§ Captain CrookshankI beg to move, in page 10, line 14, to leave out "a body corporate," and to insert "an employer."
This does not appear to be an important Amendment, but as we are entering into a new Section of the Bill, I would like to know whether it would be to the 995 convenience of the Committee if we had a general discussion on the next five Clauses and take a somewhat wider view of the issues raised by those Clauses. I do not know if you would consider that that would be a feasible course Major Milner.
§ Mr. DaltonIf that is agreeable to you, Major Milner, and to the Committee, I think it might be helpful. There are a number of common aspects of these Clauses, and it may be that we can clarify the matter better as a result of a general discussion. We might see how we get on. We need not now be exact as to what conclusions we might reach, but I think a general discussion would be useful.
The ChairmanI am of course largely in the hands of the Committee. Did I understand the right hon. and gallant Gentleman to refer to other Clauses?
§ Captain CrookshankI refer to Clauses 14 to, 18. They constitute a group.
The ChairmanI understand it is proposed that the discussion should take place on the Amendment which the right hon. and gallant Gentleman has just moved?
§ Captain CrookshankYes, Major Milner. I do not propose to take up much of the time of 'the Committee, but there are a few general observations I would like to make. The reason for this group of Clauses, as I understand it, is that there has been discovered a mischief. I have tried to find out, and I think I have found out, what the mischief is, but I do not propose to say what it is, because I know that in these matters the Treasury are always very careful as to how much information should be given in public and how much should not. If the Chancellor likes to explain it, that is his affair, but I do not propose to say further than that we on this side of the Committee are aware of the sort of mischief with which these Clauses are intended to deal. Of course, we are also in agreement that any flagrant evasions of taxation must obviously be dealt with, not only in the interest of the Exchequer but also out of common fairness to the honest taxpayer.
10.0 p.m.
Having been so long at the Treasury myself, I know that that particular argu- 996 ment is always acceptable to this Committee. We are on common ground there. But the point at issue now is whether, granted that there is a mischief, this group of Clauses is a kind of group which should be introduced into a Finance Bill; and on that we find, having considered them as best we could—and they are in very complicated language, and even the Solicitor-General must admit that they are not very easy reading—we find that they go rather too wide, and that, while they may very well deal with the problem with which the Chancellor set out to deal, they will also, undoubtedly, if they are carried in this form, cause an enormous amount of trouble, bother, and, in many cases, real hardship. But I was putting trouble and bother from the administrative point of view as a first argument.
It is quite certain that, when we come into the sphere of trust funds, annuities, benefits, and all that group of payments, the law is difficult and obscure. Sometimes tax is raised on one form of benefit, on another form of contribution, and in different ways on the income. The first suggestion, therefore, that I would put to the right hon. Gentleman is, that the whole matter ought to be investigated. Some form of committee could easily be set up to look into this complex business. I am strengthened in that suggestion in that it was the conclusion that my right hon. and hon. Friends came to some time ago, as a suggestion we ought to put to the Chancellor of the Exchequer. But remembering what he said on the last Amendment but one, and his own colloquialism, "a jolly good working party" for the cotton industry, it is interesting to find that the jolly good chairman of that jolly good working party, Sir George Schuster, wrote on these very lines id "The Times" yesterday. In view of the encomium the right hon. Gentleman has already passed tonight on our former colleague, I hope he will have considered very carefully Sir George Schuster's letter dated 6th June in yesterday's "Times" making an urgent plea that the Chancellor of the Exchequer should appoint a Committee
to review all the arrangements for taxing the provision of funds for pensions and other forms of compensation on retirement or loss a office. The law on these matters has become intolerably complex.997 That is the preliminary proposal we should like to put to the right hon. Gentleman, and, sc far as I know, there is no particular reason why that should not be adopted. At the same time, it would be possible for him to safeguard the position he wants to with regard to tax evasion. There have been to my own knowledge in the past Chancellors who have said, "We have discovered a leak, and we intend to stop it up. Everybody is at risk who is acting in that way." Then, subsequently, legislation was passed to deal with it. So, from the point of view of evasion, he would not be necessarily any worse off through the delay imposed by a thorough investigation of the whole matter. That is the first submission I put to the right hon. Gentleman.Now—briefly, because many of my hon. Friends want to speak on this matter, and have far more knowledge of the details than I have—I want to make clear that this is a matter of very great importance. It was rather passed off, I think, at the earlier stages as if it were something quite different, and that evasions by directors of public companies, and they and only they, were affected by what is now in the Bill. Of course, that is not true. It may be that they are the cases that the right hon. Gentleman has in mind, but as the Clauses are drafted they cover a very much wider field, because they cover not only directors but every employee—so far as I know right down to the charwoman, who may come within their ambit.
§ Mrs. Braddock (Liverpool, Exchange)What about the charwomen?
§ Captain CrookshankI am sorry if the hon. Lady does mind, but, of course, the function of a charwoman is not a directorial function in a public company. There is a sort of hierarchy. As drafted, it means every employee. Moreover, in Clause 18, which is the definition Clause, retirements or other benefits which are covered by the Bill involve a very large scope of possible benefits, because that Clause says:
'retirement or other benefit,' means any pension, annuity, lump sum, gratuity or other like benefit given or to be given on retirement, or in anticipation of retirement or, in connection with past service, after retirement, or given or to be given on or in anticipation of or in connection with any change in the nature of the service of the person in question …That is a very wide matter, with an exception, of course. Therefore, before hon. 998 Members pass these Clauses, let them be quite certain what it is they risk: it is every kind of retirement or other benefit, in the very widest sense of the word, which may come the way of any director or any employee of any body corporate. In order to catch what might be quite a small section of evil doers this vast net has been spread. It is so vast that in many ways it looks to us as if it will make life, or these particular arrangements in life, almost intolerable for the honest man. It is quite true that any schemes which may be approved by the Inland Revenue will be exempt from the scope of this matter, but payments which are not under any approved scheme will be penalised in different ways, generally speaking by making any premiums paid for them, whether real or notional, additions to the taxable income of the beneficiary. Now, because taxation goes so low down, there may be caught by these notional premiums a number of people who in years past, if such a scheme had been introduced, would never have been affected one way or the other. All schemes will be exempt if approved. That means that every scheme, presumably, which is devised, or which already exists, will be sent forward for approval; and, of course, there are vast numbers of schemes.When we were discussing an Amendment to Clause 11 the Chancellor was saying how today the Inland Revenue were working at enormous pressure, and that they could not begin to look at the proposal which was then under discussion. If the Inland Revenue are already working at this enormous pressure, it seems to me that if they are to have sent to them for vetting purposes every kind of scheme which may come within these Clauses, their position will be well-nigh intolerable. But apart from the position of the Inland Revenue, what will be intolerable will be the long delay which is bound to elapse, in those circumstances, between approval or disapproval; and that will mean uncertainty to a great number of people who are possible beneficiaries, and general chaos all round. I am sure that is the last thing anybody would want to happen. It seems to me an extraordinary thing to set up this enormous machine in order to catch what is, presumably, only a very small number of people. That is the general objection that I would make to the whole proposal. It is quite true that when we 999 come to the proposals of the actual Clauses some of the results, whether they were intended or not, are quite fantastic.
I think the Chancellor will find that in the course of this Debate he will have brought to his notice instances which could never have been envisaged when these Clauses were drafted. For example, the whole question of any casual payments becomes very unsatisfactory, and very difficult to define. A case which I have in mind is that of a man given a pension under a regular pension fund scheme, to whom the company say, on his retirement, because he has performed some especially good work during the war: "We should like to give you a little more on your pension—say an extra £300 or £400—in view of the fact that you stayed on and worked so hard during the war." Under the existing law, which will not be altered by this, that original pension, and the additions to it, will naturally be subject to tax in the ordinary way, but it appears more than likely, from the legal advice given in this particular case, that the additional pension, because it is something extra, comes within this definition, and will have to be treated in a special way, the special way being that after taxation has been paid, it is taxed over again under these Clauses.
That does not seem to us to be the intention. If hon. Members care to look at Sir George Schuster's letter, they will see that he translates what would happen under this Bill to the well-known case of the Lord Chancellor, although the Bill as drawn does not affect anyone except employees of a body corporate. We all know that the Lord Chancellor receives a fixed pension of £5,000 a year on ceasing office. He receives that pension if he has held that office for only one, two or three years. If he were an employee or a director of a corporate body, he would have, under these circumstances, a calculation made on what was the notional premium required to provide that pension and he would be taxed on that as well. It brings about the most fantastic results when there are any alterations here or there. I do not want to go into that further, because it has been published in the Press and anyone can read it.
1000 I cannot believe that the Chancellor of the Exchequer, or those who drafted this Clause, had any idea of the wide ramifications inherent in it. It is a bit like the matter we have discussed on other legislation, where it was much easier to take very wide powers in order to deal with one problem. The Solicitor-General will be familiar with that, as it has been raised several times in his presence. I think that is what has happened here, and that very wide powers have been taken to deal with a comparatively small problem. Now that people have looked at the result of the wording of this Clause, they have found that every sort of payment of every sort of person, whose honesty no one has ever suspected, whose motives no one has ever thought anything but honest, are liable to be caught, and caught to the great detriment of his financial position. There are many cases where it has been found, as the result of the calculations necessary under this Clause, that in the last years before retirement, people will have to find taxation payments higher than the income they receive. They will be paying to the State more than they are receiving at work. No one is likely to do that, and in order to get out of the mess, people will wish to retire from their body corporate, depriving it of their services—which will be a pity no doubt—because the Bill has made a charge which is so heavy that they cannot pay it. That cannot be the intention of the right hon. Gentleman.
10.15 p.m.
I hope the right hon. Gentleman will be prepared to reconsider and recast these Clauses. We ourselves have been helpful in these matters in the past, and we have had a shot at drafting an Amendment which has not been selected by the Chair. The Amendment to Clause 14, page 10, line 13, was devised as one way, at least, of dealing with this problem. It is largely founded on some legislation which has been passed, or is being passed, through the Canadian Parliament to deal with this problem, as a result of an investigation which took place in that Dominion on this group of subjects. Therefore, it is an Amendment of decent parentage. I hope the right hon. Gentleman will look at the whole matter again, and take note of some of the more extraordinary cases which will be brought to his notice during the Debate. Instead of a corporate body, this 1001 should apply to all employers, because if it is right in one case it ought to be right in all others.
The ChairmanI am afraid I had not appreciated the wide ramifications of this matter, and it would be more satisfactory if we had a wide Debate on the Question that the Clause stand part rather than a Debate on an introductory Amendment.
§ Mr. StanleyWe have a very large number of detailed Amendments to Clause 14, which would have to be moved before we came to the Motion that the Clause stand part of the Bill. We do not know what answer the Chancellor may make to the general case which has been put, but it may well be that if he were prepared to promise reconsideration, or make some offer of that kind, some of these details would become unnecessary. It would be a great pity if we had to discuss details first, before we got from the Chancellor an answer on the main principles which are involved in this matter.
§ Mr. DaltonAs these Clauses hang together, I thought we might have a brief general discussion. I assumed that Members on the other side, who have studied this matter, and perhaps some of my hon. Friends on this side, would have something to say, and I thought that the Solicitor-General or myself would make some observations on the points raised. I thought I might be able to give an undertaking that if we could get the Clauses in this form now, we would be prepared to study the matter. I do not think we could wish for any extra Parliamentary machinery to be set up, but I thought we should be glad to study the matter with Members opposite and perhaps some of my hon. Friends, and bring forward, on the Report stage, Clauses in a recast and amended form, if a case could be shown. The only alternative to this course would be to go laboriously through Amendment after Amendment which, apart from taking up a lot of time, would be tedious and unprofitable. I am not trying to force anything through in a final form, but we are anxious to stop this serious leakage. I am advised that it ought to be stopped, but it may well be that we have not arrived at the simplest and most effective way of doing it. As to that, we are prepared to consult between now and the Report stage. I am sure we do not want 1002 a late Sitting tonight—I was assuming not —and if we could avoid a detailed discussion, Amendment by Amendment, and get these Clauses tonight, on the undertaking I have given, I think a brief general discussion would be helpful.
The ChairmanI understand it was desired that there should be something in the nature of a Second Reading discussion, and that then it would be quite open to right hon. Members or hon. Members to put down detailed Amendments on the Report stage if they were not satisfied.
§ Colonel Crosthwaite-Eyre (New Forest and Christchurch)Is it to be understood that all the Amendments on the Order Paper will be considered before the Report stage? There are a great number of detailed points and is it to be understood that these are to be considered and reported upon by the Report stage when the view of the Government on the whole matter would be ascertained?
§ The Chancellor indicated assent.
The ChairmanThe Amendment in Clause 14, page 10, line 14 has already been moved and I propose to put the question. I understand the Amendment will then be withdrawn by leave and I will put the question that the Clause stand part of the Bill.
§ Amendment, by leave, withdrawn.
§ Motion made, and Question proposed, "That the Clause stand part of the Bill."
§ Mr. StanleyI think that something has gone a little wrong. We want to hear the Chancellor of the Exchequer's statement before we can agree not to move the detailed Amendments to this Clause. We were hoping that discussion would be taken on the Amendment, and in the light of that we could then decide whether it was necessary to move the other Amendments. We certainly would not agree now to withdraw all the Amendments to Clause 14 before we have even heard the Chancellor of the Exchequer.
The ChairmanI am sorry, but it is not the usual practice of this House to have a discussion extending over five Clauses on one comparatively minor Amendment. I understood that the proposal of the right hon. and gallant 1003 Member for Gainsborough (Captain Crookshank) was that there should be something in the nature of a Second Reading discussion and that the Chancellor of the Exchequer, after right hon. Members and hon. Members who desire to do so have spoken, should give some assurance, and if on the Report stage the result of that assurance was not satisfactory to the right hon. and gallant Member and his friends it would be open to them to put down Amendments again. The Amendment which was before the House has been withdrawn, and I now put the Question, "That the Clause stand part of the Bill."
§ Mr. StanleyAm I to understand that none of the other Amendments to Clause 14 have been selected?
§ Mr. StanleyThat is not the result which we wish, and not the result for which we have asked. We hoped to have a general discussion on the first Amendment, and we hoped that in the light of the Chancellor's statement, it would be unnecessary for us to move any of these other Amendments. What we certainly have not asked for is, that this Amendment—for some reason which I do not understand—should not now be selected by the Chair. If we are dissatisfied with the answer of the Chancellor of the Exchequer at the end, we should find that our opportunity of moving this Amendment in detail would have been thrown away.
§ Mr. DaltonI think that we are in danger of so long discussing procedure as to lose sight of the direction in which we want to go. I thought that it would meet the general convenience if those hon. Members, of whom there are a number who have studied this, would explain their criticisms of and their general objections to the Clause as drafted. I thought that then either my hon. and learned Friend or I would make a reply in the light of those speeches. Then we should be able I hope, if this reply is satisfactory—because there is nothing essentially controversial in this Clause—to have a consultation between the ordinary Members of the House and representatives of the Government with a view to seeing whether before we reach the Report stage 1004 we could put down and redraft the Clauses in the light of such discussion. I think that was the intention. What particular peg we hang this discussion on does not matter much. Even some of my own Amendments fall under this arrangement, but I do not object to that.
§ Mr. StanleyI prefer the discussion to hang on the peg of the first Amendment.
The ChairmanI understood that the right hon. Gentleman and his friends on the Opposition side of the House asked for this general discussion. When the Chancellor agreed, I took the action I did, and I certainly could not have agreed had I appreciated that it was desired to have a discussion extending over five Clauses based on one small Amendment on one Clause. I am sorry, but I think it will work out all right. The question now before the Committee is, "That the Clause stand part of the Bill."
§ Mr. EcclesNow that we are to discuss these five Clauses together, I should like briefly to give our general objections to the Clauses. I want to start by saying something which will repeat what my right hon. Friend has just said, namely, that we on this side are as much concerned as the Chancellor to catch those who are evading tax. There is, therefore, no question of political principle. There are a certain number of transactions which have taken place and which undoubtedly will have the effect of evading tax. These we should like to see stopped by a reasonable Amendment in the Finance Bill. Our complaint about these Clauses is that they are unfair and that they have strayed over a much wider field beyond that of the evaders.
First, I would point out to the Committee that these Clauses affect the pensions and lump sum benefits of a certain number of people who have been singled out because they are servants of corporate bodies. Anyone who is a civil servant, a servant of a local authority, of a single master, or of a partnership, escapes. It is not really fair to single out a certain type of pensioner who is enjoying some remuneration at the end of his service and leave a whole lot of other people who are also enjoying remuneration of one kind or another. It is unfair to a certain section of the people. I am no lawyer, but I understand that the legal grounds on 1005 which this Clause can be defended derive from the law in relation to annuities. I put it to the Committee that the law is a bad law and that many times we have put down Amendments to previous Finance Bills to try to get it amended.
10.30 p.m.
It is clear that if an ordinary citizen wants to take out an annuity which is not terminable, he has to pay tax twice. First of all, he pays tax on his income, and then when that sum is paid, he has a sum of money left. He may want to pay part of that money as a lump sum in order to receive £100 a year when he reaches the age of 60. He is taxed on that £100 a year when it comes in. He may die after receiving the first £100, the result, of course, is that he has paid much more in tax, since he paid tax on his income from which he saved money to put the capital sum down. The law as it stands is bad in relation to annuities for which there is no capital payment. A person is taxed twice. I understand that the position of the Government in inserting this Clause was that they wanted to make members of corporate bodies pay tax twice in the same way that anyone does who buys an ordinary annuity. Their justification is an extension of what I consider to be bad law.
In order to show the Committee how it will work out in relation to the employees of ordinary business firms, I would like to give one or two examples. Supposing a man is killed at his work and has not been covered by any approved scheme. It may be only a small firm, and it may not have enough money for an approved scheme. The directors may say that they would like to do something for the widow, and they may decide to give the widow a pension of £150 a year for life. Under this Clause, the following effect takes place. Supposing the widow is aged 40, they have to calculate what is her expectations of life. They have to find a capital sum which that £150 a year represents over her life. It may well be £7,000. Having decided that is the notional value of £150 a year for the rest of her life, they have to discover what would be the annual premiums spread over six years in order to obtain this sum of £7,000. It would be more or less £1,000 a year for six years. This widow, under the Clause, would have to pay ordinary Income Tax on £1,000 a year 1006 for the first six years in which she received £150. The result would be that she would have a minus quantity for six years. That is the effect of carrying out, under this Clause, a bad principle of law which obtains in relation to annuities.
It does not end there. It is more absurd than that. The ordinary practice of a company, if it does what I have suggested, and gives the widow of a man in its service who has been killed at his work a purely voluntary pension of £150, is to say, "We will give the pension until you remarry." That is the ordinary practice, as the Solicitor-General knows. Therefore, under this Clause, the calculation has to be made of what is the expectation of time before that widow remarries in order that they may know the capital sum as represented by the £150 a year. Is the Government going to look at this widow aged 40, and say, "This year, next year, some time never"? That is what has to happen under this Clause. It is manifestly absurd that such a calculation should have to be made.
Suppose that there is the sort of man quoted by the right hon. and gallant Member for Gainsborough (Captain Crookshank), who retires in 1953 and is given a pension voluntarily, where the company has not paid into any scheme for, say, £150. What happens is that in his case, too, a calculation has to be made of the capital value of that £150 for the remainder of his life, and he has to pay on that sum Income Tax for six years. Suppose that he dies a year after he retires? Then, under this Clause, his estate becomes liable to Income Tax on the whole of the six years' premiums representing a capital sum of whatever his expectation of life was at the time he retired. That is manifestly absurd. I cannot think that the Chancellor of the Exchequer really meant things of that sort to come about. I am sure the Chancellor will say that none of these things will fall upon pensions which are paid out under an approved scheme: that Is to say, a scheme which has been taken to the Commissioners, and has been approved. If we were to discuss these Amendments one by one on these Clauses, I would warn the learned Solicitor-General that I have 24 valid questions to ask him regarding these schemes and how they are to be approved. However, I will not go into that.
1007 I will only say that a big company which has an approved scheme will always find the odd case which is not covered under its scheme. The companies want to make provision for those extraordinary accidents which occur. In the case of a small man employing half a dozen men —perhaps prosperous although small—it may not be worth his while to have a scheme approved by the Commissioners. Four or five of his employees may be changing fairly often. It may be that one or two of the old ones go on. He may want to do something for the old ones, but it is not worth his while to have a scheme. But if he does have a scheme, every time benefit is given in the future it will be taxed twice, in the sense that the income of the employee will have added to it the notional premiums which the company would have paid to assure the pension, whatever that may be, if it had gone to an insurance company or if it had had one of these approved schemes.
I could talk on this matter for a long time, but I do not intend to keep the Committee very long. I think this thing is absurd. The Chancellor's intention is to catch certain forms of evasion. I think that big lump sum payments to some official or director of a company at the time he retires ought to be taxed. Such payments should be caught and dealt with. But this Clause catches a quite unknown number of people, and there is no reason why they should be caught. If the Chancellor insists on this, it will be quite unfair not to bring in the Civil Service and local government; it will be unfair not to bring in the Lord Chancellor and all the other dignitaries who get pensions. We know that could be shown to be quite absurd. It is also absurd in regard to these small sums. I am sure that the Chancellor of the Exchequer has received evidence from serious people connected with business that this will upset their businesses, and will put upon their clerical staffs an immense amount of extra work. I do not know exactly what part of the Inland Revenue Department will be dealing with this matter, but we know what the conditions are like in certain parts of that service. Every scheme will have to be brought to them to be approved, and there will be a mounting up of work which, I am sure, will not be worth while.
1008 From all the questions I was going to ask the Government I will put just one. It is highly important that employees of British companies who do their service abroad should not be brought in under this Clause. When a man goes abroad, say to Venezuela or to some other place where the climate is not very good, it is customary to give him an undertaking that when he retires after service with some British company, and comes back to the United Kingdom, he will have a lump sum and a pension, and will be able to make a home in England when he comes back. Many men and their families would not go abroad if they did not know that was waiting for them when they came back. There is nothing that we can see in this Clause which enables the employee who is not resident in the United Kingdom to escape tax. I am sure it is the Government's intention not to bring in those people, but I ask that question because, particularly interested as we all are in the development of oils and minerals in foreign countries and in the British Empire, if the Government do not deal with this matter, they will be injuring our prospects very much. I hope that on that point we can get an assurance tonight.
The main thing I want to put to the Chancellor of the Exchequer is that these Clauses are all right in intention, but their effect is really unfair, and we should like to see them most carefully redrafted, and, if time permits, evidence taken from those people who are really interested in, and understand, these pension schemes, and who will co-operate in catching the people who ought to be caught and see that those who are perfectly innocent and honest are not penalised under the same legislation.
§ Mr. CallaghanThere is a great deal of what was said by the right hon. and gallant Member for Gainsborough (Captain Crookshank) and the hon. Member for Chippenham (Mr. Eccles) with which I would agree. I am not sure that we have not to some extent brought this upon ourselves. We said that we were going to subject these Clauses, when produced, to very critical examination in order to make certain. I imagine that the critical examination should be confined to what is proper and reasonable. These Clauses have been drawn in such a way that they really do make great confusion of a very 1009 complicated subject. One of the difficulties is that just as there is, under the Income Tax law, no definition of what is income, so there is no definition of what constitutes superannuation, and in consequence we are faced with this hotchpotch of Clauses which are designed to deal with a very real evil, but which catch or might catch, quite simple, homely people in their ambit.
To give a simple example, I would hazard the view that it is not clear from this Clause as drawn whether the clerk who is given three months' salary in lieu of notice is liable to tax in respect of that payment. It is quite possible to construe the Clause so that he would be so liable, though it is the long-established practice that he is not. There is quite another reason, apart from the pension, which does make something like this necessary, and that is the effect of two decisions in two cases, one in 1932 and the other in 1941, which have had the effect of making the capital sum paid for these purposes taxable neither in hands of the donor nor in the hands of the recipient, and it is clearly desirable to draft some legislation to catch cases of that sort. But we are going wider than that.
I fear that the complications of trying to administer this Clause will be exceedingly difficult. The hon. Member for Chippenham stated that he had 24 valid questions to ask. What I would like to say is that I counted 23 different types of cases, but then I found that it was time for tea, so I left it; but I have no doubt that there are many more, and I hope the Chancellor will say that he will reconsider this Clause to see if anything can be done. What is happening here is the same thing as is happening elsewhere in the field of Income Tax. It is becoming so complicated that we are suffering from a degeneration—a fatty degeneration—and Income Tax is now beginning to suffer that fate which overtook the Window Tax, and various other taxes, and we are having to use this extremely intricate machinery to catch a fairly small form of evasion because of the complications into which modern life is getting us. There is the question of double taxation. As I understand it, the Chancellor said that the case for doing this varies from the tax on annuities. He did not, I think, carry it far enough. It is also true of sums saved voluntarily in the form of life in- 1010 surance. If one contracts a policy which is due to mature in thirty years' time, and which one then invests, one is liable to taxation on the income which accrues. It is a liability for anybody who saves money and then puts that money into an investment from which income is drawn.
§ 10.45 p.m.
§ Sir Hugh Lucas-Tooth (Hendon, South)May I interrupt the hon. Member? I think that it does not apply with so much weight to the person drawing an income from an investment as to the annuitant, whose income is being used up.
Mr. CallghanI agree, and that is a strong case for relieving the annuitant. It is a well-tried practice that the man who saves money and then converts his savings into a capital sum is taxed on it. He pays tax in the course of saving his money, and he pays tax later on when the money provides an income; but I do not think there is a more onerous burden of double taxation imposed on any of these people than on the person who voluntarily indulges in life insurance. There is one type of case in which I think it operates in a particularly hard way. Let us think of the company which makes an agreement with a manager and undertakes to pay a pension after fifteen years. This man is to be assessed on the amount paid for him year by year. Supposing the firm becomes insolvent after ten years. The man has, in effect, paid tax on the proportion they have put away on his behalf for ten years. There is no provision in this Clause for repaying him for something which he has never had and something which he is never going to get. That seems to be an obvious deficiency that ought to be put right, and there are many others which I could quote. Sufficient has been said to show that the whole of the Committee is agreed that there is a case here to be met, and that we do want legislation of this sort. This looks like blossoming into a first-class "racket". I am not sure whether it is Parliamentary or not for me to use such an expression. On the other hand, these Clauses as drawn cover both the just and the unjust, and will cause a lot of inconvenience to the just and to the Inland Revenue Department, and I hope my right hon. Friend, whose drafting I am sure it is not, will reconsider the matter and will let us have fresh Clauses on the Report stage.
§ Colonel Crosthwaite-EyreThe hon. Member for South Cardiff (Mr. Callaghan) made his final point that these Clauses covered the just and the unjust, and his argument was, in brief, that for this reason of possible injustice these Clauses should be reviewed. With this I agree. I do think the Chancellor of the Exchequer, or whoever is going to answer the Debate, should as his first argument, since his advisers have through him made the case, tell the Committee what is the extent of the evasions these Clauses are going to cover. We on this side of the Committee so far have had no indication whatsoever whether this loophole is large or whether it is small. We have no idea whether these Clauses, which are penal in their nature, are intended to remedy some grave defect in the social structure of taxation, or whether they are just some piece of Socialist legislation designed to appeal to hon. Members on the Government Benches.
In so far as it may be the former, we are more than ready to support the Chancellor, but we do feel that we should have some information as to the extent he thinks this is a grave matter. He says, and I think I quote him rightly, that there are a number of Surtax paws evading tax by obtaining benefits, often in retirement, and not being taxed. He said, if I remember rightly, earlier and within the last half-hour, that that was the advice of those responsible for this legislation. I think he ought to come out and tell the Committee the total sum involved. Only then can this Committee have any idea of the gravity of the issue. We have been dealing with this matter purely theoretically as to whether this is a grave matter or not. If it is grave, we on this side will be more than ready to co-operate in stopping it, and if it is not, it is then merely another measure propounded, not for the benefit of the body politic, but merely to satisfy the class hatred of hon. Members opposite. Until we know which is the issue, it is impossible for the Committee to judge it. This is something which the advisers of the Government have stated is used by unscrupulous people to the disadvantage of the State.—[interruption.] We on this side of the Committee do not qualify for a first-class return ticket to Moscow.
1012 If these Clauses are designed to stop a loophole, why is it that they are designed so that they prohibit any ex gratia payment to a servant of a company who, through misadventure, may not be able to complete his term of office? If a man, say, the secretary of a company, falls ill, this Clause prohibits him from being pensioned off; because that would merely result in the back payment of tax on an assessment of six years, plus demands on whatever he may receive in future. This would render the recipient insolvent. Why has the Chancellor of the Exchequer drafted that Clause so that any payment made to a man dispossessed of his job shall be taxed? Supposing the Minister of Fuel and Power takes over an electricity company and dispenses with a director. That director is entitled to certain payments. It has nothing to do with him that he has been sacked. But that individual will be taxed on what he will receive for loss of compensation under this Bill. Therefore, he will not only lose his job, but he will be taxed in a penal manner, which will put him in such a position that he will have to pay to the Chancellor of the Exchequer more than he can possibly receive from the Ministry of Fuel and Power as compensation. That seems to me so illogical that I cannot believe that even the Chancellor of the Exchequer is willing to defend it.
I would put this further point. He has made it a condition that all directors and all employees are to be considered under this scheme. But, surely, he knows that that is an impossible requirement, that in no firm is it possible to compare all directors and all employees. One has to take a reasonably comparative view between directors as a class and employees as a class. To try and set down as a standard that all employees and all directors shall be taken in a group is impossible, and to put that down as one of the conditions which he demands under Clause 14 is merely going to mean that no scheme whatever can come within the terms of the Finance Bill.
He has further said that the Income Tax Commissioners may withdraw their approval, but at no stage has he made any way in which people can appeal against their decisions. One of the things I believe is that the strength of the Treasury lies in the elasticity of the Finance Acts. I have on various occa- 1013 sions had the necessity of appealing to the Treasury. The one thing I have always found is that in the Finance Acts they have always a margin in which they can make allowance for common sense. These Clauses leave no such allowance whatever for common sense. They make it a matter of fact, a matter in which every word of the Clauses is bound to be rigidly adhered to. I would also like to ask the Chancellor of the Echequer whether in these Clauses he could not permit some kind of an appeal; could not he make it possible for anyone who disagrees with the Income Tax Commissioners in a direction to have an appeal to special Commissioners? I would like anyone to have the right within 30 days, or whatever period it might be, to appeal.
11.0 p.m.
I say to the Chancellor of the Exchequer, that no matter how he drafts this Clause, he can never hope, in justice, to make a watertight definition. The more he strives to make it watertight, the more difficult he is going to make it for an honest employer to carry out his duties towards his employee. I suggest to him that if he wishes to fulfil the intention of what he is trying to do, he will make it far less watertight. He will give far more discretion to the Commissioners of Income Tax and far more discretion of appeal to the Special Commissioners. He will do what the Treasury always strive to do— to make all regulations of this kind such that whilst the evil cannot escape, anyone with an honest case can be certain of getting a just decision. If I may say so, I have taken part—this is personal —in a recent case with the Treasury. It was a permissive case in which the Treasury could make directions or not as they liked. The whole case depended on whether the Treasury in their discretion made an order or not. That, so far as I was concerned, resulted in an equitable decision.
I suggest to the Committee that this penal Clause, if passed in its present form, gives the Treasury no discretion, but forces the Treasury to make penal legislation designed to stop the rabbit-hole when they are trying to catch the badger. That will not work. If they will frame this Clause again to give some discretion to the Treasury, and to allow appeal, and to make permissive directions and, above all, to encourage industry to make provi- 1014 sion for those people who fall by the roadside, and for whom they wish to provide, then indeed not only will they have stopped the abuse to which they refer, but they will have done something to aid industry as a whole. As these Clauses stand, they are impossible. We are hoping they may revise them, because both sides of the Committee are equally keen to stop abuse and yet maintain the right of industry to provide for the individual.
§ The Solicitor-General (Sir Frank Soskice)On all sides I believe we are agreed on the necessity of some legislation. The right hon. and gallant Gentleman the Member for Gainsborough (Captain Crookshank) indicated from his own experience that it would not always be in the public interest to state exactly what are dimensions of the evil against which it is desired to legislate. If I may adopt what he says, I will content myself by saying simply that there is an evil and it certainly does require some action. I believe that on both sides we are agreed about that.
The question the Committee desired to debate is whether we have really gone about it in the right way and whether we have cast our net too wide. My right hon. Friend has given an assurance, and I think it may be of assistance to the Committee in considering what further course is to be taken between now and Report, if I indicate the broad outlines, the sort of lines on which we have endeavoured to tackle this problem. May I, therefore, state the general law of the position as I see it? Supposing there were no excepted approved superannuation schemes and funds under the 1921 and 1922 Acts. I shall say a little more about them in a moment. But leaving them out of account, and considering what would be the law apart from that, I think it would be this.
Suppose we have an employer and an employee, and that the employer makes a contribution to a fund, or an insurance company, or to any other similar institution, with a view to procuring what we have called, in general terms, a retirement benefit for his employee; and suppose that the employee also makes an equivalent, proportionate contribution towards the fund himself: the employer's contribution would be allowable for a reduction, being regarded as a trade ex- 1015 pense. The employee's contribution would be in this position: if the employee, as a result of the joint contributions, obtained an absolute right to receive and enjoy a retirement benefit in whatever form, it may be that the employer's contribution would form part of the remuneration that the employee received, that is to say, what the employer in fact contributed on behalf of the employee would be regarded as part of the employee's remuneration; and the result of that would be that it would be taxed as all the rest of his remuneration. In other words, as the law stands, disregarding excepted approved superannuation schemes, the employee would have to pay tax upon the employer's contribution. That is the position from which we start.
Starting from that general position, one finds that the law has excepted from that principle certain schemes of funds. First, there is Section 32 of the Finance Act, 1921, and that excepts approved superannuation funds; and superannuation funds which come within the scope of that Section of that Act work out in this way. The employee, in that particular case, does not have to pay tax upon the contribution made on his behalf. That is what happens with regard to those particular funds. Funds which are approved for the purpose of the 1921 Act, for the purpose of that Section, are funds with regard to which, speaking in general terms, it can be said that their main object is to provide a real pension—not a lump sum, but a pension. They may provide a subsidiary lump sum, but their primary object must be to provide a pension. When they do not do that, they will not be approved under Section 32 of the 1921 Act. But if they are approved, as I have said, the employer and the employees are allowed relief from tax in respect of their contributions.
Then there is Section 31 of the Finance Act, 1922, which does very much the same thing with regard to statutory superannuation schemes. If hon. Members will conceive in a sort of group the excepted approved schemes and funds in these cases, relief is given, amongst other forms of relief, in respect of the contributions of the employer and the employee.
§ Major HaughtonAm I not right in saying that the Commissioners have the 1016 absolute right within their discretion to turn down the schemes that the hon. and learned Gentleman is discussing?
§ The Solicitor-GeneralCertainly, under Section 32 of the 1921 Act the Commissioners have a discretion as to what schemes they will approve; and that, in point of fact, is what we have reintroduced in another form in the Clauses we are discussing. We have got that machinery. We have tried to introduce that machinery.
§ Colonel Crosthwaite-EyreThe Solicitor-General says the Government are reintroducing the machinery. How far retrospectively can that machinery be introduced? If the Commissioners make an order, how far retrospectively can that order be made?
§ The Solicitor-GeneralI will come to that point later. The position with which one starts is by taking Clause 14. What does Clause 14 do? It is designed to achieve a limited object, to prevent an abuse of this kind. Supposing there is an employee who has not got an absolute right to retirement benefits, and supposing that right is contingent. Supposing he does not obtain an indefensible claim to retirement payment which is made to some third party, he does not have to pay a tax on the employer's contributions.
I hope I have made that clear, because that is crucial to the understanding of Clause 14. If a man obtains an indefensible right to the retirement benefits, he has to pay tax on his employer's contribution. I am not talking now about approved schemes. If he obtains only a contingent right, he does not have to pay tax on the employer's contribution. Therefore, the first abuse which we want to come to is the abuse which takes advantage of that circumstance, because it is not difficult to conceive a scheme in which the employee does not have to pay tax on the employer's contribution. It is simple to arrange and formulate a scheme in which the employee's right to the retirement benefit is only a contingent right. I can assure hon. Members that that device has been adopted and is being adopted. Therefore, we want to stop it.
How do we seek to stop it? In the first place, if hon. Members will look at Clause 14, the first thing we say with regard to any statutory pension scheme— 1017 that is to say, a scheme within Section 31 of the Finance Act, 1922—is that this Clause does not apply. May I compendiously refer to that as an approved scheme? Under Clause 14, there is no obligation at all with regard to an approved scheme, but the Clause goes on to say that it shall not have an obligation with regard to a great many more schemes, and to any scheme which the Commissioners approve. Hon. Members will see that under Subsection (2, c) any scheme which the Commissioners approve will also be taken out of the scope of Clause 14. That is Subsection (2, d) which excepts certain existing schemes, which thus come out of the ambit of Clause 14. By so doing we effect the object which we have in mind.
Therefore, we take out everything which can be said to be a genuine superannuation fund or scheme. When I use the term "genuine," I want to use a non-controversial term. What I mean to infer is that any real superannuation fund —that is, a fund which is really designed to provide pensions—is taken out of the ambit of Clause 14 altogether. It is either a statutory one or it is an approved one, or one which the Commissioners are given the power, under this Clause, to approve. They can write it out of the picture altogether. So we are left only with those schemes with regard to which it can be stated that, for one reason or another, they have some deleterious characteristic in them whereby they cannot be approved. They are not really genuine pension schemes. It is only with regard to those that Clause 14 operates. With regard to them it says that we must not rely upon the device to make a claim to retirement benefit a contingent claim whether that device has been adopted or not. The employee has to pay tax on the employers contribution to the fund or the insurance company, whichever it may be. That is all Clause 14 does.
May I turn to Clause 15 and review it, and Clauses 16 and 17, in that same way? Clause 15 deals with schemes which can be made to be approved schemes, or approvable schemes, in that same way as Clause 14 does; so we are left only with those schemes which have something objectionable about them. With regard to them, Clause 15 says that position must be treated as if an employee has received a notional contribution, as 1018 if an employer has made a contribution on his behalf, so that he has to be charged tax on the basis that he is receiving an advantage on which his employer has made a contribution, very much in the same position as the employee or director contemplated in Clause 14. Clause 16 deals with a particular type of director, that part-time director or controlling director, to use a general description, and it says, in regard to that type of director, that he is to be treated, in effect, as if he were not an employee of the company, which he really is not. He is more or less in a position of a proprietor or partner. He is treated not as an employee, but as being in the position of an ordinary citizen making an investment out of his own money, and, therefore, he is treated, when given some form of gratuity or any other payment, as if he has received an emolument, and, therefore, he pays tax on it during that year. A private individual who buys an annuity of £1,000 will have to pay tax on £1,000 when he earns it, and when he takes it out of his bank he will have to pay tax on the annuity. Here, again, the part-time director is to be treated as if he were an ordinary citizen buying an annuity.
§ 11.15 p.m.
§ Colonel Crosthwaite-EyreThe hon. and learned Gentleman said part-time or controlling director, which I presume refers to the definition in Clause 18. In view of modern industrial organisation, how can he say a director is part-time if he holds only five per cent. of any company?
§ The Solicitor-GeneralI am endeavouring to give the general principles on which we base this Clause. We try to draw a distinction between the two. Clause 17 gathers up those cases which have not been brought into the three earlier Clauses. This Clause deals with directors who are not part-time or controlling directors, but again are in the position of persons within Clause 15. They are treated as if, during the previous six years, a notional payment had been made on their behalf to buy an annuity. The next clause is simply a definitions Clause. That is the general framework which we have endeavoured to put in these Clauses. It is not easy to understand, but I have done my best to explain it, so that hon. Members can 1019 consider the Clauses later on in the course of the Debate, or between now and the Report stage.
§ Major HaughtonI think we are debating this matter in a helpful atmosphere. In the first place, I think it most helpful that we are given enough latitude to debate these Clauses together. In the second place, it is most helpful that the Chancellor of the Exchequer said he would reconsider this matter after having heard the speeches made from different parts of the Committee.
The hon. Member for South Cardiff (Mr. Callaghan), in his very pertinent remarks, said that we are dealing with a very complex subject. We are dealing really with two very simple main issues. The two main things at which the Revenue are aiming under this Clause are lump-sum payments and annuities purchased by companies. These are two perfectly simple things. There is nothing wrong in them. There could be wrong in lump-sum payments, if there was any evasion, but when we come to annuities it is a question of the complexity of the law. It is a question of the "out-of-dateness"—if that is grammatical—of the law concerning annuities. There is not a lawyer in the Committee at present who would not agree with me that the lay, concerning these things is very tricky, and that the Clauses as drafted in this Bill are intended to keep within the framework of a very antiquated and very tricky law, whereas we know that in other countries, such as Canada and South Africa, these things have been subjected to commissions to straighten them out, so that the law concerning annuities and Income Tax matters shall be easy, simple and more readily understood. There is no question at all that these Clauses are striving to keep within a difficult law. The learned Solicitor-General quoted Clause 15 and he said that Clause 15 is entirely reasonable. As a lawyer, of course, he was striving to keep within it.
At this late hour, I do not want to weary the Committee with examples. The hon. Member for South Cardiff said he had worked out 23 examples before tea, and then he got weary. I got weary when I worked out three, but, if I may show what I regard as the absurdity of Clause 15, I will quote just one example. This is an example I worked out in connection 1020 with Clause 15. Suppose that a company agrees to pay its managing director, instead of a salary of £5,000 a year, until he retires, £4,000 a year until he retires, and £2,000 a year afterwards. The managing director will pay tax at full rates on all the money received under this agreement.
There can be no question whatever of evading tax, and it is difficult to see what on earth it can have to do with the Revenue authorities if the company chooses to pay him in this fashion. Under Clause 15, however, in future, the managing director would have to pay tax until he retired not only on his income of £4,000 a year, but, in addition, on the equivalent of the premium he would have had to pay to an insurance company to provide him with the £2,000 which he will receive from the company as fully taxable income after he retires. That is all I have to say at this stage. The Chancellor of the Exchequer has been good enough to say he will reconsider these matters. I have no doubt he will be good enough to consider the cases we have formulated. I would say, before I sit down, that I think it is more reasonable to frame a law within which reasonable taxation can be applied than to formulate Clauses in the Finance Bill in order to keep within the bounds of an antiquated and disjointed law.
§ Mr. Donovan (Leicester, East)If the Government are going to re-consider these Clauses, may I put to them a point which I think merits consideration. It is a development of the point which was put, in the first place, by the hon. Member for Chippenham (Mr. Eccles) in relation to foreign employees of British concerns. In order to put my point, I must keep away, as far as possible, from the language of these Clauses. I will, therefore, put it in the form of a simple illustration. A British company is carrying on business in India and in various other parts of the world. The business is controlled from this country. It is therefore resident in this country, and pays tax on the whole of its profits, wherever they are made. It, therefore, pays on its Indian profits. Due to developments in India, the company decides to close its Indian branch and to do no more business in that country. It has some thousands of Indian natives in its employment in India. In order to preserve its good name, the company decides that it cannot dismiss those employees 1021 without some reward, and that it must give them something in the nature of compensation for the loss of their employment. It does so.
What is to happen now is that under Clause 17, using broad language, the amount which each employee gets is to be divided into six, and then, to use the language of the Clause, that amount shall be deemed for all the purposes of the Income Tax Acts to be income of his for each of these six years, and assessable to tax under Schedule E. That will not worry the Indian natives, or imperil the settlement, because Indians cannot be assessed for Income Tax; but since 1944, the company can, because it is the company's duty under P.A.Y.E. regulations to deduct the tax. If these words are to be given their literal meaning, we get the anomaly that the native is not liable for tax on earning a wage, but he is liable for tax on this particular sum. I know that this result is not intended. These words are too wide in their drafting. What is really meant is that, provided the employee has an office or employment with that British company, under Schedule E that particular sum shall be deemed to be income from that source. I merely ask whether the Government will consider this point and introduce some limiting words on the Report stage.
§ Mr. Oliver Poole (Oswestry)It happens that I spend a considerable part of every day dealing with insurance matters of this sort. Let me say straight away that I would hesitate, because I know the complexity of these matters, to express any expert knowledge of them. I was very interested in the remarks of the hon. Member for South Cardiff (Mr. Callaghan), and I think that if he and I, with our expert knowledge of Inland Revenue matters got together, we could produce a number of anomalies which would surprise not only ourselves, but the right hon. Gentleman. I do not wish to go over the question of the necessity for reconsidering these Clauses; nor, in fact, to add to the instances of complexities. There are, indeed, very great complexities. What I am concerned about at the moment is the assurance which the right hon. Gentleman is going to give at the end of our discussion. I rather gather from the remarks he made, and from the remark, of the Solicitor-General—whom I would like to congratulate on his explanation of 1022 these complicated Clauses, for though they are extremely difficult, I was able to follow him quite easily—that the Chancellor of the Exchequer is going to say, "I will reconsider the Clause and do something between now and the Report stage." I think it is unlikely that he could, in fact, in that short time redraft these Clauses in such a way as to meet the problem, and I suggest that, for two reasons, he will have difficulty in doing so.
The first is that there has been since the war an enormous increase in the demand for this type of insurance, and because of that, naturally, all the insurance companies are thinking out new ways of meeting the demand, not to evade taxation, but to meet the general demand. It would be a very great pity if at this stage ill-devised Clauses were put into this Finance Bill which might do irredeemable harm to the general practice of insurance at this time. It is a most complicated matter. Many companies have schemes they are bringing out—a vast variety of schemes—and I do not believe that it can be done overnight. The second point which I want to put to the Chancellor for his consideration is very difficult at the moment. I admit that as taxation has risen, more and more loopholes have been found. So long as taxation is kept at its present high rate, it is absolutely inevitable that people will continue to look for ways round it. We might consider it honest or dishonest, however we feel according to the circumstances, but do not let us waste time discussing that. Let us admit that it is so.
What is, in fact, happening is that certain regulations and laws have been passed and new methods have been found, leaks have been noticed, more legislation and more regulations have been brought in and passed, and a complicated device has been built up. These Clauses, which are extremely complicated, add further complexities, and I suggest to the Chancellor that what is really needed is that the whole thing should be gone into most carefully. I suggest that for two reasons. The first is the complexity of the position —I know of my own personal experience how complicated it is—and the second is the position in the insurance world at this moment, when there is a great demand for this type of insurance. Even if it means bringing in something on the Report 1023 stage, I ask the Chancellor to undertake that in the near future there will be a really full inquiry into this very important and complicated matter.
§ 11.30 p.m.
§ Mr. Collins (Taunton)I want to put a small point on Clause 14. I think I can illustrate my point best by quoting an actual example I have in mind. I have knowledge of a superannuation scheme which has been approved by the Commissioners of Inland Revenue. It has the usual features of pension, time, age and so on, and under this scheme the firm pays some 80 per cent. of the contributions and the employees 20 per cent But it has one unusual feature in that if an employee leaves the firm—perhaps a girl gets married—he or she has the option, of continuing at his or her own cost, or of commuting. It may take the form of a dowry. The person can still draw it out, the sum varying according to the number of years he or she has been in the superannuation scheme. I may be wrong, but according to my reading of the Clause the Commissioners of Inland Revenue shall not be able in future to approve schemes where payments are commuted. In other words, it would appear that such schemes—schemes which I have emphasised have already been approved by the Commissioners of Inland Revenue—would contain what the Solicitor-General called "deleterious characteristics." It would appear to me that such characteristics would not normally be undesirable. We want the young people to go into these schemes, but it might well be that they would be "put off" if they were told they could not commute in this way. It might be subject to abuse, but I do not think it would be deleterious in the sense in which I have put it, and I hope, therefore, that the Chancellor will look at cases of this sort.
§ Sir P. BennettI should like to follow the remarks which we have just heard. The hon. Member for Taunton (Mr. Collins) is correct in the views he has expressed. For the last 25 years or more, I have tried to wrestle with these pensions schemes for employees, and I think the question of the girls is a very difficult one. We could not get our girls to join a pension scheme if we told them that the only hope they had of ever getting any- 1024 thing was that they should work until they were 60 or 65 years of age and then have a pension. Of course, many of them do not expect to stay in the company's employment for that period. They expect to marry, and when they leave to get married they expect a small marriage dowry to take with them.
I rose particularly to ask the Chancellor, in considering this matter, to give a little thought to those who are trying to run these schemes; the people who are worrying about, and working on, these schemes. We have been re-organising our scheme. Values of money have altered, and there are many other facts which have to be borne in mind, but, with all one does, one can always find the hard case which needs special payments. One cannot get out of that, and what with men remarrying, and young widows and old widows, the thing is full of headaches. It is one of the most difficult problems. We try to cover everything we can, but we always find that there are cases wanting special assistance, or ex gratia payments, or something of that sort. We who run these schemes are not doing it for what we can get out of them, although we do get the good will and loyalty and support of the workers. I am sure the Chancellor would not wish that that should be taken away, and I ask him please not to make us say, "We wish we lived in the days of our grandfathers when there was no need to worry about these things."
§ Mr. DaltonI think perhaps it would be helpful if I gave some explanations, although all I wish to say at this stage of the Debate, without making technical observations, is that we have had an excellent series of contributions from various parts of the Committee. I will not name any one particular contribution more than another, because hon. Members have shown a very great knowledge of this very difficult question. I agree with the hon. Member for Edgbaston (Sir P. Bennett) that this can be all headaches, and I agree with the hon. Member for Oswestry (Mr. Poole) who shows much knowledge of this matter, and who did not think we should be able to arrive very quickly at a perfect and final solution. I am sure he is right. But between now and the Report stage, in the light of what has been said, those who advise me in conjunction with members of that Committee who have 1025 contributions to make—we can arrange that machinery of consultation very easily —can assist, at any rate, in preparing what I hope will be a distinct improvement both from the point of view of intelligibility, and perhaps even prosaic elegance, of those Clauses as they now stand. When dealing with these gaps in the law through which evasion operates, it may well be possible to make a fairly good job this year; but none the less a good deal will be thrown forward on future years, and for the Clauses next year to carry the process a little further.
I agree with the hon. Member for Oswestry that we shall not get finality, but there is general agreement that there is an abuse to be dealt with. The extent to which it may grow and extend is a matter of speculation, but if we do not stop it up now it may get worse. I will most happily discuss it with those who have spoken, between now and the Report stage, and I am very anxious that any hon. Member making useful contributions tonight should co-operate in giving us this year improved Clauses aiming at this object we have in common. I do not know whether I can usefully say anything more at the moment, but I repeat the agreement we reached at the beginning of these discussions. I will not move any of my Amendments on the Order Paper, but will reserve my thoughts for later on, and if we could now get the Clauses subject to these arrangements, we would put down amended Clauses for the Report stage. We shall see that at that time they are not unduly galloped through and that a reasonable time is allowed for examining them.
§ Mr. StanleyI think I can say, on behalf of my hon. Friends, that we are very grateful to the Chancellor of the Exchequer for the suggestion he make. He was quite right in saying that there is nothing fundamentally controversial about the Clauses. All of us want flagrant evasions to be stopped and no sound scheme to be interfered with, or the administration clogged. The fact is that in the pursuit of the evader those responsible for the drafting of the Clauses have overlooked to some extent the damage they do to the innocent, and it is the desire on all sides to see that put right.
The Chancellor of the Exchequer has offered, between now and the Report 1026 stage, consultations with Members on all sides who are interested, and no doubt with bodies and experts outside who can bring special knowledge and experience to hear and advise some common form. I had intended to make a point in support of my hon. Friend the Member for Oswestry (Mr. Poole), who I think made a most valuable contribution, but the Chancellor of the Exchequer has already agreed with the hon. Gentleman and there is no need, therefore, for me to press the point. As I understand it, our object between now and the Report stage—a comparatively short period—is not to try to restate the whole law upon these matters in such a form that it will be able to stand unchanged, for years. All of us realise that in a matter of such complexity, we could not hope in the few weeks available to attain that object. What I understand we shall set out to do is to try to find, between now and the Report stage, some scheme which will stop the flagrant abuses which are now taking place, but will not interfere with the great mass of schemes—and the large quantities of those exceptions which have to be catered for under any scheme—under the present system. Having done that, having tried to devise an interim shield for the Chancellor of the Exchequer, thereafter consideration shall be given to the wider aspects of the question which have been raised.
I should like to suggest to the Chancellor for his consideration that when we come to that wider consideration, it might be the moment for setting up some committee to which all who have a special knowledge or experience can go. In that way it may be found easier to see all the pitfalls from the start, and to devise a final and complete scheme. I do not press that now; I only throw out the suggestion. We on this side will co-operate most wholeheartedly in the Chancellor's efforts between now and Report, and I certainly shall advise my hon. Friends —and I am sure they will agree—not to press any of their detailed Amendments —which may be found during our discussions to be wholly relevant—at this stage.
§ 11.45 p.m.
§ Mr. Gallacher (Fife, West)I have listened to a lot of nonsense tonight, and I would like to say one or two words. I would like to speak from a class point of view, even though it does annoy the 1027 hon. and gallant Member for New Forest (Colonel Crosthwaite-Eyre), who said something about my travelling to Moscow. I would be out of Order if I told him where he should go. The hon. and gallant Member was all for protecting the just. The right hon. Gentleman the Member for West Bristol (Mr. Stanley) is all for saving the innocent.
§ Mr. StanleyWe were not either of us referring to the hon. Member.
§ Mr. GallacherI quite understand that. I quite understand what my category is in the eyes of hon. Members on the other side. Others of them seemed to desire to express their generosity towards the workers in the sense that they want to give them all kinds of gratuities and annuities and lump sums. The right hon. and gallant Member for Gainsborough (Captain Crookshank) was concerned about the man who had given great service in the war and had got a lump sum or something of that sort; he was concerned that that should not be taxed. With all their generosity, and their desire for justice, and their anxiety to protect the innocent, the marvel to me is how the Labour Party had to come into existence. It is obvious that there is no real meaning at the back of these expressions. Their only desire is to find, if they can, some way of protecting still those who are getting lump sums and who do not deserve them. An hon. Member referred to a man getting £4,000 instead of £5,000 a year, with £2,000 when he retires, who will have to pay taxation on the insurance premium. The simple answer is to let him take his £5,000 a year, and pay his Income Tax, and do without the £2,000 when he retires—save up for when he retires. That is the answer the workers have always had to give. To listen to Members on the other side, one would think that the workers of this country—or the widows of the workers of this country who were killed—
§ Mr. GallacherI beg pardon, Major Milner. The hon. Member for Chippenham (Mr. Eccles) gave us an instance of a widow of a man who had been killed and 1028 stated that she had been granted so much a year by his firm. But where are these wonderful firms that have given the workers such money?
§ Mr. GallacherI have had experience of that "all over the country". I will take a case in point. An hon. Member on this side has talked of native labour in India, which was given compensation when the business was closed down, by a firm in this country to keep up its reputation. Where in the name of God do you hear of anything like that? Can you show me a textile mill in Lancashire where, when 't was closed down, the workers were given compensation, to keep up the prestige of the firm? Can you show me a shipyard in this country which, when it was closed down, to keep up its prestige paid its workers compensation? It is just a lot of nonsense. I hope the Chancellor of the Exchequer, between now and the Report stage, is careful he does not leave any gaps which enable the artful dodgers to slip through. They will do him if they can.
§ Clause ordered to stand part of the Bill.
§ Clauses 15 to 17 agreed to.