NEW CLAUSE.—(Provisions as to interest on loans used for payment of premiums, etc.)

HC Deb 03 July 1930 vol 240 cc2239-308

(1) Subject to the provisions of this section, in computing for the purposes of surtax the total income for any year of an individual who has entered into a contract of assurance no deduction shall be allowed in respect of any interest on any borrowed money which has been applied directly or indirectly to or towards the payment of any premium under that contract, or of any sum paid in lieu of any such premium.

(2) Where the benefit of a contract of assurance entered into by any person has become vested in another person, being an individual, sub-section (1) of this section shall apply in relation to that individual—

1. (a) as if the contract had been a contract entered into by him; and
2. (b) in a case where the benefit of the contract became vested in him by virtue of an assignment and any payment was made by him in consideration of the assignment, as if that payment were the payment of a premium under the contract; and
3. (c) in a case where, either as being the person in whom the said benefit is vested, or by reason of any agreement under or in pursuance of which the said benefit became vested in him, he pays any interest on any borrowed money, as if that money had been applied to the payment of a premium under the contract.

(3) This section shall not, where the interest is payable at a rate not exceeding ten per cent. per annum, apply to—

1. (a) interest on borrowed money applied to or towards the payment of any premium under a contract of assurance entered into before the fifteenth day of April, nineteen hundred and thirty, which assures a fixed capital sum payable either—
1. (i) on death only; or
2. (ii) on the expiration of a period of not less than ten years from the date of the commencement of the contract or on earlier death;
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2. (b) interest on Money borrowed before the sixth day of April, nineteen hundred and twenty-nine, unless—
1. (i) the money was borrowed from an assurance company; and
2. (ii) the repayment thereof was secured on a contract of assurance; and
3. (iii) the premium in question was a premium under that contract;
3. (c) interest on money borrowed mainly on the security of property other than a contract of assurance, if the premium in question either—
1. (i) is payable under a contract of assurance entered into in order to provide against the failure of a contingent interest in any property, and to serve as additional security for the loan and for no other purpose; or
2. (ii) is the first of a series of premiums payable under a contract of assurance entered into solely in order to provide for the repayment of the money borrowed and does not exceed ten per cent. of the sum assured under that contract;
4. (d) interest on borrowed money applied to or towards the payment of premiums under a contract of assurance, which assures throughout the term of the contract, a capital sum payable on death, if neither the amount of the first premium under the contract nor the amount subsequently payable by way of premiums thereunder in respect of any period of twelve months exceeds one-eighth of the capital sum payable on death;
5. (e) interest on borrowed money applied to or towards the payment of premiums (not being premiums such as those specified in the preceding paragraphs of this subsection) each of which is one of a series of equal premiums payable at equal intervals of not more than one year, except so far as such interest exceeds in the year of assessment on hundred pounds inall.

(4) The provisions of section twenty-two of the Finance Act, 1922, with regard to the delivery of particulars as to deductions claimed to be allowed, shall be extended so as to enable the special commissioners to require such particulars with respect to deductions and otherwise as they may consider necessary for the purpose of carrying this section into effect.

(5) In this section—

1. (a) the expression "contract of assurance" means a contract of assurance or a contract similar in character to a contract of assurance, being in either case a contract under which a capital sum is expressed to be payable in the future in return for one or more antecedent payments, and the expression "premium" means any such antecedent payment;
2. (b) the expression "interest" includes any sum payable in respect of any borrowed money;
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3. (c) any reference to borrowed money applied to or towards any payment shall be deemed to include a reference to borrowed money applied directly or indirectly to or towards the replacement of any money so applied;
4. (d) any reference to a capital sum payable on death under a contract of assurance shall be construed as a reference to the actual capital sum assured on death, exclusive of any addition which has arisen or may arise from any bonus, share of profits, return of premiums or otherwise, and in the case of a contract under which different capital sums are payable on death in different events, as a reference to the least of those sums.—[Mr. P. Snowden.]

Brought up, and read the First time.

Mr. P. SNOWDEN

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

This Clause is in substitution for the Clause 12 which originally appeared in the Bill. When that Clause came before the Committee I agreed to a postponement of its consideration in order that negotiations might be continued with certain interested parties, particularly the representatives of the life assurance companies, to see whether objections which had been raised and criticisms which had been levelled against it might be met. I am glad to say that the negotiations which have since taken place between the Board of Inland Revenue and the Association of Life Offices have reached a very successful conclusion, and the Clause which I now submit to the Committee represents the agreement which has been reached. It will be remembered that a White Paper was circulated some time ago explaining Clause 12, and that relieves me from the necessity of doing more on this occasion than explaining the changes which have been made as between the old Clause and the new Clause. There are a few minor alterations, mainly of a verbal character, to which I would first draw attention. The word "premiums" has been substituted for "antecedent payments," and I think the Committee will agree that the new word, at any rate, is one that will be more popularly understood. Similarly, the definition of "contract of assurance" which appeared in the old Clause has been removed from Subsection (1) to the end of the Clause. These are not alterations of substance.

8.0 p.m.

There is one other alteration which is I think of some considerable importance. It is now made quite clear that any profits which may be included in the policy of insurance, where a policy secures a definite capital sum, or rather where there are profits secured by the policy, will not be taken into consideration. Secondly, the Committee will find added at the beginning of Sub-section (3) of the Clause words which serve to confine the exemptions enumerated in the Sub-section to cases where the rate of interest does not exceed 10 per cent.

Mr. A. M. SAMUEL

Why 10 per cent.?

Mr. SNOWDEN

It is a purely protective figure, and the sole object of the words is to prevent evasion of the Clause by means of loans at rates of interest which are artificial. Thirdly, there is a fresh exemption inserted in paragraph (a) of Sub-section (3), and this is perhaps the most important which has been made and one which was perhaps one of the principal matters of discussion which the Inland Revenue have had with the representatives of the life assurance companies. It is this: Under this exemption, all the life insurance policies, including single premium policies, entered into before the date of the Budget will be exempted from the operation of the Clause, provided they have a term of life of not less than 10 years. This is the most important alteration that has been made in the Clause. Policies of this character, unlike the policies of the sinking fund or pure endowment type, the abuse of which has led up to the necessity for this Clause, do contain a real measure of genuine life insurance, even although they undoubtedly also carry with them a certain advantage in the way of relief—I will not say avoidance—of Surtax. As avoidance in this way is being made impossible in the future, it is not unreasonable to give this restricted measure of protection to contracts already entered into in good faith between the taxpayer and the assurance company.

There is another Amendment of some importance, and it is in Sub-section (3, b) of the old Clause, which now becomes Sub-section (3, c). This Sub-section governs the case where a taxpayer borrows money from an insurance company on security other than a policy, taking out at the same time a policy to secure repayment of the loan, and the first premium under that policy, as a matter of course, is deducted from the borrowed money. This, I think the Committee will agree, is a genuine business transaction with no element of tax avoidance in it.

Lastly, Sub-section (3, d), formerly Sub-section (3, c), has been substantially altered with the object of defining the ordinary run of annual premium life insurance so as to put it right outside the Clause. We have no desire to do—and indeed it has been our wish all through the consideration of this matter to avoid doing—anything which would be injurious to genuine life insurance, and I think we have, in the revised Clause, succeeded in protecting genuine life policies. In its original form the conditions laid down in the definition were rather complicated, but as the result of further negotiations between the Board of Inland Revenue and the life assurance companies, a simpler formula has been devised, and I may say that under this all life insurance policies will be regarded as hearing the hall-mark of genuineness if none of the annual premiums exceeds one-eighth of the nominal capital sum payable at death. In cases where different sums are secured at different times, the smallest sum will be taken for the purpose of ascertaining whether or not this condition has been fulfilled.

I think I have explained the changes which have been made as between the old Clause 12 and the Clause which I am now moving. I have said more than once that this new Clause represents an agreement between the Inland Revenue and the life insurance companies, and I am satisfied that, as it now appears, it will succeed in stopping what has hitherto been the legal avoidance of Super-tax payments, while it will not in any way prejudice genuine life insurance; and I want to acknowledge the help that the life insurance offices have given to us in this matter. They have been of very great assistance to us, not only in re-modelling the old Clause 12, but in pointing out to us methods of evasion and in helping us to fill up those gaps. This, as I say, is agreed between us, and I am afraid, therefore, that I shall not be able to accept any Amendment which may be moved which will materially alter the Clause as it now stands.

I do not know if it is necessary to explain, just in a word, the necessity for a Clause of this character. Probably every Member of the Committee is familiar with the practice, which has been growing up in recent years, of taking out what are called single premium policies for the purpose of avoiding or evading the payment of Supertax. A policy is taken out under which a large single premium is payable, and the money or as much as 97 per cent. of it, is borrowed from the life insurance company. Then the person taking out the policy is able to deduct the interest that he has to pay from the amount of his income for Surtax, and he, has been able to deduct it from the top slice of his Super-tax income. In the case of a policy of a very large amount, that might amount to a reduction in Supertax payment of some thousands of pounds a year. This practice has been growing rather extensively in recent years, and such policies now in operation amount, I understand, to a good many millions of pounds. I should like to add that many of the leading insurance companies have discouraged this practice, but as long as some companies did it, competition was so keen that some companies that were unwilling to do it have been driven to it, and they are welcoming the step that we are taking, because it will, we hope, put an end to a practice which has brought genuine life insurance into discredit, and at the same time maintain unimpaired all the advantages and benefits of genuine life insurance.

Sir A. STEEL-MAITLAND

The Chancellor of the Exchequer, in moving this Clause, has alluded to the action of the life insurance companies. I should be glad also, so far as any of us who have taken an interest in this Clause have had the benefit of the advice of those who have the skilled knowledge which some of the insurance companies possess, to pay my tribute to them, because in all the advice they have given to any of us, there has never at any moment been the least wish to defeat the object which the Chancellor has in mind. Their wish throughout, so far as I have had any knowledge of them, has been to discourage advantage being taken of methods of insurance in order to defeat the true purpose of the Revenue.

The Chancellor of the Exchequer has also said that he and the insurance companies have discussed the subject-matter of this Clause since it was last brought before this Committee, and have come to an agreement, and I should like to assure him that, so far as that agreement is concerned, though perhaps he is already aware of the fact, those of us who have taken an interest in this Clause have ourselves been informed by the insurance companies of the fact that they have reached an agreement and that they desire, so far as they are concerned, that the principles to which they have given approval should be embodied in legislation. Therefore, I trust that the Chancellor of the Exchequer will agree that in any criticisms which we may adduce upon this Clause, so far as the insurance companies are concerned, they have neither suggested, initiated, nor desired anything of the kind, and that we are doing it entirely on our own initiative. I say this deliberately, because there was a suspicion in the words which the Chancellor used either yesterday or the day before and, though to a slighter extent, to-night, that just because he had agreed upon this Clause with the insurance companies, it was to be passed in its entirety here.

I am sure that I have only to mention it for the right hon. Gentleman to concur, that, of course, no agreement which he reaches with any body of people whatever outside will bind this Committee in its deliberations one way or the other. Therefore, when he asks us almost in advance to accept this Clause because he has agreed as to its terms with the insurance companies, and to regard it as having literal inspiration so that no word can be altered, that is a position which we cannot accept for a moment. On the other hand, of course, as sensible people we realise the spirit in which insurance companies have dealt with this matter, and we do not want to throw the whole thing into the melting pot again. I want to say one or two general words about the Clause. We all realise that from the drafting point of view, and in putting a proper definition Sub-section at the end, it shows an immense improvement in form and in substance.

The point to which I want to allude is Sub-section (3, b). Otherwise, the general order of the Clause seems quite clear. At the beginning we have the same sort of introduction of the subject as was provided in the original Clause. In Sub-section (2), we have practically the same prevention of evasion by providing that a man cannot do indirectly what he ought not to do directly Sub-section (3) is really the operative Sub-section. I understand that there is a concession under paragraph (a). What I am not quite so clear about, and it is capable of easy explanation, is this: Under paragraph (a) it is clear that single premium policies taken out with borrowed money before 15th April this year—the Budget date—will be still liable. At any rate, this Sub-section will not apply to them if the money it not borrowed so long as they are whole life policies or so long as they are policies which have a currency of not less than 10 years. What I am not quite certain about is with regard to paragraph (b) of Subsection (3). I am not certain whether that deals with the same policies or with a portion of the same policies of the class dealt with under paragraph (a).

Suppose that this Clause is passed as it stands, single premium policies for the future will be possible, and will not come under this Clause, if they are made with the policy holder's own money and without borrowing. As to existing single premium life policies and policies of a currency of not less than 10 years, those that have been taken out before the Budget day will not be affected by the Clause, even though they have been taken out on money borrowed from an insurance company, and although the payment of it was secured on a contract of insurance. When the proper time comes, perhaps we can have some explanation of the precise object of Sub-section (3, b). Further than that, I do not wish to pursue the subject at the moment, except to say by way of anticipation that probably there is raised a question of retro-active legislation, about which we may have some words to say without it affecting the structure or the essential nature of the Clause.

Nothing has been said with regard to Sub-section (4) The provisions of that Sub-section are extraordinarily wide. If anyone reads Section 22 of the Finance Act of 1922, they will see that very considerable powers are given, and just how much this vaguely expressed intention is intended to cover is a matter about which we shall probably have to ask subsequently. Otherwise, subject to some criticism and to some of the Amendments of which notice has been given, we can say that this, Clause is a great improvement on the Clause that was previously introduced. We think the Chancellor was well advised to accept the suggestion of my hon. Friend the Member for Watford (Sir D. Herbert) to bring it in again and we only regret that he did not take the same step with regard to the Clauses which we have just passed.

Mr. A. M. SAMUEL

I want to put some questions so that we may know where we are. Is the Budget date the starting point for the operation of this Clause; how far is the Clause retroactive, and when does it begin to apply to existing contracts? That is all I want to know, because when we get these points cleared up, we shall know how the proposed law operates.

Mr. PALMER

I cannot allow this opportunity to pass without saying, as one who knows something about insurance and the practical application of these things, that this is a Clause which meets the industry in an admirable and generous manner. At the same time, I agree with the right hon. Member for Tamworth (Sir A. Steel-Maitland) that even agreements between the Chancellor of the Exchequer and the life assurance offices cannot be subversive of the rights and powers of this Committee. What I see in this proposed new Clause more than anything else is a correct attitude on the part of the Government and the Treasury to give a proper and thorough going business facility for what is, after all, a very extensive business and an important business in the life of this nation. It operates very extensively in all money matters and in all matters of income.

I was not surprised to find the Chancellor of the Exchequer pointing to the grave abuses as regards tax evasion that were possible under the single premium method, and I say without hesitation, knowing British insurance offices, and knowing the practical men in the field, that this new legislation is a welcome step. In spite of what may have been said to the contrary about our industry, I do not hesitate to say that it will always come down on the side of the State whenever there is any question of evasion. This Clause will, on the other hand, allow the development of legitimate business, in which we should otherwise have been handicapped, and on behalf of the industry as well as on behalf of the party of which I am a member I congratulate the Chancellor on this new Clause and I hope the Committee will take it from me that it is one which ought to be accepted.

Sir D. HERBERT

When the original Clause 12 was reached in the Committee stage I made some remarks about it which were not at all complimentary to it, and I am glad to be able to say that, in my humble opinion, this new Clause is an immense improvement. It is now a reasonable Clause. While congratulating the Chancellor of the Exchequer I may, perhaps, to some extent, congratulate myself on the suggestions which I made to him, and on having been so persistent. There is one point in regard to which I think he might have done better. My friends and I thought that some of us would be called into consultation as well as the representatives of the Life Offices Association, and had that been done I think it is extremely probable that the right hon. Gentleman would have got his Clause through to-night with even less discussion than now. I was entirely unaware that the Chancellor and his advisers had made any progress with the Life Offices Association until two or three days ago, and I have felt obliged to put down one or two Amendments to raise certain points, though not in any spirit of hostility to the Clause.

There is this justification for considering the Clause very carefully. The Life Offices Association, excellent as their objects in this matter may have been, and good as their work may have been—and all that I acknowledge most candidly—cannot bind any party in this Committee, and they do not even represent all the business interests concerned. I suppose my own profession has as much to do with transactions in policies after they have been effected as any profession, and, as is very well known to members of the lower branch of the legal profession points arise which are not within the cognisance of the Life Offices Association or life assurance societies generally. Therefore, I think it is unfortunate that the Chancellor did not call others into consultation.

I wish to refer to one or two points which the Chancellor mentioned in explaining the changes which have been made in this Clause. I am glad to notice that the alternative Clause which I put down has been made use of to some extent. It was only a skeleton Clause, but I think it has helped to make this Clause simpler. The most important part of this new Clause, or the portion which is most open to criticism, is Sub-section (3). I have no complaint at all about Sub-sections (1) and (2) but there are one or two points which may arise on Subsection (3) and we must discuss them on certain Amendments, though I may say that one or two are more drafting Amendments than anything else. But I observe that the Government propose now to relieve from the operations of this Clause all single-premium policies which were effected before the recent Budget, subject to the interest net exceeding 10 per cent., and when the policy is one which is payable on death only or payable on the expiration of a period of not less than 10 years. I have an Amendment on that which will allow that important question to be discussed later.

We are all aware of extreme cases in which payment of tax has been avoided by these short-term policies which really have no element of life insurance in them. On the other hand, there are policies which have a big element of life insurance, and I think the Government ought to take care that they do not hit policies where the element of life insurance is by far the biggest thing in the policy, and where the Government are very nearly certain—certain in 99 cases out of 100—to get very heavy death duties when the assured dies. With a view to discussing that question generally I have put down an Amendment. There are still faults in the drafting of this Clause which might have been avoided if others had been called into consultation. I refer particularly to Sub-section (3, c). That provides for the exemption applying to a policy which is taken out to protect a contingent interest or something of that kind. Obviously, one thing is there omitted. A policy taken out for the protection of a contingent interest is, I take it, in all ways on exactly the same footing as a policy which is taken out to protect a wasting interest, and I hope I am right in assuming that the Government will accept an Amendment to cover policies against a wasting interest.

The case of a policy with a contingent interest is limited in a way which I am inclined to think militates against what ought to be the policy of the Government, and what has been the policy of this country, that is to try and increase the amount of genuine life insurance. That has been qualified here by the necessity for what I call the supporting policy being taken out to serve as an additional security for the loan, and for no other purpose. I hope that that matter will be reconsidered between now and the Report stage. That is a question upon which some of us desire to be satisfied in one way or another. For the moment we certainly are not satisfied, and we hope to get some reasonable consideration for this question when we come to that part of the Clause. I would like to thank the Chancellor of the Exchequer and the Financial Secretary to the Treasury for what they have done in this matter, and to say that, as far as I am concerned, I shall proceed in a spirit of good will towards this Clause, which is mainly directed towards an object with which we all sympathise, and it does not stray very far from what we have been asking for.

Major HILLS

I congratulate the Government upon having produced a Clause which meets many of the objections which we have put forward from these benches. I am glad that they have done so, because I have covered the Order Paper with Amendments with a view to improving the original Clause 12. I confess to the Financial Secretary that I found my task an extremely difficult one, but now we have a very clearly-drawn Clause, and my criticisms will be upon small matters where the intention is not clearly expressed, and where I think the concessions which have been made might have gone a little further. It is always rather ungracious to ask for further concessions, more especially when so many have been granted, but there are two or three points which I desire to mention.

First of all, I think the Government are very wise in proceeding on the lines of excluding transactions in policies in which there is no life element. Nearly all those so-called tax evasion transactions are carried out on policies of very short currency up to six or seven years. They have no life element at all about them, and the money is only paid at the expiration of the term of the policy. If the insured should die during the currency of the policy no payment is made to the executors, and it is more in the nature of a gambling transaction. My second point is that actually, in hard cash, more money is paid to the insurance company than comes back to the insured, provided that the insured person lives for five or seven years. The advantage he gets is at the expense of the Treasury to such an extent that he can afford to pay co the insurance company for a so-called policy of insurance substantially a larger sum than he gets. All those transactions are now excluded, and they are wisely excluded.

Mr. PALMER

I would like the right hon. and gallant Member for Ripon (Major Hills) to be more specific about the cases where insurance can be overpaid in the manner which he has described.

Major HILLS

It is overpaid in this way: A single premium policy is taken out for a large sum, and 97½ per cent. of that premium is borrowed at interest. If you reckon up the interest it will be found that a good deal more is paid to the company than comes back to the insured if the man lives to the end of the time, and should he die during the currency of the policy all that interest is lost.

Mr. PALMER

I agree that, plus the interest, you may arrive at that conclusion.

Major HILLS

Practically the whole of the single premium is borrowed, and that premium, for a short currency policy, is bound to be a very large fraction of the value of the policy. Under Sub-section (3) the Government have made it a necessity that the policy should possess a life element, and should not be merely a gambling transaction. Secondly, I see that the term of 10 years has been fixed element, and should not be merely a policy to which this concession is granted, and I think that that is quite sound, too, if I may say so. Nobody takes out an endowment policy for less than 10 years for pure insurance purposes, or, at any rate, such policies are so rare that they need not be counted. Therefore, I think that the Clause is very well constructed. It meets the evil that the Government have to meet, and I think that in the main it does not damage insurance.

The important part of the Clause is Sub-section (3), which contains the exceptions, and I desire to make a few remarks upon it. The except-ions are limited to cases where interest is payable at a rate not exceeding 10 per cent. per annum, and I think that that also is quite a sound limit. Nobody would pay more than 10 per cent. in a reasonable business transaction, and I think that the Government have come to a wise decision here. Coming to paragraph (b): interest on money borrowed before the sixth day of April, 1929, I do not at present quite see what this does. The exception is given in regard to policies that were taken out before the 15th April of this year, and I do not see that the matter is carried very much further by paragraph (b).

A further objection, and a more important one, that I feel is in regard to paragraph (c) of Sub-section (3), which enables a man to borrow the premiums on a policy which he has assigned as security for a loan to cover the failure of a contingent interest in any property. A man may be entitled to come into money under a will, but he may lose that money if somebody living marries and has a child; and so, if he wants to borrow on that contingent interest, he must insure against the possibility of that child being born. There is another class of loan that I think ought to be included here. It is where a man borrows on a wasting security. Suppose that a man has a leasehold of a short term, say of 10, 12, or 15 years. If he wishes to raise money upon it, he must include a policy of leasehold redemption which runs out at the same time as the lease, and I do not think that under either sub-paragraph (i) or sub-paragraph (ii) of paragraph (c) he can do that. He can provide against the failure of a contingent interest, but I cannot see that he can borrow the premiums that fall due on a leasehold redemption policy, and I think it was the intention of the Government that he should be able to do so. I think that my hon. Friend the Member for Watford (Sir D. Herbert) raised this point during the first discussion of this matter, and I understood that the Chancellor of the Exchequer accepted his suggestion. Certainly, it is quite a fair suggestion; there is no sort of tax-dodging about a transaction of that kind. A man may be compelled, in these days, to raise money, and, if his only possession is the lease of a house, he must take out an endowment policy to complete the security. There is no tax-dodging about that at all; it is simply a facility which we may all be driven to use.

Then, at the beginning of paragraph (c), we find the word "mainly"— interest on money borrowed mainly on the security of property other than a contract of assurance. Therefore, the benefit of this Clause would not be given unless the money were borrowed mainly on property which was not the policy. May I put to the Financial Secretary a case which I think ought to be covered? Take the case of a man who holds a policy on his life. Assume that that policy was taken out many years ago, and that it runs at a premium of £100 a year. He may want to raise money on that policy. He goes to an insurance office, and says, "I will give you security for the premium on this policy. I have property or investments which I will pledge to you to meet the contingency of my failing to pay my premium, in order to complete the security for the loan on the policy." In that case the loan would not be secured mainly on the property, but would be mainly secured on the policy of insurance. That, again, is a perfectly reasonable and proper transaction. He may have a very valuable policy, which has run for many years at a low premium compared with the sum assured, and perhaps that is by far the cheapest way that he has of raising money; but, of course, the insurance office will say, "We have no security that you will pay these premiums. Charge your investments with these premiums, and then we will lend you the money." I cannot see any danger in leaving out the word "mainly," and I see that my hon. Friend the Member for Watford has an Amendment down to that effect.

Then, as I understand it, paragraph (d) of Sub-section (3) contains the main exception. It grants the benefit: of the exception to interest on borrowed money applied towards the payment of premiums under a contract of assurance which assures, throughout the term of the contract, a capital sum payable on death under certain conditions; and so a man may go to his bank and borrow the premium on his policy, and may deduct the interest on that borrowed money from his Super-tax return. I think that that is a perfectly proper exception to make, but may I ask the Financial Secretary to consider one thing? As I read paragraph (d), it applies only to whole-life policies; it applies to a contract of assurance for a capital sum payable on death. Could not that be extended to an endowment policy for 10 years or longer? Such a policy is a perfectly fair business insurance proposition. When you get a term of 10 years, and still more of 15 or 20 years, you reach a class of insurance that is more and more used. A man rather likes to think that he is not only paying for his successors, and he is not always satisfied with insuring a sum that somebody else can spend. Therefore, he assures a sum that will be paid on his death, but in any event will be paid at the end of, say, 20 years if he lives so long. That is what is called an endowment policy. It is extremely popular; it is perfectly proper; and I do not see why it should not be included under paragraph (d) by some such words as: a capital sum payable on the expiration of not less than 10 years from the date of the commencement of the contract, or on death. I venture to think that this point has been omitted accidentally. I do not think that paragraph (d), as drawn, would cover an endowment policy, and I do think that it is a very valuable thing. I think the Financial Secretary will find that, if two conditions are attached to such policies—firstly, that they shall run for 10 years at least, and, secondly, that they shall be payable on earlier death as well as at the expiration of that number of years—or, in other words, if all those transactions are excluded where there is no life element at all, I think it would be safe. I do not think it matters whether a single premium is paid or whether yearly premiums are paid. A man may want to insure his life for the benefit of his wife, and he may say, "I have got the money now for a single premium; I may not have the money to pay every year. I am rather an extravagant man, and would not trust myself to go on keeping up these premiums." There is no reason why that man should not pay a single premium, borrowing it from his bank, and making the policy quite sure for all time.

I am very glad all those transactions are included in the exceptions and, if the Financial Secretary sticks close to those two points, I think he could meet us on the other points we have raised. I do not want to help those who are escaping taxes. It has gone on to a very great extent. It was disliked intensely by all except a very small fraction of the life offices, but it was almost impossible, when one started, for the rest not to follow. The offices were all engaged in taking business, their agents were making money and things looked profitable for them. Still I know, as a matter of fact, they have warned the Treasury before now of the dangers ahead, and the Association of Life Offices have set their face against it always. So I do not suggest any of these Amendments with any idea of helping the man who wants to escape paying taxes. I think we have a good Clause and, with some of the Amendments of my hon. Friend the Member for Watford, it can be made into a very good Clause.

Sir HUGH O'NEILL

The growth of these single premium tax-evading policies has been very rapid and marked in the last few years, but we cannot avoid remembering that the reason that has given rise to this increasing practice is the very heavy rate of direct taxation from which we are suffering. There are a great many offices which have not gone in for this type of policy. I think my right hon. Friend was not strictly correct in saying practically all the companies had to follow the lead of those who are particularly connected with it, because I know of some which up to to-day have maintained the position that they do not care for this type of policy. Some of the very large new business figures which have been published by certain offices in recent years have been largely due to the great amount of single premium policies which they have been carrying through.

One of the most important alterations that has been made is that contained in Sub-section (3, a). It amounts to a very-material and considerable concession. It is all to the good as far as it goes, but the Government might have gone further. I do not quite see why these endowment and whole life policies should be limited to those entered into before 15th April of this year, and I think the point my right hon. Friend made was really the same point that I am suggesting, that the time limit of these endowment policies up to the day before the Budget could very properly, and I should have thought very reasonably, be removed. Endowment assurance is a very important, highly popular and greatly increasing form of life insurance, and anything that penalises it, as this Clause may do, is acting contrary to the advancement of life insurance. People like to think, if they are paying annual premiums, that they are going to get some advantage out of it before they die, and that is why the endowment insurance is so popular.

9.0 p.m.

We in this country are, I believe, very much under-insured as compared with many other countries, and it is very important for all Governments—I believe this Government recognise it as much as those which have preceded it—to encourage to the utmost of its power this very great institution of life insurance. I think no man who is dependent upon any form of salary or annual payment for his living should ever run the risk of death without being covered to some extent by life insurance, and it is a very natural and proper thing for every prudent and sensible man to do. Although we all admit that the Government is right in trying to put a stop to undesirable evasion of Super-tax payment by means of single premium policies, nevertheless they are running some risk in doing anything that is in any way going to affect life insurance or cause any loss of public confidence in it, and I hope very much that this new Clause, improved as it undoubtedly is, will go no further than to stop these undesirable policies and, if that is so, perhaps not so much damage to the great business of life insurance will be done as many of us had thought might be the result of this Clause.

Sir B. PETO

This Clause is fairly plain. There is only one part to which I want to address myself. It is in Subsection (3), where it appears to be made plain that the Clause as a whole is not to apply to interest on money borrowed before the 15th day of April, 1930, a date which is obviously selected because that was when the mind of the Government was first made public. It is not to apply to money borrowed before that date on a policy which assures a fixed capital sum payable on death only. I am dealing with this question on principle, Probably the minds of the Government are made up as far as this year is concerned, but I want to ask the Financial Secretary to the Treasury whether it is wise to do anything to prevent the Super-tax payer providing money, payable on death only, to be devoted to the payment of Estate Duty. The more we increase Surtax and the more we increase the share of the capital sum to be handed over at death, the more desirable it is, in the interests of the Treasury, to encourage the provision of a sum by insurance which can be handed over in settlement of Death Duties.

It will become more and more difficult to meet the Estate Duty according to how the policy of successive Governments is directed towards raising a larger share of the annual revenue from that source. Therefore, it is necessary to consider the principle whether it would not be wise in the interests of the Government to eliminate the date altogether and to say that they are quite prepared, as a matter of policy, where sums are payable at death only and are to be allocated to the payment of Estate Duties and consequently handed over to the Treasury, to make this act of remission to the Surtax payers during life. This is a policy which is well worth considering. With regard to the date being fixed as the 15th day of April, 1930, I think that it is a very proper thing that contracts with insurance companies entered into before the taxpayer had any knowledge of the objection to this form of insurance should be allowed to stand. But they say for the future that they are going to discourage any attempt to provide Death Duties by giving no remission of Surtax.

What is the proposition from the point of view of the oldish man who has to provide for an increase in the amount of Estate Duty larger than what he had anticipated in the early stages of his life'? He says, "I can afford, perhaps, to squeeze out of my income the premium for another policy of insurance. I have several policies, but the State is now demanding a still larger amount and I want to leave something for my heirs." This is not an unmeritorious sentiment on the part of anybody, whether old or young. And he says, "If only I had not to pay Surtax on the whole of my income and find this huge additional premium which is now demanded on a life policy because of my age, I might just be able to manage, and I should be providing a sum of ready cash which would prevent the dislocation of my estate, whatever it may be, on my death, and provide something, which could be got straight from the insurance company by my executors and so prevent a great deal of the hardship and dislocation which extend a very long way on the death of a rich man under the present circumstances."

I think that that is a thing which the Treasury ought to discuss. It really savours of the nature of double taxation. I think that it is not unreasonable if any Surtax payer has to make provision for the taking of a large part of his annual income for the settlement of the interest due on the loan raised for a big single premium policy, that the Treasury should say, "Well, that is a thing which on the whole is in the interests of the Treasury in the collection of Estate Duty." I put that point before the hon. Gentleman as another aspect of the question which has not been so thoroughly looked into as the mere question of Super-tax evasion. There are two sides to this question, as there are to most questions, and I have put down a new Clause—it may or may not be called—which bears upon the same question.

The CHAIRMAN

I can hardly allow the hon. Member to discuss his new Clause.

Sir B. PETO

Nothing was further from my mind than to discuss the Clause. I merely mentioned that this is an alternative method of dealing with the same subject. I think that it is very pertinent to say that it is well worth the while of the Treasury to consider whether it is not to the advantage of the collection of taxes to make it easy to make provision for the payment of those taxes. Therefore, in considering a Clause like this, which is aimed at the evasion of Surtax, the Treasury should not lose sight of the fact that these insurance policies ought to be operated without undue hardship to the person on whose estate the duty is to be levied, and without undue hardship to those other persons who are very numerous, in all cases of the death of the life owner of a large estate.

Mr. ALBERY

I presume I shall be in order in referring indirectly to an Amendment which was put down to the original Clause 12 and which has, presumably, been taken into consideration by the Government in framing their new Clause. I want to draw the attention of the Financial Secretary to the Treasury to the fact, as I understand the law at the present moment, that a certain class of insurance, paricularly life assurance, is at a very great disadvantage. It is a disadvantage which applies to the person who takes up the policy, and it is detrimental to the State as a whole and to people generally. I refer to the kind of policy which, I believe, is known as a half premium policy. Young people who have just been married and who are perhaps not earning a great deal of money and foresee the possibility of having children, frequently wish to cover themselves by insurance. They are not earning sufficient money at the time to enable them to take out as large a policy as they would desire, and it has been the custom of some insurance companies to grant them a policy and to loan to them half the premium. That has enabled people to take out a life policy for double the amount they otherwise would have been able to afford on their existing income. They hope, naturally, as frequently happens, that later in life they will be earning a bigger income, when the full premium on the policy may have decreased somewhat, and they may be able to pay off the money loaned by the in- surance company and continue the payment of the full premium. That is in every way a desirable thing, but it appears that, owing to the framing of the law at the present time—I am not well versed in the legal aspect of the case—the law is so framed that in order to get the benefit of deduction from Income Tax in respect of the premium paid they must have actually paid the premium.

The fact that they have only paid half the premium and have borrowed the other half, has resulted, I understand, in the law courts having decided against them. Therefore they have lust any benefit that they might have got by taking out a larger insurance. The effect of that decision must be that that kind of policy will not be taken out to the extent that would otherwise have been the case. It seems to me to be entirely desirable that that kind of policy should be encouraged, and I did hope that in framing the new Clause the Chancellor of the Exchequer would have taken that into consideration. It only needed a very small change in the present law, a change of two or three words. It would not have had any material effect on the Exchequer in the loss of money, although it would have encouraged a kind of policy which is in every way desirable, and against which I cannot conceive anything that can be advanced.

Captain BOURNE

I think this Clause is a very great improvement on the original Clause, and I should like to thank the Government for accepting my suggestion that they should use the word "premium" wherever possible. I felt that, on the whole, the word "premium" is much better understood than the words "antecedent payments." I should like to have some explanation with regard to the provision in Sub-section (1) that, no deduction shall be allowed in respect of any interest on any borrowed money which has been applied directly or indirectly towards the payment of any premium. At first sight it would seem that this might work rather harshly in certain cases. Take the case of a man who takes out a policy, and who happens, because of bad trade or for other reasons, to have an overdraft at his bank for two or three years upon which he pays interest, because he wishes to maintain his insurance policy. I believe that in such a case the fact that he has had to pay that interest will not bring him under this Clause. I think I am right in that assumption, because Sub-section (3) takes him out. I suggest that it is rather unfortunate that while one Subsection will bring a lot of people into the Clause another sub-section is put in which takes them out.

I should like also to know what is the object of Sub-section (3, b). I cannot see why it is any more heinous to borrow money from an insurance company than to borrow from anyone else. If the Government took up the attitude that it was iniquitous to borrow money in order to pay an insurance premium, that would be understandable, although I should not agree with them, but it seems to me a remarkable thing to say that it is a perfectly legitimate transaction to borrow money from the bank in order to pay a premium, and that under Sub-section (3, b) that transaction does not fall within the ambit of this Clause, but that if you borrow money from the insurance company with whom you have made the insurance, then the transaction falls within the ambit of this Clause, and the person who has borrowed the money is not permitted to deduct the interest on that borrowed money for the purpose of computing his income under this Clause. I am puzzled to understand why this provision has been put into the Clause, because it would seem to me that there is no greater heinousness or sin in borrowing from an insurance company than in borrowing from anyone else. I should be glad if the Financial Secretary to the Treasury would explain (1) why if an insurance premium is paid by a man who has an ordinary overdraft at the bank, that that does not come within the ambit of the Clause and (2) why it is necessary to penalise people who borrow money from an insurance company, when it is not necessary to penalise a person who borrows from a bank.

Mr. PETHICK-LAWRENCE

I will deal first with the point raised by the hon. and gallant Member for Oxford (Captain Bourne). With regard to Subsection (3, b) it is true that there is no greater heinousness in borrowing money from an insurance company than from any other source, but this paragraph is put in for administrative convenience. So far as borrowings from an insurance company are concerned this provision only applies to money borrowed before the 6th April, 1929. All the cases where an evasion was attempted will have been cases of money borrowed from an insurance company, because there was no reason why they would have taken any other course. Once they have been warned that money borrowed from an insurance company was likely to be caught, they may have tried another method of borrowing in order to escape the net of the provision that they anticipated was likely to be spread. A year ago some sort of warning was given that an attempt would be made to catch people who attempted to evade, and therefore the date is fixed for a year back, but in future there will not be the distinction which the hon. and gallant Member for Oxford rightly characterises as being for no good reason. It is not necessary to search all cases of other borrowings. It is sufficient for us to track down those cases where a man borrowed directly from the insurance company.

With regard to the other point raised by the hon. and gallant Member, I do not think that I can give an answer which will apply to all cases. So far as the future is concerned, it will depend whether the man comes within the exemptions in Sub-section (3). Provided that he comes within the exemptions of Sub-section (3), then such borrowing as is referred to will be all right; otherwise he will be caught. As regards the right hon. and gallant Member for Ripon (Major Hills), I think that some of his objections are unreal, because they are already covered under Sub-section (3, d). With regard to the hon. Member for Gravesend (Mr. Albery), I do not quite gather what he wishes. So far as this Clause is concerned, it deals with the evasion of Surtax. I do not anticipate that any of the people with whom he is concerned come under it, and we need not go out of our way in a Clause dealing with the evasion of Surtax to give relief to an entirely different class on an entirely different proposition. A separate Clause will be required, and it would certainly be difficult to introduce it in this Clause.

Sir D. HERBERT

Does the hon. Gentleman propose to deal also with policies in regard to wasting assets in the same way?

Mr. PETHICK-LAWRENCE

There is an Amendment dealing with that.

Lord EUSTACE PERCY

What happens supposing a man is living on an overdraft from his bank for some years and during those years he continues to pay a premium? He does not borrow from his bank specifically to pay a premium because he happens to have a current overdraft. The Financial Secretary said that whether that man is caught depends on whether he comes under the particular exemptions provided in Sub-section (3), but all the exemptions provided in Sub-section (3) depend upon the nature of the contract of assurance. What has the nature of the contract of assurance got to do with the fact that the man is going on paying his premiums, whatever the nature of the contract, and simply has a current overdraft at his bank? Is it really intended that, unless the contract of assurance is of a particular kind, the mere fact that a man has an overdraft at his bank is sufficient to make him incur the suspicion of evading Surtax by paying premiums on borrowed money?

Major HILLS

Do I understand that Sub-section (3, d) includes an endowment policy as well as a whole life policy?

Mr. PETHICK-LAWRENCE

It includes a policy which is either life or endowment and not a policy confined an endowment.

Major HILLS

Is the hon. Gentleman sure there is not some misunderstanding there? If he reads Sub-section (3, a, ii) he will find quite a different definition of an endowment policy.

Mr. PETHICK-LAWRENCE

Paragraph (a) refers to pre-Budget policies and paragraph (d) refers to post-Budget policies.

Major HILLS

Then it is clear that paragraph (d) does not exclude an endowment policy. If so, it has removed any objections I felt.

Sir D. HERBERT

I beg to move, as an Amendment to the proposed new Clause, to leave out from the word "assurance," in line 23, to the word "which," in line 24.

I put this Amendment down rather hurriedly last night when I was trying to follow what was going on here as well as to consider this Clause, and I quite realise from what the Chancellor said that it is not at all likely that he will agree to it at this stage, but at the same time I want to move it and to draw the attention of the Government Front Bench to the real point I have in mind. I should like, therefore, to explain that, in leaving out this limitation to policies which were entered into before the Budget day of this year, I am not particularly anxious to cancel that limitation except in cases of policies payable on death only. If there is any chance of the Government considering this Amendment, I should follow this Amendment by a further one so as to make this Amendment apply to a contract of insurance, whenever entered into, which ensures a fixed sum payable at death only or, secondly, one which, having been entered into before 15th April, 1930, assures the payment of a fixed sum at the expiration of a period of not less than 10 years, and so on.

I want to press upon the Government a point of view which has been very much overlooked with regard to the Clause. Policies which are payable on death only are very seldom, if ever, taken out for the main purpose of avoiding tax. No doubt it is perfectly true that the avoidance of a certain amount of tax may be one result of it, but it has been our policy to let people off a certain amount of tax in order to encourage them to assure their lives. We give them a rebate and relief from Income Tax in respect of premiums paid. In my view, the Government and the revenue ought almost to be prepared to allow further relief to the taxpayers for the purpose of encouraging them to take out genuine life assurance policies. If those policies can only become payable on death, then I do not think the revenue is going to lose because, as the hon. Member will agree, it is very difficult, if not impossible, under the law as it stands at present, for any policy taken out on a man's life and payable only after his death to escape payment of Estate Duty on his death. Therefore, if the life assured lives out the ordinary term of life, assuming that the revenue has lost a certain amount of Surtax during his lifetime, in return for that they get on his death money which he would not have saved otherwise. They get a large sum falling into his estate which has to pay death duties and, if it is a large amount, will probably increase the rate of Estate Duty that is paid.

Therefore, I suggest very seriously that it is a mistake in this particular Clause to include in any degree at all policies which are payable only on death. I am afraid that it is too late now to press this, but none the less I feel bound, because this is the kind of thing that may be brought up again, to remind the Government of a matter they seem to have overlooked both here and in other parts of the Bill. The Government have not recognised sufficiently the immense value to the people and to the revenue of this country of an extension of life assurance, particularly in big figures. I think I am justified in moving this Amendment and hearing the views of the hon. Member in reply as to how he can really defend bringing into this Clause policies which are payable on death only.

Mr. PETHICK-LAWRENCE

I am afraid it is quite impossible to accept this Amendment. In the form in which the hon. Member moves it, it will, of course, affect not merely life assurance but pure endowment single premium policies and, even in the form in which the hon. Member says he would agree to accept his Amendment, I can see no real, genuine ground on which he ought to ask us to accept it. It would let in practically all the policies, and the whole object of the Clause would be defeated. One who chose to take out by a single premium an endowment policy, would only have to take out a policy for over 10 years to avoid entirely the provisions of this Clause. The hon. Member seems to assume that this is a normal and natural method of effecting a life assurance, but really that is not the case. The normal method of effecting a life assurance is by a series of premiums which the assurer pays out of his own pocket. The normal method of a working man is to pay a premium out of his income. Alternatively, a man can take the course of a single premium paid out of his estate in order to secure assurance at his death. Further to that, he can, if he likes, pay a series of premiums extending over a considerable period of time, and borrow the money. The hon. Member wishes to protect him in taking the very unusual course of a single premium, the whole or a considerable part of which he borrows.

I suggest that that is a course which is so unusual, and there is so little point in taking that action, that it can only be done for the purpose of evading Surtax. And if it is said: "Well, the man wishes to do it," at least I think we are entitled to say that if he does it, he shall not evade Surtax. That is all we are asking in the Clause as it stands. If a man effects a life assurance by the wholly unnecessary method of a single premium, and borrows the money in order to pay that single premium, he shall not thereby be enabled to evade the Surtax. The whole object of this Clause is to secure that he shall not evade. I cannot accept the Amendment.

Major HILLS

I believe the hon. Member has correctly stated the facts of this Amendment. We are getting to a rather curious conclusion. A man may borrow premiums up to any amount so long as they are annual premiums, and he can deduct the interest on his borrowed money from his Surtax return, and he can in the end, if he lives a normal term of expectation, get much more off of his Surtax return than he would if he had paid a single premium and deducted the interest paid to his bank on the sum borrowed in his Surtax return. I am afraid I recognise that no concession is possible, and I agree with my hon. Friend that I cannot see any tax-dodging in the single premium. It is often used by people who want 6ecurity and absolute certainty. A man says, "I want to know that when I die, ray wife will come into a thousand, pounds, and nothing that I can do will prevent her coming into that thousand pounds," and he may go to his bank and borrow a single premium, of 40 per cent. or 60 per cent., and pay it over to the assurance company, and he knows that his wife is safe. I cannot see that he can dodge tax by that. I believe the revenue would lose more in the concession under paragraph (b), whereby a man can borrow all the successive premiums and can deduct the interest on the money borrowed in his Surtax return.

Sir D. HERBERT

I do not propose to press the Amendment.

Amendment, by leave, withdrawn.

Sir D. HERBERT

I beg to move, as an Amendment to the proposed new Clause, to leave out the words from the word "twenty-nine," in line 30, to the end of line 34.

This Amendment was put down by me with the object of obtaining an explanation of what the Government means in paragraph (b), because I do not understand it. In order to get at the meaning of this particular Clause we must first go back for a moment to a previous provision, which exempts borrowed money in respect of policies entered into before April of this year. Now we get an exception, of interest on money borrowed before the 6th April of the previous year. That, of course, is covered by the Clause above. Then there is this qualification to it: If the money was borrowed before the 6th April, 1929, it was certainly borrowed before the 15th April, 1930. Therefore to that extent, interest on money borrowed before the 6th April, 1929, was covered by the previous Clause, which deals with a contract entered into before the 15th April, 1930. The hon. Member is, I think, with me so far. Then follows the qualification: "Unless the money so borrowed is borrowed from an assurance company, etc."

Am I right in understanding this? There are cases of money borrowed before the 6th April, 1929, which would not be excluded under the previous sub-section, because—and I think that would be the only reason—they were endowment policies for a period of less than 10 years. I think that is, as far as I can see, the only policy which can be affected here. If that is so, I realise that the particularly objectionable type of policy to which we all object—the very short-term endowment policy taken out before this year, where the man who has taken it out has got some fear of what was going to happen, and therefore went and borrowed the money from his bank in order to repay the insurance company or something like that, to endeavour to get out of this legislation—is the kind of case which this paragraph is intended to cover. I have been trying to put my own interpretation on the remarks of the Financial Secretary a short time ago but, apparently, he does not understand my description and, therefore, I must have misunderstood his description. In these circumstances, I would ask him for a little further information as to the reasons for this paragraph, and what are the cases which can possibly come under it?

Mr. PETHICK-LAWRENCE

I think the hon. Member has stated the position correctly, but it is a little difficult to understand exactly his method of putting it. The position is that paragraph (a) definitely exempts certain pre-Budget policies from the operation of the Clause and paragraph (b) is put in for administrative purposes, largely in order not to impose an investigation when in 999 cases out of 1,000 no advantage would be gained. So far as policies which were entered into more than a year before the Budget began, if there had been a desire to evade they would have borrowed their money from the assurance company. If they do not do so and the money was borrowed in some other form, it was not for the purpose of evasion, and there is no need to trouble with those cases.

Sir D. HERBERT

But that policy is exempt under a previous paragraph if it is payable on death or has a currency of more than 10 years. This paragraph can only apply to short term endowment policies of less than 10 years. In these circumstances, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Sir D. HERBERT

I beg to move, as an Amendment to the proposed new Clause, in line 35, to leave out the word "mainly."

This Amendment must be taken with the following Amendment on the Order Paper—in line 35 to leave out the words "other than," and to insert instead thereof the words" together with." I hope that the Parliamentary Secretary will report to the Chancellor of the Exchequer that I have been very good in his absence and that he will be able to meet me on these two Amendments. The effect of them is to get rid of the uncertainty arising from the use of the word "mainly" and also to per- mit the exception from this Sub-section of a policy which, quite possibly, may be just as important a part of the security as the other property which the policy supports. Let me give the Financial Secretary a common type of security on which money is borrowed, namely, the security of the life interest with a policy on the life. It is difficult in many cases to say that the life interest is the security on which the money was mainly borrowed. It would depend on the age of the life and on many other considerations, and in some cases it might be borrowed mainly on the policy. You may have this ridiculous position, that when the money was first borrowed on the life interest of a young person it would undoubtedly be mainly on the life interest, but 20 years afterwards, when the loan still remains and the life becomes old, it would be principally on the policy. There is a strong case here for a reconsideration of the wording of the Clause. This is perhaps the kind of criticism which comes from this Committee rather than from the officials of life insurance associations. It is not a point which would be as likely to occur to them as to members of my profession. But we have a strong case for asking for the omission of the word "mainly" and for the substitution of the words "together with" for the words "other than."

Mr. PETHICK-LAWRENCE

I am sorry, in spite of the sweet reasonableness of the hon. Member for Watford (Sir D. Herbert), to say that we do not feel able to accept these amendments. The essence of this exemption is that the assurance policy is something ancillary to another property. If the word "mainly" is left out, and if the words "other than" are left out and the words "together with" inserted, you may get an entire reversal of the position. The assurance policy may become the main matter and the other may become entirely ancillary to it. That being so, the door would be open, not necessarily very wide, for evasion of the precise kind which we are endeavouring to stop. This Clause with the word "mainly" has been accepted by the life offices with whom we have been in consultation, and they are very anxious that it should be carried in the form in which it has been approved. In these circum- stances, I do not see any advantage in introducing verbal Amendments of this kind which either have little effect or have the effect of again opening the door which we hope to close by this Clause. I am sorry to have to give this reply, but I feel that we must stand firm on the Clause as it is.

Major HILLS

I can assure the Financial Secretary that this is not a verbal Amendment but an important matter, and I really think it is a concession which the Chancellor of the Exchequer might give without in the least impairing the efficiency of the Clause. All we ask is that when you allow a man to deduct interest on borrowed money from his Surtax return you should not confine that concession to cases where the money is borrowed mainly on the property, but should extend it to cases where the policy of assurance may be the main part of the security. I cannot see how you would encourage any tax dodging. A man may possess a policy on his life, on which he has paid premiums for many years. He may want to borrow money on that policy, but he cannot complete that security unless he pledges some investment to the assurance company to meet the premiums on the policy. Unless the office are assured that the premiums will be paid as long as that man lives the security is not complete. There the main security for the loan is the policy and not the investment. There is no difference in the equity of the transactions and that transaction is just as little open to tax-dodging as the other. I know the difficulty of giving concessions and perhaps I know the danger too, but I ask the Chancellor of the Exchequer to consider this matter between now and the Report stage because I think that the Mover of the Amendment has put his finger on what is a serious blot on the Clause. I think it reasonable to ask that we should have some promise that it will be considered, and I believe that my hon. Friend would be satisfied with such a promise.

Sir B. PETO

The Committee have omitted to notice that all this matter is contingent on the alternatives set out in Sub-section (3, c, i) and (3, c, ii). I understand that paragraph (c) is inserted in the Clause simply to deal with certain exceptional cases—first, the case in which the premium is payable under a contract of assurance entered into to provide against the failure of a contingent interest in property, and, second, where the premium is the first of a series of premiums payable under a contract of assurance entered into solely to provide for the repayment of the money borrowed. I understand that assurance companies very often issue policies for a round sum, say of £10,000, at a premium of £500 a year and deduct £500 from the amount which they hand over, thus handing over £9,500. That is the contingency which is dealt with in paragraph (c, ii). Therefore, in the whole of paragraph (c), we are dealing with certain quite exceptional cases, specified in the manner I have indicated, and all this question which we have been discussing appears to me not to arise on this paragraph. I agree with the hon. Member for Watford (Sir D. Herbert) that the word "mainly" is perhaps a rather unfortunate word to use, but, after all, this is a very limited question, and the word is not inappropriate when we consider the terms of paragraph (c, i) and (c, ii). It indicates that the exception applies to money borrowed mainly on the security of property other than the assurance policy if it is one of these two exceptional cases, and only if it is one of these two exceptional cases.

Amendment negatived.

Sir D. HERBERT

I beg to move, as an Amendment to the proposed new Clause, in line 38, after the word "contingent," to insert the words "or wasting."

10.0 p.m.

It is agreed that, if a policy is taken out to support a contingent interest, it should be excepted so long as it is limited to that purpose and surely there ought to be the same protection if the termination of the interest in that property is quite certain and is not merely contingent. Let us consider the kind of thing which may happen very often in connection with a trust fund. A leasehold house is bought out of moneys advanced from a trust fund. Those moneys have to go back to the fund at some time or other and the ordinary business way of doing it is by means of what is known as a leasehold endowment policy. The man who is entitled to live in the house or is entitled to the income from the property may only be able to get the trustees to advance the money to buy the house—if it is a leasehold house—on the understanding that he pays down a sum of money which in the course of years will provide enough, by means of insurance, for the repayment to the trust fund when the lease expires. I think that a wasting asset which requires to be protected by insurance in order to make it a substantial and continuing form of property requires as much consideration as one, the continued existence of which depends only upon an uncertain contingency.

Mr. PETHICK-LAWRENCE

I regret that in this case too we are not able to meet the wishes of the hon. Member. We feel that the words in paragraph (c, ii) are sufficient to give as much relief as people are entitled to in these cases. We have given relief in respect of interest on money borrowed which is applied to the payment of the first of a series of periodical premiums on a redemption policy, provided the premium does not exceed 10 per cent. of the sum assured. Paragraph (c, ii) we think provides all that is required for ordinary business convenience. We think that the Amendment goes a great deal further than that—indeed that it goes too far and would leave open the way to transactions which would enable avoidance of Surtax to take place.

Major HILLS

Surely paragraph (c, ii) refers only to the first premium payable and the reason for that is perfectly clear. If a man is raising money on a wasting security coupled with a policy and he borrows the first premium in order to start clear, he could not get the concession on that borrowed premium unless this paragraph were in the Clause. It is true that the Amendment goes further than that but surely it is not desired that a man who borrows on a contingent interest—an interest that might be defeated for instance by the birth of a child or some other event—should be placed in a better position than a man who borrows on a leasehold which is a far more common thing. There is an immense amount of leasehold property—by far the bigger part of London is leasehold property—and if you are giving this concession at all, surely you ought to give it in the case of a wasting security of the character of a leasehold and not only in the case of a contingent security which may be defeated by some future event. It is a very large class of transactions, that is going on every day, and since the concession has been given, I think it ought to be extended. It cannot affect tax dodging; it is simply a business transaction. A man has a leasehold and he has to raise money on it, but he cannot do so unless he takes out a leasehold redemption policy, which will provide the money at the termination of the lease. Why should you penalise that man? If you allow the man with a contingent interest to get this concession, this man with a wasting asset should get it also.

Sir A. STEEL-MAITLAND

May I reinforce this very briefly, because it is typical of the way in which some of our suggestions have been met? An Amendment has been proposed by any hon. Friend the Member for Watford (Sir D. Herbert), to which the Financial Secretary has replied, "This is going too far. It will open the door to some other undesirable things." We do not want to do that, but it is up to the Financial Secretary to suggest an alternative. Here you introduce Clauses intended to stop tax evasion. We do not wish to prevent evasion being stopped, but if those Clauses interfere also with practices equally legitimate and right with those for which you yourselves wish to provide, surely, when we produce an Amendment in order to meet those cases, it is not enough to reply, "We do not like the look of it, and therefore we shall do nothing." The answer should be to say, "If you do not press your Amendment, we will at least try to meet these legitimate practices by some other and better way."

Sir D. HERBERT

I think we are entitled to ask for some better explanation than we have had hitherto of the refusal to accept this Amendment. The hon. Gentleman used arguments which, so far as they were applicable at all, were quite as applicable to the case of a contingent interest as to the case of wastage. I am very sorry, but I can only draw one conclusion, and that is that the hon. Gentleman and his chief have come to the conclusion that whatever happens they are net going even to consider any sort of suggestion by way of Amendments to this Clause. I have already moved three Amendments, every one of which I withdrew, because I got the explanation that I wanted, or at least some sort of answer, which showed that there was some reason for refusing the Amendment. In this case we have none at all. I would challenge any man of business or any lawyer to tell me why a wasting asset should be treated any differently from a contingent interest, and unless the Government can give us a better answer, I shall feel bound to divide on this Amendment. I feel confident that if the right hon. Gentleman were to put this question to the business men of the City of London, he would find that they would support my contention; and until I get some very much better answer, I must continue to press the Amendment.

Mr. PETHICK-LAWRENCE

There are two things to be said in reply to the hon. Member. In the first place, the normal method of procedure in the cases mentioned is for a man to pay the premiums himself; and, in the second place, if he does borrow, we are not stopping him from carrying out the practice which the hon. Member wishes him to do.

Sir D. HERBERT

But the whole essence of it is the borrowing.

Mr. PETHICK-LAWRENCE

All that we say is that if he adopts the particular method which the hon. Member envisages, he shall not thereby escape the Surtax which otherwise he would have to pay. These Amendments have been very carefully considered, and not only so, but the form of words which we have inserted in the Clause has been agreed with a, very large number of people who have thought them out very carefully. They have not asked for additional Amendments, and under those circumstances it is not from any sense of discourtesy, but after very careful consideration, that the words in the Clause seem to us not to open the door to evasion, and they have been accepted by those who, from the other point of view, have been looking into the matter.

Sir A. STEEL-MAITLAND

The Financial Secretary has just repeated the kind of argument which both the Chancellor of the Exchequer and he disclaimed any wish to use at the beginning of the discussion of this Clause. The greater part of what he said amounts to this, that they have agreed this Clause with the insurance companies outside, and that that ought to be sufficient. It is true that consultation with the insurance companies has resulted in an infinitely better Clause than was the case before, but that it should be the ultimate word of wisdom on every conceivable point, which could not possibly be amended, is absurd.

Mr. CHURCHILL

I beg to move, "That the Chairman do report Progress, and ask leave to sit again."

I am most anxious that nothing should occur to raise the temperature of this debate at a season of the year when already the physical temperature runs unusually high in these latitudes, and therefore, as I indicated a little earlier in our proceedings, in the hope that we may accelerate our proceedings as much as possible, I ask leave to move to report Progress in order to give to the Chancellor of the Exchequer an opportunity of telling us now with fuller knowledge what he thinks should be the immediate course of our discussion.

Mr. P. SNOWDEN

I regret to have to say that I am not in possession of any fuller knowledge now than I was some two hours ago, and I am sorry that I cannot satisfy the right hon. Gentleman to any greater extent than when I last spoke. The debate on this Clause has gone on longer than I expected. I do not complain I simply state the fact. When I last spoke, I said I hoped that we might be able to make some inroad upon the new Clauses this evening, and I have not abandoned that hope. I shall certainly not ask the Committee to sit after 12 o'clock, and I hope that between now and then we may make reasonable progress. I am afraid I cannot say anything beyond that.

Mr. CHURCHILL

Of course, I am sorry the right hon. Gentleman is not able to give any further indication of his wishes than that which has just fallen from him. This Clause on which we have been engaged is one of very deep interest, affecting as it does at so many points the life of the community. The right hon. Gentleman would, I am sure, be well advised to come to some conclusion in his mind, because we feel, although we may be allowed to go to bed to-night at a reasonable hour, that he would have a grievance—not a legitimate grievance, out a natural grievance, not a grievance against us, but a grievance against things in general, if he had not made considerable progress with the new Clauses. There is not much chance of that, and he will be well aware of the difficulties that lay before us. This particular Clause, although the right hon. Gentleman has agreed it with the experts and the authorities of the life assurance companies, is a matter which cannot be hurried. We have our views and they are disinterested views, and we cannot leave this on the Statute Book simply in the form in which it is arranged with the eager tax-gatherer and these great vested interests in the life assurance companies. We must examine it, and make sure that legislation is not the result of any particular deal or arrangement between the Government and any particular section of the community, but that it represents the settled conviction, after searching examination, of the House of Commons and of the great mass of the electorate of which we are the servants.

I trust that we may get through this Clause before the hour of midnight strikes to wake Cinderella from her dream, but even so, the next step will be to embark upon a question of extraordinary complexity and one which appeals in a special manner to almost every family among the Income Tax payers—the question whether Income Tax should be reckoned jointly or severally between people who are living together united by the matrimonial tie. I am not going to anticipate that on a Motion to report Progress, but it seems to me that this is a subject which arouses the combative instincts of millions of householders throughout the land, and it is only natural, and indeed inevitable, that these combative instincts, so widely excited, should find their representative repercussions in our attitude upon this side of the Committee. We shall have to address ourselves with very great zest and zeal to these matters if we are to make any progress to-night, and rather than delay the proceedings I will ask leave, in order to facilitate progress, to withdraw my Motion, which I made in the hope that the Chancellor of the Exchequer would be able, by a wave of a fairy wand, to relieve us of many of our anxieties. He is not able to do so, and therefore I think the best thing I can do is to ask leave to withdraw the Motion, so that we may immediately address ourselves to the serious difficulties that lay before us.

Motion, by leave, withdrawn.

Question again proposed, "That those words be there inserted."

Sir B. PETO

In moving this Clause, the Chancellor states that he could not accept any substantial Amendments which would change its main purpose. My hon. Friend the Member for Watford (Sir D. Herbert) moved a series of Amendments which were mere drafting Amendments, and would not have changed the purpose which the Chancellor had in moving this Clause. We have got now to an Amendment which aims at liberating from the operations of this Clause a number of ordinary commercial transactions which are much more frequent than those which are expressly exempted by this particular Sub-section. The Financial Secretary said he could not accept the Amendment because he could see no reason why those ordinary commercial transactions should not be put through if the borrower of the money were prepared to pay the premium in the ordinary way without borrowing money at all. Paragraph (c) deals expressly with an exception governed by the words of Sub-section (3), which says that the Clause shall not apply to interest on money borrowed mainly on the security of property other than a contract of assurance, if the premium in question either (i) is payable under a contract of assurance entered into in order to provide against the failure of a contingent interest And there my right hon. Friend proposes to put in the words "or wasting interest." If this Clause were not put into this Bill, this type of transaction would never be questioned, and whatever rights the borrower of this money has in respect of the interest on the borrowed money, setting it as against his ordinary income, would exist. The Finan-

cial Secretary says, however, that he cannot accept the Amendment, not because of any attempt to evade Surtax, and not because he says this is a type of transaction that ought not to be included; in fact, he really gives us no reason whatever why money borrowed under a contract of insurance to provide against the failure of a contingent interest should be exempt, but not a contract of insurance to provide for a wasting interest.

I rose only to point out to the Chancellor that dais is not an Amendment of the kind which he said he could not accept as being an Amendment directed at the root purpose of the Clause. This Amendment merely points out a flaw in the Clause, which would not have occurred if my right hon. Friend the Member for Watford had been brought into consultation, or if the Treasury had consulted anybody representing the ordinary commercial interests of the country, or solicitors, who are as frequently concerned in these transactions. [An HON. MEMBER: "Or Lord Beaverbrook!"] Naturally they look at it from the point of view of the insurance business, and I think the Chancellor of the Exchequer ought to look at this question with an open mind. There is nothing in this Amendment which will prevent full accomplishment of his purpose. I appeal to the right hon. Gentleman to say that he will look into the question between now and the Report stage, and I hope he will consult some of those gentlemen who can advise him on this point. I am sure he can consult some of the legal members of the community, who will be able to tell him what is the ordinary practice, and whether there is any evasion of this Clause or not, When he has had an opportunity of consulting those advisers, I am sure he will see the wisdom of inserting this Amendment on Report.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 131: Noes, 258.

Division No. 411.]	AYES	[10.26 p.m.
Acland-Troyte, Lieut.-Colonel	Balniel, Lord	Bracken, B.
Albery, Irving James	Beamish, Rear-Admiral T. P. H.	Braithwaite, Major A. N.
Allen, Sir J. Sandeman (Liverp'l., W.)	Birchall, Major Sir John Dearman	Brass, Captain Sir William
Atholl, Duchess of	Bird, Ernest Roy	Buchan, John
Baillie-Hamilton, Han. Charles W.	Boothby, R. J. G.	Bullock, Captain Malcolm
Baldwin, Rt. Hon. Stanley (Bewdley)	Bourne, Captain Robert Croft	Cadogan, Major Hon. Edward
Balfour, George (Hampstead)	Bowyer, Captain Sir George E. W.	Christie, J. A.
Balfour, Captain H. H. (I. of Thanet)	Boyce, H. L.	Churchill, Rt. Hon. Winston Spencer
Cockerill, Brig.-General Sir George	Henderson, Capt. R. R. (Oxf'd, Henley)	Reid, David D. (County Down)
Colman, N. C. D.	Heneage, Lieut.-Colonel Arthur P.	Remer, John R.
Colville, Major D. J.	Herbert, Sir Dennis (Hertford)	Rentoul, Sir Gervais S.
Cranborne, Viscount	Hills, Major Rt. Hon. John Walter	Reynolds, Col. Sir James
Crichton-Stuart, Lord C.	Howard-Bury, Colonel C. K.	Roberts, Sir Samuel (Ecclesall)
Cunliffe-Lister, Rt. Hon. Sir Philip	Hudson, capt. A. U. M. (Hackney, N.)	Russell, Alexander West (Tynemouth)
Dalkeith, Earl of	Iveagh, Countess of	Salmon, Major I.
Dalrymple-White, Lt.-Col. Sir Godfrey	Kindersley, Major G. M.	Samuel, A. M. (Surrey, Farnham)
Davidson, Rt. Hon. J. (Hertford)	King, Commodore Rt. Hon. Henry D.	Samuel, Samuel (W'dsworth, Putney)
Davies, Dr. Vernon	Knox, Sir Alfred	Sandeman, Sir N. Stewart
Davies, Maj. Geo. F. (Somerset, Yeovil)	Lane Fox, Col. Rt. Hon. George R.	Savery, S. S.
Davison, Sir W. H. (Kensington, S.)	Law, Sir Alfred (Derby, High Peak)	Skelton, A. N.
Dawson, Sir Philip	Leigh, Sir John (Clapham)	Smith, R. W. (Aberd'n & Kinc'dine, C.)
Dixey, A. C.	Leighton, Major B. E. P.	Smith-Carington, Neville W.
Dixon, Captain Rt. Hon. Herbert	Llewellin, Major J. J.	Somerville, A. A. (Windsor)
Dugdale, Capt. T. L.	Locker-Lampson, Rt. Hon. Godfrey	Somerville, D. G. (Willesden, East)
Eden, Captain Anthony	McConnell, Sir Joseph	Spender-Clay, Colonel H.
Edmondson, Major A. J.	Macquisten, F. A.	Steel Maitland, Rt. Hon. Sir Arthur
Falle, Sir Bertram G.	Maitland, A. (Kent, Faversham)	Thomson, Sir F.
Ferguson, Sir John	Marjoribanks, E. C.	Tinne, J. A.
Fielden, E. B.	Mason, Colonel Glyn K.	Titchfield, Major the Marquess of
Ford, Sir P. J.	Merriman, Sir F. Boyd	Train, J.
Forestier-Walker, Sir L.	Mitchell-Thomson, Rt. Hon. Sir W.	Tryon, Rt. Hon. George Clement
Ganzoni, Sir John	Mond, Hon. Henry	Vaughan-Morgan, Sir Kenyan
Gibson, C. G. (Pudsey & Otley)	Monsell, Eyres, Com. Rt. Hon. Sir B.	Ward, Lieut.-Col. Sir A. Lambert
Glyn, Major R. G. C.	Moore, Sir Newton J. (Richmond)	Warrender, Sir Victor
Gower, Sir Robert	Moore, Lieut.-Colonel T. C. R. (Ayr)	Wells, Sydney R.
Graham, Fergus (Cumberland, N.)	Morrison, W. S. (Glos., Cirencester)	Williams, Charles (Devon, Torquay)
Greene, W. P. Crawford	Morrison-Bell, Sir Arthur Clive	Windsor-Clive, Lieut.-Colonel George
Grenfell, Edward C. (City of London)	Muirhead, A. J.	Wolmer, Rt. Hon. Viscount
Gretton, Colonel Rt. Hon. John	O'Connor, T. J.	Womersley, W. J.
Guinness, Rt. Hon. Walter E.	Oman, Sir Charles William C.	Worthington-Evans, Rt. Hon. Sir L.
Hacking, Rt. Hon. Douglas H.	O'Neill, Sir H.	Young, Rt. Hon. Sir Hilton
Hamilton, Sir George (Ilford)	Peake, Capt. Osbert
Hanbury, C.	Percy, Lord Eustace (Hastings)	TELLERS FOR THE AYES.—
Harvey, Major S. E. (Devon, Totnes)	Peto, Sir Basil E. (Devon, Barnstaple)	Sir George Penny and Captain
Haslam, Henry C.	Ramsbotham, H.	Wallace.
NOES.
Adamson, Rt. Hon. W. (Fife, West)	Cove, William G.	Horrabin, J. F.
Adamson, W. M. (Staff., Cannock)	Daggar, George	Hudson, James H. (Huddersfield)
Addison, Rt. Hon. Dr. Christopher	Dallas, George	Hunter, Dr. Joseph
Aitchison, Rt. Hon. Craigie M.	Davies, E. C. (Montgomery)	Hutchison, Maj.-Gen. Sir R.
Alpass, J. H.	Dudgeon, Major C. R.	Isaacs, George
Ammon, Charles George	Duncan, Charles	Jenkins, W. (Glamorgan, Neath)
Arnott, John	Ede, James Chuter	John, William (Rhondda, West)
Aske, Sir Robert	Edge, Sir William	Johnston, Thomas
Attlee, Clement Richard	Edmunds, J. E.	Jones, F. Llewellyn- (Flint)
Ayles, Walter	Edwards, E. (Morpeth)	Jones, Morgan (Caerphilly)
Baker, John (Wolverhampton, Bilston)	Egan, W. H.	Jowett, Rt. Hon. F. W.
Baldwin, Oliver (Dudley)	Elmley, Viscount	Jowitt, Rt. Hon. Sir W. A.
Barnes, Alfred John	Foot, Isaac	Kelly, W. T.
Barr, James	Forgan, Dr. Robert	Kennedy, Thomas
Batey, Joseph	Freeman, Peter	Kinley, J.
Bellamy, Albert	Gardner, B. W. (West Ham, Upton)	Lang, Gordon
Benn, Rt. Hon. Wedgwood	Gardner, J. P. (Hammersmith, N.)	Lansbury, Rt. Hon. George
Bennett, Capt. Sir E. N. (Cardiff C.)	Gibbins, Joseph	Lathan, G.
Bennett, William (Battersea, South)	Gibson, H. M. (Lancs, Mossley)	Law, Albert (Bolton)
Benson, G.	Gill, T. H.	Law, A. (Rosendale)
Bentham, Dr Ethel	Glassey, A. E.	Lawrence, Susan
Bevan, Aneurin (Ebbw Vale)	Gossling, A. G.	Lawrie, Hugh Hartley (Stalybridge)
Birkett, W. Norman	Graham, D. M. (Lanark, Hamilton)	Lawson, John James
Bondfield, Rt. Hon. Margaret	Graham, Rt. Hon. Wm. (Edin., Cent.)	Lawther, W. (Barnard Castle)
Bowen, J. W.	Granville, E.	Leach, W.
Brockway, A. Fenner	Gray, Milner	Lee, Frank (Derby, N. E.)
Brooke, W.	Grenfell, D. R. (Glamorgan)	Lee, Jennie (Lanark, Northern)
Brothers, M.	Griffith, F. Kingsley (Middlesbro' W.)	Lees, J.
Brown, C. W. E. (Notts, Mansfield)	Groves, Thomas E.	Lewis, T. (Southampton)
Brown, Ernest (Leith)	Grundy, Thomas W.	Lindley, Fred W.
Brown, W. J. (Wolverhampton, West)	Hall, F. (York, W. R., Normanton)	Lloyd, C. Ellis
Buchanan, G.	Hall, G. H. (Merthyr Tydvil)	Logan, David Gilbert
Burgess, F. G.	Hall, Capt. W. P. (Portsmouth, C.)	Longbottom, A. W.
Burgin, Dr. E. L.	Hamilton, Mary Agnes (Blackburn)	Longden, F.
Buxton, C. R. (Yorks. W. R. Elland)	Hardie, George D.	Lowth, Thomas
Caine, Derwent Hall-	Harris, Percy A.	Macdonald, Gordon (Ince)
Cameron, A. G.	Hartshorn, Rt. Hon. Vernon	MacDonald, Rt. Hon. J. R. (Seaham)
Charleton, H. C.	Hastings, Dr. Somerville	McElwee, A.
Chater, Daniel	Haycock, A. W.	McEntee, V. L.
Church, Major A. G.	Hayes, John Henry	McGovern, J. (Glasgow, Shettleston)
Clarke, J. S.	Herriotts, J.	McKinlay, A.
Cluse, W. S.	Hirst, G. H. (York W. R. Wentworth)	MacLaren, Andrew
Clynes, Rt. Hon. John R.	Hirst, W. (Bradford, South)	Maclean, Neil (Glasgow, Govan)
Cocks, Frederick Seymour	Hoffman, P. C.	Malone, C. L'Estrange (N'thampten)
Compton, Joseph	Hollins, A.	Mander, Geoffrey le M.

Mansfield, W.	Quibell, D. J. K.	Stamford, Thomas W.
March, S.	Ramsay, T. B. Wilson	Stephen, Campbell
Marcus, M.	Rathbone, Eleanor	Strachey, E. J. St. Loe
Markham, S. F.	Raynes, W. R.	Strauss, G. R.
Marley, J.	Richards, R.	Sullivan, J.
Marshall, Fred	Richardson, R. (Houghton-le-Spring)	Sutton, J. E.
Mathers, George	Riley, F. F. (Stockton-on-Tees)	Taylor, R. A. (Lincoln)
Matters, L. W.	Ritson, J.	Thurtle, Ernest
Maxton, James	Romeril, H. G.	Tinker, John Joseph
Messer, Fred	Rosbotham, D. S. T.	Toole, Joseph
Middleton, G.	Rowson, Guy	Tout, W. J.
Millar, J. D.	Russell, Richard John (Eddisbury)	Townend, A. E.
Mills, J. E.	Salter, Dr. Alfred	Turner, B.
Milner, Major J.	Samuel, Rt. Hon. Sir H. (Darwen)	Vaughan, D. J.
Montague, Frederick	Samuel, H. Walter (Swansea, West)	Viant, S. P.
Morgan, Dr. H. B.	Sanders, W. S.	Walkden, A. G.
Morley, Ralph	Sandham, E.	Walker, J.
Morris, Rhys Hopkins	Sawyer, G. F.	Wallace, H. W.
Morrison, Robert C. (Tottenham, N.)	Scrymgeour, E.	Walters, Rt. Hon. Sir J. Tudor
Mort, D. L.	Scurr, John	Watkins, F. C.
Moses, J. J. H.	Sexton, James	Watson, W. M. (Dunfermline)
Mosley, Lady C. (Stoke-on-Trent)	Shaw, Rt. Hon. Thomas (Preston)	Wellock, Wilfred
Muff, G.	Shepherd, Arthur Lewis	Welsh, James (Paisley)
Muggeridge, H. T.	Sherwood, G. H.	Welsh, James C. (Coatbridge)
Murnin, Hugh	Shield, George William	West, F. R.
Nathan, Major H. L.	Shiels, Dr. Drummond	Westwood, Joseph
Naylor, T. E.	Shillaker, J. F.	White, H. G.
Newman, Sir R. H. S. D. L. (Exeter)	Shinwell, E.	Whiteley, Wilfrid (Birm., Ladywood)
Noel Baker, P. J.	Short, Alfred (Wednesbury)	Whiteley, William (Blaydon)
Oldfield, J. R.	Simmons, C. J.	Wilkinson, Ellen C.
Oliver, P. M. (Man., Blackley)	Simon, E. D. (Manch'ter, Withington)	Williams, David (Swansea, East)
Palin, John Henry	Sinclair, Sir A. (Caithness)	Williams Dr. J. H. (Llanelly)
Paling, Wilfrid	Sinkinson, George	Wilson, C. H. (Sheffield, Attercliffe)
Palmer, E. T.	Sitch, Charles H.	Wilson, J. (Oldham)
Parkinson, John Allen (Wigan)	Smith, Ben (Bermondsey, Rotherhithe)	Wilson, R. J. (Jarrow)
Perry, S. F.	Smith, Frank (Nuneaton)	Winterton, G. E. (Leicester, Loughb'gh)
Pethick-Lawrence, F. W.	Smith, Tom (Pontefract)	Wise, E. F.
Phillips, Dr. Marion	Smith, W. R. (Norwich)	Wood, Major McKenzie (Banff)
Pole, Major D. G.	Snell, Harry	Young, R. S. (Islington, North)
Potts, John S.	Snowden, Rt. Hon. Philip
Price, M. P.	Snowden, Thomas (Accrington)	TELLERS FOR THE NOES.—
Pybus, Percy John	Sorensen, R.	Mr. Charles Edwards and Mr. T.
		Henderson.

Captain BOURNE

I beg to move, as an Amendment to the proposed new Clause, to leave out Sub-section (4).

The bulk of this Clause has been agreed between the Treasury and the insurance companies, but I am given to understand, that as far as Sub-section (4) is concerned, there is no agreement whatever, as the insurance companies regard it as a matter with which they are not concerned. It is a power to the special commissioners to ask for certain extra particulars, and I am extremely puzzled to see why any such power should be required. The Section of the Act of 1922 which the Clause purports to extend runs as follows: The special commissioners may, whether an assessment to Super-tax has been made or not, require any individual who has been required to make a return of his total income for the purposes of Super-tax to furnish to them within such time as they may prescribe, not being less than twenty-eight days, such particulars as to the several sources of his income and the amount arising from each source, and as to the nature and the amount of any deductions claimed to be allowed therefrom, as they consider necessary. I fail to see what extra information the special commissioners require in order to deal with single premium policies. Is this an attempt to give them power to make inquiries of the insurance companies? Up to now we have strenuously resisted claims that have been made on several occasions on the part of the Inland Revenue officials that they should have the right to demand particulars from insurance companies or banks in respect of any individual's private transactions. I do not know if the Government wish to depart from the present system, which has worked well for the best part of a century, but unless they want to enable the special commissioners to obtain information from sources that are at present closed to them, I fail to see why this Sub-section is required.

Mr. PETHICK-LAWRENCE

I can give the hon. and gallant Gentleman the assurance he desires. As I understand it, he is anxious to be assured that the object and intention of the use of these words is not to give the Commissioners power to inquire of all and sundry as to the affairs of the taxpayer. The object of this Clause is simply to give them sufficient power to inquire of the taxpayer, and the taxpayer alone. [An HON. MEMBER: "They do that now!"] I am advised that the words which already exist in the Finance Act, 1922, are not sufficient to cover the amount of inquiry of the taxpayer which would be necessary for this information. They are only to inquire from the Surtax payer particulars of the nature and the amount of any deduction claimed to be allowed. These words by themselves would not empower the commissioners to pursue inquiries which would be likely to be necessary for the administration of this Clause. [An HON. MEMBER: "What inquiry?"] The inquiry to find out whether the deductions which the taxpayer is making on account of interest relate to the deductions envisaged in this Clause. It is for that purpose, and that purpose alone, that these words are inserted. They are not inserted with a view to enabling commissioners to inquire of other persons than the taxpayers.

Sir A. STEEL-MAITLAND

May again point out how extremely inadequate are the explanations which the hon. Member has given. He gives us this assurance, but really anyone will see by the ordinary reading of the Clause that they can ask for such particulars as to the several sources of a man's income and the amount arising from such sources, and for particulars of the nature and amount of any deduction claimed to be allowed therefrom as are considered necessary. It is difficult to understand how there can be anything more which the hon. Member can possibly want. It is not sufficient to be told that this is not enough. We want to know in what respect it is not enough. With regard to Sub-section (3), we were told that one reason why it was inadvisable to alter anything at all was that it was the subject of an agreement with the insurance companies outside. I would like to ask, so as to make sure that we may not inconvenience the Government from that point of view or help the tax evader by upsetting the agreement with the insurance companies: Was this any part of the agreement with the insurance companies? If it was, perhaps it may influence us. When we are told that a Clause is an agreed Clause we want to know whether the terms of this part of the Clause were specially agreed upon also. The main point is that they are the most extraordinary wide words, and it is not enough for the Financial Secretary simply to give the answer that he has given to the Committee. We have a right to know in some detail in what respect the words are sufficient. There are two words which we are asked to pass to which I take a peculiar dislike: shall be extended so as to enable the special commissioners to require such particulars with respect to deductions and otherwise. In all this type of legislation, the one thing that is thoroughly undesirable is to give vague powers such as are conveyed in the words "and otherwise." Unless we can get some detailed information, we shall not be satisfied with the Financial Secretary's statement that "these are the words, and they are sufficient." We say that these words give powers to the Government to have a roving commission.

Mr. PETHICK-LAWRENCE

No.

Sir A. STEEL-MAITLAND

The Financial Secretary says "no." Let him read the words of the powers that he has already got. Then let him read the words of the new Clause which extend the power quite indefinitely: to require such particulars with respect to deductions and otherwise as they may consider necessary. On reading this Clause there is no human being who does not realise that whether the Treasury want to have the powers of a roving commission or not, that is what is being given by this Sub-section. No one can misunderstand the plain meaning in that respect.

Mr. BOOTHBY

It seems to me that the Government are Attempting to do the very thing which this Committee, if it is to serve any purpose, exists to stop, or to inquire into. The Committee ought not to pass such a provision unless some full and adequate reason is given for it. The Financial Secretary cannot claim to have satisfied the Committee that there is a good and just cause for inserting this particular Sub-section. Is this part of the agreement with the life offices? It it very important that we should know that. If the life offices think that this additional power is essential, then we should have to consider very seriously the advisability of dividing against it, bat if it is no part of the agreement, then it is a little additional section slipped into the Finance Bill by the Inland Revenue authorities, and it is that sort of thing that we exist to stop. If this Committee is going to serve any useful purpose, it ought to be able to stand up on behalf of the taxpayer against the steadily encroaching powers of bureaucracy, which have already reached almost intolerable proportions. I do not think that we can be satisfied with the sort of general assurance and the quite inadequate assurance given by the Financial Secretary. I am not certain that an assurance of that kind is of any use. If we pass the Clause as it stands, with this Sub-section in it, it does not matter how many assurances the Financial Secretary may have given they will not affect the law as it will exist, and the judgment of the Courts will not be affected by any assurance which the Financial Secretary has thought fit to make. If we are not to divide against this Sub-section we must ask why, if there is no good and just reason, these extra additional roving and very dangerous powers are demanded by the Government.

Mr. A. M. SAMUEL

The Financial Secretary ought not to try to brush us aside in this way. Can he not make a definite statement? Either the Treasury has made up its mind or it has not. The Treasury must know what it wants and what it seeks to find out and, if it does, what reason is there for trying to hide it? What are these "such particulars"? What does "otherwise" cover?

Sir B. PETO

I should like to give the answer that we cannot get from the Financial Secretary to the Treasury. The words of Sub-section (4) of the new Clause are absolutely identical with the words of Sub-section (4) in the old Clause, and therefore it is perfectly clear that they could not have been any part of any arrangement or agreement with the assurance companies for the reconstruction of this Clause. They were in the old Clause, and they are not part of the new Clause except that they are imported verbatim into the new Clause. Therefore, any arrangement as to the Clause cannot possibly apply to Subsection (4). We can get no answer what- ever to the questions that we have put as to why, when in the Finance Act of 1922 very specific powers were given, ample powers in every direction, they are not enough. We want to know why the Treasury cannot tell us in what way these powers are not sufficient, and why they should put in these words that give them power to do anything that they choose, to make these inquiries and, even beyond that, to investigate under such wide words as "or otherwise," which covers anything in the universe not specified in the Sub-section. In those circumstances I do not see any obligation, moral or otherwise, to assist this proposal.

Mr. CHARLES WILLIAMS

I was very interested just now to hear the Secretary to the Treasury state that, as far as the special commissioners are concerned, they already had very considerable powers, but for some reasons were not quite certain whether they had sufficient powers to act under this Clause. With his usual thoughtfulness he deliberately abstained from telling the Committee how those powers had failed or in what way they had broken down. Unless he makes out a prima facie case to show that his actual powers are not sufficient for the carrying out of this Clause, I fail to see how he can ask the Committee to give such wide powers. He should tell us quite simply in what way these particular powers have broken down. He did not tell us, because he knows perfectly well that he has got full and adequate powers, and that the commissioners have perfect powers to extract any information they wish.

The real reason why he refused to give an answer was that he knew, as has been pointed out by my right hon. Friend the Member for Tamworth (Sir A. Steel-Maitland), that those two seemingly innocent words "and otherwise have been slipped into this Bill, giving them power to go far outside what was meant in the original part of this Clause. I have listened to the right hon. Gentleman and to the Financial Secretary with considerable patience from time to time during this Finance Bill, and I have not seen any part which was quite so vague and quite so deliberately going outside those powers which they needed. It has been laid down by several Members of the party on this side of the House that you must not, as a Committee of the House of Commons, lay down vague and indefinite words for your civil servants, however excellent they may be and however well they exercise their powers. You should rather tell them how and where to exercise their powers. For that reason, in consideration of the last three lines of this Sub-section, we should refuse to give the Government the powers of this new Clause.

One other point has been raised. I wonder why it is that the Government feel themselves unable to give a direct answer to a quite simple question as to whether this was part of the agreement between the taxing authorities and certain companies outside? It is all very well to have these agreements arrived at in the background. I am not so fond of them. It would be far better if matters connected with the taxation of the people of the country were worked out on the Floor of the House of Commons. I quite realise that in a business of this kind, unless you get direct knowledge of that business, which can only

be given to the Government by the people who are in the business, it is almost impossible to accomplish what we wish to do here. But when you come down to the direct taxpayer, as you are in this Sub-section, it is only right that we should have the clearest definition, of what the Chancellor wants, in order that no chance should be left of oppression being put upon individuals. The position of those individuals should be made perfectly clear and simple under this new Sub-section, and how far they will be interfered with by the Commissioners. The Commissioners have the respect, I think, of all sections of the community, and it is grossly unfair to put them in the vague and indefinite position in which this Clause does put them, and about which we are trying to elicit some information from the Chancellor.

Question put. "That, the words proposed to be left out stand part of the proposed new Clause."

The Committee divided: Ayes, 247: Noes, 125.

Division No. 412.]	AYES.	[10.59 p.m.
Adamson, Rt. Hon. W. (Fife, West)	Cocks, Frederick Seymour	Hayes, John Harvey
Adamson, W. M. (Staff., Cannock)	Compton, Joseph	Herriotts, J.
Addison, Rt. Hon. Dr. Christopher	Daggar, George	Hirst, G. H. (York W. R. Wentworth)
Aitchison, Rt. Hon. Craigie M.	Dallas, George	Hirst, W. (Bradford, South)
Alpass, J. H.	Davies, E. C. (Montgomery)	Hoffman, P. C.
Ammon, Charles George	Dudgeon, Major C. R.	Hollins, A.
Arnott, John	Duncan, Charles	Horrabin, J. F.
Aske, Sir Robert	Ede, James Chuter	Hudson, James H. (Huddersfield)
Attlee, Clement Richard	Edge, Sir William	Hunter, Dr. Joseph
Ayles, Walter	Edmunds, J. E.	Hutchison, Maj.-Gen. Sir R.
Baker, John (Wolverhampton, Bilston)	Edwards, C. (Monmouth, Bedwellty)	Isaacs, George
Baldwin, Oliver (Dudley)	Edwards, E. (Morpeth)	Jenkins, W. (Glamorgan, Neath)
Barnes, Alfred John	Egan, W. H.	John, William (Rhondda, West)
Barr, James	Elmley, Viscount	Johnston, Thomas
Batey, Joseph	Foot, Isaac	Jones, F. Llewellyn. (Flint)
Bellamy, Albert	Freeman, Peter	Jones, Morgan (Caerphilly)
Benn, Rt. Hon. Wedgwood	Gardner, B. W. (West Ham, Upton)	Jowett, Rt. Hon. F. W.
Bennett, Capt. Sir E. N. (Cardiff C.)	Gardner, J. P. (Hammersmith, N.)	Jowitt, Rt. Hon. Sir W. A.
Bennett, William (Battersea, South)	Gibbins, Joseph	Kelly, W. T.
Benson, G.	Gibson, H. M. (Lancs, Mossley)	Kennedy, Thomas
Bentham, Dr. Ethel	Gill, T. H.	Kinley, J.
Birkett, W. Norman	Gillett, George M.	Lang, Gordon
Bondfield, Rt. Hon. Margaret	Glassey, A. E.	Lansbury, Rt. Hon. George
Bowen, J. W.	Gossling, A. G.	Lathan, G.
Brockway, A. Fenner	Graham, D. M. (Lanark, Hamilton)	Law, Albert (Bolton)
Brooke, W.	Graham, Rt. Hon. Wm. (Edin., Cent.)	Law, A. (Rosendale)
Brothers, M.	Granville, E.	Lawrence, Susan
Brown, C. W. E. (Notts, Mansfield)	Gray, Milner	Lawrie, Hugh Hartley (Stalybridge)
Brown, Ernest (Leith)	Grenfell, D. R. (Glamorgan)	Lawson, John James
Brown, W. J. (Wolverhampton, West)	Griffith, F. Kingsley (Middlesbro' W.)	Lawther, W. (Barnard Castle)
Buchanan, G.	Groves, Thomas E.	Leach, W.
Burgess, F. G.	Grundy, Thomas W.	Lee, Frank (Derby, N. E.)
Burgin, Dr. E. L.	Hall, F. (York, W. R., Normanton)	Lee, Jennie (Lanark, Northern)
Buxton, C. R. (Yorks. W. R. Elland)	Hall, G. H. (Merthyr Tydvil)	Lees, J.
Caine, Derwent Hall-	Hall, Capt. W. P. (Portsmouth, C.)	Lewis, T. (Southampton)
Cameron, A. G.	Hamilton, Mary Agnes (Blackburn)	Lindley, Fred W.
Charleton, H. C.	Hardie, George D.	Llcyd, C. Ellis
Chater, Daniel	Harris, Percy A.	Logan, David Gilbert
Clarke, J. S.	Hartshorn, Rt. Hon. Vernon	Longbottom, A. W.
Cluse, W. S.	Hastings, Dr. Somerville	Longden, F.
Clynes, Rt. Hon. John R.	Haycock, A. W.	Lowth, Thomas
Lunn, William	Perry, S. F.	Snowden, Thomas (Accrington)
Macdonald, Gordon (Ince)	Pethick-Lawrenee, F. W.	Sorensen, R.
MacDonald, Rt. Hon. J. R. (Seaham)	Phillips, Dr. Marion	Stamford, Thomas W.
McElwee, A.	Potts, John S.	Stephen, Campbell
McEntee, V. L.	Price, M. P.	Strauss, G. R.
McGovern, J. (Glasgow, Shettleston)	Pybus, Percy John	Sullivan, J.
McKinlay, A.	Quibell, D. J. K.	Sutton, J. E.
MacLaren, Andrew	Ramsay, T. B. Wilson	Taylor, R. A. (Lincoln)
Maclean, Neil (Glasgow, Govan)	Rathbone, Eleanor	Thurtle, Ernest
Malone, C. L'Estrange (N'thampton)	Raynes, W. R.	Tinker, John Joseph
Mander, Geoffrey le M.	Richards, R.	Toole, Joseph
Mansfield, W.	Richardson, R. (Houghton-le-Spring)	Tout, W. J.
Marcus, M.	Riley, F. F. (Stockton-on-Tees)	Townend, A. E.
Markham, S. F.	Ritson, J.	Turner, B.
Marley, J.	Romeril, H. G.	Vaughan, D. J.
Marshall, Fred	Rosbotham, D. S. T.	Viant, S. P.
Mathers, George	Rowson, Guy	Walkden, A. G.
Matters, L. W.	Salter, Dr. Alfred	Walker, J.
Maxton, James	Samuel, Rt. Hon. Sir H. (Darwen)	Wallace, H. W.
Messer, Fred	Samuel, H. Walter (Swansea, West)	Watkins, F. C.
Middleton, G.	Sanders, W. S.	Watson, W. M. (Dunfermline)
Millar, J. D.	Sawyer, G. F.	Wellock, Wilfred
Mills, J. E.	Scurr, John	Welsh, James (Paisley)
Milner, Major J.	Sexton, James	Welsh, James C. (Coatbridge)
Montague, Frederick	Shaw, Rt. Hon. Thomas (Preston)	West, F. R.
Morgan, Dr. H. B.	Shepherd, Arthur Lewis	White, H. G.
Morley, Ralph	Sherwood, G. H.	Whiteley, Wilfrid (Birm., Ladywood)
Morris, Rhys Hopkins	Shield, George William	Whiteley, William (Blaydon)
Morrison, Herbert (Hackney, South)	Shiels, Dr. Drummond	Wilkinson, Ellen C.
Morrison, Robert C. (Tottenham, N.)	Shillaker, J. F.	Williams, David (Swansea, East)
Mort, D. L.	Shinwell, E.	Williams, Dr. J. H. (Llanelly)
Moses, J. J. H.	Short, Alfred (Wednesbury)	Wilson, C. H. (Sheffield, Attercliffe)
Mosley, Lady C. (Stoke-on-Tront)	Simmons, C. J.	Wilson, J. (Oldham)
Muff, G.	Sinclair, Sir A. (Caithness)	Wilson, R. J. (Jarrow)
Muggeridge, H. T.	Sinkinson, George	Winterton, G. E. (Leicester, Loughb'gh)
Murnin, Hugh	Sitch, Charles H.	Wise, E. F.
Nathan, Major H. L.	Smith, Ben (Bermondsey, Rotherhithe)	Wood, Major McKenzie (Banff)
Naylor, T. E.	Smith, Frank (Nuneaton)	Young, R. S. (Islington, North)
Oldfield, J. R.	Smith, Rennie (Penistone)
Oliver, P. M. (Man., Blackley)	Smith, Tom (Pontefract)	TELLERS FOR THE AYES.—
Palin, John Henry.	Smith, W. R. (Norwich)	Mr. Allen Parkinson and Mr. T.
Paling, Wilfrid	Snell, Harry	Henderson.
Palmer, E. T.	Snowden, Rt. Hon. Philip
NOES.
Acland-Troyte, Lieut.-Colonel	Elliot, Major Walter E.	Mitchell-Thomson, Rt. Hon. Sir W.
Albery, Irving James	Falle, Sir Bertram G.	Monsell, Eyres, Com. Rt. Hon. Sir B.
Amery, Rt. Hon. Leopold C. M. S.	Ferguson, Sir John	Moore, Sir Newton J. (Richmond)
Atholl, Duchess of	Fielden, E. B.	Moore, Lieut.-Colonel T. C. R. (Ayr)
Baillie-Hamilton, Hon. Charles W.	Ford, Sir P. J.	Morrison, W. S. (Glos., Cirencester)
Baldwin, Rt. Hon. Stanley (Bewdley)	Forestier-Walker, Sir L.	Morrison-Bell, Sir Arthur Clive
Balfour, George (Hampstead)	Ganzoni, Sir John	Muirhead, A. J.
Balfour, Captain H. H. (I. of Thanet)	Gibson, C. G. (Pudsey & Otley)	O'Connor, T. J.
Bainiel, Lord	Glyn, Major R. G. C.	Oman, Sir Charles William C.
Beamish, Rear-Admiral T. P. H.	Gower, Sir Robert	O'Neill, Sir H.
Boothby, R. J. G.	Graham, Fergus (Cumberland, N.)	Peake, Capt. Osbert
Bourne, Captain Robert Croft	Greene, W. P. Crawford	Percy, Lord Eustace (Hastings)
Bowyer, Captain Sir George E. W.	Grenfell, Edward C. (City of London)	Peto, Sir Basil E. (Devon, Barnstaple)
Boyce, H. L.	Gretton, Colonel Rt. Hon. John	Ramsbotham, H.
Bracken, B.	Hacking, Rt. Hon. Douglas H.	Reid, David D. (County Down)
Braithwaite, Major A. N.	Hamilton, Sir George (Ilford)	Remer, John R.
Brass, Captain Sir William	Hartington, Marquess of	Rentoul, Sir Gervals S.
Buchan, John	Harvey, Major S. E. (Devon, Totnes)	Reynolds, Col. Sir James
Cadogan, Major Hon. Edward	Haslam, Henry C.	Roberts, Sir Samuel (Ecclesall)
Christie, J. A.	Henderson, Capt. R. R. (Oxf'd, Henley)	Rodd, Rt. Hon. Sir James Rennell
Churchill, Rt. Hon. Winston Spencer	Heneage, Lieut.-Colonel Arthur P.	Russell, Alexander West (Tynemouth)
Cockerill, Brig.-General Sir George	Herbert, Sir Dennis (Hertford)	Salmon, Major I.
Colman, N. C. D.	Hills, Major Rt. Hon. John Waller	Samuel, A. M. (Surrey, Farnham)
Colville, Major D. J.	Iveagh, Countess of	Samuel, Samuel (W'dsworth, Putney)
Crichton-Stuart, Lord C.	Kindersley, Major G. M.	Sandeman, Sir N. Stewart
Cranborne, Viscount	Knox, Sir Alfred	Savery, S. S.
Crookshank, Capt. H. C.	Lamb, Sir J. Q.	Skelton, A. N.
Cunliffe-Lister, Rt. Hon. Sir Philip	Lane Fox, Col. Rt. Hon. George R.	Smith, R. W. (Aberd'n & Kinc'dine, C.)
Dalkeith, Earl of	Law, Sir Alfred (Derby, High Peak)	Somerville, A. A. (Windsor)
Dalrymple-White, Lt.-Col. Sir Godfrey	Leigh, Sir John (Clapham)	Somerville, D. G. (Willesden, East)
Davidson, Rt. Hon. J. (Hertford)	Leighton, Major B. E. P.	Spender-Clay, Colonel H.
Davies, Dr. Vernon	Llewellin, Major J. J.	Steel-Maitland, Rt. Hon. Sir Arthur
Davies, Maj. Geo. F. (Somerset, Yeovil)	Locker-Lampson, Rt. Hon. Godfrey	Thomas, Major L. B. (King's Norton)
Davison, Sir W. H. (Kensington, S.)	McConnell, Sir Joseph	Thomson, Sir F.
Dawson, Sir Philip	Macquisten, F. A.	Tinne, J. A.
Dixon, Captain Rt. Hon. Herbert	Maitland, A. (Kent, Faversham)	Titchfield, Major the Marquess of
Dugdale, Capt. T. L.	Marjoribanks, E. C.	Train, J.
Eden, Captain Anthony	Mason, Colonel Glyn K.	Tryon, Rt, Hon. George Clement.
Edmondson, Major A. J.	Merriman, Sir F. Boyd	Vaughan-Morgan, Sir Kenyon

Wallace, Capt. D. E. (Hornsey)	Windsor-Clive, Lieut.-Colonel George	TELLERS FOR THE NOES.—
Ward, Lieut.-Col. Sir A. Lambert	Wolmer, Rt. Hon. Viscount	Sir George Penny and Sir Victor
Wells, Sydney R.	Womersley, W. J.	Warrender.
Williams, Charles (Devon, Torquay)	Worthington-Evans, Rt. Hon. Sir L.

Question put, and agreed to.

Motion made, and Question proposed, "That the Clause be added to the Bill."

Sir A. STEEL-MAITLAND

On a point of Order. Have you, Mr. Dunnico, in your discretion decided not to call the Amendment standing in my name—in line 61, at the end, to insert the words: (5) This section shall apply only as respects Sur-tax charged for any year subsequent to 1929–30.

The DEPUTY-CHAIRMAN

That Amendment is not selected.

Mr. CHURCHILL

On a point of Order. I did not quite understand, Mr. Dunnico, your answer to my right hon. Friend. Do I understand that you have excluded this Amendment?

The DEPUTY-CHAIRMAN

I have said that the Amendment is not selected.

Mr. CHURCHILL

May I ask, then, what is the question which you are putting to the Committee?

The DEPUTY - CHAIRMAN

The Question which I put was, "That the Clause be added to the Bill."

Sir D. HERBERT

I cannot allow this Clause to be added to the Bill, without claiming the right to make some remarks about the rather remarkable history of these proposals, beginning with the original Clause 12 in the Finance Bill. When the Finance Bill was introduced, it included a Clause 12 which, in the opinion of many of us, was one of the worst of the many bad cases which have occurred of unintelligible, ineffective, and harmful Clauses introduced in the Finance Bills. When the Clause was reached in Committee, as a result of the extraordinary nature of that Clause, I asked the Chancellor of the Exchequer to postpone it in order that he might have the opportunity of bringing before the House a better form of Clause. He refused that request three times, until he was driven by the hard logic of facts to accept my proposal to postpone the Clause.

As I have some knowledge of insurance matters, I have taken a special interest in this Clause, and I think it only right that the Committee should take some notice of what are the real facts of the case. What I am going to relate is no doubt known to the Chancellor himself, and therefore there is no need for him to listen to it if he does not wish to. But when the question was raised first, when this Clause was reached, and he was asked to postpone it, the Chancellor of the Exchequer referred to the fact that he had been in communication with the Life Offices Association. That was perfectly true. It was known to me before he made the announcement, and I too had been in communication with the Life Offices Association. The fact of the matter was that all the right hon. Gentleman's negotiations with the Life Offices Association, down to the day before this Clause was reached in Committee, had mainly resulted in the right hon. Gentleman refusing to accept the suggestions which were made to him or to comply with the requests of the Life Offices Association.

When the matter came before this House in Committee, as I have already stated, the right hon. Gentleman was driven by the logic of facts and by sound argument to postpone the Clause for further consideration, and it is interesting to note what happened after that. When that matter was being considered, and possibly with the sarcasm for which he is well known, the right hon. Gentleman said, in regard to the suggestion which I had made to him: I am sure that my hon. and learned Friend the Attorney-General will be delighted to meet the hon. Member opposite —that is, my humble self— and to go over these points with him. Now note the last words, typical of the right hon. Gentleman: I am sure that in such a conversation as that the services of the hon. Member would be invaluable."—[OFFICIAL REPORT, 5th June, 1930; col. 2488, Vol. 239.] I want no compliments from the Chancellor of the Exchequer of any party opposed to me. I am not hurt by any sarcasm of the right hon. Gentleman, if it was meant as such.

Mr. P. SNOWDEN

It was a perfectly honest remark.

Sir D. HERBERT

I am much obliged to the right hon. Gentleman. I have no need to say anything about sarcasm if he says it was honest. It brings me to the point which I want to bring before the Committee, and it is worthy of notice. I was in communication with the Life Offices Association, and I expected after that to be asked to consult with the right hon. Gentleman or his advisers about our objections and criticisms in regard to this Clause. It is not a question of myself. I care nothing about that, but no Member of this House has been consulted by the right hon. Gentleman since he first withdrew the Clause in regard to the new Clause which he was going to introduce. That was more than a mere matter of bad policy on the part of the right hon. Gentleman, for regard what follows. The day before this new Clause is to be considered, he puts it on the Order Paper, giving us slightly over 24 hours' notice to consider it. Then he comes and says that he expects to get the Clause through in a minimum of time, and without discussion as an agreed Clause. The Members opposite are anxious that the Labour party shall prove fit to govern. There is an opportunity for them to consider something as to how Parliamentary Government should be carried on. The right hon. Gentleman puts down the Clause a little more than 24 hours before he expects it to be discussed, and he expects it to be carried practically with no discussion. Why? Because he, as Chancellor, one of the leading Members of the Government in this country, and the head of the financial affairs of this country, in a matter which affects subjects of all kinds and all degrees, goes to one particular business association without consulting any of his critics who have forced him to withdraw his original proposal, and arranges with them a Clause in which he makes certain concessions, consulting no Member of the House, and no body of persons concerned on behalf of those with whom the life offices do their business. He comes down to this Committee and expects the Committee to sanction a bargain which he has made, and which is to bind people of this country generally, simply and solely because he has been driven by Members of this Committee to withdraw a proposal and has agreed a revised proposal with a body which has no standing in the Government of this country.

I do not want it to be supposed that I have any complaint to make against the Life Offices Association. They have done their work well, as the Chancellor knows; but it is a poor example of how fit the Labour party is to govern when their Chancellor, known to be a person of no mean capacity, can insult the House of Commons—[HON. MEMBERS: "Oh!"] I say it advisedly, insult the House of Commons—by asking them to pass, practically without discussion, a Clause—substituted for one originally suggested by him but which he was forced to withdraw—because of an arrangement made with a body which, however estimable it may be has no position whatever in the legislative affairs of this country. I do not say that without evidence to support it.

The Clause is an improvement in many ways on the previous Clause, but it includes what every reasonable business man would regard as a slip. When an Amendment is moved to correct that apparent slip or error in drafting, arising on a point with which the Life Offices Association would have nothing to do, neither the right hon. Gentleman nor the Attorney-General is on the Treasury Bench, and we are left with the Financial Secretary, who as far as we can gather, has got instructions that the Clause is to be forced through without any Amendments whatever, on the ground that it has been agreed to with a body which has nothing to do with the proceedings of Parliament. If I have said anything that is not in accordance with the actual facts as to this Clause, and the right hon. Gentleman can saisfy me that I have done so, I will gladly withdraw.

To sum up my statement I say this: The right hon. Gentleman in the first place declined to accede to the request and the advice of the body best calculated to advise him in a matter of this kind, the Life Offices Association. He was forced in Committee to withdraw the proposals, and then he goes back to that body and gives way to their criticisms. Without giving sufficient notice to this House or consulting any Members of this House, the right hon. Gentleman puts down a Clause which has satisfied the criticisms of those people whom he con- sulted outside this House, but which has never been discussed with those who criticise this Clause from a different angle, and he has declined to consider any Amendments, although they were Amendments which did not go to the root of this part of the Bill. The right hon. Gentleman has declined to consider those Amendments, and he has based his refusal to do so mainly on the ground that he had settled this Clause with a body which had nothing to do with the proceedings of Parliament. I want no compliments from the Chancellor of the Exchequer, and I care nothing for the opposite of compliments, but I have some regard for the forms of Parliamentary government. When one finds that an Amendment is moved in a case of this kind to which there is practically no answer given; when one sees that it was a perfectly reasonable Amendment which would not have upset the agreement which the right hon. Gentleman arrived at with the Life Offices Association, one can only come to the conclusion that the Chancellor of the Exchequer has adopted an attitude which is only an insult to the House of Commons. [Interruption.] I say that after very careful consideration and meaning it most thoroughly. It is not the first time that the right hon. Gentleman has made a slip. Last night the right hon. Gentleman made a statement which I have no doubt he was ashamed of when he came to think, and he was allowed to slide out of it by saying that it was said jocularly. When the right hon. Gentleman referred to people who had avoided taxation by certain methods which were perfectly legal as being in fact criminals, he was showing his attitude towards the House of Commons.

Mr. LOGAN

Is the hon. Member for Watford (Sir D. Herbert) in order in accusing the Chancellor of the Exchequer, when he makes a statement, of being incorrect?

Mr. CHURCHILL

On a point of Order, Mr. Dunnico. May I direct your attention to, and invite your Ruling regarding, the increasing practice of Members of the Labour party raising purely sham and fictitious points of Order in order to obtain the opportunity of wrongfully intruding upon the debate.

The DEPUTY - CHAIRMAN

Hon. Members and right hon. Members may leave the matter to me.

Mr. CHURCHILL

May we have your ruling upon the point of Order which has been raised by the hon. Gentleman?

The DEPUTY-CHAIRMAN

My Ruling is that points of Order, such as that raised by the right hon. Gentleman are for me to decide as circumstances suggest.

Mr. CHURCHILL

With very great respect, I did not desire to challenge in any way your right of decision, but to ask if you would be so kind as, perhaps, to let us know what it was.

The DEPUTY-CHAIRMAN

As the right hon. Gentleman knows, whenever any hon. Member of the House desires to use his privilege of raising a point of Order he is entitled to do so. The question as to whether it is an abuse is for the decision of the Chair to determine.

Sir PATRICK FORD

On a further point of Order. May I ask your Ruling with regard to the raising by the hon. Member opposite of a point of Order?

The DEPUTY-CHAIRMAN

I have given my Ruling.

Sir D. HERBERT

I was just going to sum up my conclusions with regard to the history of this Clause, and I am justified in saying that the party of which I am a humble Member has in this case proved, not only that an Opposition has a right to be heard, but that an Opposition may improve the legislation initiated even under the aegis of so great a person as the present Chancellor of the Exchequer. A proposal was brought before us which he was forced to withdraw——

The DEPUTY-CHAIRMAN

The hon. Member has occupied this Chair himself, and he knows perfectly well that repetition is not in order. This is the fifth or sixth time that he has repeated that statement.

Sir D. HERBERT

I apologise for having done that, and will endeavour not to do so again. One does occasionally, in discussing a subject of this kind, have to repeat a statement several times, in order that it may be taken notice of. As I have said, I was just at the conclusion of what I was about to say when the last interruption was made. It invites me rather to advise the hon. Member who made that interruption to follow the advice given to a Member of his party by his own Leader only the other day. That advice was that Members of his party should learn the Rules of Procedure themselves before they attempt to dictate to others. I give that advice to the hon. Member opposite. Perhaps I might be allowed at last to complete the summing up of what I wanted to say in regard to this Clause. It was introduced for a purpose with which everybody in the House, I think I am right in saying, was in complete sympathy, but it was a hopeless, ineffective, useless and impossible Clause. It was withdrawn by its author, who was responsible for it. That was one good deed to which he was forced. He comes back with a Clause more or less dictated to him, which has been passed through Committee now without being improved in the way that it ought to have been if the right hon. Gentleman had been prepared to allow the matter to be properly considered in accordance with the ordinary Rules of Procedure in Committee of this House.

Mr. ERNEST BROWN

I cannot refrain from adding a word to the judicial summing up from the Bench above. In the course of it, the hon. Gentleman expressed a great deal of regard for the usages of the House. May I suggest that there are a great number of other Members who also have a regard for the usages of the House. As I understand it, one of the most valuable usages of the House is for Members to use debate in order to get the Government to understand that there are other points of view than their own, and thereby to get conclusions different from those first of all brought about in the drafting of a Measure. I cannot share his view with regard to the Chancellor of the Exchequer in this matter, because surely it is a very bad precedent for any Member to set, when a Member of the Government meets criticism frankly, fairly and freely, and at some cost of time and care, and produces another Clause which is universally admitted to be a better one than that which was introduced, to bring him into the dock instead of offering a meed of thankfulness that criticism had been met.

In my understanding of the usages of the House there are political and business questions, and surely one of the best things we can get by way of debate is that, when business points are met, they should really be met, not in a political, but in a business manner, and in the case of this Clause they have undoubtedly been so met. [Interruption.] The hon. gentleman has had his opportunity and the usages of the House permit the Member following him to have his opportunity also. He complains that the Chancellor has consulted people outside and has not consulted those in the House. Surely his memory is very short. It is only 18 months ago that the then Opposition were complaining, on one of the most complex and technical measures ever brought before Parliament, when the then Minister of Health brought down Clause after Clause after consultation with the Association of Municipal Corporations and told the House to take it or leave it. We were not consulted as Members of the House. The hon. gentleman should not take himself quite so seriously. This House has a history not of one day but of a good many years, and all parties have had their share in making precedents in the usages of the House. He talks about playing a lone hand. If he would look at the number of Amendments in his own name on the Order Paper—it does not look as if he had consulted his colleagues about some of them—I think he would pray, not for a judicial mind but for a sense of humour.

Mr. MARJORIBANKS

I think the object of the Clause must meet with general approval and, in fact, many of the leading insurance companies have refused to undertake insurances made in order to avoid taxation. There is a real substantial point of criticism that I should like to make for the purpose of improving the Clause. The words "being an individual" in Subsection (2) obviously were put in advisedly. No one could say that this is a simple Clause. Everyone agrees that it is most complex and will be difficult for the courts to construe afterwards. If there were a loophole, everyone would agree that it is a great pity it was ever introduced.

I do not know whether the hon. Members opposite appreciate the meaning of the word "individual," and whether they are aware that it does not cover legally under the Income Tax Acts, the word "company." Therefore it will be possible for persons to transfer to a company their interest in a contract of insurance and the company apparently is to avoid any kind of liability under the Clause. It would seem that the whole of the discussions which we have indulged in during all these weary days about the evasion of taxes by companies have absolutely been in vain. It would still appear that the Chancellor of the Exchequer is providing another trap for himself in order to enable individuals to transfer to companies their interest in this kind of contract of insurance and thereby drive a coach and four through this very complicated Clause. I think everybody will agree that, if that were so, it would be a tremendous pity that such a Clause should have been introduced. I cannot help feeling that there must be an answer to this very simple contention. It is beyond question that the word "individual" does not cover a company, and, therefore, I would like to ask the Attorney-General and the Chancellor of the Exchequer to meet my point.

I had intended originally to draft an amendment upon this question and to suggest the omission of the words "being an individual," but I found that it would so vitally affect every single provision of this very complicated Clause that a proposal of the kind would have been futile and the whole of the Clause would have had to be redrafted again and submitted to the House. I think that the Attorney-General ought to agree that this is a point of substance, and that the Chancellor of the Exchequer ought to be unwilling to prepare another trap for himself and complications for his successor. I would ask the Chancellor of the Exchequer to consider, before the Report stage is reached, whether he cannot improve his Clause by bringing companies under it?

Mr. CHURCHILL

The Chancellor of the Exchequer is to be congratulated upon the arrangement which has been made that this debate on Clause 12 should come to a conclusion at 12 o'clock. I rise at this stage only for the purpose of saying that it is not our intention to divide against the Clause in its resuscitated and novel form. Although we consider that it still contains many objections, we must admit that it has been so completely remodelled that it does not call from us at this stage a manifestation in the Division Lobby. But let the Chancellor of the Exchequer not imagine that he is entitled to receive any bouquets for this legislation. On the contrary, he owes it to the House of Commons, and to no one more than the hon. Member for Watford (Sir D. Herbert), that he has been rescued from the fate which lay before him, from the pitfalls into all his untutored steps were remorselessly leading him. What a discreditable transaction is the history of this Clause! Here is the Chancellor of the Exchequer using all the force and power of his office upon his opponents, with the utmost vigour. Having had all the winter to consider these matters, having all the brilliant experts of the Treasury at his disposal, having also at his disposal, if he had only asked for it, all the advice of the great commercial companies and interests who are involved in this aspect of legislation, with mature deliberation he produced his plan he produces it in the Finance Bill, it is printed and circulated, and the House goes into Committee upon that carefully considered plan.

The briefest examination shows that it is vitiated at every point, that it is contrary to reason and logic and good sense, that it would not work and that it would involve immense injury to our affairs. The right hon. Gentleman has to go off tardily and, after the due hour has passed, do the work which he should have done earlier. He has to go and consult those very vested interests which his party exists to insult and undermine. He has to go and meet them in humble parley and, line by line and word by word, redraft and recast his legislation, until the final form of his Clause is utterly unrecognisable from that in which he cast it with the aid of his officials. After he has done that, after he has gone to Canossa or has sat shivering in the courtyard—or would have sat shivering but for the season of the year—of the great life assurance companies, he comes down to the House and tries to convert his humiliation into a positive wean of victory. He tells us that because he has now, at last, made peace with the great vested interests, therefore the alliance of the Socialist Government with great vested interests is complete and that the House of Commons need not concern itself further in the process. In his drafting and redrafting of this Clause, the right hon. Gentleman has exhibited every vice which can be scarified in our legislation. He has shown carelessness in preparation, arrogance in the advancing of his Measure, swift and weak retirement, readiness to arrive at accommodations with those he had been previously prepared to scout and finally a renewal of the original arrogance.

What do we see? His original Clause, a misbegotten abortion, has been withdrawn, and now we are invited to witness the rising from its ashes of a phœnix, assisted by the life insurance companies. This is presented to Parliament as a specimen or the efficiency of Labour legislation in regard to complicated commercial and financial matters. My hon. Friend was absolutely justified in the careful manner in which he exposed the shortcomings of the Chancellor of the Exchequer to the Committee, and my hon. Friend below the Gangway, whose robust interventions in our debates always excite our pleasure, even when they do not command our agreement, who told us off so sharply and who is always ready to tell us off as sharply as if we were a squad of infantry, was not in some at least of the closing passages of his remarks sufficiently recognisant of the services which my hon. Friend the Member for Watford (Sir D. Herbert) rendered to the Committee.

Although we have made our protest against the careless, slipshod, slovenly, slapdash manner in which the Chancellor of the Exchequer has commended his proposals to the Committee, we do not intend on this occasion to carry our proposal into the Division Lobby. We must admit that the skilful advice of the great interests concerned, elaborated as it has been by a Committee of the House of Commons, which has not shirked its duties, has enabled the country to escape most mischievous proposals, which, if we had not banded ourselves together to effective resistance, would at this moment be passing smoothly and remorselessly to their place in the permanent legisla- tion of the country. It is worth while reflecting on the risks we run and the jeopardy we stand in every hour. If a number of private Members in this Committee had not scorned delights and lived laborious days, if they had not sacrificed their time and strength, and endangered their health and confronted the Socialist Chancellor of the Exchequer with a firm resistance, with a hedge of fixed bayonets, this Clause in its original mischievous and atrocious form would already be sailing along on its way to the Statute Book. We have done our duty, and we have had one of the rewards, one of those rare and refreshing fruits that fall from time to time from the tree of Fortune to those who have laboured long. Encouraged by the success the Committee has had in the remodelling of this Clause, we shall devote our energies with even greater force to the further stages of the class-prejudiced, spiteful, fruitless and injurious Measure, of which this Clause is a typical example.

Mr. P. SNOWDEN

I beg to move, "That the Chairman do report Progress, and ask leave to sit again."

The patent exhibition of buffoonery, which has just disgraced this Committee—[Interruption.]—is a fitting end to the proceedings of this afternoon. It is a fitting end to the proceedings. I believe that many Members opposite do not by any means uphold it. Those who have been responsible for the breaking of understandings and for dishonouring agreements, will go home after the proceedings proud of the part that they have taken. [Interruption.]

The DEPUTY-CHAIRMAN

I heard some hon. Member say "Liar." That word must be withdrawn at once.

Mr. CHURCHILL

I was sitting near the hon. Member, and I do not think he used the expression.

HON. MEMBERS

Yes, he did!

The DEPUTY-CHAIRMAN

The word "Liar" came clearly and distinctly to my ears, and the hon. Member must withdraw the expression at once.

Mr. BAILLIE - HAMILTON

I certainly withdraw the remark, but I do not remember that I said it.

An HON. MEMBER

Then why withdraw it?

Mr. SNOWDEN

I was saying, when that interruption took place, that I hope those Members opposite who have been responsible for the way in which the proceedings have been conducted this afternoon, will be proud of their achievement.

Sir L. WORTHINGTON-EVANS

The right hon. Gentleman has accused the Opposition of having broken agreements. That is an utterly unjustifiable accusation. The only agreement that was made was made yesterday, with one slight variation, in the course of the afternoon, that the right hon. Gentleman should be assisted by the Opposition to get the Clause we were on yesterday, and Clause 12. The agreement yesterday afternoon, so far as it was an agreement, was that the Opposition should help him to do so. The only variation was that about six o'clock this afternoon I intervened to point out that it would be highly desirable that longer time should be given to the discussion on Clause 33 and that we ought, if we could, to get it done about 7.30. That was assented to by the Chancellor of the Exchequer, and completely and absolutely honoured by the Opposition. The other part was that he should get Clause 12 by 12 o'clock.

He has got Clause 12, and he has no more right to accuse the Opposition of having broken their undertaking than he had the other day to accuse them of tomfoolery. It meant that he had to withdraw the Clause, eat his words, and reprint the Clause so that the Committee could discuss it. Now he accuses us in a most disorderly way of "buffoonery." I am going to ask the Deputy-Chairman in a moment whether that is a disorderly word. There has been no buffoonery, and the Chancellor ought to be ashamed of attempting to use his position to bully the Committee.

Mr. P. SNOWDEN

Every word that I said in regard to the breaking of the agreement is absolutely true.

HON. MEMBERS

Nonsense!

Sir L. WORTHINGTON - EVANS

Absolutely untrue!

An HON. MEMBER

We will not have any more agreements!

12. m.

Mr. SNOWDEN

The right hon. Gentleman gave an undertaking last night that the debate on Clauses 29 to 33 would be completed about 6 o'clock this evening, but when 6 o'clock arrived we were still discussing Clause 32. Then I generously released the party opposite from that undertaking, and later in the evening, indeed twice in the evening, the right hon. Gentleman intimated that they desired to accelerate business and that the debate on those Clauses would be speedily concluded and that we should get on to Clause 12 and possibly some of the other new Clauses before the Committee rose.

Mr. CHURCHILL

I made no arrangement except that which is recorded in the "OFFICIAL REPORT," which can be examined. As to the arrangements made to vary the agreement so that the discussion on the group of Clauses ending with Clause 33 should be brought to a conclusion between six and seven this evening, I was not concerned with it, but I understood from the Chancellor of the Exchequer that he gave a release from the undertaking, and he cannot, therefore, go back upon it. Never in any circumstances have we made any agreement that anything more than Clause 12 should be got to-night. On the contrary, we expressed grave doubts as to whether that Clause could be dealt with by midnight, and it was only in the event of the right hon. Gentleman withdrawing the original Clause 12 that we made any suggestion of agreement. As far as I am aware, the right hon. Gentleman has not the slightest ground of complaint when he goes home to-night, not only with the group of Clauses up to 33, but also with his new Clause 12. He has got all that was ever suggested or agreed to by us in any of the discussions which happily have taken place in the full light of day across the floor of the Committee. It is quite true that if the right hon. Gentleman had been willing to give us some indication of his intentions with regard to the future Committee proceedings on the Bill, I held out a hope that we might, by sacrificing many things which we consider are essential, have accelerated the progress of business. He refused. I asked him at 6 o'clock, and at 7 o'clock, and at a quarter past ten to give the Committee some guidance as to the future conduct of business. He declined; and, that being the case, he has not the slightest ground for complaint. He makes these complaints when he is angry, but the point is whether he makes them when they are true. He knows very well that we did not agree that he should have more than Clause 12 by midnight to-night unless by indicating the future course of the Bill he rendered the conduct of business easier. This is the statement from yesterday's OFFICIAL REPORT: If the Opposition are willing to agree to the suggestion that we should get through these Clauses and also the new Clause 12 by midnight to-morrow, I would be satisfied."—[OFFICIAL REPORT, 2nd July, 1930; col. 2047; Vol. 240.] Really, I make great allowances for the Chancellor. He has a great burden upon him, and I think he bears it with a great deal of courage. From many quarters foes advance upon him, and he is abused for much that he can control and for more that he cannot control. Therefore, I am not one of those who would hound him down, but I put it to the Committee, in the broad fair play of the House of Commons, whether he has not shown the results of the pressure that is upon him when he charges us with a dishonourable breach of faith and with failing to keep Parliamentary agreements, when those words which I have just read out, placed in my hands by a colleague, can be already nakedly placed before him across the Floor.

Mr. P. SNOWDEN

The words which the right hon. Gentleman has read have no bearing at all on this question, and the OFFICIAL REPORT will prove that tomorrow. I remember saying, I think it was at 10 o'clock this evening, that we must make an inroad into the earlier of the new Clauses on the Paper, and that, I am sure, is within the recollection of the Committee. I know quite well what the understanding was.

Mr. CHURCHILL

Might I ask one question? What concession did the right hon. Gentleman make? An understanding cannot be unilateral. It is quite true that I offered that we would endeavour to accelerate business if the Chancellor outlined subsequently the future progress of this Bill, but he refused to do so, and he has no right to expect from us our share when he has utterly refused to make any contribution whatever.

Sir AUSTEN CHAMBERLAIN

I was not present during the discussion, and I do not propose to add anything to what might right hon. Friends have said as to exactly what passed. But this is not the first time that the Chancellor of the Exchequer has flung across the House a charge against the party sitting on these benches of breaking a Parliamentary agreement. I have sat in many Parliaments, in many Governments, and I have been a party, active or passive, to many agreements. I have sometimes known a misunderstanding arise, but I say without hesitation that I have never known any party, however heated the Parliamentary atmosphere, break an agreement so arrived at; and I would venture before we leave this matter to-night, to ask the right hon. Gentleman to re-consider his attitude on these matters. Granted that he understood one thing and hon. Gentlemen on this side of the House understood another—that is possible; it is very unfortunate but still possible—but the business of this House cannot be conducted with satisfaction to ourselves or with contentment to the nation if charges of ill-faith are to be flung across this Table such as, in the hottest times of Parliamentary strife, have never been heard from the Leader of the House before.

On the last occasion my right hon. Friend the Chief Whip of our party made his explanation. The right hon. Gentleman the Chief Whip of the party opposite made his, and I think all of us recognised that, though he did not in any way withdraw from his understanding, the incident would have been closed and would have passed from our memory without bitterness if the Chancellor of the Exchequer could have found it in his heart to say exactly what the Chief Whip had said. The Chancellor of the Exchequer refused, and to-night he renews the charge. You cannot do Government business on those terms. This House cannot work if those charges are to be flung across the Floor in this way, and we all of us, who have had experience, know that we do not break Parliamentary bargains, that it is possible that we may misunderstand, that we may in a moment of passion utter words of that kind, but that it is our duty and that it is more consonant with the truth to admit that we spoke in heat and to accept the explanation which honourable men can offer and honourable men can receive. I do not ask for more from the Chancellor of the Exchequer to-night. I do not think he is in a mood to consider these things calmly or fairly—

The FINANCIAL SECRETARY to the WAR OFFICE (Mr. Sanders)

That is a nice way of putting it!

Sir A. CHAMBERLAIN

I withdraw that. If to the Chancellor of the Exchequer or to any one of his friends I have used a phrase that sounded offensive, I withdraw it. I think that in the heat of what has passed the Chancellor can hardly perhaps see things in the full light of what has occurred. But I ask him to reconsider it, before the House resumes to-morrow, and to see if he cannot withdraw a charge which should never have been made, which will make any Parliamentary agreements with him impossible, and which must prolong unnecessarily the discussion of any business which he conducts.

Committee accordingly report Progress; to sit again upon Monday next, 7th July.

The remaining Orders were read, and postponed.

It being after half-past Eleven of the Clock upon Thursday evening, Mr. SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.

Adjourned at a Quarter after Twelve o'Clock.