HC Deb 30 June 1964 vol 697 cc1249-76

Notwithstanding subsection (1) of section 22 of the Finance Act 1961, annuities payable under the Federal German Compensation Law for Public Service (B.W.G. öD) shall not be regarded as income for any income tax purposes, provided that any such annuity has been awarded and is paid on condition that the recipient thereof has renounced such further or other claim or claims as he might otherwise have possessed for tax-free compensation under BEG (Federal Compensation Law) for racial persecution, and such exemption shall operate retrospectively from the date of the granting of such annuities.—[Mr. Gurden.]

Brought up, and read the First time.

Mr. Harold Garden (Birmingham, Selly Oak)

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

I should perhaps apologise for repetition. This new Clause is exactly the same as the one which I proposed during the Committee stage. I should also apologise for adducing a considerable amount of new argument in addition to that which appeared in column 1677 onwards of the OFFICIAL REPORT for 18th June, but for the benefit of those who were not present on that occasion perhaps I should repeat some of the things which I said then.

The argument was that a taxpayer was paying tax on compensation which was paid to a Czechoslovakian by the German Government for Nazi persecution. This constituent of mine suffered the loss of all his goods and chattels in Czechoslovakia and lost the whole of his family, numbering 60 people, if one takes in second cousins and the like. The only survivors were Mr. Kollmann, my constituent, and his aunt.

The Germans ultimately agreed compensation, but would not pay it to him. In the final analysis they said, "We are prepared to give you the money, but it will be paid by way of annuity. It suits us better". There was a court sitting to decide these matters, but my constituent was not invited to it to put his case. This was simply imposed on him. He could have his compensation by annuity or not at all. He therefore had to sign saying that he would accept the annuity as compensation for the loss which had been inflicted on his family and himself by Nazi persecution.

Mr. Arthur Lewis (West Ham, North)

And there were others.

Mr. Gurden

Mr. Kollmann—and I believe that there are others in this country and in other countries in a similar position—had compensation given to him by way of annuity instead of a straight payment. There is no difference in the result. The money would have been paid just the same.

9.15 p.m.

Our Government, in consultation with the German and I believe other Governments, afterwards agreed that there should be tax relief, and indeed no tax charge, on compensation paid for Nazi persecution. This is quite fair because this was compensation for the loss of capital goods. These were physical things, not an earned income. There is nothing of this in dispute, but just because this particular compensation was paid by way of annuity the Income Tax remains to be paid on it, unless something is done tonight to prevent it.

This is a gross injustice. Just because the German Government have not done the right thing is no reason why the British Government should extract money from these people who have suffered so much. Surely they have suffered enough already. Earlier today we discussed what should be or should not be taxed, but I should have thought that there was no political argument here and that all people should now be agreed that compensation paid by the German Government to anybody should not be taxed. I am sure that the British taxpayer would wish to be relieved of this responsibility.

I do not want to repeat the arguments which were put forward in the earlier discussion of this matter. On that occasion my right hon. Friend the Chief Secretary to the Treasury said that it had been agreed between the British and German Governments that if the compensation was admitted there would be no tax charges, but just because this compensation was paid as an annuity by quarterly cheque it is said that it must be taxed if the principle agreed upon is to be maintained. I should have thought that my Amendment was an admissible Amendment, still upholding the principle which was agreed upon between the Governments at that time. In spite of what my right hon. Friend has said, I contend that this slight Amendment, to apply solely to those who suffered Nazi persecution, is well within the limits laid down.

I still maintain that we cannot rely on the German Government to adjust this matter. Efforts have been made to persuade them to transform this payment from an annuity into straight compensation. They will not do this, or at least they have indicated that they are not interested. They have nothing to gain or to lose either way, and I maintain that it is for our Government to make this slight amendment to the law. No other annuity would be free of taxation as a result of this Amendment.

I agree that a genuine annuity might be taxable, but this income was not generated in England. The money comes from Germany. It is nothing to which the taxpayers here are entitled. There is no benefit that they wish to have from it. The amount involved is very small. At a guess, I suppose that a few hundred £s a year would settle the bill. The taxpayers would not be robbed by the slight adjustment which I propose.

The hon. Member for Sowerby (Mr. Houghton) and I have discussed the case and neither of us sees any reason why the Clause should not be accepted. This is not a political matter. In view of everything which has taken place with German compensation, at least we should complete the matter in this way. If we pass the Clause, everybody who receives compensation for what the Germans did will receive his just reward without being taxed upon it.

Mr. Houghton

I am sure that grievous wrong is being done in this case. Had I been able to stay after a very late hour during the Committee stage, I would have given to the hon. Member for Birmingham, Selly Oak (Mr. Gurden) the support that I shall give him now. I am glad that the new Clause has been called on Report, because it was inadequately considered when it came before the Committee. I have studied the case with great care and, as the hon. Member for Selly Oak knows, I have had direct voluminous correspondence with his constituent, with the hon. Member's knowledge and consent.

It will be worth while for the House to spend a few minutes to consider this man's case, because it is a most moving one. This young man was 23 years of age, working in a public department in Prague, when the Nazis overran Czechoslovakia. He is not a German; he is a Czech. By the time that Czechoslovakia was overrun, he had served as an assistant clerk in the first health insurance institution for commercial and private employees for exactly two years and five months only. The significance of that will be clear to the House presently.

This man's family was destroyed by the Nazis. His mother, his brother and his sister were all murdered in concentration camps. Their property was taken away. Other members of the family were murdered, too. The man has come to this country and has married an English girl and he lives in the constituency of the hon. Member for Selly Oak. He is an honourable and, I am sure, valued member of the community. This is now his land of adoption. For these matters to be kept alive in his mind after this time must create unbelievable anguish when he reflects upon what has happened to his family. For 16 years he has been battling with the German authorities to get some compensation for the grievous, irreparable damage done to his family and himself during that time.

There appear to be two schemes of compensation under which the Federal Government can make grants or award annuities for losses and damage which they admit should be compensated in this form. They are both referred to in the new Clause, and if there are any defects in the Clause, I must accept responsibility for them. The first scheme is the Federal German Compensation Law for Public Service. It gives restitution for loss of employment and loss of pension rights, which takes the form of annuities to replace the security rights or superannuation rights which individuals had and lost under Nazi rule. Since they are a replacement of income which would otherwise be taxable under the German Federal law, compensation payments under the first named scheme—which for short is called B.W.G. öD—are taxable, and it seems on the face of it that that is not an unreasonable position for payments of this kind. The other scheme is the Federal Compensation Law—BEG for short—which is compensation for the destruction of families, for the pain and the anguish, and possibly also for the loss of possessions and all that the imagination can grasp, if it can grasp in this terrifying situation.

After a very long time, the German Government apparently agreed to pay compensation, but not under the Federal Compensation Law, the scheme which, on the face of it, should have applied to this claim. Surprisingly enough, they awarded the compensation under the first of the schemes that I mentioned, the Federal Gorman Compensation Law for Public Service.

I now come back to the public service which this man had rendered, which was two years and five months in that Government Department in Prague. One would wonder what compensation would normally be payable for a man who lost his job at the age of 23 after having been in it for exactly two years and five months. Yet this man has been awarded an annuity of £30 a month. Clearly, this annuity cannot be compensation for the loss of a job at 23 years of age after less than two and a half years' service. What, then, is it for? It is for the claim which should have been admitted under the other scheme. One can then say that £30 a month is probably small enough for that. It might be too much for the loss of the man's job at the time, but under the second heading, involving family possessions worth, so Mr. Kollmann estimates, about £37,000 in prewar values, £30 a month is small enough compensation for that.

The dilemma of the Chancellor of the Exchequer in this matter is that at the time we passed the alteration to the Income Tax law in 1961 the Chancellor thought, and the House believed, that we had found the simplest and clearest way out of the dilemma which had been before the House on several occasions before the law was actually changed.

9.30 p.m.

If hon. Members look at Section 22 of the Finance Act, 1961, they will see what a simple remedy was prescribed. It was that if the Germans exempted this from their Federal Income Tax law we would also exempt it from ours. The Section does not go into the question of what scheme the compensation is paid under. No scheme is mentioned. The declaration is there—"if the Federal Government exempt it, we will follow suit".

That is how the matter was left and it seemed satisfactory enough at the time. Now we see that, in this case, it has not proved satisfactory. The hon. Member for Selly Oak says that there are a number of cases. I have had only one drawn to my attention, but that does not mean there are not more. This is a grievous problem affecting a very few people.

In our debate in Committee, the Chief Secretary to the Treasury suggested that if the Germans would change the classification of the award and put it under the Federal Compensation Law, exempting it from tax, our remedy would be simple. The case would then come within Section 22. Mr. Kollmann has been back to the Federal Government to ask them to do this. They say that no exception can be made in this case.

One wonders why it was that the Federal Government made an award under a scheme which seems inappropriate to the claim that Mr. Kollmann made, on condition that he surrendered all claims under the scheme against which he did claim. Why did they get him to sign away his claim under the Federal Compensation Law and give him an annuity under the Federal German Compensation Law for Public Service, in which he scarcely served and which is certainly not appropriate to the annuity of £30 a month? That puzzles me and I do not know the explanation. If the Federal Government could be prevailed upon to change this classification, clearly it would satisfy the requirements of Section 22 but so far they have refused to do so.

Mr. Gurden

Every effort has been made to persuade the German Government to explain why they did this. They have all failed. The Federal Government have no reasons. This was simply done in a court of law without my constituent having an opportunity to be there.

Mr. Houghton

That confirms what Mr. Kollmann told me, which was that the reply he received from the Federal authorities was brief and said that it could not be done. No explanation was offered. It seems strange that he had to sign away his rights under the scheme appropriate to his claim by a declaration on oath, made in this country, which was a firm legal renunciation of his rights under the Federal Compensation Law, for the return of an annuity of £30 a month under a scheme against which he had no valid claim.

What are we to do about it? The Federal authorities refuse to change the classification. Are we then to stand by the literal terms of Section 22 and say to Mr. Kollmann, "Bad luck"? I do not think that the House can leave the matter at that and I beseech the Financial Secretary to take it most seriously. The emotions and feelings of the House are deeply aroused on matters of this kind. We want to see an end of such cases because we do not want individual anxiety to be prolonged and a condition of disputation and unhappiness all round.

It was suggested in Committee—and this attracted me at first sight—that the Chancellor of the Exchequer might make this an extra-statutory concession. Could he not issue a direction to the Inland Revenue under the Income Tax Act? I do not think that the Comptroller and Auditor General would take serious exception to that. I can offer the suggestion only with some hesitation, because I know how reluctant—rightly so—the Chancellor of the Exchequer and the Inland Revenue are to tamper with the law in individual cases, however sympathetic towards them they are.

However, surely the law can be bent or changed, one of the two. If the Chancellor of the Exchequer cannot bend the law, I beseech the House to change it, and here is the opportunity. If I may say so with great respect to the hon. Member for Selly Oak, he has been too mild about it. He should have been battling with vigour and determination to see this injustice remedied. I am trying to add something to the representations which he has made over recent months with moderation and with courtesy and with all the qualities which we know the hon. Member to possess. Now he has passed the matter to the House and we have the responsibility of deciding what we shall do with his constituent's grievance, because it is a grievance.

Mr. Kollmann has taken the proper steps open to him under the Income Tax Act. He has appeared before the Commissioners, perhaps little knowing that the case was bound to go against him under the provisions of Section 22 of the 1961 Act. So he lost his case and the assessments over a number of years were confirmed. The total amount of tax which he has now to pay on the annuities which have been granted to him must seem like squeezing the very blood out of him at this stage.

I therefore hope that it will be possible for the Financial Secretary to offer some comfort and reassurance to the House, to the hon. Member and to his constituent, and to say that an effort will be made to find some way out of this difficulty and that if the German Government—and we know what problems it has—does not feel able to adjust this matter to facilitate the exemption of this annuity under our own Income Tax law, in these special circumstances we should exempt it ourselves in the interests of justice. No valid explanation has been given by the Federal German authorities to show why they have compensated Mr. Kollmann under a taxable scheme when his claims were under a non-taxable scheme.

I sincerely trust that this time we shall hear something more favourable than we heard last time. If we do not, I hope that the House will register its view.

Mr. Anthony Fell (Yarmouth)

I congratulate my hon. Friend the Member for Birmingham, Selly Oak (Mr. Gurden) on raising this matter. I am sure that the hon. Member for Sowerby (Mr. Houghton) did not mean to imply that my hon. Friend had not battled. Had he not been battling, he would not have gone to the hon. Member for Sowerby.

This is a matter which the House takes most seriously, and which is way above partisanship of any sort. When one considers that this man was a Czechoslovak and when one considers that Britain, together with certain other European nations, could hardly opt out of any responsibility for the fate of Czechoslovakia in those dreadful years, in a case like this we have to use not only humanity, but common sense and conscience. Just because it is difficult is no argument for not doing something about it.

I am certain that my hon. Friend, who is as humane a man as I know, has been seeking ways to put this right. I hope that he has succeeded and that he will not put us in a difficult position over this case. I say that because some of us would be in an extremely difficult position. I hope that something will be done to help my hon. Friend.

Mr. Green

My hon. Friend the Member for Birmingham, Selly Oak (Mr. Gurden) has pursued this matter with characteristic persistence, and with great courtesy, too. I know that he has the sympathy of everybody who thinks about this matter at all.

The hon. Member for Sowerby (Mr. Houghton) put his case with his usual steam. Obviously this is a very difficult matter which commands, and must command, a great deal of sympathy for the person involved.

Let me remake the points which have been made already. There is no quarrel that the 1961 Agreement was an intelligent, sensible one, and that in general terms it was all right. I think that my hon. Friend agrees with that. There is, further, no question of compensation that is received in a taxable form being subject to double taxation. What does arise is the strong suggestion—and I hope that I may be pardoned for saying that it is no more than a strong suggestion, because I am not in a position to judge it here and now, though my hon. Friend believes that it is more than a suggestion and considers it to be a fact—that this man has been awarded the wrong kind of compensation. This is where our dilemma arises.

I am not able to say here and now—I wish that I could—that this man has been awarded the wrong compensation. Although the hon. Gentleman has studied the case in great detail, and would go into the lists to say so, I do not think that the hon. Member for Sowerby could assert that this man was paid the wrong kind of compensation. The hon. Gentleman is able to say that there is a strong supposition that he was, as he told the House tonight and gave the reasons for saying so.

Mr. Houghton

I think that the supposition is strengthened by the fact that before they would compensate him under the wrong scheme they asked him to sign away his rights under the right scheme.

Mr. Green

I know that the hon. Gentleman will forgive me if I say that I cannot comment on that. I am certain that I would be wrong if I did. It is a strong supposition. I am certain that we shall get into great difficulties if I start discussing that particular merit, or lack of merit, because I do not have the detailed evidence before me. Nobody has it at this moment. I am not trying to evade the issue. I do not want to argue a case which it is not within my capacity to argue at this moment. I believe that we shall get into trouble if we go about it that way.

The problem here is that if we changed the law unilaterally in this case, I do not know whether it would upset other people who have also accepted compensation which is taxable. They would be able to say, quite rightly, that if they had claimed in the wrong way off the German Government, then the law of this country unilaterally could put them right too, and give them tax-free compensation whether or not their cases were arguable. This is the difficulty that confronts my right hon. Friend the Chancellor in his examination of the Clause.

9.45 p.m.

Mr. Gurden

I am quite sure that my hon. Friend has overlooked the fact that the Clause provides that the recipient thereof has renounced such further or other claim or claims as he might otherwise have possessed for tax-free compensation … It would be an extraordinary thing if it turned out that a mass of similar cases had not come to light.

Mr. Green

That is not the point. Before the Clause appeared on the Order Paper people had acted in a certain way. If we passed the Clause would not they wish to have acted in a way that would allow them to take advantage of it? That would then be their grievance. That is where the anomaly and the difficulty arises. If this were not so I imagine that in this case the difficulty would not exist, and we should not have this argument of deep pathos and real difficulty.

The offer made to my hon. Friend is that if he will see my right hon. Friend the Chief Secretary and have a talk with him about the matter at least the possibility is posed—which seems to me to be well worth considering before we create an anomaly in our own otherwise quite satisfactory law—that it may be possible to approach the German Government to get the fault righted where it is so strongly suggested that the fault lies, namely, the German judgment of the kind of compensation which should have been awarded.

I invite the House to see whether we cannot tackle the problem from that angle. I appreciate the point made about delay, but I am sure that it will be more satisfactory to tackle the matter in that way than to create an anomaly in what is generally accepted to be our good law. I would rather my right hon. Friend talked on this basis, so that we could see what could be done.

Mr. Norman Dodds (Erith and Crayford)

In view of the fact that this is a scandalous injustice, and that it creates a dilemma, why have not the Government already made these representations? If they have, what was the result? Why have not they done this already?

Mr. Green

The individual has made his own representations, as I understand it from my hon. Friend, and has not been successful.

Mr. Dodds

It should be for the Government.

Mr. Green

I am not too sure that the hon. Member's intervention is particularly helpful at the moment. The offer is made for my hon. Friend to talk to my right hon. Friend the Chief Secretary in order to see whether we can advance the matter further in Germany, which seems to be the proper place to do so. I invite my hon. Friend to proceed in that way first.

I agree that this is a very difficult matter, and that it arouses great sympathy. I hope that we may have another go at it on the terms that I have suggested, rather than go to the length of creating an anomaly in our own law, the repercussions of which I cannot estimate. They may be very small, but they may be quite large. I realise that strong emotions are involved here, and I am trying not to stir them up wrongly. I am trying to offer a way of tackling the problem which I believe is a better way. That is the only opinion that I can give to the House with any honesty.

The matter is in the hands of the House, however, and I am not pretending that a great issue is involved—but I believe that if we accepted the Clause we might be doing some damage that could be avoided. I hope that my hon. Friend will accept the offer that I have made.

Mr. A. Lewis

The suggestion made by the Minister is admirable, but in view of the fact that this was discussed in Committee he must have known for some time that a new Clause had been tabled. What approaches have the Government made during the weeks since the discussion in Committee? Can the Minister say when he made an approach and what was the view of the Federal German Government? What further steps does he propose to take if, as would appear to be the case, the Federal German Government will not act?

Mr. Green

The invitation to my hon. Friend was that he should talk to my right hon. Friend the Chief Secretary on this matter. That invitation was made during the Committee stage. I am not directly involved in this, at least not at the moment, but if I understand aright that meeting has not yet taken place. I hope that it may take place very quickly. Until it does, I think that it would be difficult for any further action to be taken.

Mr. David Weitzman (Stoke Newington and Hackney, North)

I find the attitude of the Government, as revealed in the answer by the Financial Secretary, an extraordinary one. The Minister recognises that an injustice has been done. Apparently it is thought that the remedy is to go to the Federal German Government and to say, "Please help us by putting this right. If you do, we shall be able to put ourselves right."

As was said by my hon. Friend the Member for West Ham, North (Mr. A. Lewis), there has been time for the Government to make representations about the matter. I assume that they were aware of the efforts made by the hon. Member for Birmingham, Selly Oak (Mr. Gurden) and know the details of the case. I assume that they are aware of the efforts of this gentleman to get the Federal German Government to move in the matter. We have heard the answer of that Government, without any explanation, that they refuse to do anything at all to remedy this situation.

I have heard tonight for the first time the details recounted by the hon. Member for Selly Oak and by my hon. Friend the Member for Sowerby (Mr. Houghton). It seems clear that here is someone who has been asked to sign away his rights under a claim made under the Federal German compensation law. I gather it is admitted that had a payment been made, there would have been no question of taxation with reference to the amount he received. He has been asked to sign away his right and, in return, he receives an annuity.

If that is the case—and the Minister does not dispute it—surely there is an obvious injustice and the Government—representing that British justice which is our proud heritage, and recognising that we always are ready to cure an injustice—will put it right. If the Government do not put it right, surely this House should register a protest in a way which would compel the Government to do so. It seems extraordinary to me that we should have to depend on the Federal German Government to do something before we are ready to remedy what, on the face of it, appears an obvious injustice.

I hope that the House will register a protest in the most emphatic terms, if the Minister is not prepared to give way.

Sir H. d'Avigdor Goldsmid

This problem to which hon. Members have addressed themselves with such vigour and so much human sympathy is a very old one. I can claim to have been personally engaged very deeply in these matters for upwards of 15 years.

I think I can perhaps help my hon. Friend the Member for Birmingham, Selly Oak (Mr. Gurden) by saying that there can be no question that Mr. Koll-mann had in fact no legal claim at all on the German Government. The German Government have at all times refused to recognise claims emanating from people who were not originally living within their boundaries. This is an important point because, if there is no legal claim, what happened between the German Government and this gentleman is something about which none of us is in a position to be dogmatic. I know this case and will not say anything more about it than that.

I congratulate my hon. Friend for having taken it up, but we have to recognise that what the German Government have done in the case of former State employees who lost their jobs in 1933 as a result of Hitlerism has been to reinstate their pensions at the rate they would have received had they continued all the time in State employment up to the date of their retirement. In most cases if a man had been forcibly retired in 1933 with 30 years' increments, very substantial pensions are now being paid by the German Government.

If we were to accept the form of words in the Clause it might be up to almost every single person in receipt of an annuity to raise the question of whether or not he accepted it under duress. This is a serious problem we have to live with. There is this great twilight zone about the conditions under Nazism. Former officials have testified that there is much information, but also a great deal of misinformation. The German Government in the cases to which their attention has been directed have been extremely sympathetic. It was Dr. Adenauer's philosophy that he would rather that claims which were not 100 per cent. valid should be met than that any genuine claim should be dismissed. That being the attitude of the German Government to their former citizens, it is highly regrettable that they have not been willing to do anything for those whom they do not consider to be their citizens. That is the legal position.

I find this an extraordinarily difficult case. It is only fair to say to the Financial Secretary that, having worked in these matters for many years, I shall not be able to vote against any proposal in this House to do something to help people who have been victimised, but, having said that, I think that the danger in passing this Clause in this form is very real and hon. Members should be made aware of it. It would be easy to make it possible for a large number of cases to be reopened, I suspect at the expense of the taxpayer.

10.0 p.m.

Mr. Gurden

I speak again with the leave of the House. I want to clear up one or two points which have arisen. I thank my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) for what he has said. I know that he great knowledge of these things. Surely he could not have missed the point that although, as he said, this annuity, compensation, or whatever we call it, is paid for loss of office my constituent has not received a single penny in respect of the £37,000 which his relatives lost. I accept a good deal of what he said. I know that he is an expert.

My hon. Friend the Financial Secretary to the Treasury said that there is a good deal of supposition in the case. This hurt me, because I had not wished to take up time to show all the proofs which can be shown and I have not brought all the papers into the House with me, but I assure my hon. Friend that a good many of the things which he said were suppositions are facts. It is a fact that Treasury officials have begged me and begged Mr. Kollmann to keep applying to the German Government to put this matter right. We have gone all through this exercise. I hoped that my right hon. Friend could persuade the German Government to think again, but that is the advice which we have had for years from the Treasury—to apply to the German Government. What shall we do after tonight if we do not put it straight? Although I am sure that there is good will on the Front Bench, this is a waste of time, and I cannot see that these people, including Mr. Kollmann, can get any joy out of our Government or anyone else appealing to the German Government.

The reason that they paid this compensation at £30 a month is obvious. It was better than paying out a huge capital sum. That is the simple reason. It was far better for them to spread this over the period of years of his life up to the time of retirement. I do not think that we have had very much help tonight. I am sorry that my hon. Friend does not realise the facts as they are. They are as bad as I have said they are. The House will have to decide.

Mr. Fell

My hon. Friend knows that I am very much with him in this case. But if he had an assurance from the Treasury Bench that pending the result of the Government's inquiries, if they were able to go to the German Government, no tax should be charged, and that if there were no success in their efforts they would re-examine the position, would he feel that this was a sufficient assurance?

Mr. Gurden

This would be a very happy solution, and this is all that I have asked. I know that my constituents and others would be quite happy to let this go for a while. After all, it has been going on for a number of years, and it could go on for another 12 months if one had that assurance.

Mr. Diamond

As the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) said, this is a very difficult position. Nobody wants to reach a conclusion hurriedly, or emotionally, but we have to reach a conclusion. That is what the House is for and what the debate is about. We have to reach a conclusion now, because we are at the final stage of the Finance Bill. It is not open to us to say, "We should be grateful if the Government would consider the matter and bring it forward at a later stage of the Bill", for that opportunity has gone.

We recognise that this is not a party or partisan issue, and we are faced with the fact that we have to make up our minds now. We might have said that this was not fair on the Government if the Government had had no knowledge of the feeling of the House or of the facts involved, but the hon. Member for Birmingham, Selly Oak (Mr. Gurden) has been pressing this matter for a long time. His constituent has written to my hon. Friends and to me and I dare say to other hon. Members, and the matter has been well known for a very long time.

The difficulties are not new, the dilemma is not new. All that is new is the suggestion that now, at ths latest hour, we should leave it for the hon. Member to see his own Minister. This is nothing for us to get hold of. No one wants to force the issue in a case such as this, but we are compelled to do so. The Government are forcing us to force the issue because they have left it to the last moment to say anything—and what they have low said is of no real value to us.

The Government are saying, "We are in difficulty. We have to weigh justice against administrative convenience. We would rather we did not have to reach a solution on this. We would rather you put the problem back in the hands of the German Government and let them solve it, and let them solve it in a way which coincides with Section 22 of the Finance Act, 1961 and leaves us, the Government, with no problem to decide". That would be very easy for the Government, but that is not the problem before us.

We must make a decision. There is no reason to believe that at this late stage the German Government would alter their mind. The German Government might very well find themselves in certain difficulties. They might well find that it was possible to make payment only in this form. Any undue pressure might result in circumstances much more damaging to the hon. Gentleman's constituent than the situation is now.

We just have to reach a solution and we have to come to a conclusion. The only argument then left for the Government is that this would make some other people, who have had their cases and their tax position settled, jealous. It will certainly not make their position any worse than it is at present. It will not do them any damage. It may stir certain emotions. If the Government feel that the emotions which will be stirred are too strong for them to withstand, they can deal with those persons also in the way provided in Section 22.

I remind the Financial Secretary of the provisions of Section 22, which is the Section giving relief: (2) This section shall be deemed always to have had effect, and any necessary repayment of tax shall be made … In 1961, the Government deliberately said, "We shall repay tax". If the Government feel that, as a result of their accepting the new Clause, others would be caused a serious injustice, the Government have it in their power to deal with that injustice.

There is no real money involved. This is not a question whether the country can afford it. This is a question of justice, upon which we all feel deeply. The last thing any of us on this side want is to have a Division, which can be misunderstood. Therefore, I want to make it absolutely clear that it is simply on the issue that this is a real injustice, that this man would have received money free of tax had he received it in a different form, that there is no real difficulty in terms of the Government's financial situation to prevent it being done, and that the machinery for retrospective relief from taxation is already provided for.

In these circumstances, recognising that there is cross-party support for the Motion, we on this side are bound to say that the answer the Government have given at this late stage is no answer at all, and that we must fight for justice.

Mr. Boyd-Carpenter

I regret that, owing to an inevitable engagement outside, I have not heard the greater part of the debate. I am very familiar with the issue, since, as the House may recall, I took part in the discussion on a similar Clause moved in Committee by my hon. Friend the Member for Birmingham, Selly Oak (Mr. Gurden). If I may say so, having studied the case, I fully understand my hon. Friend's feelings about this case, for it is a difficult one and the facts are far from being clearly established.

What the House has to deal with is not only—not that I under-rate it—a decision on an individual case, however hard and difficult, but also the issue which is now before us, whether we should alter our own law. That poses very difficult problems. As my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), who, as the House knows, has great experience in this matter and has done a great deal of extremely unselfish work on the subject, pointed out, if the general law is altered one affects not only one case but all others, including those which have been settled and which this would reopen. That is itself quite a serious thing to do and one which the House would feel disposed to do only if it were satisfied that there were no other conceivable means of dealing with the individual case about which hon. Members on both sides of the House are concerned.

It not only would alter the law in respect of cases which have been settled, but would introduce a difficult new position, creating new anomalies in our law. As I understand it, my hon. Friend wishes to exempt from tax recipients of this compensation in this category who have had refused or have given up their rights in respect of compensation in some other category. It would not, as I understand it, benefit those in this category whom we have always dealt with in this category; and it would introduce a new distinction between those in this category who, as a result of discussion, negotiation, or a decision of the German Government, have been put in this category, whichever category they thought they should be in, while it would leave subject to tax in this country those who have always been in this category. That would create very serious anomalies.

When we discussed this matter in Committee I suggested that the right thing to do in the circumstances, if the position was as my hon. Friend and his constituent maintained—that this gentleman was in the wrong category—would be to seek to persuade the German Government of that fact. [HON. MEMBERS: "Oh."] This is so. And if one is successful in so doing then, automatically, the tax consequences, as the Financial Secretary explained, follow in this country. I ventured to suggest in Committee that my hon. Friend should have a word with me about this between that stage and now. He did not apparently feel able to arrange a talk with me, which is entirely his business.

Mr. A. Lewis

Why did not the right hon. Gentleman arrange it?

Mr. Boyd-Carpenter

I am sure that if hon. Members opposite pause to think they will realise that this is a matter which my hon. Friend, to his great credit, has studied and about which he probably knows more than any other hon. Member. I thought, and I still think, that one would have a better chance of assessing the chances of persuading the German Government that they were, as my hon. Friend thinks, wrong if my hon. Friend would put his knowledge of the case in discussion to myself, the Financial Secretary or others of my colleagues so that we could have the advantage of his knowledge and argument, if necessary to put to the German Government.

Although I appreciate the difficulty which the hon. Member for Gloucester (Mr. Diamond) fairly put, I still suggest that we should not make a considerable alteration in our law, creating new anomalies while, perhaps, remedying one, unless we were absolutely convinced beyond peradventure that there was no hope of putting right what according to my hon. Friend is the basic wrong; that is, the wrong categorisation of this claim by the German Government.

Mr. Gurden

We should get this matter cleared up. As to my seeing my right hon. Friend, I am, of course, grateful to him for his continued invitation. I did take the matter up, but the reason we have not met to consider it is simply that there was a slight misunderstanding. I spoke to his secretary on the telephone and I still hope to take advantage of his offer. I have reminded the House that this exercise has been gone through before, in correspondence and telephone calls, and that the Government have had an opportunity—at least the civil servants have—of dealing with the German Government. I cannot blame my right hon. Friend for this, because he was not in office at the time, but I can assure him that the Government have had ample opportunity to deal with this matter.

Mr. Boyd-Carpenter

I appreciate what my hon. Friend says and I hope that he did not think that I was holding it against him when I said that he had not taken advantage of the invitation which I extended to him. I am glad to hear that he still wishes to accept it. It seems to me that this is the right way to handle it.

10.15 p.m.

I can understand the feelings of my hon. Friend the Member for Selly Oak, because I too, like I think most hon. Members, have fought individual constituency cases for a long time. I believe that many of us have had that experience and have found it a very useful one. But my hon. Friend also accepts that I came fresh to this matter when I had the privilege to reply to him in Committee. The offer which I made to him then, and which I repeat now, was a sincere one. I should like to discuss the matter with him with a view to seeing whether we are in a position to make representations to the German Government to put right what he thinks is wrong.

Mr. Diamond

As this is the sole point on which the right hon. Gentleman is basing his case, am I not right—and I would crave the attention of the hon. Member for Selly Oak for a moment—in saying that this matter has been going on for over a year? I had representations from the hon. Member's constituent more than a year ago. Is it not right that this has been going on for more than one year and has covered more than one Finance Bill? If so, how can we at this late stage of the Bill attach any importance to the right hon. Gentleman's suggestion?

Mr. Boyd-Carpenter

The hon. Gentleman says that this is the only point that I rest my case on. It certainly is not. I addressed some remarks—and I should be guilty of tedious repetition if I repeated them—to the general effect on our tax law of making the change suggested in this new Clause. I had reached that point in my argument, which I think was accepted by the House, that the only argument in favour of making this change was the hardship in this case.

I was addressing myself to the problem—and I hope that the House does not think that it was an unreasonable approach—as to whether this was the only way of dealing with this case. It is still an open matter whether it is right to create new anomalies to remedy this one. We could argue about that at some length.

When the hon. Member for Gloucester intervened, I was addressing myself to the different point of whether this was the only way to deal with the matter. I do not think that any hon. Member who has pursued a constituency case will regard the fact that this has gone on for some time as a reason for feeling that it is hopeless to pursue it further. I have never taken that view, and I do not imagine that many hon. Members have. I still think that it would be of great value, before taking what would be the very serious step of altering our law, if my hon. Friend would let me have the advantage of his knowledge of this case and of the arguments which have convinced him that his constituent has been placed in the wrong category by the German Government.

I have had a certain number of dealings with the German Government on wider matters. That Government is manned by reasonable people who are prepared to be helpful if a reasonable case is put to it.

Mr. A. Lewis

Why did not the right hon. Gentleman put it?

Mr. Boyd-Carpenter

I have never had the opportunity to do so.

Hon. Members

Nonsense.

Mr. Lewis

The Minister has talked about the possibility of an approach being made to the German Government. I suggest that he knew at the time of the Committee stage, and has known since, that this matter was still pending. Why did not he take the initiative and go to the German Government? He knew all about it.

Mr. Boyd-Carpenter

The hon. Gentleman is wrong, as he so often is. [HON. MEMBERS: "No."] I did not, and I do not, know all about it.

Mr. Dodds

Then find out.

Mr. Boyd-Carpenter

As I have said, my hon. Friend the Member for Selly Oak probably knows more about it than any man in the House.

I ask my hon. Friend the Member for Selly Oak to come and discuss the matter with me and to give me the arguments and material with which it would make sense to approach the German Government. My hon. Friend, for the reasons which he gave and which I fully understand, has not yet been able to do that. He has said tonight that he is willing to do that. I am prepared to tell the House that if my hon. Friend will do that and will give me the relevant material I will see that every effort that we can make on behalf of Her Majesty's Government to

put the case to the German Government is made. It still seems to me that that is the right way to handle this difficult matter, but I fully understand the concern of the House about it.

Mr. Houghton

I can speak again only by leave of the House, but I crave the opportunity of making one or two concluding remarks. I hope that the House will settle this matter now and will not be afraid of the new Clause and of the possible consequences on other cases.

In the first place, I think that the hour is too late for fresh approaches to be made to the German Government to alter the classification of this award. It may be true, as the hon. Baronet the Member for Walsall, South (Sir. H. d'Avigdor-Goldsmid) said, that the German Government made the award under this particular classification because they were not free to make an award under the other classification to a non-national and non-resident. Nevertheless, the proper classification of this annuity is undoubtedly for losses and the destruction of the man's family, and so on.

The Clause makes the concession only in those cases where the persons concerned have accepted compensation under one classification on condition that they renounced their claims under the other. I cannot conceive that there will be many cases in that category. I know personally of only one. I hope that the House can feel that if it passes the Clause it will not only be disposing of this case, which otherwise will be hanging about for 12 months at least, but also disposing of other cases, small in number as I believe, where payment has been made under one category on condition of renunciation of claims under another.

Let us conclude this matter, let us face the issue, and not have this and other cases on our consciences any longer.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 147, Noes 179.

Division No. 126.] AYES [10.23 p.m.
Ainsley, William Allen, Scholefield (Crewe) Benn, Anthony Wedgwood
Alldritt W. H. Awbery Stan (Bristol, Central) Blackburn, F.
Allaun, Frank (Salford, E.) Beaney, Alan Blyton, William
Bottomley, Rt. Hon. A. G. Harper, Joseph Oram, A. E.
Bowden, Rt. Hn. H. W. (Leics, S. W.) Hayman, F. H. Padley, W. E.
Bowen, Roderic (Cardigan) Henderson, Rt. Hn. Arthur (Rwly Regis) Pavitt, Laurence
Braddock, Mrs. E. M. Herbison, Miss Margaret Pearson, Arthur (Pontypridd)
Bradley, Tom Hill, J. (Midlothian) Peart, Frederick
Broughton, Dr. A. D. D. Hilton, A. V. Pentland, Norman
Butler, Herbert (Hackney, C.) Holman, Percy Price, J. T. (Westhoughton)
Butler, Mrs. Joyce (Wood Green) Holt, Arthur Probert, Arthur
Carmichael, Neil Houghton, Douglas Rees, Merlyn (Leeds, S.)
Castle, Mrs. Barbara Howell, Denis (Small Heath) Rhodes, H.
Cliffe, Michael Hoy, James H. Roberts, Albert (Normanton)
Collick, Percy Hughes, Cledwyn (Anglesey) Roberts, Goronwy (Caernarvon)
Craddock, George (Bradford, S.) Hughes, Hector (Aberdeen, N.) Robertson, John (Paisley)
Cronin, John Hunter, A. E. Rodgers, W. T. (Stockton)
Crosland, Anthony Hynd, H. (Accrington) Ross, William
Cullen, Mrs. Alice Hynd, John (Attercliffe) Short, Edward
Dalyell, Tam Irvine, A. J. (Edge Hill) Silkin, John
Davies, Ifor (Gower) Jay, Rt. Hon. Douglas Silverman, Julius (Aston)
Davies, S. O. (Merthyr) Johnson, Carol (Lewisham, S.) Slater, Joseph (Sedgefield)
Deer, George Jones, Elwyn (West Ham, S.) Small, William
Delargy, Hugh Jones, T. W. (Merioneth) Smith, Ellis (Stoke, S.)
Dempsey, James King, Dr. Horace Stainton, Keith
Diamond, John Lawson, George Steele, Thomas
Dodds, Norman Lee, Frederick (Newton) Stones, William
Doig, Peter Lever, L. M. (Ardwick) Swingler, Stephen
Driberg, Tom Lewis, Arthur (West Ham, N.) Symonds, J. B.
Duffy, A. E. P. (Colne Valley) Loughlin, Charles Taverne, D.
Edwards, Rt. Hon. Ness (Caerphilly) Lubbock, Eric Taylor, Bernard (Mansfield)
Fell, Anthony Mabon, Dr. J. Dickson Thornton, Ernest
Finch, Harold McBride, N. Thorpe, Jeremy
Fletcher, Eric MacColl, James Wade, Donald
Foley, Maurice McInnes, James Wainwright, Edwin
Foot, Dingle (Ipswich) McKay, John (Wallsend) Warbey, William
Foot, Michael (Ebbw Vale) Mackenzie, Gregor Watkins, Tudor
Fraser, Thomas (Hamilton) Manuel, Archie Weitzman, David
Galpern, Sir Myer Mapp, Charles White, Mrs. Eirene
George, Lady Megan Lloyd (Crmrthn) Mason, Roy Whitlock, William
Ginsburg, David Mayhew, Christopher Wilkins, W. A.
Gordon Walker, Rt. Hon. P. C. Mendelson, J. J. Willey, Frederick
Gourlay, Harry Millan, Bruce Willis, E. G. (Edinburgh, E.)
Greenwood, Anthony Milne, Edward Winterbottom, R. E.
Grey, Charles Mitchison, G. R. Woodburn, Rt. Hon. A.
Griffiths, David (Rother Valley) Morris, Charles (Openshaw) Woof, Robert
Griffiths, Eldon (Bury St. Edmunds) Morris, John (Aberavon) Yates, Victor (Ladywood)
Grimond, Rt. Hon. J. Noel-Baker, Francis (Swindon)
Gurden, Harold Noel-Baker, Rt. Hn. Philip (Derby, S.) TELLERS FOR THE AYES:
Hannan, William O'Malley, B. K. Mr. Charles A. Howell and
Mr. Redhead.
NOES
Agnew, Sir Peter Courtney, Cdr. Anthony Hall, John (Wycombe)
Allason, James Craddock, Sir Beresford (Spelthorne) Hamilton, Michael (Wellingborough)
Anderson, D. C. Critchley, Julian Harris, Frederic (Croydon, N. W.)
Atkins, Humphrey Curran, Charles Harris, Reader (Heston)
Awdry, Daniel (Chippenham) Currie, G. B. H. Harrison, Col. Sir Harwood (Eye)
Barber, Rt. Hon. Anthony Dance, James Harvie Anderson, Miss
Barter, John Deedes, Rt. Hon. W. F. Hastings, Stephen
Batsford, Brian Donaldson, Cmdr. C. E. M. Henderson, Sir John (Cathcart)
Bennett, F. M. (Torquay) Doughty, Charles Hendry, Forbes
Bidgood, John C. Drayson, G. B. Hiley, Joseph
Biffen, John du Cann, Edward Hill, J. E. B. (S. Norfolk)
Biggs-Davison, John Duncan, Sir James Hirst, Geoffrey
Bingham, R. M. Eden, Sir John Hogg, Rt. Hon. Quintin
Birch, Rt. Hon. Nigel Elliot, Capt. Walter (Carshalton) Holland, Philip
Bishop, Sir Patrick Elliott, R. W. (Newc'tle-upon-Tyne, N.) Hughes-Young, Michael
Bourne-Arton, A. Emery, Peter Hulbert, Sir Norman
Box, Donald Emmet, Hon. Mrs. Evelyn Hutchison, Michael Clark
Boyd-Carpenter, Rt. Hon. John Farr, John Irvine, Bryant Godman (Rye)
Boyle, Rt. Hon. Sir Edward Finlay, Graeme James, David
Brown, Alan (Tottenham) Fisher, Nigel Johnson, Eric (Blackley)
Bryan, Paul Fletcher-Cooke, Charles Johnson Smith, Geoffrey
Buck, Antony Fraser, Ian (Plymouth, Sutton) Kaberry, Sir Donald
Bullard, Denys Freeth, Denzil Kerans, Cdr. J. S.
Bullus, Wing Commander Eric Gammans, Lady Kerr, Sir Hamilton
Carr, Compton (Barons Court) Gardner, Edward Kershaw, Anthony
Carr, Rt. Hon. Robert (Mitcham) Gibson-Watt, David Kirk, Peter
Chataway, Christopher Giles, Rear-Admiral Morgan Lancaster, Col. C. G.
Chichester-Clark, R. Gilmour, Ian (Norfolk, Central) Legge-Bourke, Sir Harry
Clark, William (Nottingham, S.) Glyn, Dr. Alan (Clapham) Lewis, Kenneth (Rutland)
Cleaver, Leonard Goodhart, Philip Lilley, F. J. P.
Cole, Norman Goodhew, Victor Lucas-Tooth, Sir Hugh
Cooper-Key, Sir Neill Green, Alan MacArthur, Ian
Cordeaux, Lt.-Col. J. K. Gresham Cooke, R. McLaren, Martin
Corfield, F. V. Grosvenor, Lord Robert Maclean, Sir Fitzroy (Bute & N. Ayrs)
McMaster, Stanley R. Prior, J. M. L. Thornton-Kemsley, Sir Colin
Macmillan, Maurice (Halifax) Proudfoot, Wilfred Tiley, Arthur (Bradford, W.)
Maitland, Sir John Quennell, Miss J. M. Tilney, John (Wavertree)
Markham, Major Sir Frank Ramsden, Rt. Hon. James Touche, Rt. Hon. Sir Gordon
Matthews, Gordon (Meriden) Rawlinson, Rt. Hon. Sir Peter Turner, Colin
Maude, Angus (Stratford-on-Avon) Redmayne, Rt. Hon. Martin Turton, Rt. Hon. R. H.
Maudling, Rt. Hon, Reginald Rees, Hugh (Swansea, W.) van Straubenzee, W. R.
Mawby, Ray Rees-Davies, W. R. (Isle of Thanet) Vaughan-Morgan, Rt. Hon. Sir John
Maxwell-Hyslop, R. J. Ridley, Hon. Nicholas Walder, David
Maydon, Lt.-Cdr. S. L. C. Ridsdale, Julian Walker, Peter
Miscampbell, Norman Roots, William Walker-Smith, Rt. Hon. Sir Derek
Montgomery, Fergus Ropner, Col. Sir Leonard Ward, Dame Irene
More, Jasper (Ludlow) Sharples, Richard Webster, David
Morrison, Charles (Devizes) Shaw, M. Williams, Sir Rolf Dudley (Exeter)
Morrison, John (Salisbury) Shepherd, William Wills, Sir Gerald (Bridgwater)
Neave, Airey Smith, Dudley (Br'ntf'd & Chiswick) Wilson, Geoffrey (Truro)
Orr, Capt. L. P. S. Spearman, Sir Alexander Wise, A. R.
Osborn, John (Hallam) Steward, Harold (Stockport, S.) Wolrige-Gordon, Patrick
Page, John (Harrow, West) Stoddart-Scott, Col. Sir Malcolm Woodhouse, Hon. Christopher
Panned, Norman (Kirkdale) Storey, Sir Samuel Woodnutt, Mark
Percival, Ian Studholme, sir Henry Woollam, John
Pickthorn, Sir Kenneth Talbot, John E. Worsley, Marcus
Pike, Miss Mervyn Taylor, Edwin (Bolton, E.) Yates, William (The Wrekin)
Pitt, Dame Edith Taylor, Frank (M'ch'st'r, Moss Side)
Pounder, Rafton Teeling, Sir William TELLERS FOR THE NOES:
Powell, Rt. Hon. J. Enoch Thomas, Sir Leslie (Canterbury) Mr. Peel and Mr. Pym.
Price, David (Eastlelgh) Thompson, Sir Richard (Croydon, S.)