in order, Mr. Speaker, to quote from a speech in the same Session of another hon. Member unless he is a Minister?

Mr. Bennett

Frightened.

Mr. Speaker

I thought that the hon. Member for Torquay (Mr. F. M. Bennett) was picking up some point. There must be some licence in order to reveal the point which is involved. I am advised that is right. The hon. Member cannot quote. He should in some way dodge round quotation.

Mr. Callaghan

I hope that the hon. Member for Torquay will paraphrase in any way he can and repeat it as often as he cares to.

Mr. Bennett

I was aware of the rule and I was encouraged to quote only because, possibly due to inadvertence, you, Mr. Speaker, tolerated earlier quotations from the same speech today and I noticed that the hon. Member for Cardiff, South-East did not then make the objection which he now makes.

Mr. Callaghan

A line must be drawn somewhere.

Mr. Bennett

The line is to be drawn no doubt when the quotation is particularly pertinent.

I would remind the House that the hon. Member alleged perfectly clearly that this reform arose from a small group in my party who had a clear interest in getting the Stamp Duty abolished, an interest which was shared by the Stock Exchange. Those were the actual terms of the criticism. It seemed to mean that a small group of us had a clear interest in this matter. Two of my hon. Friends have made their position clear and I want to do so, and I have been asked by one of my hon. Friends, who is not here because of constituency duties, my hon. Friend the Member for Nottingham, South (Mr. W. Clark), to make his position clear, too.

It will be within the recollection of the House that I welcomed—almost insisted on—being included in this lobby, not from any masochistic feelings about the criticism of the hon. Gentleman, but because I take pride in the fact that over a number of years several of us in public and at other times made it clear that we have regarded a high rate of Stamp Duty as an obstacle to the maximum use of the resources of this country in investment. It is for that reason alone, and if—as it is—to belong to that lobby is to wish to see the interests of the country furthered I am sure that we are all pleased to be criticised by the hon. Gentleman for being in that lobby.

As for the halving of the Stamp Duty, it seems to me that there are three main reasons for it which must have been in the Chancellor's mind. The first relates to domestic investment, to encourage a wider and wider circle of people to invest in stocks and shares and industry in this country. I do not pretend to any expert knowledge of this. My hon. Friend the Member for Halifax (Mr. Maurice Macmillan) knows a great deal more about this, and he has done a great deal of work in this connection during the last few years, and I do not think there is any need for me to add anything to what he has said about it.

The second question, which arose in those early hours, is that of investment in British shares by foreigners. I emphasised during my remarks then that I, like many of us, am in favour of an increase in investment from overseas in this country. Then I was criticised for this by the right hon. Gentleman the Member for Battersea, North (Mr. Jay), who is not here today, on the basis that this was a dangerous process because, far from meaning an increase in our earnings, it might, as dividends from shares are paid overseas out of sterling actually mean a net loss in our earnings. This, of course, is a misleading picture, because in the first place this is capital investment in this country, which is a gain to us in the sense that it adds not only to our direct reserves, and to the confidence of the outside world in this country's expansion, but incidentally enables our own industries to expand with greater reserves of capital than they could get merely from internal sources. At any rate, a lot of these investments are made from blocked sterling, and it is just as well for that blocked sterling to be invested in industry in this country rather than held idle and to contribute to those variations in the value of sterling which caused financial crises in the past when the £ has been under strain.

Mr. H. Lever

Having made a defence of dividends in this country on the grounds of encouraging investment here from overseas—with which I readily agree—would the hon. Gentleman tell the House why he gave support to the Government in not giving fiscal advantage by the opposite process, namely, our investing our capital overseas, where it has not a fiscal advantage, thereby helping to promote financial crises by which we have been bedevilled over recent years?

Mr. Bennett

Certainly. I do not know how far it would be in order to pursue that matter, which is an economic question rather than one of the detail of this Bill, but the reason, surely, for that is, that we are a trading nation, and that applies to our finances as well as to everything else, and we really cannot expect everyone else to invest in our country unless we do something to invest in other countries, if we wish to export more, particularly manufactures, from this country. That is as far as one can go into that field, I think, without being out of order, much as I am tempted to go further.

Under this second heading of investment in England the strangest of all analogies was made by the hon. Member for Cardiff, South-East with Switzerland. I think a correction of what was said must be placed firmly on the record.

The Swiss do not object to investment in Switzerland, nor do they penalise investors. I think the hon. Gentleman with the aspirations he has ought to get straight a fundamental financial matter like this. I will repeat, therefore, what I was attempting to say in the early hours. The only thing the Swiss penalise is the opposite process, leaving one's money idle in a bank, in current account or some other form where it is not invested in Switzerland in industries. If one is prepared to invest in Switzerland one is encouraged in every way, but if one leaves one's money in a bank idle one is penalised—although it is not fair to use the word "penalised", because the truth is that the Swiss are so prosperous that they do not require idle resources of currencies lying idle in banks. The argument is therefore precisely the opposite of what the hon. Gentleman said.

Lastly I come to a point not touched on yesterday morning. I think it is a very important feature not just for investment in England, not just to domestic investment. I will say again what I sought to say yesterday morning.

In recent years, particularly because of the expertise of the City of London, foreigners, for example Americans, who have become increasingly interested in investment overseas, apart from investment in England—I am now referring specifically to investment in Common Market countries—have had a clear choice before them, either to go to a Continental financial centre to do it or to come to London. Because of our particular expertise we have been able to get a certain amount of this business from Americans who wished to invest on the Continent.

There was no possible question of a strain on sterling present or prospective. It is a question of dollars going into other currencies, apart from sterling, anyway. The choice was whether to do it through London or through Continental centres, and the only question which arose here was whether all the benefits which come from these indirect invisible earnings should come to Britain or should go to a Continental centre. There was no question of a choice between British investment and Continental investment. It was a matter of Americans specifically wishing to take up positions on the Continent and whether they would use London or some rival centre to do it.

In these circumstances there has been a certain amount of such method of investment not only, incidentally, by Americans in Europe but, very often, by Europeans who want to invest in America, or elsewhere, and who want to use the City of London so to do. In these cases everything which accrued to us was a net benefit with no possible risks of over-investment by foreigners in the sterling area. Foreigners, when making investment in a third country, were faced with this choice of using England as their medium or not.

Up to now there has been a not inconsiderable disadvantage in their doing it here because of the extra costs involved. One of the Treasury Ministers—I think it was the Economic Secretary—during those early hours, gave the sort of figures involved when an American, say, wanting to invest in France, was choosing whether to do so through Milan or through London. In London it would have cost him 2.8 per cent., in Milan 0.4 per cent.

This is the issue which has not been touched on so far. I have a little knowledge of this subject. I hope that from now on, with the change in the Stamp Duty, there will be a considerable increase in our earnings through facilitating investment through our financial centre through which a large amount, and an increasing amount, of the world's investment can be done with benefits accruing to us and no possible disadvantages whatever.

For this reason, and if this were the only reason, I am particularly happy at what the Chancellor has done by removing—I mean, cutting—the Stamp Duty. The fact that I keep saying "removing" shows how keenly I wish that he had been able to remove it. We must hope for that on a future occasion.

With regard to being a centre for international investments, the third category I mentioned, I suggest that we should not underrate their importance to our industry and other aspects of British financial and industrial activity. Once one gets a foreign businessman used to doing his business deals through London in one field, he usually does them in another field. One finds insurance and shipping matters and actual orders for goods often flowing once one gets an individual used to doing part of his business through London, and that benefits not only the City but the whole of the British economy.

Therefore, I warmly welcome the Chancellor upon a first step—I think there will have to be a second step soon—towards making it even easier for Britain to become once more the leading financial centre for the world.

12.11 p.m.

Mr. Tam Dalyell (West Lothian)

I wish to hark back to a point raised by my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) and myself at 2 o'clock yesterday morning and referred to by my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) and the hon. Member for Orpington (Mr. Lubbock). It concerns the presentation of the work with which we are expected to familiarise ourselves.

It is very easy when arguing for lucid presentation to pick out certain perhaps rather extraordinarily long Clauses, but I wish to take an average Clause. I would refer, for example, to paragraph 7 of the Chancellor's new Schedule, "Allowance of Trading Deductions where Premium Etc. Paid," which we discussed the other night. If I am right—and it is a big "if"—there are in it 11 adverbial clauses, 4 noun clauses and 3 adjectival clauses. This seems to me to be a reasonably fair average of the sort of thing that we have to deal with. I am not criticising the Parliamentary draftsmen, because they are among the ablest people in our country. I do not doubt this; there is no question about it. But, at the same time, is it not important in itself that this kind of legislation should be easy to understand by all hon. Members and those who have to deal with it outside?

Taking the Bill itself, I would refer to Clause 37 (9), which consists of 17 lines. Perhaps I may give a concrete example of how it could be changed. It begins: Where a person (in this subsection referred to as 'the transferee') acquires a mineral asset from another person (in this subsection referred to as 'the transferor')…. Would it not be more lucid to put at the top of the subsection a series of definitions and then to print the heart of the matter?

The objection to this line of arguing is that there is a constant battle between the Inland Revenue and the lawyers of financial houses, who are perhaps chiefly concerned. At the same time, unless legislation is fairly well understood by firms, which are concerned with many of these Clauses, how can one expect them to take advantage of the measures which the Chancellor may introduce?

A further point of some consequence is that many experienced members of the Press who work here will themselves say that they are just lost when it comes to Finance Bill legislation. This in itself is unhealthy.

Therefore, in connection with Questions to be addressed on Thursday next week to the Prime Minister by my hon. Friend the Member for Rotherham (Mr. O'Malley) and myself, I would ask the Minister to have a word with those who are responsible for deciding action on this sort of subject so that we may have a sympathetic answer to our Questions.

Mr. William Yates (The Wrekin)

Would not the hon. Gentleman go one stage further? Is it not time that some of this expertise business of the Committee stage, and of other stages of the Bill if necessary, was taken upstairs? Would he not also ask the Government to examine that?

Mr. Speaker

It is not in order to deal with that subject on the Third Reading of the Finance Bill.

12.15 p.m.

Mr. Graham Page (Crosby)

The hon. Member for West Lothian (Mr. Dalyell) has criticised the complication of some of the Clauses in the Finance Bill. That is very easy criticism. There are always complicated Clauses in any Finance Bill. Other hon. Members have criticised the fact that we received some very long Clauses and Schedules at a very late stage in the progress of the Bill. But this is easy criticism, too.

I should like to put the other view. When the Government come to the House with a Bill already written and refuse to make any alterations to it during its stages and are obstinate when hon. Members put forward recommendations and propose Amendments to make the Bill better, we complain, and we complain bitterly. I do not think we ought to complain when, as occurred in this case, the Government listen to and act upon the speeches made on Second Reading and particularly during the Committee stage. My right hon. and hon. Friends on the Treasury Bench did everything they could to meet the good points made from both sides of the Committee, but it involved rather long new Schedules and the rewriting of a large part of the Bill.

I should like to pay my tribute particularly to my hon. Friends the Financial Secretary and the Economic Secretary to the Treasury and my hon. and learned Friend the Solicitor-General for the way they dealt with the Amendments and not only got our points right but explained our own points to us very clearly.

The hon. Member for Cardiff, South-East (Mr. Callaghan) said that this was not a very exciting Bill, but I think one can call it a major Bill, both politically and fiscally. The hon. Member for Manchester, Cheetham (Mr. H. Lever) put his finger on the three points in respect of which it is a major Bill. Incidentally, it is always delightful to hear the hon. Member for Cheetham, even when he is charming the House for only a few minutes instead of a few hours.

I must say that the hon. Member for Cheetham would not have got away with a speech like that on any other day but a Friday. We on this side of the House are very polite on Friday mornings, and so are his hon. Friends, but I think that had he put forward such extraordinary statements from that side of the House on any other day he would have had a considerable number of stabs in the back from his hon. Friends. I was delighted to hear some of his remarks, and I shall remember to quote them—his criticism of the assistance to development districts, his strictures about the abolition of Schedule A and his praise for the reduction of Stamp Duty on transfers. This came strangely from the mouth of the hon. Gentleman.

Those were, I think, the three major points of the Bill. With regard to Schedule A the hon. Member for Cheetham—I refer again to him because his speech interested me so—said that it was a sound principle of tax law. What on earth is sound or even a matter of principle in taxing a man for using his own property and taxing him on an entirely notional figure with the idea that he might have hired it out for someone else to use? If one has to be logical about that and say that it is a matter of principle, one surely has to go the whole hog and make a true valuation of his property. I would like any hon. Member to think what his constituents might say if, instead of abolishing Schedule A, my right hon. Friend had brought the annual value up to the true value and had said that owner-occupiers would now be taxed on that.

Mr. H. Lever

He should have done.

Mr. Graham Page

The hon. Gentleman will find himself in a very small minority if lie holds that view. After all, this will affect a large body of people whose number over the last few years has grown in proportion to the number of other householders, with the result that a very substantial proportion of householders will welcome the abolition of Schedule A.

I want to call the attention of my hon. Friend the Financial Secretary to what has been happening already as a result of the Bill. Throughout its stages, we have discussed mainly the effect of the abolition of Schedule A on the owners of rented property, and, indeed, that is where the transition is most complicated—from Schedule A to Case VIII.

Incidentally, perhaps I may interpolate here the comment that each year we seem to get a new Case. Next year, I suppose that we shall go one over the VIII, and I am rather nervous as to what Case IX may be. However, we have Case VIII this year and have discussed the transitional stage from Schedule A to that Case, mainly, for the owners of rented property.

We did not spend much time on what was happening with the owner-occupier. Owner-occupiers who paid their Schedule A tax on 1st January last have now been sending in their usual maintenance claims—for the relief on an average of their expenditure over the last five years, including, of course, the last year, 1962–63, in which they may have spent quite a bit of money before they knew that the Chancellor would wholly abolish Schedule A.

In reply, they have received one of the nastiest little notes from the Treasury that I can imagine. It is not even a nice form. It is only a small note. It says that, because of the provisions of the Bill, the owner-occupier will not now be entitled to make any claims for maintenance relief.

Those of us who have studied the Bill knew that, but to those who have not it does seem rather tough on the owner-occupier, who has paid his tax in January, and has spent money since the April before last on his house. Of course, we know that he used to get it back, in the year of assessment, on the average for the five previous years. But the Department might have explained that fact, instead of sending out this nasty little note. I do not know whether other hon. Members have had it sent to them by their constituents, as I have, but I know that some of my constituents are "hopping mad" about it.

They say that it cannot be right for the Government to do this. They have paid their taxes, they say, and want relief in respect of expenditure, but now the Government tell them that they cannot have it. If the note had explained carefully the basis of Schedule A and explained it politely, I do not think that we should have had this resentment. I hope that my hon. Friend the Financial Secretary will look into this and see that the note which will go out in future, telling people that they cannot claim relief, will explain things a little more carefully.

Chapter I of the Bill deals with changes in rates of tax and personal reliefs. This will involve a new P.A.Y.E. Tax Tables which will, I understand, come into operation on 5th July. This means reprinting the P.A.Y.E. Tax Tables, and I understand that they are to be in the old form. My hon. Friend knows that I have put to him in the past two years a very simplified form of P.A.Y.E. Tax Tables, and surely this was the opportunity in which to simplify the present tables, which constitute one of the most difficult forms to work out quickly. One has to turn pages and turn back to columns, and so on. The Bill, having made it necessary to reprint the Tables, provided an excellent opportunity for a simplified form of Tables to be used. This would save millions of pages of printing and thousands of hours of time in working out the figures.

I mentioned that there were three important items in the Bill—all major steps both politically and fiscally. They are Schedule A, capital allowances in development districts and the Stamp Duty relief. My right hon. Friend said today that the effects of the Budget would not be seen for some time, but I assure him that the capital allowances and the discrimination in favour of the development districts have already begun to take effect. Clause 38 has had an immediate result, certainly in my own area on Merseyside, where there have been inquiries from manufacturers about the prospects of development there. It is a subject of the utmost importance.

In dealing with Part IV Stamp Duties, which reduced duties on conveyances and transfer of shares, there emerged from our discussions on the Bill a plea from time to time for the complete abolition of Stamp Duty on these various transactions. It seems to me that we are progressing towards the stage where Stamp Duty on documents of this sort will be an exception. As it is, having abolished the duty on conveyances, up to a fairly high figure, in the Bill, and having reduced it on transfers of shares, it is becoming more and more exceptional on documents.

The Bill confirms Schedule I of the Stamp Act, 1891, except for certain alterations, which gives me the opportunity of saying that the confirmation of that Schedule confirms the collection of the petty imposition of the 2d. receipt stamp. This produces only £1½ million now compared with the £5 million it yielded at one time. But it costs industry and commerce £9½ million a year in labour and stationery to collect that £1½ million for the Treasury. Having got that point in without you interrupting me, Mr. Speaker, I had better sit down again, repeating my tribute to my hon. Friends the Financial and Economic Secretaries and to my hon. and learned Friend the Solicitor-General for the assistance they gave throughout the Bill.

12.30 p.m.

Mr. Brian O'Malley (Rotherham)

I want to support what has been said by my hon. Friend the Member for West Lothian (Mr. Dalyell). When I came here a few months ago as a new Member interested in economic and financial affairs I decided—for this year, at any rate—to make an academic study of the proceedings arising from the Budget and the various stages of the Finance Bill. Although I had had some limited previous experience of reading Bills, including Finance Bills, I found very great difficulty in understanding some of the Clauses and Schedules of this Measure.

Like my hon. Friend, I appreciate the skill of the draftsmen, and the problems involved for the Inland Revenue, and accountants and solicitors of finance companies and other organisations. Therefore, while not going as far as my hon. Friend in asking for the form of Finance Bills to be amended, I would ask the Chancellor—particularly in view of his remarks the other day—whether, with future Finance Bills, detailed explanatory memoranda might be published as White Papers to assist back benchers like myself, with my limited experience, and others with more experience, the better to understand, before coming into the Chamber, just what we are to discuss.

My hon. Friend and I have Questions to the Prime Minister next Thursday to this effect, but I take this opportunity of asking the Chancellor to consider helping us in this way in future years.

12.32 p.m.

Mr. William Yates (The Wrekin)

The hon. Members for Rotherham (Mr. O'Malley) and for West Lothian (Mr. Dalyell) have a point. I join in paying tribute to the Chancellor, the Financial Secretary and the Economic Secretary, first for producing this Bill, and then for piloting it through all the various stages—sometimes to a very latehour—but, having been faced with these Finance Bills now for quite a number of years, I wonder whether it is necessary to have them at all, together with all the hullabaloo of the Budget, all the accompanying paraphernalia and the dislocation of other work.

I could, if I wished, divide the House against this Bill. I shall not do that, but I will lay down certain conditions about the Bill that I want my right hon. Friend to note. First, I do not approve of this protracted method of conducting our Finance Bill work, and I ask him to consult once again those to whom he is responsible for preparing—

Mr. Speaker

Order. One cannot possibly bring within the rules of order relating to the Third Reading of this Bill the entirety of our finance procedure, annuality, and so on.

Mr. Yates

I realised that I was in danger of getting into grave difficulty now to draw attention to the progress of the Bill through its various stages to this Third Reading. However, the Chancellor must already have taken the point made by the two hon. Members to whom I have referred, and all I ask is that, in future, we might have explanatory documents so that we can understand these Measures, and carry out our duties to our constituents.

12.35 p.m.

Mr. Douglas Houghton (Sowerby)

Though I warmly welcome the plea of the hon. Member for The Wrekin (Mr. W. Yates) for enlightenment, explanation and elucidation of this complicated Bill, he has, if I may say so, come into the debate rather late in the day. This plea for greater assistance in dealing with this Finance Bill and similar Measures has been reiterated several times in our debates, and it is noteworthy that it has been reaffirmed by at least three hon. Members today. Indeed, my hon. Friends the Members for West Lothian (Mr. Dalyell) and Rotherham (Mr. O'Malley), both of whom we have welcomed to our debates on this Bill, confined their brief interventions to this very point.

I hope that the Chancellor will have taken note of their remarks. Although it is not in the fashion just now to make rash promises from this side—it is really unnecessary, when a Government are on their way out, to assist matters by making any rash promises about what we will do when we take their place—at least I will say that a Labour Government will certainly assist the House more than it has been assisted on a complicated Bill of this kind. In the middle of the night this week I made another speech on this very question. I said that this was not a local glee club, but the House of Commons, and that the House of Commons should be allowed to do its work intelligently and be given every assistance to do so. I leave the matter there.

The Chancellor spoke of this being a large Bill—a thick document—and I want to speak of its contents from the point of view of administration. Before doing so, however, I want to thank the Chancellor for his own courtesy and help in dealing with this Bill and, of course, most warmly to thank his colleagues on the Treasury Bench, who have worked so hard and have been unfailingly courteous and diligent in their duties.

We should also thank all those who have assisted them—the Inland Revenue, the Customs and Excise, the Parliamen- tary draftsmen, and, indeed, the printers, who have produced the Bill for us this morning in its final form when we were still carving it up only a little more than 24 hours ago. That is a feat of production that private enterprise might one of these days emulate.

The Chancellor has been a most agreeable and modest opponent—so very different from the gentleman named Mr. Cassius Clay, of whom we caught a brief glimpse a few days ago.

When my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said that this has been a dull Bill, I do not think that he meant that it has been lacking in interest or substance. It has not been exciting in a Parliamentary sense, perhaps—we have not had bitter clashes between the two sides on contentious proposals—but that is not surprising. When the Chancellor of the Exchequer of a Conservative Government at last goes our way, who are we to quarrel with him, and make life more difficult for him in our debates on the Bill? I shall say more about that in a moment or two.

There is an enormous amount of work in this Bill, and I think that some processes in connection with tax administration now need serious examination. The earlier part of this Bill, Chapter 1, alters personal allowances on a wide scale, and an almost complete recoding for P.A.Y.E. is necessary as a result of the proposals in this Chapter. Twenty million people who are assessed to tax under P.A.Y.E.—I think that that is roughly the right figure—received coding notices before Christmas telling them what their code number would be for1963–64. The tax deductions which began for this current tax year on 6th April were based on the codings issued to them at the end of last year. The Bill provides for those codings to be changed from the first pay week in July to give effect to the changes in the Bill. This means that since the Chancellor made his announcement of these changes on 9th April, until this week, the Inland Revenue has had to carry out an entire recoding for P.A.Y.E. In other words, it has had to do last year's job all over again.

There is nothing more disheartening than having to do the same job twice. That is what nearly broke our hearts in the debates the other night, when we ploughed through Schedule IV and poured forth our energy, drained our intellects and our application, and then found that we were presented with a revised version and had to start all over again. Some of us rebelled, and I wonder that the Inland Revenue has not rebelled at what it has to do to get the recoding out. Two million hours of extra work have been involved in this, with the employment of extra staff, and so on, and I think that the Chancellor should consider whether, when changes of this kind are introduced, there could be some smoother transition even if it meant using the coding issued at the end of the previous calendar year temporarily to carry on until the changes under the Bill became effective in the first pay week in July. I shall not stay further on that, but it is a big question of administration which I think the Chancellor should consider.

Case VIII of Schedule A is another source of additional work, and I am not at all satisfied that the Inland Revenue is at present equipped to cope with it. No one really knows what is going to come out of Case VIII, or how many problems will arise. Certainly the comparative simplicity of the old Schedule A will be replaced by the examination of individual cases to an extent never necessary before.

The hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) referred to the physical side of the Finance bill—the wear and tear on hon. Members on both sides of the House. We are not complaining of the time which has been given to the consideration of the Bill. The Chancellor has been very accommodating about this, and has provided us with reasonable time in the circumstances. There may be considerable weariness of the flesh. It is tiring if one sits for too long. It is tiring if one stands for too long, and it is certainly tiring to other hon. Members if one speaks for too long. I must be careful not to run into that danger myself, but my enthusiasm for Finance Bills does not wilt on the Third Reading. As I have made clear before, the last opportunity that one has of discussing a Finance Bill on Third Reading is far too good to be missed.

My hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) is a most entertaining nonconformist. I envy the freedom that he has had to speak his mind on Schedule A.

Mr. Graham Page

On a Friday morning.

Mr. Houghton

On any morning. All I can say is that if I had been as free as my hon. Friend has been I should have been here very much earlier, and would have spoken for very much longer and more emphatically on this topic than my hon. Friend has done.

Mr. H. Lever

My hon. Friend's recollection is faulty. I spoke for longer than I ought to have done. I spoke with even greater vigour on this subject and expressed my protests and supported the notional speeches that my hon. Friend would have made.

Mr. Houghton

I had not overlooked that, but on a matter of this kind, upon which one might feel deeply, it is not enough to make one protest. One has to be persistent. One has to drag it in at every conceivable opportunity. After all, the hon. Member for Crosby (Mr. Graham Page) has just thrust into the debate his own passion for the abolition of the Stamp Duty on receipts. Anyway, this is a very late hour at which to indulge in any lamentations, if any remain, about this change.

My hon. Friend the Member for Cardiff, South-East very properly mentioned the likelihood that with the abolition of the tax on the annual value of an owner-occupied house the occupants of tenanted properties who are paying rent will reappraise their position in relation to our taxation system. Indeed, the right hon and learned Member for Wirral (Mr. Selwyn Lloyd) mentioned two years ago, and Lord Amory, as he now is, even before that referred to the logical consequence of the abolition of Schedule A on the owner-occupier and the claim that would be made for some corresponding relief on the tenant. However, events will unfold on this matter.

The hon. Member for Halifax (Mr. Maurice Macmillan) who, if he will forgive a personal reference, seems to be wearing "Liberal" socks this morning, is to speak in the radio programme "The Week in Westminster" tomorrow and I hope that this will not prevent appropriate reference being made to the inspiration which he brought to our debates the other night and again this morning on the question of the removal of Stamp Duty.

The hon. Member for Torquay (Mr. F. M. Bennett) and the hon. Member for Walsall, South seemed to be stunned by something said by my hon. Friend the Member for Cardiff, South-East during the long debate the other night. Both hon. Members seemed to be on the defensive, but the Bill contains, at least in large measure, the concession they wanted. What are they nattering about? Perhaps they feel that my hon. Friend said something about their activities and those of their friends which seems to have produced a sharp reaction, but the Chancellor of the Exchequer has in large degree met the insistent claim that has been made on him in this regard.

The hon. Member for Torquay made a Freudian slip when he spoke of the removal of this duty when, of course, it has been removed only as to a half. He said that it just showed how strongly he felt about getting rid of it altogether. My hon. Friend the Member for Cheetham said that the abolition of Schedule A on the owner-occupier was a very high price to pay for the arrival of the hon. Member for Orpington (Mr. Lubbock). I think that it would have been truer to say that this was the cost of the efforts being made by the Government to get rid of the hon. Member for Orpington. That is the cost of the abolition of Schedule A. I hope that the country will take note of the price—£50 million a year in tax relief—put on the head of the hon. Member for Orpington. Obviously he could not bear such a heavy load of responsibility because he has left the Chamber temporarily to recover from his own very pointed but, nevertheless, complicated contribution to our debate.

The hon. Member for Torquay made an impertinent observation, saying that our reserve about the abolition of Schedule A on the owner-occupier was an indication that the Labour Party would come out in favour of the restoration of the tax which the Chancellor of the Exchequer is removing in this Bill. The hon. Member has no justification for making any such suggestion, and I must refute it straight away.

I must not trespass on the time of the House for very much longer, but may I be allowed to say this. The hon. Member for Crosby said that this is a major Bill. It is a major Bill. I doubt whether it is sufficiently realised that this is the first Finance Bill for many years which provides for what is commonly called deficit financing of the Budget. That makes it a major Bill. I think that it is the first time since the war that a Finance Bill has been introduced the financial consequence of which is known to be, and indeed is designed to produce, a deficit above the line. We on this side believe that in present circumstances a Bill of this kind which does this is justified. As the Chancellor of the Exchequer said, the Bill opens up the possibilities of economic expansion and the encouragement given by tax adjustments and concessions which are to come partly out of revenue and partly out of borrowing.

During an earlier debate when I was moving a new Clause asking for further reduction of taxation, the hon. Member for Ilford, South (Mr. Cooper) asked "How is this money to be found?" That is a question which we have heard many times. I replied that it would obviously add to the borrowing requirement under the Bill. So then he asked, "Are we no longer to go on paying our way?" The truth is that the express design of the Bill is that we should not contain our expenditure this year wholly within current revenue. The Chancellor of the Exchequer made that clear this morning.

Borrowing in this context is not a profligate policy. It is a means of channelling some of the savings of the people in directions which the Chancellor of the Exchequer judges will promote his economic aims. This is, perhaps, not an occasion when money should fructify in the pockets of the people so much as it should fructify in the hands of the Chancellor of the Exchequer, who has what he conceives to be a proper use for it. The Bill is one means of bringing that about.

The financial consequences of the Bill are tax reliefs of £270 million, but, after allowance is made for a cut in taxation of £270 million, the amount of taxation which, on his estimates, the Chancellor of the Exchequer will get will be up by £45 million more than in the last financial year. If expenditure were not rising so sharply at the same time, he could have estimated for a substantial surplus at the end of the year, notwithstanding that he is giving tax reliefs of this magnitude, but, as expenditure is to rise this year by £490 million, the Chancellor has to make provision for a deficit of £90 million above the line and provide for his below-the-line requirements as well as some of the expenditure on the Consolidated Fund and the supply services above the line by borrowing.

That is what is called deficit financing, and some people will regard this as rake's progress. They will ask, "Are not we living within our means?" The question is, what are our means? The country's means go far wider than the simple revenue return under this Bill. Many people believe that tax reductions are synonymous with a lower yield from taxation. They are not. That is not true. As I said in other circumstances, we could have had tax reductions together with a rise in revenue and an increase in expenditure. Had not the expenditure risen so sharply, deliberately and with a purpose, this time, that would have been the outcome of this Bill and this year's Budget. The Chancellor would have finished on the right side, notwithstanding the slash in taxation which the Bill envisages.

I am sure that the Chancellor of the Exchequer would have been far happier—so would we all—if what he is doing this year could have been financed from a more buoyant economy and a more buoyant revenue. He is having to provide for the borrowing requirement to meet his tax reliefs which have an economic purpose which he feels it imperative he must fulfil.

If one looks back over previous Finance Bills and Budgets, one sees how consistently it has been possible to make tax reliefs and at the same time to have the benefit of rising revenue out of which additional expenditure can be met and still have a surplus at the end of the year. I wish that this point were better understood. If it were, we should not have so many Tories saying at different times, "Where is the money coming from? How will you pay for it?" They were saying that in 1959. Only a few weeks before, the Chancellor of the Exchequer had cut taxation by over £300 million. He was providing for a rise in expenditure and still budgeting for a surplus. That kind of paradoxical approach to our budgetary affairs is very difficult for people to grasp.

Incidentally, we are talking about reductions in taxation. For the record, may I be permitted to amend a reference to a speech which I made the other night in which I am reported to have said that the Chancellor had reduced taxation in 1952 by only £81 million. I hope that I have never referred to £81 million as "only", whether it be a reduction or an increase in taxation. It should be, of course, by £8½ million. This is in column 1350 of Hansard. I should not like it to go out that I cannot distinguish between £81 million and £8½ million. My reputation as a statistician is not as good as all that, that I can take a risk with it.

To conclude, I think it worth while just bringing to the notice of the Chancellor, while he is here, one aspect of the Bill which I am sure must be causing him considerable concern, and that is whether it is going to do the economic job which he has designed it to do, and, secondly, whether it is going to have in one field at any rate—the trade union field—the effect that he hopes it will have. We all read in the Guardian on Monday, 24th June, with considerable interest and concern, an article by Mr. John Cole, the labour correspondent, in which it is reported that the Chancellor, rarely I am sure, was impatient at a meeting of the National Economic Development Council and that he made an acid remark. This is out of character, and the Chancellor must have been feeling something if this happens to be true. The point is that it is reported that the Chancellor pointed to his Budget, which has been tacitly recognised in the trade unions as the kind likely to create a climate for restraint in wage claims, and said pointedly that it is time for someone else to act.

This Bill contains a great many things which the Trades Union Congress had urged on the Chancellor and which we on this side of the House had urged on him, and it would be a comfort if we could have some assurances that the Bill is going to achieve in the several directions of importance the purpose which the Chancellor has in mind.

That is the end of what I want to say, and once more I wish, on behalf of my hon. Friends and myself, to thank the Chancellor and the Treasury Ministers for all their help during our long and at times difficult debates.

1.4 p.m.

The Financial Secretary to the Treasury (Mr. Anthony Barber)

In reply to this vote of thanks on behalf of my hon. Friends and myself, may I begin by saying how very much we, in turn, are grateful to the hon. Gentleman the Member for Sowerby (Mr. Houghton) and to his colleagues? Indeed, I think at the outset, when I moved the Second Reading of the Bill, I expressed some gratitude, because, having worked with the hon. Gentleman and his hon. Friends in previous years, I knew that this year also we should receive the same courtesy and knowledge from a good many of them as we have in the past. I think I can say without discourtesy to another place that this is, for all practical purposes, the end of another Finance Bill and to me falls the lot of burying it, but, like another funeral orator, I hope that I may be permitted a word of praise.

The Bill embodies the Budget proposals of my right hon. Friend, and I must say that although I have not been in this House for as long as others, some 12 years or so, I cannot recall another Budget the basic principles of which evoked less criticism than this one. I think it is true to say that since 3rd April when the Budget was announced it has, in the view of most commentators, justified the various measures which my right hon. Friend advocated and which are contained in the Bill.

Mr. O'Malley

Surely the hon. Gentleman and his right hon. Friend the Chancellor will recognise that their confidence of an expansion arising from this Budget in at least one section of industry is not well founded. If one looks at the company returns and comments of the steel people and recognises that the heavy steel industry is still running at only about 76 per cent, of capacity, one sums up by saying that the view of the people in the steel industry is that there is very little prospect of an upturn in their orders during the rest of this year.

Mr. Deputy-Speaker (Sir William Anstruther-Gray)

Order. I am sorry to interrupt the hon. Member, but he will appreciate that he is not entitled to make a second speech. One is all that can be allowed.

Mr. O'Malley

I apologise, Mr. Deputy-Speaker. The point I was trying to make was that the confidence of the Chancellor is not being fulfilled and that we are not seeing any improvement in the heavy steel industry as a result of this Budget.

Mr. Barber

Of course, it is perfectly true to say, as my righthon. Friend has said on a number of occasions recently, that all the sections of the proposals which he announced on 3rd April have not yet been effective. The P.A.Y.E. reductions do not come into operation until the beginning of next month. As one of myhon. Friends pointed out, the provisions for accelerated depreciation for those engaged in capital development will have a more gradual effect. But I think one can say with some confidence that so far the proposals of my right hon. Friend are working out pretty satisfactorily. One has only to look at the unemployment figures to gain some satisfaction, and to see what is happening.

My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) said that the better the Bill, the less need to talk about it. That is an observation that may apply to some more of my hon. Friends, but, unfortunately, it does not seem to apply to my hon. Friend the Economic Secretary and myself.

The hon. Member for Cardiff, South-East (Mr. Callaghan) stated that this Budget curiously embodied a reversal of last year's policy and said that we were now back to where we were. Perhaps I might make two observations to him. If it is accepted, and, indeed, I know that it is by the hon. Gentleman and his hon. Friends, that the Budget should be used as an instrument of economic policy, then it must follow that what is appropriate for one year is not necessarily appropriate for another. Last year's Budget is not in the scope of this Bill, but I will not refer to it. However, as far as this year's proposals are concerned, the fact is that, in the words of one of my hon. Friends a few minutes ago, this is a good Bill and appropriate to present circumstances.

The hon. Gentleman went on to make once again some most disparaging remarks about the City of London. This is beginning to become common form. One might have thought, and I say this with respect, listening to the hon. Gentleman, that the strength of sterling and sound monetary policy are matters of concern only to the City of London. I must say that I agree with my hon. Friend the Member for Halifax (Mr. Maurice Macmillan) that the hon. Gentleman's approach to the affairs of the City seem to be superficial in the extreme. Certainly, if his approach be taken at its face value, then the arrival of a Labour Government would be followed by rip-roaring inflation.

To the hon. Member for Manchester, Cheetham (Mr. H. Lever) I offer my sincere and genuine gratitude, gratitude for making a speech much shorter than I anticipated. His views against the abolition of Schedule A and fiscal discrimination in favour of areas of high persistent unemployment are by now well known to the House, although not, perhaps, quite so well understood.

My hon. Friend the Member for Crosby (Mr. Graham Page) referred to a number of important questions of principle in the Bill, and I know that he will not expect me to go over the ground again, but I should like to say three things to him. On the question of alteration of the layout of the P.A.Y.E. tax tables, I have written to him and explained why, in our view, it would not be wise to change them at this time. I assure my hon. Friend that the Inland Revenue has not written off the proposals which he sent to me.

Secondly, I have not myself seen the Inland Revenue note to which he referred which explains why a maintenance claim cannot be allowed for an owner-occupier in view of the abolition of Schedule A. In view of what he said, I will look into this immediately and see whether any change is desirable.

I take note of the point my hon. Friend raised about the Stamp Duty on receipts, a point which was contained in an Amendment which was not selected and which is not within the scope of the Bill.

Every year the exhilaration of Budget Day slowly gives way to a mood of grim determination and, I must frankly admit, sometimes dark despair when we sit in the Treasury with our advisers and struggle to translate the poetry of the Budget proposals into the prose of the Finance Bill. This year one can say without any qualification that the House of Commons has played a larger part than usual in shaping the Bill. I reminded the House when I moved Second Reading seven weeks ago that nineteen Clauses and several Schedules were needed to get rid of Schedule A. In the course of the last few weeks, as I have done my best to explain some of the Clauses and the Schedules, I have realised why it was necessary to deal with the matter in this way. I hope that the House will not take advantage of a confession if I say now at this late hour that I am already beginning to forget why they are necessary.

One hon. Member referred to the drafting of the Bill and seemed to think that there was cause for some complaint in the fact that in a number of respects we had had in the course of the passage of the Bill to alter the wording and make minor drafting Amendments. I can only tell the hon. Gentleman that at that moment my right hon. Friend the Chancellor of the Exchequer whispered to me and said, "The truth is that the Parliamentary draftsmen have had an appallingly difficult task and deserve our gratitude". This is so. I admit frankly that I have some sympathy with the hon. Members for West Lothian (Mr. Dalyell), Rotherham (Mr. O'Malley) and one or two others, who pointed out, fairly, that some of the provisions of the Bill are extremely difficult to understand. This is another point. The trouble is that one tries to cover every conceivable eventuality and circumstance which might be relevant, so as to avoid misunderstanding and litigation at a later stage. Further, we in this country do our best to be scrupulously fair as between one taxpayer and another. It is, in a way, this objective of perfectionism which leads to the complexity.

I join the hon. Member for Sowerby in expressing gratitude to all those who have worked unceasingly behind the scenes. I was very pleased that he reminded the House of the enormous amount of work which is consequential upon my right hon. Friend's proposals, work not only at the Inland Revenue headquarters and at the Treasury but work which goes on right down to the tax offices themselves.

Nobody will deny that as a result of its passage through the House the Bill has been much improved. I agree with my hon. Friend the Member for Crosby that the fact that so many changes have been made is not so much a reflection on the preparation of the original version of the Bill as a tribute to the effective working of the House of Commons and, I might say also, to the public-spirited approach of the professional bodies. It is a significant fact that more than two-thirds of the 99 Government Amendments which we debated earlier this week on Report were tabled in response to points raised either by right hon. or hon. Members or by the various professional bodies. Let no one say that in legislation concerning finance this House acts as a mere rubber stamp, although, as my hon. Friend the Member of The Wrekin (Mr. W. Yates) has now left, I have my hopes that it is just possible that the Third Reading of the Bill will be unopposed.

Mr. Lubbock

Would the hon. Gentleman care to deal with the point I raised about the interpretation of Clause 15(1,c) in its application to local authority receipts from games fees?

Mr. Barber

I took note of what the hon. Gentleman said. This is a matter to which my hon. Friend the Solicitor-General referred the other night when it was raised by my hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth). I have taken the further point the hon. Gentleman raised this morning. I do not think that the Third Reading of the Bill is in any event an appropriate moment for me to go into such details. A second reason I can give the hon. Gentleman for not going into them now is that I could not do it off the cuff. A third reason is that it is a quarter-past one. I am not being too light-hearted about this and I can assure the hon. Gentleman that I will look very carefully again at what he said and write to him and do my best to explain fully what the present position is.

Question put and agreed to.

Bill accordingly read the Third time and passed.