§ Mr. Roy Jenkins
I beg to move, in page 56, line 37, at the end, to insert:with the substitution for the words three per cent. where they occur in section eight of the Finance (No. 2) Act, 1947, of the words six per cent.All the speeches which have been made and all the Amendments which have been moved by the Opposition have been designed to help the Chancellor of the Exchequer, but that is more manifest in the case of this Amendment than in the case of some others. The Amendment is designed to do two things, both of which should be extremely helpful to the Chancellor. It is designed, first, to enable him to get a small amount of extra revenue in certain circumstances and, second, to extend the general provisions of his financial policy to a field to which they might not otherwise extend.
We propose in the Amendment to relate the rate of interest paid on arrears of tax to the prevailing Bank rate. The idea of charging interest on arrears of tax was first brought into operation in the Finance (No. 2) Act, 1947, which arose out of the Autumn Budget of my right hon. Friend the Member for Bishop Auckland (Mr. Dalton). The rate of interest then proposed to be charged on arrears of tax was 3 per cent. The Clause as drafted proposes to continue to charge 3 per cent. on arrears of the Excess Profits Levy. We are proposing to raise that to 6 per cent.
We propose to do that for these reasons. Obviously, a very great change has come over the monetary climate since the autumn of 1947. It is not my purpose now to argue whether that change is a right change—some of us had very grave reservations about it—but it is nonetheless clear that a change has occurred. When the 1947 Budget was introduced we were perhaps not quite in the heyday of cheap money, but at any rate my right hon. Friend the Member for Bishop Auckland was still Chancellor of the Exchequer and we were pretty near the heyday. We had a Bank rate of 2 per cent., and it was, therefore, reasonable to introduce a rate of only 3 per cent. on tax arrears.
We have moved a long way since then. We have a Bank rate of 4 per cent. 994 There can be no doubt in the minds of any hon. Members who have listened to the Budget speech or the general economic speeches which the Chancellor has delivered since he took office that he regards as an absolutely essential feature of his financial policy the stiffening of credit rates. If there was something in the Budget which gave it any claim to be called an emergency Budget dealing with the balance of payments crisis it was the stiffening of the Bank rate.
Arguments were advanced by the Chancellor, and even more so by the Secretary of State for the Colonies in a speech which he made at the time, about the beneficial effects which would flow to the economy of the country by this stiffening of credit terms, an absolutely essential feature of the country's economic policy. While we cannot agree with the Chancellor, and still less with the Secretary of State for the Colonies, we feel that this credit policy is a wise policy, and while we certainly cannot agree that it is producing the results which hon. Gentlemen opposite claim, we feel that if it is the policy of the Government it ought to be applied consistently and that people who do not pay the tax which they ought to pay ought not to be granted a special exemption from its operation.
What is the position about arrears of tax? To a company arrears of tax are a loan from the Government during the period in which the tax is not paid; it is a loan which the company is able to use for its own business in a great many ways. Yet this Government which believes in dear money is saying that the rate of interest on these loans which it will make to taxpayers who are dilatory in meeting their dues should be charged only at 3 per cent., the old cheap money rate, whereas local authorities who borrow from the Public Works Loan Board and others who have to get money for various purposes have to pay a very much higher rate because of the policy which the Government itself has put forward. We say that if that is so, it is highly desirable that the policy of dear money should be extended to cover people who are very slow in paying their arrears.
I cannot believe that the Government will not accept this Amendment, because it is an Amendment manifestly designed 995 to help them in their purpose, which is to get more revenue from a source which no one will object, and to help them to carry out the central design of their economic policy. I am encouraged by the fact that it appears that the Financial Secretary is about to reply. That means that it is just possible that we may have some help from him on the first occasion, whereas if the Solicitor-General replies we know that we would have to wait at least until he made his fourth appearance at the Despatch Box before getting any glimpse of a concession. Judging by the anticipatory movements of the Financial Secretary, I think we can assume that he is going to reply, and I hope he will accept what I submit is a reasonable Amendment, and a most helpful Amendment from the point of view of hon. Members opposite.
§ Mr. Fletcher-Cooke
On a point of order. I am not experienced in these matters, but I understood it was not competent for a Private Member to move an Amendment which would increase the burden on the taxpayer. I gathered that that was a well-established constitutional principle, and I should like to know how it comes about that this Amendment is in order when undoubtedly it increases the burden on the taxpayer. It may be an impertinent question, but I should like to have your guidance, Mr. Bowles, for my future guidance.
§ Mr. Jenkins
I am sure it will be clear to the hon. Member, if he listened to my speech, that this Amendment does not increase the burden on the taxpayer but on the person who does not pay his tax.
§ Mr. Boyd-Carpenter
The purpose of this Amendment is to impose an additional burden on the dilatory taxpayer and to raise the rate of interest on E.P.L. arrears from 3 per cent. to 6 per cent. I ought to remind the Committee that 3 per cent. is the rate laid down at present under the Act of 1947 for Income Tax, Profits Tax. Surtax and old E.P.T. arrears. Therefore, the first consequence of paying 6 per cent., as is suggested in the Amendment, would be to introduce a disparity between the rate for the arrears 996 of other taxes and the rate for arrears on this Levy. That is a point of some importance.
The real essence of the matter is this. The hon. Member for Stechford (Mr. Roy Jenkins), in his very entertaining speech which he assured us was intended to be helpful—and I accept what he said—ignored one thing. He ignored that the 3 per cent. at present imposed is a net rate. It is not deductable for the purposes of the other taxes, and it is in substance, therefore, equivalent to a gross rate of 6 per cent. I do not think that the hon. Member fully appreciated that.
It equally falls as a matter of elementary mathematics, which I hope the Committee will forgive me for imposing on them, that the 6 per cent. net rate would be equivalent to a 12 per cent. gross rate. I have no sympathy with the persons who deliberately delay payment of taxes due. However, there must be a certain degree of reason in the penalties imposed, and a gross rate of 6 per cent. is a pretty substantial deterrent.
Perhaps I might carry the matter still further by saying that if the penalties imposed in this respect are wider they might come to an extortionate amount and it would be a very great incentive to avoid the payment by taking certain other steps. It would be very unwise to raise the percentage higher than at present. If we did I do not believe that we would increase the real stimulus to pay taxes. I believe, on the other hand, we would be introducing a penalty so out of line with what ordinary people think reasonable that we would be defeating the very ends we have in view. While fully appreciating the spirit in which this Amendment was moved, I am afraid that it does not seem proper to accept it.
§ Mr. Crosland
This is the most disappointing and surprising reply that we have got during today's discussions. I thought from the Financial Secretary's bearing before he got up that he was going to make some concession to our views, but this completely dogmatic refusal to recognise anything in our case has come as a great disappointment to hon. Members on both sides of the Committee, and a much greater disappointment to hon. Members opposite because it is not we but they who have this mystique about the Bank rate.
§ Mr. Crosland
The hon. Member for Oldham, East (Mr. Horobin) has entertained the Committee on a number of times during the course of this Finance Bill, but I never heard such eloquence from him as we heard during the Budget debate at 9.30 one night, when I was alarmed for his general mental stability, considering the rate at which he was going. The whole of his speech then, and it was extremely eloquent, finely phrased and held the attention of the House, though it was not without interruption, was a passionate advocacy of the influence of the rate of interest on people's behaviour.
On that occasion the hon. Member passionately advocated the use of this powerful financial weapon to deter people from doing the things which they wanted to do, and in particular from investing too much. It is true that during the whole of the Committee stage he had said exactly the opposite., the trouble being that we were deterring people too much from investing. The object of this Amendment is to do what the hon. Member advocated on that occasion. Does he want to deter people from paying their taxes? He has got this wonderful weapon, which is powerful and flexible, and by the use of it people who are unwilling to pay their taxes can be made to do so, but apparently the hon. Member wants to deter people from paying those taxes.
§ Mr. Horobin
Is the hon. Gentleman asking for a Bank rate of 12 per cent.? Surely that is too much of a good thing?
§ Mr. Crosland
It is not a question of being too much of a good thing. All we are asking is that the rate of interest on the arrears of taxes, which previously bore some relation to the Bank rate, should now bear some relation to the Bank rate in operation at present.
I should like to deal with one or two points which were mentioned by the Financial Secretary in refusing to accept this Amendment. He first of all dealt in his all too brief answer with the question of disparity between the rate of interest for arrears of this Levy and that on the arrears for Income Tax, Surtax, Profits Tax and the old E.P.T. It is perfectly true, as the hon. Member said, 998 that this Amendment will introduce a disparity, but on this side of the Committee we have only started our campaign to enable hon. Members opposite to bring their own economic policy into effect. Later we shall take steps to bring the rate of interest on other arrears into line with this.
In any event, even if there is a disparity, what follows? The Chancellor, when he defended the principle of the E.P.L. in one of our debates last week, went into a moral denunciation of rearmament profits. It was a denunciation with which Members in all parts of the Committee were extremely sympathetic. He made the case that in contrast to Income Tax and the Profits Tax this was a levy which was essentially a moral one. If that is so, it surely follows that there is a strong moral case for penalising those people who will not pay this levy more than the laggard in Income Tax or Profits Tax. I am not at all worried at the fact that there will be the disparity to which the Financial Secretary made reference for this particular reason.
The Financial Secretary also made reference to the fact that the rate of interest was net and if there is a gross rate we get about double the figure. For a large number of borrowers the rates of interest are gradually moving in such a direction that before long they will be effectively paying twice as much as a few years ago. Why should not this doubling apply to interest on tax arrears?
Consider the sort of people who will have large liability for the levy. We shall not be dealing with poor, impoverished citizens with no resources, but with powerful companies with plenty of financial resources. One cannot commiserate with them as though it were a matter of sympathy with people who were going to be plunged into difficulties by paying 6 per cent. net on their tax arrears. The burden on these companies will be nothing approaching the burdens on a great number of people up and down the country who will have to pay higher rates of interest. If we ask ourselves what the effect of the new monetary policy will be on different groups of people, and which group of people is most hard hit, we could never say it consisted of the companies liable to E.P.L. and who were somewhat behind with their payments.
999 I do not think that the arguments used by the Financial Secretary were convincing. Certainly they do not satisfy us on this side of the Committee. He has had a few minutes to think about the matter whilst I have been talking, so I appeal to him not to close his mind on this subject but to recognise that there is a serious element of injustice to be put right. There would be something slightly nauseating in putting up rates of interest for people who have to borrow money, while exempting other people who were behind in their E.P.L. payments. That is the case for this Amendment.
§ Mr. Callaghan
I was hoping for some further speech from the Financial Secretary. He was so ready to get in in the first place that I am surprised, after the powerful speech of my hon. Friend the Member for Gloucestershire, South (Mr. Crosland), that we are not to hear from him. It is clear that all he has done so far is to read the Treasury brief. In the Treasury are a good many civil servants who understand these matters very well, but they are not always fully in tune with the Government's economic policy. They cannot keep up with it as fast as the Minister of State for Economic Affairs does, for example.
It is clear also that on this matter the Treasury pundits do not understand what the Government are trying to do. The Government have told us that it is their intention that monetary rates should be stiffened in such a way that all unessential capital investment is cut out and that people should not do work unless it is vitally essential and they can afford to do it.
I want to direct a question to the Financial Secretary. Let us take the case of a company which has considerable Excess Profits Levy liability. It may have money in the bank waiting to pay the levy but it is short of ready cash for the moment for financing a particular project. Perhaps the company have got past the controls and want to build a new factory. What is to deter that company from doing a little arithmetic and saying, We have £100,000 owing on Excess Profits and we are intending to pay it, but if we hang on we shall only have to pay 3 per cent. arrears on the interest. If we go to the bank for financial accommodation we shall pay 5 or 6 per cent."?
§ Mr. Sydney Silverman (Nelson and Colne)
Does my hon. Friend remember that when the original interest was put on, the argument advanced in favour of so doing was precisely that which he is advancing now? It was that unless we had power to add interest to a post-dated payment of tax there was every inducement to large Income Tax payers to withhold payments about which there was no shadow of doubt because they could earn a substantial amount of interest during that period. It therefore paid them not to pay until later. If we do not pass the Amendment or something like it we shall really restore the status quo and be offering people interest for not paying their taxes.
§ 6.15 p.m.
§ Mr. Callaghan
I am very much obliged to my hon. Friend. I was producing, cautiously and in an interrogatory way, an argument, to see whether it would stand up to examination. My hon. Friend's recollection seems to be as good as my reasoning power. I think we are both right. Unless the Financial Secretary alters the rate of interest that has apparently stood in successive Finance Acts since 1947, he gives an incentive to large companies with considerable E.P.L. liability not to discharge that liability but to finance projects out of money that ought to be going into the Treasury.
My hon. Friends the Members for Gloucestershire, South and Stechford (Mr. Roy Jenkins) seem to retain some illusions about the Government. They seemed surprised that the Government should at the same time try to deter local authorities from building houses by higher rates of interest, and not want to deter companies from using money for financing profitable enterprises instead of using it to pay their Excess Profits Levy.
The Government are running true to form. They do not mind if large companies get away with their excess profits for some time by financing enterprises out of money that ought to be paid over to the Exchequer. If they do mind it, they had better accept the Amendment. The Government cannot resist the conclusion that they are prepared to allow these companies finance at a lower rate than the market rate of interest. [Interruption.] Does the hon. Member wish to interrupt me?
§ Mr. Horobin
The point is clear, and has already been made. We can deduct the normal interest charges, but this charge is not deductible. It is already and effectively a 6 per cent. rate, or 2 per cent. upon the tax rate. Nobody wants to encourage people not to pay taxes, but whatever can be done about it is already being done. The proposed 12 per cent. is so punitive that it will have all kinds of undesirable consequences.
As I have been dragged to my feet I might point out that the Government sometimes hold large sums of our money and do not pay. I can think of one claim well known to myself that has been outstanding since 1942, and I wish they would pay me 6 per cent. on it.
§ Mr. Callaghan
The hon. Gentleman had better address those remarks to the Financial Secretary and not to me. In 1942 there was a Coalition Government and a Conservative Chancellor of the Exchequer.
I think I have made the point clear, which is that it is obviously more worth while for a company to retain the levy and use it, rather than to borrow money from the bank at 5 per cent. [HON. MEMBERS: "No."] Even if that is wrong, which I do not accept merely because hon. Gentlemen opposite interrupt me, why is it that a rate of interest which stood at 3 per cent. in 1947 when the rate for borrowing was somewhere around that figure, should remain the rate today when the rate of borrowing has increased so much? [HON. MEMBERS: "Wrong again."] In that case no doubt we shall have a crushing reply from the Financial Secretary in due course.
Is it denied that the rates of interest have moved up over the last few years? I thought the burden of the Government case was that rates of interest bad moved up and that it costs more to borrow than it did. In that case it must be more worth while for companies to retain in their own hands money which they ought to be paying over in taxation and using those resources to finance their own enterprises.
I say in conclusion to the Government that they ought to accept this Amendment. If they do not, it will be seen that they are prepared to impose lighter penalties upon their friends than they are upon 1002 other organisations which have to borrow in the market. It will be seen quite clearly that they are ready for their friends to evade payment in order to line their own pockets. I really do not mind if the rate of interest goes up to 12 per cent. The hon. Gentleman ought not to mind either. These people ought to pay this rate of interest on these unpaid amounts. They are only being asked to pay tax on sums they have already had—
§ Mr. Callaghan
The hon. Gentleman may be speaking for himself; I do not think he is speaking for anybody else. We are asking that firms who have made excessive profits, who are due to pay the levy, should pay it on time. If they do not, there should be a substantial penalty for not doing so.
§ Mr. Callaghan
No, they should not profit by it. I see that the Financial Secretary, having been recumbent, has stirred into some activity. I hope he will not disappoint me and that we shall get some real reasons why he should not accept this Amendment. In the hope of doing so, I will now resume my seat.
§ Mr. Boyd-Carpenter
I am sorry that the hon. Member for Cardiff, South-East (Mr. Callaghan) introduced the element of there being any desire to shelter the friends of anybody from the payment of tax due. The hon. Gentleman knows perfectly well that in the imposition of this or any tax we all regard it as fundamental that the officers of the State must do their duty and enforce equal, full and as prompt payment as possible of this and of all taxes. The hon. Gentleman, from his own honourable experience at the Inland Revenue, knows that perfectly well.
The purely practical point with which we are concerned is whether there is any reality in the rather mediaeval approach of the hon. Gentleman, that we must step up the penalties because we fear an offence may be committed. Let me deal first with the suggestion that there was nothing to deter a company, which was due to pay the tax and had the money 1003 available, from simply retaining it. The hon. Gentleman knows that apart from interest rates there is the formidable Section by which, where tax is due, the Inland Revenue have the right to take the person concerned before the courts on a debt due to the Crown and, if the facts are as stated, they will no doubt get an order for the payment with, in addition, the costs of the Crown in the proceedings.
The hon. Gentleman knows that the Inland Revenue is a machine well experienced in these matters. Indeed, there have no doubt been occasions when certain members of the public wished that the Inland Revenue had not quite that efficiency in their own case.
§ Mr. Callaghan
As the hon. Gentleman has referred to my own administrative experience, let me say that it is my administrative experience that the most difficult thing in the world in the Inland Revenue Department is to get the Board of Inland Revenue to take proceedings against anybody. It is the most slow moving and cumbrous machine that I have ever come across. Every local inspector of taxes has had the dreadful experience of trying to get them to move more quickly against people who have been getting away with no payment.
§ Mr. Boyd-Carpenter
The experience of the hon. Gentleman must be a little out of date. Obviously, in a great administrative machine there is sometimes a case that an official thinks should be at the front of the queue whereas his seniors take the other view. May be the hon. Gentleman has had that experience. The point is that it is not merely the rate of interest, it is the fact that legal proceedings can be taken for the enforcement of these debts.
§ Mr. Mitchison
Am I not right in thinking that, if the action is taken, and a judgment debt is established, the rate of interest paid on the judgment debt is higher than is provided for here?
§ Mr. Boyd-Carpenter
I am advised in certain cases, but if any hon. Member wants to pursue that side issue, my hon. 1004 and learned Friend will deal with it. However, it does not affect the central issue.
I ask the Committee to consider a further point. I thought it was an out-of-date idea in this country that by increasing the penalty one automatically ensured better enforcement. That is a line of argument which, not unnaturally, induced the interruption of my hon. Friend the Member for Farnham (Mr. Nicholson). The practical point is this: we have here the equivalent of a rate of 6 per cent. That is a substantial amount. As my hon. Friend the Member for Oldham, East (Mr. Horobin) has pointed out, if one goes to the market and borrows at 4 per cent., that is deductible from tax. This is not. This is equivalent already to a rate of 6 per cent., and it is a substantial amount.
Let us follow it a little further. Suppose it were doubled, making it 12 per cent. as this Amendment suggests. It would give those liable to it a considerable incentive to take the step which enables them to stop the running of interest —entering an appeal. The costs of entering an appeal will probably deter them from doing it frivolously, but if we push the rate of interest to this level, we shall give them a big incentive to do that.
Therefore, I ask hon. Members to appreciate my arguments. We are at one in our desire and determination to use the machinery of the Inland Revenue to secure that this tax, as all other taxes, is punctually collected. However, we do not consider that to pass from a rate of interest already substantial to one so severely penal in its incidence, as is suggested, is the right way to tackle this.
That is the difference between us. I am quite sure that hon. Members appreciate there is not the slightest desire to do anything but to collect the Revenue as quickly as is physically possible. It is not perhaps a very great issue and the Committee has a good deal of other business before it this evening. I hope, therefore, the hon. Gentleman will understand when I say that we cannot, ad hoc and in this way, import what seems a wholly disproportionate rate of penalty into the administration of tax law. That is a serious matter.
We shall, of course, watch the collection of this tax, and if it seems to us that the tax is coming in badly and that an 1005 adjustment of the interest rates—probably not as great as this—would be of assistance in collecting it, we shall not hesitate to come to Parliament and seek powers so to do.
Our present view is that however well-intentioned this proposal may be, it would not help in the object that Members on both sides of the Committee desire; that on the contrary, by going beyond what ordinary people would regard as reasonable, it would introduce some difficulty into the working of the tax machinery. I am sorry if the hon. Member thought my first speech was too brief —that is not normally the criticism to which I am subjected in the Committee—and I hope I have redeemed that in the course of this speech; but we do not feel at this stage that the case is made out for so large an increase in this particular interest rate in respect of this particular tax.
As I have said, however, we shall watch the position. We are as anxious as are hon. Members to secure collection of the taxes, and if it seems to us that some adjustment of the rate of interest, which, it has, quite rightly, been pointed out, was fixed as long ago as 1947, is necessary, we shall not hesitate to come to Parliament; but almost certainly we would do so in respect of the whole wide body of taxes and not of this particular one.
§ Mr. S. Silverman
I think that the case was put forward admirably and completely, and I do not say that the hon. Gentleman has not offered a reasonable and considered argument on the other side. All that I rise for is to point out that his argument does not answer the case that was put forward, and is based on a fallacy.
The hon. Gentleman's argument assumed that he was being asked to increase the penalty, and he put forward an elaborate argument, which, I think, all of us would accept, to the effect that one does not reduce crime always by increasing penalties—nobody denies that. The whole point of the Amendment, however, was that we were not increasing penalties. On the contrary, the Government's financial policy, which is not being debated on the merits now, has been to raise the Bank rate, and to raise it considerably.
1006 Therefore, unless we do something of the nature that is contemplated by the Amendment, we are either reducing or abolishing the penalty altogether. Either we are giving the dilatory taxpayer an actual profit on his delay, or, if in some cases we are not quite doing that, at any rate we are making the cost of delay in relation to the cost of money less than it was when the interest was first made collectible in this way.
The whole of the hon. Gentleman's argument rested on that fallacy—that what he was being asked to do was to increase the penalty; and since he is not being asked to increase the penalty at all, his argument has gone and the arguments that were put before him hold good.
§ Mr. Roy Jenkins
The attitude of the hon. Gentleman has been most disappointing and unsatisfactory. He finished by saying that this was a small matter and that the Committee wanted to get on and make progress. If the hon. Gentleman really wants to get on and make progress, the right way to do it is to accept reasonable Amendments and not merely to give little lectures to the Committee. The hon. Gentleman is catching from his hon. and learned Friend the Solicitor-General the bad habit of having to make several speeches because his first speech is so unsatisfactory, and the bad habit of putting forward contradictory arguments in those several speeches.
The hon. Gentleman's first great argument was that this proposal was not necessary because already the rate of interest was prohibitive; that it was already equivalent to a gross rate of 6 per cent., and that that was quite enough. By the time he got to his second speech, he had changed round on that point and said that he was very much against having a prohibitive rate of tax and that he depended much more on the fact that the taxpayer could be taken to court and be made to pay rather than have any prohibitive penalty, which, I think, he said was an archaic way of going about it.
Our whole case is this. Three per cent. was, apparently, right in 1947. Hon. Members opposite did not vote against it. There were several Divisions on the corresponding Clause in that 1947 Bill, but, that was not a point on which hon. Gentlemen chose to oppose. Presumably, therefore, they too thought that 3 per cent. was right in 1947. If it was an 1007 effective deterrent then it cannot possibly be an equally effective deterrent in the conditions of today.
If hon. Members opposite believe in having—if they do not believe in it, why are they putting it on?—a deterrent rate of interest on E.P.L. which is not paid, then let us have an effective deterrent. If 3 per cent. was effective in 1947, it cannot possibly be effective today. Hon. Members have said that 12 per cent. was quite out of all reason. After all, under the Bill, we are giving 12 per cent. increase in standard for new capital which is subscribed. I do not see the great difference between that and imposing a gross rate of 12 per cent. on people who deliberately do not pay their tax. In neither of his speeches did the Financial Secretary give any argument whatever which could be accepted as being an answer to the case.
The Amendment is a genuine attempt to help the Chancellor to carry out a main design of his financial policy. I am sorry that the Financial Secretary either has so little faith in his right hon. Friend's monetary policy, or is so hidebound by the brief of his Department, that he cannot be a little more helpful.
§ Mr. Jay
I accept the Financial Secretary's assurance that this is not a matter of giving special benefits to the friends of one side of the Committee or another, but he really has not answered the logic of the arguments of my hon. Friends.
The hon. Gentleman has adduced only two real arguments. The first was that the rate of interest was 3 per cent. in relation to the arrears on Income Tax and, I think, on Profits Tax and that, therefore, it ought to be the same in relation to E.P.L. My hon. Friend acknowledged that at once when he said that we were only too willing to see a uniform rate of 6 per cent. throughout.
Secondly, the hon. Gentleman argued that 3 per cent. was quite sufficient because it is 3 per cent. net and, therefore, 6 per cent. gross. But that has no substance, as my hon. Friend has pointed out, because the rate stood at 3 per cent. net and 6 per cent. gross before the Bank rate was increased by the Government last November and again in the spring. The Bank rate has been more than 1008 doubled since this rate stood at 3 per cent. last winter. Therefore, it cannot possibly be the appropriate rate now.
After all, at the rates of gilt-edged prices to which the Government have succeeded in depreciating the national credit in the last few weeks, one can today earn a very great deal higher yield by investing surplus money in gilt-edged or, indeed, in many other things than was the case last autumn. Therefore, the incentive to do so is much greater, and, therefore, the deterrent which was right in comparison with the gilt-edged yields of last autumn cannot possibly be right with the gilt-edged yields of today.
This is our real complaint on the Amendment. Why do the Government apply one principle to the local authorities for housing and other purposes, and another principle to these, I do not say tax evaders, but dilatory taxpayers? After all, we maintained a rate of 3 per cent. on public works loans. The Government then came along last autumn and said, "Why 3 per cent.? Gilt-edged yields have gone up and, therefore, the 3 per cent. on public works loans ought to go up also."
If that argument was sound for public works loans, it must also be sound for the 3 per cent. deterrent to the dilatory taxpayer. We also ask why the rate should remain at 3 per cent. when, on the Government's own admission about public works loans, they have put that rate up. It seems to be one law for the dilatory taxpayer and another for the local authority.
Does the Government's attitude on the Amendment mean that they do not have the courage of their convictions in their dear money policy? Are they now showing the first signs of abandoning that policy? I think that we ought to know. A great deal of uncertainty already has been caused in the last week or two by the Government's change of mind and vacillations over the E.P.L. We have seen all sorts of movements of prices, and so on, in the City in the last week or two.
If doubt is to be cast on the Government's courage in maintaining their dear money policy, a great deal more uncertainty will be created, and we ought to know where we are. Of course; it is all very well. We raise the Bank rate and we raise it again in order to produce certain 1009 effects. The effect is produced for a few weeks and then begins to wear off, and people naturally say, "Is the Bank rate to be raised further? "On the evidence of their attitude to this Amendment I think many people may be beginning to doubt whether the Government will have the courage to go further with that policy at all.
The right thing on this Amendment would have been to have had a considered pronouncement about interest rate policy from the Minister of State for Economic Affairs. It was he, we remember, who conducted the debate on this subject before Christmas at considerable length. He is obviously the Government expert
§ on the subject of interest rate policy and one would have expected to see him present to answer the debate this afternoon.
§ In the absence of any such statement, which we would all like to have heard, and in protest against the decision of the Government to apply quite a different principle to dilatory taxpayers from that which they are applying to local authorities, I must advise my hon. Friends to press this Amendment to a Division.
§ Question put, "That those words be there inserted."
§ The Committee divided: Ayes, 199; Noes, 216.1013
§ Clause ordered to stand part of the Bill.