Clause 25.—(REDUCED RATE OF DUTY ON CERTAIN BUSINESS ASSETS.)

HC Deb 24 June 1954 vol 529 cc653-753

Sir Patrick Spens (Kensington, South)

I beg to move, in page 26, line 38, to leave out from the beginning, to "shall." in line 39, and to insert: the assets used in or occupied for the purpose of the business.

The Temporary Chairman

In calling the right hon. and learned Member for Kensington, South (Sir P. Spens), I would point out that there are a large number of Amendments linked with this one which I think might be taken together for the purpose of discussion. They are: In page 26, lines 38 and 39; in page 27, lines 6, 20, 24, 29, 35. 41 and 46; in page 28, line 5; in page 28, leave out lines 11 to 31, and in page 28. line 20.

The Chancellor of the Exchequer (Mr. R. A. Butler)

Is the Amendment in page 28, line 47, also to be taken with this group, since it covers the same point?

The Temporary Chairman

I am advised that it is not selected, but if it covers the same point possibly it can be discussed.

Sir P. Spens

I am sure that it would be for the convenience of everybody if all these Amendments could be discussed together.

This Clause is intended to carry out certain promises made in the Budget Statement and on the Second Reading of this Bill. As it is drafted, however, the benefit of the reduced rate on Estate Duty is confined, so far as premises are concerned, to industrial hereditaments. That is a phrase which was not used either in the Budget Statement or during Second Reading. The phrase used in the Budget Statement by the Chancellor was "industrial premises and plant and machinery." The phrase used by the Financial Secretary on Second Reading was "industrial buildings, plant and machinery." I apprehend that "industrial hereditaments" has a very technical meaning. In subsection (7) there is a reference to the Rating and Valuation (Apportionment) Act, 1928, which is applied, and that contains a definition of industrial hereditaments.

The Committee must realise that the definition in the Act is a very narrow one. Naturally, it does not include dwelling-houses. It does not include the premises of public supply undertakings. What is more important is that it does not include premises used for storage purposes, premises used for distributive wholesale purposes, or retail shops. In fact, it includes only premises which are used for the purposes of a factory or workshop.

If that is right, the businesses which will benefit from the Clause are very limited indeed. I do not want to look a gift horse in the mouth. For those businesses which have premises which comprise factories and workshops, we welcome very much the benefit conferred by the Clause, but, if my construction is right about the very narrow meaning of "industrial hereditaments," we feel disappointed that the benefit will be so restricted.

I am not too certain, having read the Clause—nor do I know whether it was intended—that the plant and machinery have to be on or to belong to the business that has the industrial hereditaments or whether any business of whatever nature that has plant or machinery may, so far as the plant and machinery are concerned, obtain the benefit of the Clause.

There must be many businesses used for storage or retail purposes which have certain plant and machinery on their premises although the premises are not industrial hereditaments. I do not know, whether or not plant and machinery generally in any sort of business is to be included. I hope it is, but I have a strong feeling that the Clause would be liable to be construed at present as meaning that the only businesses which can take advantage of the relief would he businesses which have industrial hereditaments and have, in connection with those industrial hereditaments, plant and machinery.

Therefore, if my reading of the Clause is right, the relief is confined not only to a limited number of businesses but to a very limited portion of the business assets of those businesses. Even where one has a business which is carried on in industrial premises and has plant and machinery, the relief is confined to those assets only and does not extend at all to any of the other assets of the business. For instance, it will not extend to the raw materials which are certain to be there on any death occurring in connection with those industrial hereditaments. It does not extend to the stocks, which are equally certain to be there. Therefore, it means that when Estate Duty comes to be paid on the death of an owner or shareholder of a business—I will not go into the details of the shareholders, for that would make my speech much too long—it would have to be raised either out of the other assets of the business or out of the property of the deceased.

6.45 p.m.

If the very limited effect of the Clause is as I think it is, I cannot follow why there was so much discussion on the earlier stages of the Bill and on the Budget Statement about how the Estate Duty was to be borne.

My Amendment is the broadest of all the Amendments. It asks, frankly, that all assets of a business shall receive this relief, both the real property, the hereditaments and the plant and machinery and all other assets. If the principle underlying the Clause is that there is grave difficulty in raising Estate Duty out of family businesses, I should have thought that, on principle, the relief ought to be given to all the assets. I will not develop the argument—it is a perfectly straightforward point—as to whether this is a limited or extended provision.

I want to make a small plea on behalf of those who carry on businesses in my constituency. In my part of London there are very few businesses which have industrial hereditaments in the ordinary sense. We have a great many retail businesses which have extraordinarily valuable stocks. For instance, many antique shops are to be found in my division. Those businesses are nearly all small family businesses, and the value of the stocks is enormous. Yet, when the owner of the business dies, Estate Duty has to be faced at the full rate in respect of those valuable stocks in the retail premises. Those businesses will get no relief under the Clause. The difficulties are just as great for businesses of that nature as they are for businesses which happen to have a factory or a workshop.

I repeat that we thank the Chancellor for having applied the relief which is enjoyed by agriculture to businesses where there are factories, workshops, plant and machinery, but we hope he will find it possible to go rather further. If the object is to save family businesses, the relief should be extended much further.

Mr. J. Grimond (Orkney and Shetland)

I want to say a word in support of the Amendment moved by the right hon. and learned Member for Kensington, South (Sir P. Spens). I awaited his speech with interest. I could hardly believe that the Clause really meant what he assured the Committee it meant. I agree with him that, if he is correct, it is a very much narrower Clause than most of us expected when we heard reference to it on Second Reading.

I agree almost entirely with what the right hon. and learned Gentleman said. It seems to me that if we are to have small businesses of this sort, we should make the help effective and cover at least the great bulk of them. If the construction put on the Clause by the right hon. and learned Member is right—and it appears to me to be right—it is going to be restricted to certain assets of the business and to certain businesses. It will take some time to work out.

There are, first of all, shops, and as I read this subsection they will be excluded. They are liable to be bought up by multiple stores and very definitely they are many examples of small businesses going out of business and more and more becoming parts of larger undertakings. Then there are things like small printing businesses, which very often have a shop in front and the printing works behind. They possess a large stock of paper and considerable goodwill. None of these things will rank for a reduction in Estate Duty, as I read this subsection.

In my own constituency there are small weaving businesses with small shops in front and certain weaving machinery at the rear. The machines will count for a reduction in duty but not the shop, the tweed or the yarn. There are also engineering businesses which may carry certain types of assets. Some of them will rank for benefit under this Clause, but some will not.

It seems to me that the wording of the Amendment sponsored by the right hon. and learned Gentleman is most comprehensive, and to the laymen it looks the simplest of the Amendments. Others deal with livestock and industrial matters. There are cases in which livestock ought to be included, but that might mean widening the Clause further than the Chancellor intended. It seems to me that in principle there may be arguments for land against reducing Estate Duty on small businesses, but I am convinced by the arguments in favour of such a proposal.

What I find difficult to follow is the argument that part of the benefits shall apply to certain premises and to certain of the plant belonging to a business but not to all the assets. It would seem that that will be difficult to administer, and, if the Chancellor accepts the principle of the Clause, then he ought to extend it to, all the assets of any business.

Mr. Stevens

Like my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens), I give a qualified welcome to this half-loaf which is better than no bread, but I am not sure that it is even a half-loaf, as the hon. Member for Orkney and Shetlands (Mr. Grimond) has illustrated. We are a merchant nation as well as a manufacturing nation, and there should be relief under this Clause for merchant businesses, for stocks and for shop premises. Despite the fact referred to by the hon. Member for Orkney and Shetland about the growth of multiple shops, we still remain to a very large extent Napoleon's nation of shopkeepers. Yet the shopkeeper gets no relief of any kind under this Clause. I think that is quite clear.

Business has changed a great deal in the last 40 or 50 years. Large-scale manufacture is much more widespread today than 30 or 40 years ago. I suppose that 30 years ago there were about 60 different manufacturers of motor cars and quite a number of them were small family businesses. Today the motor manufacturer requires a large plant beyond the capacity of the ordinary family. Today, as a result, there are perhaps not more than 20 manufacturers of motor cars, few of which are family businesses.

The whole trend today is for family businesses to cease to be manufacturing businesses and rather to go in for distribution and personal service. I have in mind not so much the antique dealers, who are of very great importance to this country, but the hotels, boarding-houses, restaurants and cafés in Hayling Island in my constituency. Although they are family businesses, none of them will get any relief under this Bill.

Hon. Members

Order.

The Temporary Chairman

I think the hon. Member is wandering a little into the Gangway.

Mr. Stevens

I beg your pardon, Mr. Thomas. I must mind my step.

The Chancellor says that he wants to help small family businesses, but by these words "industrial," "plant" and "machinery" he is specifically excluding a very large proportion of a very important section of our industrial and social structure to which it seemed he was referring in his Budget speech and in his Second Reading speech on this Bill. We hope he will look at the Clause again.

Mr. Austen Albu (Edmonton)

The hon. Member for Langstone (Mr. Stevens) and the hon. Member for Orkney and Shetland (Mr. Grimond), in supporting this Amendment, referred to small businesses and the assumption behind their argument was that the whole of the Clause is designed to assist such businesses. Hon. Gentlemen will, of course, recognise that that is not the case. What this Clause does is, of course, to assist inherited businesses whatever their size and. therefore, any arguments directed to the idea of this Clause being designed to assist small businesses falls to the ground unless the right hon. and learned Gentleman the Member for Kensington, South (Sir P. Spens) and his hon. Friends will support the Amendment which my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) will later move to restrict this Clause to small businesses.

It would be out of order for me to discuss the reasons why my right hon. and hon. Friends are not in favour of the Clause at all. So many of the arguments have been addressed to the suggestion for widening the Clause that we should have to controvert many of them, which we could not do during this discussion, but they could be more appropriately dealt with on the Motion, "That the Clause stand part of the Bill." It is quite obvious from the views expressed on Second Reading, and from what I have just said, that nobody on this side of the Committee will support an extension of the concession.

The speeches which we have so far heard have assumed that what the Government wish to do is to assist the inheritors of small or family businesses, but that is not what the Government want to do. What the Government are desirous of doing is to deal with the difficult situation arising in manufacturing undertakings from the point of view of the national economy. On a number of previous occasions in Committee the same confusion arose between the Treasury Bench and some Government supporters. When we were discussing investment allowances, the Chancellor had to make it clear to them that the intention of such an allowance was to assist manufacturing industries and was not a taxation concession given in order to assist particular individuals or as a matter of equity.

As I understand this concession, the same principle applies. The object is to deal with what the Chancellor concedes to be a serious disadvantage from the point of view of the national economy. It is not to give relief to particular individuals or particular classes in the community, because that relief has got to be justified on grounds of equity. Certainly, my right hon. and hon. Friends will later have an opportunity of explaining that we would be strongly opposed purely on the grounds of equity to any extensions of the relief on inheritances. We must consider not only questions of taxation equity and relief, but also questions of the national interest and economy.

7.0 p.m.

I quite see the argument about businesses with fixed assets, very often in the form of plant and machinery which would not be saleable, or on which it would be difficult to obtain loans because of its specialised nature and because it is incorporated in a manufacturing business in such a way that it would have little value by itself. There may be difficulties in those cases, and there may be some justification for relief from Estate Duty on such businesses on the death of the owner. I cannot see the argument when applied to retail businesses, particularly those of the nature referred to by the right hon. and learned Member for Kensington, South, who moved this very wide Amendment.

If his assumption is correct that the Government's intention is to relieve Estate Duty on individuals, his argument may hold, but if my assumption is right, as I believe it is—and I hope that the Financial Secretary will indicate that the Government's intention is to deal with something considered to be harmful to the economy of the country as a whole rather than with the relative pressure of taxation between individuals—the argument advanced by the right hon. and learned Gentleman does not hold.

I cannot believe that on the type of valuable stocks to which the right hon. and learned Gentleman was referring, or on stocks as a whole of a general saleable nature, it would not be possible for the inheritors to raise a sufficient loan to carry on the business. This position is very different from that of a manufacturing business, and so far no argument has been advanced from the Government side of the Committee that it is impossible to carry on a business of the sort, except that of hardship on the inheritors. The question of hardship is just as relative as the distribution of taxation and income. We are not sympathetic to the idea of reducing the level of Estate Duty by relieving the burden of taxation on inheritance and we cannot support Amendments based on those arguments.

As to the other arguments about the effect of the present level of inheritance duty on the national economy as a whole. I cannot believe that it is in any way desirable or necessary to extend the Clause from its present application to take in industrial undertakings and partnerships.

Mr. Gerald Nabarro (Kidderminster)

I support my right hon. and learned Friend's Amendment, and in doing so I hope that the Chancellor of the Exchequer will not consider that I am in any way ungrateful in what I am about to say. I recognise the great concessions that he has made to the point of view that has been expressed in the Committee for several years past on the need for alleviating death duties on family businesses.

In the last few years I have been fairly prominently concerned with this matter. The Chancellor will undoubtedly recall that the National Union of Manufacturers employed an economist two years ago to carry out a comprehensive survey of the way in which death duties affected family businesses of all kinds and sizes, and that in response to the plea made by my hon. Friend the Member for St. Marylebone (Sir W. Wakefield) and myself last year the Chancellor gave an undertaking that he would look into the circumstances.

There are very great difficulties in the interpretation of the Clause. I would refer to the phrase "industrial hereditament," which I find difficult to define within the meaning of the Clause. There are businesses which are not of the manufacturing kind which might be deemed, on a strict interpretation of the Clause, not to be industrial businesses yet are essential to the operation of general industry. I will give one example at random, in response to the observations of the hon. Member for Edmonton (Mr. Albu).

The whole of British industry is dependent directly or indirectly for its production arrangements upon a steady flow of small tools made to a very wide range of specification. It is not customary for the manufacturers of small tools to supply them direct to the consumers because it would be uneconomic to supply in single units or penny parcels every one of thousands of specifications. A system has, therefore, grown up of having entrepreneurs, or large factoring firms, the names of which I will not mention in this Committee but which are generally well-known. They perform a vital industrial purpose, for example within the engineering industry. Whether or not a family business engaged in that kind of trade would be adjudged an industrial hereditament in spite of its fixed assets, within some narrow connotation under this Clause, is a matter of great doubt.

Mr. Houghton

I am trying to find the definition of "industrial hereditament." As I understand the matter, it is governed by the valuation for rating. If industrial premises are derated for the purpose of rating and valuation, they are industrial hereditaments for the purposes of the Clause. The one goes with the other, and there is no statutory determination of "industrial 'hereditament" to be made under the Clause.

Mr. Nabarro

I am grateful to the hon. Gentleman. That is precisely the point on which I was trying to obtain information when the reply is given on this series of Amendments. There is uncertainty about it, in view of the wide variety of family businesses which will come under consideration if the Clause becomes part of the law.

The second point is that in the speeches made by hon. Gentlemen opposite there seemed to be a good deal of misunderstanding about family businesses as a whole. There seems to be a general view that the family business is a small business and that the small business is a bad business. That is not true, and it would be a very dangerous generalisation to fall into. Again, without mentioning the name of any particular industrial firm, I can readily call to mind a very famous carpet manufacturing firm in Kidderminster which has been established for 200 years, which employs nearly 2,000 people and which has a capital of several millions of pounds, not more than 50 per cent. of which represents fixed assets in the form of buildings, plant, machinery, looms, and so on. The remainder is stock-in-trade.

I envisage that there are businesses of that kind where the operation of death duties has caused very great difficulty. If the amelioration of death duties were not put into effect under the Clause it would not be possible for businesses of that kind to find the necessary money to pay the heavy duties while retaining control of the business within the family or without cutting down very considerably the level of essential working stocks. That kind of position arose regularly during the great depression in raw materials following the outbreak of the Korean with when, for instance, wool yarn used in the carpet industry rose to 200d. per lb. or three times the level that had existed two years before.

The assessment of death duties in circumstances of that kind on a large, active manufacturing family business inevitably leads to the erosion of stocks, or otherwise—or in conjunction with it—the realisation of the family's interest in the business. Both of those courses I conceive to be inimical to the national interest. In the particular case I cited the business has been in the hands of one family and a long and continuous tradition has been established ever since carpet manufacturing commenced in Kidderminster which is a matter of 200 years. Without wishing to appear ungrateful to my right hon. Friend for what he has conceded, I give my general support to the Amendment.

Mr. Arthur Holt (Bolton, West)

I feel a little less uncertain about my knowledge of the Clause now than I did before I heard some of the speeches on it. I understood the Clause not to refer to family businesses but only to those sections of family businesses which can be assessed for Estate Duty on the death of one person who controls the business, and on an assets basis. If that explanation is something like right, I am reassured.

If the arguments are good and are accepted by the Committee, that it is desirable to endeavour in some way to stop the erosion of such businesses, that they are efficient and should not be taken over by some combine or sold out on the death of the person who has previously controlled them, I cannot see why the Clause should be confined just to industrial undertakings. I know that in his Budget the Chancellor has not felt that he can give much away. He has been concerned, in investment allowances, with increasing production, but it is not just an increase in production that the nation wants. It wants not even merely an increase in economical production. We are concerned with the whole range of business activities from the raw material to the stage when the article is placed in the hands of the final consumer. It is that whole range of business activity that we wish to see carried out as economically and efficiently as possible.

If it is argued, therefore, that it is desirable to prevent the passing away into some big amalgamation of some of these industrial businesses which are under the control of one person, it seems to me just as important that we should do the same thing for the wholesaling and retailing businesses and any other business concerned with economic activity. That is a point which must be accepted. Whether one can then go on and widen the whole scope as between the proposals of the right hon. Member for Blackburn West (Mr. Assheton) and the Amendment in the name of the right hon. and learned Member for Kensington. South (Sir P. Spens) is another matter.

I do not know what it would cost the Chancellor to accept the Amendment in the name of the right hon. and learned Member for Kensington, South. If he could accept it, it would be a good thing. There was very great weight in the right hon. and learned Member's arguments and I accept them, but if the Chancellor cannot accept that Amendment I do not see how he can refuse at least the intention of the proposals in the name of the right hon. Member for Blackburn, West. Whether they are correctly and legally worded I do not profess to know. I hope that we shall have an answer from the Government to the question why other parts of business activity are excluded from the provisions of the Clause.

7.15 p.m.

Mr. Aubrey Jones (Birmingham, Hall Green)

I should like to draw attention to a wider aspect of this matter which so far has not been discussed. The hon. Member for Edmonton (Mr. Albu) is quite right. These provisions can be compared with those of Clause 15 and the Amendments are exactly the same in principle as the hon. Member's earlier Amendments to Clause 15. In other words, they involve the important principle of selectivity or discrimination in the field of direct taxation.

I assert that, as a general rule, it is wrong to discriminate by way of direct taxation. That does not mean to say that I necessarily hold it to be wrong to discriminate by other methods. I am led to this belief by the following considerations. The payment of a tax is an obligation. In these days that obligation rests very heavily upon the taxpayer and, therefore, it becomes more important than ever to ensure continued respect for the obligation. Surely, the most certain way to undermine respect for that obligation to pay tax is for the State to come along, disguised though it may be in the benevolent figure of the Chancellor, and say in the case of A. "I will relieve you of a part of your obligation merely because I consider you more important than B." It is not a question of merit but of sheer accident. For economic reasons A is judged to be more important than B and therefore is relieved of part of his obligation. I see nothing more calculated to undermine the whole basis of respect for the system of taxation.

Even if that is not accepted, what is surely most highly objectionable is to select a relatively small part of the economy and to discriminate within that part. That is what the Clause does. It carves out of the economy the field of family businesses and gives relief predominantly to businesses of an industrial nature as against those of a commercial nature. Here—within this limited field—the discrimination leaps to the eye. Therefore, it seems to me that the Amendments which we are discussing are the inevitable product of the Clause. Discrimination must lead the Chancellor to receive further requests for concessions of the kind embodied in the Amendments.

I shall be interested to hear on what grounds the Chancellor or the Financial Secretary will resist the Amendment. I cannot imagine that he is going to accept them. I can understand the case for resisting the widest Amendment of all, that in the name of my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens). It can be said in the case of that Amendment that after all, realisable, floating assets can be sold and fixed assets cannot be sold and therefore Estate Duty weighs more heavily upon fixed assets, but I do not see any case in principle for resisting the extension of the concession from industrial premises to commercial premises.

If I may indulge in prophecy, I think that the Chancellor or the Financial Secretary will probably fall back upon the assertion that productive investment is more important to the economy than non-productive investment. Important though these economic considerations are, however, they should not be lifted to an importance above the considerations of principle which I have suggested. Apart from that, the economic benefit to be obtained from this concession is surely an uncertain one. I would hold that the deterrent to investment in the field of family businesses has far more to do with the general economic circumstances and the general rates of current taxation than with death duty. Be that as it may, the gain is highly uncertain and the breach of principle is surely clear and unmistakable. I would weigh that breach of principle very heavily in the scale.

Mr. Jay

Do we judge from the hon. Member's interesting speech that he, like us, is opposed to the whole of the Clause?

Mr. Jones

I trust that the right hon. Gentleman will not strain my discipline too far. I agree that if one is going to give relief at all one should give it all—the way round. All I wish to say is that we are in the position—and I say this in no spirit of criticism or reproach—that my right hon. Friend so far has made relatively little impression on the general weight of taxation.

Mr. R. A. Butler

Perhaps my hon. Friend will give some estimate of what he thinks the general weight of taxation has been as he makes a generalisation of that sort?

Mr. Jones

I think my right lion. Friend is really misjudging me; I am saying nothing in a spirit of reproach or criticism. I was drawing attention to the dilemma that, unable as we are to make a great impression on the general burden of taxation, it seems to me that we are driven to a quite different order of things, to a series of devices in an attempt to lighten the burden of taxation here and there. It seems to me that these devices which I see embodied here and which seem to be embodied in later Amendments to Clause 29 are likely in the long run to lead to disrespect for the whole system of taxation and so undermine the obligation which we ought all to be endeavouring to maintain.

Mr. Roy Jenkins

I think we would all agree that we have listened to an extremely interesting speech from the hon. Member for Hall Green (Mr. Aubrey Jones). I am sorry that he drew upon himself the censure of the Chancellor of the Exchequer, which I thought quite undeserved, and I was sorry that the Chancellor was so intolerant with him. The hon. Member was advancing quite an interesting, almost philosophical, proposition. It was that discrimination of any sort in direct taxation was inherently undesirable. I thought he rather exaggerated the extent to which this Clause broke new ground because we must remember the existing agricultural provisions and there is not so much a production principle to be considered in that way.

Mr. Aubrey Jones

The hon. Member will recognise that there was a whole series of Amendments on the Order Paper which sprang from what I was referring to.

Mr. Jenkins

I was coming to that. I was not altogether clear what were the remedies proposed by the hon. Member for this difficulty. When my right hon. Friend the Member for Battersea, North (Mr. Jay) put the point to him, I thought he was a little equivocal in his answer.

Mr. Jones

If I manage to catch the eye of the Chair, I hope later to indicate what I would do in regard to Estate Duty.

Mr. Jenkins

Certainly, we look forward with great pleasure to hearing that contribution and I hope that the Chancellor joins in that pleasant anticipation. Dealing with the matter at this stage merely from the point of general principle, what I was doubtful about was the extent to which, on his own showing, one might improve the position by making the discrimination rather wider. If we make a discriminatory advantage wider we do away with discrimination altogether, but that was not suggested even in the widest of the Amendments—that in the name of the right hon. and learned Member for Kensington, South (Sir P. Spens).

It seems at least an arguable point whether if we are to have a degree of discrimination one cannot make it sufficiently wide that we get anywhere near to doing away with that discrimination altogether, whether on the premises of the hon. Member for Hall Green the thing becomes less objectionable if one makes it wider and bigger or narrower and smaller. I was not clear on which side the hon. Member was arguing on that proposition.

As my hon. Friend the Member for Edmonton (Mr. Albu) extremely forcefully said—and the point was dealt with by the hon. Member for Kidderminster (Mr. Nabarro) later—it is very important to remember with what we are dealing in this Clause and the issue raised by this Amendment. We do not for a moment assume that small and family businesses are synonymous. We certainly think it perfectly valid to adopt the view we have adopted in the past of putting forward—unsuccessfully, I am sorry to say—Amendments to previous Clauses, designed to help small businesses without giving an indiscriminate advantage to inherited businesses.

Here we are dealing with inherited businesses. Even if we accepted, as my hon. Friends and I do not accept, a general need for a concession under this Clause by the Chancellor of the Exchequer, it would still be necessary, in order to widen it, not merely to show that there were certain businesses of importance and national character outside the range of the Clause as it stands, but that it was necessary to give the concession to those businesses now outside the Clause so that they may continue to discharge functions of value to the economy.

The hon. Member for Kidderminster gave his example of businesses selling tools to the engineering industry generally. But it is not enough to describe to the Committee that such businesses exist and to make the fairly obvious point that they are of some importance in the economy. What has to be shown is that it is particularly desirable that those businesses should continue as family businesses if they are to be of value. I do not think the hon. Member advanced that case at all; in fact, he did not even apply his mind to it.

The hon. Member for Langstone (Mr. Stevens), who is not in his place at the moment, and two hon. Members on the Liberal benches talked a certain amount about very small businesses, and small shops in particular. I was particularly surprised to hear the hon. Member for Bolton, West (Mr. Holt) laying down as a principle that what we should see was not merely that goods should be produced, but that at all stages they should be distributed as economically as possible and that he apparently regarded as an argument that it was at all costs necessary to preserve the small shopkeeper.

Mr. Holt

I did not advance the argument about the small shopkeeper. The whole argument is misconstrued when we talk about the family business. In this Clause we are endeavouring to prevent businesses, otherwise efficient, being broken up merely because they are under the control of someone with a controlling interest. If that is true of an industry it is also true of wholesale business.

Mr. Jenkins

The hon. Member made the point about the business being economically efficient and, also, that we must not have theoretical nostrums, but see how it works in practice. I really thought that could not be produced as an argument for saying that it is highly desirable in the retail trade to keep small shops in being in order to prevent the spread of the chain store. I should have thought it very difficult to argue that on the grounds of efficiency. I was also surprised to hear the right hon. and learned Member for Kensington, South, no doubt putting a particular constituency interest on this matter, talking about small antique shops.

Sir P. Spens

My whole point is that there ought not to be discrimination either between businesses or industries. If it is applied at all everyone should have the advantage.

Mr. Jenkins

The difficulty, as the hon. Member for Hall Green clearly realised, is that we start on the basis of this Clause and if the right hon. and learned Member feels strongly about this—as I can well understand he may—he should vote against the Clause as a whole.

Sir P. Spens

This is the second part of a very good move, of which the first part was the benefit given to agriculture. This is now giving the benefit to manufacturing industry and I hope that in due course it will be given to these other classes of industry.

7.30 p.m.

Mr. Holt

Would not the hon. Gentleman agree that the present basis of assessing death duty on an assets basis is, in fact, discrimination against a company controlled by one person and to put that previous discrimination back is the purpose of this Clause?

Mr. Jenkins

The fact is that the position as it has previously existed was a discrimination against a business of that sort. But I have not heard it argued from the Treasury Bench, during our debates on this subject, that this is merely designed to correct that difficulty and to put these businesses where that occurs—where they are controlled by one man or a small number of people—on a valued on assets basis.

It is merely designed to put them in the same position as businesses which are quoted on the Stock Exchange and assessed in a different way. If that were the sole object of the Chancellor, I think he could have achieved it by a substantially smaller rate of concession than is contained in the Clause. I should have thought, were that his purpose, that he would be inclined to accept one of our Amendments which is designed to reduce somewhat the rate of concession given.

What I think has been brought out extremely clearly in our discussion on this Amendment is that many hon. Members are approaching the matter in a different way from that which we thought the Chancellor was approaching it. They are approaching this as a taxation concession given to certain individuals, and not as something designed to deal with a specific economic difficulty where businesses of national importance, largely manufacturing businesses, would be broken up: and to protect the family units which hon. Members opposite thought have a certain value which would be lost. I thought that to be the approach of the Government and the Chancellor. But that is very different from getting any concession which may be got by anyone engaged in business at all, which seemed to be the approach of hon. Members opposite. We should know the view of the Government on the subject.

Mr. Boyd-Carpenter

We have had an interesting debate and a clear line of division between the two sides of the Committee. On the one hand, we have had hon. Members opposite taking the view that they dislike the whole thing and, therefore, would be horrified to see it extended: and, on the other hand, my right hon. and hon. Friends have put down a series of Amendments, which we have discussed with that of my right hon. and learned Friend the Member for Kensington, South (Sir P. Spells), which suggest that we have drawn the line in the wrong place.

I do not think I should anticipate what may well be the subject of a later debate by arguing with hon. Gentlemen opposite on the general merits of the Clause and the proposals embodied in it. That, in any case, would probably be out of order, and no doubt we shall have an opportunity for such a discussion at a later stage. I think I should best assist the Committee if I dealt with the question of where the line has been drawn and whether it was drawn in the most sensible place.

This debate is an example of the fact that when provisions of this kind are made, it is very natural for people to feel that the line should be drawn at a somewhat different point in order to cover a particular concern in which they are interested. That is natural, as I think my hon. Friend the Member for Hall Green (Mr. Aubrey Jones) implied. In a Clause of this sort there can be and will be legitimate differences of opinion as to the right point at which to draw the line.

The Committee will appreciate that in considering this matter my right hon. Friend gave careful thought to how far it would be legitimate and sensible to make this concession. He had to consider the very limited sums of money at his disposal this year. The Committee will appreciate that it has been possible, generally speaking, in this Finance Bill to make only very limited concessions in terms of cost. My right hon. Friend came to the conclusion that it would be best to concentrate the relief given under this Clause on industrial buildings and on the plant and equipment of industrial and commercial businesses. That is similar to the line of demarcation adopted on the investment allowances to which the Committee gave approval in Clause 15.

My right hon. Friend felt it right to concentrate this relief in that direction, not because this is necessarily a major matter from the point of view of the economy or stimulating investment, but because in the important part of the economy represented by businesses of this character—and particularly industrial businesses—an atmosphere encouraging to investment would undoubtedly be created if those concerned in the management of such businesses had not to contemplate quite so severe a burden of Estate Duty. That is the background against which my right hon. Friend came to the conclusions embodied in the Clause.

I wish to apply those considerations both to the Amendment and to the speeches made in support of it and the other Amendments on the Order Paper. As has been pointed out, the Amendment in the name of my right hon. and learned Friend the Member for Kensington, South is much the widest. It goes very far indeed. It would go so far even as to cover not only business assets, but the property investments of property holding and investment holding companies. Were we to do that, it would seem to me that persons of substantial means would hurriedly form one-man companies to hold their investments to obtain the relief.

The subsequent batch of Amendments which we are discussing, most of which are in the name of my right hon. Friend the Member for Blackburn, West (Mr. Assheton), do not go anything like so far. In substance, they extend relief to commercial buildings as well as to commercial equipment.

Let me come to the argument of my right hon. and learned Friend as to the scope of the Clause as it stands. I would hesitate to start an argument with him on a point of construction. Indeed, some years ago he occupied an office in which it was not possible to argue with him on points of construction without being brought up with considerable firmness and I would not wish to involve myself in anything like that. But it is clear, I think, if my right hon. and learned Friend would look at the first subsection, that its effect is, as I indicated a few moments ago, to confer this relief in respect, in the first place, of industrial buildings, in the second place, of industrial plant and equipment and, in the third place, in respect of equipment used in other commercial businesses.

If my right hon. and learned Friend will look at subsection (1) he will see the words: …or in respect of machinery or plant so used… I think that, to some extent at any rate, is the answer to my hon. Friend the Member for Langstone (Mr. Stevens), who said that the retailer got nothing out of this. It is true that the retailer does not get an allowance out of this in respect of his building, but so far as his plant and equipment would be liable for duty—as the hon. Member for Sowerby (Mr. Houghton) knows, plant and machinery is sometimes construed quite widely, going down to such things as office furniture and cash registers—he gets the relief in precisely the same way as an industrialist does on his plant and equipment.

Mr. Stevens

When my right hon. Friend says that plant and machinery is limited to industrial plant and machinery, he is deliberately excluding the plant and machinery used in agriculture.

Mr. Boyd-Carpenter

I said it was the precise opposite, and, by their interventions, some of my hon. Friends have confirmed that. I said that, whereas the relief in respect of buildings was limited to industry, the relief in respect of plant and equipment was not restricted to industry. That covers the point mentioned by my hon. Friend about tractors and other equipment used in farming. It also covers plant and equipment used in retail trades.

I hope I have reassured my hon. Friend, who was under the impression that the retailer got nothing out of this. We can argue as to the extent to which the retailer should be placed on the same basis as the industrialist, but I do not think we shall conduct the debate on a basis of understanding if we are not clear about the fact that the relief extends to the plant and equipment used in the distributive trades. That is one of the grounds of criticism by hon. Members opposite. It would be hard to be criticised by my hon. Friends for the provision not being in the Clause and by the Opposition because it is there.

There is another aspect relating to my right hon. and learned Friend's Amendment. It would go very wide. It would cover not only the buildings, as the later Amendments would do, but also all the assets of the business, including the stocks, and so on. It would even go to the point—I do not want to stress it, but it illustrates the extreme width of his proposals—of covering property and investment holding companies, and I do not think he contemplated that.

My right hon. Friend the Member for Blackburn, West (Mr. Assheton) was not clear about the scope of the provisions in the Clause. He was concerned not so much with the objects covered as with the scope. The field covered is businesses carried on by individual traders, businesses carried on in partnership, and shareholdings and debentures in a company which falls to be valued under Section 55 of the Finance Act, 1940.

The narrower Amendment in the name of my right hon. Friend the Member for Blackburn, West relates to buildings used in commerce. If adopted, the Amendment would extend the scope of the benefits of the Clause to cover those buildings. To do that would be to carry the relief wider than the relief to which I referred by way of comparison in respect of Clause 15. That is not conclusive, because they are different in their subject matter, but it is an indication of the fact that if one widens the scope of the benefit it is inevitable that further demands will arise to widen the scope further. It seems to me that our existing line of demarcation in the Clause offers a sensible and reasonable solution.

On the other hand, I can well understand the force of many of the arguments which have been put in the course of the debate. Although there are very real difficulties in going further, my right hon. Friend would like to study what has been said in the debate. Up till now we have not had the advantage of hearing the arguments for the more limited advance adduced in full, with the skill and clarity with which a number of my hon. Friends can adduce arguments.

Although my right hon. Friend sees great difficuty in leaving the, as it seems to him, logical and coherent line of demarcation of the present Clause, he would nonetheless not wish to exclude from his consideration the possibility of some adjustment. He would like to have the opportunity of studying the speeches which have been made on the point as they will appear in the OFFICIAL REPORT. The arguments which have been delivered—I will not say they were delivered at excessive length—naturally took some time and they call for rather careful consideration and rather fuller consideration than is possible in the course of debate.

7.45 p.m.

Mr. John Arbuthnot (Dover)

Has my right hon. Friend formed an assessment of the cost of accepting the Amendment in the name of my right hon. Friend the Member for Blackburn, West (Mr. Assheton)?

Mr. Boyd-Carpenter

It is extremely difficult to assess the cost with precision, because the cost in any year depends very much on whether a sufficient number of people concerned on a substantial scale die in the financial year. Therefore, any figure that I can give is, in the nature of things, imprecise, and I should not like to be held to it. I will give the figures in respect of the Amendment in the name of my right hon. and learned Friend the Member for Kensington, South and that in the name of my right hon. Friend the Member for Blackburn, West subject to that qualification.

So far as we can see, the Amendment moved by my right hon. and learned Friend the Member for Kensington. South would, in a full year, cost about £4½million extra. It would, therefore, cost three times the existing full-year cost of the provisions of the Clause. The more modest proposal by my right hon. Friend the Member for Blackburn, West—though this is particularly difficult to assess—would probably cost about £500,000. That would increase the cost of the concession in a full year by about one-third over its present cost.

Mr. Roy Jenkins

Can the right hon Gentleman tell us the saving to the Exchequer which would result if the Amendment in my name in page 28, line 47, were accepted?

Mr. Boyd-Carpenter

I am not quite certain to what the hon. Member is referring. I do not think that his Amendment is being dealt with at the moment.

Mr. Albu

I understood that that Amendment was being dealt with at the same time.

The Deputy-Chairman (Sir Rhys Hopkin Morris)

I understood that the Amendment in page 28, line 47, in the name of the hon. Member for Stechford (Mr. Roy Jenkins) was to be dealt with the other Amendments.

Mr. Boyd-Carpenter

I did not want to get into trouble. I can tell the hon. Member that, subject to the same qualification as I mentioned earlier, it would about halve the cost.

Mr. Dalton

I am glad that the Financial Secretary has resisted these Amendments. As has been said more than once, and as will probably be indicated again, we are against the whole Clause. We think it is a mistake.

I thought that one of the most penetrating contributions to the debate was that made by the hon. Member for Hall Green (Mr. Aubrey Jones). I thought that the Chancellor himself showed signs of agreement with the judgment which I have just offered. It is, indeed, a case of discrimination. The Clause is a discriminatory one, and the Amendments have sought to widen the discrimination; and I am very glad that they have been resisted.

I should like to ask the Financial Secretary—and I rise at this stage only to ask a question and make one more comment—about his estimate of the cost to the Revenue of these various rejected Amendments. If I might have the attention of the Financial Secretary, I wonder whether I correctly understood him to say, as one of the arguments against the further extension of the concession, that, if it were made, wealthy people would soon be running off to buy up these one-man companies, which was one of the arguments used against the Amendment of the right hon. and learned Gentleman the Member for Kensington, South (Sir P. Spens).

Mr. Boyd-Carpenter

Not quite. It was that the strength of that proposal would even cover the investments of property-owning companies, and there would be an obvious inducement to persons of substantial means to set up such companies—not to buy them, but to set them up.

Mr. Dalton

The question was whether the right hon. Gentleman was not adumbrating the danger even when the Amendments are rejected, but that might be developed on a later occasion. I think it is rather significant that that line of thought was passing through the minds of the representatives of the Treasury. I will not develop that further now, but I wish to say something on the estimate of the loss of revenue which the Financial Secretary gave in answer to a question.

The right hon. Gentleman said that, if the Amendment in the name of the right hon. and learned Gentleman the Member for Kensington. South was accepted, it would lead to a further loss of £4½million of revenue, and that, of course, is a very good reason, from the Treasury point of view, for rejecting it. We have often done the same thing when we were in office. If there is any substance in the question previously addressed to the right hon. Gentleman, there may be the danger, even when these Amendments are rejected, that some of these businesses may be bought up by wealthy people.

I have always been inclined to think, though I have not now the facilities within the Treasury and the Inland Revenue Department for estimating, that Eli million, which I think is the estimated cost of this concession as a whole, is on the low side, and might very likely be found to be considerably below the mark, so that next year's revenue might suffer accordingly. Having that general apprehension in mind, I was very much struck by the extent to which this danger would be increased by accepting the Amendment, in comparison with that in the name of the right hon. and learned Gentleman.

I will not pursue this point further, because I think it might well be done better at a later stage, but I thought it might be appropriate to ask this question and make this point at this stage.

Mr. Boyd-Carpenter

I should like to correct the answer which I gave to the hon. Member for Stechford (Mr. Roy Jenkins), who is not now with us. I quite understood that the Amendment in which he was interested was that in page 28. line 47, which stands in his name. I thought that was the one to which he referred. The answer which I gave the hon. Gentleman related to another Amendment, however, and the correct answer to his question is that the saving if his Amendment were adopted is not precisely ascertainable, but it would be very small.

Mr. Albu

Can the right hon. Gentleman say whether or not, as the Clause is drawn, this Amendment would be necessary, or whether, in fact, as it is at present drafted, the concession would be granted to private road vehicles, or whether they would be excluded?

Mr. Boyd-Carpenter

The point will arise on another Amendment in the name of my right hon. Friend which covers a considerable part of the ground covered by the hon. Member for Stechford, and perhaps it would be convenient if I dealt with this matter when we discuss that Amendment; otherwise, there may well be some duplication. The Amendment which I have in mind is the one in the name of my right hon. Friend in page 28, line 10.

Mr. Anthony Hurd (Newbury)

I can state very briefly the object I had in mind in putting down the Amendment in page 26, line 39 in the names of my hon. Friends and myself on the subject of livestock. It is to include livestock with plant and machinery.

We have been well satisfied with the assurances given by the Financial Secretary just now that agricultural plant and machinery, in the form of tractors, combine harvesters and so on, will qualify for this concession. What is worrying us is that this concession will then operate very unevenly as between different parts of the country. It is well known that a large part of the working capital and equipment of farmers in the eastern half of the country is in the form of tractors, combine harvesters and so on, whereas in the western half of the country, in Wales and Scotland, and, indeed, the Home Counties, a large part of the farmer's working plant and machinery is, in fact, livestock.

This is particularly true of the hill farms of Scotland, Wales and Northumberland, where, indeed, sheep are tied to the ground and are the working plant and machinery of those particular farms. A farmer who is one of my own constituents pointed this out to me, and said that milking cows were really just as much plant in the production of condensed milk as the actual machinery in a condensing factory. They were plant and machinery right through from the dairy cow to the factory. That is true. The raw materials are the grass or the oilcake which the cows eat, and, so far as production is concerned, they are just plant and machinery.

I put that point to the Chancellor now, though I am not hopeful, knowing how difficult it must be for him to satisfy all claims and be absolutely fair to everyone, but I hope he will keep the point in mind for another year, because the incidence of this relief, which we much welcome, will be somewhat uneven as between the eastern and western half of the country. Today, when we are looking for an increase in the livestock population, we do not want the small family businesses in the western half of the country to be at a disadvantage compared with the highly mechanised farmers in the other half.

Mr. R. A. Butler

I hope we may come to a decision now, because we are trying to work towards the objective of keeping the many new Clauses for Monday and Tuesday, and, therefore, we want to make as much progress with the actual Clauses of the Bill as we can tonight, and yet do not want to sit too late.

May I make an appeal that we should come to some understanding about this matter, following upon the speech of my right hon. Friend the Financial Secretary? Of course, if there is anybody who wishes to put a legitimate point, there is no constitutional method of preventing him, and it is simply a case of giving a warning to hon. and right hon. Gentlemen that we do not want to keep the House too late. We can finish the Clauses tonight, and we shall have very big debates upon the new Clauses on Monday and Tuesday. With a little reticence, we shall not keep the House sitting too late.

On the point raised by my hon. Friend the Member for Newbury (Mr. Hurd), the short and simple answer is that, if his Amendment were accepted as drafted, it would not only include the technical matter of the cows on the herd basis, which are regarded as fixed capital, but it would, alas, as drafted, include animals in a pet shop and elephants in a circus. As I do not believe that my hon. Friend wants it to be as wide as that, we could not accept the Amendment in the terms in which he submits it.

I want to say that I recognise that this is a matter of great interest to him and his friends in the agricultural world, but am afraid that, on examination, I find that, if we were to accept the inclusion of livestock as well as premises as proposed by my right hon. and learned Friend the Member for Kensington. South (Sir P. Spens), we should have extended the scope of this concession upon Estate Duty to an extent that would be very hard indeed to hold, and might land us in liabilities even larger than those involved in the Amendment of my right hon. and learned Friend.

Therefore, I regret very much that I should have the greatest difficulty in accepting this Amendment, even if it were submitted in a way which would restrict it to the fixed capital assets which I believe my hon. Friend has in mind.

8.0 p.m.

I only want to say one other word about the speeches that have been made. The speech by the hon. Member for Hall Green (Mr. Aubrey Jones) omitted, I think, a very large slice of the argument. The manner in which I approached this concession was through a very exhaustive review of the assets basis of valuation.

I wanted to rise in order to pay tribute to the many representations I have received throughout industry and other places on this subject. We have spent the year since the last Finance Bill examining the assets basis of valuation in response to many requests made last year. This has been a very arduous task, and, as a result, I am sorry to tell the Committee that I have decided to adhere to the assets basis of valuation, which is net a popular decision.

That basis applies particularly hardly to the type of company I am trying to assist in this Clause, and, therefore, I thought, apart from the reasons that I gave in my speech, that this would chime in with the investment allowance. I also thought that it might be some consolation to that type of business upon which the assets basis of valuation weighs particularly heavily

Therefore, the Committee will see that the decision was reached in a very wide and careful manner. It was the result of a year's examination of this hideously complicated question of the assets basis of valuation, and I think that the hon. Member might have realised that in approaching this concession I did it in a very laborious manner, and not light-heartedly as discriminatory taxation.

Mr. Jay

Can the right hon. Gentleman give his reasons for deciding to adopt the assets basis of valuation, because it would appear that some of this difficulty would have been got over by departing from it?

Mr. Butler

To do that would detain the Committee for a very long time, and, as we have not yet finished with the Clause. I have no doubt that an opportunity will arise on the discussion on the Clause.

Mr. Ralph Assheton (Blackburn, West)

Although a good many of the Amendments under discussion are in my name, I do not propose to add to the debate this evening, in view of what my right hon. Friend has said, and also in view of the assurance which my right hon. Friend the Financial Secretary gave at an earlier stage in the debate. I know that both my right hon. Friends will study very carefully all that has been said during this discussion and we shall no doubt come to it again on the Report stage.

However, there is one point which I should like to put to my right hon. Friends which has not so far. I think, been suggested for consideration. I wish to ask them whether the definition of "industrial hereditaments" need be the definition for rating rather than the definition of "industrial hereditaments" for Income Tax purposes. I should have thought that the latter would have met quite a number of the difficulties with which we are faced, and I ask that that also should be taken into consideration when the matter comes up for further consideration.

Mr. Houghton

I rise only to fortify the Chancellor against his hon. Friends, because I do not think that we on this side ought to give any encouragement to the Financial Secretary's conciliatory remarks concerning the possibility of extending the concession beyond the fixed assets mentioned in the Clause.

The hon. Member for Kidderminster (Mr. Nabarro) and the right hon. Member for Blackburn, West (Mr. Assheton) referred to the difficulty of defining industrial hereditaments. There is, I believe, confusion this evening between industrial premises and hereditaments. I think it is true to say that for Income Tax purposes the Inland Revenue can accept premises as industrial premises which may not have qualified for derating as industrial hereditaments. But it seems to me that one very good reason for restricting the classification of industrial hereditaments to those which qualify for derating under the Rating and Valuation Acts was that it would reduce the area of dispute. Moreover, whatever arguments may be put forward as to whether premises are industrial hereditaments or not have in most cases been made and concluded in connection with rating long ago.

I think there is something to be said for sticking to a definition which does not allow of a lot of contentious argument, and which is clear and well understood by everybody concerned long before the event which may lead to the matter being raised at all. If the Chancellor is going beyond the line of fixed assets, that is to say, industrial premises, plant and machinery used in the business, then the door may be opened very wide indeed.

For instance, is it suggested in connection with the Amendments that investments held by businesses should be brought within the concession? Is it suggested that cash reserves should be brought within this concession? Even when we look at the question of stocks—essential, of course, as they are to the activities of most businesses—it opens the door to avoidance if stocks are built up to an excessive level in order to get the maximum relief from Estate Duty in the event of the death of the proprietor of the business.

There is one thing about fixed assets, and that is that people do not indulge in them extravagantly or excessively. They are too expensive, and are not easily disposed of like stocks and other assets. There is, of course, another question—that much of the ploughing back of profits into businesses today is purely nominal. It is not a ploughing back into fixed assets, but into investments and reserves of one kind and another.

Mr. Assheton

That does not apply only to fixed assets.

Mr. Houghton

I said that much of the ploughing back of profits into business is purely nominal to the extent that many of the reserves are cash or investments. I think that such a concession would encourage the leaving of profits or reserves in a business which might otherwise be distributed, solely in order to get relief under the provisions of this Clause. That is something which would clearly have to be watched. Therefore, I do not know in what direction the right hon. Gentleman can consider extending this discrimination without getting into very deep water indeed.

As the hon. Member for Hall Green (Mr. Aubrey Jones) said, there may be differences of opinion as to how far discrimination should be used in direct taxation. I am perhaps more orthodox than my hon. Friends in this connection. I think that there are very distinct limits to the use which can properly be made of the fiscal device for economic and social purposes. But the hon. Member for Hall Green will, of course, recall that discrimination was introduced into the Income Tax law very early in its history and not always in order to make sure that the burden of taxation should be adjusted to the ability of the taxpayer to pay.

Life assurance relief is a very ancient example. It has nothing necessarily to do with the ability of the taxpayer to pay. Moreover, it is quite unfair in its discrimination as between the taxpayer who can be admitted as a good life by an assurance company and thus get relief on the premiums paid on the policy, and the taxpayer who is rejected on health grounds.

The hon. Member for Hall Green is rather late in the day in his philosophical musings upon the use of discrimination in the field of direct taxation, though I agree with him that there are limits to the manner in which it should be employed. Those of us who are against this Clause altogether cannot offer to the Financial Secretary any encouragement along the line of appeasement which he suggested in the concluding sentences of his reply.

Amendment negatived.

Mr. Dalton

I beg to move in page 26, line 42, to leave out "forty-five" and to insert "twenty"

The Temporary Chairman (Sir Gordon Touche)

It would be convenient to the Committee, I think, to discuss, at the same time, the Amendments in lines 9 and 13.

Mr. Dalton

The Amendment is very simple and I hope that the Government, having had second thoughts over this matter since the Budget, and especially since tonight's debate, will feel able to accept it. The proposal is to reduce the proposed reduction from 45 per cent. to 20 per cent. on the ground that that would be a lesser evil than the proposal as it stands.

In one of our recent debates the Chancellor of the Exchequer said that he regarded all taxation as a necessary evil. I cavil a bit at that. If I were asked to indicate a tax which I thought was an exception to that rule I should say the Estate Duty. I hope that the right hon. Member for Blackburn, West (Mr. Assheton) will stay. I do not want to cut short any consultation on the Front Bench opposite, particularly if it is leading to the acceptance of my Amendment.

Mr. R. A. Butler

I was asking my right hon. Friend the Financial Secretary to listen most carefully to the right hon. Gentleman.

Mr. Boyd-Carpenter

Which request was purely unnecessary.

Mr. Dalton

I am much obliged to all concerned.

When venturing to criticise the Chancellor's general doctrine I brought in the concept of good expenditure which, when linked with a good tax system, would give good results on the whole. When we consider the Estate Duty I do not even think it necessary to take account of public expenditure. I regard the operation of the Estate Duty in itself as desirable in so far as it diminishes the grotesque inequality in the distribution of private property which disfigures our Motherland.

With the work begun by Sir William Harcourt in the historic Budget of 1894, Estate Duty took its present general shape and it was continued by a long series of Chancellors of the Exchequer of all party colourings. Nearly all Chancellors, or, at any rate, a large number—I will not recite the names now—of Liberal, Conservative and, more lately, Labour persuasion, have continuously increased the scales and the gradation of the Estate Duty, especially at the upper end of the scale.

Indeed, I was the only Chancellor who ever helped the poor in this field. While graduating upwards the Estate Duty in my Budget of 1946 I did give a relief, far more substantial than anything proposed in this Clause, to the smaller estates. I will not develop the argument; I merely recall a historical incident. Relatively speaking, I gave a tremendous help. I exempted more than 75 per cent. of estates then liable by lifting the bottom level of the exemption from £100 to £2,000. Therefore. I can claim to have done something human, and I hope, helpful, in the field of Estate Duty.

8.15 p.m.

The Estate Duty, highly graduated as we have it today, prevents the rich from continually becoming very much richer. When people say that there is not much difference now between the distribution of private wealth as compared with a period between the wars, and even as compared with the period before the First World War, then I say that it is irrefutable that but for the Estate Duty and the continual increases made in it, the concentration of wealth, the large fraction of the national wealth in the hands of a very small fraction of the people, would be even more grotesque and unequal than it is today. The Estate Duty has saved us from that. I believe that the Chancellor, as a civilised and forward-looking man, would agree with me when I say that it would have been a disgrace to Britain had that state of affairs been allowed to develop. The Estate Duty, ever increasing in weight at the higher levels, has saved us from that disgrace.

It is for that reason that I move the Amendment, so that no part of that advantage should be lost to us. I propose that this relief, to which, indeed, we object, should be a little more than halved. It will apply all up the scale. The Chancellor proposes a reduction of 45 per cent. all up the scale, or all down the scale, in respect of the group of estates affected. I propose the smaller reduction or relief of 20 per cent. instead of 45 per cent. That would also mean that at the top end of the scale the absolute amount of relief, as distinct from the proportionate amount would be reduced. This would be a less disequalising Measure if amended in the way I propose.

There is a curiosity which I should like to ask about because it has a bearing on the application of the Amendment. It is a curiosity of drafting which is not very clear. We begin in subsection (1) by saying that …(except as hereinafter provided)… Estate Duty shall— be charged in accordance with a scale of rates of Duty representing the usual scale for the time being in force with a reduction of forty-five per cent. It is that which I propose to reduce to 20 per cent., but the definition is, as it were, postponed, and in subsection (2) there is a reference to the famous Section 55 of the Finance Act, 1940.

The Chancellor has already touched on the point in what he said on the previous Amendment. This is the Section in which the famous assets basis finds a place. I will not go into the matter in great detail, but it is quite clear, broadly speaking, that the beneficiaries of the reduction—whether the 45 per cent. proposed by the Government or the 20 per cent. proposed in my Amendment—will be those who cannot have their estates valued at the market value of the shares. It is on the other side of the line on which operates the so-called assets basis.

Putting the matter in simple language and not attempting a technical legal statement, it is limited to businesses of whatever size controlled by one man. I think that that is as good a short statement as can be given. I hope that the Financial Secretary will agree that it is substantially that. It is one-man businesses, however large or small. Broadly, that is it. That is a further reason why we take objection to the Clause in this form, and that will be dealt with in a later Amendment. It is businesses of whatever size conducted in this way. I am not sure whether, even if the purpose were accepted, it would not be possible to draft this a little more clearly. I think I have disentangled it after much mental pain, and substantially its purpose is as I have just summarised it.

I notice that the Chancellor has now left the Committee; I do not blame him, for he has been here a great deal today. I was about to ask him—although he has already, so to speak, contracted out of the acceptance of my invitation—to say why it would not have been possible to approach this difficulty by changing not the rate of duty but the whole asset basis. However, I will not pursue that now. I will merely say that if we are to have anything of this kind—and we do not wish to have anything of the kind—introduced into the Estate Duty scheme, then the less it is the better.

If the Government had been in serious trouble with a section of their supporters pressing the other Amendment, and if they had really been in danger of defeat, we should have had to consider carefully whether it was not part of our duty to come to their rescue. However, that did not occur. But we are most anxious to diminish the range of this mischievous and undesirable provision, and it is for that reason that I have moved the Amendment.

Mr. Holt

I am very glad to have had confirmed by the Chancellor, as a result of my interruption of the speech of my hon. Friend the Member for Stechford (Mr. Roy Jenkins), the reason for this Clause, namely, to correct a discrimination against the companies controlled by one man. I am not myself particularly attached to the figure of 45 per cent. and I should like to know whether the Chancellor in the end will alter this Clause to conform to the Amendment of the right hon. Member for Blackburn, West (Mr. Assheton) or the Amendment of the right hon. and learned Member for Kensington, South (Sir P. Spens), on the basis of having a lower percentage than 45 per cent.

The right hon. Gentleman said that there would be a considerable loss of revenue if he accepted the very wide Amendment moved by the right hon. and learned Member for Kensington, South. I think he said the loss would be about £4½ million. If the figure were not 45 per cent. but on some lower basis, there would be considerably less loss, and, personally, I should have thought that the public interest would be better served by whatever allowance is being given to the whole range of industry, both wholesale and retail, rather than that a high percentage of 45 per cent. should be given just to industrial premises, plant and machinery. If we can be given any figures on that aspect of the matter, I should be much obliged.

Mr. Boyd-Carpenter

This Amendment poses a direct and simple point. The right hon. Member for Bishop Auckland (Mr. Dalton) wants the relief given by this Clause to be at 20 per cent., whereas the suggestion is that it should be at 45 per cent. I know that the right hon. Gentleman will acquit me of any discourtesy if I do not follow him into a general discursion whether taxation in general and Estate Duty in particular is what the authors of "1066 and All That" would call "a good thing." I would only comment that the taxation and, indeed, the Estate Duty with which we are concerned in this Amendment, whatever may be the right hon. Gentleman's views on Estate Duty in the broader sphere, is Estate Duty which falls on the plant and equipment of commerce and industry and upon the buildings of industry.

I am not certain whether the right hon. Gentleman was quite clear what the scope of this concession is, and, to avoid any misunderstanding, perhaps I might tell him that it covers not only businesses carried on by an individual trader and carried on in partnership—those are covered by subsection (1) to which he made reference—but also shareholdings and debentures in a company which falls to be valued under Section 55 of the Finance Act. 1940.

The straight issue is whether this should be done at 45 per cent. or at 20 per cent., and I do not think it is necessary for me to detain the Committee at any length on that issue. We have discussed whether this is a good thing to do at all. I think the right hon. Gentleman's real feeling on this Amendment is that this is a bad thing and, therefore, he wants to limit it. Let me put these points to him. In the first place, there is no peculiar or particular sanctity about the rate of 45 per cent. It has the advantage, of course, of being the same as that given for many years in respect of the agricultural value of agricultural land. I think we may take it that hon. Members opposite do not disapprove of that concession in as much as it in fact dates from the Finance Act, 1949.

Mr. Dalton

Since this point is addressed to me, perhaps I might say that when I was Chancellor I carefully considered whether we should maintain it or not, and I judged that the balance was in favour of maintaining it. It was maintained by myself, by the late Sir Stafford Cripps and by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell).

Mr. Boyd-Carpenter

At 45 per cent.?

Mr. Dalton

Yes.

Mr. Boyd-Carpenter

Therefore, if it is a reasonable figure in respect of the agricultural value of agricultural land, it seems to us that if we decide at all to deal with this kind of business assets in this way—and I agree that the right hon. Gentleman thinks we should not—there does not seem to me to be much justification for dealing with these business assets at a different rate from that which we agree is applicable in respect of the agricultural value of agricultural land. The more one considers this, the more force one finds in it.

As was made clear on the earlier Amendment, this concession does not operate on the whole assets of a business. Estate Duty does operate upon the whole assets of a business. Therefore, looked at over the business as a whole, this concession does not amount to a reduction of 45 per cent. in the total of Estate Duty payable. It will vary with the circumstances. In so far as plant and equipment and industrial buildings are a high proportion of the assets, it will move somewhere towards it.

Where, on the other hand, stocks and other business assets form a large proportion, the degree of relief over the value of the business as a whole will be very substantially less than 45 per cent. We are not discussing—except in some wholly theoretical way—a proposal to grant a 45 per cent. relief in respect of the whole assets of a business; we are

concerned with a 45 per cent. relief on assets which are themselves only a part of the assets of a business which attracts Estate Duty when death comes. When one considers that fact, to treat these business assets on a less favourable percentage basis than has been applied with general agreement to the agricultural value of agricultural land—which may constitute a very large proportion of the assets concerned—does seem a trifle illogical.

8.30 p.m.

Although I have listened to what the right hon. Gentleman has said with great attention, as I always do, I feel that this proposal springs not from the basis that, accepting that this should be done, there is any real case for a differential rate between industry and agriculture, but rather from the view that the right hon. Gentleman does not think that it should be done at all. That is an issue which we have discussed and may discuss again in the future.

We are here dealing with the narrow question whether or not, assuming that we do it, we should do it at a conspicuously lower rate than is generally accepted as being applicable to the agricultural value of agricultural land. It seems to me that no case for discrimination has been made out, more especially when one bears in mind the proportion which these assets very often bear to the whole assets of the business. If we are to do this I think we should do it properly and, therefore, at a rate which is equivalent to that in the case of agricultural land.

Question put, "That 'forty-five' stand part of the Clause."

The Committee divided: Ayes, 229; Noes, 210.

Division No. 170.]	AYES	[8.[...]p.m
Aitken, W. T.	Black, C. W.	Clarke, Brig. Terence (Portsmouth, W.)
Alport, C. J. M.	Bossom, Sir A. C.	Conant, Maj. Sir Roger
Amery, Julian (Preston, N.)	Boyd-Carpenter, Rt. Hon. J. A.	Cooper, Sqn. Ldr. Albert
Anstruther-Gray, Major W. J.	Boyle, Sir Edward	Cooper-Key, E. M.
Arbuthnot, John	Braine, B. R.	Craddock, Beresford (Spelthorne)
Assheton, Rt. Hon. R. (Blackburn, W.)	Braithwaite, Sir Albert (Harrow, W.)	Crosthwaite-Eyre, Col. O E
Baldock, Lt.-Cmdr. J. M.	Braithwaite, Sir Gurney	Crouch, R. F.
Baldwin, A. E.	Bromley-Davenport, Lt.-Col. W H.	Crowder, Sir John (Finchley)
Barlow, Sir John	Brooke, Henry (Hampstead)	Darling, Sir William (Edinburgh, S.)
Baxter, Sir Beverley	Buchan-Hepburn, Rt. Hon. P. G. T	Davidson, Viscountess
Beach, Maj. Hicks	Bullus, Wing Commander E. E.	Deedes, W. F.
Beamish, Maj. Tufton	Burden, F. F. A.	Digby, S. Wingfield
Bell, Philip (Bolton, E.)	Butcher, Sir Herbert	Donaldson, Cmdr. C. E. McA
Bell, Ronald (Bucks, S.)	Butler, Rt. Hon. R. A. (Saffron Walden)	Donner, Sir P. W.
Bennett, F. M, (Reading, N.)	Campbell, Sir David	Douglas-Hamilton, Lord Malcolm
Bennett, Dr. Reginald (Gosport)	Cary, Sir Robert	Drayson, G. B.
Birch, Nigel	Channon, H.	Drewe, Sir C.
Bishop, F. P.	Clarke, Col. Ralph (East Grinstead)	Duncan, Capt. J. A. L
Duthie, W. S.	Lindsay, Martin	Robson-Brown, W.
Eden, J. B. (Bournemouth, West)	Linstead, Sir H. N.	Roper, Sir Harold
Erroll, F. J.	Lloyd, Maj. Sir Guy (Renfrew, E.)	Ropner, Col. Sir Leonard
Finlay, Graeme	Lockwood, Lt.-Col. J. C.	Russell, R. S.
Fisher, Nigel	Longden, Gilbert	Ryder, Capt. R. E. D.
Fleetwood-Hesketh, R. F	Lucas, Sir Jocelyn (Portsmouth, S)	Savory, Prof. Sir Douglas
Fletcher-Cooke, C.	Lucas, P. B. (Brentford)	Schofield, Lt.-Col. W.
Ford, Mrs. Patricia	Lucas-Tooth, Sir Hugh	Scott, R. Donald
Fort, R.	McAdden, S. J.	Scott-Miller, Cmdr. R.
Fraser, Hon. Hugh (Stone)	McCorquodale, Rt. Hon. M. S	Simon, J. E. S. (Middlesbrough, W.)
Fyfe, Rt. Hon. Sir David Maxwell	Macdonald, Sir Peter	Smithers, Peter (Winchester)
Galbraith, Rt. Hon. T. D. (Pollok)	McKibbin, A. J.	Smithers, Sir Waldron (Orpington)
George, Rt. Hon. Maj. G. Lloyd	Mackie, J. H. (Galloway)	Smyth, Brig. J. G. (Norwood)
Glover, D.	Maclean, Fitzroy	Snadden, W, McN.
Godber, J. B.	Macmillan, Rt. Hon. Harold (Bromley)	Spearman, A. C. M.
Gomme-Duncan, Col. A	Maitland, Comdr. J. F. W. (Horncastle)	Speir, R. M.
Gower, H. R.	Maitland, Patrick (Lanark)	Spens, Rt. Hon. Sir P. (Kensington, S.)
Graham, Sir Fergus	Manningham-Buller, Rt. Hn. Sir Reginald	Stanley, Capt. Hon. Richard
Grimond, J.	Marlowe, A. A. H.	Stevens, Geoffrey
Grimston, Hon. John (St. Albans)	Marples, A. E.	Steward, W A. (Woolwich, W.)
Grimston, Sir Robert (Westbury)	Marshall, Douglas (Bodmin)	Stewart, Henderson (Fife, E.)
Hall, John (Wycombe)	Maude, Angus	Stoddart-Scott, Col. M.
Harris, Frederic (Croydon, N.)	Maudling, R.	Storey, S.
Harris, Reader (Heston)	Maydon, Lt-Comdr S. L. C	Strauss, Henry (Norwich, S.)
Harvey, Ian (Harrow, E.)	Medlicott, Brig. F.	Studholme, H. G.
Harvie-Watt, Sir George	Mellor, Sir John	Summers, G. S.
Hay, John	Monckton, Rt. Hon. Sir Walter	Sutcliffe, Sir Harold
Head, Rt. Hon. A. H.	Moore, Sir Thomas	Taylor, Sir Charles (Eastbourne)
Heald, Rt. Hon. Sir Lionel	Mott-Radclyffe, C. E	Taylor, William (Bradford, N.)
Heath, Edward	Nabarro, G. D. N.	Teeling, W.
Higgs, J. M. C.	Neave, Airey	Thomas, Rt. Hon. J. P. L. (Hereford)
Hinchingbrooke, Viscount	Nicholson, Godfrey (Farnham)	Thomas, Leslie (Canterbury)
Hirst, Geoffrey	Nicolson, Nigel (Bournemouth, E.)	Thompson, Kenneth (Walton)
Holland-Martin, C. J.	Nield, Basil (Chester)	Thompson, Lt.-Cdr. R. (Croydon, W.)
Hollis, M. C.	Noble, Comdr. A. H. P	Thornton-Kemsley, Col. C. N.
Holt, A. F.	Nugent, G. R. H.	Tilney, John
Hopkinson, Rt. Hon. Henry	Oakshott, H. D	Vane, W. M. F.
Hornsby-Smith, Miss M. P.	Odey, G. W.	Vaughan-Morgan, J. K.
Horobin, I. M.	O'Neill, Hon. Phelim (Co. Antrim, N.)	Vosper, D. F.
Horsbrugh, Rt. Hon. Florence	Orr, Capt. L. P. S.	Wakefield, Edward (Derbyshire, W.)
Howard, Gerald (Cambridgeshire)	Orr-Ewing, Charles Ian (Hendon, N.)	Walker-Smith, D. C.
Howard, Hon. Greville (St. Ives)	Orr-Ewing, Sir Ian (Weston-super-Mare)	Wall, Major Patrick
Hudson, Sir Austin (Lewisham, N.)	Osborne, C.	Ward, Hon. George (Worcester)
Hulbert, Wing Cdr. N. J.	Page, R. G.	Ward, Miss I. (Tynemouth)
Hurd, A. R.	Perkins, Sir Robert	Waterhouse, Capt. Rt. Hon. C.
Hutchison, Sir Ian Clark (E'b'rgh, W.)	Peto, Brig. C. H. M	Watkinson, H. A.
Hylton-Foster, H. B. H.	Peyton, J. W. W.	Webbe, Sir H. (London & Westminster)
Iremonger, T. L.	Pickthorn, K. W. M.	Wellwood, W.
Jenkins, Robert (Dulwich)	Pitman, I. J.	Williams, Rt. Hon. Charles (Torquay)
Johnson, Eric (Blackley)	Pitt, Miss E. M.	Williams, Gerald (Tonbridge)
Jones, A. (Hall Green)	Price, Henry (Lewisham, W.)	Williams, Sir Herbert (Croydon, E.)
Joynson-Hicks, Hon. L. W	Prior-Palmer, Brig. O. L	Williams, Paul (Sunderland, S.)
Kerby, Capt. H. B.	Profumo, J. D.	Williams, R. Dudley (Exeter)
Kerr, H. W.	Raikes, Sir Victor	Wills, G.
Lambert, Hon. G.	Redmayne, M.	Wilson, Geoffrey (Truro)
Lambton, Viscount	Rees-Davies, W. R	Wood, Hon. R.
Leather, E. H. C.	Remnant, Hon. P.
Legge-Bourke, Maj. E. A. H.	Renton, D. L. M.	TELLERS FOR THE AYES:
Legh, Hon. Peter (Petersfield)	Ridsdale, J. E.	Mr. T. G. D. Galbraith and
Lennox-Boyd, Rt. Hon. A. T.	Robinson, Sir Roland (Blackpool, S.)	Mr. Robert Allan.
NOES
Acland, Sir Richard	Brockway, A. F.	Davies, Ernest (Enfield, E.)
Adams, Richard	Brook, Dryden (Halifax)	Davies, Harold (Leek)
Albu, A. H.	Broughton, Dr. A. D. D.	Davies, Stephen (Merthyr)
Allen, Arthur (Bosworth)	Brown, Rt. Hon. George (Belper)	de Freitas, Geoffrey
Allen, Scholefield (Crewe)	Brown, Thomas (Ince)	Deer, G.
Anderson, Frank (Whitehaven)	Burke, W. A.	Dodds, N. N.
Attlee, Rt. Hon C. R.	Burton, Miss F. E.	Donnelly, D. L.
Awbery, S. S.	Butler, Herbert (Hackney, S.)	Dugdale, Rt. Hon. John (W. Bromwich)
Bacon, Miss Alice	Callaghan, L. J.	Ede, Rt. Hon. J. C.
Bartley, P.	Castle, Mrs. B. A	Edelman, M.
Benson, G.	Champion, A. J.	Edwards, Rt. Hon. John (Brighouse)
Beswick, F.	Chetwynd, G R	Edwards, W. J. (Stepney)
Bing, G. H. C	Clunie, J.	Evans, Albert (Islington, S. W.)
Blackburn, F.	Coldrick, W.	Evans, Edward (Lowestoft)
Blenkinsop, A.	Corbet, Mrs. Freda	Fernyhough, E.
Blyton, W. R.	Cove, W. G.	Fienburgh, W
Boardman, H,	Craddock, George (Bradford, S.)	Finch, H. J.
Bottomley, Rt. Hon. A. G.	Crosland, C. A. R.	Fletcher, Eric (Islington, E.)
Bowden, H. W.	Daines, P.	Follick, M.
Bowles, F. G.	Dalton, Rt. Hon. H	Forman, J. C.
Braddock, Mrs. Elizabeth	Darling, George (Hillsborough)	Fraser, Thomas (Hamilton)

Freeman, Peter (Newport)	McNeil, Rt. Hon. H.	Shinwell, Rt. Hon, E.
Gaitskell, Rt. Hon. H. T. N.	Mallalieu, E. L. (Brigg)	Short, E. W.
Gibson, C. W.	Mann, Mrs. Jean	Shurmer, P. L. E.
Glanville, James	Manuel, A. C.	Silverman, Julius (Erdington)
Gordon Walker, Rt. Hon. P. C	Mason, Roy	Silverman, Sydney (Nelson)
Greenwood, Anthony	Mayhew, C. P.	Simmons, C. J. (Brierley Hill)
Grenfell, Rt. Hon. D. R.	Mellish, R. J.	Skeffington, A. M.
Grey, C. F.	Mitchison, G. R.	Slater, J. (Durham, Sedgefield)
Griffiths, David (Rother Valley)	Monslow, W.	Smith, Ellis (Stoke, S.)
Hale, Leslie	Moody, A. S.	Smith, Norman (Nottingham, S.)
Hall, Rt. Hon. Glanvil (Colne Valley)	Morgan, Dr. H. B. W.	Snow, J. W.
Hall, John T. (Gateshead, W.)	Morley, R.	Sorensen, R. W.
Hamilton, W. W.	Morris, Percy (Swansea, W.)	Soskice, Rt. Hon. Sir Frank
Hannan, W.	Mort, D. L.	Sparks, J. A.
Hargreaves, A.	Moyle, A.	Steele, T.
Hastings, s.	Mulley, F. W.	Stokes, Rt. Hon. R. R.
Hayman, F. H.	Neal, Harold (Bolsover)	Strachey, Rt. Hon. J.
Henderson, Rt. Hon. A. (Rowley Regis)	Oldfield, W. H	Stross, Dr. Barnett
Herbison, Miss M.	Oliver, G. H.	Sylvester, G. O.
Hewitson, Capt. M	Orbach, M.	Taylor, John (West Lothian)
Hobson, C. R.	Oswald, T.	Taylor, Rt. Hon. Robert (Morpeth)
Holman, P.	Padley, W. E.	Thomas, Iorwerth (Rhondda, W.)
Houghton, Douglas	Paling, Rt. Hon. W. (Dearne Valley)	Thomas, Ivor Owen (Wrekin)
Hudson, James (Ealing, N.)	Paling, Will T. (Dewsbury)	Thomson, George (Dundee, E.)
Hughes, Emrys (S. Ayrshire)	Palmer, A. M. F.	Thornton, E.
Hynd, H (Accrington)	Pannell, Charles	Tomney, F.
Hynd, J. B. (Attercliffe)	Pargiter, G. A.	Turner-Samuels, M.
Irvine, A. J. (Edge Hill)	Parker, J.	Ungoed-Thomas, Sir Lynn
Irving, W. J. (Wood Green)	Paton, J.	Usborne, H. C.
Jay, Rt. Hon. D. P. T.	Peart, T. F.	Viant, S. P.
Jeger, George (Goole)	Plummer, Sir Leslie	Warbey, W. N.
Jeger, Mrs. Lena	Popplewell, E.	Watkins, T. E.
Jenkins, R. H. (Stechford)	Porter, G.	Wells, Percy (Faversham)
Johnson, James (Rugby)	Price, J. T. (Westhoughton)	Wheeldon, W. E.
Jones, David (Hartlepool)	Price, Philips (Gloucestershire, W)	White, Mrs. Eirene (E. Flint)
Jones, Jack (Rotherham)	Proctor, W. T.	White, Henry (Derbyshire, N. E.)
Keenan, W.	Pryde, D. J.	Whiteley, Rt. Hon. W.
Kenyon, C.	Pursey, Cmdr. H.	Wigg, George
Key, Rt. Hon. C. W	Reeves, J.	Willey, F. T.
King, Dr. H. M.	Reid, Thomas (Swindon)	Williams, W. R. (Droylsden)
Kinley, J.	Reid, William (Camlachie)	Williams, W. T. (Hammersmith, S.)
Lawson, G. M.	Robens, Rt. Hon. A.	Willis, E. G.
Lee, Frederick (Newton)	Roberts, Albert (Normanton)	Winterbottom, Ian (Nottingham, C.)
Lever, Leslie (Ardwick)	Roberts, Goronwy (Caernarvon)	Winterbottom, Richard (Brightside)
Lindgren, G. S.	Robinson, Kenneth (St. Pancras, N.)	Woodburn, Rt. Hon. A.
Lipton, Lt.-Col. M.	Rogers, George (Kensington, N.)	Wyatt, W. L.
Logan, D. G.	Ross, William	Yates, V. F.
McInnes, J.	Royle, C.
McKay, John (Wallsend)	Shackleton, E. A. A.	TELLERS FOR THE NOES:
McLeavy, F.	Shawcross, Rt. Hon. Sir Hartley	Mr. Holmes and Mr. Wallace.

Mr. Boyd-Carpenter

I beg to move, in page 28, line 10, at the end, to insert: (6) The relief from estate duty conferred by this section in respect of, or by reference to the value of, machinery or plant used in any business shall, in the case of machinery or plant not used exclusively in that business, be such part only of the relief conferred apart from this subsection as appears to the Commissioners of Inland Revenue to be just and reasonable having regard to all the relevant circumstances of the case and, in particular, to the extent of any other use (whether for business purposes or not). This Amendment is designed to meet what I believe to be the point behind the Amendment in the name of the hon. Member for Stechford (Mr. Roy Jenkins), in page 28, line 47, at end, add: (10) In this section "machinery or plant" includes office machines and mechanical office equipment, but does not include office furniture or road vehicles unless they are of a type not commonly used as private vehicles and unsuitable to be so used or are provided wholly or mainly for hire to or for the carriage of members of the public in the ordinary course of a business. The hon. Member for Edmonton (Mr. Albu), who intervened on the last Amendment but one, will remember that I made some reference to this Amendment.

The short point that arises and which we can deal with in the Amendment is this. There will be some plant and equipment used partly for business and partly for private purposes. Probably the two most obvious examples are those which the hon. Member for Stechford sought to deal with in his Amendment: that is to say, motor vehicles, on the one hand, and types of office furniture, on the other hand. But theoretically there might be other examples, and this Amendment, unlike that of the hon. Member for Stechford, is general in its scope and would cover all forms of plant and equipment in respect of which these circumstances arose

I can best illustrate the effect by giving a specific example. Take the case of the motor car that is used two-thirds for business and one-third for private purposes. The Amendment would provide that the relief would continue to apply in respect of the two-thirds of the value of the vehicle which related to business use but would not apply in respect of the one-third which related to private use.

It seems to us that the method provided by the Amendment is the most effective way of dealing with this matter. In the majority of cases in which it would arise in practice, the proportions would probably have been established for Income Tax purposes anyhow. The easiest course would be to adopt for purposes of this Estate Duty concession the same proportion as has been accepted for Income Tax purposes.

Mr. Jay

Does the right hon. Gentleman mean that but for the Amendment the effect of the Bill would have been that a motor car used only one-third for business purposes would nevertheless have got the whole relief for death duties?

Mr. Boyd-Carpenter

Yes. It is to correct that, in the light of the Amendment by the hon. Member for Stechford and the thought we gave arising from it, that the Amendment is intended.

As the Committee will appreciate, very little money is involved in this change, but it seems to us that as a matter of principle the private use ought not to attract the relief which is aimed, as the Committee has already heard several times from me, at certain business assets. We feel that this general method is preferable to the method proposed by the hon. Member for Stechford of simply cutting out two particular classes of goods.

8.45 p.m.

Mr. Roy Jenkins

I recognise that, as the right hon. Gentleman says, this Amendment, in certain respects, goes further than the Amendment in my name and the names of my hon. Friends; but in one respect it does not go quite so far. Our Amendment was designed to deal with the difficulty, which I think the Government recognise, that the whole question of private motor cars in business is open to abuse.

It is not easy to come along and say, "Two-thirds of this motor car is used in business and one-third is used privately." When dealing with motor cars in particular, it is very difficult to be sure that the number and type of motor cars is not affected by the private convenience of the individuals concerned, rather than by the direct interests of business.

It is clear that the Government to some extent recognise that this is so by the fact that they give no investment allowance for motor cars or any vehicles which can be used as private vehicles. I would ask the right hon. Gentleman why, in accepting that principle in the case of the investment allowance, he does not feel that it was also necessary to accept it in the case of this Clause.

Mr. Boyd-Carpenter

It is only accepted in respect of investment allowance to the extent that the initial allowance remains, but the additional investment allowance is not given. In the case of the hon. Gentleman's Amendment, he would have gone the whole way and deprived the person who owned the motor car of the full benefit.

It is the fact that, in coming to the business in which we are concerned from the point of view of Estate Duty, the motor car is an important part of the assets, and we feel that it would be wrong to cut it out of the benefit of this concession, in so far as it is used for business purposes. If the Committee accepted this Amendment, it would only be that part of it relating to business purposes which would get the benefit from this concession. We feel that in the circumstances of Estate Duty, it is right to do that, and it would be unfair on certain types of business if we were not to give the concession.

Amendment agreed to.

Mr. Boyd-Carpenter

I beg to move, in page 28, line 13, to leave out "so treated," and to insert: treated as an industrial hereditament (or industrial lands and heritages). This is a drafting Amendment. We have used the term "industrial hereditament" because we thought it was applicable to Scottish law. We have to add the words: (or industrial lands and heritages) because we are advised that that is the equivalent in Scottish law.

Notice taken that 40 Members were not present—

The Temporary Chairman (Sir Gordon Touche)

We had a Division about a quarter of an hour ago when over 400 Members were present.

Amendment agreed to.

Mr. Jay

I beg to move, in page 28, line 35, at the end, to insert: (a) to a business the net assets of which exceed fifty thousand pounds or to the business of a company where the relevant proportion of the net value of the shares or debentures as defined in subsection (3) of this section exceed fifty thousand pounds. This is an Amendment to which we attach some importance on this side of the Committee, and which, I am sure, will prove helpful to the Chancellor, and also, incidentally, be welcomed by the hon. Member for Langstone (Mr. Stevens), who spoke earlier today in favour of small businesses suffering from Estate Duty.

The purpose of the Amendment is to confine the relief given under this Clause to businesses with approximate net assets of under £50,000, and thereby exclude the concession from all such businesses. We are not entering into the general argument about this concession, which we regard as quite inadmissible and for which, it seems to me, no general case has been made out, for we shall come to that later on the Question, "That the Clause, as amended, stand part of the Bill." We are here assuming that the general concession takes place and we are arguing that it should be limited to businesses of under £50,000.

As the Bill stands there is no limitation at all to the size of the business to which this concession applies. All the propaganda which we have heard for concessions to family businesses has used the term "family business" in such a way that it has come to mean, in the ordinary man's mind, a small type of business. But this is common ground: this concession is not limited in any sense to a business below a certain size.

Whether the concession is justified or not in the case of a really small business, surely it is grossly unfair to give such a discriminatory concession to a one-man business worth, perhaps, hundreds of thousands or even millions of pounds. Earlier, the hon. Member for Hall Green (Mr. Aubrey Jones) objected to discrimination in direct taxation. It is hard to imagine a worse case of discrimination than that between two men who die, one worth £1 million in various forms of property which would not attract this concession, and another worth the same amount but all in virtue of one family business, who would get the enormous concession of 45 per cent. off the 80 per cent. rate of Estate Duty. That would be the effect of the Clause.

The Financial Secretary may perhaps argue that there are very few businesses which are private companies within the rather narrow definition of Section 55 of the Finance Act, 1940, which is relevant for the purposes of this Clause, and which are worth very large sums of money. He would have the hon. Member for Kidderminster (Mr. Nabarro) against him, for the hon. Member earlier argued quite rightly that many private businesses and family businesses in this sense are large. I think most of us could quote examples of such family businesses. On Second Reading I pointed out—and I still think it is relevant—that up to a certain year in the 'thirties, the firm of Morris Motors was a private interest very largely in the control of one man.

Mr. Charles Pannell (Leeds, West)

It was 1926.

Mr. Jay

Shortly before the date when it became a public business, the firm must have been worth some millions, if not £10 million or £20 million. The Financial Secretary rightly points out that the concession refers only to certain assets—roughly, the plant, equipment and buildings of an industrial company—but I should have thought that a very high percentage of the assets of Morris Motors would have been of that kind and therefore would attract the concession under the Clause.

On Second Reading, the Chancellor suggested that I mentioned Morris Motors only to create general political prejudice about this concession, but that was not my intention. It was merely to illustrate what the Clause does, and I am glad to see that the right hon. and learned Member for Kensington, South (Sir P. Spens) appreciates that that is the purpose of the illustration. When we are asked to approve a concession of this kind on the ground of certain arguments, we ought to be clear about what we are arguing. Surely it is not the intention of the Committee to grant relief to the extent of 45 per cent. of 80 per cent. in death duties in the case of a single individual owning a business which might be worth £5 million or £10 million. That would be discrimination carried to an extraordinary degree.

I should like to ask the Financial Secretary whether I am right in thinking that a business of the kind of Morris Motors before 1926 would have attracted this relief. I should also like to ask him is it really the Government's intention that relief on that scale and in that extraordinary discriminatory fashion should be given by the Clause. I want to ask him one other question arising out of what he said on this matter in his Second Reading speech. He was inclined to argue that the grievance or hardship was greater in the case of the larger businesses than in the case of the smaller.

He will remember that our objection to the whole of this concession is largely based on the Report of the Board of Inland Revenue on Estate Duty and Family Businesses, Cmd. 8295, which went into the whole case for the relief of Estate Duty on family businesses and found that the great weight of evidence suggested that there was absolutely no case made out at all. The Financial Secretary, on Second Reading, referred to the fact that the Inland Revenue stated that on businesses worth £1,000 and upwards—this figure I think is agreed—only 1.6 were found to have been involved in an encroachment on the trading assets in order to pay the Estate Duty, and that in the case of all companies other than the 1.6 there were other assets available sufficient to pay the duty.

The Financial Secretary replied that if that was true for the firms whose assets exceeded £1,000, then it was different in the case of firms with assets of £10,000. These are his words: If, however. we take cases where trade assets exceed £10,000—and. after all, that is not a very large business—the percentage where encroachment takes place rises to 25 per cent."—[OFFICIAL REPORT, 3rd May, 1954; Vol. 527, c. 35.] If that be true it would suggest a very special problem for the larger businesses.

I should like to ask the Financial Secretary from where he gets the 25 per cent. and if he can answer that straightaway I shall be grateful. It will clear up at least one point in the argument. Paragraph 5 of the White Paper to which I have referred points out that 1.6 per cent. was the correct figure for the businesses of over £1,000, and then says: If £20,000 were taken as the starting point for the present investigation on the ground that this in real terms corresponds much more closely to £10,000 in 1922, the percentage would go up to 3.4 per cent. On the face of it that figure seems to contradict the Financial Secretary's 25 per cent., for which I can find no authority in this Report whatever. If, in fact, that figure was erroneous or was given by the Financial Secretary by mistake for something else, then I think he was rather seriously misleading the House on Second Reading. I hope he will clear that up before we part with this Amendment tonight.

9.0 p.m.

Our main point is, even if a case could be made out—we think it cannot—for this concession over the rest of the field—that there is little or no case against limiting it to firms with assets of £50,000 and under. I hope that the Amendment will commend itself to the Chancellor, who still shows little inclination to accept the advice of this Committee. I hope that the Amendment, which is so much in line with the Chancellor's own arguments and is so reasonable in every way, and particularly as the Financial Secretary got his figures wrong on the Second Reading, will this time be acceptable to the Government.

Mr. Albu

I support the Amendment. I do not think we have enough figures to indicate the number of companies or businesses of different sizes that would be affected by the Clause. One has therefore to make guesses.

I think that my right hon. Friend the Member for Battersea, North (Mr. Jay) would agree that the number of companies of the size of Morris Motors in 1926, is rather small and might be considered marginal. Nevertheless, there are companies which reach substantial size. In view of the statement from the Treasury Bench that it is not the intention of the Government to change by this Clause the relative level of taxation but only to deal with what they consider to be an anomaly, those of us who are not anxious to see any radical and regressive change in the present incidence of taxation on Estates as a whole must try to understand what the effect of the present proposals might be.

In the 96th Report of the Commissioners of Inland Revenue, on page 112, Table No. 104, there is a very interesting classification of property passing on death in 1953. It shows that the proportion of estates represented by stocks and shares in private British companies goes up the larger the estate. This is an extremely significant fact. It starts at the low level of 1.83 per cent. for estates between £2,000 and £5,000 and rises to 8.63 per cent. for estates between £40,000 to £50,000. For estates between £200,000 and £300,000 it is 16.18 per cent., for estates between £500,000 and £1 million it is 19 per cent., for estates between £1 million and £2 million it is 26 per cent. and for estates of £2 million and upwards it is more than 30 per cent.

It is a pretty reasonable assumption, if one understands anything about the nature of private companies, that the shares of the vast majority of these larger estates will be all in one or two private companies associated with each other. It looks as though this concession might be very substantial for a number of very wealthy inheritors. It is not possible to get the figures exactly because the Report does not indicate exactly the size of the companies at different ranges nor does it indicate the proportion of their fixed assets; nor is it possible to know how many of them were valued on a fixed-asset basis. In view of what we know about the gross inequalities of the distribution of wealth, the extraordinary range in the size of estates and the very small number of very large estates which comprise the bulk of the wealth passing on death, there is some significance in these figures.

When we are discussing the question of family businesses, it is always discussed as a matter of the passing of small businesses, but surely these figures are sufficient to show that this is by no means the case. The intentions of the Government are not the intentions of their back benchers. They are quite different, as the Chancellor and the Financial Secretary have told us quite clearly, but even from the point of view of the Government's intentions, to deal with what may bean anomaly and almost insuperable difficulties, as they seem to think, with regard to businesses with a substantial proportion of fixed assets, it is a question whether these difficulties really apply in cases of this sort.

Mr. George Odey (Beverley)

From the point of view of principle, what does it matter whether the business is large or small?

Mr. Albu

I do not think that the hon. Member has been here during the debate.

Mr. Odey

Yes, indeed, during much of it.

Mr. Albu

I remember the hon. Member interrupting a speech which I made on a similar subject during our debates on the Finance Bill last year.

Mr. Gordon Walker (Smethwick)

It is the same speech and the same interruption.

Mr. Albu

Hon. Members really must not think that I am still making the same speech. Much has happened since then. From the point of view of those of us who are not in favour of very large inheritances, and in view of the fact that, because of the progressive nature of Estate Duty, the effect of a concession will be very much greater for large estates than for small estates, there are very substantial reasons why we should make this differentiation. If the hon. Member for Beverley (Mr. Odey) had been present during the whole of the debate he would have known that on a previous Amendment we had a discussion on whether the Government's intention was to relieve or readjust taxation because of inequities, or to deal with an anomaly which had an effect upon the national economy. The Government quite clearly told their own back bench supporters, who had been pleading for the widening of the Clause, that it was not their intention to deal with taxation relief in the Clause but with something which had been brought to their attention, namely, an anomaly in the assessment of estates for Estate Duty which was considered to have an inhibiting effect on industrial expansion. They had no other intention whatsoever. It is on that basis that I am now dealing with this Amendment.

Mr. Odey

It is very kind of the hon. Member to have informed me but I was present at the time.

Mr. Albu

Then I am even more surprised at the hon. Member's intervention.

My point is that in the case of the larger business—and I suppose all of them would be companies—I find it difficult to believe that they would not be able to raise the necessary money to pay the duty. As has been pointed out by my right hon. Friend the Member for Battersea, North (Mr. Jay), only in a negligible number of cases would those concerned lose control of their businesses. There is a substantial difference in this case between the larger and smaller businesses. The small businesses have more difficulties and, among other things, the larger businesses must be more firmly established.

It seems to me that the large business, or large company, in private hands—except in very rare cases, like the original Morris Motors—can hardly be a business of the first generation. The inheritance and transference can hardly be the first, although it may be the second or the third. From the point of view of hon. Members on this side of the Committee, that greatly strengthens the argument for reducing the concession. Whatever may be the case for assisting the business over the first inheritance, I believe that there is very little case for continuing to give concessions in the third or fourth generation.

Arguments against that have been deployed in the Committee before and I hope to have something to say on the matter on the Motion, "That the Clause stand part of the Bill," where I think it would be more appropriate because, as you know, Sir Charles, we on this side of the Committee are altogether opposed to the concession in the Clause. If there is any justification for the case of the Government that there is an industrial necessity to maintain these businesses in being and that they cannot be maintained in being because of the present method of assessment and the difficulty in paying the duties placed on them, on that basis alone, although I can see that possibly there may be a case for the smaller company—the business passing for the first time—there surely can be no case whatever for making a very considerable concession to very much larger companies, which apparently form a very high proportion of the total value of estates in the higher ranges.

When I read the figures for the first time I was surprised and I am not entirely certain how to interpret them. But I think it is impossible not to draw from them the conclusion that in the larger estates there is a very high proportion of larger businesses remaining and any substantial concession made to them must in the end have a considerable effect on the return from Estate Duty which, even after the number of years it has been in operation—my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) went back into history on the subject—has had an extraordinarily small effect on the distribution of wealth in this country.

Mr. Grimond

I cannot say that I feel that the arguments of the hon. Member for Edmonton (Mr. Albu) flowed to his conclusions. I felt he had come to certain conclusions about the Amendment and was supporting it by arguments not in all cases really on his side. I do agree that there are strong arguments against the Clause on a whole. It might well be said that there will be individual cases in which one rich man will have to pay a very much higher rate of duty than another simply because one happens to hold shares in a public company and another holds shares in a private company.

It may well be argued, as has been argued in this Committee, that there will be injustice as a result of this Clause. I feel that all the more because if we must have taxation—and, clearly, we must—I feel that death duties are not the worst form of taxation. In fact, I would much rather see direct forms of taxation like Income Tax reduced instead of death duties reduced.

What I did not entirely grasp is the particular reason for this Amendment. Earlier, a distinction was drawn between the small and the family business and a very effective defence was put up from this side of the Committee for the small business. The innate chivalry of the hon. Member for Gloucestershire, South (Mr. Crosland), for instance, has been brought out by the thought of these pitiful little businesses struggling against the Chancellor of the Exchequer and there is something very British in his attitude. I like to see that the economic machine, which we know is contained inside the head of the hon. Member for Gloucestershire, South, is slightly mellowed by these emotional appeals. I have recommended before to the hon. Member that he should put down an Amendment asking for some consideration for small businesses with more than two women on the board. I think there is a great deal to be said for it.

9.15 p.m.

I ask the Chancellor to agree that there are small businesses, and small businesses, Some may be run as sweat shops. Some may be owned by rich men. The purpose of this Clause, in essence, is neither to help the family business, nor the small business, but to prevent businesses from being put out of operation because of the action of the Estate Duty. Rightly or wrongly, the Chancellor takes the view that there may be types of businesses—shops, or industries, or even antique shops—which should not be killed, not because a rival business may be able to do better, but simply from the effect of the Estate Duty.

If that be so, is it logical to limit the effect of this Clause to businesses which have assets of £50,000 or under? I appreciate that there may be injustices between the family of one testator and another, between a rich man and a man who is not so rich. But if we look at the reason for the Clause I do not see that the difficulty is met by limiting the concession to certain businesses. It may be that an extremely rich man happens to be the sole owner of a business with assets worth only £40,000. He will have the full benefit of the provisions of this Clause while a comparatively poor family with a business worth £60,000 will not.

I know that the right hon. Gentleman who moved the Amendment is not tied to the particular figure mentioned, but wherever the amount is fixed the same difficulty will arise which, I suggest, is a result of not looking at the reason for the Clause. If it is felt that this is so unfair as between one testator and another the right and logical argument, and the one which I think the Labour Party will pursue, is to vote against the Clause. There is no Amendment which would make it acceptable. Although I see the difficulties I think we must accept them with the Clause.

Mr. Roy Jenkins

There is a point which should be borne in mind when we are discussing whether it be practicable and desirable to place a limit on this sort of advantage and to the extent to which the concession can be given. It is that the larger the business the more easy it would be to turn it into a public company if the effects of the Estate Duty made that necessary.

The Government have come forward with this concession on the express ground that they are anxious to preserve businesses which are valuable units in the national economy from being put into difficulties, and perhaps driven out of existence, by the operation of the Estate Duty. I think that is exaggerated, but it is less exaggerated in the case of small businesses because we have chosen the figure of £50,000.

I agree with the hon. Member for Orkney and Shetland (Mr. Grimond) that one could have chosen another figure and that we could argue as to what it should be. But there is a level at which small businesses shade into bigger businesses, and we chose £50,000 as being a reasonable point. It is obviously the case that as one moves from small to large businesses, so the danger of the business being put out of existence, and broken up as a result of the operation of the present death duty provisons unamended by this Clause, become very much less. That is a point which the hon. Member for Orkney and Shetland did not face.

If one looks at the activities of E.D.I.T., the finance corporation set up to deal with the troubles of firms which meet difficulties because of Estate Duty, one sees that none of its deals at present involves an investment of more than £60,000 in any one company. What moved it in that direction was the feeling that substantially bigger companies which wanted a great investment could solve their problem more easily by going to the market and turning themselves into public companies. We should hear that important point in mind when determining whether or not the concession should be limited in the way we suggest.

The hon. Member for Orkney and Shetland invited us to vote against the Clause, suggesting, that that was the only way in which we could satisfactorily express our general disapproval. I did not gather whether he would come with us into the Lobby against the Clause. That certainly is a means of doing it, but, undesirable though the Clause may be, it would none the less be possible to reduce its undesirable effects by limiting it to the smaller companies. There is a logical case for doing this on the grounds of the greater ease with which other steps can be taken by the large companies if Estate Duty presents them with the difficulties which the Government have in mind.

Mr. Crosland

I assure the hon. Member for Orkney and Shetland (Mr. Grimond) that I shall try once again to make a British speech. I should certainly consider it very bad taste to make my speech in Italian, and I imagine that I should be out of order if I did so. I am sorry that he himself is not going to show a more British attitude by expressing his views in the Lobby. I should have liked to follow up his allusion to women on the board, but I missed the point of it and could not follow what was in his mind.

The hon. Member made a serious point that we ought to consider. He said that a small business is not necessarily a good or desirable thing, because it may be a sweat shop. That is true. It would be foolish for anyone to set out with a complete prejudice in all circumstances in favour of small businesses rather than large businesses, but the reason the Opposition have put down a great number of Amendments to this Finance Bill and to previous Finance Bills specifically designed to lighten the burden of taxation on small businesses is not necessarily because we think that small businesses are better than big businesses, but because we think that the present level of taxation hits small businesses much worse than it hits large businesses. Small businesses find it much harder under the present tax rates to expand and obtain the necessary finance. I assure the hon. Member that it is not because we hold some very romantic view about small businesses.

An hon. Member opposite raised a very serious point which was extremely relevant to the Amendment when he asked why the Opposition want to differentiate between the small family business and the large family business and why we have tried to confine the Clause in this way. It is not illogical for us to say that we are more concerned to limit the Clause to the smaller family businesses than to apply it to the larger family businesses as well.

One reason is that, as my hon. Friend the Member for Edmonton (Mr. Albu) pointed out, since the Opposition are bound to look upon Estate Duty purely as a redistributive instrument, the exemption of large family businesses will have a more serious effect on the distribution of our capital wealth than would relief of small family businesses only. That is one reason for confining the Clause to small family businesses.

The second reason, which I mentioned in another connection some time ago, is that the small family business is much more likely to have financial difficulties than the larger family business, and therefore, is much more deserving of the concession in this respect.

The third reason—and here I come back to the point with which I began—is that it would be true to say that most of us on this side of the Committee have rather more prejudice in favour of the small family business as such than the large family business as such. I am not at all certain that one could make out for the really large family business quite as strong a case as for the small family business on the kind of social grounds that are frequently put forward from the other side of the Committee.

We are told—and it is an argument which has much validity—that the family business, though not necessarily, may have rather better relations on account of the personal touch, because all the workers in the business have known the family operating that business, perhaps for several generations, and there is a much more intimate atmosphere and better relations generally. I can see that this argument can very well be true of relatively small family businesses but not of the really very substantial ones. Therefore, for those three reasons, it is true that we think it is acceptable to differentiate between the smaller family business and the larger one.

At different times we have heard a great deal from hon. Gentlemen opposite about small family businesses, and we had hoped to gain their support when we put down Amendments designed to relieve the smaller business from the present rates of profits taxation both last year and the year before, but we have never had very much support from hon. Gentlemen on the other side of the Committee. When they are given an opportunity of doing what they really want and limiting this Clause to the people who need protection, it is rather disappointing that we have had such little support from the other side.

I see that the hon. and gallant Member for Knutsford (Lieut.-Colonel Bromley-Davenport) is in his place, and he has been sitting there during the whole of this discussion and is clearly interested in the matter. He has not spoken a great deal this year—rather less than usual—and he has been greatly missed. I therefore hope that he will give us some support.

Lieut.-Colonel W. H. Bromley-Davenport (Knutsford)

I welcome the remarks of the hon. Gentleman, but when I listen to the long, boring accounts of the two long-haired intellectuals opposite. I have "had it," and so have many of my hon. Friends.

Mr. Boyd-Carpenter

I do not think I am called upon to add anything to what has just been said by my hon. and gallant Friend the Member for Knutsford (Lieut.-Colonel Bromley-Davenport), but I should like to say a word or two about the Amendment.

As I think the right hon. Gentleman the Member for Battersea, North (Mr. Jay) will appreciate, it is somewhat curiously phrased, in that the limit of £50,000 is related to net assets in the case of unincorporated businesses dealt with in subsection (1), whereas subsection (2) relates only to the relative proportion of the net value of the shares, and, therefore, the limit of £50,000 would operate generally even within the sphere of the businesses with which we are concerned. I do not know whether that is intentional, but it certainly would be a rather odd effect, and the hon. Gentleman did not give any indication of any particular reason for so framing it.

The real point which is raised by this Amendment is the suggestion that, if this relief comes into effect, it should be cut off at a figure of about £50,000. That is the issue, and it is to that issue that I should like to address one or two observations.

9.30 p.m.

One consequence of doing what the right hon. Gentleman suggests would be to discourage very severely businesses approaching the £50,000 level from expanding. It would be perfectly clear to any business slightly below that level that to expand a small degree above it would carry a considerable risk of losing its Estate Duty concession, and in so far as these provisions do operate—and I think they do to some extent—on the decisions that business men make as to investment and expansion, the insertion of a rigid limit at the £50,000 figure would undoubtedly discourage what the right hon. Gentleman apparently regards as small businesses from becoming what the right hon. Gentleman apparently regards as large businesses. I am sure that that discouragement of this form of business enterprise would be a very great pity and entirely contrary to the ideas on the subject which were so eloquently expressed by the hon. Member for Gloucestershire, South (Mr. Crosland) in our debates last week.

Mr. Jay

I recognise that there is a tapering difficulty in this case, but if the right hon. Gentleman is willing to improve our Amendment so as to get over that difficulty, in which he and his advisers would be even more skilful than we would, we should be very glad to support him.

Mr. Boyd-Carpenter

We would be deliberately giving a less proportionate advantage as the business itself expanded in size and became liable in the ordinary way to higher rates of Estate Duty. The effect of a tapering provision could not eradicate that difficulty, because it is fundamental to the right hon. Gentleman's proposal that he wishes to give some degree of discouragement to these businesses from expanding beyond the £50,000 level. For that reason alone, I would suggest that this Amendment is unacceptable inasmuch as it would work against one of the main purposes of the Clause.

Let us take this matter a little further. The right hon. Member for Battersea, North seemed very worried by what he described as the enormous concessions which would result from leaving the Clause in its present form. He rather skated over the class of case in which he thought an enormous concession would arise. The only specific case was that of a famous public company as it was before 1926. It is our common experience that all the circumstances of the day seem to cause businesses as they expand to anything like the level of the business to which he referred to become public companies. All the tendencies are such, and I should have thought it was in the highest degree improbable, as my right hon. Friend the Chancellor said on Second Reading, that we should really come across cases of that sort of level in present circumstances.

Be that as it may—and we must deal with this matter if necessary even on a theoretical basis—I think the right hon. Gentleman failed to face the fact that Estate Duty, even as operated upon by the reduction provided in this Clause, is on a graduated scale. All that the Clause does is to reduce by a certain percentage the amount of Estate Duty otherwise payable; but as the assets liable to Estate Duty rise in value, so does the rate of duty applicable rise.

I do not want to weary the Committee with figures, but when we come, for example. to Estate Duty at the 80 per cent. rate, which is the rate applicable in the sort of circumstances which the right hon. Gentleman was thinking about, even subject to this concession the rate of Estate Duty applicable would be some 44 per cent. When one appreciates that it falls, ex hypothesi, in cases with which we are dealing on the assets of a business, that is a pretty serious matter for a business. I do not think it is really fair to speak, as the right hon. Gentleman did, of enormous concessions resulting from this provision.

Mr. Jay

Surely, since 45 per cent. of 80 per cent. is a great deal more than 45 per cent. of 10 per cent. or 15 per cent., the discrimination which the right hon. Gentleman is introducing is all the greater in the case of the larger businesses. That is precisely the case for the Amendment.

Mr. Boyd-Carpenter

I can quote to the right hon. Gentleman the remark of my hon. Friend the Economic Secretary, on just this sort of issue, that it is not really an unduly great concession, if one is knocking someone very hard on the head, to knock a little less hard. That remark is just as relevant to this issue as to the one with which my hon. Friend was dealing. Although this concession is at a flat rate, the rate of Estate Duty applicable to the very business assets covered by the Clause rises, and continues to rise, on a graduated scale.

The right hon. Gentleman referred to certain observations which I made in the Second Reading debate. I think he conceded by implication, if not by expression, that those observations indicated that the danger of encroaching, on the business assets appeared to rise as the amount of the business assets themselves rose. I have no reason to correct the figures which I gave the House during the Second Reading debate, and I should like to repeat them because I regard them as relevant. I said: If, however, we take cases where trade assets exceed £10,000—and, after all, that is not a very large business—the percentage where encroachment takes place rises to 25 per cent."—[OFFICIAL REPORT, 3rd May, 1954; Vol. 527, c. 35.] That does appear to indicate that the problem with which we are concerned and with which this Clause seeks to deal certainly does not become less acute as the size of the business concerned rises.

Mr. E. Fletcher

Will the right hon. Gentleman give us the authority for that statement? It does not seem to be borne out by anything contained in the White Paper.

Mr. Boyd-Carpenter

It is not in the White Paper; it is the result of inquiries which have been made. I hope that the hon. Member is not suggesting that all truth, for all time, is embodied in the White Paper. It is a very good document, but it is not a kind of Koran.

Mr. Jay

Not merely is the 25 per cent. not included in the White Paper, but it seems to me it is directly contradicted by paragraph 5 of the White Paper, which says: If £20,000 were taken as the starting point for the present investigation on the ground that this in real terms corresponds much more closely to £10,000 in 1922, the percentage would go up to 3.4 per cent. In the White Paper the percentage is shown as 1.6 for the number of cases over £10,000, and 3.4 for the number of cases over £20,000, at present prices. How can it possibly be 25 per cent. on the Financial Secretary's definition?

Mr. Boyd-Carpenter

I gave those figures to the House in the Second Reading debate as a result of inquiries made in the usual way. These figures are available to those who speak at the Dispatch Box. I have no reason whatever to modify them, and I take the responsibility of repeating them. The right hon. Gentleman himself must agree that they are somewhat damaging to the proposition he has put forward.

Mr. Jay

I should like to make it clear that I am quite sure that the right hon. Gentleman believes the figure he is giving the Committee to be correct, but I am suggesting that he is possibly mistaken, as what he says is clearly contradicted by the White Paper, and this shows that the Government's case for the Clause is based on a failure to look the facts in the face.

Mr. Boyd-Carpenter

Naturally the right hon. Gentleman will not expect nor wish me to proceed on the "You are, you aren't" basis. I have told him that, since he raised the matter, I have taken the responsibility of checking through the usual sources that are available to those who speak from this Box the accuracy of these figures, and they were confirmed. It follows, I think, that the right hon. Gentleman must accept the converse of his own argument. He must agree that the figures are somewhat damaging to the proposition put forward in the Amendment. I think he accepts that. Indeed, if he does not so accept it, I cannot understand why he mentioned the matter at all.

I do not want to proceed solely on that basis. I much prefer to argue the matter, as I think the Committee would wish, as a matter of principle. It seems to me that the desire which we have expressed in this Clause to provide some alleviation of the rates of Estate Duty upon the plant of industry and commerce and upon the buildings of industry is served just as well above the £50,000 level as below it. It is, indeed, arguable that when we get into those levels, levels at which in the normal way Estate Duty operates very severely, the case is, if anything, stronger, because we are very concerned that the rates of Estate Duty do and as a matter of common sense must fall very heavily indeed upon a business of this sort.

I do not want to weary the Committee by repeating the varying rates of Estate Duty, which both sides of the Committee know to be very severe. Hon. and right hon. Gentlemen opposite welcome that, and my hon. Friends deplore it, but the fact is so. When we face that fact, it really does seem to me wholly wrong in principle to abandon the proposals of this Clause when the zone is reached at which Estate Duty bites most severely. I can understand an argument that we should not provide the alleviation at all. That is one point, but once we accept it, I really cannot see a case for limiting it just at the point at which it becomes of very real importance.

I do not think we want to approach this matter by the fantastic or the extreme case. So far as I know, it does not exist. Indeed, the fact that it is not likely to exist is, I think, borne out, as my right hon. Friend said on Second Reading, by the calculation that we have given of the total cost to the Exchequer. If there were to be reliefs on these very large sums which the right hon. Gentleman seems to contemplate, then, of course, the figure of total cost would be appreciably higher than that which we have given, but we have given that figure also on the basis of considerable thought and considerable advice, and I think that does make it clear that we are not concerned here with the extreme case.

What we are concerned about, however, is a proposal suggested from the benches opposite to cut off this relief, with the adjustment I mentioned, at or about the £50,000 level. I would suggest to the Committee that not only is it wrong in principle, not only would it defeat the very purpose for which the Clause is in the Bill, but it would have a highly discouraging effect on just the up and coming business which is below the £50,000 level which I should have thought it was the wish of everybody in this Committee to see expanded.

For these reasons, while we shall naturally be prepared to argue the main case for this concession, it would be quite wrong to mutilate the Clause in this way.

9.45 p.m.

Mr. Mitchison

As a matter of principle, I am a trifle shocked to hear the Financial Secretary repudiating his own illegitimate offspring with so much circumlocutory rectitude. On the second day's debate on the Budget proposals, it was the Financial Secretary himself who, in one of his inimitable sentences, produced the following: I suggest to the Committee that this is a wise concession, not only in equity to those concerned in small businesses but, what is from the national point of view far more important, as an encouragement to them"— that is to say, to those concerned in small businesses— in the same way, but in a smaller degree, is the investment allowance—to modernise and re-equip themselves and enable them to play a proper part in our national economy. What I am concerned with is the approaching mutilation of a promising child and the rather naughty way in which the right hon. Gentleman has repudiated it. He went on to say: I believe that this concession will be a very solid advantage. I am sure that another excellent sentence was coming, but at that point my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) got up and said: The right hon. Gentleman keeps referring to small businesses."—[OFFICIAL REPORT, 7th April, 1954; Vol. 526, c. 388.] My right hon. Friend pointed out that the concession did not seem to be limited to small businesses. Now we are trying to help the right hon. Gentleman to carry out the matter of principle, for reasons which he himself gave, for having any relief of the sort, and then he tells us that as a matter of principle we have got it wrong.

As a matter of practice, I should be the first to concede to the right hon. Gentleman that there is a little to be said. By all means let us consider whether the concession cannot be tapered. By all means let us examine the figure of £50,000 and see whether it is right. It does not sound to me very far off the mark, but all those are matters of machinery, and we are invited by the right hon. Gentleman to consider this as a matter of principle.

As a matter of principle, what I would say about it depends on a passage in the White Paper. It illustrates a point which was made a minute or two ago by my hon. Friend the Member for Stechford (Mr. Roy Jenkins). What he pointed out was that the fact that some recourse is necessary to business assets to pay the duty does not necessarily mean that the business is broken up on the death of the deceased, and that other alternatives are open—that shares might be issued to the public, that part of the deceased's shareholding might be sold, that the company might raise a loan, and so on.

The substantial difference from this point of view between the small company and the large company, both of them companies of the special type that we are now considering, is that the small company may find it very much harder to do that sort of thing than the large company would do. Of course, there are many more small companies than large ones, but it is just those small companies which will find it exceedingly difficult to sell off shares, to let the public in, and to turn themselves into a little more of a public company than they were before.

The next point is whether there is really a moral case for extending this benefit to the large companies, which, we would all agree, are far fewer. In that direction one does to some extent come to the social question of power that is involved. The small companies, by and large, will be businesses probably of a family character. As for the large companies, if the case of Morris Motors is out of date, I suspect that there are others, and I should look at the shipping industry for one or two of them; but there will be some cases, at any rate. Is it really sound so to use taxation as to encourage these largish concerns to remain in the course of time strict family businesses?

Ought we not, when we are considering this kind of relief, to bear in mind that, if the national objective of which the right hon. Gentleman spoke on Second Reading, is to be achieved—the requipment and modernisation of the companies—and the social objective might be attractive to a party which professes to believe in a property-owning democracy—to encourage these large family businesses to remain purely family businesses is unacceptable? On these grounds, there is reason for treating these businesses, which appeal to the right hon. Gentleman somewhat differently, as between the small business and the large business.

Of course, we bow every time to the Treasury and to the Government draftsman as to the exact place and the degree of tapering which we should give to it. It is a matter of principle which we have been invited to consider, and, as a matter of principle, I believe that the right hon. Gentleman was quite right the first time, and has now, unfortunately, lapsed a little in not accepting this Amendment in principle.

Mr. E. Fletcher

It seems to me that there is a glaring inconsistency between the figures which the right hon. Gentleman has given and those contained in the White Paper. Since he based nearly the whole of his argument upon these percentages, it seems important that we should clear up this matter.

The right hon. Gentleman gave the figures on Second Reading and repeated them today. I do not think that it is good enough for him to give us his ipse dixit from the Treasury. The inconsistency is so glaring and obvious that I think the right hon. Gentleman owes it to the Committee either to withdraw or to explain what seems to me to be the vital point of his argument.

He says that if we take the whole field of the companies about which we are talking, the number of cases in which there is encroachment for the purpose of paying Estate Duty over the non-trade assets is 1.6 per cent. That is precisely the figure given in paragraph 5 of the White Paper. We agree that he has had it in front of him.

Then he goes on to say if we take the cases where the trade assets exceed £10,000, the percentage where encroachment takes place rises to 25. But what does the White Paper say? The White Paper was published as recently as 1951, and it says that if £20,000 were taken as the starting point—not £10,000, but an even higher starting point than that given by the right hon. Gentleman—the percentage would go up to only 3.4 per cent.

That has stood the test of time in the last two or three years, and it is supported by the statistical tables. It is not good enough for the right hon. Gentleman to come here and say that it has risen to 25 per cent. I find it impossible to believe that, in the short space of three years since 1951, the figure has risen from 3.4 per cent., as the White Paper says, to the figure of 25 per cent. as the right hon. Gentleman said tonight. It seems to me that the White Paper completely destroys his argument. He has pleaded this difficulty of 25 per cent. without any explanation or justification. That seems to be a real disservice to the Committee, and makes it impossible for us to have any confidence in the explanation which he had given.

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

The Committee divided: Ayes, 214: Noes, 233.

Division No. 171.]	AYES	[9.55 p.m
Acland, Sir Richard	Chetwynd, G R.	Gaitskell, Rt. Hon. H. T. N
Adams, Richard	Clunie, J.	Gibson, C. W.
Albu, A. H.	Collick, P H.	Glanville, James
Allan, Scholefield (Crewe)	Corbel, Mrs. Freda	Gordon Walker, Rt. Hon. P. C
Anderson, Frank (Whitehaven)	Cove, W G.	Greenwood, Anthony
Attlee, Rt. Hon. C. R.	Craddock, George (Bradford, S.)	Grenfell, Rt. Hon. D. R.
Awbery, S. S.	Crosland, C. A. R.	Grey, C. F.
Bacon, Miss Alice	Daines, P.	Griffiths, David (Rother Valley)
Bartley, P.	Dalton, Rt. Hon. H.	Griffiths, William (Exchange)
Benson, G.	Darling, George (Hillsborough)	Hale, Leslie
Beswick, F.	Davies, Ernest (Enfield, E.)	Hall, Rt. Hon. Glenvil (Colne Valley)
Bing, G. H. C.	Davies, Harold (Leek)	Hall, John T. (Gateshead, W.)
Blackburn, F.	Davies, Stephen (Merthyr)	Hamilton, W. W.
Blenkinsop, A	de Freitas, Geoffrey	Hannon, W.
Blyton, W. R.	Deer, G.	Hargreaves, A.
Boardman, H.	Dodds, N. N.	Hastings, S.
Bottomley, Rt. Hon. A. G.	Donnelly, D. L.	Hayman, F. H.
Bowden, H. W.	Dugdale, Rt. Hon. John (W. Bromwich)	Healey, Denis (Leeds, S. E.)
Bowles. F G.	Ede, Rt. Hon. J. C.	Henderson, Rt. Hon. A. (Rowley Reg[...]
Braddock, Mrs. Elizabeth	Edelman, M.	Herbison, Miss M.
Brockway, A. F	Edwards, Rt. Hon. John (Brighouse)	Hewitson, Capt. M
Brook, Dryden (Halifax)	Edwards, W. J. (Stepney)	Hobson, C. R
Broughton, Dr. A. D. D.	Evans, Albert (Islington, S. W.)	Holman, P.
Brown, Rt. Hon. George (Belper)	Evans, Edward (Lowestoft)	Holmes, Horace
Brown, Thomas (Ince)	Fernyhough, E.	Houghton, Douglas
Burke, W A.	Fienburgh, W.	Hudson, James (Ealing, N.)
Burton, Miss F. E	Fletcher, Eric (Islington, E.)	Hughes, Emrys (S. Ayrshire)
Butler, Herbert (Hackney, S.)	Follick, M.	Hughes, Hector (Aberdeen, N.)
Callaghan, L. J.	Forman, J. C.	Hynd, H. (Accrington)
Castle, Mrs. B. A.	Fraser, Thomas (Hamilton)	Hynd, J. B. (Attercliffe)
Champion, A. J.	Freeman, Peter (Newport)	Irvine, A. J. (Edge Hill)
Irving, W. J. (Wood Green)	Oliver, G. H.	Sparks, J, A
Jay, Rt. Hon. D. P. T.	Orbach, M.	Steele, T.
Jeger, George (Goole)	Oswald, T.	Stokes, Rt. Hon. R. R.
Jeger, Mrs, Lena	Paling, Rt. Hon. W. (Dearne Valley)	Strachey, Rt. Hon. J.
Jenkins, R. H. (Stechford)	Paling, Will T (Dewsbury)	Strauss, Rt. Hon. George (Vauxhall)
Johnson, James (Rugby)	Palmer, A. M. F.	Stross, Dr. Barnett
Jones, David (Hartlepool)	Pannell, Charles	Summerskill, Rt. Hon. E.
Jones, Jack (Rotherham)	Pargiter, G. A.	Sylvester, G. O.
Keenan, W.	Parker, J.	Taylor, John (West Lothian)
Kenyon, G.	Paton, J.	Taylor, Rt. Hon. Robert (Morpeth)
Key, Rt. Hon. C. W	Peart, T. F.	Thomas, Iorwerth (Rhondda, W.)
King, Dr. H. M.	Plummer, Sir Leslie	Thomas, Ivor Owen (Wrekin)
Kinley, J.	Popplewell, E.	Thomson, George (Dundee E.)
Lawson, G. M.	Porter, G.	Thornton, E.
Lee, Frederick (Newton)	Price, Philips (Gloucestershire, W)	Tomney, F.
Lever, Harold (Cheetham)	Proctor, W. T.	Turner-Samuels, M.
Lindgren, G. S.	Pryde, D. J.	Ungoed-Thomas, Sir Lynn
Lipton, Lt.-Col. M.	Pursey, Cmdr. H.	Usborne, H. C.
Logan, D. G.	Reeves, J.	Viant, S. P.
MacColl, J. E.	Reid, Thomas (Swindon)	Wallace, H. W
McInnes, J.	Reid, William (Camlachie)	Warbey, W. N.
McKay, John (Wallsend)	Roberts, Rt. Hon. A.	Watkins, T. E.
McLeavy, F.	Roberts, Albert (Normanton)	Wells, Percy (Faversham)
McNeil, Rt. Hon. H	Roberts, Goronwy (Caernarvon)	Welts, William (Walsall)
Mallalieu, E. L. (Brigg)	Robinson, Kenneth (St. Pancras, N.)	Wheeldon, W. E.
Mann, Mrs. Jean	Rogers, George (Kensington, N.)	White, Mrs. Eirene (E. Flint)
Manuel, A. C.	Ross, William	White, Henry (Derbyshire, N. E.)
Mason, Roy	Royle, C.	Whiteley, Rt. Hon. W.
Mayhew, C. P.	Shackleton, E. A. A.	Wigg, George
Mellish, R. J.	Shawcross, Rt. Hon. Sir Hartley	Willey, F. T.
Mitchison, G. R.	Shinwell, Rt. Hon. E.	Williams, W. R. (Droylsden)
Monslow, W.	Short, E. W.	Williams, W. T. (Hammersmith, S.)
Moody, A. S.	Shurmer, P. L. E.	Willis, E. G.
Morgan, Dr. H. B. W.	Silverman, Sydney (Nelson)	Winterbottom, Ian (Nottingham, C)
Morley, R.	Simmons, C. J. (Brierley Hill)	Winterbottom, Richard (Brightside)
Morris, Percy (Swansea, W.)	Skeffington, A. M.	Wyatt, W. L.
Mort, D. L.	Slater, J. (Durham, Sedgefield)	Yates, V. F.
Moyle, A.	Smith, Ellis (Stoke, S.)
Mulley, F. W.	Smith, Norman (Nottingham, S.)	TELLERS FOR THE AYES:
Neal, Harold (Bolsover)	Snow, J. W.	Mr. J. T. Price and
Noel-Baker, Rt. Hon. P. J	Sorensen, R. W.	Mr. Arthur Allen.
Old field, W. H.	Soskice, Rt. Hon. Sir Frank
NOES
Aitken, W. T.	Cooper, Sqn. Ldr. Albert	Harris, Frederic (Croydon, N.)
Allan, R. A. (Paddington, S.)	Cooper-Key, E. M.	Harris, Reader (Heston)
Alport, C. J. M.	Craddock, Beresford (Spelthorne)	Harvey, Ian (Harrow, E.)
Amery, Julian (Preston, N.)	Crosthwaite-Eyre, Col. O. E.	Harvie-Watt, Sir George
Anstruther-Gray, Major W. J	Crouch, R. F.	Hay, John
Arbuthnot, John	Crowder, Sir John (Finchley)	Head, Rt. Hon. A. H.
Assheton, Rt. Hon. R. (Blackburn, W.)	Darling, Sir William (Edinburgh, S.)	Heald, Rt. Hon. Sir Lionel
Baldock, Lt.-Cmdr. J. M.	Davidson, Viscountess	Heath, Edward
Baldwin, A. E.	Deedes, W. F.	Higgs, J. M. C
Barlow, Sir John	Digby, S. Wingfield	Hinchingbrooke, Viscount
Baxter, Sir Beverley	Donaldson, Cmdr. C. E. McA.	Hirst, Geoffrey
Beach, Maj. Hicks	Donner, Sir P. W.	Holland-Martin, C. J.
Bell Philip (Bolton, E.)	Douglas-Hamilton, Lord Malcolm	Hollis, M. C.
Bell, Ronald (Bucks, S.)	Drayson, G. B.	Holt, A. F.
Bennett, F. M. (Reading, N.)	Drewe, Sir C.	Hopkinson, Rt. Hon. Henry
Bennett, Dr, Reginald (Gosport)	Duncan, Capt. J. A. L.	Hornsby-Smith, Miss M. P.
Birch, Nigel	Duthie, W. S.	Horobin, I. M.
Bishop, F. P.	Eden, J. B. (Bournemouth, West)	Horsbrugh, Rt. Hon. Florence
Black, C. W.	Erroll, F. J.	Howard, Gerald (Cambridgeshire)
Bossom, Sir A. C.	Finlay, Graeme	Howard, Hon. Greville (St. Ives)
Boyd-Carpenter, Rt Hon J. A	Fisher, Nigel	Hudson, Sir Austin (Lewisham, N.)
Boyle, Sir Edward	Fleetwood-Hesketh, R. F	Hulbert, Wing Cdr. N. J.
Braine, B. R.	Fletcher-Cooke, C.	Hurd, A. R.
Braithwaite, Sir Albert (Harrow, W.)	Ford, Mrs. Patricia	Hutchison, Sir Ian Clarke (E'b'rgh, W)
Braithwaite, Sir Gurney	Fort, R.	Hylton-Foster, H. B. H.
Bromley-Davenport, Lt.-Col. W. H	Fraser, Hon. Hugh (Stone)	Iremonger, T. L.
Brooke, Henry (Hampstead)	Fyfe, Rt. Hon. Sir David Maxwell	Jenkins, Robert (Dulwich)
Buchan-Hepburn, Rt. Hon. P. G T	Galbraith, Rt. Hon. T. D. (Pollok)	Johnson, Eric (Blackley)
Bullard, D. G	Galbraith, T. G. D. (Hillhead)	Jones, A. (Hall Green)
Bullus, Wing Commander E E	George, Rt. Hon. Maj. G. Lloyd	Joynson-Hicks, Hon. L W
Burden, F. F. A.	Glover, D.	Kerby, Capt. H. B.
Butcher, Sir Herbert	Godber, J. B.	Kerr, H. W.
Butler, Rt. Hon. R. A. (Saffron Walden)	Gomme-Duncan, Col A	Lambert, Hon. G.
Campbell, Sir David	Gower, H. R.	Lambton, Viscount
Cary, Sir Robert	Graham, Sir Fergus	Leather, E. H. C.
Channon, H.	Grimond, J.	Legge-Bourke, Maj. E. A. H
Clarke, Col. Ralph (East Grinstead)	Grimston, Hon. John (St. Albans)	Legh, Hon. Peter (Petersfield)
Clarke, Brig. Terence (Portsmouth, W.)	Grimston, Sir Robert (Westbury)	Lennox-Boyd, Rt. Hon. A. T
Conant, Maj. Sir Roger	Hall, John (Wycombe)	Lindsay, Martin

Linstead, Sir H. N.	Orr-Ewing, Charles Ian (Hendon, N.)	Stevens, Geoffrey
Lloyd, Maj. Sir Guy (Rendrew, E.)	Orr-Ewing, Sir Ian (Weston-super-Mare)	Steward, W. A. (Woolwich, W)
Lockwood, Lt.-Col. J. C	Osborne, C.	Stewart, Henderson (Fife, E.)
Longden, Gilbert	Page, R. G.	Stoddart-Scott, Col. M.
Lucas, Sir Jocelyn (Portsmouth, S.)	Perkins, Sir Robert	Storey, S.
Lucas, P. B. (Brentford)	Peto, Brig. C. H. M	Strauss, Henry (Norwich, S.)
Lucas-Tooth, Sir Hugh	Peyton, J. W. W.	Summers, G. S.
McAdden, S. J.	Pickthorn, K W M	Sutcliffe, Sir Harold
McCorquodale, Rt. Hon. M. S	Pilkington, Capt R A	Taylor, Sir Charles (Eastbourne)
Macdonald, Sir Peter	Pitman, I. J,	Taylor, William (Bradford, N.)
McKibbin, A. J.	Pitt, Miss E. M.	Teeling, W.
Mackie, J. H. (Galloway)	Powell, J. Enoch	Thomas, Rt. Hon. J P. L. (Hereford)
Maclay, Rt. Hon. John	Price, Henry (Lewisham, W)	Thomas, Leslie (Canterbury)
Maclean, Fitzroy	Prior-Palmer, Brig. O L	Thompson, Kenneth (Walton)
Macmillan, Rt. Hon. Harold (Bromley)	Profumo, J. D.	Thompson, Lt.-Cdr. R. (Croydon, W)
Maitland, Comdr. J. F. W. (Horncastle)	Raikes, Sir Victor	Thornton-Kemsley, Col. C. N.
Maitland, Patrick (Lanark)	Redmayne, M.	Tilney, John
Manningham-Bulier, Rt. Hn. Sir Reginald	Rees-Davies, W. R	Vane, W. M. F
Marlowe, A. A. H.	Remnant, Hon. P.	Vaughan-Morgan, J. K
Marples, A. E.	Renton, D. L. M	Wakefield, Edward (Derbyshire, W)
Marshall, Douglas (Bodmin)	Ridsdale, J. E.	Walker-Smith, D. C
Maude, Angus	Robertson, Sir David	Wall, Major Patrick
Maudling, R.	Robinson, Sir Roland (Blackpool, S)	Ward, Hon. George (Worcester)
Maydon, Lt.-Comdr S. L C	Robson-Brown, W.	Ward, Miss I. (Tynemouth)
Medlicott, Brig. F	Roper, Sir Harold	Waterhouse, Capt. Rt. Hon. C
Mellor, Sir John	Ropner, Col. Sir Leonard	Watkinson, H. A.
Monckton, Rt. Hon. Sir Walter	Russell, R. S.	Webbe, Sir H. (London & Westminster)
Moore, Sir Thomas	Ryder, Capt. R. E. D.	Wellwood, W.
Mott-Radclyffe, C. E	Savory, Prof. Sir Douglas	Williams, Rt. Hon. Charles (Torquay)
Nabarro, G. D. N.	Schofield, Lt.-Col. W.	Williams, Gerald (Tonbridge)
Neave, Airey	Scott, R. Donald	Williams, Sir Herbert (Croydon, E)
Nicholson, Godfrey (Farnham)	Scott-Miller, Cmdr. R.	Williams, Paul (Sunderland, S.)
Nicolson, Nigel (Bournemouth, E.)	Simon, J. E. S. (Middlesbrough, W)	Williams, R. Dudley (Exeter)
Nield, Basil (Chester)	Smithers, Peter (Winchester)	Wills, G.
Noble, Comdr. A. H. P	Smithers, Sir Waldron (Orpington)	Wilson, Geoffrey (Truro)
Nugent, G. R. H	Smyth, Brig. J. G. (Norwood)	Wood, Hon. R.
Oakshott, H. D.	Spearman, A. C M
Odey, G. W.	Speir, R. M.	TELLERS FOR THE NOES:
O'Neill, Hon. Phelim (Co Antrim, N.)	Spens, Rt. Hon. Sir P. (Kensington, S)	Mr. Studholme and Mr. Vosper.
Orr, Capt. L P. S.	Stanley, Capt Hon. Richard

Mr. E. Fletcher

I beg to move, in page 28, line 37, after "into," insert: before or is entered into within three years after the death.

The Chairman

This Amendment can be taken with the next Amendment also in the hon. Gentleman's name and that of his hon. Friends, in page 28, line 45. at end, insert: or in respect of which a resolution for voluntary winding up (save as aforesaid) is made within three years after death.

Mr. Fletcher

I know that the Chancellor wants to make progress on this Bill, and I hope that I can put the case for this Amendment shortly. The merits are so self-evident that I believe we shall have an indication from the Chancellor, before long, that he is prepared to accept it.

The object of the Amendment is to carry one stage further the purpose of the Government in giving this relief from Estate Duty, to preserve the small family businesses. In subsection (9) it is conceded that if before a claim for Estate Duties arises there has been a binding contract for the sale of the company the need for relief has disappeared. For precisely the same reason, we say that there is no need for the relief to be given it there is a sale within a limited period of years after the death of the owner of the company. Unless there is some exception to cover the case where a business is sold shortly after the death, the object of the Bill will be defeated.

As things stand, it would be possible for the executors both to claim the benefit of the relief from Estate Duty under Clause 25 and to sell the business, in which case there would be no continuity of the small family business in the same hands which the Clause is aimed at preserving. I hope that the Government will, therefore, agree that there must be provision in the Bill to ensure that the object of the Clause is not defeated by the estate first obtaining this very considerable measure of relief, and the executors then selling the business, which would mean discontinuance of the family connection which it is the whole object of the Clause to preserve.

The only other point on which one may comment is the period of time selected. My hon. Friends and I thought an appropriate time might be one year, but now we think that is far too short. If the limit were one year, there would be a temptation for executors who were minded to sell to postpone the sale until after the year. Three years is a reasonable period of time in all cases for executors to make up their minds whether to pay the Estate Duty and enable the business to carry on under the same family management, or to sell the business. I hope that the Amendment will be acceptable to the Government.

Mr. Grimond

I, too, have an Amendment down designed in a different way to cover the same point, which is a real one.

As the Clause is drafted there is nothing to prevent a very rich man from buying up one, two, three or more small companies and thereby gaining considerable relief from his liability to death duty. The Clause only affects certain assets and is limited to that extent. Nevertheless, the relief which he or his heirs would get in certain circumstances would be very considerable. I do not want to rest my case on moral grounds. If a man can reduce his liability to taxation he is entitled to do so within the law, and it may not be right to draw moral distinctions between one case and another. We do not want to create obvious loopholes by which one rich man can considerably reduce his liability as against another.

But the real and strongest argument, as suggested by the hon. Member for Islington, East (Mr. E. Fletcher) is that, unless an Amendment of the kind which he or I have suggested is written into the Clause, it may defeat the Chancellor's object, which is to prevent small companies being either broken up as a result of death duties or being bought up by a bigger combine. As the Clause stands, it will be open for a rich man to make an attractive offer to the company, obviously something above its market value. He may have no interest in continuing the company and, as soon as his heirs have gained the necessary reduction in duty, they will either break up the company or sell to a large combine. The Amendment will deter them from doing that for three years, but after that period they would be at liberty to do it. The effect would be exactly what the Chancellor wants to avoid.

It may be said that the rich man can do this already in the case of agricultural land, but from the national point of view the position of agricultural land is very different. It is true that, by buying up farms, rich men may be keeping deserving young farmers out of farms, but, on the other hand, they may bring in certain advantages to agriculture in the way of new capital and new ideas, and when they sell they sell the land as a going concern and it probably continues as such. It is difficult to see how comparable advantages would accrue to small businesses made attractive to rich men who want to escape tax liability.

If these rich men do bring in more capital it is reasonable to ask them to take part in the management, and I should have thought that it would be reasonable that unless a rich man buys a small company some years before his death or takes an active part in the management of it he should not gain the advantages that are conferred by the Clause. I do not want to argue my proposals in detail, because no doubt the Treasury can think of some much better way of doing what I have in mind. I do not know whether those who support the Amendment which is now before the Committee want to rest on their particular form of the Amendment, but I think the Chancellor must agree that this is a genuine difficulty which, unless it is met, may to some extent defeat the very purpose of the Clause. If the right hon. Gentleman does not accept the Amendment I ask him at least to put forward some alternative.

The Solicitor-General

We are in substantial agreement with a great deal of what has been said by the hon. Member for Islington, East (Mr. E. Fletcher) and the hon. Member for Orkney and Shetland (Mr. Grimond). I agree that one of the main purposes of this new relief is to maintain family businesses in the family's hands and one hopes that the relief will reduce the number of cases in which a sale becomes necessary. That is one of the objects of giving the relief.

One must realise that within the three-year period after the death there may be perfectly legitimate sales, not for the purpose of exploiting the relief or even for the purpose of raising money to pay the duty. There might be a sale because there is no suitable member of the family left to run the business, or because the surviving member of the family does not consider it suitable for him to run, as for instance might be the case with a teetotaller succeeding to a brewery.

If we penalise the teetotaller by saying, "If you sell the business within three years you must refund the relief," we shall be putting considerable pressure upon him to carry on for more than the three-year period. It is very unfair to require the payment of a larger sum in duty by excluding relief because no member of the family is there to carry it on or because the new owner's sincere convictions are against carrying it on.

10.15 p.m.

There are also two considerable practical difficulties which I will indicate quite shortly. If we accepted the Amendment providing for three years it would mean that the Estate Duty officer would have the duty of supervision of these estates throughout that period. In relation to small estates the Estate Duty problem is settled fairly quickly and the Office has no further concern with the estate until the misfortune of another death occurs. The imposition of this duty would mean a considerable amount of work. It would mean supervision of a large number of small estates over this three-year period and it might well be that after all this work had been done and all this expense, very little grist would come in.

The second Amendment is limited to the winding up of the company. It does not deal with the transference of the business by the sale of shares. Of course, we could provide that on the sale of a 10 per cent. shareholding it could be withdrawn, but that could be overcome by the sale of 9 per cent. now and 1 per cent, after the three-year period and to make the provision effective we would have to fix some particular percentage. There does not seem any particular basis on which the percentage could be assessed. It is difficult to find an answer to the question of at what point does it seem right to leave the relief with the estate. Unless we can find the proper answer to that question it is pointless to deal with the winding up within three years and not with the sale of the business by shares.

The hon. Member for Orkney and Shetland (Mr. Grimond) referred to his Amendment, which is also designed to prevent the exploitation of this relief. A difficulty in relation to all three Amendments, is to find a solution which will hit the man who is trying to exploit this relief but which will not, at the same time, penalise the perfectly genuine bona fide transaction which has not that end in view. The hon. Member for Orkney and Shetland suggested a time test, but that would not work at all for this reason: the hon. Member said that unless the interest was acquired 10 years before death or unless the deceased was actually engaged in the business at least five years before death the relief should not be given.

Take the case of an iron founder who has been hard at work for four years, and is killed in an accident at a time when he had every intention of continuing work. It would be very hard and very unjust in that case to withdraw the relief. It is for that reason that the lapse of time test is not an answer to the problem.

It may be suggested, why not take the test on motive and try to determine on what motive the transaction and sale have been effected? Experience has shown that it is a most difficult matter to try to establish the motives of a man now dead. Such inquiries in the past have very often proved a complete waste of time.

Mr. Gaitskell

Is not the right hon. and learned Gentleman aware that in the Schedule to Clause 15 very special emphasis is laid on the question of motive in determining whether the person is committing an offence or not?

The Solicitor-General

In some cases regarding offences when a person is living the motive is of immense importance in establishing the offence, but I am dealing with a person who is dead and can no longer be subjected to cross-examination. We recognise the objective behind these Amendments and the force of the arguments which have been advanced, but at present we cannot see a satisfactory solution to the problem. I can say that the situation will be most carefully watched, and I will issue the warning that if it were found in the future that this relief is being abused the Government will not hesitate to take steps to stop it.

It may be that the taking of these steps may affect some innocent persons as well as those exploiting the relief. That may prove to be inevitable; but one does not wish to take those steps in advance. In my view, it is better to keep a close watch on the position to see whether exploitation does take place, and, if so, to note what devices are used and to stop the use of them. It is better I think—because there is not much difference between us about what we want to stop—to see what are the devices used and to try to stop them, rather than to legislate in advance to meet an abuse which one hopes will not, and which may not, develop at all.

Mr. E. Fletcher

The Solicitor-General said just now that one reason why he could not accept this Amendment was because it would involve the Estate Duty office in very much more work in watching these estates for three years. Now he says that the Government will keep a close watch on the position to see whether there are any abuses. The two arguments would appear to be inconsistent, because it will cost just as much to keep a close watch on the position.

Mr. Geoffrey Bing (Hornchurch)

I think it necessary to intervene so that there does not go out from this Committee the rather unfortunate parallel drawn by the Solicitor-General when he said that one reason against the Amendment was that it was incompatible that a teetotaler should inherit a brewery. As hon. Members may know there is no incompatibility about that. The hon. Member for Wimbledon (Mr. Black) would be able to explain that brewers arc, in fact, among those who contribute more to the temperance movement than many others and that their products have been sold in America during prohibition. I hope, therefore, that the right hon. and learned Gentleman will not persist in that example.

Mr. Dalton

I consider that the reply of the right hon. and learned Gentleman was most unconvincing. He said that there was nothing much between us, so I hope that he will go a little further and agree to accept this Amendment. At an earlier stage the Financial Secretary said, in reply to an Amendment moved from the other side of the Committee which sought to widen this concession, that he feared that if that were done—I am paraphrasing what he said—there would be an ugly rush of rich men to buy one-man businesses. When a little later I asked if there were not more danger of this happening if this further extension of the concession were refused he said, "No."

But, evidently, the principle of continuity applies here. There is the danger, which is admitted by the right hon. and learned Gentleman, that this will be abused, and so much so that he is to continue a system of inquisition into a large range of transactions. That is what he has said, that he will take care, and keep a close watch. A horde of officials will be employed to keep a close watch on these transactions to see whether anything wrongful is done. Would not it be much better to minimise the risk by accepting this Amendment?

These time limits are very familiar in law. We have the limitation of time provisions in relation to the Estate Duty which has been helpful in bringing in revenue and preventing last minute transfers in order to avoid duty. Why should we not in this case pursue a similar plan, even if it does not completely stop the kind of transaction of which we should all disapprove? Surely it is to some extent a safeguard. I cannot see why it should be resisted.

I hope that, in view of the arguments which have been used, the right hon. and learned Gentleman will slightly modify his legal advice to the Chancellor and that we shall get an acceptance of the Amendment. Otherwise, we shall be compelled to divide the Committee. That can easily be avoided by a simple statement that the Amendment will be accepted, and then the right hon. and learned Gentleman can closely watch, with rather fewer officials, how it works. If he finds, as a result of his close watch, that the Amendment is not required, he can modify this provision in a future Finance Bill.

Mr. Roy Jenkins

There is rather more difference between the Solicitor-General and the Opposition than the right hon. and learned Gentleman indicated in the soothing last sentences of his speech. I was surprised to hear him not only adduce the practical difficulties which he thought might arise if our Amendments were accepted but also say that they might conflict with certain transactions which he thought were legitimate.

He gave instances. He said that there might be a sale within three years of the death of the owner of a business of the type with which we are dealing because none of his heirs wished to carry on the business or none was capable of carrying on the business. He seemed to regard it as extremely undesirable that the concession should be withdrawn in those cases.

This is a most extraordinary approach to the Clause, and we need a further statement about it from the Chancellor. We are still dealing with a position in which the Government are bringing forward certain proposals which they consider necessary to safeguard the continuity of family businesses. What sort of continuity will there be if there is no heir capable of carrying on the business or if the family do not wish to carry on the business and desire to sell it? Yet in the view of the Solicitor-General it is highly desirable that where that sort of thing takes place the family should none the less have the benefit of the concession.

I cannot understand that approach. I do not know whether it commands the support of the Chancellor and the Government as a whole. One can appreciate to some extent some of the practical difficulties which the Solicitor-General said might arise, but it is very difficult for us to feel at all comforted by his statement that he will keep an eye on these practices if he regards as legitimate what the Opposition regard as capable of abuse. Before we accept the Solicitor-General's assurance we ought to know from the Chancellor whether he intends the concession to apply to cases in which there can be no possible continuity because the family decides within three years of the death to sell the business.

Mr. R. A. Butler

In response to the appeal, I should like to say, first of all, that there was not a sinister motive in introducing the Clause. The fundamental reason was, as mentioned in the Budget Statement, to link up with the investment allowance in helping productive industry which, in a business of this kind, is affected severely by the application of the assets basis. This forms a certain compensation, allied as it is to the productive aspect of the business. Despite the many appeals made in the debate today, it seems to hinge up with the general help of the investment allowance to productive industry.

The second reason was to try to do what we could to help family businesses, which have throughout been very difficult to define. When we came to examine these Amendments, we found they had a certain point in them. There is no point in trying to help a family business or productive industry if any sort of attempt is made either to buy up such units for the purpose of exploitation or to break the thread of the family business.

10.30 p.m.

The result is that, on examining the Amendments and the arguments put forward, we thought that there was a good deal in them. There may be cases where a sale takes place, human affairs being as fallible as we all expect to find them, as indeed we have found in recent experience. There may well be a sale which we cannot foresee. Believing as we do in a free economy, we could not lay down by legislation an absolute prohibition on the sale of a family business or of a business affected by Section 55. Therefore, we found the terms of the wording of the Amendment a bit too stiff.

Without going into detail, I would say that many of us are concerned by what happens, namely, the purchase by old people of agricultural land with a view to avoiding Estate Duty. There again, there is an example of a possible tax evasion which, in the purity of my office, I do not like to see. Therefore, again, there was a justification for this approach; but seriously, on examining the matter, with the best advice we can get, we do not think that it would be wise to accept the Amendment as drafted.

We would prefer to watch the action under the Clause and, if there is an abuse, reserve the right to deal with it. If hon. and right hon. Gentlemen opposite regard that as unsatisfactory, the best thing we can do is to come to an immediate decision and vote, but I should like to reassure them that I will look again at the remarks they have made, without giving any undertaking—that is why I say that, if they prefer to vote, they should vote.

If we can find any way out we will do so, but I think it more likely that we shall adhere to our decision to allow the Clause to operate. Then if there is abuse arising in future years—not necessarily a long period of years—we shall deal with it by taking action in the light of experience. If that is not good enough, let us come to a decision, so that we can make further progress with the Bill. I conclude by saying that I thought that the spirit in

which the Amendment was moved was perfectly sincere.

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

The Committee divided: Ayes, 192: Noes, 221.

Division No. 172.]	AYES	[10.34 p.m.
Acland, Sir Richard	Hale, Leslie	Parker, J.
Adams, Richard	Hall, Rt. Hon. Glenvil (Colne Valley)	Paton, J.
Albu, A. H.	Hall, John T. (Gateshead, W.)	Peart, T. F.
Allen, Scholefield (Crewe)	Hamilton, W. W.	Plummer, Sir Leslie
Attlee, Rt. Hon. C. R.	Hannan, W.	Porter, G.
Awbery, S. S.	Hargreaves, A.	Price, J. T. (Westhoughton)
Bacon, Miss Alice	Hastings, S.	Price, Philips (Gloucestershire, W)
Bartley, P.	Hayman, F. H.	Pryde, D. J.
Benson, G.	Healey, Denis (Leeds, S. E.)	Pursey, Cmdr. H.
Beswick, F.	Henderson, Rt. Hon. A. (Rowley Regis)	Reid, Thomas (Swindon)
Bing, G. H. C.	Herbison, Miss M.	Reid, William (Camlachie)
Blackburn, F.	Hewitson, Capt. M.	Robens, Rt. Hon. A.
Blenkinsop, A.	Hobson, C. R.	Roberts, Albert (Normanton)
Blyton, W. R.	Holman, P.	Robinson, Kenneth (St. Pancras, N.)
Boardman, H.	Holmes, Horace	Ross, William
Bottomley, Rt. Hon. A. G	Holt, A. F.	Royle, C.
Bowden, H. W.	Houghton, Douglas	Shackleton, E. A. A.
Bowles, F. G.	Hudson, James (Ealing, N.)	Shawcross, Rt. Hon. Sir Hartley
Braddock, Mrs. Elizabeth	Hughes, Emrys (S. Ayrshire)	Short, E. W.
Brockway, A. F.	Hughes, Hector (Aberdeen, N.)	Shurmer, P. L. E.
Brook, Dryden (Halifax)	Hynd, H. (Accrington)	Silverman, Sydney (Nelson)
Broughton, Dr. A. D. D.	Hynd, J. B. (Attercliffe)	Simmons, C. J. (Brierley Hill)
Brown, Rt. Hon. George (Belper)	Irvine, A. J. (Edge Hill)	Skeffington, A. M.
Brown Thomas (Ince)	Jay, Rt. Hon. D. P. T.	Smith, Ellis (Stoke, S.)
Burke, W. A.	Jeger, George (Goole)	Snow, J. W.
Burton, Miss F. E.	Jeger, Mrs. Lena	Sorensen, R. W.
Butler, Herbert (Hackney, S)	Jenkins, R. H. (Stechford)	Soskice, Rt. Hon. Sir Frank
Callaghan, L. J.	Johnson, James (Rugby)	Sparks, J. A.
Castle, Mrs. B. A.	Jones, David (Hartlepool)	Stokes, Rt. Hon. R. R.
Champion, A. J.	Jones, Jack (Rotherham)	Strachey, Rt. Hon. J.
Chetwynd, G. R.	Keenan, W.	Strauss, Rt. Hon. George (Vauxhall)
Collick, P. H.	Kenyon, C.	Stress, Dr. Barnett
Corbet, Mrs. Freda	King, Dr. H. M.	Summerskill, Rt. Hon. E
Cove, W. G.	Lawson, G. M.	Sylvester, G. O.
Craddock George (Bradford S.)	Lee, Frederick (Newton)	Taylor, John (West Lothian)
Crosland, C. A. R.	Lewis, Arthur	Taylor, Rt. Hon. Robert (Morpeth)
Dalton, Rt. Hon. H.	Lindgren, G. S.	Thomas, Iorwerth (Rhondda, W.)
Darling, George (Hillsborough)	Lipton, Lt.-Col. M	Thomas, Ivor Owen (Wrekin)
Davies, Ernest (Enfield, E.)	Logan, D. G.	Thomson, George (Dundee, E.)
Davies, Harold (Leek)	MacColl, J. E.	Thornton, E.
Davies, Stephen (Merthyr)	McInnes, J.	Tomney, F.
Deer, G.	McLeavy, F.	Ungoed-Thomas, Sir Lynn
Dodds, N. N.	Mallalieu, E. L. (Brigg)	Usborne, H. C.
Donnelly, D. L.	Mann, Mrs. Jean	Viant, S. P.
Dugdale, Rt. Hon. John (W. Bromwich)	Manuel, A. C.	Wallace, H. W.
Ede, Rt. Hon. J. C	Mason, Roy	Warbey, W. N
Edelman, M.	Mayhew, C. P.	Watkins, T. E.
Edwards, Rt. Hon. John (Brighouse)	Mellish, R. J.	Weitzman, D.
Evans, Albert (Islington, S. W.)	Mitchison, G. R.	Wells, William (Walsall)
Evans, Edward (Lowestoft)	Moody, A. S.	Wheeldon, W. E.
Fernyhough, E.	Morgan, Dr. H. B. W	White, Mrs. Eirene (E. Flint)
Fienburgh, W.	Moriey, R.	White, Henry (Derbyshire, N. E.)
Fletcher, Eric (Islington, E.)	Morris, Percy (Swansea. W)	Whiteley, Rt. Hon. W.
Forman, J. C.	Mort, D. L	Wigg, George
Freeman, Peter (Newport)	Moyle, A.	Willey, F. T.
Gaitskell, Rt. Hon. H. T. N.	Mulley, F. W	Williams, W. R. (Droylsden)
Gibson, C. W.	Neal, Harold (Bolsover)	Williams, W. T. (Hammersmith, S.)
Glanville, James	Oldfield, W. H.	Willis, E. G.
Gordon Walker, Rt. Hon. P. C	Oliver, G. H.	Winterbottom, Ian (Nottingham, C.)
Greenwood, Anthony	Orbach, M.	Winterbottom, Richard (Brightside)
Grenfell, Rt. Hon. D. R.	Oswald, T.	Wyatt, W. L.
Grey, C. F.	Paling, Will T (Dewsbury)	Yates, V. F.
Griffiths, David (Rother Valley)	Palmer, A. M. F.
Griffiths, William (Exchange)	Pannell, Charles	TELLERS FOR THE AYES:
Grimond, J.	Pargiter, G. A	Mr. Arthur Allen and
		Mr. G. H. R. Rogers.
NOES
Aitken, W. T.	Arbuthnot, John	Barlow, Sir John
Allan, R. A. (Paddington, S.)	Assheton, Rt. Hon. R. (Blackburn, W.)	Baxter, Sir Beverley
Alport, C. J. M.	Baldock, Lt.-Cmdr. J. M.	Beach, Maj. Hicks
Amery, Julian (Preston, N.)	Baldwin, A. E.	Bell, Philip (Bolton, E.)
Bennett, F. M. (Reading, N.)	Holland-Martin, C. J.	Pitman, I. J.
Bennett, Dr. Reginald (Gosport)	Hollis, M. C.	Pitt, Miss E. M.
Birch, Nigel	Hopkinson, Rt. Hon. Henry	Powell, J. Enoch
Bishop, F. P.	Hornsby-Smith, Miss M. P.	Price, Henry (Lewisham, W)
Black, C. W.	Horobin, I. M.	Prior-Palmer, Brig. O. L.
Bossom, Sir A. C.	Horsbrugh, Rt. Hon. Florence	Profumo, J. D.
Boyd-Carpenter, RI. Hon, J. A.	Howard, Gerald (Cambridgeshire)	Raikes, Sir Victor
Boyle, Sir Edward	Howard, Hon. Greville (St. Ives)	Redmayne, M.
Braine, B. R.	Hudson, Sir Austin (Lewisham, N.)	Rees-Davies, W. R.
Braithwaite, Sir Albert (Harrow, W.)	Hulbert, Whig Cdr. N. J.	Remnant, Hon. P.
Braithwaite, Sir Gurney	Kurd, A. R.	Renton, D. L. M.
Bromley-Davenport, Lt.-Col. W. H	Hutchison, Sir Ian Clark (E'b'rgh, W.)	Ridsdale, J. E.
Brooke, Henry (Hampstead)	Hylton-Foster, H. B. H.	Robinson, Sir Roland (Blackpool, S.)
Buchan-Hepbum Rt. Hon. P. G. T.	Iremonger, T. L.	Robson-Brown, W.
Bullard, D. G.	Jenkins, Robert (Dulwich)	Roper, Sir Harold
Bullus, Wing Commander E. E.	Johnson, Eric (Blackley)	Ropner, Col. Sir Leonard
Burden, F. F. A.	Jones, A. (Hall Green)	Russell, R. S.
Butcher, Sir Herbert	Joynson-Hicks, Hon. L. VV	Ryder, Capt. R. E. D.
Butler, Rt. Hon. R. A. (Saffron Walden)	Kerby, Capt. H. B.	Savory, Prof. Sir Douglas
Campbell, Sir David	Kerr, H. W.	Schofield, Lt.-Col. W.
Cary, Sir Robert	Lambert, Han. G.	Scott, R. Donald
Channon, H.	Leather, E. H. C.	Scott-Miller, Cmdr. R.
Clarke, Col. Ralph (East Grinstead)	Legge-Bourke, Maj. E. A. H.	Simon, J. E. S. (Middlesbrough, W)
Clarke, Brig. Terence (Portsmouth, W.)	Legh, Hon. Peter (Petersfield)	Smithers, Peter (Winchester)
Cooper, San. Ldr. Albert	Lennox-Boyd, Rt. Hon. A. T.	Smithers, Sir Waldron (Orpington)
Cooper-Key, E. M.	Lindsay, Martin	Smyth, Brig. J. G. (Norwood)
Craddock, Beresford (Spelthorne)	Linstead, Sir H. N.	Spearman, A. C. M.
Crosthwaite-Eyre, Col. O. E.	Lockwood, Lt.-Col. J. C.	Speir, R. M.
Crouch, R. F.	Longden, Gilbert	Spens, Rt. Hon. Sir P. (Kensington, S.)
Crowder, Sir John (Finchley)	Lucas, Sir Jocelyn (Portsmouth, S.)	Stanley, Capt. Hon. Richard
Crowder, Petre (Ruislip—Northwood)	Lucas-Tooth, Sir Hugh	Stevens, Geoffrey
Darling, Sir William (Edinburgh, S.)	McAdden, S. J.	Steward, W. A, (Woolwich, W.)
Davidson, Viscountess	McCorquodale, Rt. Hon. M. S	Stewart, Henderson (Fife, E.)
Deedes, W. F.	Macdonald, Sir Peter	Stoddart-Scott, Col. M.
Digby, S. Wingfield	McKibbin, A. J.	Storey, S.
Donaldson, Cmdr. C E. McA.	Mackie, J. H. (Galloway)	Strauss, Henry (Norwich, S.)
Donner, Sir P. W.	Maclay, Rt. Hon. John	Summers, G. S.
Douglas-Hamilton, Lord Malcolm	Maclean, Fitzroy	Sutcliffe, Sir Harold
Drayson, G. B.	Macmillan, Rt. Hon. Harold (Bromley)	Taylor, Sir Charles (Eastbourne)
Duthie, W. S.	Maitland, Comdr. J. F. W. (Horncastle)	Taylor, William (Bradford, N.)
Eden, J. B. (Bournemouth, West)	Maitland, Patrick (Lanark)	Teeling, W.
Erroll, F. J.	Manningham-Buller, Rt. Hon. Sir R.	Thomas, Rt. Hon. J. P. L. (Hereford)
Finlay, Graeme	Marlowe, A. A. H.	Thomas, Leslie (Canterbury)
Fisher, Nigel	Marples, A. E.	Thompson, Kenneth (Walton)
Fleetwood Hesketh, R. F	Marshall, Douglas (Bodmin)	Thompson, Lt.-Cdr. R. (Croydon, W.)
Fletcher-Cooke, C.	Maude, Angus	Thornton-Kemsley, Col. C. N
Ford, Mrs. Patricia	Maudling, R.	Tilney, John
Fort, R.	Maydon, Lt.-Comdr. S. L. C	Vane, W. M. F.
Fraser, Hon. Hugh (Stone)	Medlicott, Brig. F.	Vaughan-Morgan, J. K.
Fyfe, Rt. Hon. Sir David Maxwell	Mellor, Sir John	Vosper, D. F.
Galbraith, Rt. Hon. T. D. (Pollok)	Monckton. Rt. Hon. Sir Walter	Wakefield, Edward (Derbyshire, W)
Galbraith, T. G. D. (Hillhead)	Nabarro, G. D. N.	Walker-Smith, D. C.
George, Rt. Hon. Maj. G. Lloyd	Neave, Airey	Wall, Major Patrick
Glover, D.	Nicholson, Godfrey (Farnham)	Ward, Hon. George (Worcester)
Godber, J. B.	Nicolson, Nigel (Bournemouth, E.)	Ward, Miss I. (Tynemouth)
Gower, H. R.	Nield, Basil (Chester)	Waterhouse, Capt. Rt. Hon. C.
Graham, Sir Fergus	Noble, Comdr. A. H. P	Watkinson, H. A.
Grimston, Hon. John (St. Albans)	Nugent, G. R. H.	Webbe, Sir H. (London & Westminster)
Grimston, Sir Robert (Westbury)	Oakshott, H. D.	Wellwood, W.
Hall, John (Wycombe)	Odey, G. W.	Williams, Rt. Hon. Charles (Torquay)
Harris, Frederic (Croydon, N.)	O'Neill, Hon. Phelim (Co. Antrim, N.)	Williams, Gerald (Tonbridge)
Harris, Reader (Heston)	Orr, Capt. L. P. S.	Williams, Sir Herbert (Croydon, E)
Harvey, Ian (Harrow, E.)	Orr-Ewing, Charles Ian (Hendon, N.)	Williams, Paul (Sunderland, S.)
Harvie-Watt, Sir George	Orr-Ewing, Sir Ian (Weston-super-Mare)	Williams, R. Dudley (Exeter)
Hay, John	Osborne, C.	Wills, G.
Head, Rt. Hon. A. H.	Page, R. G.	Wilson, Geoffrey (Truro)
Heald, Rt. Hon. Sir Lionel	Perkins, Sir Robert	Wood, Hon. R.
Heath, Edward	Peto, Brig. C. H. M
Higgs, J. M. C.	Peyton, J. W. W.	TELLERS FOR THE NOES:
Hinichingbrooke, Viscount	Pickthorn, K. W. M.	Sir Cedric Drewe and
Hirst, Geoffrey	Pilkington, Capt. R. A,	Mr. Studholme.

Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

Mr. Gaitskell

Of all the Clauses in the Bill this is the one we like least. We think it is bad, and we have tried to to improve it. It would have been substantially better if the Government had been disposed to accept the three major Amendments which have been moved and discussed. They decided to reject them, and the Clause remains as bad as ever.

One of the major weaknesses of the Clause is the inability of the Government to make up their minds what they really want to do. They have argued at times that they were concerned with what is called the "assets basis" of valuation for Estate Duty purposes. Is that really what they were worried about? At other times they have spoken as though they were concerned with the much more familiar matter of the small business, raised on many occasions in the past in the House of Commons and outside. The argument is fairly familiar and is that, owing to the necessity to pay Estate Duty, many small businesses are forced out of existence.

There has been yet another argument, an extraordinarily simple one that, since there is already a concession of 45 per cent. of Estate Duty in relation to agricultural property, why not have it in relation to something else? That is not entirely a convincing argument, and it might embarrass the Chancellor seriously if it were generalised. There are many things done for agriculture which are not done for other industries; we subsidise agriculture quite heavily, but that is not accepted by the Chancellor as a reason for subsidising other industries. Therefore, it is not convincing to us for him to suggest that because agriculture has a special concession of one sort or another, this should be applied in other spheres.

10.45 p.m.

If we take the objection to the assets basis for valuation, the question which one wants to put to the Chancellor is, what precisely is the evidence that this basis has been found to be unfair? I am fully aware that one hears complaints about it, but I have seldom seen any particular instance of where it could be shown that this basis for valuation has been excessive and has resulted in a larger payment of Estate Duty than would have been the case before the 1940 Finance Act. What is the objection to the assets basis?

The second point which arises is, if the Chancellor is satisfied that this is unfair, surely then, it would have been much wiser for him to have modified the assets basis for valuation so as to have had some more satisfactory basis. But we have heard no mention of why nothing else has been suggested. To me, it seems most extraordinary that if he is simply worried about the assets basis, he should have found it necessary to have made such a large concession—one of 45 per cent. That really is a very big concession. Does the Chancellor really think that the assets basis is so wrong that the amount of duty to be paid has to be reduced by nearly half in order to make it right?

Might I, in passing, make reference to something else which the Chancellor has said? He said, somewhat airily, "Well, we are introducing a measure which is supplementary—which is complementary—to the new investment allowances; it is designed to enable businesses to put more into bricks and mortar and into plant and machinery in order to help production." I must say that I cannot see much connection between these two things. The investment allowances represent a substantial tax remission, or subsidy, and are attached to the actual act of investment.

In the case of the Estate Duty reduction, there is no necessary association with investment at all. All that happens is that the taxpayers in the particular category covered by this Clause do not have to pay so much as before. So I submit that that argument falls to the ground; but, even if one accepts that as the Chancellor's argument, then one must ask him why he did not at least show a more conciliatory attitude to our proposal that the concession should be limited.

The Financial Secretary gave us a lot of arithmetic which, he tried to say, meant that owing to the fact that the Estate Duty was a progressive tax, the larger the estate, the more duty one paid. That is really what it amounted to. That we followed absolutely. We also followed that, accordingly, the larger the estate the greater the amount of the concession in this case, but I am afraid that I completely fail to understand what was the purpose of that arithmetic.

The plain fact remains that under the Clause very substantial remissions of taxation are being made to certain companies, irrespective of their size, irrespective of any question of hardship, irrespective of the need of the taxpayer, indeed irrespective of anything except the conditions which, by some fortuitous chance, have been laid down in the Bill. The argument that the Financial Secretary put forward against our proposal to place a limit upon the concession amounted to the fact that it would involve an abrupt break and that there would be an incentive to businesses to keep themselves below the £50,000 limit which we have suggested. My right hon. Friend the Member for Battersea, North (Mr. Jay) explained that we were aware of that difficulty and that the way to deal with it was by way of a tapering provision.

I was astonished by the Financial Secretary's reply, because he must be perfectly well aware that in other fields of taxation tapering provisions are employed and that there is no argument against them on the ground that they do not give quite as much incentive later. Any limit necessarily means that people above that limit do not get the tax concession That was another example of platitude, which we followed equally as well as we followed the arithmetical truism, but it does not seem to us relevant to the issue.

I take the Financial Secretary once more to an examination of the White Paper. It is extraordinary that the Government should be bringing forward a measure of this kind in complete defiance of the inquiry which was made only three years ago. That inquiry showed overwhelmingly that the argument that small businesses were being broken up by having to pay Estate Duty was utterly without foundation. I ask the Financial Secretary to follow me because I want to emphasise some of the points made in that inquiry. The White Paper takes a sample of nearly 13,000 cases and of these 3,290 were cases where the trade assets exceeded £1,000. The sample inquiry showed that of this total of nearly 13,000 cases only 1.6 per cent. were cases where the payment of the Estate Duty in question could not be made out of the non-trade assets.

In other words, only in these 1.6 per cent. of cases was there any encroachment, as the phrase goes, on the trade assets. Even that is really an exaggeration, because that 1.6 per cent. included investment companies, and I do not think that many people would wish to say that the Clause is really concerned with investment companies. Certainly, that is not my impression.

If one takes the number of cases, excluding investment companies, where non-trade assets were insufficient to pay the duty it is only 86 out of nearly 13,000, that is 0.7 per cent. The sample inquiry took estates over £10,000—a point of some importance in itself, because we are not concerned here with the very small estates. But, even if we take estates over £20,000 and still include the investment companies, the proportion of cases in which the non-trade assets are insufficient to pay duty only rises to 3.4 per cent.

If we take the 86 cases of the 13,000 where the non-trading assets are insufficient, and these are the cases where we exclude the investment companies, in 51, that is to say 60 per cent. of them, the proportion of the trading assets actually required to pay duty was less than 25 per cent. Only in 15 cases out of 13,000 would the duty encroach on more than 50 per cent. of the trading assets.

Mr. George Odey (Beverley)

Would the right hon. Gentleman bear in mind that so far as this inquiry is concerned, they had no means whatever of taking cognisance of the large number of private businesses that had taken evasive action either by being sold, or, turning themselves into public companies?

Mr. Gaitskell

What is wrong with turning themselves into public companies? I do not want to get drawn into that argument, but perhaps I might return to it later. I am dealing with the White Paper and I think the case is absolutely overwhelming.

May I mention one other point that seems to be relevant to our discussions this evening? We are concerned in this Clause with manufacturing businesses because the concession that is made here relates only to industrial hereditaments. If we take these 86 cases, the only cases in 13,000 where the non-trading assets were insufficient, no less than 70 were, in fact, not in manufacturing at all. 63 were in distribution and seven in services of various kinds—laundries, hotels, and so on. Therefore, one really cannot argue that this particular White Paper produces a shred of evidence on which the Government can possibly act.

Now I want to come to the Financial Secretary's remarks on this matter, because he has really behaved in a very odd way. This is what he said during the Second Reading debate referring to my right hon. Friend, the right hon. Member for Bishop Auckland (Mr. Dalton): The right hon. Gentleman quoted them over the whole field where entrenchment"— I think that should be "encroachment"— takes place as amounting to something between 0.5 per cent. and 1.6 per cent., but the percentages to which he referred are based on all cases in which trade assets exceed £10,000;"— that is true— that is to say, they include a large number of very small businesses indeed"— well, of course, because the whole argument was about small businesses. If, however, we take cases where trade assets exceed £10,000—and, after all, that is not a very large business—the percentage where the encroachment takes place rises to 25 per cent. The Financial Secretary has now explained that the figures he presented were not included in the White Paper. That is really a rather extraordinary thing to say at this stage because, in his Second Reading speech, he went on to say: …if one looks at this very helpful analysis, it becomes clear that this problem is rather more serious than the right hon. Gentleman gave it credit."—[OFFICIAL REPORT, 3rd May, 1954; Vol. 527, c. 35.] We have looked at this "very helpful analysis," but nothing in the very helpful analysis bears out what the Financial Secretary says. We would like to ask him in how many cases did the trade assets exceed £10,000? Secondly, what was the encroachment? Thirdly, how many of those cases were manufacturing businesses? Perhaps the right hon. Gentleman would obtain that information. We would be glad to keep the debate going while he gets assistance in the matter so that he can explain the rather extraordinary arguments he used.

11.0 p.m.

This is a Clause which we feel the Government have completely failed to justify. All the facts available show that they are here making a concession which cannot possibly be justified. In my view it is another example—there have been several in the course of this Parliament—where they are clearly making a concession, just giving way to particular vested interests very much embedded in their own party.

It is not only that; there is no doubt whatever that this particular concession is open to the gravest abuse. My right hon. Friends have just spoken on that in connection with our earlier Amendment. I do not think it can be denied that the agricultural concession, which as the Chancellor admitted, is really justified on totally different grounds, undoubtedly has led to abuses of that kind. Here we have a concession which will lead to similar abuses and all the Chancellor can say is, "We cannot do anything about it now because it is almost impossible, but if we discover that there are abuses we will do something about it." I have never heard such an extraordinary argument. For those reasons, unless we hear totally different arguments, I strongly recommend my hon. Friends to vote against the Clause.

Mr. Crosland

My right hon. Friend has deployed the main arguments against the Clause, and I would like to put three points. I think we should have some indication from the Government on the assets basis for valuation because part of the justification for this Clause is the argument that because the assets basis for valuation normally gives a higher valuation than one based on Stock Exchange prices, therefore, Estate Duty falls particularly heavily on businesses valued in that way.

That is a quite different attitude from the one we had used on nationalisation Measures because hon. Members opposite used to attack the Labour Government for basing the valuation on Stock Exchange prices. We seem now to have a completely different attitude according to whether we are discussing relief to small businesses or compensation for nationalised industries. The whole basis of the arguments we have heard from hon. Members opposite has been that it is extremely important to take special measures to maintain the family business in British industry because it is of particular social value, it is a more intimate form of business with better social relations and the rest and it is implied therefore that it is a thoroughly bad thing if a private family concern is forced to form itself into a public company.

That was implicit in speeches of hon. Members opposite, but the argument was carried too far. For one thing it was ignored that the public company may find it much easier to raise capital than a private family business and we all want to encourage expansion. The other thing which is ignored is that it is assumed that if a small family business is compelled by the present weight of Estate Duty to form itself into a public company it will somehow lose its characteristics.

That is not the case. All hon. Members must have had experience of family businesses which have been converted into public companies, but, nevertheless, the members of the family have retained their control and it has made very little difference to the people who occupy the positions of managing director or other directors. It is an illusion to suppose that because a family business is forced to form itself into a public company it therefore loses it characteristics.

My third point is that I think the new Clause may lead to great difficulties in the future. It is admitted that it is a piece of very considerable discrimination in favour of a particular type of business and the businesses are now discriminated against because of the assets basis of valuation. I imagine that the Financial Secretary may have noticed among the various Press notices on the Clause one of the most interesting which appeared in "The Times Review of Industry" for May. It said: There is, of course, much difference of opinion over the extent to which the concession on estate duties on family businesses can fairly be regarded as discriminatory. It is argued with justice that businesses assessed under Section 55 are already discriminated against by the method of valuation, so that a compensating discrimination in their favour merely leaves them on the same basis as everybody else. This is true enough under present conditions. This seems to me significant. It goes on: Of course, shares have not always been valued on stock exchanges at less than the underlying assets of the businesses. Things may change once again, and one of these days it may be found that valuation by shares gives just as high a price as valuation by underlying assets. For that reason the 45 per cent. abatement is potentially discriminatory, and it cannot necessarily be accepted as a permanent part of the fiscal system… I want to ask the Government whether they regard the Clause as justified by the fact that the assets basis of valuation normally gives a much higher figure of valuation than a valuation based upon Stock Exchange prices. In other words, if the disparity between the two methods of valuation were to disappear, would the concession which is being given this year be withdrawn? Does the Government agree with the "Times Review of Industry," that this should not form a permanent part of the fiscal system, and that it is merely justified now by the disparity existing between the two bases of valuation?

Mr. Albu

The Government are putting forward this Clause as a limited concession for the special purpose of dealing with a limited class of business; but it has become increasingly clear that the motives behind the Government's action are mixed, and perhaps are not very plain. As my hon. Friends have pointed out, it is probably largely due to the great interest on the other side of the Committee in family businesses. I doubt if many hon. Members opposite would be able to continue as whole time politicians but for the fact that they are directors of family businesses in which otherwise they play little part. This is a particular interest which is not of general interest to the economy of the country, or is not typical of our general industrial society.

On this side of the Committee we are against reduction of Estate Duty because of the continuing disparity in the ownership of the wealth of the country, in spite of the existence of Estate Duty at a comparatively high level over a number of years. Since 1926 the effect on the ownership of property has only been such that while in that year 1 per cent. of the population owned 57 per cent. Of the wealth, in 1946 1 per cent. owned 50 per cent. That shows that the effect of the Estate Duty has not been very great with regard to the distribution of wealth.

Therefore, to be successful the argument in favour of this concession would have to be very great indeed, and the national economic interest would have to be demonstrated beyond doubt. I have previously pointed out that the number of private businesses, and probably of family businesses of a relatively large size, is great. The benefit, as the Government refused to accept an Amendment to restrict the concession to small businesses, is likely to be particularly great to the wealthy inheritor, as it is such people who would normally pay the higher rate of Estate Duty.

Attention has already been drawn to the report published three years ago in Command Paper 8295 by the Board of Inland Revenue, which controverted the arguments that the family business is being crushed by the burden of Estate Duty. Since that time the National Union of Manufacturers has employed the "Economist" intelligence service to try to produce figures and arguments to show that the original report was wrong. It is interesting that only the hon. Member for Kidderminster (Mr. Nabarro) has bothered to quote this report. It is not surprising, however, because the report makes heavy weather of the case, and in my view does not destroy the argument of the Board of Inland Revenue.

In a table which they give showing the effect in the case of 36 businesses which had so far taken no action, but which were liable to be affected by Estate Duty within the next few years, they show that it is true that in 12 cases out of 30 control would be lost when the present owner died. But it is interesting that those are cases where the companies are the largest. It shows that out of 11 companies where 30 per cent. of the value of the business would have been sold, nine were worth over £100,000. That would appear to bear out my argument that the concession would be more valuable for the larger companies and not for those which find difficulty in maintaining their existence.

It is the larger companies which will have the least difficulty in raising the necessary finance to pay the Estate Duty and continue as a going concern. I agree that there may be some difficulty for small businesses to raise the money to pay Estate Duty under present conditions. That difficulty arises largely from the fact that most institutions which could provide the money are willing to do so only in the form of loans or redeemable preference shares, and when the shares have to be repaid Profits Tax has to be paid on them. Surely the answer is not to make an alteration in the Estate Duty structure but to provide some institution willing and able to provide capital, particularly equity capital to enable the businesses to continue.

I doubt if it is desirable that any capita] should be provided where it is to be provided by passive share- holders. The experience of financial institutions is that most family businesses which they have been asked to assist are very inefficient. It is generally beneficial to the institutions to play some part in stimulating the efficiency of the business, to make a contribution towards its production efficiency and general control, if they are to support it with money.

We all know the long history of nepotism in British industry, particularly in Lancashire, and there is no economic argument for ensuring the continuance of the inheritance of a business from one generation to another. As was pointed out by my hon. Friend the Member for Gloucestershire, South (Mr. Crosland), there is every advantage in a business having its directorships and managerships renewed over the course of years. As he also pointed out, if the inheritors of the business are efficient managers no one who provided the finance to keep the business in being would turn them out. It would seem that the Government have not made out their case, and I commend my hon. Friends to divide against this Clause.

11.15 p.m.

Mr. R. A. Butler

I hope we may now come to a decision on this important Clause, which has occupied us during the larger part of today. I do not want to keep the Committee too late, but I want to make progress with the actual Clauses of the Bill, to leave as much time as possible for these important new Clauses on Monday and Tuesday.

The right hon. Member for Leeds, South (Mr. Gaitskell) made a speech which was fully up to his usual standard of research, and which included a great many figures, not all of which I can answer tonight. I have made some preliminary inquiries, but I cannot give him a detailed answer on the subject of his analysis of the 13,000 and the 86, and the sub-division he made of this, but I will undertake that this subject will be examined in the morning, and if we have any information to send him in regard to his more detailed points we will do so as soon as we can.

The right hon. Gentleman asked what we really wanted to do with this Clause.

Mr. Gaitskell

Is the right hon. Gentleman going to be able to answer any of the questions which I have put to the Financial Secretary to the Treasury? If so, I would rather wait and hear what he has to say first, but, if not, I must say I really feel that the Financial Secretary, who has deployed his argument with such vigour, has gravely misled the Committee.

Mr. Butler

It is very difficult to answer unless I can make my speech. I have a great many answers here, all of which relate to various points which hon. Gentlemen raised. I think it is unusual to rise before a Minister replies to ask if he is going to make an answer before one knows what the answer is.

Mr. Gaitskell

I am talking about the White Paper, and it was the right hon. Gentleman who introduced this at the beginning of his speech by saying lie would not be able to answer same of my questions, especially relating to the figures. I was not quite sure whether he was going on to answer some others. This is an important point.

Mr. Butler

I will clear it up, but the right hon. Gentleman will see that I was not able to answer before I was able to. Clearly it is reasonable to let a Minister answer a debate without interruption, but I will do my best to take up the right hon. Gentleman's point. His first question was what we really wanted to do, and I was going to answer that first. Is that it?

Mr. Gaitskell

I have no desire to make the right hon. Gentleman's speech for him—in fact, I should find it quite impossible because he has such a bad case. But he has brought up this question, which is about the White Paper. I understand, since he referred to that to start with, that he wished to take it up separately.

Mr. Butler

Let the Committee be quite clear. I started by paying the right hon. Gentleman a compliment about the manner in which he had worked out his speech. I have made inquiries through those helping me tonight as to whether I could give a detailed answer, and I was unable to do that straight away. I then proceeded to take the right hon. Gentleman's arguments and try to deal with them. So perhaps we may now proceed in the same spirit and manner in which I was trying to start.

The position is that the right hon. Gentleman asked what we really wanted to do. According to our procedure, these debates can be repeated time after time on the Committee stage, so all I can do is to repeat what I have said twice previously. We had a dual motive in the Clause by bringing in this. First, to give some relief to businesses which, in my opinion, were affected by the assets basis of valuation; and, second, to give some relief to small businesses, so that in the ordinary tradition they could carry on.

Those were our motives, and they were combined with the economic motive of giving some help to productive industry. As far as I can see from the debates we have had today, we have succeeded in carrying the greater part of the Committee with us in this objective. The right hon. Gentleman says that he objects to this Clause more than to any other. I can see that there is something in the point put by the hon. Member for Hall Green, that whenever one has any discriminatory taxation it is easy to criticise. I accept that. Therefore the contribution by the hon. Member was a valuable one, because it is a point in our tax law which is important to remember.

Nevertheless, after taking full account of his speech and of the criticisms of the right hon. Gentleman opposite, we think that it is worth while to introduce the Clause and now to proceed to pass it into law. We believe that, for the three reasons I give, it will he valuable. The right hon. Gentleman the Member for Leeds, South asked me about the assets basis. I do not want to detain the Committee with a ponderous description of the assets basis or its merits or demerits.

The position is that after this review—again I repeat what I have said twice before today—we have decided to maintain the assets basis of valuation. The objections to it have been very strongly put during our debates last year and the year before by hon. Members especially on this side of the Committee. The simple point, without reading out briefs or going into statistics, is that, the assets basis is a more ponderous method than the basis of the market value of the share and it results in many cases in a much bigger sacrifice, a bigger operation, on the part of the company concerned. Therefore, it is very unpopular indeed. The fact that I have made the provision will, I hope, be mitigated by the concession which I have tried to make.

The hon. Member for Gloucestershire, South (Mr. Crosland) more or less agreed that that was a consecutive line of argument, whether he agreed with it or not, when he asked whether we would withdraw the benefit after a certain time. The answer is that our term of office is likely to be so long that we can certainly look ahead more than any other Government. So far as we can see ahead the answer is that we do not propose to withdraw it.

The right hon. Gentleman the Member for Leeds, South raised a point to which he attached importance, namely the White Paper which was mentioned during the Second Reading and which, of course, we had read and studied before we decided to introduce this reform. He raised several arguments in connection with the White Paper, copies of which I have again studied before the occasion of this debate. He raised a criticism of the Financial Secretary.

I have ascertained that the statement by my right hon. Friend that encroachment on business assets took place in 25 per cent. of the cases where the business assets—not the estates, and that is an important point to make clear—exceeded £10,000 was made by the "Economist" information unit commenting, about the time of the publication of the White Paper, on the White Paper and the subsequent controversy that arose.

That is the source of our information. Therefore, I entirely support the evidence given by my right hon. Friend and I see no reason to doubt that the answer was correct or that this proves that the White Paper was in itself rather too general and sweeping and condemnatory a document, and that there are features in the incidence of the burden on business assets by this Estate Duty which were not fully brought out in the White Paper itself. Although the right hon. Gentleman the Member for Leeds, South may like to criticise the White Paper, I do not think that it is conclusive evidence of the case he wishes to make.

I should have thought that we might now come to a decision upon the Clause. We have got a very good reason for bringing it in. I do not accept the view of the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) that the Estate Duty in itself is the best of our taxes.

Mr. Dalton

Which is the best?

Mr. Butler

I think that the death duty weighs extremely heavily upon a great deal of the traditional virtues which are handed down from family to family and generation to generation. It is also a form of tax on capital which may well do more harm than good to our nation. I am not here going to go into the question of whether I wish to see great discrepancies between wealth, because I do not. I do not agree with what hon. and right hon. Gentlemen opposite say about the nature of my economic policy being one in which I wish to transfer money from the rich to the poor. That is just nonsense. We wish in our philosophy a reasonable sharing out in a proper way of goods as between one section and another. In many cases death duties, whether on large or small estates, redound to the national disadvantage because they do not allow tradition to be passed on to the national advantage. If in a small way, and for good reasons, we make this concession in this year's Bill I hope it will be accepted in the same spirit of sincerity as it has been put forward.

Mr. Dalton

I think there must be one word from this side before we divide the Committee, as now we must. I have never heard a less convincing reply than that which the right hon. Gentleman has just given. He has failed to answer almost every question asked him from this side, and made a promise that he would furnish my right hon. Friend with answers on reflection. But of answers statistical and argumentative we have had few. This is the most objectionable Clause in a rather colourless Bill. It is a step backwards, for reasons already developed tonight. It is discrimination of a most objectionable kind. I hope that the hon. Member for Hall Green (Mr. Aubrey Jones), to whom I paid tribute in his absence will accompany us into the Lobbies in support of the powerful and lucid argument he advanced at an earlier stage. We shall welcome him most warmly when the Division takes place.

As for the White Paper, it is produced by those whom I would rate rather higher than the private enterprise experts, or those associated with Mr. Crowther or any other person who dabbles in these matters. They are serious experts we see before us in the box tonight: they have been associated with successive Chancellors for many years. I would like it to be made clear whether this White Paper is accepted as being true within the limits of what it says.

The Chancellor may suggest that further statements should be added to give a full picture, but is it repudiated or asserted to be untrue? I will give way if he wishes to answer. Why does not he say yes? I remember it was said of Mr. Lloyd George when he occupied that office that when his highly skilled officials produced some material for a White Paper he said, "I do not like those figures, go away and get me some better ones." For the purpose of this reform the Chancellor could not say he was dissatisfied with the figures three years ago because they were based on earlier studies, so he has asked Mr. Crowther to cook up some others.

Mr. Butler

The "Economist" commented on the figures before I took office and without my knowledge. The Inland Revenue informed me that they checked them and informed the Economic Information Unit that they were correct.

11.30 p.m.

Mr. Dalton

Is there something in this Paper which is not correct?

Mr. Butler

I have never attempted to say so. I will accept what the right hon. Gentleman has generally said himself is a true picture. I could put a gloss on the Paper and explain some ways in which the Paper does not represent the full picture, but it is not any wish of mine to repudiate a document produced from Somerset House.

Mr. Dalton

Until evidence to the contrary is produced, we shall continue to believe that the Paper is accurate. If any further arguments of a statistical character are produced, we shall read them with interest.

After studying this Clause, I should like to ask one final question. This notable White Paper, after discussion of the general problem has run on through paragraphs and through figures—not through many, as this is a terse Paper—in the final paragraph says: Nevertheless the general picture which is presented is clear enough; in this connection it is worth noting that the public discussion has not so far resulted in the production, to either the Chancellor of the Exchequer or, the Board,"— that is, the Board of Inland Revenue— of any cases in which a business has in fact been broken up by the operation of the death duties. That is a very important statement. I ask the Chancellor whether this is still true, or has there been produced to him since he has been in office any single case in which a business has been broken up by the operation of the duties? Will he be kind enough to answer—[HON. MEMBERS: "Answer."]—whether there has been any single case since the publication of this White Paper, which has been produced by the Board of Inland Revenue, in which a business has been broken up by the Estate Duty? There is no answer. Evidently there has been no case. If there had been, the Chancellor would have told us. This is evidence that this Paper still holds true; and that single declaration at the end of the White Paper is sufficient justification for us to reject the Clause. That I ask my hon. and right hon. Friends now to do, so far as they are able.

Question put.

The Committee divided: Ayes, 203; Noes, 148.

Division No. 173.]	AYES	[11.32 p.m.
Aitken, W. T.	Bell, Philip (Bolton, E.)	Brooke, Henry (Hampstead)
Allan, R. A. (Paddington, S.)	Bennett, F. M. (Reading, N.)	Buchan-Hepburn, Rt. Hon. P. G. T.
Alport, C. J. M.	Bennett, Dr. Reginald (Gosport)	Bullard, D. G.
Amery, Julian (Preston, N.)	Bishop, F. P.	Bullus, Wing Commander E, E
Amory, Rt. Hon. Heathcoat (Tiverton)	Black, C. W.	Burden, F. F. A.
Arbuthnot, John	Bossom, Sir A. C.	Butcher, Sir Herbert
Assheton, Rt. Hon. R. (Blackburn, W.)	Boyd-Carpenter, Rt. Hon. J. A.	Butler, Rt. Hon. R. A. (Saffron Walden)
Baldock, Lt.-Cmdr. J. M.	Boyle, Sir Edward	Campbell, Sir David
Baldwin, A. E.	Braine, B. R.	Cary, Sir Robert
Barlow, Sir John	Braithwaite, Sir Albert (Harrow, W.)	Channon, H.
Baxter, Sir Beverley	Braithwaite, Sir Gurney	Clarke, Col. Ralph (East Grinstead)
Beach, Maj. Hicks	Bromley-Davenport, Lt.-Col. W. H.	Clarke, Brig. Terence (Portsmouth, W.)
Cooper-Key, E. M.	Joynson-Hicks, Hon. L. W	Profumo, J. D.
Craddock, Beresford (Spelthorne)	Kerby, Capt. H. B.	Raikes, Sir Victor
Crosthwaite-Eyre, Col. O. E.	Kerr, H. W.	Redmayne, M.
Crouch, R. F.	Lambert, Hon. G.	Rees-Davies, W. R.
Crowder, Petre (Ruislip—Northwood)	Leather, E. H. C.	Remnant, Hon. P.
Darting, Sir William (Edinburgh, S.)	Legge-Bourke, Maj. E. A. H.	Renton, D. L. M.
Davidson, Viscountess	Legh, Hon. Peter (Petersfield)	Ridsdale, J. E.
Deedes, W. F.	Lennox-Boyd, Rt. Hon. A. T.	Robinson, Sir Roland (Blackpool, S.)
Digby, S. Wingfield	Lindsay, Martin	Robson-Brown, W.
Donaldson, Cmdr. C. E. McA.	Linstead, Sir H. N.	Roper, Sir Harold
Donner, Sir P. W.	Lockwood, Lt.-Col. J. C.	Ropner, Col. Sir Leonard
Douglas-Hamilton, Lord Malcolm	Longden, Gilbert	Russell, R. S.
Drewe, Sir C.	Lucas, Sir Jocelyn (Portsmouth, S.)	Ryder, Capt. R. E. D.
Duthie, W. S.	Lucas-Tooth, Sir Hugh	Scott, R. Donald
Eden, J. B. (Bournemouth, West)	McAdden, S. J.	Scott-Miller, Cmdr. R.
Erroll, F. J.	McKibbin, A. J.	Simon, J. E. S. (Middlesbrough, W.)
Finlay, Graeme	Mackie, J. H. (Galloway)	Smithers, Peter (Winchester)
Fisher, Nigel	Maclay, Rt. Hon. John	Smithers, Sir Waldron (Orpington)
Fleetwood-Hesketh, R. F.	Maclean, Fitzroy	Smyth, Brig. J. G. (Norwood)
Fletcher-Cooke, C.	Macmillan, Rt. Hon. Harold (Bromley)	Spearman, A. C. M.
Ford, Mrs. Patricia	Maitland, Comdr. J. F. W. (Horncastle)	Spens, Rt. Hon. Sir P. (Kensington, S.)
Fort, R.	Maitland, Patrick (Lanark)	Stanley, Capt Hon. Richard
Fraser, Hon. Hugh (Stone)	Manningham-Buller, Rt. Hn. Sir Reginald	Stevens, Geoffrey
Fyfe, Rt. Hon. Sir David Maxwell	Marlowe, A. A. H.	Steward, W. A. (Woolwich, W.)
Galbraith, Rt. Hon. T. D. (Pollok)	Marples, A. E.	Stewart, Henderson (Fife, E.)
Galbraith, T. G. D. (Hillhead)	Marshall, Douglas (Bedmin)	Strauss, Henry (Norwich, S.)
Glover, D.	Maude, Angus	Summers, G. S.
Godber, J. B.	Maudling, R.	Sutcliffe, Sir Harold
Gower, H. R.	Maydon, Lt.-Comdr. S. L. C.	Taylor, Sir Charles (Eastbourne)
Graham, Sir Fergus	Medlicott, Brig. F.	Taylor, William (Bradford, N.)
Grimond, J.	Mellor, Sir John	Teeling, W.
Grimston, Hon. John (St. Albans)	Monckton, Rt. Hon. Sir Walter	Thomas, Rt. Hon. J. P. L. (Hereford)
Grimston, Sir Robert (Westbury)	Nabarro, G. D. N.	Thomas, Leslie (Canterbury)
Hall, John (Wycombe)	Neave, Airey	Thompson, Lt.-Cdr. R. (Croydon, W.)
Harris, Frederic (Croydon, N.)	Nicholson, Godfrey (Farnham)	Thornton-Kemsley, Col. C. N.
Harris, Reader (Heston)	Nicolson, Nigel (Bournemouth, E.)	Tilney, John
Harvey, Ian (Harrow, E.)	Nield, Basil (Chester)	Vane, W. M. F.
Hay, John	Noble, Comdr. A. H. P.	Vaughan-Morgan, J K.
Heald, Rt. Hon. Sir Lionel	Nugent, G. R. H.	Vosper, D. F.
Heath, Edward	Oakshott, H. D.	Wakefield, Edward (Derbyshire, W)
Higgs, J. M. C.	Odey, G. W.	Walker-Smith, D. C.
Hnohingbrooke, Viscount	O'Neill, Hon. Phelim (Co. Antrim, N.)	Wall, Major Patrick
Holland-Martin, C. J.	Orr, Capt. L. P. S.	Ward, Hon. George (Worcester)
Hollis, M. C.	Orr-Ewing, Charles Ian (Hendon, N.)	Waterhouse, Capt. Rt. Hon.
Holt, A. F.	Orr-Ewing, Sir Ian (Weston-super-Mare)	Watkinson, H. A.
Hopkinson, Rt. Hon. Henry	Osborne, C.	Webbe, Sir H. (London & Westminster)
Hornsby-Smith, Miss M. P.	Page, R. G.	Wellwood, W.
Horobin, I. M.	Perkins, Sir Robert	Williams, Rt. Hon. Charles (Torquay)
Howard, Hon. Greville (St. Ives)	Peto, Brig. C. H. M.	Williams, Gerald (Tonbridge)
Hudson, Sir Austin (Lewisham, N.)	Peyton, J. W. W.	Williams, Sir Herbert (Croydon, E.)
Hulbert, Wing Cdr. N. J.	Pickthorn, K. W. M.	Williams, Paul (Sunderland, S.)
Hurd, A. R.	Pilkington, Capt. R. A.	Williams, R. Dudley (Exeter)
Hutchison, Sir Ian Clark (E'b'rgh, W.)	Pitman, I. J.	Wood, Hon. R.
Iremonger, T. L.	Pitt, Miss E. M.
Jenkins, Robert (Dulwich)	Powell, J. Enoch	TELLERS FOR THE AYES:
Johnson, Eric (Blackley)	Price, Henry (Lewisham, W.)	Mr. Studholme and Mr. Wills.
Jones, A. (Hall Green)	Prior-Palmer, Brig. O. L.
NOES
Acland, Sir Richard	Champion, A. J.	Hall, Rt. Hon. Glenvil (Colne Valley)
Adams, Richard	Corbet, Mrs. Freda	Hannan, W.
Albu, A. H.	Cove, W. G.	Hargreaves, A.
Allen, Arthur (Bosworth)	Crosland, C. A. R.	Healy, Denis (Leeds, S. E.)
Allen, Scholefield (Crewe)	Dalton, Rt. Hon. H.	Henderson, Rt. Hon. A. (Rowley Regis)
Awbery, S. S.	Darling, George (Hillsborough)	Herbison, Miss M.
Bacon, Miss Alice	Davies, Ernest (Enfield, E.)	Hewitson, Capt. M.
Benson, G.	Davies, Harold (Leek)	Hobson, C. R.
Beswick, F.	Deer, G.	Holman, P
Bing, G. H. C.	Dugdale, Rt. Hon. John (W. Bromwich)	Houghton, Douglas
Blackburn, F.	Ede, Rt. Hon. J. C.	Hudson, James (Ealing, N.)
Blenkinsop, A.	Edelman, M.	Hughes, Hector (Aberdeen, N.)
Bottomley, Rt. Hon. A. G	Edwards, Rt. Hon. John (Brighouse)	Hynd, H (Accrington)
Bowden, H. W.	Evans, Albert (Islington, S. W.)	Hynd, J. B. (Attercliffe)
Bowles, F. G.	Fernyhough, E.	Irvine, A. J. (Edge Hill)
Braddock, Mrs. Elizabeth	Fienburgh, W.	Jay, Rt. Hon. D. P. T.
Brockway, A. F.	Fletcher, Eric (Islington, E.)	Jeger, George (Goole)
Brook, Dryden (Halifax)	Freeman, Peter (Newport)	Jeger, Mrs. Lena
Broughton, Dr. A. D. D.	Gaitskell, Rt. Hon. H. T. N.	Jenkins, R. H. (Stechford)
Brown, Rt. Hon. George (Belper)	Gibson, C. W.	Johnson, James (Rugby)
Brown, Thomas (Ince)	Gordon Walker, Rt. Hon. P. C	Jones, David (Hartlepool)
Burke, W. A.	Grenfell, Rt. Hon. D. R.	Jones, Jack (Rotherham)
Burton, Miss F. E.	Griffiths, David (Rother Valley)	Keenan, W.
Butler, Herbert (Hackney, S.)	Griffiths, William (Exchange)	Kenyon, C.
Callaghan. L. J.	Hale, Leslie	King, Dr. H. M.

Lawson, G. M.	Pargiter, G. A.	Summerskill, Rt. Hon. E.
Lee, Frederick (Newton)	Parker, J.	Taylor, John (West Lothian)
Lever, Leslie (Ardwick)	Peart, T. F.	Thomas, Iorwerth (Rhondda, W.)
Lewis, Arthur	Plummer, Sir Leslie	Thomas, Ivor Owen (Wrekin)
Lindgren, G. S.	Porter, G.	Thornton, E.
MacColl, J. E.	Price, J. T. (Westhoughton)	Tomney, F.
McInnes, J.	Price, Philips (Gloucestershire, W.)	Ungoed-Thomas, Sir Lynn
McLeavy, F.	Pryde, D. J.	Usborne, H. C.
Mallalieu, E. L. (Brigg)	Pursey, Cmdr. H.	Wallace, H. W.
Mann, Mrs. Jean	Robens, Rt. Hon. A.	Warbey, W. N.
Mason, Roy	Robinson, Kenneth (St. Pancras, N.)	Watkins, T. E.
Mayhew, C. P.	Royle, C.	Weitzman, D.
Mellish, R. J.	Shackleton, E. A. A.	Wheeldon, W. E.
Mitchison, G. R.	Silverman, Sydney (Nelson)	White, Mrs. Eirene (E. Flint)
Moody, A. S.	Simmons, C. J. (Brierley Hill)	White, Henry (Derbyshire, N. E.)
Morgan, Dr. H. B. W	Skeffington, A. M.	Wigg, George
Morley, R.	Smith, Ellis (Stoke, S.)	Williams, W. R. (Droylsden)
Moyle, A.	Snow, J. W.	Williams, W. T. (Hammersmith, S.)
Mulley, F. W.	Sorenson, R. W.	Willis, E. G.
Neal, Harold (Bolsover)	Soskice, Rt. Hon. Sir Frank	Winterbottom, Ian (Nottingham, C.)
Noel-Baker, Rt. Hon. P. J	Sparks, J, A.	Winterbottom, Richard (Brightside)
Oliver, G. H.	Stokes, Rt. Hon. R. R.	Wyatt, W. L.
Orbach, M.	Strachey, Rt. Hon. J.	Yates, V. F.
Oswald, T.	Strauss, Rt. Hon. George (Vauxhall)
Palmer, A. M. F	Stross, Dr. Barnett	TELLERS FOR THE NOES:
		Mr. Holmes and Mr. Rogers.

Question put, and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Mr. R. A. Butler

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

We have now got this major Clause 25 and, while I should have like to get a few more, I think that the Clauses 26 to 29 are not very difficult. We shall want a short debate on Clause 29, and after that we shall get on to the new Clauses. Therefore, I do not think that we shall be far behind if we allow people to try to catch their trains now and not keep them back, it being Thursday night.

Committee report Progress; to sit again Tomorrow.