Commons Sitting of 15 June 1936

Preamble
The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.
Gas Light and Coke Company (No. 2) Bill,
York Gas Bill,
Read the Third time, and passed.
Huddersfield Corporation (Trolley Vehicles) Bill [Lords],
Kingston-upon-Hull Corporation Bill [Lords],
As amended, considered; to be read the Third time.
Birmingham Corporation Bill [Lords],
To be read a Second time upon Thursday.
Dover Corporation Bill [Lords],
Read a Second time, and committed.
Liverpool Corporation Bill [Lords],
To be read a Second time To-morrow.

ORAL ANSWERS TO QUESTIONS.
  CHINA.

    MARITIME CUSTOMS.
    Mr. MOREINGasked the Secretary of State for Foreign Affairs whether he is still satisfied that the Japanese Government are opposed to the establishment of special Customs tariffs by any local authority in China; and whether such opposition extends to the establishment of a separate Customs administration in the Hopei-Chahar area?
    The SECRETARY of STATE for FOREIGN AFFAIRS (Mr. Eden): An assurance regarding the point dealt with in the first part of my hon. Friend's question was referred to in the reply given by the Prime Minister to my hon. Friend the Member for Stourbridge (Mr. Morgan) on 13th May. The attitude of the
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    Japanese Government will presumably be further defined when the report of the Japanese official now investigating the situation generally has been received and considered.
    Mr. MOREING: Can the right hon. Gentleman say whether the Japanese official proceeded to North China to make his investigations?
    Mr. EDEN: Yes, I understand so.

    SMUGGLING.
    Mr. MOREINGasked the Secretary of State for Foreign Affairs whether he has now completed his examination of the report of the inspector-general of the maritime customs as to the causes of the growth of smuggling in North China; and, in view of the damage to British trade, what action he proposes to take in the matter?
    Mr. EDEN: Yes, Sir. As regards the second part of the question my hon. Friend will be aware that representations have on more than one occasion been made to the Japanese Government. His Majesty's Government will continue to take any action which may be deemed useful.
    Mr. MOREINGasked the Secretary to the Overseas Trade Department whether he has yet obtained from His Majesty's Consuls-General in Shanghai and Hankow a report as to the extent of the injurious effect on British trade in these centres and in the Yangtze valley by the competition of goods smuggled into North China through East Hopei?
    Captain EUAN WALLACE (Secretary, Overseas Trade Department): I have received a telegraphic report from the Commercial Counsellor at Shanghai, comparing the Chinese Customs figures for the first four months of this year with the same period of 1935. Generally speaking this report indicates that the direct effect of smuggling on United Kingdom trade has not so far been substantial, because the goods smuggled are in general not of a type usually obtained from this country. The position is, however being closely watched, and I will send my hon. Friend a summary of the report.

    JAPANESE OFFICER'S DEATH.
    Lieut.-Colonel MOOREasked the Secretary of State for Foreign Affairs,

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    whether he can make any statement on the Japanese charges that soldiers of the British Embassy guard at Peking had attacked and killed a Japanese officer named Sasaki?
    Mr. EDEN: Yes, Sir. The officer in question, who was apparently in the employ of the present régime in Manchuria was found dead in a Peking street on the night of 26th May. On 28th May the attention of His Majesty's Representative in Peking was drawn to a report which had appeared that day in a local newspaper suggesting that soldiers of the British Embassy guard were responsible for the murder. He immediately called on the Secretary in charge of the Japanese Embassy and requested that if the Japanese authorities entertained such suspicions they should so inform His Majesty's Embassy without delay in order that inquiries might effectively be made. At the same time he spontaneously set on foot a preliminary investigation, which established that there had been no British troops either on pass or on duty outside their own quarters at the time when the incident was stated to have taken place. On 30th May a note was received from the Japanese Embassy alleging that British soldiers were responsible for the crime. A British Military Court of Inquiry was set up at His Majesty's Embassy on 1st June. Meanwhile, when His Majesty's Representative asked for permission for the body of the murdered man to be examined by the doctor to His Majesty's Embassy he was informed that it had been cremated on 29th May, that is, on the day before the Japanese note was handed in. The Court of Inquiry, which sat on 1st and 2nd June effectively confirmed the result of the preliminary investigations. Its findings were duly communicated to the Japanese Embassy who, however, subsequently submitted the testimonies of a number of witnesses of Japanese or Korean extraction in support of the original Japanese allegation. These witnesses now assert that they have identified three members of the British Embassy guard as being involved in certain disturbances which took place on the night of the murder. Meanwhile, investigations are proceeding, and the witnesses mentioned above are to be examined by the Court of Inquiry.
    Captain MACDONALD: Can the right hon. Gentleman say on what ground the Japanese authorities based their charge? Were there any actual and direct witnesses, and, if so, was their evidence taken on oath?
    Mr. EDEN: The matter is now before a Court of Inquiry, and I would rather wait for the result.

    SITUATION.
    Mr. THURTLEasked the Secretary of State for Foreign Affairs whether he has any statement to make regarding the outbreak of hostilities in China?
    Mr. EDEN: I have so far received no official confirmation of the report which has appeared in the Press that fighting has broken out in South China.

  EGYPT.

    ANGLO-EGYPTIAN CONVERSATIONS.
    Captain PETER MACDONALDasked the Secretary of State for Foreign Affairs whether he is in a position to make any statement with regard to the recommencement of the Anglo-Egyptian negotiations?
    Mr. EDEN: The conversations will be continued on the return to Egypt of His Majesty's High Commissioner.

    BRITISH TEACHERS.
    Miss RATHBONEasked the Secretary of State for Foreign Affairs whether he is aware that British graduates taking educational service in Egypt for periods of a few years lose these years for the purpose of promotion and superannuations, while foreign graduates in similar circumstances are safeguarded by their Governments from suffering a similar disadvantage; and whether, in view of the growth of cultural propaganda by the Italian and other foreign Governments in Egypt and of the importance of securing a high quality of British ability in these services, any steps have been taken to meet this difficulty, and with what result?
    Mr. EDEN: His Majesty's Government are fully aware of the position to which the hon. Member has drawn attention and have, under the Teachers' Superannuation Act, 1933, secured certain pension rights for British teachers in Egypt.

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    They hope also, that, through the goodwill of the Egyptian Government, who have appointed a British chief inspector to look after the interests of European school teachers in Egypt, certain improvements may be made in the conditions of service in that country. The question of the promotion of British teachers on their return from Egypt is one of greater difficulty, owing to the fact, as I understand, that in Great Britain these teachers are employed by the local educational authorities and not, as in the foreign countries to which the hon. Member refers, employed by the State. His Majesty's Government are, however, considering, in consultation with the British Council for Relations with other Countries, whether anything can be done to improve the position in this respect also.
    Miss RATHBONE: Seeing that the disadvantages are national rather than educational, will the Government consider the possibility of meeting the expenses of making up any breaks in superannuation when they may occur, and will the right hon. Gentleman consult with the Universities upon the whole question?
    Mr. EDEN: Perhaps the hon. Lady will be good enough to communicate with me.

  LOCARNO TREATY.
  Mr. A. HENDERSONasked the Secretary of State for Foreign Affairs which, if any, of the Governments of the British Dominions has signified its acceptance of the Locarno Treaty of mutual guarantee?
  Mr. EDEN: None, Sir.

  PACT OF PARIS.
  Mr. A. HENDERSONasked the Secretary of State for Foreign Affairs, in view of the breach by Italy of her obligations under the Pact of Paris, what effect this will have on the policy of Great Britain and the other signatories to the Pact; and whether Italy is still to be treated as a party to the Pact?
  Mr. EDEN: This is a matter which would be one for all the parties to the Pact of Paris. I would, however, point
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  out that the Pact does not itself prescribe any action to be taken in the event of its violation by one of the high contracting parties.
  Mr. HENDERSON: Is the Foreign Secretary aware that in the Preamble of the Treaty in question the signatories expressed the view that any country which fails to carry out its obligations under the Treaty should be deprived of the benefits of the Treaty? If that be so, is it not desirable to take some action in order to prevent the Treaty being reduced to a tragic farce?
  Mr. EDEN: I am well aware of what is in the Preamble. If the hon. Member wants to put a question, I should like him to put it on the Order Paper, because I do not think that the meaning is precisely that which he imagines it is.

  MOTOR TRAWLER "GIRL PAT."
  Mr. DAYasked the Secretary of State for Foreign Affairs what representations have been made to him by the owners or any persons interested in the trawler "Girl Pat" in asking for the Government's assistance in the detention or arrest of this vessel; and what action His Majesty's Government have taken and with what results?
  Mr. EDEN: As regards the first part of the question, I would refer the hon. Member to the answer given to him by my right hon. Friend the President of the Board of Trade on 9th June. Instructions of the nature indicated in that answer have been sent to His Majesty's Ambassadors at Paris, Lisbon and Madrid and to His Majesty's Consular officers at Dakar, Leopoldville, Monrovia, Loanda and Teneriffe. It has not, however, yet proved possible to secure the detention of this vessel.
  Mr. DAY: Can the right hon. Gentleman say whether the Admiralty have been asked to assist in the location of the vessel?

  LEAGUE OF NATIONS AND SANCTIONS.
  The following Questions stood upon the Order Paper:
  Mr. A. HENDERSONasked the Secretary of State for Foreign Affairs

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  whether His Majesty's Government will oppose any proposal that sanctions shall be ended on the ground that the policy of sanctions has failed, and also oppose any proposal to limit the powers of the League on the ground that collective security has failed?
  Mr. DALTONasked the Secretary of State for Foreign Affairs whether His Majesty's Government have now decided what attitude they will adopt at the forthcoming Council and Assembly of the League of Nations as regards sanctions against Italy?
  Sir PERCY HARRISasked the Secretary of State for Foreign Affairs whether the policy of His Majesty's Government with regard to the Italo-Abyssinian dispute remains in accordance with the provisions of the Covenant of the League of Nations?
  Mr. THURTLEasked the Secretary of State for Foreign Affairs whether, at the forthcoming meeting of the Council of the League of Nations, His Majesty's Government will exert their utmost influence to preserve the system of collective security as embodied in the Covenant of the League?
  Mr. KENNEDY: On a point of Order. Before the right hon. Gentleman answers, may I say that on Thursday of last week I handed in a starred question for to-day asking for information regarding the Government's policy on sanctions and the League of Nation's treatment of the Abyssinian question? My question does not appear on the Order Paper to-day, and I should like to be informed of the reason for it not appearing.
  Mr. SPEAKER: If the hon. Member handed the question in on Thursday, it is almost exactly the same question which was put by the Leader of the Opposition on the previous day.
  Mr. KENNEDY: On the same day. The question put by the Leader of the Opposition was not answered.
  Mr. SPEAKER: A questioner is often dissatisfied with the reply which is given, but that cannot be an adequate reason for putting the same question down again.
  Mr. EDEN: It is the desire of His Majesty's Government that there should
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  be a Debate on foreign policy on the earliest date that can be conveniently arranged. On that occasion I shall be prepared to state the views of His Majesty's Government as to the action which is to be taken collectively at the meetings of the Council and the Assembly of the League of Nations, which are to be held on 26th and 30th June respectively.
  Mr. DALTON: Will the statement which the right hon. Gentleman will then make be on the lines of the speech of the Chancellor of the Exchequer?
  Mr. EDEN: Perhaps the hon. Member will exercise his customary patience.
  Mr. ATTLEE: In view of that reply, I beg to give notice that on Thursday next we shall ask for the Vote on the salary of the Prime Minister to be put down, in order that we may get an authoritative statement of what is the Government's foreign policy.
  Mr. LENNOX-BOYD: Is the right hon. Gentleman aware of the very lively satisfaction with which in many parts of the country the speech of the Chancellor of the Exchequer has been received?
  Mr. THURTLE: Arising out of my question, is the right hon. Gentleman even now prepared to affirm the continued belief of the Government in the policy of Collective Security without the House having to wait for a statement?
  Mr. EDEN: I think my answer covered all the questions.
  Mr. A. HENDERSON: In view of the widespread publicity which this unfortunate speech has received in this country and in other countries, can the right hon. Gentleman consider making a statement forthwith as to the intentions of the Government, so as to remove the great anxiety that has been caused as a result of this great indiscretion on the part of the Chancellor of the Exchequer?
  Mr. EDEN: No, Sir. I have made it plain already that the Government welcome a Debate at the earliest opportunity, and we are grateful to the Leader of the Opposition for asking for the Debate on Thursday.
  Mr. VYVYAN ADAMS: Before formulating a Government policy for the

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  near future, will the right hon. Gentleman bear in mind our vital and legitimate Imperial interests in seeing that the League does not compound Italy's abominable felony.
  Mr. V. ADAMSasked the Prime Minister when the House is to be given an opportunity to debate the international situation?
  The PRIME MINISTER (Mr. Baldwin): As my right hon. Friend has already announced, His Majesty's Government are anxious that such a debate should take place. The date is a matter for arrangement through the usual channels. Since the questions were answered by my right hon. Friend the Secretary of State for Foreign Affairs a definite request has been made by the Leader of the Opposition.
  Mr. ADAMS: Does that mean that the Prime Minister himself, personally, will elucidate the famous surrealist speech of the Chancellor of the Exchequer?
  Sir P. HARRIS: Is the right hon. Gentleman aware that a Private Bill has been put down for 7.30 o'clock on Thursday which would mean that we would have only a half-day for this debate?
  The PRIME MINISTER: It is, of course, the fact that such a Bill has been put down, but I have no doubt the usual consultations will take place subsequently. If it is the strong desire of the House that a debate should take place as early as Thursday, then, of course, arrangements will have to be made, and I think the whole day might be available. I should add that the Private Bill has been put down by direction of the Chairman of Ways and Means, and we shall have to see what can be done. I can give no guarantee myself.

  ETHIOPIAN REPRESENTATIVE.
  Miss RATHBONEasked the Secretary of State for Foreign Affairs whether Dr. Martin is still the accredited representative of Ethiopia to the Court of St. James?
  Mr. EDEN: Yes, Sir.

  DESTRUCTION OF FOOD.
  Mr. CECIL WILSONasked the Minister of Agriculture whether he will state the cases brought to his notice in which, during the last 12 months, food of any description fit for human consumption has been destroyed, and in each case the reason for the destruction and the action taken by the Department either before the destruction or since; and whether it is intended to take further powers to prevent such destruction?
  The MINISTER of AGRICULTURE (Mr. Elliot): The only such cases that have been brought to my notice relate to certain heavy landings of highly perishable fish which the port markets were unable to absorb. The quantities of fish thrown back into the sea were about four or five tons of pilchards in November of last year, and about 60 tons of herring in August and September of last year and in May of this year. The absence of the Italian market was mainly responsible for the destruction of the pilchards. As regards the steps which might be taken to deal with occasional landings of herring surplus to the capacity of the markets, I would refer the hon. Member to the answer I gave on 11th June to questions by the hon. Member for Consett (Mr. David Adams). As these cases occur only very exceptionally, the quantities involved in those I have mentioned amounting to not more than.01 per cent. of the landings of wet fish by British fishing vessels in England and Wales for the last 12 months, I do not think it would be possible to provide against them by legislation.
  Mr. LEACH: Can the right hon. Gentleman say what he means by the inability of the market to absorb? Does it mean that there is no demand or that prices are not good enough for the people concerned?
  Mr. ELLIOT: Generally, landings of fish are a long way off, and on some particular date, such as a Saturday afternoon, it is impossible to get them to the market before they are spoilt.
  Miss WILKINSON: Will the right hon. Gentleman consider in those circumstances where food has to be destroyed in this way, distributing it free in distressed areas where the children are in need of food?
  Mr. ELLIOT: Nobody thanks anybody for a bad herring.
  Miss WILKINSON: What is the Department doing to see that when fish is landed fresh it is prevented from going bad?
  Mr. ELLIOT: I have already explained that to the hon. Member for Consett (Mr. David Adams).
  Mr. LESLIE: Is the right hon. Gentleman aware that the dumping of fish is happening every week—it is not the exception—and that only last Saturday 3,200 cran were dumped into the ocean?
  Mr. ELLIOT: I must ask the hon. Member to agree that.01 per cent. is exceptionally good.
  Mr. T. JOHNSTON: Apart from the dumping of fish is it not the case that there is an organised limitation in production?
  Mr. ELLIOT: No, Sir. That is why dumping takes place.

  ORDNANCE SURVEY.
  Sir WILLIAM DAVISONasked the Minister of Agriculture what progress is being made with the preparation by the Ordnance Survey of the 25-inch to the mile maps, most of which have become out of date by reason of the reduction in the Parliamentary grant to the Ordnance Survey Department made in 1922; whether he is aware of the difficulties caused in making town and country planning schemes as well as to the land registration of the conveyance of property by the absence of such maps; and whether, pending their preparation, an aerial survey of the country can be prepared?
  Mr. ELLIOT: The whole question of the revision of Ordnance Survey maps is under consideration by a Departmental Committee of which my right hon. Friend the Chancellor of the Duchy of Lancaster is chairman. They have already submitted an interim report, of which I am sending my hon. Friend a copy. The recommendations contained therein, which cover town and country planning schemes, have been accepted by the Government, and as a result the establishment of the Ordnance Survey Department has already been increased by 550
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  technical assistants who are now in process of training. Arrangements have also been made for an extensive experiment in the use of air photography in the survey, and the Departmental Committee will doubtless make further reference to this subject in their final report.
  Sir W. DAVISON: While thanking my right hon. Friend for his satisfactory reply, does he consider that the 550 additional members of the Ordnance Survey will be adequate in order to get rid of the arrears as quickly as possible?
  Mr. ELLIOT: I cannot say as to that. A great deal depends on the progress of the experiments in the Air Department, but at any rate it is making a satisfactory start.
  Sir JOSEPH NALL: Is the right hon. Gentleman aware of the great inconvenience caused by the delay in printing revised maps, and cannot the Department in the meantime make use of the surveys made by county surveyors?
  Mr. ELLIOT: I do not think that the Ordnance Survey can delegate its authority and responsibility to anyone.
  Sir J. NALL: But as the information collected by county surveyors is available why cannot the Department make use of it?
  Mr. ELLIOT: The committee is going into that question and other questions of the kind.
  Mr. SORENSEN: Will the right hon. Gentleman see that the most up-to-date maps are put in the Library for the use of hon. Members?

  AGRICULTURE.

    OTTAWA AGREEMENTS.
    Major D0RMAN-SMITHasked the Minister of Agriculture what steps he has taken to invite the observations of the representatives of agricultural interests in England and Wales on the subject of the revision of the Ottawa Agreements; the names of the organisations with which he has communicated on the subject; and the final date fixed for the receipt of their replies?
    Mr. ELLIOT: I am in close touch with agricultural opinion on the subject referred to, concerning which I have already

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    received a number of representations. No formal invitations on the lines indicated by my hon. and gallant Friend have, however, been issued, nor, I am afraid, could I adopt the suggestion. If any representatives of agricultural interests send me their observations I shall, as always, be glad to give them consideration.
    Mr. T. WILLIAMS: Is the right hon. Gentleman in close touch with any association of consumers?
    Mr. ELLIOT: Yes, through my right hon. Friend the President of the Board of Trade.

    PRODUCTION.
    Mr. TINKERasked the Minister of Agriculture whether his Department is kept informed of the various crops of foodstuffs grown in this country, the amount that is gathered for use and sale, and the quantity, if any, left ungathered because it would be unprofitable to market?
    Mr. ELLIOT: Estimates of the total production of the more important crops are compiled annually in my Department. No information is obtained regarding the quantity that is unsecured for any reason.
    Mr. TINKER: Would it not be as well if the right hon. Gentleman tried to get this information?
    Mr. ELLIOT: It is extremely difficult to differentiate between foodstuffs destroyed by the weather and those which are not. It is impracticable to get a return of the amount.
    Mr. H. G. WILLIAMS: If my right hon. Friend gives further thought to this problem, will he prepare an estimate of the weight of blackberries which are not gathered each year?

    RABBITS (IMPORTS).
    Mr. HANNAHasked the Minister of Agriculture whether he is aware that the flooding of the market with foreign rabbits has made it impossible for British farmers to sell their own, although it produces no apparent lowering of the cost to the consumer; and whether he will take steps to exclude the unneeded foreign supply?
    Mr. ELLIOT: I am aware that there has been a marked increase in imports
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    of fresh rabbits, but this has been mainly caused by larger imports from the Irish Free State. As regards the last part of the question, the answer is in the negative.

  SEA FISH COMMISSION (REPORT).
  Mr. H. G. WILLIAMSasked the Minister of Agriculture when he hopes to be in a position to announce the decision of the Government in respect of the recommendations of the Sea Fish Commission?
  Mr. ELLIOT: The recommendations of the commission are under active consideration, together with the views thereon of such sections of the industry as have submitted them. I am not yet in a position to say when it will be possible to make an announcement.
  Mr. PETHERICK: Will the House have every opportunity of discussing the report of the commission fully before any further steps are taken involving Government interference with industry?
  Mr. ELLIOT: There will, of course, be an opportunity to discuss it on the Estimates, but there will also be a special opportunity this year on the affirmative Resolution under the Act.
  Mr. T. WILLIAMS: Have not the Government already interfered with this industry by restricting catches of sea fish?

  POST OFFICE.

    TELEPHONE SERVICE.
    Mr. GROVESasked the Postmaster-General what, if any, special arrangements are made to ensure that wrong telephone numbers are not called at unreasonable hours; whether he is aware that a subscriber on the Maryland Exchange was at 2 a.m. on 8th June awakened by a telephone call only to be told that it was a wrong number; and whether he will ensure that all steps will be taken to ensure greater care at these hours?
    The POSTMASTER-GENERAL (Major Tryon): Calls to subscribers on manual exchanges in London are specially challenged by the operators between midnight and 6 a.m. in order to guard as far as possible against subscribers being

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    disturbed unnecessarily; and I am very sorry if this challenge was omitted on the occasion to which the hon. Member refers.
    Mr. HULBERTasked the Postmaster-General what is the number of direct trunk telephone lines between London and Stockport in operation to-day; and whether any increase is contemplated?
    Major TRYON: Stockport is part of the Manchester automatic telephone area; and there are 82 trunk circuits between London and Manchester. Three additional circuits are being provided, and further circuits will be provided as the traffic grows.

    MOBILE OFFICE.
    Mr. DAYasked the Postmaster-General whether he will give particulars of the mobile post office which his Department proposes to introduce in the near future; and whether full telephone and cable service will be available from these movable post offices?
    Major TRYON: The mobile post office now under construction as an experiment will consist of a trailer caravan towed by a motor tractor and equipped to perform postal, telegraphic and telephone services. Its purpose is to afford the services of the Post Office in a convenient and accessible form at special events such as agricultural shows. I anticipate that normally it will be possible to provide full telephone and telegraph facilities at such post offices.
    Mr. DAY: How many of these is it proposed to construct?
    Major TRYON: Perhaps the hon. Member will put that question down.

    AIR MAILS (SHETLAND).
    Major NEVEN-SPENCEasked the Postmaster-General whether his attention has been called to the establishment, since 2nd June, of communication with Shetland by two independent air lines, operating on alternate days; if he is aware that both lines will be operating daily in the near future; and whether he is prepared, at an early date, to make use of one or both of these lines for the conveyance of first-class mail matter to Shetland?
    Mr. GARRO JONESasked the Postmaster-General whether he has yet
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    invited tenders for the carrying of air mails between Aberdeen and Shetland, via Orkney; and whether the two air line companies which opened regular lines from Aberdeen to Shetland this month will be given equal opportunity to tender for any such air mail contract under consideration?
    Major TRYON: I am aware that air services between the mainland of Scotland and Shetland have been in operation since the beginning of this month. It is desirable to have a few months' experience of the working of the new services before entrusting mails to them, but if and when it is decided to consider sending mails by air to Shetland, the hon. Member for North Aberdeen (Mr. Garro Jones) may rest assured that opportunity to tender will be given to any air company which is in a position to offer a regular and satisfactory service.
    Major NEVEN-SPENCE: Could the Postmaster-General give an assurance that advantage will not be taken of this unexpected competition by the Post Office to secure an uneconomic rate for the carriage of mails by either of the companies concerned?
    Major TRYON: I do not anticipate that any uneconomic tenders, will be made.

  BROADCASTING (ULLSWATER COMMITTEE'S REPORT).
  Mr. SUTCLIFFEasked the Postmaster-General whether the Government decisions with regard to the Ullswater Committee on Broadcasting can now be announced; and whether he will arrange for their publication at an early date so that there may be an opportunity of studying the policy proposed before a further Debate takes place?
  Major TRYON: I hope very soon to be able to announce the Government's proposals with reference to the report of the Ullswater Committee on Broadcasting, and I will consider my hon. Friend's suggestion.

  GOVERNMENT ORDERS (NORTH EASTERN AREA).
  Miss WILKINSONasked the First Commissioner of Works what proportion of all orders placed by his Department since October, 1934, were allocated to

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  firms in the North-Eastern area; and what steps are being taken to increase the proportion?
  The UNDER-SECRETARY of STATE for the HOME DEPARTMENT (Mr. Geoffrey Lloyd): I regret that I cannot say without further inquiry what proportion of the orders for coal were placed with firms in the North-Eastern area. As regards other goods, the proportion of direct orders given by the Office of Works during the period mentioned, was approximately 1 per cent. As regards the second part of the question, it is the practice, other things being equal, to give preference in the allocation of contracts to tenders received from firms in the Special Areas: in addition, special steps have been taken to bring contracts open to tender to the notice of firms in these areas.
  Miss WILKINSON: As it is of no use asking the Under-Secretary for the Home Department questions on this matter, may I ask the Prime Minister whether the Cabinet, in view of the serious condition of employment in the North-Eastern area, are impressing upon the purchasing Departments the necessity, where other things are equal, of considering the things that are not equal, that is to say, the high proportion of unemployment in this area? The Prime Minister ought to reply to this question.
  The PRIME MINISTER: I ought to get notice of these questions.
  Sir NICHOLAS GRATTAN - DOYLEasked the First Lord of the Admiralty whether he has considered the desirability of giving a larger proportion of orders to the Tyne?
  The CIVIL LORD of the ADMIRALTY (Mr. Kenneth Lindsay): In the allocation of contracts, the Admiralty always have under review all relevant factors such as the prices quoted and the situation in the various shipbuilding areas. In present circumstances, it is reasonable to anticipate that the Tyne will receive a considerable share of such contracts.
  Miss WILKINSONasked the President of the Board of Education what proportion of all orders placed since October, 1935, by his Department have been allocated to the North-eastern area; and whether any steps are being taken to increase the proportion?
  The PRESIDENT of the BOARD of EDUCATION (Mr. Oliver Stanley): I am not quite clear what the hon. Member has in mind. My Department does not place any orders for supplies.
  Miss WILKINSON: In view of the very large orders that must be placed for educational services in this country, has the right hon. Gentleman's Department no influence on how these orders are placed?
  Mr STANLEY: If the hon. Lady's question refers to orders placed by local education authorities and she will put it on the Paper in that form, I will see what information I can obtain for her.

  TRANSPORT.

    HYDE PARK (MOTOR DRIVING OFFENCES).
    Mr. HULBERTasked the First Commissioner of Works in how many cases during the year ended 31st March, 1936, have parkkeepers, in contradistinction to police officers, instituted proceedings against motorists in relation to the speed limit and dangerous driving offences in Hyde Park?
    Mr. LLOYD: I understand that park-keepers are not employed in Hyde Park, and the question therefore does not arise.

    SPEED LIMIT.
    Mr. REMERasked the Minister of Transport what is the present position as to the restriction of roads under the 30-mile limit in the city of Birmingham?
    The PARLIAMENTARY SECRETARY to the MINISTRY of TRANSPORT (Captain Austin Hudson): As I informed my hon. Friend on the 27th April, a further local inquiry had to be held into this matter. The inquiry, which lasted three days, was held towards the end of May, and I am awaiting the inspector's report.
    Mr. REMERasked the Minister of Transport what is the present position as to the restriction of roads under the 30-mile limit in the county of Warwick, particularly at Meriden, on the main Coventry-Birmingham road?
    Captain HUDSON: The inquiry was held on 5th June. I await the inspector's report.

    MOTOR-WAYS.
    Mr. SORENSENasked the Minister of Transport whether he has had his attention drawn to the construction of motor-ways in Germany; and will he consider constructing separate motor-ways for high-speed traffic in this country and the application of a moderate general speed-limit on public highways?
    Captain HUDSON: I am aware that motor-ways for the exclusive use of motor traffic have been constructed in certain countries, and my Department is watching the experiment with interest.
    Mr. SORENSEN: Will the hon. and gallant Gentleman take some occasion to make a report on the investigation in due course?
    Captain HUDSON: We will consider that.

  PALESTINE.
  Captain P. MACDONALDasked the Secretary of State for the Colonies whether he is now in a position to make any statement as to the causes of the recent Arab unrest in Palestine; whether this is in any way due to propaganda; if so, what has been the source of such propaganda; and who will bear the cost of the additional military assistance which has had to be called in to deal with the situation?
  The SECRETARY of STATE for the COLONIES (Mr. Ormsby-Gore): The causes of unrest in Palestine will be one of the matters to be inquired into by the Royal Commission, and in the circumstances it would be improper for me to attempt to analyse them at this moment. As regards the additional military assistance, the Palestine Government will bear the extra cost in respect of the various units due to their being stationed in Palestine.
  Captain MACDONALD: When will this inquiry be set up and proceed to Palestine?
  Mr. ORMSBY-GORE: It will only be set up when law and order are fully restored and the British administration is in a position to guarantee its safety and peace in that country.
  Mr. T. WILLIAMS: Have the Government no information as to the cause of
  632
  the present disturbances in Palestine, and further, what action, if any, is the leader of the Mohammedan population, whose salary is paid by the British Government, taking to attempt to quell the riots?
  Mr. ORMSBY-GORE: The answer to the last part of the question is that it is a complete misunderstanding. In fact, it is quite definitely wrong to state that the leader of the Mohammedan population, namely, the Grand Mufti, is paid by the British Government. I will contradict that quite clearly and definitely here and now, as it might lead to serious trouble throughout the Mohammedan world if it were thought that the head of any religious community was being paid by the British Government. I have, no doubt, many views as to the various causes of unrest in the Near and Middle East, but it would be most improper, as His Majesty's Government have announced their intention of appointing an impartial Royal Commission to go into and examine this question and to hear evidence on oath, for me to attempt to give my views.

  BREACH OF PROMISE.
  Mr. DAYasked the Attorney-General whether his attention has been called to the decision of the divisional court of New York, upholding the recent law passed by the New York legislature, which bans from the courts all claims for damages founded on alleged breach of promise or alienation of affection; and will he consider introducing similar legislation in Great Britain.
  The ATTORNEY - GENERAL (Sir Donald Somervell): The answer to both parts of the question is "No."
  Mr. LOGAN: If such legislation were passed, would it be possible to deal with the relations which exist between the Prime Minister and the Chancellor of the Exchequer?

  UNEMPLOYMENT.

    SPECIAL AREAS.
    Mr. E. J. WILLIAMSasked the Minister of Labour whether his Department is prepared to sanction the Special Commissioner undertaking a scheme for the construction of a sea-wall or

    633
    promenade in a Special Area; and would the same apply to a scheme extending into the boundaries of a non-Special Area?
    The MINISTER of LABOUR (Mr. Ernest Brown): The powers of the commissioner in regard to measures outside the Special Areas are set out in Section 1 (6) of the Special Areas Act, 1934. As regards the first part of the question, schemes of the type referred to, which comply with the conditions of the Act, are eligible for assistance from the fund.

    ASSISTANCE REGULATIONS.
    Mr. T. SMITHasked the Minister of Labour the number of cases in which additional allowance has been granted under the discretionary clause in the unemployment assistance regulations in the area covered by the Pontefract area office during 1935 and the approximate cost, and the amount so expended during the first three months of this year?
    Mr. E. BROWN: I am making inquiries of the board, and will communicate with the hon. Member.
    Mr. SMITH: Is the right hon. Gentleman aware that it is now four months since he promised to give this information?
    Mr. BROWN: The hon. Member will recollect that that was on a much wider question than this, which is about a particular case.

    VOLUNTARY WORK (JARROW).
    Sir JOHN JARVISasked the Minister of Health whether his attention has been called to the decision of the Jarrow Public Assistance Committee that the men working voluntarily on the State-aided scheme for making an unemployed men's sports stadium at Jarrow will lose their relief unless they cease work; and whether this policy has the approval of his Department?
    The PARLIAMENTARY SECRETARY to the MINISTRY of HEALTH (Mr. Shakespeare): My right hon. Friend is making inquiries and will communicate with my hon. Friend as soon as possible.

  OLD AGE PENSIONS.
  Mr. De La BÈREasked the Minister of Health (1) how long must a
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  married woman be resident in a public assistance institution or similar institution before she is regarded as living apart from her husband;
  (2) Whether a woman applicant for an old age pension who has been temporarily placed in a public assistance institution by her husband because of illness, and for whom he pays £1 per week for her maintenance, is treated as living with her husband for the purpose of Section 2 (2) of the. Old Age Pensions Act, 1911?
  The FINANCIAL SECRETARY to the TREASURY (Mr. W. S. Morrison): The question when an old age pensioner, who is in a public assistance institution because of illness, should be regarded as no longer living with her husband, so as to necessitate a reassessment of her means, must depend on the circumstances of each case, and falls to be decided by the local pensions committee or by the Minister of Health on appeal. The fact that her husband contributes to her support would not appear to affect the question.

  IMPERIAL CONFERENCE.
  Captain P. MACDONALDasked the Prime Minister whether an Imperial Conference is to be held next year; what will be the approximate date; and whether the opportunity will be taken to hold a Colonial Conference simultaneously?
  The PRIME MINISTER: I am glad to announce that it has now been arranged that a meeting of the Imperial Conference should be held in London in May next year immediately after the Coronation. As regards the question of holding another Colonial Office Conference on the lines of those of 1927 and 1930, my right hon. Friend the Secretary of State for the Colonies will communicate in due course with Colonial Governments, but at present he doubts whether it would be practicable to hold such a conference next summer.
  Captain MACDONALD: Will the same procedure be adopted as last time, and will the Secretary of State for the Colonies represent the Colonies at the conference?
  The PRIME MINISTER: Yes, that is so.

  STATE CEREMONIES.
  Sir W. DAVISONasked the Prime Minister whether he is aware of the dislocation of traffic and consequent financial loss caused by having State ceremonials, such as the recent Proclamation, on a weekday which is not a public holiday; and whether he will consider having any such ceremonials in future at a suitable hour on Sunday, which would obviate this disadvantage and enable many thousands of the public to participate in the ceremony who are now unable to do so?
  The PRIME MINISTER: I can assure my hon. Friend that in fixing the date of State ceremonies all relevant considerations, including the point to which he refers, are carefully borne in mind.
  Sir W. DAVISON: Does my right hon. Friend consider that there would be any disadvantage in the proposal stated in the question, which would enable a large number of people who are now prevented from doing so to participate in such an interesting ceremony as the Proclamation, and would also save a great deal of possible inconvenience due to the obstruction of traffic?
  The PRIME MINISTER: A Proclamation is, fortunately, a very rare event, and I do not know whether it would be worth while laying down any fresh regulations. Perhaps if my hon. Friend has any other form of ceremonial in mind he will communicate with me. Formerly, I believe, it was frequently done on Sunday, and I do not know that there should be any prejudice against that, but perhaps my hon. Friend will, as I say, let me know what kind of ceremonial he has in mind.

  RECRUITING.
  Mr. EMMOTTasked the Prime Minister what percentage of the applicants to the recruiting offices last year were refused on the grounds that they were not physically fit; and what steps the Government propose to take to raise the present level of the physique of the nation?
  The PRIME MINISTER: The percentage for England, Scotland and Wales is approximately 35. As regards the last part of the question, I would refer my hon. Friend to Circular 1445 issued by the Board of Education in January last, from
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  which he will see that in addition to giving close attention to the various health services such as the School Medical Service and the Maternal and Child Welfare Service, it is the Government's policy to promote the development of physical education for children of school age and for persons no longer attending school.
  Viscountess ASTOR: Will the right hon. Gentleman bear in mind the fact that children who attend open-air nursery schools are five pounds heavier and half an inch taller than those who do not? Will he also bear in mind that 95,000 of the pupils entering elementary schools are physically defective and that the only way to put them right is a proper system of open-air nursery schools?
  Mr. SANDYS: Does the Prime Minister recognise that these figures show a very distressing position?
  The PRIME MINISTER: I think there can be no dispute about it.
  Mr. T. J0HNSTON: In addition to the 35 per cent. who are rejected as physically unfit, is the Prime Minister aware that a further 30 per cent. are rejected as medically unfit; and as there is general agreement in the House that something should be done to improve the nutrition of the people of this country, would the Prime Minister give facilities for an early discussion of the subject?
  The PRIME MINISTER: If the matter were raised, that of course would be for discussion. It is a matter that we have in hand now.
  Mr. EMMOTT: Does not the right hon. Gentleman think that, in the consideration of this question there is an opportunity for devising a policy which shall, at the same time, assist agriculture and meet the needs of the nation in regard to defence?
  Miss WARDWould the Prime Minister consider having a conference of all the Government Departments interested in this question of health as there seems to be a lack of co-ordination among them at present?

  PUBLIC HEALTH (NUTRITION).
  Mr. LENN0X-BOYDasked the Minister of Health whether he has any

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  statement to make on the facts, quantitative and qualitative, in relation to the diet of the people, or any proposals to effect changes therein which may appear desirable in the light of modern advances in the knowledge of nutrition?
  Mr. SHAKESPEARE: These questions have been referred to the Advisory Committee on Nutrition. As regards the facts, the committee have reported that the available data are insufficient and have recommended the collection of further particulars. The committee have, however, recently stressed the importance of milk as a food?
  Mr. LENNOX-BOYD: Can the hon. Gentleman give us even an approximate estimate of the date on which this committee may be expected to report again?
  Mr. SHAKESPEARE: I am afraid I could not. It is a very wide and complicated inquiry.
  Mr. SHINWELL: Are we to understand that the lack of nutrition is largely, if not entirely, a question of wages?
  Viscountess ASTOR: No.
  Mr. CARTLANDasked the Minister of Health what sums were allocated last year for the expenses of his Advisory Committee on Nutrition?
  Mr. SHAKESPEARE: The sum of £300 was provisionally authorised for the expenses of the Advisory Committee on Nutrition in the financial year 1935–36 but the actual expenses were about £160.
  Mr. SANDYSasked the Minister of Health what is the present average daily consumption per head of milk; and, in view of the conclusions of the recent report of the Advisory Committee on Nutrition, what steps he proposes to take further to increase it?
  Mr. SHAKESPEARE: The present average daily consumption of liquid milk in this country is estimated at slightly less than half-a-pint per head. The Government accept the views expressed by the advisory committee as to the high value of milk as a food and, as my hon. Friend is aware, schemes for the provision of milk, either free or at cheap rates, to mothers and children are now in operation. The Government will give consideration to the further development
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  of these schemes, but this must await the general review of milk policy which will take place when the report of the Milk Reorganisation Commission is available.
  Mr. SANDYS: Can the hon. Gentleman hold out any hope that definite Government action will be taken during this Session?
  Mr. T. JOHNSTON: Arising out of the original answer, is the Minister aware that there are industrial areas in this country where it has been shown by experiment that 26 per cent. of the houses never get any liquid milk at all?
  Viscountess ASTOR: They get beer all right.
  HON. MEMBERS: Withdraw !
  Mr. JOHNSTON: No, they do not.
  Mr. T. WILLIAMS: Is the hon. Gentleman aware that in the Cardiff experiment it was definitely proved that 26 per cent. of working-class children were getting no liquid milk at all; and can he give the House any idea as to when a report is expected on the subject from the Milk Reorganisation Commission; and will he also take the hon. Member for the Sutton Division of Plymouth (Viscountess Astor) aside and try to teach her something about beer and milk?
  Mr. BELLENGER: On a point of Order. Is it in order for the Noble Lady to make a rash assertion without any substantial evidence whatever to back up that assertion?
  Mr. SPEAKER: I am afraid that if my time were taken up in considering all the rash assertions that are made, it would be impossible to make any progress.
  Miss HORSBRIJGH: In calculating the amount of a half-pint per head, is the amount of milk consumed in the schools included?
  Mr. SHAKESPEARE: I fancy that is so. As regards the question put by the hon. Member for Don Valley (Mr. T. Williams), I could not without notice express an, opinion on the experiment referred to, but I do know that under the policy of the Government the drinking of milk by school children has increased enormously.
  Mr. SANDYS: Will my hon. Friend answer my question whether any action will be taken during the course of this Session?
  Mr. SHAKESPEARE: That is not a question for me to answer.

  INDIA (TARIFF BOARD'S REPORT).
  Mr. MOREINGasked the Under-Secretary of State for India when the report, with recommendations, of the Indian Tariff Board will be made public; and what action His Majesty's Government propose to take thereon?
  The UNDER-SECRETARY of STATE for INDIA (Mr. Butler): I cannot give a definite date, but I can assure my hon. Friend there will be no avoidable delay.

  ROYAL AIR FORCE (DISPLAY).
  Lieut.-Commander FLETCHERasked the Under-Secretary of State for Air whether a retired officer of the Royal Air Force is in the Royal Air Force or in the Reserve of Air Force Officers; and whether he will consider giving retired officers the same privilege as serving officers and ex-short-service officers when issuing tickets for the Royal Air Force annual display?
  The UNDER-SECRETARY of STATE for AIR (Sir Philip Sassoon): An officer on his retirement from the Royal Air Force is not placed in the Reserve of Air Force Officers. Retired officers are allowed on application two free tickets for the Royal Air Force display.

  ROYAL NAVY (COAL-DUST FUEL).
  Mr. MOREINGasked the First Lord of the Admiralty whether any tests are being carried out by the Admiralty to use coal-dust fuel direct in internal combustion engines to replace the use of imported oil?
  Mr. LINDSAY: No tests are at present being carried out by the Admiralty, but close touch is being kept with developments.
  Mr. MOREING: Will the hon. Gentleman consider paying special attention to
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  this matter, not only in view of the very serious danger that may arise in regard to our supplies of imported oil in case of war, but also in the interests of the unemployed miners of South Wales?
  Mr. LINDSAY: I can assure the hon. Gentleman that the very closest touch is being kept with all these questions, both at home and abroad.
  Mr. MATHERS: Will the hon. Gentleman also bear in mind the importance of developing the production of oil from shale from the Scottish shale fields?
  Mr. LINDSAY: I think that is relevant factor.
  Mr. GEORGE GRIFFITHS: Is the hon. Gentleman aware that private companies are using this coal dust and that it is proving successful?
  Mr. LINDSAY: I should like to go into that question before replying.
  Mr. GRIFFITHS: I asked whether the hon. Gentleman was Aware that this dust was being used.
  Mr. LINDSAY: Yes, I am aware of it.

  COAL INDUSTRY (ACCIDENT FUNDS).
  Mr. McGOVERNasked the Secretary for Mines the total amount of money in each mining disaster fund up to the latest date?
  The SECRETARY for MINES (Captain Crookshank): The hon. Member will find this information in Command Paper 5167, which was presented to Parliament in April last.

BUSINESS OF THE HOUSE.
Lieut.-Colonel MOORE: May I ask for your guidance, Mr. Speaker, as to whether I can get this information from you or from the Prime Minister? During the discussion this afternoon it was intimated in conversation that on Thursday a Foreign Affairs Debate would be raised, but we had already been led to assume that Scottish Estimates would be considered on that date, and so I want to ask whether both you, Sir, and the Government are going to be accessories to denying justice to Scotland? It

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appears now that we are to discuss foreign affairs on that date, and the Opposition have done nothing to prevent it.
Mr. SPEAKER: The arrangement of the time for taking public business has nothing to do with me.
Mr. T. JOHNSTON: Arising out of that comment, is the hon. and gallant Gentleman not aware that we were only getting a, half-day for Scotland, and that we shall probably get a whole day later on?

SELECTION (STANDING COM MITTEES).

  STANDING COMMITTEE A.
  Sir Henry Cautley reported from the Committee of Selection; That they had discharged the following Member from Standing Committee A (added in respect of the Firearms (Amendment) Bill [Lords]: The Attorney-General; and had appointed in substitution: The Solicitor-General.
  Report to lie upon the Table.

ORDERS OF THE DAY.

  FINANCE BILL.
  Considered in Committee.—[Progress, 10 th June.]
  [Captain BOURNE in the Chair.]

  FINANCE BILL.

    CLAUSE 15.—(Deduction in respect of children.)
    3.36 p.m.
    Mr. TINKER: I beg to move, in page 11, line 22, at the end, to add:
    "(2) The said section twenty-one shall have effect as if the references in subsections (1) and (2) thereof to a child receiving full-time instruction at an educational establishment included references to a child undergoing training by any person (hereafter referred to as 'the employer') for any trade, profession, or vocation in such circumstances that—

    (a) a child is required to devote the whole of his time to the training for a period of not less than two years; and

    (b) the emoluments, if any, receivable by, or payable by the employers in respect of the child while undergoing the training, do not exceed thirteen pounds a year, exclusive of any emoluments receivable or payable by way of return of any premium paid in respect of the training;

    For the purpose of paragraph (b) of this sub-section all emoluments at any time receivable by, or payable by, the employer in respect of a child in respect of whose training a premium has been paid shall be deemed to be receivable or payable by way of return of the premium, unless and except to the extent that the amount thereof exceeds in the aggregate the amount of the premium.
    (3) In this section the expression 'emoluments' means any salary, fees, wages, perquisites, or profits or gains whatsoever, and includes the value of free board, lodging, or clothing,
    (4) For the purpose of a claim in respect of a child undergoing training the surveyor may require the employer to furnish particulars with respect to the training and the emoluments of the child in such form as may be prescribed by the Commissioners of Inland Revenue."
    It might be convenient to inform the Committee that this matter was before the last Parliament on 15th June, 1935, when we had a long discussion upon it, and we did so well that we prevailed on the Chancellor of the Exchequer to review the matter again. On that occasion he allowed the Treasury officials to meet certain Members of the House in order to see what could be done in
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    the matter. We had their assistance and drafted another Amendment, which was brought to the House on 1st July, and we on these benches expected to prevail upon the Chancellor to accept it. However, on examination he found that he could not do so, and so to-day we are making another effort to see whether the new House of Commons takes a different view from that taken by the old House of Commons. It is true that the numbers on the other side have not been reduced by very many, and that ours have increased somewhat, and we shall get their support, but we shall still require help from other Members before we can carry this Amendment. I notice that there is a new Clause on the Order Paper in the names of several hon. Members opposite bearing on the same matter, so probably there may be a change in outlook on their part, and they may help to support our Amendment.
    The point is an extension of the facilities given for children to take on full-time education. It was recognised in 1920 that some help should be given to children to continue in universities and gain a whole-time education. It was felt that the burden was too great for families to take on, and that help ought to be given. But that point of view was rather narrow and was only for those who followed what is called scholastic education. That is a term that has always troubled me, because what is called scholastic education takes the line, I understand, of meaning just the ordinary education in universities or colleges. I look upon education in a rather wider way, especially now, when we are living in a mechanical age and children have to be educated in other forms of life. It is because of that fact that we are asking the Committee to consider the advisability of extending this Clause to those children who are put to other forms of vocation or profession.
    May I outline one or two cases? We will say, for instance, that there are two families almost similarly placed in regard to income and position in life. One family send their child to a college or university, and because of that they are granted exemption. The other family decide that their son or daughter shall be put to another form of education, it may be by being articled to a solicitor or

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    being put into engineering, or something like that, which is essential in these days if we are to get the best out of our children. In the first case exemption would be allowed. In the second case there would be nothing, even though neither family got any help from the children. The argument against it is that it would be difficult to find out whether there was any value coming into a home, because when a person is articled he sometimes has to pay a premium and the premium is paid back together occasionally, with other forms of benefit to the child. That was the point of view of the Chancellor when he resisted our Amendment last year.
    This Amendment has been made comprehensive enough to cover all the points that he raised. Instead of this relief being given only for education under the terms of the 1920 Act, it would be extended by the Amendment to any trade, profession or vocation in such circumstances that a child would be required to devote the whole of his time to the training for a period of not less than two years. This period is sufficiently long to avoid any attempt to defeat the object of the Chancellor and gets over the objection that the Chancellor made in regard to the period when our Amendment was moved last year. We try to cover, the question of payment by saying in the Amendment that the emoluments payable by the employer, if they do not exceed £13 a year, shall not be taken into account. No one will argue that £13 can be regarded in any sense as adequate payment for a child who is being trained. We have also tried to deal with the question of premium, and in every way we have attempted to encourage in these enlightened times the idea of getting the fullest form of education. We do not want education to be tied down to university or college education; we want to make it wider and broader in every way. The cost to the Exchequer of the Amendment is problematical, but it is well worth while in order to encourage that broader opportunity for education to which, we think, all families are entitled.
    One of the Chancellor's arguments, which I thought was rather sound, was that once he gave way on this point other people who were watching would see that the gate was open and would try to get a little more. Life is like
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    that. You will never keep people from asking for a little more, but if the object is good and sound it ought to be granted whatever the consequences and other requests should be argued as they come forward. We, therefore, ask for this matter to be reconsidered after a lapse of 12 months. Last year it was a fairly new thing. The Chancellor does not take on any form of expenditure without full consideration. He has now had 12 months in which to think over this question, and he is still in a position to grant it. It may be his last opportunity. I am not saying that in any derogatory way of the right hon. Gentleman, for if common opinion is anything to go by, he may get to a higher position. If that is likely to happen, he should not leave some other Chancellor to do this good action. If he does it, he can say to the future generation, "While I was Chancellor I did something for you, and when the time comes and you get the vote, remember what I did for you." However, I am not offering bribes but simply asking for common justice for families who do not send their children to universities.
    3.46 p.m.
    Mr. BELLENGER: There was a long discussion on this question last year, and I have taken the opportunity of looking up some of the speeches, including the Chancellor's speech when he said that he would have to refuse the Amendment. The right hon. Gentleman adopted a very cautious attitude, but I think that, unless I have misinterpreted his speech, he was in agreement with us on the principle of the Amendment. I suggest also that many of the Chancellor's supporters are in agreement with the principle. Therefore, we are perhaps half way towards getting the Chancellor's agreement to the Amendment. The Chancellor based his argument last year on two grounds. One was that the Amendment would not meet the purpose which the Mover suggested that he had, that is to say, it would not enable the apprenticeship system to be carried out, but rather that it would benefit those with higher incomes who were not entitled to it. He went on to say that if he accepted the Amendment there would be no finality. I take it that the Chancellor must have been somewhere near agreement with the Amendment; otherwise, he would

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    not have suggested that we should bring it up on a further stage.
    I maintain that if the Chancellor would accept the Amendment it would do something which all quarters of the Committee would say was highly desirable, that is, it would get the apprenticeship system, which has fallen into disrepute in the last few years, going again. When we listen to discussions like those that took place on the Cotton Industry Bill, when we hear of the lamentable state of affairs which exists in the cotton trade, which show that parents are not sending their children to learn a trade, we must admit that it is highly desirable that the apprenticeship system should be got going again. It has been suggested that it is impossible to get the Government rearmament plan thoroughly going owing to the lack of skilled labour. If the Chancellor will accept the Amendment it will have the effect, in what I may term the lower middle-class families, of some attempt being made to send children into a, trade to learn it thoroughly by way of apprenticeships with or without premiums. It is highly desirable that our mechanics of the future should be as skilled as those of the past.
    I have addressed my remarks to the two objections which the Chancellor raised last year, but there is another ground on which I support the Amendment, and that is the ground of equity. If a parent can get an allowance by keeping his child at school up to 16, surely it is only reasonable that, if he would rather send his child out to work to learn the trade which it will eventually follow he should also get the benefit of that allowance. I appreciate the Chancellor's desire to help parents, which is evidenced by the increased allowances he has this year given to parents in respect of their children. As a parent myself, I agree entirely with the arguments put forward by the Chancellor in earlier Debates on the Finance Bill. As to the cost to the Exchequer, perhaps the Chancellor is better able to estimate it than I am, but I hazard a guess that it would not be very great. It has been alleged from these benches by, I regret to say, no less a person than the Mover of the Amendment that the Chancellor is a very hard man. It may be that he
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    looks a hard man, but appearances are often deceptive. I do not think the Chancellor is a hard man; at any rate, I will hold that opinion until I hear what he has to say on this Amendment. But I do put it seriously to the Chancellor that the Amendment is reasonable and will effect the purpose for which it is put down, and I would point out, further, that it is supported not only from these benches but from the benches which support the Chancellor.
    3.52 p.m.
    Mr. LANSBURY: I wish to support the Amendment, as I did on the last occasion. I do not propose to bandy compliments with the right hon. Gentleman, except to say that he did prove himself a humanitarian the other day when he "lugged" the boy out of the water. That shows that on occasions he does the right thing. Neither am I going to attempt to forecast his future. That is on the knees of the gods, I suppose, or of the Prime Minister. The argument which I felt to be the strongest that he put forward last year was that if he once started giving way in these matters it would open the door to many other applications. On occasions he does give way, and this is one of the occasions where it is hard to see what similar applications can be put forward. If the right hon. Gentleman makes this concession he meets the only case, I think, which can be regarded as being on all fours with the case of a boy remaining at school, and, therefore, he ought to judge it on its merits, and without regard to what anyone may press him to do in the future.
    I take rather a different view of apprenticeship from the hon. Member for Bassetlaw (Mr. Bellenger). It may well be that under present conditions it would be better for a boy or girl not to serve an actual apprenticeship, but to learn, say, for a couple of years how to adapt himself—or herself—to the mechanised system of production which prevails to-day. I think the apprenticeship system has broken down, because there is such a tremendous amount of mechanisation in our methods of production that skilled men in the old sense are not required. I cannot for the life of me see the justification, for parents who may be so well off that they are able to keep their children at school or college getting the advantage of this allowance and it

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    being refused to parents in different circumstances. There does not seem to be any logic or reason for that distinction. I think that on the last occasion the Chancellor was really convinced by the arguments of my hon. Friend the Member for Leigh (Mr. Tinker), but that the Treasury officials who discussed the matter with Members of the Liberal party and the Opposition generally were some- how not able to see how the proposal could be carried out. I really fail to understand what difficulties there can be, and I very much hope that to-day the Chancellor will grant this small concession to parents who really need it.
    3.58 p.m.
    The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain): This question was originally raised by the hon. Member for Leigh (Mr. Tinker) last year, and he will recollect that the form of his Amendment as it was presented on the Committee stage then was open to a number of objections which I pointed out. It is true that his purpose in moving the Amendment, namely, to revive the system of apprenticeship, was one with which I Felt a great deal of sympathy, and it was for that reason that I did offer to allow Treasury officials to assist in redrafting the proposal in such a form as would not be open to the objections which I had put forward. The result was the draft which is now before the Committee. The hon. Member has brought it forward again in the same terms as he put it forward last year after those consultations, which produced an Amendment which, I think, is quite unexceptional in form, and which I cannot say is not practicable. If I was not able to accept the Amendment last year it was not on account of its technical objections, but owing to rather more general considerations. The hon. Member put his case to-day with great moderation and sincerity, and so did the hon. Member who supported the Amendment. It is a case which, on first examination, appeals to us on two grounds. First, there are a good many besides myself and the hon. Members who would like to see the system of apprenticeship revived; and, secondly, there is an undoubted anomaly in, the fact that the parent who keeps his child at an educational establishment obtains a relief from Income Tax which is denied to the parent who puts his child to another form of education, that obtained by training, whether for a trade or a profession.
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    Let me examine those considerations. In the first place I am sure that the right hon. Member for Bow and Bromley (Mr. Lansbury) is a better authority than I am on the subject, but I do not agree with him as to the causes of the apprenticeship system breaking down. It seems to me that although mechanisation has spread very far and wide throughout industry, none the less it has created a new demand for the higher types of skilled mechanical labour. Today the prospects for anyone who has attained the best of that skill are as good as are to be found in any branch of industry. I think the apprenticeship system has broken down because it means a considerable sacrifice for some time on the part both of the parents and the young child concerned. It means that they have to be content with the very small remuneration paid while the boy is learning the trade to which he has been apprenticed. Parents who make that sacrifice may see a very good prospect that the child will get the reward of a better position than he would obtain if he had not got the skill and experience that apprenticeship give him, but in years of trade depression there is no such prospect, and indeed the parent has to face the position that a boy may spend some years in getting practical experience of a trade and bringing nothing into the household at a time when the whole household is probably anxious about its income, and at the end there is no security, no certainty that the boy will find occupation in the trade to which he has been apprenticed. The situation now is entirely different, and I should hope that with the return to activity in the engineering and allied trades the system of apprenticeship will once more come into favour, in the long run with very substantial consequences. Therefore, I would be glad to see the system revived.
    The question is, how far the proposal of this Amendment would go to effect that end. I must say that the case for the Amendment seems to me to be very weak. I am taking now the first of the two grounds I have mentioned—what does it really mean; what is the relief which would be obtained by anybody who had the benefit of this concession, if I accepted the Amendment? I am not now dealing with the argument of the comparatively wealthy parent, for I

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    am sure that that is not the case which the hon. Member had in mind. He spoke of the man who is a small Income Tax payer. Let us examine how the Amendment affects him. What is the relief that he will get? It will be only a relief on £60 a year, and not at the standard rate but at the rate of 1s. 7d. in the £. That is under £5 a year. I submit that that is not going to decide the question whether a parent shall apprentice his son or not. If a parent has made up his mind on other grounds that it is a good thing for his boy to be apprenticed, he will not alter that decision according to whether or not he gets this relief of something less than £5.
    Now I come to the other argument, which is that this is inconsistent and illogical compared with the relief already given to the child who is engaged in educational pursuits. I frankly admit that there is an anomaly and that the Amendment would remove it, but I have to repeat what I said on a previous occasion, that in removing one anomaly you would create a further series of anomalies. The right hon. Member for Bow and Bromley said that he could not foresee any other case that would be likely to come along. He has not the ingenuity of some of his hon. Friends on the benches opposite. If I exercised my ingenuity in that direction I should have no difficulty in seeing the next case that would come along. It would be said, "Here is the case of a man who has got relief because his child has been apprenticed." He would not be getting more than £5. But it would be said, "Here is another case of a man who would like to apprentice his boy but he cannot find any place where he can get him apprenticed. Why deny him the relief which you give to the man who is really much more fortunate in finding a trade which will take his boy?" When you have made the concession in the case of the young person who is unemployed but would like to be apprenticed, there comes the case where a young person is unemployed because he does not wish to take any particular form of work.
    A series of steps would lead us up to the position where all juveniles would be the subject of this rebate whether they were employed or not, and after
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    that we should get the case of dependent relatives and we would be asked how we could justify only £25 allowance in the case of dependent relatives when £60 allowance was given in the case of the child. I may be called a hard Chancellor again in putting forward these arguments, but it must be remembered that the Chancellor of the Exchequer is the trustee for the taxpayer, and he is inevitably dragged along the downward path which leads from one concession to another, which removes one anomaly and creates another, and finally he is brought to the position that has so often been reached in other cases where the last stage of a concession which appeared quite small reaches a substantial sum, which, in conjunction with many other substantial sums, involves additional taxation. I very much regret that I cannot give a more favourable answer, because I have genuine sympathy with the object of the Amendment. I cannot accept it for the two reasons I have given: first, I do not think it is going to make much difference; and, secondly, I can see that the grant of this concession would lead to a request for more concessions.
    Mr. E. J. WILLIAMS: Has the right hon. Gentleman estimated what the cost of this concession would be?
    Mr. CHAMBERLAIN: The Amendment, as drafted, would not cost very much—perhaps £100,000 a year; but if it led to the other steps which I have indicated, as I feel convinced it would, the ultimate cost might run into millions.
    4.9 p.m.
    Mr. PETHICK-LAWRENCE: I confess my disappointment at the concluding part of the right hon. Gentleman's speech. In the earlier part of his answer he held the balance fairly equally, and we waited to know the final result of his decision. Even now I do not wholly despair of the Chancellor in this matter. The two sides of the case are so nearly equal that only a little pressure, or a little cajolery on the part of the Government supporters, is required to induce the Chancellor to come down entirely on the side of the Amendment. I would remind him that it is usual for those in his position to do at least one good deed in the course of a day, and I hope the right hon. Gentleman will start off by doing this good

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    deed at the beginning of to-day. That would very much accelerate business and improve relations among all Members of the House.
    Let me examine briefly the two arguments which the right hon. Gentleman used. The first argument was that it was such a little thing from the point of view of the recipient, that the recipient of the benefit would have to make a sacrifice in any case to get his boy into full apprenticeship, and that while he was making a fairly large sacrifice there was no particular reason why he should not have to make a smaller additional sacrifice at the same time. I do not see that there is much in that argument. It applies equally to all other cases. A man keeps a boy at school and makes a sacrifice, and the amount he gets by the remission of Income Tax in such a case is very small. Yet this House has not disdained to give him that slight relief and the recipient is grateful for it.
    There is surely the other side of the picture, brought out by the figures of the Chancellor himself. If the relief to the recipient is small the corresponding burden on the Exchequer is small. The £100,000 which the right hon. Gentleman mentioned as the total cost of the Amendment is not a very heavy burden on the Exchequer, but spread about among the various people who are perhaps weighing in the balance whether they can afford to let their children be apprenticed, it may be a considerable thing. The Chancellor of the Exchequer spoke not so much about the £100,000 as about the stages which would follow if he granted this concession. He said that by removing this particular anomaly he would be creating other anomalies, that it would be easy, if this victory were won, for greater pressure to be brought to bear on future Chancellors in order to remedy other anomalies. My answer to that is that surely the right decision is to get as nearly to a logical halting-place as possible.
    I do not think that the anomaly that would be created if the Chancellor accepted this Amendment would be nearly as great as the anomaly which exists now. It is a very real anomaly. One child is undertaking a certain amount of training in the form of general education. The anomaly is that another child devoting years to another kind of training is put
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    in an entirely different category. The position of the two children is very nearly the same, and the positions of parents who are considering whether to allow their children to go on being trained at school or to be trained in some work are almost precisely the same. The right hon. Gentleman says that if this concession were granted there would be the anomaly that the child who was at vocational training of some kind would get this relief, whereas the parent who had not put his child out to apprenticeship because he could not, did not get any relief. The anomaly there is not very great. I have sat on the Treasury Bench and have had to resist Amendments for the precise reasons that the Chancellor has given—that when one anomaly was pulled down another was created—but I honestly think that in this case the anomaly that would be created by acceptance of the Amendment is rather farfetched. I suggest that the Chancellor would be taking a logical stand in accepting the Amendment. I hope that other hon. Members will support our appeal to the Chancellor and that he, instead of balancing himself levelly on the top of these criticisms, will come down on the right side on this occasion. It will help very much. If he does not, I believe what we have said may help next year's Chancellor of the Exchequer, who-ever he may be, to take a favourable view of this Amendment.
    4.16 p.m.
    Mr. KINGSLEY GRIFFITH: The speech of the Chancellor of the Exchequer was divided into two parts, and rather reminded me of that ancient volume, "Pros and Cons," although I cannot help thinking that the pros are very much stronger than the cons which came from him. When he speaks of £5, it does not require much exercise of the imagination to picture family circumstances in which £5 would be of very great use. We ought to try to enter into the frame of mind of people to whom £5 is a matter of very great interest. The Chancellor admits that an anomaly exists. If so, why can he not have the courage to do away with it? I suggest it is his duty to do so. He says that he is the trustee of the taxpayers, but he is not a trustee for the maintenance of anomalies the existence of which he himself recognises. His speech seemed a most feeble attempt to find

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    other anomalies which would flow from the new situation, and if he cannot do better than that, the speech was merely an exercise in setting up his own Aunt Sally in order to knock it down. I can well imagine on some previous occasion a Chancellor of the Exchequer resisting a proposal to give an exemption in respect of children at an educational establishment because if he gave way on the point he might be asked to extend it to apprentices. If people are to be as timorous as that, no forward step will be made in achieving justice.
    The acceptance of the Amendment would be a notable step, and one particular group of demands for relief would be completed, based on educational work, because a sufficiently extended view of education would have been taken. I agree with every word that was said by the hon. Member for Leigh (Mr. Tinker). The proposers of the Amendment have not shown themselves unreasonable because, when difficulties have been pointed out to them, they have endeavoured to meet them and they have tried to safeguard their Amendment from misuse. I appeal to the Chancellor to do justice. If this be an anomaly, and if other unjustifiable demands are put before him on other occasions, let him have the courage to refuse those demands on their merits; but let him not anticipate the future unreasonableness of others, and use it as an excuse for refusing the very reasonable demands made upon him now.
    4.20 p.m.
    Mr. KELLY: In spite of the speech made by the Chancellor of the Exchequer, I hope he will reconsider this matter, particularly when he realises how difficult is the position in the big cities, and even in smaller ones, for children who are undertaking this work. Great sacrifices have to be made by their parents. One need only picture the position in London, which I do not say is typical, of children who go to the great shops to learn dressmaking and other sewing trades. Great sacrifices have to be made in the matter of fares and the provision of fees for school and books, and those sacrifices are a great drain upon the family incomes. I assure the Chancellor of the Exchequer that £5 is a very serious matter for such people, and that they would be grateful for a prospect of saving £5 by the acceptance of this Amendment.
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    Apprenticeship has been referred to. Hon. Members who have served apprenticeship, say, in the engineering trades, in which the wages were a great deal less than 5s. per week when they started, can assure the Chancellor of the Exchequer that those who are responsible for the upkeep of apprentices at such times would appreciate to the full his assistance. I appeal to him to reconsider his attitude. The Amendment does not apply only to apprenticeships. It speaks of two years' training in occupations giving a prospect of reasonable wages at adult age. I cannot see that the anomalies to which the Chancellor referred would arise. I do not believe that people would declare, because they could not get their children into an apprenticeship, that their work was a training and not an apprenticeship. I trust that the Chancellor will accept the Amendment, in order to help the families of these young people.
    4.24 p.m.
    Mr. H. G. WILLIAMS: The hon. Member for Leigh (Mr. Tinker) is to be congratulated upon raising this issue which, incidentally, would have been raised by a new Clause which appears upon the Order Paper, but which I imagine, will not now be called owing to the discussion which we have had upon this Amendment. That new Clause is drawn in much fewer words than this Amendment; whether the draftsmanship is better or worse I am not clear, but the underlying principle is the same in both cases, namely, that we should regard apprenticeship as education.
    If I were intending to be a doctor I should go to a medical school, for a period of training which is now six years. If I were the parent in such a case, I should have the advantage of being able to claim an exemption from the payment of tax in respect of that medical student. If the student decided to take up the more lucrative profession of the law—I understand that it is easier to make money in law that it is in medicine—the preliminary training would last about the same time, which I think is about five years. After that, the boy would leave school and be articled to somebody in practice. I understand that when the articles are signed, you pay some money down and that you have to pay Stamp

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    Duty. The young boy is being trained as a solicitor, while in the other case he would have been a medical student. One, as a rule, studies in the offices of a practising solicitor, and the other practises in hospitals, lecture rooms and laboratories. Why any difference should be made between those two positions I cannot understand.
    Let us take the case of apprenticeship. I was apprenticed to the engineering trade, although it was only a very short apprenticeship, because I had spent a good deal of time in the engineering school. My apprenticeship was a continuation of the educational process. I had been for some time in the lecture rooms, laboratories and university workshops, and when that period was over I thought I had better do a certain amount of practical work before I could be in a position to undertake designing work or the other work which I wanted to do. I remember that the remuneration was 1d. per hour, which did not seem excessive. I do not see why that should not have been regarded as a continuation of education for my profession.
    The hon. Member for Rochdale (Mr. Kelly) has drawn attention to the fact that there is a shortage of juvenile labour. Despite the predictions of the educational experts, who said that when the bulge came, as they termed it, there would be an acute glut, their predictions have not yet been verified.
    Mr. KELLY: I did not call it actually a shortage.
    Mr. WILLIAMS: The point is that, so far as South England is concerned, every child that leaves school looks for a job and that in a good many cases there are many more jobs available than there are juveniles to fill them. That is one of the problems in the metal trades, which has been particularly affected because of a shortage of the more highly skilled operatives. I do not think anyone will deny that.
    Mr. KELLY: I deny it.
    Mr. WILLIAMS: The hon. Member for Rochdale represents the unskilled operatives, perhaps, more than he represents the skilled. I am not unfamiliar with the trouble he has with other unions. It is true that 8,000 or 9,000 members of the Amalgamated Engineering Union are
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    without jobs. I think that was the figure mentioned at their annual conference—perhaps rather more; but that does not alter the fact that while a number of skilled men, in certain classes of skill, are without jobs, it is equally true that there is a shortage of skilled men in the engineering trade at this moment. Every skilled man has not identical skill; there are grades of specialisation and subdivisions of skill. There is a shortage of highly skilled labour in my own industry, and unless the situation be remedied we may perpetuate unemployment among unskilled people also.
    Surely it is more desirable that we should give every encouragement to people to train their children for the best conceivable position in life. It is worth while making a little sacrifice, although not a sacrifice of principle, upon a certain kind of occasion. The Chancellor of the Exchequer is the custodian of the national purse, and we merely ask that the word "educational" shall not be limited strictly to educational establishments. I do not know what is to happen with respect to the raising of the school-leaving age. It does not thrill me very much, and I am dubious about the experiment but it will be raised, and it will be disastrous if all the children are turned to a literary education. A great many minds would revolt against that unless they got only very little of it. Many of the children will have a preliminary training in handicraft, and because they are receiving that instruction in the schools the parents will be able to claim exemption. If the same children had left the schools and had been doing exactly the same thing in a factory, that would not count for exemption.
    If we could do this in some proper way, it might be of enormous advantage. It might have the effect of making sure that apprenticeship was rather better run than has sometimes been the case. Some firms have been very good; they have had a manager whose business it was to see that their apprentices were properly trained; but in other cases boys have been left to drift along in odd jobs, and, although they were gradually trained, it was not in any very formal way. If the principle were conceded, and the allowance were only granted where it was shown to the satisfaction of the inspector of taxes that the apprenticeship was being properly conducted, it might do a great

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    deal for the young people of this country who want to be properly trained. I do not know what sum this proposal would involve; unfortunately, I missed that—
    Mr. KELLY: £100,000.
    Mr. WILLIAMS: Even on the basis of £100,000 I think the money would be well invested. I understand that the Chancellor has rather dug his toes in this afternoon, but there will still be another opportunity on Report, and, even if he cannot do anything to-day, I hope he will examine the question sympathetically, because I am certain that this encouragement of training for professions and of apprenticeship would help us enormously in the future.
    4.33 p.m.
    Mr. E. J. WILLIAMS: It is very seldom that we on this side have occasion to agree with the hon. Member for South Croydon (Mr. H. G. Williams), but we welcome his intervention in this Debate, and trust that the Chancellor of the Exchequer will consider the speech that he has made. I think that last year the right hon. Gentleman was good enough to say he would see what could be done to assist my hon. Friend the Member for Leigh (Mr. Tinker) in drafting a suitable Amendment on this subject, and I hope that now the right hon. Gentleman will reconsider the matter. I should have thought that, in view of the opinions expressed from all quarters of the Committee, not only in the Debate on this Amendment to-day, but last year, he would have realised that the emphasis has been rather against the manual worker who endeavours to give his son a training of this kind, and in favour of the professional man, who, on the average, has a larger income than the manual worker. Educationists in this country are doubtful whether there is not too great a tendency in these days towards academic rather than vocational training; that point of view always comes to the fore in discussions on education among headmasters and so on. In the present Amendment the emphasis, in my opinion, is put in the proper place.
    Surely, also, the Chancellor ought to reconsider this question on grounds of equity. If people who are relatively well off are able to obtain an exemption from taxation in this regard, surely the same should apply to persons who are
    664
    relatively poor, because they are the people who usually have the larger families. It is people whose incomes are low or who are overloaded with domestic responsibilities that are unable to send their children to the university, and are obliged by circumstances to limit what they can give them to two years' training in this way. I hope the Chancellor will realise that £5 is really a significant sum to a family of that kind. It means a complete rig-out for the year for the child, and that is something which matters, particularly in a large family with a small income. A sum of £100,000 is small to the Treasury, but £5 is a really large sum to a poor family.
    Personally, I have little knowledge of apprenticeship. I am attached to an industry in which boys work for a small wage when they are very young. I myself started at 13 as a boy underground, with no apprenticeship, just getting 7s. or 8s. a week. That continued for 12 months. But, if my parents had been able to afford it, I should have been kept at school a little longer, and perhaps apprenticed to engineering or something of that kind. I am inclined to believe that unemployment has been detrimental to apprenticeship. The fact that such a large number of competent craftsmen have been unemployed during the last few years has certainly not encouraged them or others to train their children for engineering or any other craft, and I think the Chancellor is probably correct in what he said on that point. One cannot fail to appreciate also the fact that jobs which, in what might be described as the manufacturing age, were done by skilled men, are now being done by machinery in an age in which the machine produces the man rather than the man the machine. I would ask the Chancellor to reconsider the matter in the light of the fact that, although the sum involved in each case is only £5, it means a great deal to people who are relatively very poor.
    4.39 p.m.
    Mr. MICHAEL BEAUMONT: I am sorry to say that I did not realise at first that the Amendment which we are now discussing raises the same point which I desired to cover in a new Clause which I put down. I must apologise, therefore, for not having been present to hear what I have no doubt were the forceful and

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    cogent arguments in favour of the Amendment, and also the Chancellor's reply, though I have been made acquainted with the nature of it. I do not wish to press upon the Committee all the various advantages which I maintain would accrue from this assistance to the principle of apprenticeship. Many of us in different quarters of the House who are interested in education from different angles have always felt that the neglect of apprenticeship in recent years has been an educational disaster. We feel most strongly that the education in craftsmanship that is received during apprenticeship is every bit as valuable and as much to be encouraged as the education received in the school, and I do not think my right hon. Friend will seriously combat that view. It has been the policy of the Government, in theory, at any rate, to encourage and support the principle of apprenticeship and the vocational education which it involves, and I am, therefore, the more sorry that the Chancellor cannot see his way to give this practical assistance to that end. It is most undesirable that it should go forth from the House of Commons or the Government that the only education worthy of assistance is academic school education, and that vocational or craftsmanship education should not be assisted and relieved.
    There seem to be only two possible objections to this proposal. The one is the fact—I do not know whether the Chancellor urges it or not—that apprentices receive some form of remuneration which is not given to those who remain at school. I have tried since putting down the new Clause to which I have referred, to get some figures to show exactly what that remuneration amounts to, but it is very difficult, because remuneration of this sort varies so much in different industries and according to different employments and different ages. There is no uniformity at all, and to make any general statement on the subject is very nearly impossible. As far, however, as I have been able to gather, there is hardly a case in which the remuneration received by the apprentice is not infinitely less than the relief suggested in this Amendment or in my proposed new Clause, and it would be wrong to suggest that the families of apprentices are in any way compensated for the absence of this relief by the remuneration which the apprentices receive.
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    I think that the refusal of this Amendment will have the unfortunate effect of weighting the decision of parents and forcing them, in order to get the rebate, to keep their children to academic education. That is a branch of education which is already overfilled, and the tendency will unquestionably be to produce more black-coated workers, who are already more numerous than the places available for them, and fewer workers of the kind that we all want to encourage. The only other objection that I can see to the Amendment is the one on which I understand the Chancellor based his opposition, namely, that it would cost £100,000. I have never been an advocate of expenditure of public money on education or any other service, nor am I now, but I do say that, in view of the vastness of the sums that this Government and all other Governments appear to be ready to find for academic education, it appears to me that, in refusing this very valuable £100,000 for the assistance of the kind of education in question, they are straining at a gnat and swallowing the camel.
    Mr. CHAMBERLAIN: I think my hon. Friend was not here when I made my speech. I did not base my opposition on the ground of the £100,000.
    Mr. BEAUMONT: I am sorry if I have misinterpreted the Chancellor, but that is a possible objection, and it seems to me that it would not be a sound one, because when you consider the cost of the new and, as I believe, very largely futile Education Bill which we have just passed through the House, I think this £100,000 would be infinitely more valuable to the youth of the country, and to the country as a whole, than the whole of that Bill, and it would cost a great deal less. For these reasons, I urge the Government most seriously to consider whether they cannot see their way to giving what I believe is a most necessary assistance to a neglected branch of education.
    4.46 p.m.
    Mr. EDE: I believe that if this concession were granted it would give to apprenticeship and to vocational training a status and a prospect of steady employment which at the moment it lacks. You have this really amazing position, that a boy who goes to a technical school

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    is able to secure for his family some exemption from Income Tax, but if he does exactly the same work in some firstclass firm as an apprentice, it does not rank for exemption. I believe we talk a great deal of cant about vocational training. After all, the two ancient universities were for centuries merely providing vocational training for the parson, the pedagogue and the politician. I very nearly became the first. I only escaped as a brand plucked from the burning. It was when I was at the university represented by the hon. Gentleman who has expressed such surprise that I realised that it would be very difficult to live up to the requirements of that profession, so I fell into the other two. There can be no doubt that there are many boys who really become better citizens if they take their practical course first and through that proceed to the theoretical, as they do in apprenticeship, especially in modern conditions where you can attach the requirement that the boy shall attend some technical school, and in that way they get back into the realm of general education.
    This is only £100,000 in a Budget of £800,000,000. The Chancellor of the Exchequer had every sympathy for the Amendment except the practical sympathy of conceding the principle for which my hon. Friend contended. I should hope that he could go one step further and grant the concession, because it would not merely be a benefit to the families concerned, but it would be a very great national benefit to give to approved apprenticeship, under the stipulations set down by my hon. Friend, the educational status that it really occupies. It would mean a great deal to a number of families who are doing their utmost to see that their boys become useful citizens and get in their early years that mental, moral and physical discipline which comes from the knowledge that for a certain time they have to give their undivided attention to
    qualifying themselves for a particular walk of life. That is not the least of the advantages that come from apprenticeship, and I could have hoped that the right hon. Gentleman, who represents part of a City which in itself is a monument of what skilled craftsmen of years gone by have built up, could have seen his way to meet us in this matter.
    4.51 p.m.
    Mr. LANSBURY: I have probably had as much experience of apprenticing children as any Member in the House. Backed by the Poor Law, with plenty of money, we had the utmost difficulty in finding the employers and, even when we found them, there was great difficulty in the boys finding occupation after they had served their time. We came to the conclusion that it was due to the development of mechanisation. I should have asked my hon. Friend to alter the Amendment if I bad not read it as meaning that training, whether apprenticeship or not, was involved. It was in that sense that I tried to support it. Even to-day the children who come under the care of the Public Health authorities will have an advantage over other children both in regard to apprenticeship and to training, because public funds will maintain them right through to the end. The right hon. Gentleman's argument as to this being as anomaly which, if rectified will create yet other anomalies, is unworthy of his reasoning capacity. I would ask him to give the matter more consideration so that, when we have the assistance of the hon. Members for Aylesbury (Mr. M. Beaumont) and South Croydon (Mr. H. G. Williams), we may be able to get an Amendment of this kind on Report. I am sorry the right hon. Gentleman is not in the mood to do it now, but there is time for him to consider it before Report.
    Question put, "That those words be there added."
    The Committee divided: Ayes, 112; Noes, 212.

    Division No. 232.]

    AYES.

    [4.55 p.m.

    Acland, Rt. Hon. Sir F. Dyke

    Batey, J.

    Cripps, Hon. Sir Stafford

    Acland, R. T. D. (Barnstaple)

    Bellenger, F.

    Daggar, G.

    Adams, D. M. (Poplar, S.)

    Benson, G.

    Dalton, H.

    Adamson, W. M.

    Bevan, A.

    Day, H.

    Alexander, Rt. Hon. A. V. (H'lsbr.)

    Broad, F. A.

    Dobble, W.

    Ammon, C. G.

    Burke, W. A.

    Dunn, E. (Rother Valley)

    Anderson, F. (Whitehaven)

    Chater, D.

    Ede, J. C.

    Attlee, Rt. Hon. C. R.

    Cluse, W. S.

    Edwards, Sir C. (Bedwellty)

    Banfield, J. W.

    Compton, J.

    Fletcher, Lt.-Comdr. R. T. H.

    Barr, J.

    Cove, W. G.

    Foot, D. M.

    Frankel, D.

    Kirby, B. V.

    Seely, Sir H. M.

    Gardner, B. W.

    Lansbury, Rt. Hon. G.

    Sexton, T. M.

    Garro Jones, G. M.

    Lathan, G.

    Shinwell, E.

    George, Major G. Lloyd (Pembroke)

    Leach, W.

    Short, A.

    George, Megan Lloyd (Anglesey)

    Leslie, J. R.

    Silkin, L.

    Gibbins, J.

    Logan, D. G.

    Smith, Ben (Rotherhithe)

    Green, W. H. (Deptford)

    Macdonald, G. (Ince)

    Smith, E. (Stoke)

    Greenwood, Rt. Hon. A.

    McGhee, H. G.

    Smith, Rt. Hon. H. B. Lees- (K'ly)

    Griffith, F. Kingsley (M'ddl'sbro, W.)

    MacLaren, A.

    Smith, T. (Normanton)

    Griffiths, G. A. (Hemsworth)

    MacNeill, Weir, L.

    Sorensen, R. W.

    Griffiths, J. (Llanelly)

    Marklew, E.

    Stewart, W. J. (H'ght'n-le-Sp'ng)

    Groves, T. E.

    Maxton, J.

    Strauss, G. R. (Lambeth, N.)

    Hall, J. H. (Whitechapel)

    Messer, F.

    Taylor, R. J. (Morpeth)

    Hardle, G. D.

    Montague, F.

    Thurtle, E.

    Harris, Sir P. A.

    Morrison, G. A. (Scottish Univ's.)

    Tinker, J. J.

    Henderson, A. (Kingswinford)

    Morrison, Rt. Hon. H. (Ha'kn'y, S.)

    Viant, S. P.

    Henderson, T. (Tradeston)

    Owen, Major G.

    Walkden, A. G.

    Holdsworth, H.

    Parkinson, J. A.

    Walker, J.

    Holland, A.

    Pethick-Lawrence, F. W.

    Watkins, F. C.

    Hopkin, D.

    Potts, J.

    Whiteley, W.

    Jagger, J.

    Price, M. P.

    Wilkinson, Ellen

    Jenkins, A. (Pontypool)

    Pritt, D. N.

    Williams, D. (Swansea, E.)

    Jenkins, Sir W. (Neath)

    Richards, R. (Wrexham)

    Williams, E. J. (Ogmore)

    John, W.

    Ritson, J.

    Williams, T. (Don Valley)

    Johnston, Rt. Hon. T.

    Roberts, W. (Cumberland, N.)

    Wilson, C. H. (Attercliffe)

    Jones, A. C. (Shipley)

    Robinson, W. A. (St. Helens)

    Young, Sir R. (Newton)

    Kelly, W. T.

    Rothschild, J. A. de

    Kennedy, Rt. Hon. T.

    Salter, Dr. A.

    TELLERS FOR THE AYES.—

    Mr. Charleton and Mr. Mathers.

    NOES.

    Acland-Troyte, Lt.-Col. G. J.

    Davison, Sir W. H.

    Kerr, H. W. (Oldham)

    Adams, S. V. T. (Leeds, W.)

    DC Chair, S. S.

    Kerr, J. Graham (Scottish Univs.)

    Amery, Rt. Hon. L. C. M. S.

    Denman, Hon. R. D.

    Kirkpatrick, W. M.

    Anderson, Sir A. Garrett (C. of Ldn.)

    Denville, Alfred

    Lamb, Sir J. Q.

    Aske, Sir R. W.

    Dorman-Smith, Major R. H.

    Lambert, Rt. Hon. G.

    Assheton, R.

    Duckworth, G. A. V. (Salop)

    Leech, Dr. J. W.

    Astor, Visc'tess (Plymouth, Sutton)

    Duckworth, W. R. (Moss Side)

    Lennox-Boyd, A. T. L.

    Astor, Hon. W. W. (Fulham, E.)

    Dugdale, Major T. L.

    Lewis, O.

    Atholl, Duchess of

    Duggan. H. J.

    Lindsay. K. M.

    Baldwin, Rt. Hon. Stanley

    Duncan, J. A. L.

    Little, Sir E. Graham-

    Balneil, Lord

    Dunglass, Lord

    Llewellin, Lieut.-Col. J. J.

    Barclay-Harvey, C. M.

    Eden, Rt. Hon. A.

    Lloyd, G. W.

    Baxter, A. Beverley

    Elliot, Rt. Hon. W. E.

    Lovat-Fraser, J. A.

    Beaumont, Hon. R. E. B. (Portsm'h)

    Elliston, G. S.

    Mabane, W. (Huddersfield)

    Blair, Sir R.

    Emmott, C. E. G. C.

    M'Connell, Sir J.

    Blindell, Sir J.

    Emrys- Evans, P. V.

    McCorquodale, M. S.

    Bossom, A. C.

    Erskine Hill, A. G.

    MacDonald, Rt. Hn. J. R. (Scot. U.)

    Boulton, W. W.

    Findlay, Sir E.

    McEwen, Capt. J. H. F.

    Bowater, Col. Sir T. Vansittart

    Fox, Sir G. W. G.

    McKie, J. H.

    Bower, Comdr. R. T.

    Fremantle, Sir F. E.

    Macnamara, Capt. J. R. J.

    Boyce. H. Leslie

    Fyfe, D. P. M.

    Macquisten, F. A.

    Braithwaite, Major A, N.

    Ganzoni, Sir J.

    Makins, Brig.-Gen. E.

    Brass, Sir W.

    Glimour, Lt.-Col. Rt. Hon. Sir J.

    Manningham-Buller, Sir M.

    Briscoe, Capt. R. G.

    Gluckstein, L. H.

    Margesson, Capt. Rt. Hon. H. D. R.

    Brocklebank, C. E. R.

    Goodman, Col. A. W.

    Mason, Lt.-Col. Hon. G. K. M.

    Brown, Rt. Hon. E. (Leith)

    Granville, E. L.

    Mayhew, Lt.-Col. J.

    Browne, A. C. (Belfast, W.)

    Gridley, Sir A. B.

    Mills, Major J. D. (New Forest)

    Bull, B. B.

    Grimston, R. V.

    Mitchell, H. (Brentford and Chiswick)

    Bullock, Capt. M.

    Guinness, T. L. E. B.

    Mitchell, Sir W. Lane (Streatham)

    Burton, Col. H. W.

    Hacking, Rt. Hon. D. H.

    Moore, Lieut.-Col. T. C. R.

    Campbell, Sir E. T.

    Hanbury, Sir C.

    Moreing, A. C.

    Cartland, J. R. H.

    Hannah, I. C.

    Morris-Jones, Dr. J. H.

    Cary, R. A.

    Hannon, Sir P. J. H.

    Morrison, W. S. (Cirencester)

    Castlereagh, Viscount

    Hartington, Marquess of

    Munro, P.

    Cayzer, Sir C. W. (City of Chester)

    Haslam, H. C. (Horncastle)

    Neven-Spence, Maj. B. H. H.

    Cazalet, Thelma (Islington, E.)

    Haslam, Sir J. (Bolton)

    O'Neill, Major Rt. Hon. Sir Hugh

    Cazalet, Capt. V. A. (Chippenham)

    Hellgers, Captain F. F. A.

    Orr-Ewing, I. L.

    Chamberlain, Rt. Hn. Sir A. (Br. W.)

    Hepburn, P. G. T. Buchan-

    Palmer, G. E. H.

    Chamberlain, Rt. Hn. N. (Edgb't'n)

    Hepworth, J.

    Patrick, C. M.

    Channon, H.

    Herbert, Major J. A. (Monmouth)

    Peat, C. U.

    Chapman, A. (Rutherglen)

    Herbert, Captain S. (Abbey)

    Penny, Sir G.

    Chapman, Sir S. (Edinburgh, S.)

    Hills, Major Rt. Hon. J. W. (Ripon)

    Percy, Rt. Hon. Lord E.

    Clarke, F. E.

    Hoare, Rt. Hon. Sir S.

    Petherick, M.

    Clarry, Sir Reginald

    Holmes, J. S.

    Pickthorn, K. W. M.

    Cook, T. R. A. M. (Norfolk N.)

    Horsbrugh, Florence

    Pilkington, R.

    Cooke, J. D. (Hammersmith, S.)

    Howitt, Dr. A. B.

    Ponsonby, Col. C. E.

    Cooper, Rt. Hn. A. Duff (W'st'r S.G'gs)

    Hudson, Capt. A. U. M. (Hack., N.)

    Pownall, Sir Assheton

    Cranborne, Viscount

    Hulbert, N. J.

    Radford. E. A.

    Crooke, J. S.

    Hume, Sir G. H.

    Ramsay, Captain A. H. M.

    Crookshank, Capt, H. F. C,

    Inskip, Rt. Hon. Sir T. W. H.

    Ramsbotham, H.

    Crossley, A. C.

    James, Wing-Commander A. W.

    Rawson, Sir Cooper

    Crowder, J. F. E.

    Jarvis, Sir J. J.

    Reed, A. C. (Exeter)

    Davies, C. (Montgomery)

    Joel, D. J. B.

    Reid, Sir D. D. (Down)

    Davies, Major G. F. (Yeovil)

    Keeling, E. H.

    Reid, W. Allan (Derby)

    670

    671

    Remer, J. R.

    Smithers, Sir W.

    Tree, A. R. L. F.

    Robinson, J. R. (Blackpool)

    Somervell, Sir D. B. (Crewe)

    Wakefield, W. W.

    Ropner, Colonel L.

    Somerville, A. A. (Windsor)

    Ward, Lieut.-Col. Sir A. L. (Hull)

    Ross, Major Sir R. D. (L'derry)

    Southby, Comdr. A. R. J.

    Ward, Irene (Wallsend)

    Ruggles-Brlse, Colonel Sir E. A.

    Spens, W. P.

    Wardlaw-Milne, Sir J. S.

    Russell, A. West (Tynemouth)

    Stanley, Rt. Hon. Oliver (W'm'l'd)

    Waterhouse, Captain C.

    Samuel, Sir A. M. (Farnham)

    Stewart, J. Henderson (Fife, E.)

    Wickham, Lt.-Col. E. T. R.

    Samuel, M. R. A. (Putney)

    Storey, S.

    Williams, C. (Torquay)

    Sandeman, Sir N. S.

    Strauss, E. A. (Southwark, N.)

    Wilson, Lt.-Col. Sir A. T. (Hitchin)

    Sanderson, Sir F. B.

    Strauss, H. G. (Norwich)

    Windsor-Clive, Lieut.-Colonel G.

    Sandys, E. D.

    Strickland, Captain W. F.

    Wise, A. R.

    Sassoon, Rt. Hon. Sir P.

    Stuart, Lord C. Crichton- (N'thw'h)

    Withers, Sir J. J.

    Savery, Servington

    Stuart, Hon. J. (Moray and Nairn)

    Wood, Rt. Hon. Sir Kingsley

    Scott, Lord William

    Sueter, Rear-Admiral Sir M. F.

    Young, A. S. L. (Partick)

    Shaw, Major P. S. (Wavertree)

    Sutcliffe, H.

    Simon, Rt. Hon. Sir J. A.

    Tasker, Sir R. I.

    TELLERS FOR THE NOES.—

    Smiles, Lieut.-Colonel Sir W. D.

    Taylor, Vice-Adm. E. A. (Padd., S.)

    Captain Hope and Mr. Cross.

    Smith, Sir R. W. (Aberdeen)

    Touche, G. C.

    Motion made, and Question, "That the Clause stand part of the Bill," put, and agreed to.

    CLAUSE 16. —(Provisions for preventing avoidance of Income Tax by trans actions resulting in the transfer of income to persons abroad.)
    5.3 p.m.
    Sir JOHN WITHERS: I beg to move, in page 11, line 24, after "resident," to insert "and domiciled."
    The object of this Clause, as I understand it, is to prevent people resident in England transferring assets abroad for the purpose of avoiding taxation. I think that the whole of the Committee will agree that this is a form of evasion which ought not to be supported by this House, but I wish to draw attention to a class of persons in respect of whom, possibly, it might be a hardship. It arises in this way. A number of foreigners come to live in England. For example, a considerable number of Americans come to live here, and are ordinarily resident here. They do not bring over their property to England. Their family connections, their assets, money and everything else are in America, but their income is spent here, and they have to pay tax on the amounts that are remitted to them. The result of the Clause in its present form would be that those people, if they have rearranged their affairs in America in a way which involved a "transfer of assets" they would have to pay tax in the future. If they made no transfer of assets from here, even their assets in America would come within this Clause, and they would be taxed under both the American and the English laws. It would be impossible for them to pay two lots of taxation, because taxation is so heavy in both countries, and they would have to clear out, or become domiciled here.
    Mr. BENSON: Would it not be necessary for an American to have transferred assets, a transfer from a person owning them in this country to a person outside this country—a mere transfer from somebody outside the country to another person?
    Sir J. WITHERS: That effect is exactly what we want to prevent. My point is that the Clause as it stands would have that effect. I have tried to remedy it by saying that a resident in England shall be taxed if he is permanently domiciled here, that is to say, if he is not going back to America at all. An ordinary resident is understood to be a person in the ordinary acceptation of the word, but the domicile of a man is his country of origin, which is called his domicile of origin. He retains that domicile for ever, unless he gets a domicile of choice, but he can only get a domicile of choice by taking up a permanent residence in another country and making it his home and deciding that he will never return to his domicile of origin. He gives up his aminus revertendi.
    Mr. DINGLE FOOT: In the sense that lie will not return permanently to live there?
    Sir J. WITHERS: He will not return to live there permanently. The addition of the words "and domiciled" is to prevent the ordinary foreigner resident in England from coming within the hardship which the hon. Member opposite has pointed out, and confining it to the case where foreigners make England their permanent home, and do not propose ever to leave it, and to all intents and purposes become English people. That is the object of the Amendment.
    5.9 p.m.
    Major HILLS: I support the Amendment for the reasons given by my hon.

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    Friend the Member for Cambridge University (Sir J. Withers). I think that hon. Members are all of the same opinion in wanting to do away with the possibility of persons resident here escaping Income Tax by transferring assets to foreign countries. That is what is done at the present time, and we all want to stop it. But there are a few cases where hardship will be caused unless the restrictions are limited in the way suggested by my hon. Friend in his Amendment. An American living in this country, as long as he has a domicile of origin in the United States, will pay the Income Tax and Sur-tax of that country. If he has to pay the Income Tax and Sur-tax of that country, and the Income Tax and Sur-tax of Great Britain as well, all his income will be gone and he will have to go. The people who come to reside here spend their money here and pay tax on what they spend, and the State ought not to discourage their coming. This is not the case of a man who has come here, and has then transferred his assets to avoid Income Tax. The case I have in mind is that of the man who made arrangements about his investments quite innocently and then came to reside in this country. The effect of the Clause will be to treat that arrangement as a transfer of assets, and I do not believe that the Treasury intend that to be so. I do not suppose that it is likely to affect a, large class of people, but it will be a very real hardship upon people who are not responsible for the mischief at which the Clause aims. It aims at the avoidance of the payment of Income Tax by a person resident here who transfers his assets to a foreign country for the express purpose of escaping taxation.
    5.11 p.m.
    The FINANCIAL SECRETARY to the TREASURY (Mr. W. S. Morrison): The Amendment which has been moved by the hon. Member for Cambridge University (Sir J. Withers), and supported by the right hon. and gallant Member for Ripon (Major Hills), is one I cannot accept, and I think when I have explained the reasons, they will be quite content. The Clause which we are now discussing does not, as far as we can make out, effect the mischief which they pointed out. I want to make it clear that, with regard to what the right hon. and gallant Member for Ripon said, I am not going into the
    674
    whole question of double taxation, which is a very much larger question than anything involved in this Clause. The Clause is directed to the prevention of one form of Income Tax and Sur-tax evasion. Therefore, it has a limited object and is directed, as is all Income Tax legislation, to individuals who are ordinarily resident in this country.
    The effect of the Amendment would be to exclude from the provisions of the Clause a foreigner even if he were ordinarily resident in this country, and the question before the Committee is, when they consider the limited object of the Clause, whether they wish a foreigner ordinarily resident in this country not to have this Clause for the prevention of tax evasion directed against him. I think that when the Committee reflect upon the matter, the answer to the question will be obvious. Take the case of foreigners ordinarily resident in this country. They enjoy all the amenities of this country, are defended by its defence forces, enjoy the benefits of its system of law and order, and the harmony which prevails among its citizens. In three cases, which I could describe, by means of exactly the same sort of tax dodging device which we are trying to stop by this Clause, foreigners get away with Surtax amounting to £93,000 a year. What reason is there for a foreigner ordinarily resident in this country receiving better treatment from that point of view than our own nationals?
    There is another point I wish to emphasise. The cases which have moved to compassion the hon. Gentleman the Mover and the right hon. and gallant Gentleman the supporter of the Amendment are not, as I apprehend the matter, affected by the objects of the Clause. The right hon. and gallant Gentleman the Member for Ripon drew attention to a case which he put before the Committee in the disguise of a foreigner who had innocently made this kind of transfer and arrangement, and then came to live in this country. Clearly, if the right hon. and gallant Gentleman has regard to the proviso of the first Sub-section of the Clause, such a case would be left out of the Clause altogether. Such a man would clearly be able to show to the satisfaction of the taxing authorities that the transfer and the associated operations were effected mainly for some purpose other than the avoidance of taxa-

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    tion. There can be no question in such a case that such a man had entered into the arrangement not with the object of avoiding British Income Tax, because, exhypothesi, it was a matter of no concern to him when he made the arrangement. In general, when you are dealing with the case of foreigners who are ordinarily resident in this country, their trust dispositions, because of their foreign connections, have about them a quality which is quite distinct from the artificial arrangements which are being struck at by this Clause, and in general there will be some other purpose for the creation of these trusts which is not merely the avoidance of British Income Tax and Super-tax. For that reason, I would suggest that there is no danger that an innocent foreigner will be struck at by the Clause, and that it would be restricting our efforts to stop this form of evasion if we extended this particular provision to our own nationals and not to foreigners.
    5.16 p.m.
    Mr. M. BEAUMONT: The Financial Secretary has made an important statement from the point of view of many of us. Perhaps he will forgive me if I address to him a question on his statement which may have the effect of shortening the discussion at a later stage. He has drawn attention to the proviso with reference to foreigners and has pointed out that in such a case as the right hon. and gallant Member for Ripon (Major Hills) mentioned it could be clearly shown that it was done for the purpose other than the avoidance of taxation in this country.
    Mr. W. S. MORRISON: Mainly.
    Mr. BEAUMONT: May I put this further question? What happens in the case of those of us—I may tell the Committee quite frankly that I am personally interested in this matter, and it is well that I should say so—whether they be foreigners or British subjects, who have inherited money or have had moneys transferred to them under irrevocable trusts? That is to say, the money was transferred or settled years ago, the parties who made the trusts are dead—heaven knows what their object may have been—and it is impossible for the present holders of these assets to alter the dispositions, however much they may wish
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    to do. Would they or would they not be covered by the proviso, whether they be British subjects or foreigners?
    Mr. MORRISON: That is a different question and one would need to have all the facts of such a case clearly in mind before giving a definite answer. I apprehend from what my hon. Friend has said that in such a case as he has described this Clause would not apply, because it would be clearly an easy matter to make it plain that the transfer was not made for the purpose of avoiding taxation here. If the hon. Member looks at the scheme of the Clause he will see that it is not only necessary that there should have been a transfer but that the individual who is to be charged shall have made the transfer and shall have acquired rights to enjoy the income. I should imagine that the cases the hon. Member has in mind would on that account be excluded from the operation of this Clause.
    5.19 p.m.
    Sir J. WITHERS: Suppose there is an American who resides here but whose property is all in America and he has two or three daughters and wishes to make a marriage settlement on them. Can he transfer funds and make trusts in favour of those daughters and denude himself of that property, and has he to go on every occasion to the commissioners and say that these transfers are not for the purpose of avoiding the liability to taxation in this country? If so, it seems to me to be a great hardship.
    5.20 p.m.
    Major HILLS: I am not satisfied that the Sub-section at the top of page 12 carries the full effect of the Financial Secretary's statement. Let the Committee note that, contrary to the usual practice of the taxing authority, the onus is here laid on the taxpayer to prove that he is not liable. That is an innovation which I confess I do not like.
    The TEMPORARY CHAIRMAN (Colonel Sir Charles MacAndrew): The right hon. and gallant Gentleman cannot deal with that point now.
    Major HILLS: I want to answer the Financial Secretary to the Treasury. I agree that many difficulties would be transactions which may have taken place created in having to prove that some

    677
    years before or a short time before were or were not made with the object of avoiding Income Tax. That would mean proving the negative, and I believe that it would be so difficult that we should hit the people whom the Financial Secretary does not mean to hit. It would include people he does not want to penalise. We cannot leave out the question of double taxation. I do not want to discuss that point now, but it does come in here. If the taxpayer is domiciled abroad but resident here the country of domicile will not let him off his taxation because he is resident in a foreign country. That is the person we have to bear in mind—the person who pays double taxation. He cannot escape on the ground that the investment in foreign securities was not made with the object of avoiding Income Tax, unless he is put to a very difficult proof. That means a new principle of taxation law and one which ought not to be carried so far. If the State wants to tax an individual the State ought to have the burden of proving that the individual is liable to taxation.
    Amendment negatived.
    5.24 p.m.
    Mr. FOOT: I beg to move, in page 11, line 35, after "income," to insert:
    "(arising by way of interest or dividend from the assets transferred or any assets representing whether directly or indirectly any of the assets transferred or representing whether directly or indirectly the accumulations of the income arising from such assets)."
    This is a very simple Amendment, designed to put an extra definition into the wording of the Clause. It is clear that the Clause as a whole is designed to catch for Income Tax purposes income arising out of assets transferred, whether it arises directly or indirectly. The only purpose of the Amendment is to make that perfectly clear. There has been a certain method adopted in the drafting of the Clause. It says:
    "Where such an individual has by means of any such transfer, either alone or in conjunction with associated operations, acquired any rights …"
    Sub-section (2) then says:
    "For the purposes of this section an associated operation means, in relation to any transfer, an operation of any kind effected by any person in relation to any of the assets transferred or any assets representing, whether directly or indirectly,
    678
    any of the assets transferred, or to the income arising from any such assets, or to any assets representing, whether directly or indirectly, the accumulations of income arising from any such assets."
    I would draw attention to the words "by any person." Suppose the transactions in question are carried out not by a person but a, company. The company may be selling and buying securities. Then the income of the company would be the profits or the loss on those dealings. It might be said that those dealings by the company abroad would not be an associated operation within the meaning of this Clause. I may be wrong, and if so no doubt the Financial Secretary or the Attorney-General will correct me, but it seems to me that there may be a loophole in the Clause as drafted, and it is in order to try and stop up that loophole that we have put down the Amendment.
    5.27 p.m.
    Mr. W. S. MORRISON: I am much obliged to the hon. Member for his assistance. In this very complicated and difficult matter we cannot have too much assistance. It is his evident desire to stop up a loophole but, such is the complexity of this form of legislation, if he reconsiders the matter he will find that he would create one by the Amendment. It is for that reason that I would ask the Committee to prefer the drafting of the words in the Clause. This Clause is concerned with cases where an individual has by the transfer of assets abroad acquired rights which enable him to enjoy the income of a company. I would draw the attention of the Committee to the fact that the words in Sub-section (1) are "any income". The hon. Member proposes that this provision should be restricted to cases where an individual has power to enjoy such income as arises by way of interest or dividends from the transferred assets.
    It would be perfectly easy to ensure by a chain of associated operations that the income did not inure in either of those two forms but in the way of annual payments or income of some other category. If we accepted the Amendment the tax evasion expert would see to it that the final payment to the company would be made in some other form. There is no necessity for the Amendment. If the whole Clause is considered carefully the hon. Member will see that the power of

    679
    enjoyment is linked up with the rights which the individual has acquired throughout the Clause. Those rights are linked up again with the actual transfer operations, so that you get the power of enjoyment of income completely linked up. That is what the hon. Member is anxious to establish by his Amendment. If he will accept my assurance I would ask him to agree with me that the Amendment would restrict the power of the Clause to deal with this form of evasion.
    Mr. FOOT: After the statement of the Financial Secretary I beg leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    5.30 p.m.
    Mr. FOOT: I beg to move, in page 11, line 36, to leave out "were" and to insert "had been."
    In this Amendment, and also the next three, my hon. Friends and I are endeavouring to get a clear expression of what we believe to be the intention of the Clause. The purpose of the Clause, as I understand, is that the income which the person concerned enjoys, that is the person in this country, as income which would be chargeable to tax in the United Kingdom, should be chargeable to tax in the same way as if it were actually his income. I am still a little doubtful as to whether that purpose is carried out by the words of the Clause. In Sub-section (1) we have the words:
    "Would be chargeable to Income Tax by deduction or otherwise."
    I suggest that that phrase may be ambiguous. It might be assumed that the income of a foreigner would be chargeable to British Income Tax if it were the income of a British subject. In my submission that is not necessarily the case. Let me give an example. Under the present Income Tax law a British subject would not be liable to tax on deposit interest payable by a bank abroad unless and until that interest is brought into this country. There you have a loophole, it may be a small one, but that is no reason why we should not endeavour to stop it. That is the purpose I have in trying to redraft the Clause.
    5.32 p.m.
    Sir JOHN WARDLAW-MILNE: I understand, Mr. Chairman, that it is not
    680
    your intention to call the Amendment in my name to leave out the words:
    "whether it would or would not have been chargeable to Income Tax apart from the provisions of this Section,"
    as it is covered by the Amendment of the hon. Member for Dundee (Mr. Foot). My object in putting down my Amendment was to cover any possible ambiguity and at the same time to get an explanation of why these words are included. I suggest that they do not add anything to the clarity of the Clause. Indeed, it seems to me that there is a better chance of dealing with evasions if the words are left out. I shall be glad to know why these words are put in and in what direction they extend the scope of the Clause?
    5.33 p.m.
    The ATTORNEY-GENERAL (Sir Donald Somervell): In dealing with these matters one hopes to understand the points put and also that one will be able to make them intelligible. The hon. Member for Dundee (Mr. Foot) is anxious to stop a loophole and took the case of deposit interest in foreign countries which would not be taxable unless it was received in this country. The hon. Member for Kidderminster (Sir J. Wardlaw-Milne) has asked for an explanation of particular words in the Clause. The hon. Member for Dundee will see in Sub-section (1) the words:
    "which if it were income of that individual received by him in the United Kingdom would be chargeable to Income Tax."
    These words are the result of a recent decision in the House of Lords, which said that the word "income" in a Section of an earlier Act must be construed as meaning income taxable under the Income Tax Acts. It is the object of the Clause that it should apply to all cases. The point is whether the income, if it came over here and was received by a resident here, would be liable to Income Tax. If it would, then prima facie the Clause applies, unless the individual can show that the arrangement has been effected for some purpose other than that of avoiding Income Tax. The words,
    "whether it would or would not have been chargeable to Income Tax apart from the provisions of this Section,"
    are directed to the same point. That is to say, we get within the Clause all incomes, including that from foreign pos-

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    sessions. But in case that statement should be unduly alarming let me say at once that if some doubt arises as to whether they are foreign possessions of the kind on which no Income Tax is payable, unless the proceeds a-re remitted here, and they are not remitted, then, of course, it could not be suggested that the individual is dealing with these assets for the purpose of tax evasion because he would not have been assessed to Income Tax on the income of the possessions. I think that makes the matter reasonably clear, or at least as clear as the subject-matter allows. The wording of the Clause has been carefully chosen and is designed to keep out transactions which really do not affect the person's income which is liable to tax as far as foreign possessions are concerned, but to bring in all transactions.
    Amendment negatived.
    5.39 p.m.
    Mr. BENSON: I beg to move, in page 12, to leave out lines 1 to 5.
    It seems to me that the main object of the Clause is to deal with all the income which a person has the power of enjoying irrespective of whether he is actuated by good or bad motives as to the way he invests his capital. It seems to me that the question of enjoyment should be the criterion. During the discussion on the previous Amendments nothing has been said which provides an adequate reason for withdrawing this Amendment. The hon. Member for Aylesbury (Mr. M. Beaumont) raised the point that in past years certain arrangements had been entered into which but for these lines in the Bill would come within the ambit of the Clause, and the Financial Secretary gave a definite ruling that the particular case mentioned by the hon. Member would be excluded by these lines. But it must be noted that the hon. Member for Aylesbury was an interested person. He apparently enjoys the income. Why should he be allowed to evade a tax on income which he enjoys merely because of some peculiar arrangement in the investment of the money by the original testator.
    Take the position of a foreigner in this country. I understand that a foreigner who is merely a temporary resident here would never come within the Clause, but if a foreigner is more or less making this
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    country his permanent home then he should not be treated differently from any Englishman so far as taxation is concerned. He has the power of enjoying the income whether it is received from arrangements made prior to his entry into this country. It is this power of enjoyment which ought to be taxed. Suppose by some fortunate circumstance I became possessed of the wallet of the Financial Secretary, which I am sure is packed with £ notes. I am sure that he would ask for their return, although my object in keeping them might be a very good one. He would not give roe the solid advantage of having a good motive, which he proposes to give to the investor. The Attorney-General has said that certain interest from foreign securities which is not brought into this country, but which the individual still has the power of enjoying, would not come within the Clause because the arrangement is such that it has been entered into prior to the necessity for making any arrangements for the evasion of taxation.
    The ATTORNEY-GENERAL: I said that under our existing Income Tax laws income from foreign possessions and securities is not taxed at all unless it comes into this country.
    Mr. BENSON: The only reply I can make is that it ought to be, and if the elimination of these lines will bring that about it is a strong argument in favour of the Amendment. Now I come to the extraordinary word "mainly." Apparently income which arises out of certain arrangements which have been entered into partly for the avoidance of tax is to be granted a remission of taxation. If instead of "mainly" the proviso contained the word "solely" or "completely," there might be some argument for it, but the word "mainly" definitely permits a certain avoidance of tax which I think condemns the proviso. Unless a much stronger argument and a much more cogent case are made for this exception to the Clause than has been made on previous Amendments, we on this side will press the Amendment to a Division.
    5.46 p.m.
    Mr. E. J. WILLIAMS: I should be glad if the Financial Secretary would explain what is the test to be applied in order to find out whether a certain person is avoiding the payment of tax and

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    whether that test is to be of a retrospective nature. Are we to understand that what may have been done by a certain person in the past will not be considered? An hon. Member on the opposite benches, who said he was personally involved, referred to this Sub-section, and it would seem that he obtained the utmost satisfaction from the Financial Secretary. We are anxious to find out how the hon. Member can hope to have the utmost satisfaction in this respect without the application of a test of some sort. It would seem to me that persons who have foreign securities or investments abroad have them ostensibly for the purpose of avoiding the payment of Income Tax in this country, and it is not fair to Income Tax payers in this country that persons who receive income from any source abroad should avoid bearing a burden which ought legitimately to fall upon their shoulders.
    5.48 p.m.
    Mr. RADFORD: Before the Financial Secretary replies, I would like to put a question to him. Are we to take it that the meaning of the Clause is that it is only the individual who makes the transfer of the assets to whom the provisions of the Clause will apply? When the Bill becomes law and an individual makes a transfer of assets for the purpose of evading taxation and allows the income or the benefits to which he is entitled to accumulate, he thereupon becomes liable to the tax as though he had been receiving the income. In the event of his dying six months hence, his heirs may claim the money accumulated, and all that money which he has accumulated escapes Income Tax. If the Clause applies only to the individual who has made the transfer, there is a very big loophole in it, and it will mean that the provisions can be applied only in a transitory way to individuals as long as they live. I think it is undoubtedly the intention of the Government that the Clause should not only apply to the man who makes the transfer, but to his heirs. I should be glad if my hon. Friend would give some assurance on that point.
    5.51 p.m.
    Mr. ALBERY: This Amendment raises a very important point. I would like to ask the Attorney-General whether he
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    knows of any other instance in which taxation is levied not merely in accordance with the laws on taxation, but with regard to the intention of a person who has carried through some transaction. This appears to me to be an entirely novel procedure. This is perhaps all the more important because the word "evasion" is constantly being used very loosely. I have no desire in any way to assist evasion and I have every sympathy with the Clauses in the Bill which seek to prevent it, but we have been told over and over again that the taxpayer is entitled to pay as little tax as he is compelled to pay by law. He has the right to study the law and to arrange his business or his liability for taxation in such a manner that he will be liable for as little taxation as possible. We now have introduced in this Bill a Clause which makes the amount of money which he is liable to pay dependent upon whether he has sought to evade taxation. If we are to do that, it seems to me that the whole system must be revised and that we must say that the moment a man seeks by any Bans to pay less tax than the Income Tax Commissioner may be able to assess for him, that shall be an evasion. I do not think there is much chance of such a Clause being devised or passed, but this particular Sub-section seems to raise the whole issue. I hope the Attorney-General will tell us whether there is at present in existence any legislation by which the amount of tax which a man is liable to pay can be varied on account of his intention.
    5.53 p.m.
    Mr. W. S. MORRISON: The hon. Member who moved the Amendment was, I think, to some extent still under the impression that this Clause is one which imposes taxation, and most of his speech was based upon that. He referred to the foreign trusts mentioned earlier in the Debate by my hon. Friend the Member for Aylesbury (Mr. M. Beaumont). The liability of the beneficiaries of those trusts is at present determined and measured by the Income Tax law as it stands, and this Clause does not in any way alter that assessment of liability. All the Clause does is to say that where a man in this country abuses the provisions of the existing Income Tax with regard to foreign companies and trusts for the purpose of evading the burdens

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    of that liability, he is to be made unsuccessful in his endeavour. Consequently, the first part of the speech of the hon. Member for Chesterfield (Mr. Benson) is not really justified by this Clause, which is of a very restricted nature.
    What is the test which this Clause adopts in order to see whether or not exceptional measures shall be taken with regard to income? The hon. Member for Chesterfield (Mr. Benson) said that the condition that a man has power to enjoy the income should be sufficient. It might be sufficient for his system of Income Tax liability, but that is another matter. Under the Clause, for the purpose of treating a man's income in an exceptional manner, there have to be three conditions present. In the first place, there has to be a transfer of assets abroad by an individual resident in this country. Secondly, that transfer must have given rise to rights in the individual who makes it. Thirdly, the individual must have power to enjoy the income of the foreign company. It is not until these three conditions are present that the Clause comes into operation. The method which is adopted, if it does come into operation, is that the income of the foreign company or trust is treated as the income of the individual here. It is clear that that system is of an exceptional character, and it might be that if the proviso against which the hon. Member for Chesterfield protests were omitted, the system would injure legitimate trading and commercial interests. For instance, in the case of an individual in this country transferring assets to a company abroad, not for the purpose of evading taxation, but for some legitimate commercial purpose connected with trade or the financing of some interest abroad or the overcoming of currency restrictions which are now becoming such a clog in many directions in the free passage of trade, if this proviso were taken out it might mean that the individual would have added to his income for Income Tax purposes the whole profits of the company or such proportion as corresponded to the assets transferred. He would in fact be in a worse position than the man at home who would be liable only to the income distributed by the company as dividends. I suggest to the Committee that it would be a very hazardous undertaking to omit this proviso, hazardous not from the point
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    of view of the revenue but from that of industrial, commercial and trading interests of a useful and ordinary character.
    The hon. Member for Gravesend (Mr. Albery) saw something so novel in this proviso as to make the Clause reprehensible. He said the whole Clause is dependent upon intention, and he asked my hon. and learned Friend the Attorney-General to deal with that particular aspect of the problem. In fact, this Clause is not based upon intention. In its positive and general sense, the Clause lays down that when the three conditions I have mentioned are present and the individual has power to enjoy the income from the foreign company, the income of that foreign company shall be treated as the individual's income. That is the positive enactment of the Clause and it is in this proviso alone that the question of intention arises. The proviso is designed to exclude from the generality of that positive enactment the possible case where a proper trading operation is involved.
    The hon. Member for Ogmore (Mr. E. J. Williams) asked how this would work out in practice and how would the tribunal be able to judge the true nature of a transaction and the intent of the individual concerned? I can assure him that the great majority of these devices—I would not like to put a percentage figure on it—bear obvious signs of artificiality, which make it clear that they serve no other purpose than that of the avoidance of taxation. That is the chief answer to him. I have mentioned cases, and no doubt cases may arise, in which people enter into these transactions from innocent motives, but those who have done so will be given the right of appeal to a body which is well-designed to deal with such eases, a body with a distinguished legal chairman and the members of which are drawn from a panel of business men.
    Mr. RADFORD: The reference here is to the Special Commissioners, who are not business men but Inland Revenue officials. If the reference were to the General Commissioners I should agree with the hon. and learned Gentleman.
    Mr. MORRISON: The body of which I am speaking now is not the Special or the General Commissioners but the Board of Referees, to which an aggrieved

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    taxpayer, if he thinks that in regard to motive the commissioners have made a mistake, can appeal on the question of fact, and that is a body well qualified to judge the truth in such cases. The hon. Member for Rushholme (Mr. Radford) asked me a certain question. He and the hon. Member for Ogmore both asked the extent to which this provision would be retrospective. I am putting the effect of their questions in a general way. Under Sub-section (7) the provisions apply to the tax for the year 1935–36, and subsequent years—
    Mr. RADFORD: My question was not in regard to the extent of the retrospection.
    Mr. MORRISON: I was not dealing at the moment with the whole question of the extent of the retrospection, and having answered the hon. Member for Ogmore I now turn to the point raised by the hon. Member for Rushholme. As I apprehend it, he was fearful lest a transaction entered into by a father might be used to penalise the child.
    Mr. RADFORD: No, I was anxious that it should be.
    Mr. MORRISON: In this case it is not the intention of the Clause to visit the sins of the fathers upon the children. The only person whom you could get back at for Income Tax that had been evaded would be a husband or wife. That is following the precedent which is usually followed in Income Tax cases. As it is, the son would not be liable.
    Mr. A. BEVAN: Would not the estate be liable? After all, the estate of the son would be larger in consequence of the effect of the act of the father? Would it be inequitable then to proceed against the estate of the son?
    Mr. MORRISON: In respect of any tax that accrued during the lifetime of the father, the estate would be made an object, as such, for the recovery of the money, but the question with which I was dealing is somewhat larger. Suppose that the estate had been wound up and was in the hands of the son. I am saying that in such a case the transaction is closed and could not be followed up any further.
    Sir ARTHUR MICHAEL SAMUEL: Are we to understand then that the heir to the legal estate of some one who had taken action which would he affected by this Clause would escape absolutely from the operations of the Clause?
    Mr. MORRISON: Certainly, if the estate has been wound up and vested in him.
    Mr. BENSON: What does the hon. and learned Gentleman mean by "wound up"? I think that the case which the hon. Baronet the Member for Farnham (Sir A. M. Samuel) has in mind is the case of a parent who dies after having established one of these trusts. Then the whole machinery of the trust is allowed to continue without any winding up and the benefit reverts to the child. Does the child in that case, who is allowing the whole machinery to continue, avoid the taxation?
    Mr. MORRISON: No, of course, if the sort of trust and transfer system with which we are dealing is perpetuated in the lifetime of the son, the Clause becomes operative at once on that ground. But the question which I was endeavouring to answer was this: Assuming that the father had such an arrangement and then died and his estate passed to the son, and the son had no such arrangement. In that case the Revenue could not charge.
    Mr. RADFORD: But the son would inherit the foreign rights on his father's death and those rights would operate for the benefit of the son just as they did for the benefit of the father. Yet the son would not become liable under the provisions of the Clause.
    Mr. MORRISON: Precisely, but if the son himself were to enter into a fresh series of transfer operations of this character, he would be liable.
    Mr. BEVAN: If the father had been guilty of behaviour such as is referred to in this Clause, which made him liable to less Income Tax than he would otherwise have been liable for, do I understand that the son can inherit the machinery created by the father and all the benefits under that machinery, or do I understand that if he inherits the machinery and does not discontinue it, he is then liable?
    Mr. MORRISON: Let us take this matter slowly, because there are several different points to be considered. Assume that an individual enters into a series of operations of this kind, then, in future, from this year 1935–36, such operations will be fruitless. They will not result in any evasion of taxation. Suppose that a man has entered into such a series of operations and then dies and his son inherits his estate, including all this machinery. Then, as respects any sums which by that machinery became due to the State during the lifetime of the father, the estate can be called upon to pay. But if the son steps into the shoes of the father and becomes responsible in his father's place merely for continuing the arrangement, then I apprehend the provision would not apply.
    Sir A. M. SAMUEL: It goes further than that.
    Mr. MORRISON: Let me make one thing clear. The person who is liable under this Clause is the person who makes the transfer and if the son did not make the transfer himself, of course he would not be liable.
    Sir A. M. SAMUEL: Why refer all the time to father and son or to any relative? Suppose that a man enters into such arrangements as would come under this Clause and then sells his rights of ownership to a stranger and the stranger benefits in the same way as the man who transferred the rights would have benefited had he continued to possess these rights. Do I understand that in such a case the man who has bought the rights for a consideration and who then gets the benefits, which we are now trying to stop, would not be subject to the provisions of the Clause?
    Mr. MORRISON: That is a point which is worthy of consideration and I will try to get an answer to my hon. Friend upon that matter later.
    Sir A. M. SAMUEL: Why then keep on referring to a father or other relative?
    Mr. MORRISON: Because I was asked about the case of a father. My hon. Friend in asking me that question and in making the inference to be drawn from it, is putting me in the position of Joseph who was asked not only to declare an interpretation of the dream but the dream itself. But on, the question of the
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    sale of these assets, of course what would be sold would not be the complete scheme—
    Sir A. M. SAMUEL: Not only assets, but rights of ownership.
    Mr. MORRISON: What would be sold would be the rights and the assets and all that sort of thing. I would like to consider whether there is any loophole in that respect. At the present moment I do not know, but I will look into the matter and if there is anything such as my hon. Friend apprehends. I shall try to see that legislation is introduced to deal with it. In conclusion I assure the Committee again that all the devices of this kind which I have studied bear obvious evidence of the fact that they can have no conceivable motive except that of evading taxation. This proviso is inserted for the very purpose of securing that if, by chance, we have drawn the net too widely, so as to include the innocent as well as the guilty, there shall be a way of escape for the innocent if they prove to a body of commercial men who are well versed in the rights and wrongs of commercial operations, that they have acted for some purpose other than that of evading their share of taxation.
    6.12 p.m.
    Mr. PETHICK-LAWRENCE: I listened with a great deal of interest to the speech of the Financial Secretary and endeavoured to follow all the points that have been raised. I confess I am not entirely satisfied with the hon. and learned Gentleman's explanation. I am not satisfied that I completely understand the effect of this Clause, and still less the effect of the proviso, and the hon. and learned Gentleman will forgive me if I say that I am not sure whether he understands it himself or not. There are several points with which he did not seem to deal effectively. The hon. Member for Gravesend (Mr. Albery) called attention to what is, I think, a new principle. We are making the amount of the tax depend, not upon the results of a man's actions but upon the motives which have prompted his actions. That is very important. I understand it is usually said in cases of this kind that if the result of a man's action is not what you suggest but something else, then he shall escape taxation, but that is not what this proviso says. The proviso says that if these arrangements

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    have been effected "mainly for some purpose other than" avoiding taxation the sub-section shall not apply. It does not seem to me that that should be the criterion at all. I object, first of all, to the word "mainly" and I object to basing the proviso on purpose and intention. Surely it is the effect rather than the purpose which should guide us in a proposal of this kind.
    With regard to the other and larger issues raised by several hon. Members, particularly by the hon. Baronet the Member for Farnham (Sir A. M. Samuel), I am not clear. Let us consider the position. A man makes a transfer for the purpose of avoiding taxation and it has the effect of avoiding taxation for the current year. After this year or next year he dies. Two questions then arise. First there is the question of the back Income Tax for the current year for which as a result of this provision he would have been liable. Of course he has not paid it, but his son or other relative or some other person comes into the estate. Surely it is clear that that person will have to pay that back Income Tax, though the hon. and learned Gentleman seemed to indicate the reverse?
    Mr. MORRISON: No, of course, the son would be liable for any back Income Tax.
    Mr. PETHICK-LAWRENCE: I knew that that was so, but I thought that the hon. and learned Member's words might be given a different interpretation.
    Mr. MORRISON: The estate is liable.
    Mr. PETHICK-LAWRENCE: Then that is quite clear. The arrangement made achieves certain results in regard to his income. Someone else at his death steps into his shoes, and, as I understood the Clause originally, that person equally could not benefit by the effect of this transfer made by the original transferor. I am not quite clear, after the explanation of the hon. and learned Gentleman, whether that is so. If the person stepping into the shoes of the original transferor continues to benefit by the transfer, surely it is true that he also should not escape Income Tax thereby. Is it possible for him to make certain transfers not to benefit himself but to benefit his son or heir?
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    Does the hon. and learned Gentleman wish a man to have that power to create an improper avoidance for his heirs by making a transfer that during his own life will not allow him to escape?
    With regard to this proviso, I should like the hon. and learned Gentleman to extend the promise which he made just now to the hon. Baronet the Member for Farnham that he will give these things very careful consideration. I am not at all satisfied that the proviso is correctly phrased and that it does not go too far, and I should like an assurance that he will consider this point and, either in the Debate to-day or on Report, tell us whether, after full consideration and consultation with the Attorney-General, he is satisfied that these words go only so far and not farther than is necessary to achieve the results which we all desire.
    6.18 p.m.
    Sir A. M. SAMUEL: I agree in a great measure with what was said by the hon. Member for East Edinburgh (Mr. Pethick-Lawrence), and I think the Financial Secretary to the Treasury and perhaps the Attorney-General also may not have foreseen what would happen. It appears to me that under this Clause unless you have some proviso to prevent a man during his lifetime selling his rights to another party for, say, £5,000, you will have everyone selling their ownership rights to another party and every one of these cases which this Clause seeks to get at will then go on in the hands of that other person; in other words, it would be in the power of a skilful person, if I may use a colloquial expression, to knock the bottom out of the Clause. I do not know whether or not it is provided for but I do not think, from what the Financial Secretary has said—I hope I am not discourteous in saying so—that he has foreseen that this point would arise. Therefore, I hope he will postpone making any definite pronouncement here until he has talked to the Treasury draftsman and found out whether he ought not to have put something in to catch those people whom I have just described.
    6.20 p.m.
    Mr. CROOM-JOHNSON: We all want to see that property which has been transferred in the way described in this

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    Clause does not escape when it gets into the hands of an individual who succeeds to the original transferor under his will. I cannot help thinking that we have omitted to have regard to one essential fact with regard to the whole matter. When the property has been transferred abroad, if it is done by the original person for the purpose of evading tax, either in connection with other associated transactions or not, we shall, I hope, satisfactorily catch him and make him responsible for Income Tax by reason of the provisions of the Clause. But assuming that he dies and that the property has been transferred abroad, and assuming that it has been left by will, I still say, merely as an example of the sort of thing that would happen, that the result would be that the property would be a foreign possession belonging to the son who had derived it under the will of the individual, and so far as that income was concerned, he would be liable to Income Tax under the existing law and would continue to be liable. But supposing he does something other than that and, having got the foreign possession, he then proposes to deal with it in order to try to make some sort of arrangement, as his father had done before him, before Clause 16 came into existence; the result would be, in my view, that Clause 16, in the way that it is now drawn, would inevitably catch the son just as it caught the father, and it would catch any other relative who took possession of property which had been transferred for the purpose of evading tax. He would find himself explicitly within the Clause as now drafted.
    I give this view of my own with perhaps the more readiness because, although I bad not considered the matter until I heard it mentioned in the Committee a few moments ago, I am happy to think, in view of the promise of the Financial Secretary, that the matter will be further examined. I hope that, when he does examine it, he will give consideration to the present position with regard to such an individual's liability to pay Income Tax on the income of the foreign possession which he gets and which becomes a part of his income in this country. It is only when he seeks to evade that and proceeds to make the associated transactions that he will once more get within the Clause as it is drafted. If that view is right, it will bring to an end this discussion, because then we shall get the
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    very thing that we are all seeking to do and make quite certain that the son will not escape when the transfer is by the father, but the associated arrangements are by the son. I would like the Financial Secretary to say whether the transfer by the father, plus associated arrangements by the son, is sufficient to make the son responsible under the Clause. In my view it is, but if there is a hole to be stopped up here, I hope we shall get it stopped.
    6.25 p.m.
    Mr. GARRO JONES: With great respect to the experience of the last speaker, I am not able to share his assurance in regard to the meaning of this Clause. We are engaged in bringing into the realm of evasion an act which has hitherto been defined only as avoidance of Income Tax, but we are only bringing it into the realm of evasion in so far as it applies to the individual who carries out that evasion. Once the property has been transferred, the guilt of evasion is washed away. I should like to stress the urgent necessity of stopping this apparent leakage in the intentions of the Treasury. There is an even more important aspect of the Clause, of which it would be well for the Committee to take note. A large part of our difficulties in regard to this question of Income Tax arises from statements which have been repeatedly made at that Box, attempting to draw a casuistical distinction between evasion and avoidance. I have heard the Chancellor of the Exchequer say that if a business man can dodge—I do not suggest that he used that actual word—the law, he is perfectly entitled to do so. I would like the Chancellor of the Exchequer and the Financial Secretary to the Treasury to throw some cold water on the statement that there is no guilt whatever in an attempt to avoid the letter and spirit of the law because evasion is nothing more than avoidance.
    The DEPUTY-CHAIRMAN: I think the hon. Gentleman is getting rather beyond the somewhat limited scope of the Amendment.
    Mr. GARRO JONES: I think to a certain extent that is so, if I may say so very respectfully, but I think these are factors which may be of some interest to the Committee, having regard to the nature of the proviso which we are pro-

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    posing to delete. Although I support the Amendment, I am not at all sure that I do not welcome the appearance of this proviso in the Bill, because it implies an admission by the Treasury, so far as I know for the first time, that it is possible to adjudicate upon guilty intentions in regard to the avoidance or the evasion of Income Tax. I will not argue against that view, although there will be considerable difficulties in interpreting the proviso in the courts. The hon. and learned Member will know that once you have passed from the realm of purpose to that of intentions, you are in the realm of what an ancient judge once described as the thoughts of man, and, he said, "the thoughts of man are not triable, for the devil himself knoweth not the thoughts of man." I believe we have reached that stage here. I hope we shall get some information about this point, because we shall hope to use it later on. Who is to say what the main purpose in the mind of the transferor is?
    The DEPUTY-CHAIRMAN: The hon. Member is now anticipating an Amendment which I propose to call later.
    Mr. GARRO JONES: With respect, Captain Bourne, this is a proviso which excludes from the operation of the Clause transfers which are effected for some purpose other than the purpose of avoiding liability to tax. Surely I am right on the point there when I endeavour to show that it will be impossible to say what the purpose in the mind of the transferor was. I cannot conceive of anything more relevant than that.
    The DEPUTY-CHAIRMAN: There is an Amendment to those specific words which I am proposing to call later.
    Mr. GARRO JONES: Then I shall leave that point and come to the point which has already been discussed by the hon. Baronet the Member for Farnham (Sir A. M. Samuel). He stated that certain property which, having had this provision made in regard to it for Income Tax evasion, was then bequeathed or left to an heir, or fell by intestacy to an heir, would not be liable to this tax.
    Sir A. M. SAMUEL: I did not speak of that at all.
    Mr. GARRO JONES: Then the hon. and learned Gentleman who followed the hon. Baronet spoke about it.
    Mr. CROOM-JOHNSON: I certainly never mentioned the word.
    Mr. GARRO JONES: I am sorry if I have misinterpreted either hon. Gentleman. I will put forward to the Financial Secretary the case of a man who makes these convenient dispositions in regard to Income Tax and then effects a transfer of the property for a valuable consideration. Is it possible then to follow to the property that is transferred the consequences of that evasion in loss to the Treasury? Under the Clause it will not be possible to follow that evasion and make recovery and reparation to the Treasury. That being so, all those lawyers who have been skilfully and lucratively spending their time in finding loopholes in the existing law will be busily engaged in devising loopholes in this law, and we shall find a class of property advertised for sale which has been made the subject for these convenient dispositions. It will, therefore, enable people to acquire property which, although they may pay a lesser or a larger amount for it, will still deprive the Treasury of what it might originally have received in Income Tax had not this disposition been made. This is a potential loophole which ought not to be passed with the assurance that it will be looked into on some future occasion. The Committee ought to be satisfied beyond a shadow of doubt now that it will be closed.
    6.32 p.m.
    Mr. BENSON: I hope that the Financial Secretary, in view of the criticism that this proviso has received and of the extreme difficulty he finds in interpreting what it means, will accept the Amendment and introduce on the Report stage a more carefully drafted proviso if it be thought necessary. At present it is most unsatisfactory. The Financial Secretary admitted that he had not realised its implications, and hon. and learned Gentlemen on both sides of the Committee have explained that it means different things. It is unsatisfactory that the Committee should be asked to pass an important proviso like this when the Committee has had no guidance from the Attorney-General, the Financial Secre-

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    tary or any other hon. and learned Gentleman.
    6.33 p.m.
    Mr. W. S. MORRISON: The Debate that we have had on this matter is an admirable example of what this Committee can do when the subject of tax evasion and avoidance, which is a wide and complicated one, is under discussion. Of course, everything that has been said on this question will receive careful consideration before the Report stage in the hope that it will be possible to improve matters still further. I should not like hon. Members to be under any impression that the Government think it possible to have this Clause without the proviso. It may be that some improvement in its language will be discovered, but, unless there is some proviso for safeguarding proper commercial interests, we could not pass the Clause in its present form. Several questions have been put, and one in particular that I will consider is that put by the hon. Member for Farnham (Sir A. M. Samuel). Half of my difficulty in answering it now is that I do not know how a man can sell a right to avoid Income Tax. It seems a very strange form of property, but I think that I know what is at the back of the hon. Gentleman's mind. I think that he fears, if there v-ere a sale of the actual assets which are contained in a company, that perhaps by some sort of arrangement the purpose of the Clause might be avoided. I have a strong suspicion that such an operation would probably be caught under the definition given of associated operations, but I will gladly consider the point. I am much obliged to hon. Members for their contributions to this very difficult subject, and I hope that we may now come to a decision.
    Mr. PETHICK-LAWRENCE: In view of what the Financial Secretary said, that he will give consideration to this proviso, and that, if he comes to the conclusion that it should be altered, he will amend it on Report stage, I will ask my hon. Friend not to press the Amendment.
    Amendment, by leave, withdrawn.
    6.37 p.m.
    Sir J. WARDLAW-MILNE: I beg to move, in page 12, line 1, to leave out "if the individual shows," and to insert "unless the Commissioners of Inland Revenue show."
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    This Amendment must be read with the Amendment in my name in page 12, line 4, to leave out "mainly for some purpose other than," and to insert "for." If these Amendments are made, the proviso will read:
    "Provided that this Sub-section shall not apply unless the Commissioners of Inland Revenue show to the satisfaction of the Special Commissioners that the transfer and any associated operations were effected for the purpose of avoiding liability to taxation."
    What has been said in the Debate on the last Amendment has simplified my task because my hon. and learned Friend the Financial Secretary has made it clear that, while he is anxious, as we all are, to bring within the scope of the Bill those who are endeavouring to avoid taxation, he did not want to spread his net wider than any of us would want it spread. There is no question in this Amendment of assisting tax evasion. We are perhaps even more anxious than my hon. and learned Friend to see that his net is properly spread. The important point of the Amendment is that, as the Clause is drafted, the onus of proof is entirely on the taxpayer. He has to prove himself innocent instead of the authorities proving him guilty. That is a complete change in the system of English law. Hitherto, we have always understood that a man was innocent until he was proved guilty. In this proviso he is held to be guilty until he is proved innocent. That is a strange change in the whole system on which our taxation works, and one which the Committee would be well advised to consider carefully.
    The Amendments which I propose will change the onus of proof from the individual to the Commissioners of Inland Revenue. As the Clause stands, the Inland Revenue are to be entirely the judges of their own cases. In connection with the previous Amendment the Financial Secretary referred to the possibility of a reference to the Board of Referees. That remark met with a certain amount of laughter from those who have had any experience of the board. In the last four years there have been only two decisions by the Board of Referees in favour of the taxpayer. In the previous four years there were no decisions in his favour. It is, therefore, hardly possible to put this body forward as one in which

    699
    the taxpayer will feel any satisfaction or confidence that he will have a square deal. The fact of the matter is that the Board of Referees has been a complete failure for carrying out its original purpose of giving security to the taxpayer, and nobody has any confidence in it to-day. Reference to it is an extremely costly matter. You might just as well refer to the Privy Council or the House of Lords as go to the Board of Referees, even if you had a chance of getting a decision in your favour. I will ask my hon. and learned Friend to eliminate that argument as one that will not carry much weight. If that argument is removed, the whole onus of proof is put on the individual to prove that he is not guilty. These Amendments will have the effect of transferring that onus to the authorities. I am suggesting in my second Amendment that if we leave out "mainly for some purpose other than"—
    The DEPUTY-CHAIRMAN: I am calling that Amendment later, and it would be better if the hon. Gentleman did not deal with it now.
    Sir J. WARDLAW-MILNE: I mentioned it because it is really part of the present Amendment. I agree that this proviso is necessary, but the onus of proof that a man is trying to avoid taxation should be on the authorities. To place on the taxpayer the burden of proving that he is not avoiding taxation is a provision which the House of Commons would not like to see in any Act of Parliament.
    6.43 p.m.
    Sir A. M. SAMUEL: This Amendment will strengthen the Clause and make it effective. I do not like fishing inquiries by the authorities and placing the onus on a man to prove himself innocent. I have been so many years in the House that I can remember taking part in the discussions when we set up the Board of Referees. I thought that the board would act as a buffer between the taxpayer and the revenue authorities and that it would act in such a way as to give satisfaction to everybody. The gentlemen who form the board are honourable gentlemen and are doing their best, but I am completely satisfied that the system of the board has failed. It sits very infrequently—
    The DEPUTY-CHAIRMAN: I do not see, whether this Amendment is accepted or not, that it will affect the position of the Board of Referees.
    Sir A. M. SAMUEL: I bow to your Ruling, of course, but the Financial Secretary has used the Board of Referees in an earlier stage of the debate on an Amendment to the Clause as an argument when he said it was a buffer, and the point I was trying to make was that the Board of Referees is not a satisfactory solution. I was proposing to give my reason for it. If I am in order I will proceed, but if not I will not go any further. May I say that the Board of Referees—
    The DEPUTY-CHAIRMAN: I have already said that the operations of the Board of Referees do not arise on this Amendment.
    Sir A. M. SAMUEL: Then I have nothing more to say.
    6.46 p.m.
    Mr. BENSON: The speech of the hon. Member for Kidderminster (Sir J. Wardlaw-Milne) was somewhat disingenuous, using that word without any reflection on him. He suggested that he was proposing to take out of this paragraph the unpleasant sting which it contained in that the taxpayer had to prove himself innocent. I do not think that is quite the case. The taxpayer, if he wishes to come outside the scope of the Clause, has placed upon him the burden of giving an adequate alternative explanation of his action. It is not a question of proving himself innocent, he has to show merely that he had an adequate alternative motive, which is a very different matter. If he had that motive it is easy to show it, and no burden is placed upon him by asking him to do so. On the other hand, the Amendment proposes that the Special Commissioners will have to show not that there is another alternative explanation but that there is no explanation save tax evasion. It means that they have to exclude all other possible explanations. Therefore, the hon. Member is trying to put them into the impossible position of proving a negative.
    Sir J. WARDLAW-MILNE: A few moments ago we were told by the Financial Secretary that in these cases

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    it was perfectly easy for these Special Commissioners to know where there is tax evasion.
    Mr. BENSON: The opinion of the Financial Secretary, interesting though it frequently is, will not be the criterion by which this law is judged, and, obviously, if the Special Commissioners have to show that the purpose is evasion they can only do so by a process of exclusion, showing that there is no other possible explanation, and that puts them in the position of having to prove a negative. I hope that the Chancellor will firmly resist this Amendment, for it would, in effect, make the whole of the Clause valueless.
    6.48 p.m.
    The ATTORNEY-GENERAL: Nobody will complain of any hon. Member raising the very important and fundamental issue of whether a Clause does or does not appear to contradict the general principle of our law that people should be presumed to be innocent until proved to be guilty. That is a fundamental principle of our law. On the other hand, our law is equally familiar with the operation of what may be called the shifting of the onus of proof. Before we get to the proviso the conditions to which my hon. and learned Friend the Financial Secretary referred earlier have to be satisfied. First, it has to be found that a man has made a transfer of assets, and then it has to be found that he is enjoying the product of those assets in a form which, under the existing law, does not render him liable to taxation. Therefore, we start with a series of transactions which have enabled a man, while maintaining the same assets, to reduce the contribution which he makes to the National Exchequer; and it is only when those conditions have been satisfied that the proviso does, as I recognise, shift the onus of proof to the taxpayer.
    We were urged by hon. Gentlemen opposite not to bother about the motive in all these cases if there has been a transfer of assets, but we do not accept that view. We think that if a man starts a branch business in India or elsewhere, and transfers assets for the purpose of getting that branch of his business going, he should not come within the purview of this Clause, and this proviso is to enable cases of that kind to escape the operation of the Clause. It is not a question of pre-
    702
    suming a man guilty until he proves himself innocent, but a case of allowing a man to escape from the general principle if he can satisfy the Commissioners that the purpose for which he undertook the transfer was not the purpose against which the Clause is aimed. Further, it is proper and relevant to consider the point that the facts which come within the terms of the proviso are, and must be, all within the knowledge of the taxpayer and cannot be within the knowledge of the Special Commissioners.
    It is perfectly true, as was pointed out in answer to an interruption, that the vast majority of cases are plain on the face of it, and that the taxpayer is not in the least trying to disguise the object for which he has entered into the transaction, and it does not matter where you put the onus of proof, but there will always be marginal cases in which there may be some element other than tax evasion, or where the documents had been so skilfully drawn up that they were inconsistent with a motive other than that of tax evasion. It is doing no injustice to say to the taxpayer, "You have got off a certain amount of Income tax as a result of a transfer of assets. The intention of Parliament is that people who do such things should not, by such transactions, diminish the contribution they make to the national income. If you can satisfy us that you did it mainly for some other purpose than the purpose of evading liability to taxation, we will accept the explanation." Looked at in that light I hope the Committee will consider that this is not an unfair or oppressive provision, but that in the circumstances it is a reasonable provision for the Committee to pass.
    6.55 p.m.
    Mr. SPENS: I was rather sorry to hear what the Attorney-General said. I agree with the arguments put forward by the mover of the Amendment, and I would ask the Attorney-General and the Chancellor of the Exchequer to consider one other aspect of the question before they insist on having this proviso in this form. There have been many transfers of assets abroad from which the people of this country are still enjoying income, and a very great number of those people will consider, rightly or wrongly, that those transfers have been made mainly for some other purpose than that of

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    avoiding liability to our taxation. In order to get off paying taxation every one of those subjects will have to make an application to, and be heard by, the Special Commissioners, and I suggest that that will lead to appalling delay in the dealing with tax cases by that body. Apart from the merits of the arguments put forward by the mover of the Amendment, I suggest that if we put the position the other way round it would mean that the Commissioners of Inland Revenue would then, in cases where they think—and they can always get at the facts, because they have got all the returns—there is a prima facie case, and only in those cases, go before the Special Commissioners, and the Special Commissioners would have a far smaller volume of this work to do and be far more able to cope with it. These tax cases would then be dealt with without the delay which in so many cases is so inconvenient to the subject.
    6.57 p.m.
    Major HILLS: My hon. and learned Friend has said, and I think quite clearly, that in certain cases the onus of proof may shift at certain points in the transaction. If I understand his point it amounts to this, that the Special Commissioners have got to prove the transfer to a foreign person or company and to prove that the enjoyment within the meaning of Sub-section (3) of this Clause is still in the possession of the transferor. At that point, he suggests, the onus of proof should shift, and the taxpayer should be the person to prove that he is not liable to taxation. The reason he gave for that was that all the facts are in the knowledge of the taxpayer and that proof is a matter of ease to him. Surely the same argument could be used with regard to any taxing statute. On that argument you might in all cases shift the onus of proof to the taxpayer, but the State up to now has very wisely left the burden of proof on the taxing authority. There are very good reasons for that, and we need pretty strong arguments before, in this case of all cases, we shift the burden of proof, for here we have a Clause which, by the statement of my hon. and learned Friend the Financial Secretary, was expressly put in for the taxpayer, and it does not protect him as fully as it might do.
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    It comes back to what my hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne) said, that the taxpayer has to prove a negative, has to prove that he was not avoiding taxation. We are not protecting him. I do not want to excuse or to give any loophole for any avoidance of tax. That is a very bad thing for all of us, because the more Income Tax is avoided the bigger the charge which falls on the rest of the unfortunate taxpayers. I want all people who avoid tax in this way to be caught, but I do not want them to be put in a very difficult position. My right hon. and learned Friend referred to business transactions which might at first sight look as though they were avoidance of taxes. Are all transfers of assets to a foreign country, where the enjoyment within the wide ambit of Sub-section (3) is left to the transferor, to be the subject of inquiry and to come before the Special Commissioner? I would call attention to paragraph (e) which states:
    "the individual is able … whether directly or indirectly, to control the application of the income."
    Surely a case may arise in some business transactions in which he could control the application of the income and yet get no benefit from the income. This is not only a case of enjoying the income. It is a case where he controls the income, and that opens a very wide door. A wide interpretation has been put on the expression "enjoyment of income," and specially suitable terms should be given to the taxpayer who is an innocent party. This Clause has been put in ostensibly for the protection of the taxpayer, and I do not see why in this special case, where a special obligation is imposed, the protection of the innocent taxpayer should not be extended.
    7.3 p.m.
    Mr. GARRO JONES: I confess to some degree of satisfaction in finding myself in this instance on the side of the Attorney-General. I was rather surprised to hear him import the language of the criminal law in his attempt to repudiate this Amendment. He spoke about the guilty and the innocent. I would prefer to use the language of the civil law, and say that this Clause, with the exception of the

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    proviso, clearly comes within the sphere of those who make the assessment. That is the statement of claim. The proviso clearly comes within the province of the reply or the appeal, and the hon. and learned Member for Ashford (Mr. Spens) has misconceived the method of operation of the Amendment if he imagines that it would expedite the settlement of taxing difficulties. Does he suppose that to move the Commissioners of Inland Revenue to get the taxpayer out of a difficulty would be a quicker operation than to allow that individual to act for himself? Who is to move the commissioners to get the taxpayer out of this ne? The individual is the only person who has the information.
    Mr. SPENS: The hon. Member is wrong. The individual will in every case have to move to get himself out of the net. That will probably mean 2,000 cases next year if the Amendment is accepted. The commissioners will move in such cases as they think the Section applies to, which will probably be 200 or 300. If the Amendment is not accepted, I suggest that the number of applications will cause great delay in the Special Commissioners' machinery, whereas if this Amendment is accepted the applications to be dealt with would be much fewer.
    Mr. GARRO JONES: Before we can really decide who is the best person to submit that he is not liable to tax we should have a clearer definition of the meaning of the word "purpose." Until we know the meaning of that word, we cannot possibly decide whether the individual or the commissioners would be competent to state a case. I hope that before we dispose of this Amendment we shall get a clearer definition of the word "purpose."
    The DEPUTY-CHAIRMAN: That would come better on the Amendment to leave out the word "mainly."
    Mr. GARRO JONES: I bow to your Billing. We cannot reach a satisfactory decision in fullest detail without going into the facts with which I wish to deal. Apart from that, we have enough evidence to entitle the Attorney-General to reject this Amendment, and I hope he will do so.
    7.7 p.m.
    Mr. FOOT: I find myself in considerable sympathy with the Amendment and the arguments of those who have supported it. This proviso as it stands imports two extremely undesirable principles. The test of liability is not the effect of acts that are done, but the intention with which they were done. That is an extremely difficult thing for any tribunal to decide. It has been pointed out by several hon. Members that we are in fact placing the onus on the taxpayer and calling on him to prove a negative, always an extremely difficult thing to do. Nobody in this Committee has any sympathy with the tax dodger, but it would be unfortunate if, because we desired to catch those who have been avoiding taxation, we were to establish in our Income Tax law an extremely undesirable principle which might be extended in future to a much more deserving class of taxpayer. It is the first time, I think, that the onus has been placed on the taxpayer as against the Income Tax authorities. I may be wrong, but it is certainly rare in our Income Tax law. The Attorney-General referred to shifting onus, and said there were cases in our law where, after the Crown had proved its case up to a certain point, the onus shifted and something had to be proved by the defendant. These cases of shifting onus are the exception rather than the rule.
    The ATTORNEY-GENERAL: No. In criminal law the onus practically never shifts. I was thinking of civil proceedings where it shifts from time to time.
    Mr. FOOT: I should have thought it extremely rare in criminal cases. I referred to it only because the Attorney-General and one or two other hon. Members referred to the criminal law. I would like to take the analogy of a man who is charged with receiving goods knowing them to have been stolen. There the prosecution first proves that the goods have been stolen, and that they were in the possession of the defendant. When it has got to that point the defendant is expected to give an explanation, and if he fails to do so, or fails to give a reasonable explanation, then the jury is entitled to find him guilty without inquiring into the matter further. In a case like that the onus of proof never shifts. The onus always remains on the

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    Crown, and the man is never called on to prove affirmatively his own innocence. All that he is called on to give is an explanation. In a case like this the tax commissioners would prove there had been a transfer of assets within the meaning of the earlier part of the Clause, that the income from those assets was being enjoyed by a British subject in this country, and then they would be entitled to call on the taxpayer for an explanation of the reasons why he made this transfer. If he failed to give an explanation, no doubt they would be justified in assuming the worst. But that is a different thing from placing the whole onus of proof on the taxpayer, and that is what is being done under the Clause. I agree with hon. Members opposite that whatever may be the excuse in this case it is a particularly undesirable precedent.
    7.12 p.m.
    Mr. CROOM-JOHNSON: I hope that the Chancellor of the Exchequer will give further consideration to this question. By this Clause we are making a breach in a principle in connection with Income Tax law which perhaps is worth making. The breach is this: Hitherto it has always been supposed that a man was entitled so to order his affairs as not to attract taxation. Suppose a man practising professionally finds that if he makes a certain amount of money in a year he will pay a certain amount of taxation, but if he makes a few hundred pounds more he will have to pay a great deal more tax. He may legitimately say that he will not work more than six months and therefore avoid attracting taxation. That is not a fanciful picture.
    I, in common with my friends who have put down this Amendment, agree with the Government that the time has come when we cannot permit that state of affairs to continue, and that we must do something to make certain that the application of that doctrine does not stray over the narrow boundary into becoming tax evasion. But in making that breach in what has been the situation up to now, we should be extremely careful to see that we are not opening the door to possible troubles with regard to people who, on the face of it, may perhaps look as if they were doing that thing which we are seeking to stop. This
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    question of the onus of proof will not in a majority of cases be very difficult. I am inclined to accept the view put forward by the Financial Secretary when he said that in the great number of these cases it was apparent at once that they could have no other object than that of seeking to avoid the duties of citizenship in paying one's proper proportion to the State. If that is so, if the Amendment were passed the onus of proof would be discharged at once in all these cases by the mere production of a document. Under the Income Tax law, the officials are quite able to get such information by making the necessary request to the court. I am quite aware of the practice of making a nominal assessment of a large sum in suspicious cases, and of leaving the person to appeal and to substantiate his appeal, but that is not the kind of case which we are discussing. This is the case where the man has transferred his assets out of the jurisdiction of the authorities and is making other arrangements, the effect of which will be that they will not come within the purview of Income Tax at all. We are dealing with a very exceptional case, from the point of view of the large majority of the Income Tax collectors of the country. I admit that there is a substantial number of them and that they are probably all people with substantial incomes; but, however, that may be, the situation is still that, on production of the relevant document, which has to be produced already to the Income Tax people under Section 16, as was pointed out by the Attorney-General a moment or two ago, you still have the question left; "What is the main purpose of what is being done?"
    In ordinary cases, upon the production of the document, the main purpose of it sticks out a mile, and there is no difficulty in those cases in putting the documents before the Special Commissioners, in whom all taxpayers have, I think, complete confidence, and who discharge their duties with care and assiduity, and complete satisfaction. You then say, "Here is a prima facie case, and the onus of proof is satisfactory." We are not dealing with the cases in which you can make that sort of statement at once, but with borderline cases in which there is at least the possibility that if you pass the onus of proof on to the person

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    who is being attacked by the Income Tax Commissioners, there may be room for injustice or a miscarriage of justice. That is the only type of case with which I am concerned. I am sure the Committee will not forget that it usually means considerable expense when a person has to make his case out before the Commissioners. In the large number of cases of people of substantial means, I should not weep any crocodile tears if it cost them a good deal of money in order to substantiate their true position, but there are cases in which the cost falls upon an individual who has proved his case contrary to the views put forward by the Income Tax officials. The expense of proving his case still rests upon his shoulders, and there is no possibility of the individual who has won his case getting an order upon the Commissioners so as to obtain his costs. In those circumstances, I hope that the Government will give further consideration to the point.
    I desire further to emphasise and support the plea which was raised by my hon. and learned Friend the Member for Ashford (Mr. Spens) in connection with the practical point which lies behind this discussion. As the Clause stands, it looks as though all these cases must come before the Special Commissioners in the first instance, but they are a body of people who have quite enough work to do, if not more than they can satisfactorily carry out in present circumstances. To impose any new jurisdiction upon them would be adding to the burdens of their work. I suggest that, from the point of view of the convenience of the tribunal as well as in the interests of justice and minimum expense to the taxpayer, the Government would be well advised to give further consideration to the proposal which is enshrined in this Amendment.
    7.22 p.m.
    Mr. HOLMES: I hope that the Chancellor will resist this Amendment, because it will mean a great waste of public time and public money. A number of people are avoiding Income Tax, by transactions resulting in the transfer of income abroad. These are known to the Chancellor and the officials who work in the Inland Revenue Department, but the avoidance is legal, and nothing can be done about it. If the Bill becomes an Act with this Clause in it, such people will immediately become liable to Income
    710
    Tax assessment, which will forthwith be made upon them, and they will have an opportunity of proving whether or not the transference has been done for any other purpose than avoidance of Income Tax. If the Amendment goes through, every case will have to be taken by the Commissioners of Inland Revenue to the Special Commissioners before an assessment can be made, and that will choke the Special Commissioners' Department with unnecessary cases, and cause the Commissioners of Inland Revenue a great deal of work which might be avoided.
    7.23 p.m.
    Mr. McCORQUODALE: No fewer than eight members of the legal profession have followed one another in this Debate, and if I may say so, there has been an appalling smoke screen from the verbiage which those learned gentlemen have put up which has been sufficient to obscure the very simple proposal upon which the Amendment rests. All that this part of the Clause does is to provide a method by which certain people may claim relief from taxation. Anybody who claims relief from taxation has to show why he should obtain it. I have to show that I have a wife before I can claim legal relief. Why should not the people who claim some relief from taxation, owing to the operation of these mysterious methods, prove it, too? I hope that the Chancellor of the Exchequer will in no sense give way to the massed formation of the legal profession behind him.
    7.24 p.m.
    Mr. CHAMBERLAIN: If the Amendment were carried it would, in my opinion, wreck the Clause. Hon. and learned Members have said that that is the last thing they want to do, and I accept what they say, but I hope they will allow me to say that they must find a better method of meeting their difficulties than that proposed in the Amendment. I think they exaggerate the difficulties which they anticipate will attend the working of the proviso. I do not anticipate that every time anybody wants to show that his main purpose is not tax avoidance he will have to appear in person before the Commissioners. Very often the case may be put in writing and sent to the Commissioners, without the necessity for a personal appearance. I will consider the practical suggestions put forward by my hon. and learned Friends as to difficulties, and if I think the proviso can be improved so

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    as to meet their point, I certainly will not be averse from reconsidering it. The Amendment would put upon the Inland Revenue Commissioners the onus of proving in a good many cases where they could not possibly do so.
    Sir J. WARDLAW-MILNE: In view of what my right hon. Friend has said as to being prepared to consider the matter further, in order to see whether the Clause can be changed to carry out the wish of the Committee, I am prepared to withdraw the Amendment. If the method we propose is not the best, I hope the right hon. Gentleman will not forget that it is not our object to change the present practice of British law.
    Amendment, by leave, withdrawn.
    7.27 p.m.
    Mr. ALBERY: I beg to move, in page 12, line 4, to leave out "mainly."
    The purpose of the Amendment has already been referred to. More difficulty would be created by leaving in the word "mainly" than by taking it out. The Attorney-General has stated that it is often not clear whether the transaction has taken place for the purpose of evading taxation or not, but it is difficult to know how the word "mainly" can be interpreted in some of those cases. I can conceive where it would be fair to decide what the word "mainly" means in its mathematical sense. You can have a sum in which the figure 60 is "mainly," as compared with 40. I would ask the Attorney-General what his decision would be on the word "mainly" in a case which I propose to put to him. Suppose that a man transfers property to America. We will take the sum as £100,000. Suppose that £60,000 of that property brought him no income at all, and the remaining £40,000 brought him income. Would the fact that the larger portion of the property brought him in no income justify the interpretation that the transaction had not taken place for the purpose of tax evasion? I hope the Attorney-General will be able to give me some reason for the retention of the word.
    7.30 p.m.
    Mr. LEWIS: In supporting the Amendment, I would ask the Chancellor of the Exchequer whether he can help the Committee to this extent. Earlier in the afternoon, the Financial Secretary told
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    us that in most of the cases which come within Clause 16 it was obvious on the face of it that the purpose of the individual was to evade taxation, and he also told us that he had himself examined a number of such cases. I take it that probably the attention of the Chancellor also has, been directed to a number of individual cases, and I would ask him whether he has ever come across a single case which, while satisfying the conditions laid down in the Clause, would yet come within the proviso to Subsection (1)? If so, I think it would greatly assist the Committee if he would give an illustration of the facts of such a case, obviously, of course, leaving out names. It is very difficult in these complicated matters to follow the purpose of a, Clause without any concrete illustration.
    7.32 p.m.
    Mr. CHAMBERLAIN: I am afraid I cannot oblige my hon. Friend by giving him details of a particular case. Indeed, I have not occupied a great deal of my time in running through specimen cases, though my hon. and learned Friend has had to deal with such cases in the course of his professional work. It is, however, quite easy to imagine that such cases might arise, and we have to provide for a contingency which, if it did arise, ought certainly to be covered in the Bill. I would ask the Committee to consider the effect of the Amendment if it were carried. The effect would be that the Clause could not operate, if any taxpayer could give any reason whatsoever, in addition to avoidance of tax, for his action in transferring some of his assets abroad. No great ingenuity would be necessary to find, not one, but half a dozen other reasons than tax avoidance. The object of the proviso is that a taxpayer whose main purpose was other than tax avoidance should be able to show that that was the case and so escape the operation of the Clause. To delete the word "mainly" from the proviso would, I am afraid, be fatal to the Clause.
    7.33 p.m.
    Mr. PETHICK-LAWRENCE: I do not quite understand whether the right hon. Gentleman means that it would be fatal to the Clause or fatal to the proviso. It seems to me that the object of the proviso is to make sure that, where the object of transference is some quite

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    legitimate and natural object, the taxpayer should not bear this additional burden, but the effect of the word "mainly" seems to me to be that, if a man has two objects, one of which is quite legitimate and the other is to evade, or at any rate to avoid, the tax, he will escape. I do not see why he should escape. If he achieves one of his purposes, which is to evade the tax, I should have thought that he ought to be caught.
    Mr. CHAMBERLAIN: If his main purpose is to avoid the tax he will be caught under the Clause as it is in the Bill, but if the Amendment is carried, provided that he can give any other reasons besides tax avoidance, he will escape the operation of the Clause.
    Mr. PETHICK-LAWRENCE: Perhaps the right hon. Gentleman would explain that a little more clearly, for it does not seem to me to be the case. The proviso reads:
    "Provided that this Sub-section shall not apply if the individual shows to the satisfaction of the Special Commissioners that the transfer and any associated operations were effected mainly for some purpose other than the purpose of avoiding liability to taxation."
    I suppose that the important word is the word "some," though on my first reading it seemed to me that the main words were "for the purpose." I quite admit that that is not the Amendment, but I think it is what my hon. Friend has in mind.
    7.35 p.m.
    Mr. TINKER: I am not very clear on this point, but I understand that, if the word "mainly" were taken out, anyone who had transferred income would avoid any payment of tax at all, and it seems to me that that would provide a loophole for avoidance. I am not satisfied, however, as to whether if the word "mainly" were taken out, it would worsen the Clause, and I should be glad if the right hon. Gentleman could give us some further explanation, so that we may be satisfied. I do not know whether the supporters of the Amendment are satisfied with the explanation he has already given, but I certainly am not.
    7.36 p.m.
    Mr. ALBERY: I have listened to what the Chancellor had to say, but I must confess that I still remain rather
    714
    surprised at the view he takes. If the word "mainly" were left out, the proviso would read:
    "Provided that this sub-section shall not apply if the individual shows to the satisfaction of the Special Commissioners that the transfer and any associated operations were effected for some purpose other than the purpose of avoiding liability to taxation."
    It seems to me to be quite unfair to put upon the taxpayer the onus of showing that he had not any object of avoiding taxation. It seems to me that the Clause is intended to apply wherever there is an attempt to avoid taxation, and, if that be so, I fail to see the necessity for the word "mainly."
    7.37 p.m.
    Mr. CHAMBERLAIN: My hon. Friend is speaking as though his Amendment were one to leave out the word "mainly" and to substitute the word "solely." In that case it might, perhaps, bear the construction that he is putting upon it, but, as I read the proviso, it means that, if the word "mainly" were taken out, the individual would have to show that the transfer and any associated operations were effected for some purpose in addition to the purpose of avoiding liability to taxation.
    Mr. BENSON: I think the word "mainly" is hardly a, desirable word to use in this Clause, because it allows some portion of the purpose to be tax avoidance, whereas I think that tax avoidance ought to be completely excluded. Would the Chancellor of the Exchequer be prepared to consider the substitution of the word "solely"?
    Mr. CHAMBERLAIN: No, because I think that that would be too hard on the taxpayer. Although the taxpayer's main purpose might be other than tax avoidance, it would be extremely difficult for him to say that he was not also influenced by the fact that, in effecting his main purpose, he would incidentally relieve himself of taxation. To put upon him the onus of proving that that did not enter into his mind at all would be going too far.
    Mr. BENSON: The Financial Secretary gave certain examples of cases in which the motive, even if it were a minor motive, was tax avoidance, and surely, if tax avoidance plays any part whatsoever

    715
    in this series of operations, it ought to be discouraged, and ought not to be allowed to bring the transactions outside the Clause.
    Mr. LEES-SMITH: May I say that, if the Amendment goes to a Division, we shall vote for leaving out the word
    "mainly," with the intention of moving subsequently the insertion of the word "solely"?
    Question put, "That the word 'mainly' stand part of the Clause."
    The Committee divided: Ayes, 222; Noes, 107.

    Division No. 233.]

    AYES.

    [7.41 p.m.

    Acland-Troyte, Lt.-Col. G. J.

    Foot, D. M.

    Morrison, W. S. (Cirencester)

    Adams, S. V. T. (Leeds, W.)

    Fraser, Capt. Sir I.

    Munro, P.

    Agnew, Lieut.-Comdr. P. G.

    Fremantle, Sir F. E.

    Nall, Sir J.

    Aske, Sir R. W.

    Fyfe, D. P. M.

    Neven-Spence, Maj. B. H. H.

    Atholl, Duchess of

    Ganzoni, Sir J.

    O'Connor, Sir Terence J.

    Baldwin, Rt. Hon. Stanley

    George, Major G. Lloyd (Pembroke)

    Orr-Ewing, I. L.

    Balfour, G. (Hampstead)

    George, Megan Lloyd (Anglesey)

    Patrick, C. M.

    Balfour, Capt. H. H. (Isle of Thanet)

    Gledhill, G.

    Peat, C. U.

    Barclay-Harvey, C. M.

    Gluckstein, L. H.

    Percy, Rt. Hon. Lord E.

    Baxter, A. Beverley

    Grattan-Doyle, Sir N.

    Petherick, M.

    Beit, Sir A. L.

    Gridley, Sir A. B.

    Pickthorn, K. W. M.

    Bernays, R. H.

    Griffith, F. Kingsley (M'ddl'sbro, W.)

    Plugge, L. F.

    Bird, Sir R. B.

    Gritton, W. G. Howard

    Ponsonby, Col. C. E.

    Blair, Sir R.

    Guest, Maj. Hon. O.(C'mb'r W'll, N.W.)

    Pownall, Sir Assheton

    Blindell, Sir J.

    Guinness, T. L. E. B.

    Radford, E. A.

    Boulton, W. W.

    Gunston, Capt. D. W.

    Raikes, H. V. A. M.

    Bower, Comdr. R. T.

    Hanbury, Sir C.

    Ramsbotham, H.

    Boyce, H. Leslie

    Hannah, I. C.

    Rathbone, J. R. (Bodmin)

    Braithwaite, Major A. N.

    Hannon, Sir P. J. H.

    Rayner, Major R. H.

    Brass, Sir W.

    Haslam, H. C. (Horncastle)

    Reed, A. C. (Exeter)

    Briscoe, Capt. R. G.

    Haslam, Sir J. (Bolton)

    Reid, Sir D. D. (Down)

    Brocklebank, C. E. R.

    Hellgers, Captain F. F. A.

    Reid, W. Allan (Derby)

    Brown, Rt. Hon. E. (Leith)

    Heneage, Lieut.-Colonel A. P.

    Remer, J. R.

    Brown, Brig.-Gen. H. C. (Newbury)

    Hepworth, J.

    Roberts, W. (Cumberland, N.)

    Bull, B. B.

    Herbert, Major J. A. (Monmouth)

    Robinson, J. R. (Blackpool)

    Burgin, Dr. E. L.

    Hills, Major Rt. Hon. J. W. (Ripon)

    Ropner, Colonel L.

    Butler, R. A.

    Holdsworth, H.

    Ross Taylor, W. (Woodbridge)

    Campbell, Sir E. T.

    Holmes, J. S.

    Rothschild, J. A. de

    Cartland, J. R. H.

    Hope, Captain Hon. A. O. J.

    Ruggles-Brise, Colonel Sir E. A.

    Carver, Major W. H.

    Horsbrugh, Florence

    Russell, A. West (Tynemouth)

    Cary, R. A.

    Hudson, Capt. A. U. M. (Hack., N.)

    Salmon, Sir I.

    Cayzer, Sir C. W. (City of Chester)

    Hudson, R. S. (Southport)

    Samuel, Sir A. M. (Farnham)

    Cazalet, Thelma (Islington, E.)

    Hume, Sir G. H.

    Samuel, M. R. A. (Putney)

    Chamberlain, Rt. Hn. N. (Edgb't'n)

    Hunter, T.

    Sanderson, Sir F. B.

    Channon, H.

    James, Wing-Commander A. W.

    Seely, Sir H. M.

    Chapman, A. (Rutherglen)

    Joel, D. J. B.

    Selley, H. R.

    Clarry, Sir Reginald

    Jones, Sir G. W. H. (S'k N'w'gt'n)

    Shakespeare, G. H.

    Clydesdale, Marquess of

    Jones, L. (Swansea, W.)

    Shaw, Major P. S. (Wavertree)

    Colville, Lt.-Col. D. J.

    Kerr, H. W. (Oldham)

    Shepperson, Sir E. W.

    Cook, T. R. A. M. (Norfolk, N.)

    Kerr, J. Graham (Scottish Univs.)

    Simon, Rt. Hon. Sir J. A.

    Cooke, J. D. (Hammersmith, S.)

    Kirkpatrick, W. M.

    Smiles, Lieut.-Colonel Sir W. D.

    Cooper, Rt. Hn. T. M. (E'burgh,W.)

    Lamb, Sir J. Q.

    Smith, Bracewell (Dulwich)

    Courtauld, Major J. S.

    Latham, Sir P.

    Smithers, Sir W.

    Courthope, Col. Sir G. L.

    Law, R. K. (Hull, S.W.)

    Somervell, Sir D. B. (Crewe)

    Craddock, Sir R. H.

    Leech, Dr. J. W.

    Somerville, A. A. (Windsor)

    Cranborne, Viscount

    Leigh, Sir J.

    Somerville. D. G. (Willesden, E.)

    Crooke, J. S.

    Lewis, O.

    Southby, Comdr. A. R. J.

    Crookshank, Capt. H. F. C.

    Llewellin, Lieut.-Col. J. J.

    Spender-Clay, Lt.-CI. Rt. Hn. H. H.

    Crossley, A. C.

    Lloyd, G. W.

    Spens, W. P.

    Culverwell, C. T.

    Loftus, P. C.

    Stanley, Rt. Hon. Lord (Fylde)

    Davies, C. (Montgomery)

    Lovat-Fraser, J. A.

    Stewart, J. Henderson (File, E.)

    Davies, Major G. F. (Yeovil)

    M'Connell, Sir J.

    Stourton, Major Hon. J. J.

    De Chair, S. S.

    MacDonald, Rt. Hn. J. R. (Scot. U.)

    Strauss, E. A. (Southwark, N.)

    Denman, Hon. R. D.

    MacDonald, Rt. Hon. M. (Ross)

    Strauss, H. G. (Norwich)

    Dorman-Smith, Major R. H.

    Macdonald, Capt. P. (Isle of Wight)

    Strickland, Captain W. F.

    Duckworth, W. R. (Moss Side)

    McKie, J. H.

    Stuart, Lord C. Crichton (N'thw'h)

    Dugdale, Major T. L.

    Macnamara, Capt. J. R. J.

    Stuart, Hon. J. (Moray and Nairn)

    Duggan, H. J.

    Magnay, T.

    Tasker, Sir R. I.

    Duncan, J. A. L.

    Makins, Brig.-Gen. E.

    Taylor, Vice-Adm. E. A. (Padd., S.)

    Dunglass, Lord

    Manningham-Buller, Sir M.

    Thomas, J. P. L. (Hereford)

    Eckersley, P. T.

    Margesson, Capt. Rt. Hon. H. D. R.

    Touche, G. C.

    Eden, Rt. Hon. A.

    Mayhew, Lt.-Col. J.

    Train, Sir J.

    Edmondson, Major Sir J.

    Mellor, Sir J. S. P. (Tamworth)

    Tree, A. R. L. F.

    Elliot, Rt. Hon. W. E.

    Mills, Major J. D. (New Forest)

    Tryon, Major Rt. Hon. G. C.

    Elliston, G. S.

    Mitchell, H. (Brentford and Chiswick)

    Tufnell, Lieut.-Com. R. L.

    Emrys-Evans, P. V.

    Mitchell, Sir W. Lane (Streatham)

    Walker-Smith, Sir J.

    Erskine Hill, A. G.

    Moore, Lieut.-Col. T. C. R.

    Wallace, Captain Euan

    Evans, D. O. (Cardigan)

    Moreing, A. C.

    Ward, Lieut.-Col. Sir A. L. (Hull)

    Everard, W. L.

    Morris, J. P. (Salford, N.)

    Ward, Irene (Wallsend)

    Findlay, Sir E.

    Morris-Jones, Dr. J. H.

    Wardlaw-Milne, Sir J. S.

    Fleming, E. L.

    Morrison, G. A. (Scottish Univ's.)

    Waterhouse, Captain C.

    Wells, S. R.

    Willson, Lt.-Col. Sir A. T. (Hitchin)

    Young, A. S. L. (Partick)

    White, H. Graham

    Windsor-Clive, Lieut.-Colonel G.

    Wickham, Lt.-Col. E. T. R.

    Winterton, Rt. Hon. Earl

    TELLERS FOR THE AYES.—

    Williams, H. G. (Croydon, S.)

    Wise, A. R.

    Sir George Penny and Mr. Cross.

    NOES.

    Adams, D. M. (Poplar, S.)

    Henderson, T. (Tradeston)

    Parker, J.

    Adamson, W. M.

    Holland, A.

    Parkinson, J. A.

    Ammon, C. G.

    Hopkin, D.

    Pethick-Lawrence, F. W.

    Banfield, J. W.

    Jagger, J.

    Potts, J.

    Barnes, A. J.

    Jenkins, A. (Pontypool)

    Price, M. P.

    Barr, J.

    Jenkins, Sir W. (Neath)

    Pritt, D. N.

    Batey, J.

    John, W.

    Richards, R. (Wrexham)

    Eellenger, F.

    Johnston, Rt. Hon. T.

    Riley, B.

    Benson, G.

    Jones, A. C. (Shipley)

    Ritson, J.

    Bevan, A.

    Kelly, W. T.

    Robinson, W. A. (St Helens)

    Broad, F. A.

    Kennedy, Rt. Hon. T.

    Rowson, G.

    Brown, Rt. Hon. J. (S. Ayrshire)

    Kirby, B. V.

    Salter, Dr. A.

    Burke, W. A.

    Kirkwood, D.

    Sexton, T. M.

    Charleton, H. C.

    Lansbury, Rt. Hon. G.

    Shinwell, E.

    Cluse, W. S.

    Lathan, G.

    Short, A.

    Compton, J.

    Lawson, J. J.

    Silkin, L.

    Cove, W. G.

    Leach, W.

    Smith, E. (Stoke)

    Cripps, Hon. Sir Stafford

    Leonard, W.

    Smith, Rt. Hon. H. B. Lees (K'ly)

    Daggar, G.

    Leslie, J. R.

    Smith, T. (Normanton)

    Davies, D. L. (Pontypridd)

    Logan, D. G.

    Sorensen, R. W.

    Dobbie, W.

    Macdonald, G. (Ince)

    Stewart, W. J. (H'ght'n-le-Sp'ng)

    Dunn, E. (Rother Valley)

    McEntee, V. La T.

    Strauss, G. R. (Lambeth, N.)

    Ede, J. C.

    McGhee, H. G.

    Taylor, R. J. (Morpeth)

    Edwards, Sir C. (Bedwellty)

    MacLaren, A.

    Thurtle, E.

    Frankel, D.

    Maclean, N.

    Tinker, J. J.

    Gardner, B. W.

    MacNeill, Weir, L.

    Viant, S. P.

    Garro Jones, G. M.

    Marklew, E.

    Walker, J.

    Gibbins, J.

    Mathers, G.

    Watkins, F. C.

    Graham, D. M. (Hamilton)

    Maxton, J.

    Watson, W. McL.

    Greenwood, Rt. Hon. A.

    Messer, F.

    Williams, D. (Swansea, E.)

    Glenfell, D. R.

    Milner, Major J.

    Williams, E. J. (Ogmore)

    Griffiths, G. A. (Hemsworth)

    Montague, F.

    Williams. T. (Don Valley)

    Griffiths, J. (Llanelly)

    Morrison, Rt. Hon. H. (Ha'kn'y, S.)

    Young, Sir R. (Newton)

    Hall, J. H. (Whitechapel)

    Morrison, R. C. (Tottenham, N.)

    Hardle, G. D.

    Muff, G.

    TELLERS FOR THE NOES.—

    Henderson, A. (Kingswinford)

    Naylor, T. E.

    Mr. Whiteley and Mr. Groves.

    Henderson, J. (Ardwick)

    Oliver, G. H.

    Question put, and agreed to.

    7.59 p.m.
    Major HILLS: I beg to move, in page 12, line 19, to leave out "to be calculated, at some point of time, and."
    I believe the omission of these words would make the Clause rather stronger. Paragraph (a) deals with one of the cases in which an individual shall be deemed to have power to enjoy income on what I will call foreign assets. The first case is if
    "the income is, in fact, so dealt with by any person as to be calculated, at soma point of time, and whether in the form of income or not, to inure for the benefit of the individual."
    I want the income to be taxed if it inures, and not if it is calculated at some point of time to inure. "Calculated at some point of time" might be read to mean that the income would not be taken to be enjoyed unless it fell in at some definite time. "Some point of time" is not the same thing as "any point of time." It might mean that you could not tax the income unless it fell in regularly. Suppose an investment was made in a foreign company, which,
    718
    besides paying dividends, issued a large amount of its profits in bonus shares. It could make those issues at irregular times. It would not be at some definite point of time. Is it not possible that some court might hold that the income represented by these bonus shares was not enjoyed? Might not a judge say, "If you meant to include all income which inures to the benefit of the individual, why did you not say so? Why bring in the factor of calculation and the factor of some point of time?" It seems to me to weaken the Clause, and I believe it will be stronger without it.
    7.53 p.m.
    The ATTORNEY-GENERAL: I think my hon. and gallant Friend may have misunderstood what Sub-section (3) does. It defines what amounts to the enjoyment of income. It is Sub-section (1) which lays down what income is to be taxed. All that this Sub-section does is to define the circumstances in which the individual may be deemed to enjoy the income. We wish to be able to say he has been in fact enjoying the income although the arrangement may be such

    719
    as to postpone the actual enjoyment of it in the form of bonus shares or otherwise till a year later than the year in which the foreign company in fact receives the income. It was to prevent someone raising the argument that this must be construed as if it were de anno in anno—to prevent someone saying, "You cannot say that this income is inuring to the taxpayer's benefit for the purpose of this Clause because his enjoyment is postponed." I assure my hon. and gallant Friend that the intention is simply to make the Clause clear, but we will of course consider what he has said.
    Amendment, by leave, withdrawn.
    7.56 p.m.
    Mr. FOOT: I beg to move, in page 13, line 3, to leave out from "section" to "all," in line 5.
    It seems to me that the words that I am proposing to leave out raise a rather serious issue in Income Tax law and one on which we ought to have a few words from one or other of the Law Officers. It has always been a principle rigidly observed that tax Statutes should be interpreted strictly against the Crown and in favour of the subject. It appears that that rule of construction would be destroyed, or very greatly weakened, if these words were to be passed into law, because under the wording of the Subsection it is not a question of the application of the known law to ascertained facts, but simply a question of opinion. The words are:
    "regard shall be had to the substantial result and effect of the transfer and any associated operations."
    The substantial result of the transfer and any associated operations is simply a matter of opinion. That is to say that the adjudication by any tribunal, even the highest, would no longer be a matter of strict law but a matter of opinion, and the taxpayer might find himself penalised even though he had acted all along in strict conformity with the law. It seems to me that rather a doubtful principle is being introduced by these words, and I should like to hear what the Attorney-General has to say upon them.
    The ATTORNEY-GENERAL: The whole of the subject matter of this Clause is the use of legal forms designed for
    720
    ordinary commercial and financial purposes for the purpose of tax avoidance, so that what we are dealing with from the outset is someone who is using legal forms such as issues of debentures and, instead of using them for the purpose for which debentures are intended in our industrial system, using them for the purpose of reducing the contributions which my right hon. Friend extracts for national needs. Therefore, it may be that that consideration is one which justifies the insertion of such words as these in a Clause of this kind. It is not necessary to state in detail the cases concerned with Income Tax, but there have been a number of cases in which the courts have said that in Revenue matters you are entitled to look at the substance of the matter and to disregard the legal form. On the other hand, there have been other cases in which the courts have said that you cannot go behind the legal form, and that, therefore, if the legal form points in a certain direction it really concludes the matter. I am not suggesting that those decisions are in any way inconsistent with each other, but their existence makes it important that we should have a provision in the Clause making it quite clear that the commissioners are entitled to look at the substantial result and effect. It is a conception which has already been imported into Income Tax cases, as indicated by the decisions to which I have referred, where judges have said that they were trying to look at the substance of the matter and behind the legal form.
    Mr. FOOT: Has it been imported into the Income Tax law by way of Statute?
    The ATTORNEY-GENERAL: No, it has not, and I am explaining that, as there are possibly conflicting decisions, in our view it is necessary in the Income Tax law to make the position quite plain. It is not a question which is a completely new one in Income Tax jurisprudence, because there have been cases in which the courts have said expressly that you are entitled to look at the substance of the matter, and the Committee will not be surprised to hear that the substance of the matter has sometimes assisted the Revenue and sometimes has assisted the taxpayer. I have a, case in mind in which it has been said that, if you should look at the substance of what is done there is no ground upon which the

    721
    taxpayer should pay the tax which was in question. I recommend the Committee to leave in these words. I believe that they will enable the Special Commissioners to do, without any doubt or challenge, what this House intends and desires they should do, that is, not to be tied by the letter to some legal form which is being used for the purpose for which it was not originally intended, but that they should be entitled to look at the substantial result of the transaction.
    Amendment negatived.
    The TEMPORARY CHAIRMAN (Sir C. MacAndrew): The next Amendment on the Paper in the name of the hon. Gentleman the Member for Chesterfield (Mr. Benson), in page 13, line 11, after "husband," to insert "or son or daughter," is out of order.
    8.4 p.m.
    Mr. LEWIS: I beg to move, in page 13, line 41, to leave out "Income Tax," and to insert "Sur-tax."
    The point raised by the Amendment is one of considerable importance, but the issue is a very simple and straightforward one, and should not detain the Committee long. In order to understand the effect of the incorporation of the Amendment in the Bill, it is necessary to read it in conjunction with the next Amendment but one on the Order Paper, which is consequential upon it—in line 42, after the first "and," to insert "for the purpose of assessment to Income Tax for 1936–37 and." If these two Amendments were carried, Sub-section (7) of the Clause would read:
    "The provisions of this Section shall apply for the purposes of assessment to Surtax for the year 1935–36 and for the purpose of assessment to Income Tax for 1936–37 and subsequent years, and shall apply in relation to transfers of assets and associated operations whether carried out before or after the commencement of this Act."
    The Committee will see that the intention of the Amendment is to make a distinction between the period for which this part of the Bill shall apply to Income Tax and Sur-tax. The object is that, while we seek to get the benefits of the Clause into operation as quickly as possible, we do not wish the legislation to be retrospective. Many of us in this House strongly object to the principle of retrospective legislation. Hon. Members will recollect that the assessment to Surtax always lags a year behind the assess-
    722
    ment to Income Tax. Therefore, whereas the liability to Income Tax for the year 1935–36 has already been incurred under the existing law, the liability to Sur-tax for that period has not yet been incurred. We suggest that this wording should be adopted in order that the operation of the Clause shall affect Sur-tax for the year 1935–36 and shall not affect Income Tax until the year 1936–37. I hope that the Financial Secretary will see his way to accept the Amendment, because it will have the purpose of removing the sting of retrospective legislation from the legislation in question. If he says that, while he would like to do so, for some reason he does not wish to make this distinction between Income Tax and Sur-tax, I suggest that instead of the proposed Amendment, he should substitute the year 1936–37 for the year 1935–36, which occurs in line 42.
    8.8 p.m.
    Sir A. M. SAMUEL: The only objection that we have to Sub-section (7) is on principle, and not against the Clause itself in any way whatever. We are entirely in favour of the Clause. I, in common with many other hon. Gentlemen on this side of the Committee, think that we ought to put our foot down if any attempt of any kind is made to introduce legislation of a retrospective nature. That is the only reason why my hon. Friend has moved the Amendment, and why we are directing the attention of the Financial Secretary to the matter.
    8.9 p.m.
    Mr. W. S. MORRISON: My hon. Friend the Member for Colchester (Mr. Lewis) has made his point very clear. He has put it upon principle, and he objects to retrospective legislation of any kind. The Amendment leaves out "Income Tax" and inserts "Sur-tax." That is to say, that my hon. Friend would, if he had his way, make the Clause apply only as regards that part of the Income Tax which is the Sur-tax. He anticipated the objection to his Amendment that the Surtax is, in fact, part of the Income Tax. It is that part of the Income Tax which is levied upon incomes above a certain level, namely, £2,000. It is a very difficult proposition to make a Clause of this character apply to one part of the Income Tax and not to the other. The next point I would ask him and the Committee to consider is, that the Clause is

    723
    designed, as he himself and, indeed, every hon. Member would admit, to try to prevent persons escaping their just burdens of Income Tax and Sur-tax. The Clause itself, of course, affects Sur-tax more than anything else. I would ask my hon. Friend to consider whether there is not a difference, in regard to such small evidence of retrospection as exists in the Clause, between retrospective legislation which imposes a fresh burden upon persons with regard to their past income, and retrospection in the sense of trying to recover that which ex hypothesi ought to have been paid in the past.
    Sir. A. M. SAMUEL: The Financial Secretary says "ought to have been paid in the past." It has not been said in the past that anything unworthy or illegal has ever been done. The highest courts in the country have said that what has been done in regard to these cases has been legal. Therefore, it is not right, in my opinion, for my hon. and learned Friend to say "ought to have been paid in the past." He might say it if the Clause had been passed, but in the past there has never been any obligation, either moral or legal, to pay.
    Mr. MORRISON: My hon. Friend, of course, is approaching the matter in a perfectly proper way from the legal standpoint, and I agree with him that many judges in the past have made references of the character he has described to the Committee. But with all respect to that argument, I would say that on the whole this is really the assembly which has the duty of levying taxation upon the people of this country, and that we are entitled to consider the view that it is not the duty of, or a proper thing for, a man to evade the share of taxation which he ought to pay. I put this matter forward on the ground of public policy. It is obvious that, if a man avoids his share of taxation in a case of this character, there is nothing illegal in what he does, but it has the unfortunate result that it causes other people who have not avoided tax to pay a higher standard rate of Income Tax than they otherwise would have paid. It is quite within the competence of this Committee to consider, no matter what other tribunals and other authorities have said, whether this is not a thing which ought to be stopped. Indeed, I think that my hon. Friend him-
    724
    self agrees with me that it ought to be stopped, but he complains, and with an amount of reason and force which I would not in the least decry, that there is a sense of retrospection in the Clause. Let us see how much there is.
    My hon. Friend in putting forward his Amendment, has not fallen into the error that Surtax is in any way retrospective, but he says that, as regard the standard rate, there is some element of retrospection. That is true, but how much? Let the Committee remember that we are dealing with the case of the man who has transferred assets to a company or person abroad. In the ordinary case the things that he has transferred are British securities in one form or another, and in all these cases, with the exception of one or two which I am going to mention, Income Tax has already been deducted at the source. That means that the Exchequer has got the Income Tax, and that there is no more to come. But it may be that he has transferred other assets, either foreign or Dominion securities of certain classes, or certain British securities of a very limited class. That is to say, the 3½ per cent. War Loan, the 4 per cent. Victory Bonds, and the 4 per cent. Funding Loan, which are all British Government securities, with the additional attractive condition attached to them, that Income Tax is not payable on them if they are owned by a person abroad.
    We are entitled to ask what was the purpose of this arrangement. It was obviously in order to attract foreign capital to these issues and not to enable people to transfer them abroad for the purpose of avoiding British Income Tax. When one considers that the amount of retrospection involved is confined to that very limited class of security, and that by far the larger majority of assets touched by this Clause have already paid the standard rate of Income Tax and thus are unaffected by the Clause; when one considers retrospection in a case of this kind, where the Exchequer is trying to recover something which Parliament in passing Income Tax legislation clearly intended to recover, and when one further considers the difficulty of dividing that part of the Income Tax which is called Surtax from the whole body of the tax, I cannot advise the Committee to accept my hon. Friend's Amendment.
    8.16 p.m.
    Mr. LEWIS: The Financial Secretary has devoted the greater part of his argument to demonstrating what a slight difference it would make to the Exchequer if the Amendment were carried. In those circumstances I would ask him to reconsider whether for that slight difference it is worth while contravening the principle that legislation should not be retrospective. This is a perfectly clear case of retrospection. It is an alteration in the principles of the Income Tax law and it is proposed to make it applicable in respect of the income of the previous year. I would ask the Financial Secretary, having regard to what he has said about the very slight losses that would be incurred by the revenue, to reconsider his decision.
    8.17 p.m.
    Sir A. M. SAMUEL: The Financial Secretary has told us that in the great majority of cases the Income Tax will have been paid, and therefore the revenue will not suffer by one farthing in regard to that tax. It may suffer a little, but for one year only, in relation to the Surtax. Is it good policy for any party in this House to break the old principle that we do not engage in retrospective legislation. To do that is a bad principle. We support Clause 16, and I have tried to make it stronger. Nothing in the Income Tax will be touched by the Amendment. The only thing that may be lost will be a small amount of Surtax for one year only. Once this year is over the whole discussion becomes nugatory. I would ask the Financial Secretary to reconsider the matter. It is bad policy for any party ever to engage in retrospective legislation of any kind, especially when the amount is so trifling.
    8.18 p.m.
    Mr. LEES-SMITH: I should like to congratulate the Financial Secretary upon one observation. Throughout these Debates there have been laid down a series of dicta from judges. We have been told that they have said that these various methods of avoiding taxation are legal and moral.
    Sir A. M. SAMUEL: Not unworthy and not immoral and not illegal.
    Mr. LEES-SMITH: In the view of hon. Members on this side of the Committee the opinion of judges on what is legal is one to which we should pay respect,
    726
    but the opinion of judges as to what is worthy or unworthy, what is good public policy or bad public policy, is not as good as the opinion of this House. We say that these various methods of avoiding taxation by what have been called dodges, tricks and artificial devices, may be legal but they are not good public policy. They are not good citizenship, they are not decent, they are not proper, and I am very glad that we have had from the Government Bench a statement that in the opinion of the Financial Secretary these methods are not proper. I hope that that will be an answer to these various dicta.
    8.20 p.m.
    Sir A. M. SAMUEL: The right hon. Gentleman opposite is flogging a dead horse. He is pushing at an open door. We are not discussing whether it is right to try to evade taxation. We do not take that line. We are here to help the Treasury to deal with those who try to escape taxation; we say that public policy will be served by this Clause, but we protest very much against it being said that anything unworthy has been done by the people who have adopted this particular process. Hon. Members opposite must not forget that the administration of justice in this country is on a very high standard, and when great judges say that in their opinion there is nothing unworthy, nothing immoral, nothing illegal in this, the public surely can act on the fact that those who uphold British justice tell them that nothing wrong has been done. We agree that the Treasury are right in bringing in this Clause, and we support it, but we say that as a principle of Government and as a principle of policy in this House it is a bad thing to embark upon anything of a retrospective nature. For that reason I protest against the tone and the line of the argument adopted by the right hon. Gentleman opposite.
    Amendment negatived.
    Motion made, and Question proposed, "That the Clause stand part of the Bill."
    8.24 p.m.
    Mr. MAXWELL FYFE: There is one point on which I should like information from the Financial Secretary. He referred to the phrase "transfer of assets." Several times he spoke of the transfer

    727
    of assets from this country to abroad. I am sure that it cannot have escaped the attention of my hon. and learned Friend and those who advise him that there is nothing in the Clause as it stands to limit the word transfer in its meaning. At the present time it may cover the transfer of assets which are abroad and which may be removed from one place to another or from one type of investment to another abroad. The Financial Secretary will appreciate that this may act hardly in perfectly innocent cases. There may be cases where at the present time there is an investment of assets abroad and a transfer may be made which produces the results set out in Sub-section (1). I should welcome, and many of us would welcome a statement in the general interests of the clarity of the Clause and in order to know what is intended, whether it is the intention of the Treasury to strike at all transfers, even in the case of money invested abroad, or whether it is intended to strike at the transfer of assets from this country to abroad and to such transfers only. I hope the Financial Secretary will consider this point, and if he finds that it is unnecessary to go beyond the limited interpretation of transfer which he has put upon it, namely, the transfer of assets from this country to abroad, he will make it clear in a subsequent stage of the Bill.

    CLAUSE 17.—(General amendments of 12 and 13 Geo. 5, c. 17, s. 21.)
    8.26 p.m.
    Mr. W. S. MORRISON: I beg to move, in page 15, line 15, after "incorporated," to insert "in any part of the United Kingdom."
    This is to make clear that the provisions of Sub-section (3) extending the one-man company provisions of Section 21 of the Finance Act of 1932 to other incorporated bodies such as industrial and provident societies apply only to bodies which are incorporated in the United Kingdom. The existing provisions of the Act of 1921 apply only to companies in the United Kingdom, but that fact arises from the definition of a company in that Section, which says that it refers only to companies within the meaning of the Companies Act, 1908, and, of course, that means that a company can be only one
    728
    which is incorporated in the United Kingdom. The Clause as drafted did not make it clear that only bodies incorporated in the United Kingdom were intended. It would, of course, be quite impracticable to apply Section 21 to bodies established outside the United Kingdom, whether they were companies or other bodies. The Clause is designed to stop evasion of Income Tax by means of what is called the one-man company in the United Kingdom. It would be quite improper to leave any doubt that only United Kingdom bodies are intended.
    Amendment agreed to.
    Mr. W. S. MORRISON: I beg to move, in page 16, line 7, to leave out "otherwise than."
    This Amendment has to be read with the following Amendment to leave out the word "not." The terms of the Clause say that share or loan capital or debt shall be deemed to be issued or incurred otherwise than for an adequate consideration, the value of which to the company is not substantially less than the amount of capital or debt including any premium. The two Amendments merely involve the replacing of two negatives by one positive, and I think the Committee will agree that it is better English.
    Amendment agreed to.
    Further Amendment made: In page 16, line 9, leave out "not."—[Mr. W. S. Morrison.]
    8.30 p.m.
    Mr. W. S. MORRISON: I beg to move, in page 16, line 17, to leave out from "incurred," to the end of line 18, and to insert:
    "for such consideration as is mentioned in the last foregoing paragraph or which represents, directly or indirectly, any share or loan capital or debt which itself was issued or incurred for such consideration."
    In Sub-section (4) it is declared for the purposes of the Clause what share or loan capital or debt shall be deemed to be issued or incurred otherwise than for adequate consideration. In other words, what we are trying to hit at here is the creation of a fictitious debt or loan charge by a man who gives money to a company, and then through a series of operations gets his money back as if it were a debt owed by the company to him. We are seeking to differentiate the true debt from the mere fictitious debt,

    729
    by saying that a debt to be within the Clause is such as arises without adequate consideration. It is to be deemed to be issued or incurred otherwise than for adequate consideration, if—
    "(a) it is issued or incurred otherwise than for consideration the value of which to the company is not substantially less than the amount of the capital or debt (including an premium thereon),"
    or if—
    "(b) it is issued or incurred in or towards, or for the purpose of raising money applied or to be applied in or towards, the redemption or repayment of any share or loan capital or debt which itself was issued or incurred otherwise than for adequate consideration."
    These two paragraphs (a) and (b) are intended to constitute a definition of what is meant by the words "otherwise than for adequate consideration." They set out a little more fully for the guidance of tribunals what is meant by the term. If the Committee agree with the Amendment they will have a definition in a form which is clear and which will not lead to confusion.
    Amendment agreed to.

    CLAUSE 18.—(Amendments of 12 and 13 Geo. 5, c. 17, s. 21, as respects invest ment companies.)
    8.35 p.m.
    Mr. W. S. MORRISON: I beg to move, in page 17, line 6, at the end, to insert:
    "(2) For the purpose of Sub-section (1) of the said Section twenty-one the sums which are to be regarded as income available for distribution among the members of an investment company, and not as having been applied or been applicable to the current requirements of the company's business or to such other requirements as may be necessary or advisable for the maintenance and development of that business, shall include any sum expended or applied, or available to be expended or applied, out of the income of the company in or towards the redemption, repayment, or discharge of any loan capital or debt (including any premium thereon) in respect of which any person is a loan creditor of the company."
    In order to explain this Amendment, I ought to say that Clause 18—
    Mr. LEES-SMITH: I would point out to the Financial Secretary that this Clause was not explained on the Second
    730
    Reading, but it was stated at that time that there would be an explanation on this occasion of the whole Clause as distinct from any Amendment to it. Therefore, I hope the hon. and learned Gentleman will begin by telling the Committee the intention of the Clause.
    Mr. MORRISON: When I replied to the Debate on the Budget Resolutions, I told the Committee that Clauses 17 and 18 go together. Both of them are designed to counteract evasion of taxation by means of one-man companies, but whereas Clause 17 deals with one-man companies in their ordinary form, Clause 18 applies the same principles somewhat more stringently to a particular form of one-man company, that which is called an investment company and the holdings of which consist entirely of securities. It will be obvious to the Committee that in dealing with the question of evasion by one-man companies as a whole, one has to be careful to avoid injuring proper industrial companies by provisions intended to catch evaders. There may be a commercial business running as a one-man company which, although it may have been put in that form for the purpose of avoiding taxation, also has an operative industrial side, so that the provisions have to be drawn with some care in order to check that form of evasion as completely as may be, but at the same time to leave unimpaired the industrial function. When one comes to investment companies the sole purpose of which is to hold a block of securities and which, in fact, have no operative or industrial function to perform except the collection of dividends from securities and their distribution, it is clear that one can, without risk of hampering the activities of the company, go a good deal further in the provisions to stop evasion.
    When I was speaking on this matter during the discussion of the Budget Resolutions, I described briefly the purpose of Clause 17, and I said that Clause 18 was of such a highly technical character that, unless the Committee desired it, I did not propose at that stage to enter into the question. The hon. Member for East Edinburgh (Mr. Pethick-Lawrence) was good enough to agree with that, and thus we are, as the right hon. Gentleman the Member for Keighley (Mr. Lees-Smith) said, confronted with this Clause without having had any detailed exposi-

    731
    tion of its provisions. I hope I have made that clear.
    The Clause is an attempt to counter certain forms of tax evasion which have grown up with these investment companies. I will refer to one large group of these schemes as being typical of the whole. A man transfers his securities to a company and gets in return non-interest-bearing redeemable debentures which yield no income that can be assessed for Income Tax purposes, but he cashes these debentures as he wants the money, and it goes back to him in the form of capital. Of course, in order to ensure that he can do that with impunity, he has to have actual control of the company. Other people are in the habit of forming these companies and keeping them in an almost perpetual state of liquidation, so that payments of assets to the shareholders, who consist of the individual evading Income Tax and his associates, go on merrily the whole time. What is disbursed as a result of the liquidation is held to be capital paid and not dividend. Roughly, that is the sort of thing which happens. I cannot profess at this stage to go into all the myriad shapes taken by these companies for the purpose of evading taxation.
    The object of the Amendment I have moved is to ensure that an investment company which has made no distribution or only a small distribution of income in surtaxable form cannot escape from the special provisions as to taxation which we have been considering in the last Clause; that is to say, if a one-man company does not distribute its profits in a surtaxable form, those profits can be considered as the income of the shareholders and thus be subject to taxation in the proper form. If an investment company does not make any distribution or makes only a very small distribution of income in surtaxable form, we are making sure by this provision that in future it will not succeed in evading taxation by this means.
    The object of Clause 18 is to deal with schemes in which the tax evasion is done by an arrangement to draw the income of the company in capital form as by the redemption of debentures or some other form of debt. Clearly it must not be left open to the company to argue that because of this very redemption it is not in a position to distribute income
    732
    in a surtaxable form. What has happened in the past has been that, in determining what is a reasonable distribution of profits, the company has been able to say, "We owe Mr. A. £1,000 and therefore it is reasonable and proper for us to withhold from distribution £1,000 against the day when we have to pay that money to Mr. A," who is the tax evader. This provision is to prevent that happening. If the money is owed to the taxpayer, the company cannot make the withholding of that amount of money a criterion of the reasonable distribution of its profits. This is a difficult matter to explain, but I hope the Committee has followed me in my explanation.
    Amendment agreed to.
    8.45 p.m.
    The ATTORNEY-GENERAL: I beg to move, in page 17, line 12, to leave out paragraph (a).
    It may be convenient to consider this Amendment along with three other Amendments which appear later on the Paper—in line 16, to leave out "(including creditors)"; in line 18, after "entitled," to insert
    "as members or loan creditors of the company,"
    and in line 19, at the end, to insert
    "which would be available for distribution to members and loan creditors."
    These Amendments all deal with the same point. Sub-section (2) as originally drafted proposed two tests as to whether an investment company should be deemed, for the purposes of Section 21 of the Finance Act, 1922, to be under the control of not more than five persons. For reasons which have already been referred to, when one in dealing with an investment company it is important to consider not only those who are, in the ordinary sense, members of the company, but also those who may appear as loan creditors of the company. I do not want to place these Amendments before the Committee as purely drafting Amendments, but they are in fact very little more. Their effect is to substitute a single test for the two tests which at present appear in paragraphs (a) and (b) of Sub-section (2). I may best explain the matter to the Committee if I read the Sub-section as it will appear when amended, if these Amendments are accepted:

    733
    "Without prejudice to the provisions of the last foregoing section, an investment company shall be deemed for the purposes of sub-section (6) of the said section twenty-one to be under the control of not more than five persons if any five or fewer persons would, if the company were wound up, be entitled, as members or loan creditors of the company, to receive more than half the assets of the company which would be available for distribution to members and loan creditors."
    In the Sub-section as originally drafted, creditors generally were included. We have thought it better to substitute this new and simpler test which, in practice, should not be difficult of application. Suppose that a company were wound up and the assets distributed among the members and loan creditors, would more than five people appear as interested in one or other capacity? If five or fewer than five appear as interested, in one or other of these capacities, then the Section applies.
    8.49 p.m.
    Mr. SPENS: I had put down an Amendment to paragraph (a) which it is now proposed to delete, but I think the same point arises in relation to the words which the Attorney-General proposes to insert in the later Amendments. Ought there not to be some method of measuring the amount to which the five or fewer persons would be entitled on the winding up of the company? I suggest that unless there is some method such as a reference to the last audited balance sheet of the company, as I had intended to propose in my Amendment, there will be any amount of dispute as to whether or not the value of the share capital and the loan debt of the five or fewer persons is equivalent to more than one-half of the assets. The Sub-section ought to include a yard-stick for the purpose of making this measurement.
    Sir A. M. SAMUEL: If there is not to be a reference to the last audited balance sheet, what is to be the standard of measurement in this matter?
    8.51 p.m.
    The ATTORNEY-GENERAL: The difficulty of tying oneself down to the last audited balance sheet is that it might not contain the true value of the assets. Those familiar with balance sheets know that it is not unusual for a balance sheet to value assets at their original cost, although in some cases that figure has little relation to their value at the time
    734
    when the company goes into liquidation. Admittedly the proposed words, to some extent, leave the matter at large. As with so many other subjects, arguments can be advanced on both sides. If you tie yourself to the balance sheet, you get the advantage of certainty hut, on the other hand, you may depart from the realities of the position. If you leave at large the question of ascertaining the true value of the assets, no doubt you open to debate and discussion matters which would not be so open in the other case, but, in our opinion, there is unlikely to be any great difficulty in practice. These things will be determined in relation to the available evidence which probably, in 999 cases out of a thousand, will enable a decision to be made without great difficulty. We think that, on the whole, the objections which can be raised to leaving the matter at large are less than the objections which can be raised to tying oneself down to the values as shown in the last audited balance sheet.
    Mr. PETHICK-LAWRENCE: I suppose we may take it that the moment this Measure is passed, people will cease to make use of this form of avoidance and therefore the only cases that will be left will be those which obviously fall outside this provision.
    The ATTORNEY - GENERAL: We hope so.
    Amendment agreed to.
    Further Amendments made: In page 17, line 16, leave out "(including creditors)."
    In line 18, after "entitled," insert:
    "as members or loan creditors of the company."
    In line 19, at the end, insert:
    "which would be available for distribution to members and loan creditors."—[The Attorney-General.]
    8.55 p.m.
    Mr. W. S. MORRISON: I beg to move, in page 17, line 21, to leave out "paragraph (a) of."
    This is consequential on Amendments previously made.
    Amendment agreed to.
    Further Amendment made: In page 17, line 22, after "persons," insert:
    "by reason that any five or fewer persons would, if the company were wound up, be entitled as loan creditors to receive more than one-half of the assets therein referred to."—[Mr. W. S. Morrison.]
    Mr. W. S. MORRISON: I beg to move, in page 17, line 38, after "repayment," to insert "or discharge."
    I move this in order that a certain type of evasion may be brought within the scope of the Clause. I need not say more than that there is a case in mind which this alteration will meet.
    Amendment agreed to.
    8.57 p.m.
    The ATTORNEY-GENERAL: I beg to move, in page 17, line 40, at the end, to insert:
    "Provided that—

    (i) where by virtue or in consequence of any settlement within the meaning of the next following section of this Act a loan creditor has been or could be required by some other person (hereafter referred to as a 'beneficiary') to pay to the beneficiary the whole of any sums which have been or might be paid to that loan creditor by the company in redemption, repayment or discharge of the loan capital or debt (including any premium thereon) in respect of which he is a loan creditor, or to pay or transfer to the beneficiary the whole of any sums or assets representing directly or indirectly any such sums as aforesaid, the beneficiary and not the loan creditor shall be deemed, for the purposes of the said Section twenty-one and any provisions of this or any other Act relating thereto, to be a member of the company and, for the purposes of the said paragraph 8, to have the interest in the income of the company which the loan creditor would, but for this provision, he deemed to have by virtue of the foregoing provisions of this section; and

    (ii) where a loan creditor has been or could be required as aforesaid to pay or transfer to the beneficiary a part only of any such sums or assets as aforesaid, the beneficiary, as well as the loan creditor, shall be deemed to be a member of the company for the purposes of the said Section twenty-one and any provisions of this or any other Act relating thereto, and for the purpose of the said paragraph 8 the interest which the loan creditor is deemed to have in the income of the company by virtue of the foregoing provisions of this section shall be apportioned by the Special Commissioners between the beneficiary and the loan creditor.

    (4) In relation to an investment company paragraph 11 of the First Schedule to the Finance Act, 1922, shall have effect as if references to shares included references to loan capital."
    This is a somewhat long proviso designed to effect a comparatively simple purpose, which I hope will commend itself to the Committee. It is intended to meet the case in which debentures or
    736
    other loan capital are held in the name of nominees or trustees, and the proviso provides that in that case they shall be dealt with for the purposes of the original paragraph (b) on the same footing as if they were held in the name of the real owner. It is the general intention of all this part of the Bill that people shall not be able to alter their position by putting a screen of nominees between them and their taxable capacity. Paragraph (i) of the proviso enacts that provision in general terms, and paragraph (ii) deals with the question where only part of the assets or the loan is held by nominees. The new Sub-section (4) deals with a Schedule in the Act of 1922 which gives the commissioners power to require a man who is the registered holder of shares to say whether he holds them in his own beneficial interest or as a nominee for somebody else. It is clearly right that a corresponding provision should apply to loan capital.
    Amendment agreed to.
    9.0 p.m.
    Mr. W. S. MORRISON: I beg to move, in page 18, line 24, to leave out from "any," to the end of the Clause, and to insert:
    "debt incurred by the company—

    (a) for ally money borrowed or capital assets acquired by the company; or

    (b) for any right to receive income created in favour of the company; or

    (c) for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium thereon)

    or in respect of any redeemable loan capital issued by the company:
    Provided that a person carrying on the business of banking shall not be deemed to be a loan creditor in respect of any loan capital or debt issued or incurred by the company for money lent by him to the company in the ordinary course of that business."
    This is a second thought in the effort to overcome that very difficult dilemma of finding a satisfactory definition of what is called in the Clause a loan creditor. We think this definition is a better one, because it is comprehensive enough to include all cases where a person assumes the status of loan creditor to evade taxation, and at the same time it is more strictly drawn so as to make certain that ordinary trade debts are not effected. There is a proviso to exclude from the

    737
    term "loan creditor" an ordinary banker who has made an advance in the ordinary way of business. It is clear that such a person is by no means one of those collusive loan creditors against whom we are seeking to safeguard the revenue.
    Amendment agreed to.

    CLAUSE 19.—(Provisions as to income settled on children.)
    9.2 p.m.
    Sir A. M. SAMUEL: I beg to move, in page 18, line 32, after "is," to insert,
    "after the twenty-first day of April, nineteen hundred and thirty-six."
    I formally move this Amendment, which stands in the name of my hon. Friend the Member for Cambridge University (Sir J. Withers), in order that we may have a reply from the Treasury.
    9.3 p.m.
    Mr. W. S. MORRISON: This Clause deals with the question of income settled on children for the purposes of education, and is a very different class of case from those we have been considering hitherto. Whereas those Clauses which we have been considering deal with tax evasion in its most, undiluted form, when one comes to this particular form of transaction one has to approach it in a very different spirit, because you have here the element no doubt to some extent of a saving of taxation, but it is all mixed up with a highly commendable, prudential motive on the part of the parent who desires to make some provision for his children, so we have to be careful how we go about this Clause. The Amendment now before Us is one of a string of Amendments all of the same character. My hon. Friend, I think, is afraid that there may be some element of retrospection in this Clause and fears that unless the Amendment is accepted, the operation of it will go back to previous years. I can assure the hon. Member and the Committee that that is not so. The provisions of Clause 19 apply as from the current year 1936–37, commencing on the 6th April, 1936, and there is no retrospection about it.
    9.4 p.m.
    Sir A. M. SAMUEL: This is a very difficult Clause. In the first place, my hon. and learned Friend spoke of settlements of income for the purposes of
    738
    education, but that is not quite correct. Are not these trusts sometimes made to protect a child not merely in the matter of education, but for the whole of its life? Does he mean that no income received before the 5th April, 1936, may be touched? It must be made perfectly clear that this Amendment does not affect Income Tax and that the only question is the aggregation of Surtax. I want the Financial Secretary to say for what year Surtax aggregation will be claimed.
    Mr. MORRISON: I can assure the hon. Gentleman that it does not operate until this year 1936–37. It started to operate in the financial year which began on 5th April last. I can assure the Committee that there is no element of retrospection in this Clause.
    9.6 p.m.
    Major HILLS: This Clause is very difficult, and it will be amended later by the Chancellor of the Exchequer. May I suggest that we have a statement on one of the Amendments as to the whole effect of the Clause? There are certain points that I can gather from the Clause, but there are certain other points about which I am still uncertain.
    Amendment negatived.
    Sir J. WITHERS: I beg to move, in page 18, line 34, to leave out "commencement of that year," and to insert" time of such payment."
    9.8 p.m.
    Sir A. M. SAMUEL: I think that an Amendment ought to be made to insert after "unmarried," "but only in respect of such portion of the year as the child was still an infant and unmarried." If we do not make such an Amendment we shall have an unforeseen result. This does not affect Income Tax but only Surtax. If my suggested Amendment is not made the income of the child who comes of age, let us say, in May, 1935, will be charged in the parents' Surtax to be assessed after 5th April, 1936, and paid in January, 1937.
    9.9 p.m.
    Mr. CHAMBERLAIN: I really think that this is not a matter of very great practical importance, because the period during which the charge takes place is the same whether the Amendment be adopted or whether the Bill stands as it is. In

    739
    the one case the charge is taken from the time the child is born; in the other case it dates from the beginning of the financial year following the year in which the child is born. The Amendment would thus charge the year in which the child is born while the Clause would not. On the other hand the Amendment would charge the year in which the child attains its majority only until the child becomes of age whereas the Clause would charge the whole of that year. There is theoretically a good deal to be said for the Amendment, but it really involves no practical advantage one way or the other. There is this practical objection, however, that it means two apportionments, one in the year of birth and another in the year when the child comes of age, but it does not seem to me that for the sake of the correctness of the Amendment it is worth while to make these two apportionments.
    Sir A. M. SAMUEL: This Clause bristles with difficulties. Let us take the case of a girl who marries, say, in the month of May. Her income will be aggregated for Sur-tax for another 11 months after she is married although the Clause provides that she should come out of the Clause the day she marries. That cannot be right.
    Mr. CHAMBERLAIN: It does not affect her income, but only that of her parents.
    Mr. PETHICK - LAWRENCE: Of course, after she marries her income will be joined with that of her husband. In the case of this part of her income it is not joined to that of her husband but to that of her parents.
    Mr. CHAMBERLAIN indicated assent.
    Mr. PETHICK-LAWRENCE: The position is rather peculiar in those circumstances.
    Mr. CHAMBERLAIN: It is deemed to be the income of the parents for the purposes of tax.
    Amendment negatived.
    9.13 p.m.
    Mr. SPENS: I beg to move, in page 18, line 37, after "not," to insert:
    "income to which such child is entitled in his own right or."
    I move this Amendment in order to make matters absolutely clear. This
    740
    Sub-section makes the income in question of the children the income of the settlor and we assume that he will be entitled to the allowances for the children. That depends on the income in question no longer being the income of the child in its own right for Income Tax purposes. It is suggested that it is desirable in order to make the position clear that any income of the child (which of course remains in law under the settlement the income of the child) should for the purpose of this Clause be expressly declared not to be the income of the child in its own right.
    Mr. CHARLES WILLIAMS: On a point of Order. May I ask where we are, because there is no "not" in line 37? Cannot we have these words expressed in the ordinary Parliamentary way?
    The TEMPORARY CHAIRMAN: It is line 36. The explanation is that some of the copies of the Amendments are different from the others.
    Mr. C. WILLIAMS: If these printing errors are going to increase it will become serious and we ought to take notice of them.
    9.16 p.m.
    The ATTORNEY-GENERAL: We fully appreciate the point which my hon. and learned Friend has in mind, but we take the view that it is completely covered by the Clause as drafted. The last words of Sub-section (1) are:
    "the income of the settler for that year and not as the income of any other person."
    The words "any other person" are general words which would include the child, and, therefore, it would be inappropriate to insert the express words of the Amendment saying it is not to be treated as the income of the child. I hope with that explanation my hon. and learned Friend will not think it necessary to press his Amendment.
    Mr. SPENS: I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    9.17 p.m.
    Mr. SPENS: I beg to move, in page 19, line 2, to leave out "will or may become" and to insert "becomes."
    This, again, is an Amendment which I put forward for consideration. Here we

    741
    are dealing with income to which the Clause is to apply, and the first type of income is income which, by virtue of or in consequence of a settlement to which the Clause applies, is so dealt with not that it becomes payable or applicable to or for the benefit of the child but that it will or may become so payable or applicable. There we are dealing with the provisions of a complicated settlement, and someone has to define what may take place when, under complicated provisions as to resettlements of real property or marriage settlements, in some circumstances the income may become applicable to or for the benefit of the child. I submit that that will cause any amount of trouble and calculation, and I suggest that the Clause should be confined to income which in fact does become applicable to or for the benefit of the child.
    9.18 p.m.
    Mr. W. S. MORRISON: I have no difficulty in seeing the admirable motive which prompted my hon. and learned Friend to move this Amendment. He is thinking of a case where a child has a contingent interest only in the income, and says that until the contingency arises there is really no sort of guarantee that that income will actually be applied for the child's benefit. That is so far true. The trouble about accepting the Amendment would be that it would be almost impossible to work the Clause. The hon. and learned Member is dealing with an accumulating income, and if we had income of the year 1, and it accumulated for 10 years and was then paid in year 11, by the time the contingency had happened it would be too late to raise the assessment. That is a practical difficulty which, I am afraid, compels us to decline to accept the Amendment. As a consolation I would remind my hon. and learned Friend that this applies only in the first place to a revocable settlement, where there is always the opportunity to the settlor to revoke his settlement and redispose the settlement to some better advantage. In so far as there are irrevocable settlements the same considerations do not arise.
    9.19 p.m.
    Mr. SPENS: I should accept that explanation most willingly were it not for the definition Sub-sections of the Clause to which we come later. Under Sub-section (7) the definition of an irrevocable
    742
    settlement is drawn up within very narrow limits indeed, and there are going to be any number of settlements irrevocable in law which will be revocable settlements under this Clause.
    9.20 p.m.
    Mr. W. S. MORRISON: When we come to the definition Sub-sections perhaps my hon. and learned Friend will raise that point. At present I am dealing with the particular terms of the Amendment, and my answer to the Amendment is that it would be impossible to defer the ascertainment of the tax payable until the contingency has arisen, and I hope that he will agree with that view.
    Mr. SPENS: I foresaw that there might be some difficulty about this, and in view of the answer which has been given by my hon. and learned Friend I beg leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    9.21 p.m.
    Sir J. WITHERS: I beg to move, in page 19, line 4, after "future," to insert:
    "but during the settlor's lifetime and whilst the child is an infant and unmarried."
    I submit that if the income cannot during the settlor's life be paid to or for the benefit of the child the settlor cannot get the benefit of this provision, and that the Sub-section should not extend to future provisions for adult or married children nor to income which cannot be applied for the benefit of the child during its infancy. That is the short point.
    9.23 p.m.
    The ATTORNEY-GENERAL: I think the point raised by my hon. Friend is already covered by the Bill. The provisions of Sub-section (2) are, of course, directed to the case where the income is being accumulated, and nay hon. Friend's Amendment is directed to ensuring that those provisions should apply only so long as the settlor is alive and the child is an infant and unmarried, but I think on consideration he will agree that no Amendment is necessary to secure that end, because if he will look back to Subsection (1), the governing Sub-section, he will see that that makes it clear that it is only during the life of the settlor and only so long as the child is an infant and unmarried that it is to be treated as the income of the settlor. I think those words quite clearly govern the subsidiary matter dealt with in Sub-section (2), and,

    743
    therefore, I suggest that his Amendment is unnecessary.
    Sir J. WITHERS: I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    9.24 p.m.
    Sir J. WITHERS: I beg to move, in page 19, line 9, after "child," to insert:
    "but this Sub-section shall not apply to any income which could not, or, without the consent of some person (other than the settlor and his wife) having a prior interest could not have been paid to, or for the benefit of, such child during the year of assessment in which the income is so dealt with."
    This Amendment deals with a rather technical point. The income ought not to be accumulated with the settlor, as the child could not be entitled to it unless the prior interest comes in. I think the Financial Secretary will see the point of this Amendment.
    9.25 p.m.
    The ATTORNEY-GENERAL: I was not quite certain when I read the Amendment of the point which my hon. Friend had in mind. I think the point really refers to revocable settlements, because accumulations under irrevocable settlements are saved by Sub-section (3). I think that the hon. Member is raising the point that a settlement should not be deemed to be revocable for the purpose of the application of this part of the Clause if the consent of some person other than the settlor is necessary. That is a point which we cannot possibly accept in the form in which it has been put on the Paper, because the existing provisions which are intended to rope in revocable settlements have been got round—I use that term in no offensive sense—by making someone a trustee who, it was quite clear, in effect would never withhold his consent if the settlor asked him to give it. If there is any other evil or injustice which the hon. Member had at the back of his mind, of course we will consider it. For the reason I have given we cannot possibly accept the words as they appear on the Order Paper.
    Amendment negatived.
    9.27 p.m.
    Mr. CHAMBERLAIN: I beg to move, in page 19, line 19, to leave out from the beginning, to the end of line 23, and to insert:
    744
    "Where any income is dealt with as mentioned in the last foregoing Sub-section by virtue or in consequence of a settlement to which this Section applies, being a settlement which, at the time when the income is so dealt with, is an irrevocable settlement."
    I would ask the Committee to note that this Amendment carries with it no fewer than eight other Amendments which follow. There are two Amendments in line 25, one in line 33 and one in line 35. On page 20, line 6, there are two Amendments. There are two other Amendments on page 21, line 43, and on page 22, line 2. These Amendments are partly consequential and partly drafting, and they all have in view the purpose which I will now explain. As soon as it was seen that the provisions were going to apply to pre-Budget revocable settlements, but the pre-Budget irrevocable settlements would be exempt, it occurred to some ingenious person that pre-Budget revocable settlements might be made irrevocable by a supplementary deed, and I had reason to suppose that the suggestion had been widely circulated and that a number of supplementary deeds had been drawn up. The purpose of the Amendment is to ensure that no such supplementary deeds could be effective. The Amendment makes it clear that if a settlement was revocable before it cannot now be made irrevocable retrospectively.
    9.29 p.m.
    Major HILLS: I thank my right hon. Friend for his explanation and I ask only one question. I see the Amendments to paragraph (a) of Sub-section (3), but I do not quite understand the words at the end of that Clause, in line 27
    "unless and except to the extent that that income consists of, or represents directly or indirectly, sums paid by the settlor which are allowable as deductions in computing his total income for the purpose of the Income Tax Act."
    As I understand it the amended Clause frees an irrevocable settlement from the operation of Clause 19, except as to certain income.
    Mr. CHAMBERLAIN: Post-Budget.
    Major HILLS: I do not quite see the meaning of that. I do not quite see why certain incomes should be excepted from that relief. The only meaning that I can attach to the words is that the settlor must not get his deductions twice over.
    Mr. CHAMBERLAIN: That is not really affected by this Amendment. My right hon. Friend's question would be better addressed on the Amendment which deals with that point.
    9.31 p.m.
    Mr. KEELING: I have an Amendment on the Paper which I presume will be ruled out of order if my right hon. Friend's Amendment is accepted. The purpose of my Amendment was to give the makers of these revocable trusts a reasonable time to make them irrevocable, provided that the trust was made before Budget day, and I would ask him to consider whether that is not a reasonable proposal. Up to the date of a certain decision in the House of Lords I believe that everybody who wanted to make such a trust was advised by his solicitor that he should make it irrevocable, but when that decision was given a large majority of solicitors advised their clients that it was desirable to make their trusts revocable and that the effect was identical with making them irrevocable. It was a reasonable thing for a prudent parent to be in a position to revoke a settlement when a child came of age. I can conceive the position of a man having a gay daughter who, perhaps, got in the hands of some adventurer when she was 18, and who would wish to protect her from the man when she came of age. The large majority of the trusts which have been executed since the date of that decision in the House of Lords have been revocable.
    The suggestion which I made in my Amendment, which will not be called, is that the makers of these trusts should have until 1st December to decide whether they will leave them revocable or make them irrevocable. The loss to the revenue which the Chancellor would sustain in granting this concession would not be excessive, because the great majority of the people who made these revocable trusts did so with the object of revoking them when their children became 21 years of age, and they simply cannot afford to make them irrevocable, which would mean that they parted with the income for the whole of their lives. I hope that my right hon. Friend will give that point consideration.
    9.36 p.m.
    Sir CHARLES CAYZER: I support the view which has been put forward by my
    746
    hon. Friend the Member for Twickenham (Mr. Keeling). I am sure that all hon. Members wish to assist the Chancellor, but the Clause goes rather too far. It inflicts considerable hardship upon a number of persons for attempting to alter their affairs in accordance with the existing law of the land, as determined by the House of Lords itself, and it seems to be retrospective legislation, to which this House is usually somewhat slow in giving assent. The Chancellor of the Exchequer has just explained that by Sub-section (9) of this Clause he gives exemption to any irrevocable trust entered into before 22nd April of this year, and I am sure that that concession will be duly appreciated. Many persons, however, will have a somewhat rude awakening when they discover that the trusts into which they entered in the belief that they were irrevocable are no longer irrevocable under the terms of this Clause. Subsection (7) completely alters the definition of an irrevocable trust, and the definition applies to all existing trusts just as to all trusts which might be entered into in the future. Sub-section 7, which provides:
    "(b) for the determination of the settlement by the act or on the default of any person; or
    "(c) for the payment of any penalty by any person in the event of his failing to comply with the provisions of the settlement, or for the total or partial indemnification or exoneration of any person,"
    makes the settlement revocable and therefore no longer a settlement which will obtain exemption under Subsection (9). As my hon. Friend has pointed out, under the existing law both those settlements would have been regarded as irrevocable under Section 20 of the Finance Act, 1922, and are held to be irrevocable trusts by a decision of the House of Lords. It is safe to say that, since the decision of the House of Lords, trusts of this kind entered into for the benefit of children have contained this provision, but prior to that decision it is probable that all those settlements would have been irrevocable settlements and would have secured the exemption. I put the point to my own solicitors, and my solicitors informed me that they invariably advised their clients to insert a provision of revocation in certain circumstances because in doing so they retain greater power over their children.
    The DEPUTY-CHAIRMAN: We had better postpone this discussion until we reach Sub-section (7).
    Sir C. CAYZER: I defer to your Ruling. I wished only to refer to the point which the Chancellor made in explaining the scope of Sub-section (9). I will therefore say that it seems a rather new principle that the Chancellor should, in this case, seem to alter the definition of an irrevocable settlement and to make the new definition applicable to trusts which have already been entered into prior to the passing of the Measure. To say that those who wish to alter their affairs cannot base their actions upon a decision of the House of Lords, the highest legal court in the land, will be a great hardship. As regards the tendency to give effect to this kind of legislation, we have a definite precedent which may be within the memory of some hon. Members of this Committee. When Lord Snowden introduced his Finance Bill in 1930, he included a provision for dealing with single premium policies and made it retrospective in so far as it applied to policies entered into prior to the introduction of the Measure.
    The House of Commons took a different view. They did not think that the scope of the Clause should be retrospective. Lord Snowden bowed to the expression of opinion of the House of Commons, and reintroduced the Clause in a form which made it only applicable to insurances taken out after the passing of the Measure. I join with my hon. Friend who first raised this matter in respectfully urging the Chancellor to give the Clause some further consideration before the Report stage. It would be an act of justice to permit these persons, who entered in perfect good faith into what they believed to be irrevocable trusts, basing their belief upon the House of Lords' decision, to amend their settlements so as to bring them into conformity with Sub-section (7) of the Clause and to obtain the exemption afforded by Sub-section (9).
    9.44 p.m.
    Mr. CHAMBERLAIN: As will be recognised by the hon. Member who raised this point I have not really had time to consider what he is putting before me. As there are Amendments on the Paper which carry out their views —
    Mr. KEELING: There is an Amendment, but it is not called.
    Mr. CHAMBERLAIN: At any rate, I have not had very much chance to appreciate the force of the point which hon. Members are putting. If they will accept my assurances that I shall be very happy between now and the Report stage to look into the point which they raise, that will give me an opportunity of seeing exactly what their proposal amounts to.
    9.45 p.m.
    Mr. BENSON: I am extremely sorry to hear that the Chancellor is prepared to give way even more than he has already done—
    Mr. CHAMBERLAIN: I did not say that at all.
    Mr. BENSON: —or, at any rate, is prepared to consider doing so. When the Resolution was being discussed, the intention was that all educational settlements, the result of which was to avoid Income Tax, should be wiped out, and when the Bill was introduced the Chancellor had already given exemption to irrevocable settlements. Now there is a demand for permission to make revocable settlements irrevocable, and the Chancellor says he is prepared to consider it. I sincerely hope that he is not prepared to go any further than he has gone already.
    9.46 p.m.
    Mr. ASSHETON: I think that the hon. Member for Chesterfield (Mr. Benson) has perhaps missed the point—
    Sir FRANCIS ACLAND: On a point of Order. It is extremely difficult for ordinary Members of the House, having listened to the Chancellor of the Exchequer proposing an Amendment dealing with what people may have done after the date when the Budget was introduced, to follow a discussion by Members on both sides of the Committee, which may go on to any length, and which deals with a totally different point, raised by an Amendment which has not been called and is not likely to be called. Could we not get back to the Chancellor's Amendment, of which, when he moved it, he gave an explanation, which we shall forget entirely if we get on to these other points?
    Sir A. M. SAMUEL: The right hon. Gentleman the Member for North Cornwall (Sir F. Acland) has not read the Order Paper. If he will look at the bottom of page 989, he will find that it is the very point referred to in the Chancellor's Amendment that is now being discussed by my hon. Friend the Member for Rushcliffe (Mr. Assheton).
    Mr. ASSHETON: I was saying that I thought the hon. Member for Chesterfield had slightly misunderstood the point in question. As my hon. Friend the Member for Chester (Sir C. Cayzer) has pointed out, it would seem that, as the Clause is now drawn, the prudent and careful parent will to some extent be put at a disadvantage as compared with the less prudent and less careful parent who has been not so well advised by his solicitor. The Chancellor has very kindly said that he would examine the matter between now and Report, and we are very grateful to him for that undertaking.
    Amendment agreed to.
    Further Amendments made: In page 19, line 25, leave out "any," and insert "that."
    Leave out from "income," to "unless," in line 27.—[Mr. Chamberlain.]
    9.50 p.m.
    Lieut.-Colonel ACLAND-TROYTE: I beg to move, in page 19, line 27, to leave out from "settlement" to the end of the paragraph.
    As the Clause stands at present, a man can make an irrevocable settlement on a child by making certain securities over to a trustee, while if, on the other hand, he is a man living upon earned income, he cannot make an irrevocable settlement in the form of an annuity to be paid out of his earned income. During the last two years many people living on earned income have made such settlements on their children out of their income, but now, under the Clause, that wilt be impossible. It seems to me to be unfair that a man living on earned income should be in a worse position than one who is fortunate enough to have money invested.
    9.51 p.m.
    The ATTORNEY-GENERAL: Sub-section (3) of Clause 19 deals with post-Budget irrevocable settlements, and it enacts that income which has accumulated under such settlements, that is to say,
    750
    which is not paid out and used for the benefit of the parent or the child, shall be outside the scope of the Clause. The Amendment raises the point that, if a man settles a capital sum on a trustee in order that the income may be accumulated for the benefit of his children, and not used for their education and so on, that is all outside his income, whereas, if a man covenants to pay a certain sum annually to trustees in order that that money may accumulate, the money is still part of his income, and he cannot reduce his liability to taxation by the fact that he has covenanted to pay it to trustees. It is right to point out, however, that, once the money gets to the trustees, the income which then proceeds from it when it is invested by the trustees will be exempt. My hon. and gallant Friend suggests that this is really an unfair discrimination against the man who can only covenant to pay an annual sum, as compared with the man who transfers a capital sum, but I suggest that, on the contrary, so far from its being an unfair discrimination, it really puts them both on the same basis. The savings in the past which have made up the capital sum have all come out of taxed income. If a man has built up a capital sum which he can transfer to trustees, it has been built up year by year out of money which has paid tax—
    Mr. H. G. WILLIAMS: When the tax was 9d.
    The ATTORNEY-GENERAL: That is a different problem. Unfortunately to-day many of the savings that have been made have not been made when the tax was 9d., but at a time when the tax was much more in the neighbourhood of what it is to-day. We are here dealing with the case of a man saving money out of income for the benefit of his children, and it would be wrong to put him on a different basis from a person who has saved money before he made the provision, and uses it to make a provision of this sort. The right and the fairer manner is to adopt the provisions of the Clause and not to adopt the Amendment.
    9.56 p.m.
    Mr. BENSON: I support the Amendment, because it makes complete nonsense of the Clause and has the effect of taking it out of the Bill. I was rather surprised at the Attorney-General's argument. Apparently he has been reading

    751
    economy and has learned the good old adage that capital is one of the rewards of abstinence. The picture that he drew of capital settled upon a child having been built up by the slow process of accumulating income is all very well for a textbook, but it has no relevance so far as this Clause is concerned.
    Sir A. M. SAMUEL: It is an actuarial truth.
    Mr. BENSON: Is it? What about inheritance? What about the vast settlements made by owners of landed estates who inherited them? What about wealth accumulated by capital accretion? Nowadays you cannot build up great fortunes by the addition of one year's income to another. Surtax prevents that. Great fortunes are built up by capital accretions which have paid no Income Tax. The Attorney-General suggested that a man who pays an annual sum out of his earnings is not put in an unfair position as compared with a man who can settle say, £10,000 and allow the £300, £400 or 500 a year interest to accumulate. If that £10,000 had not been saved, the settlor would have had to pay Income Tax and Surtax on the £300, 2400 or £500 which now accumulates till the child is 21 without aggregation of tax, and it is in that respect that there is very definitely a differentiation against the man who cannot afford to make a capital settlement and in favour of the men who can.
    9.59 p.m.
    Mr. C. WILLIAMS: I congratulate the hon. Member on having given the first real reason that I have heard for many years for supporting an Amendment, namely, that it was nonsense.
    Mr. BENSON: I hope the hon. Member will not misrepresent me. I did not say the Amendment was nonsense. I said it reduced the Sub-section to nonsense.
    Mr. WILLIAMS: I quite agree that that is more or less the effect of the Amendment, and I only got up to congratulate the hon. Member on supporting an Amendment which originally had very great sense and meaning, as it was intended to help a section of people who are trying very hard, often under desperate conditions, to bring up their children. I shall support my hon. and gallant Friend. I hoped the Chancellor
    752
    of the Exchequer might have been in rather a more forthcoming condition on this question, but I realise that he has made certain concessions. He has kindly promised to go into other points, and possibly he may consider this between now and Report. In spite of all that, I should like to congratulate the hon. Member on his speech.
    10.0 p.m.
    Mr. H. G. WILLIAMS: I am not quite certain what the Amendment means, not because it is badly drawn but because other words have been inserted in the Bill and it is difficult to follow it, but the Proposer explained its meaning, and I will accept that it has the purpose of putting income trusts on the same basis as capital trusts. Generally speaking, when people have signed documents creating a trust which can be revoked, they did it because they were paying out of income. They feared that circumstances might arise in which they could not go on making the payments and did not want to be made bankrupt by their own children—a situation which might conceivably arise. It was not in order to dodge their obligations, but to protect themselves from that very undesirable situation. On the other hand, a parent who is in a more fortunate position, because he has substantial capital which he can transfer to trustees, would be inclined to make a permanent transfer. Therefore, we are really discriminating between the transfer of capital and the transfer of income. The Attorney-General says the capital has been built up out of income which has paid tax. That is rather an innocent remark. Honestly, does it in the remotest degree resemble the truth in a great many cases? There are vast numbers of people fortunate in t heir choice of parents who have inherited substantial sums, and they say, "This is an arrangement whereby to reduce the burdens on my income, and I will adopt this method." The man who has the satisfaction of having the security of capital behind him is able to do these things and get advantage out of them, whereas the man whose position is more precarious, because his capital resources are small, though he may earn a substantial income, is debarred.
    There are many people in my constituency who are intelligent enough to

    753
    earn a fairly substantial income and desire to take advantage of this, but only a very small proportion are in the position that they can transfer a capital sum to trustees for the benefit of their children. If I do not understand the Clause it is not my fault, because I have not yet met anyone who thoroughly understands it, but if it means what I think it means, there is a definite discrimination in favour of the man of substance, in the sense of substantial capital possessions, as against the man whose capital happens to be his intelligence and who, through that intelligence, is earning a fairly good income. I think the Chancellor ought to look at the point again. It is one of great substance and we ought to be grateful to my hon. and gallant Friend for raising it.
    10.4 p.m.
    Sir JOSEPH NALL: I was astonished at the Attorney-General's argument. It must be erroneous to suggest that, where capital is transferred into these funds, it is always the produce of taxed income. To say that at the present time, when the value of investments is high compared to what it was a few years ago, when it is obvious that, for instance, anyone who held Newfound-lands bonds when they were at the bottom and sold them after the Government guarantee was given and was able to create a surplus which could be transferred to one of these funds, has paid tax on a basis comparable to a person who now makes a trust payment out of income is perfectly ridiculous.
    I hope that the Chancellor of the Exchequer will be able to review this matter. It is clear that there ought to be similarity of treatment between the trust fund created by a transfer of capital, and the trust which is solely dependent upon income. I do not quite follow the argument of my hon. Friend the Member for South Croydon (Mr. H. G. Williams), because, if a person who has contracted to make an annual payment from income finds that some day his income has so decreased that he can no longer make those payments, he is only in the same position as the man who transferred part of his capital and has since lost the rest of his capital and desires to recover the capital which he transferred.
    Mr. H. G. WILLIAMS: The man who has lost his capital has no obligation. He may have lost everything but he is not under a liability to go on making a continuing payment. The other man may have lost all his capital, and still be under an obligation to make a payment for which he has no assets.
    Sir J. NALL: There may be that difference, but, in fact, they are in the same condition that they have no funds with which to carry on the payment. On the main issue, I would remind the Committee that the Attorney-General, in putting the case, was entirely wrong, and for that reason I hope that the Chancellor of the Exchequer will further consider the matter.
    Lieut.-Colonel ACLAND-TROYTE: In view of the possibility of putting down another Amendment, I beg to ask leave to withdraw the Amendment.—[HON. MEMBERS "No."]
    Amendment negatived.
    Amendments made: In page 19, line 33, leave out from beginning, to "any," in line 35.
    In line 35, after "paid," insert "thereafter."—(Mr. Chamberlain.)
    Sir J. WITHERS: I beg to move, in page 19, line 35, after "paid," to insert
    "out of income so dealt with or of assets representing it."
    The question arises in this way. The wording of paragraph (b) is rather wide. It says:
    "Where any income has been so dealt with by virtue or in consequence of such a settlement, any sum whatsoever paid by virtue or in consequence of the settlement."
    There is a limit to the fund which is dealt with. Very often there are two or three funds, and, surely, the Chancellor of the Exchequer cannot mean that payments out of capital from every fund can be applied to the same settlement.
    10.10 p.m.
    Mr. W. S. MORRISON: My hon. Friend the Member for Cambridge University (Sir J. Withers) knows that the Sub-section to which his Amendment is relevant is designed to exclude from the charge any income which has been accumulated under a post-Budget irrevocable settlement. That is the purpose of the Sub-section under review. It is always necessary to consider the possibility that

    755
    the trustee may, in a subsequent year, use the proceeds of the fund to make a payment to the child or to the parent. In that case the income would have respect to the first year as being accumulative, and the process might be repeated in a subsequent year. Paragraph (b) of Sub-section (3) therefore provides that any payment of any kind shall be deemed to be income, in so far as it is in the hands of trustees income which has been excluded from the child, for the reason that it was believed to be accumulating in the fund. If we accepted the Amendment, it would have the effect that the sums would be chargeable only if they could be shown to be paid out of income or dealt with out of assets. How is one to say out of what assets the sum shall be paid? That is the point. The trustees might well represent that the sums paid out were paid not out of any particular fund, but out of the original capital of the trust. The Amendment of my hon. Friend would, if incorporated in the Clause as it stands, defeat that reasonable purpose, and for that reason I am afraid that I cannot see my way to accept it.
    Mr. McCORQUODALE: Could not this paragraph be simplified as there are about 15 lines without a full stop and only two commas?
    The DEPUTY-CHAIRMAN: I do not think that that is a question which arises out of the Amendment.
    Sir J. WITHERS: Does the Financial Secretary really mean that if you have a settlement of two or three funds you can make an advance in the way he has said?
    Mr. W. S. MORRISON: What I said is true, if you have trustees dealing with a particular settlement. I do not think that that is what is contemplated. You may have an irrevocable settlement perhaps with the direction to the trustees that the income of the fund shall accumulate for the benefit of the children and not be paid out. In so far as the income is accumulated it is excluded from the charge in this Bill, but there may be a provision which enables the trustees to pay out the income which has accumulated. It would surely be reasonable that in such a case the income if paid should be charged. If we accept the Amendment it will be impossible to work the Clause.
    Amendment negatived.
    Amendments made: In page 20, line 6, after "since," insert "the date when."
    In line 6, at the end, insert:
    "or the date when it became irrevocable, whichever is the later."—[Mr. Chamberlain.]
    10.15 p.m.
    Mr. KEELING: I beg to move, in page 20, line 23, to leave out "any person," and to insert:
    "any settlor or trustee of any settlement to which this Clause may apply."
    Mr. ALBERY: On a point of Order. May I ask why the previous Amendment standing in the name of the hon. Member for Twickenham (Mr. Keeling)—to leave out Sub-section (4)—has not been selected? I raise this point because otherwise Sub-section (4) is totally incomprehensible. If that Amendment is not to be called, I fail to see how we shall get any adequate explanation.
    The DEPUTY-CHAIRMAN: I have not selected the Amendment.
    Sir A. M. SAMUEL: Although it has not been selected, may I ask whether you would sectionand ask the Chancellor of the Exchequer to give us some explanation?
    The DEPUTY-CHAIRMAN: The question of the selection of Amendments is vested by Standing Orders in me. I am not bound to give any explanation. My predecessors have not done so, and I propose to follow that practice.
    Mr. KEELING: Under the Clause as drawn the commissioners are given power to
    "require any person to furnish them … with such particulars as they think necessary."
    These words leave the way open to inquiries of the widest possible nature from any person, whether or not that person may be interested in the settlement. They give the Inspector of Taxes a weapon which he could use oppressively, without any great risk of being challenged. Parliament has not previously, in the Income Tax Acts, given the commissioners power to make sweeping demands of the whole world in respect of any one person's liability to Income Tax. No precedent supports the bestowal of such drastic powers. Section 139 of the Income Tax Act, 1918,

    757
    which is limited to cases where the taxpayer has appealed, authorises precepts only to the appellant, and Section 21 of the same Act, which deals with Supertax on the undistributed income of companies, gives the Special. Commissioners power to require particulars only of the company. Section 22 of the same Act, which deals with the Super-tax of individuals, gives the commissioners power to require particulars only from the individual concerned. I suggest that the Clause as drawn is an unwarrantable interference with liberty and an interference which may lead to grave abuses. It authorises an inquiry and gives powers which possibly were suitable for the commissioners of the Spanish Inquisition in the sixteenth century but which cannot safely be given to commissioners of Income Tax in the twentieth century, and I hope that my right hon. Friend will see his way to accept the Amendment.
    10.19 p.m.
    The ATTORNEY-GENERAL: My hon. Friend has painted in rather high colours the possible effect of the Clause. The general scope of the powers of the Special Commissioners is very different from that of the commissioners of the Spanish Inquisition. However, my right hon. Friend appreciates that the words "any person" may be unnecessarily wide, in the sense that they would appear to confer powers which there is no desire to use and which it would not be necessary to carry out for the purpose which my right hon. Friend has in mind. We think, however, that the words of the Amendment might be a little too narrow. My right hon. Friend will undertake between now and the Report stage to consider this matter and seek to get a form of words which, without hampering the commissioners and while meeting the wishes of the Committee, will not confer upon the commissioners unnecessarily wide powers. I hope, in view of that undertaking, that the hon. Member will withdraw the Amendment.
    10.20 p.m.
    Mr. FOOT: The Attorney-General has been discussing the wide powers proposed to be given the commissioners by the Clause. If the Government are considering amending the Clause in order to limit the number of persons to whom the commissioners may apply for information, will they also consider at the same time
    758
    leaving out the words "of such particulars as they think necessary." That would make them the sole judges of what is necessary, and I suggest that an Amendment on that line might be desirable.
    10.21 p.m.
    Mr. BENSON: What are these powers which the Government are so afraid of giving the commissioners; and what are the investigations they might carry out? What are the dangers of the commissioners finding anything out? The only thing that an inspector of taxes can find out is income, and if everybody declared their income, as they ought to do, there is no reason why an inspector of taxes should not have every facility afforded him. I would remind the hon. Member who referred to the Spanish inquisitors that they investigated souls not the pockets of men. I do not see any reason why any person who has made out a correct Income Tax form should fear any powers which are given to the commissioners.
    10.22 p.m.
    Mr. H. G. WILLIAMS: The hon. Member for Chesterfield (Mr. Benson) does not appreciate the dangers of this Clause. If later on we have people of a very different brand as Special Commissioners, nothing can stop them sending inquiries to the tradespeople or the domestic staff of any person in order to find out how well he does himself and then deducing certain information as to his income. That is entirely improper, and I do not think we ought to have this kind of inquiry.
    10.23 p.m.
    Mr. GARRO JONES: The hon. Member for South Croydon (Mr. H. G. Williams) has not shown his usual diligence. He should know that no person can be compelled unreasonably to give this information. In a later part of the Clause it says that if a person can offer a reasonable excuse there is no penalty attaching to his refusing to give information.
    Mr. WILLIAMS: Suppose the demand was: "Will you please say what was the total amount Mr. Smith paid for groceries in the last 12 months?" The person on whom that demand is made knows the answer and there is no reasonable excuse for not giving it.
    Mr. GARRO JONES: The hon. Member has completely misinterpreted the meaning of the Clause. It is not sufficient for him to know the information. He is only compelled to give it if he has no reasonable excuse for not giving it. That is an entirely different matter. I want to be of assistance to the Chancellor of the Exchequer. By promising to consider this question he is surrendering what may prove to be to him very useful information on the collective scale. That is a principle which, in the case of dividend warrants, for example, saves the Treasury an enormous amount of expense and trouble and puts it on the track of a large amount of income which perhaps would not otherwise have been disclosed. We know that in connection with this particular practice there are bodies of people, solicitors in particular, who make a regular practice of drawing up these transfers and deeds, and since the only object of getting the information is to prevent their clients from evading the law, surely there would not be any very serious objection to asking them to give a complete list of people who have effected these settlements upon their children. Therefore, it would be very easy for the Chancellor of the Exchequer to get at one stroke information which would otherwise cause him a great deal of trouble and expense.
    10.27 p.m.
    Sir WILLIAM DAVISON: With reference to the remarks of the hon. Member for Twickenham (Mr. Keeling) may I read one sentence from a letter from the Law Society, representing the solicitors of the country, which I have received since the Amendment was put down? The sentence is:
    "The Council of the Law Society are of opinion that the words 'any person' are too wide and that only settlors or trustees of any settlement to which the subsection applies should be compellable."
    Mr. KEELING: I wish to thank the Attorney-General for the assurance he has given that he will reconsider the wording of the Clause, and I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    10.28 p.m.
    Sir J. WITHERS: I beg to move, in page 20, line 35, to leave out paragraph (a).
    760
    I think this provision is far too wide. It makes each of the following settlements revocable. First, a fund irrevocably settled on trust to pay an annuity to a child for the life of the child and to balance of income to the settlor. Secondly, a fund irrevocably settled on trust to divide income equally between wife and child during their joint lives and to pay the whole income to the survivor for life. Thirdly, a first fund settled on the settlor for his life or the joint lives of himself and a child and a second fund irrevocably settled on a child for life or on trust to accumulate the income during the life of the settlor for the benefit of the child. I think the provision is far too wide and ought to be deleted.
    10.29 p.m.
    Mr. W. S. MORRISON: We are now dealing with the definition laid down in the Clause to distinguish between a revocable and an irrevocable settlement. The injustice of the Amendment is that it would mean that where a man has made an irrevocable settlement, and has locked up his money in the form of capital, he would have the worst of two worlds. To give effect to this saving Clause for irrevocable settlements it is necessary to make sure that they are really irrevocable in fact and not merely so by legal definition. From that point of view I suggest to the Committee that it is right to exclude from the terms of the Clause an irrevocable trust which provides by its terms for the payment back to the settlor of the proceeds of the trust. One would be apt to get into grave difficulties over such a question as how much was to be paid back out of the proceeds and how much was to go to the children. That is a question almost impossible of solution. It would depend in each case upon circumstances of the family and it is surely better for the purposes of this Clause which deals only with this particular form of trust; to accept the proposal in the Bill, to accept, broadly, the principle that if the terms of the trust provide for the benefit of the trust to inure to the settlor himself or his wife, then it is not an irrevocable settlement within the meaning of this Clause. That is to say, it is not a settlement which should receive the special treatment now being accorded to pre-Budget irrevocable settlements.
    10.32 p.m.
    Mr. SPENS: In my view this is the most important Sub-section in the Clause. I am sure the Committee realise that the effect of the Clause is to divide settlements and trusts not into two categories but into three. There are revocable trusts; there are those which are irrevocable in law and in fact, and now we find that the pre-Budget irrevocable settlements, which we understood were to be excepted from the provisions of the Clause, are to be whittled down by the taking out of certain settlements, irrevocable in law and in fact but for the purposes of this Clause deemed to be revocable. Starting with that proposition, the Committee will realise that a great number of these pre-Budget irrevocable settlements were made years ago for purposes utterly unconnected with tax evasion or anything of the kind. Some of them are marriage settlements, some separation deeds, and some are settlements made on wards of court. Yet if, in complete ignorance of any future legislation of this description, the draftsman has inserted in any of these settlements—which cannot be altered now by any means—any provision which happens to bring them within paragraphs (a), (b) or (c), then that document becomes for the purposes of this Clause a revocable settlement and the income is to be treated as if it were the income of the settlor. The Committee will appreciate that it was for that reason that I put down a series of Amendments to this Sub-section. Take for instance one very common instance in regard to which I think there is an Amendment on the Paper. In a settlement, say a marriage settlement, under which the income of the trust fund is to be payable to a child it may be thought desirable to insert a provision to deal with the contingency of the child at some future time becoming a bankrupt.
    The DEPUTY-CHAIRMAN: There is an Amendment on that subject which will be taken, and we had better not anticipate the discussion on it.
    Mr. SPENS: In those circumstances I will deal with the matter generally by saying that there are innumerable settlements made years ago which have nothing to do with tax evasion, in which you will find the provision that in certain
    762
    events, at some time during the life of the child, the whole or part of that child's income may go back to the settlor or his wife. Every one of those settlements, however long ago it was made and for whatever purpose, is a revocable settlement for the purpose of this Clause, and the exception at the end of the Clause has whittled it down enormously.
    10.35 p.m.
    Sir W. DAVISON: I cannot help thinking that the Chancellor of the Exchequer has overlooked Section 33 of the Trustee Act of 1925, by which the Legislature provided a comprehensive formula for those who wish to settle property or income upon children and at the same time to protect those children from improvidence. The settlor can settle the property or the income upon what are known as protective trusts, and the object of that is to secure that the child retains the income until it suffers or commits, or attempts to commit, some divesting act, in which case its absolute interest in the income ceases. Thereafter the trustees of the settlement have a discretion to pay the income to any one or more of certain defined persons mentioned in the settlement. The provisions of Section 33 (1, b), to the effect that the defined persons shall include those persons to whom any arrear of the annuity would be payable were the child dead, brings in the father and mother of the child while it is an infant, because if the child died while an infant, it would die intestate, and the father and mother would share its personal estate equally. Inasmuch then as the father and mother of the child are among the persons to whom the trustees could, under the protective trusts, pay the income in the event of the child committing or attempting to commit some divesting act, the Revenue would be able to argue, in the case of every protective trust effected by a parent that Clause 19 (7, a) of the present Bill makes the income the income of the parent. This is a most startling result, and I cannot believe that it can have been foreseen by the Chancellor, or he would have agreed either to the omission of the Clause or to the insertion of words qualifying the trust and providing that this Clause should not apply to settlements of the kind which I have mentioned.
    10.39 p.m.
    Mr. W. S. MORRISON: We could never agree to an Amendment to leave

    763
    out the paragraph, but my right hon. Friend is well aware that there are particular cases in this trust business which deserve looking into. My hon. and learned Friend the Member for Ashford (Mr. Spens) and my hon. Friend the Member for South Kensington (Sir W. Davison) have mentioned particular cases, and my right hon. Friend is prepared, through me, to assure the Committee that they will be looked at between now and the Report stage. There is no desire or intention to cause any injustice, but it is necessary to ensure that the law cannot be abused. These cases will certainly receive attention between now and the Report stage.
    10.40 p.m.
    Mr. H. G. WILLIAMS: We are delighted to hear the statement of my hon. and learned Friend, but is is somewhat in general terms. He said that there are a number of hard cases which must be considered. Some of them are on the Order Paper, and perhaps he will complete his statement by indicating which are the hard cases at which the Chancellor is looking. We should be much more comfortable if we left out this paragraph so that a more satisfactory provision could be brought in on the Report stage.
    Mr. MORRISON: I was dealing with these matters in a general way because they are raised in a general way. When the Amendments dealing with particular grievances are moved, my right hon. Friend will indicate which, if any, he can accept.
    Sir J. WITHERS: On the understanding that the Chancellor will consider the matter, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    10.42 p.m.
    Mr. SPENS: I beg to move, in page 20, line 40, to leave out "life," and to insert "minority."
    This is the first detailed Amendment to this Clause. Hon. Members will see that if the old settlement provides that in any circumstances whatever during the life of the child any income finds its way back to the settlor or the settlor's wife, it becomes a revocable settlement. If all we are dealing with is a question of income during the minority of the child
    764
    being aggregated with that of the father or mother as the settlor, why should we have to deal with the provisions of a settlement which go a long way beyond minority? Would not it be possible, if a settlement provided that any event during minority might send the income back to the settlor, instead of at any time during life, that that settlement should be revocable for the purpose of this Bill? It is important because one of the chief causes which are provided in settlements for bringing income back to a settlor is if a child becomes bankrupt at any time during life. We find in almost every well drawn marriage settlement, or any other settlement which I have mentioned, that in a large percentage, if there is a settlement on a child of income, the parent provides that if the child becomes bankrupt the income shall go over in some form, and we nearly always find a class among which is the father or mother. No child can become bankrupt before it has attained its majority. Therefore, if the events on which income can go back to the parent are events which can occur during minority, you would find one of those common and proper clauses which ought to occur in any properly drawn marriage or other settlement.
    10.45 p.m.
    The ATTORNEY-GENERAL: In so far as my hon. and learned Friend had in mind the question of bankruptcy, that question, as well as the question of charging interest, is dealt with in the Amendment in the name of my hon. and gallant Friend the Member for Tiverton, (Lieut.-Colonel Acland-Troyte). I hear my hon. and gallant Friend asking me whether the Government will accept it. I cannot go so far as to say that, but I think it will be found in due course that my right hon. Friend will give an undertaking to consider the point. In so far as my hon. and learned Friend's Amendment is meant to put into the irrevocable class all settlements, even those for accumulations which are irrevocable until the attainment of majority but are then revocable, it goes very much too far. In those circumstances one could have a trust in which the money was rolling in until the child was 21, and as soon as the child was 21 the settlor could revoke it and get all the money back.
    Mr. SPENS: I was assuming that there was no power of revocation at all.
    The ATTORNEY-GENERAL: I am much obliged to my hon. and learned Friend. Then I think the proper way to deal with the cases is to consider what are the circumstances which could not occur during minority which would be proper circumstances to take the settlement out of the irrevocable definition and to deal with them serratim. They are the subject of other Amendments.
    Sir A. M. SAMUEL: Would the hon. and learned Gentleman include in that category the likelihood of an improvident marriage by a minor?
    The ATTORNEY-GENERAL: I am not sure whether that point is the subject of an Amendment on the Paper. I do not think it is.
    Sir A. M. SAMUEL: My hon. and learned Friend referred to certain cases which are to be included. Will that be included?
    The ATTORNEY-GENERAL: My right hon. Friend will no doubt state at the proper time whether he considers that is a point which should be dealt with.
    Mr. GARRO JONES: It seems to me that the Attorney-General is lending countenance to a very unworthy principle. If I understand the proposal of the hon. and learned Member aright, he wishes to save in the class of irrevocable settlements a settlement which contains a provision that it reverts to the settlor in the case of the bankruptcy of the person upon whom the money is settled. Is that a principle to which the Committee would wish to give support? It is saving for the benefit of the settlor money which in truth should belong to the creditors of the bankrupt. Why should the beneficiary of such a trust be able to surrender in form only and not in reality to the settlor those monies under the trust in order to protect—
    The DEPUTY-CHAIRMAN: Does the hon. and gallant Member for Tiverton (Lieut.-Colonel Acland-Troyte) wish to move his Amendment?
    Lieut.-Colonel ACLAND - TROYTE: Yes.
    The DEPUTY-CHAIRMAN: In that case I must tell the hon. Member for North Aberdeen (Mr. Garro Jones) that his remarks will be more appropriate to that Amendment.
    10.49 p.m.
    Mr. H. G. WILLIAMS: I do not understand any of this Clause very clearly, but suppose this trust is a permanent one and provides that after the child reaches the age of 21 the trustee shall remain in control for some substantial further period. When the father is So and the child is 60, is that income which the child is spending and of which he has complete control to be regarded as aggregated to the father's income?
    The DEPUTY-CHAIRMAN: I hardly think that that arises.
    Amendment negatived.
    Lieut.-Colonel ACLAND-TROYTE: I beg to move, in page 21, line 2, after "settlement," to insert:
    "unless the interest of the child in the income or assets shall have been forfeited in consequence of the bankruptcy of the child or of an assignment thereof or a charge thereon having been executed by the child."
    Under this Clause as it now stands a trust cannot be irrevocable if under any circumstances any benefit can accrue to the wife of the settlor. It is a common practice in these deeds to insert a condition to the effect that in the case of bankruptcy of the child the trustees shall apply the income to other members of the settlor's family one of whom is usually the wife. This condition is inserted for the protection of the child and to prevent him from assigning the money. There is no ulterior motive and the cases in which it has been used must be very rare. It seems very unfair that a common form such as this should prevent the deed being considered irrevocable and I hope the Minister will be able to correct this hardship.
    10.51 p.m.
    Mr. GARRO JONES: I very much hope that the hon. and learned Gentleman will not accept this Amendment. Let me attempt to give the Committee a typical case. A father settles on a child a sum, say, of £500 or £1,000 per annum. At the age of 25 the child, having lived on that standard, becomes bankrupt. Immediately that income is nominally stopped and reverts to the father and he gets the benefit of revocability under this Clause. But everybody knows in such a case that the standard of living of that child will be precisely the same as before. All that will happen is that instead of the child receiving it under the formal settlement

    767
    he will get it in £10 notes and in other ways not traceable. All that will happen is that the creditors of the child will be robbed of the amount, which the child will go on receiving. It is a pernicious principle and I hope the Committee instead of adding to the difficulties of the bankruptcy laws will endeavour to restrict them.
    10.53 p.m.
    Mr. SPENS: May I point out that the point which we are dealing with is not actual events in the future but the form of old pre-Budget settlements. The point of this Clause is that if some innocent draftsman acting for my hon. Friend opposite made a settlement for him 10 or 15 years ago in which his children were concerned and happened to put in a clause that if the child became bankrupt there would be provision under which income went to the father, that settlement is a revocable settlement for the purpose of this Clause. If the draftsman happened to omit that clause then the settlement is an irrevocable settlement. If made in the former form the income of the child is the income of the father. For these distinctions to take effect now in respect of settlements made in one form or another 10, 12 or 15 years ago, is illogical and unfair.
    10.55 p.m.
    Mr. W. S. MORRISON: In view of the contention of hon. Members, I am bound to say that a clause guarding against bankruptcy is a very common occurrence in trusts which give power to the settlor to resume control of the assets by his own act. My right hon. Friend has asked me to say that he will consider this matter very carefully, and will try to meet it by the Report stage if he can. It should be made clear that the wording of an Amendment for this purpose would require very careful consideration, as there would be a number of repercussions from an unwary choice of words.
    10.57 p.m.
    Major HILLS: I quite agree with what has just been, said by the hon. and learned Gentleman. It might be possible to bring into the irrevocable class settlements where bankruptcies were guarded against and in which the assignment would give to the parents any benefit. I understand, from what the Financial Secretary has said, that the Chancellor will reconsider
    768
    the matter. I think the Amendment of my hon. and gallant Friend the Member for Tiverton (Lieut.-Colonel Acland-Troyte) would go rather too far, but I am very glad that the Financial Secretary has promised that the point will be considered. It is a very serious point.
    10.58 p.m.
    Mr. BENSON: I hope that the Chancellor of the Exchequer will not allow any of these exceptions. When the trusts were originally set up there was no mention of avoiding tax. [HON. MEMBERS: "Hear, hear!"] All right then; if they do not avoid tax, the people who established them have nothing to grumble about. Hon. Members opposite are trying to have the best of both worlds. They say that the trusts were set up by virtuous people who had no intention of avoiding tax, but they object to the Chancellor of the Exchequer helping them to carry out the intention of not avoiding tax. I am aware that there was no question of taxation when these settlements were made, but why are hon. Gentlemen opposite raising the question of taxation now? Hon. Gentlemen cannot have these trusts as virtuous and established for other purposes than avoiding taxation and, on the other hand, say that they shall be made into trusts which enable the settlors to avoid taxation now. That is what is being asked for, and it seems to me to be an entirely illegitimate demand.
    11 p.m.
    Sir W. DAVISON: The legislation which the Committee is discussing gives certain privileges in the way of tax remission to persons who have irrevocable settlements. Why should they not have these privileges, when, to all intents and purposes, the settlements were intended to be irrevocable settlements, and there was no idea of their being terminated for the benefit of the settlor? These clauses were put in for the protection of the children.
    Mr. BENSON: So far as we on this side are concerned, the hon. Member has got hold of the wrong end of the stick. We are not concerned with the privileges; we want to know why irrevocable trusts are allowed these entirely illegitimate privileges.
    Amendment, by leave, withdrawn.
    The DEPUTY-CHAIRMAN: Mr. Dingle Foot.
    Mr. H. G. WILLIAMS: May I ask, Captain Bourne, whether you are not going to call the Amendment of my hon. and learned Friend the Member for East Leicester (Mr. Lyons)—in page 21, line 2, after "settlement," to insert:
    "except in the case of a settlement made in contemplation of marriage where neither the settlor nor the husband or wife of the settlor is a trustee of the settlement."
    The DEPUTY-CHAIRMAN: In the first place it is now too late; and, in the second place, there is a somewhat better Amendment in the name of the hon. Member for Cambridge University (Sir J. Withers)—in page 21, line 16, at the end, to insert:
    "but does not include any settlement made by or under the provisions of a separation agreement, or an order of any court, nor any settlement made by way of compromise of legal proceedings, or any settlement made for the benefit of an illegitimate child before or within one year after its birth, or any settlement made before and in consideration of marriage or pursuant to an agreement so made"—
    which I propose to call.
    11.2 p.m.
    Mr. FOOT: I beg to move, in page 21, line 4, after "person," to insert:
    "in such a way that any part of the settled assets or income or any interest therein reverts to or becomes payable or applicable to or for the benefit of the settlor or the wife or husband of the settlor."
    This Amendment would enlarge the words which appear in Sub-section (7, b). The paragraph as it now stands reads:
    "For the determination of the settlement by the Act or on the default of any person."
    It seems to me that the meaning of these words is somewhat obscure, and particularly it is not quite clear what is intended by the word "determination." May I put to the Committee the effect of these words, as I read them, in one or two cases? If a settlor provides a sum of money of which the income is to be paid to the child or for the education of the child up to the age of 21, and at the age of 21 the capital is automatically to be paid over to the child, as I read the paragraph it would have no application at all, because the settlement would not be determined by the act or default of any person, and the payment over of the capital on the child reaching the age of 21, or whatever the age might be, would not be a determination in the sense that is meant here, but would
    770
    merely be a coming to the end of the settlement.
    A somewhat different kind of settlement, and one which I believe is fairly common, is that in which all the income is paid to the child until a certain age, and the trustees have a discretion to pay over the trust fund, either at the age of 21 or at some later age as they may determine. That would be caught by the words of paragraph (b) as I read them. Therefore, we have the rather strange result that these two settlements, each of which is intended to be irrevocable in the sense that in neither case will anything revert to the settlor at any time, nevertheless in the one case the settlement is treated as an irrevocable settlement within the meaning of the Bill, while in the other case it is treated as not being irrevocable.
    To take another case, it is quite a common practice nowadays, when money is settled on a daughter, for it to be handed over to trustees on terms that the daughter is to enjoy the income, either until she marries or until she reaches a stipulated age, and upon marriage the trustees have power to pay over the trust funds to the trustees of a marriage settlement arranged by the daughter herself. That also is a fairly common arrangement. As I read it, there also you would have a determination in the terms of this paragraph even though there again there could not be any question of any part of the sums that were settled reverting to the settlor. I do not think the sort of case that I have mentioned was really intended to be caught by those who drafted this Bill. It is obvious that the case that was aimed at was where you have a settlement that may be determined in such a way that something may come back to the settlor or to the wife or husband of the settlor, but I do not believe it was intended to catch this form of settlement where the period during which merely the income is to be paid is to be determined at the discretion of the trustees but where in fact nothing will revert either to the settlor or to the husband or wife of the settlor.
    11.7 p.m.
    The ATTORNEY-GENERAL: I have directed my attention particularly to the words that the hon. Gentleman put on the Order Paper. So far as those words

    771
    are concerned, they would have effected the results which I imagine he desires, but if these words were inserted and the person who had made the settlement was in a position to transfer the benefit of the settlement to someone else and might make that someone else anyone he thought fit, that would be making it irrevocable by a side wind. What the hon. Member is really concerned about is the meaning of the word "determination." His first case is covered by paragraph (a). The second case he puts is where under a settlement the trustees are enjoined, on the daughter's marriage, to pay over the capital to the trustees of her settlement. That is clearly a case where there is no question of the settlor getting any benefit. All these points require careful consideration in the light of whether the form of words can be used to meet the particular point one desires to meet without having other consequences. I will certainly undertake that that class of case will be considered before Report.
    Amendment, by leave, withdrawn.
    11.10 p.m.
    Mr. SPENS: I beg to move, in page 21, line 5, leave out paragraph (c).
    This is the paragraph to which I have the greatest objection of all. It deals with two entirely different things. It provides that any settlement containing a provision for the payment of any penalty by any person failing to comply with the provisions of the settlement makes an irrevocable settlement revocable. With regard to that part of paragraph (c), I confess that I do not know what the words mean or to what they refer, but I believe, from a letter which I have received, that they refer to some provision which occurs fairly commonly in settlements made in my native land of Scotland. I have personally never seen any settlements which contain any provision such as that, and I do not know what sort of gentlemen it is intended to catch. As regards the second part of paragraph (c), you have a provision which applies to every well-drawn settlement made in this country. You will not find any settlement made in this country which does not contain some partial indemnification or exoneration of trustees. The Committee will remember that we have in fact a statu-
    772
    tory exoneration of trustees under the Trustee Act. We have passed a provision that any trustee who does not perform his function but has acted reasonably and honestly is to be excused. That is a statutory provision which applies to every settlement in this country, either expressly or by implication. Moreover, in every other settlement you nearly always have some provision under which in certain circumstances and in respect of some act or other the trustees may be excused if they do not perform that particular act. To come down to the type of settlement dealt with in this paragraph, you will find in a very large percentage of settlements which contain a provision for the receipt of funds and the investment of income some express exoneration or indemnification in respect of investments of settled funds. If in any such clause as that which has anything whatever to do with tax evasion is found in a settlement, then such settlement becomes an irrevocable settlement for the purposes of this Clause. In the payment of an annuity you nearly always find a provision that if the trustees have not their costs provided or if the result of taking action would be to bankrupt the parent they shall not take action. These are clauses that are found in every settlement made years ago, and they have nothing to do with tax evasion. I submit, therefore, that paragraph (c) ought to be omitted.
    11.14 p.m.
    Mr. W. S. MORRISON: My right hon. Friend proposes to meet the substance of the views expressed in the powerful speech we have just heard. My hon. and learned Friend and the Committee understand the reason which prompted the drafting of the Clause in its original form. It was that these provisions, necessary as they are in many cases for the total or partial indemnification of trustees, were in fact being used as a cloak to enable, in many cases, the settlor to avoid the obligations which he purports to be undertaking. The purpose of paragraph (c) is intended to exclude these irrevocable settlements. Since the Bill appeared in print it has become increasingly evident that there are many cases of quite innocent provisions. In the law of Scotland, the Trust (Scotland) Act, 1921, there is an actual statutory form of partial indemnification which it would not be consistent with practice

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    to cut out from irrevocable trusts. The undertaking which my right hon. Friend gives is to introduce on the Report stage a redrafted series of definitions which will have the object of excluding the innocent cases of indemnification from the provision and leaving it as far as we can in such a form that it renders revocable only such forms as fulfil the description which I gave at the opening of my remarks.
    Mr. SPENS: That is all that I ask. I have no desire so to amend the provision as to allow settlements designed for tax evasion. All I desire is that innocent settlements should be protected. In the circumstances I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    11.18 p.m.
    Sir J. WITHERS: I beg to move, in page 21, line 16, at the end, to insert:
    "but does not include any settlement made by or under the provisions of a separation agreement, or an order of any court, nor any settlement made by way of compromise of legal proceedings, or any settlement made for the benefit of an illegitimate child before or within one year after its birth, or any settlement made before and in consideration of marriage or pursuant to an agreement so made."
    The purpose of the Amendment is that certain bona fide settlements shall be exempted from the Clause.
    11.19 p.m.
    The ATTORNEY-GENERAL: By his Amendment, my hon. Friend proposes to exclude an order of the court, among other instruments; but an order of the court is not within the purview of the Clause and therefore is already excluded. So far as the categories of other instruments are concerned the Clause is not directed against instruments for tax dodging, as we were dealing with them in Clause 16.
    The hon. Member will recognise that many of these instruments have as part of their proper motive the making of arrangements for their children on the basis of the Clause but as transactions solely for the purpose of diminishing his tax liability. But there are persons whose resources are such that they are able to make a provision of this kind for their children and it is therefore reasonable that their taxable capacity should not be diminished by the fact that they have made this arrangement. The point of the Amendment is that a person has
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    entered into this transaction under a separation agreement or order of the court. If under a separation agreement a father or mother is in a position to provide that there shall be £300 a year for the benefit of a child, why should they be in a better position than someone who has not had the misfortune to have had matrimonial troubles which have led to a separation agreement?
    Why should my hon. Friend say that a person who makes this provision voluntarily, without any matrimonial troubles, shall be in a worse position than a man who has to make this provision because of a separation agreement? The child gets exactly the same benefit, although in the one case it is because of a matrimonial dispute. You have two parents who are able to make a provision of £300 for a single child. The hon. Member desires to give an advantage to the parent who makes this provision under a separation agreement. I cannot see why there should be any discrimination drawn in favour of those who have made such a settlement as a result of any matrimonial trouble. I really think that the hon. Member's Amendment is based on a misconception. Whatever may be the object of the arrangement as far as I see it, it should be brought within the general proposal of the Clause.
    Amendment negatived.
    11.25 p.m.
    Mr. CHAMBERLAIN: I beg to move, in page 21, line 28, to leave out "where it last," and to insert "in the third and fourth places where it."
    This is a drafting Amendment.
    Amendment agreed to.
    11.26 p.m.
    Mr. KEELING: I beg to move, in page 21, line 39, at the end, to insert:
    "(e) a child shall be deemed to be an infant only if such child is either under the age of sixteen years or is over the age of sixteen years and under the age of twenty-one years and receiving full-time instruction at any university, college, school, or other educational establishment."
    It is obvious that a child in any walk of life may go out into the world and start earning his or her own living long before he or she is 21. The child may drive a car at 17; a youth may join the Army at 18; and I believe there are cases on record, in war, of a young man attaining command of a battalion before reach-

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    ing the age of 21. It is difficult to see why income settled on such a person should be treated as his parents' income. If a man settles money on his child and then dies before the child reaches 21 and the child starts earning his own living at 18, it seems utterly unjust that the widow should have to pay Income Tax on the settled income of that child. The Clause as drawn will produce this extraordinary anomaly, that whereas when a man is separated from his wife their incomes are treated separately, yet if a boy of 20 earning his own living is separated from his father the settled income of that boy is to be treated as his father's income. The Financial Secretary during the Second Reading Debate used these words:
    "The income arising from the invested funds in the trust, if that income is paid out to the parent for the maintenance of his child, will be treated as the parent's income for the purposes of tax, but if it is accumulated within the trust and not laid out it is not income and will not be aggregated."
    I think that the case for not aggregating that income is equally strong if the income is retained by the child and never goes to the parent. The definition in my Amendment is, of course, the same definition as that which fixes the parent's eligibility for the child allowance of £60 a year. I submit that it is reasonable that when the parent ceases to get that allowance he should cease to be liable to have the child's income aggregated with his own for purposes of Income Tax. I hope the Chancellor will accept my Amendment.
    11.29 p.m.
    Mr. W. S. MORRISON: The hon. Member who moved the Amendment did so, I think, to draw attention to an anomaly which he considers exists in the proposals of this Clause. The fact is that if one adopted my hon. Friend's definition of infant and child I think it would lead to even worse anomalies than exist at the present time. The provisions of the Clause only apply during minority. My hon. Friend's definition of minority would mean that a parent who was self-sacrificing enough to continue his child's education beyond the age of 16 would be prejudiced as against the parent who did not. If a parent who desired to continue his
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    child's education beyond 16 settled an income upon that child, he would be caught under the Clause by the definition which my hon. Friend proposes to insert. If he did not desire to continue the education of the child the parent would, as soon as the child was 16, if we adopted this definition, be entitled to settle an income on that child and not to have it aggregated with his own income. That surely would be a grotesque position. I suggest that the Committee would be well advised to adopt the well-known definition of minority and infancy which is in the Bill rather than embark upon the definition now suggested. The purpose of the suggestion is a very proper one, and perhaps my hon. Friend will find another opportunity of making his point, but I think that to alter the definition in the way suggested would be to create fresh evils rather than to provide a cure.
    Amendment negatived.
    11.34 p.m.
    Mr. CHAMBERLAIN: I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
    I understand that the next Amendment on the Paper is one to which the party opposite attach a great deal of importance and no doubt they would prefer an opportunity of discussing it at an earlier hour of the evening than this. They will, however, bear in mind that we count upon getting the Committee stage of the Bill finished by Wednesday night. The time table does not leave us any alternative. However, the Committee has made extremely good progress, to-day, and I think we might now agree to the Motion to report Progress.
    Committee report Progress; to sit again To-morrow.
    The remaining Orders were read, and postponed.
    It being after Half-past Eleven of the Clock, Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
    Adjourned at Twenty-Five Minutes before Twelve o'Clock.