HC Deb 26 May 1954 vol 528 cc419-85

4.3 p.m.

Mrs. Barbara Castle (Blackburn, East)

I beg to move, in page 3, line 18, after "ceases," to insert: (otherwise than by virtue of the powers conferred on the Commissioners by section twelve of the Finance Act, 1944). I should like to say how glad I am that the Chancellor of the Exchequer agreed late last night that we should not try to deal with this Clause at that late hour. I am glad because I want to raise a point of some complexity and of some substance. I am glad that I did not have to try late last night to explain this matter to the Committee, in view of the barrage of inattention with which my hon. Friend the Member for Rossendale (Mr. Anthony Greenwood) had to contend when making a very informative and fascinating speech on the art of lithography.

I want to make it quite clear at the outset that I welcome the ostensible purpose of Clause 6 as described to the House by the Financial Secretary on the Second Reading. I would ask the Financial Secretary to be kind enough to listen, because I want to point out to him something of which he may not be aware, judging from his Second Reading speech on Clause 6. He told us that the purpose which he had in mind in drafting this Clause was to deal with tax evasion. He said that a means of tax avoidance had only recently become apparent, and that the purpose of this Clause and of other Clauses in Part II of the Bill was to remedy defects in Purchase Tax law which—and here I quote because this is important— in some cases permit ingeniously-minded people to evade the payment of the tax. Tax evasion, as he pointed out, has proved possible because under Purchase Tax law, when a manufacturer or wholesaler ceases to be registered, he ceases to be liable for tax on the stocks which he holds, and the Financial Secretary pointed out that there are unscrupulous firms which find a very clever way of making a good deal of profit for themselves by ostensibly ceasing to manufacture by transferring their plant and materials to another firm or company, ceasing to be registered and so becoming possessors of large quantities of stocks on which tax is not payable. The Financial Secretary said: Clause 6 (1) will prevent this."—[OFFICIAL, REPORT, 3rd May, 1954; Vol. 527, cc. 30–31.] I am not quarrelling with the purpose of the Clause as outlined by the Financial Secretary. Clearly, tax evasion of this kind could be stopped, and we support the Clause in so far as it does that. But I want to point out to the Financial Secretary that, as it stands, the Clause does a very great deal more than this. It also covers the man who does not want to be deregistered and is de-registered against his will for the administrative convenience of Customs and Excise. I therefore want to express to the Financial Secretary my confident belief that he will accept this Amendment because its purpose is to exempt from the operations of the Clause a man of this kind whose intentions obviously are not fraudulent in any way and who is being deregistered for the advantage of somebody else and not for his own advantage.

I would point out that Customs and Excise are at present deregistering wholesalers on a considerable scale for their own administrative purposes. I raised this whole question of this sort of wholesaler in the House some two years ago, when I moved a Clause which attempted to give to a wholesaler a right to be registered if he so desired, because it was a tremendous trading advantage to him. Where the majority of wholesalers are registered, if an individual wholesaler is deregistered by Customs and Excise against his will, he may be put in a difficulty in obtaining supplies because the manufacturer to whom he goes for supplies may say to him, "Most of our customers are registered. They do not have to bother us with Purchase Tax law and we are not going to open special books for you."

Two years ago I brought to the attention of the House cases which had arisen in my constituency where wholesalers were suffering serious trading hardship because Customs and Excise had insisted on deregistering them against their will. The Financial Secretary replied to me then in a speech which seemed to put all of the point of view of Customs and Excise and none of the point of view of the trading needs of the wholesaler. He said, "If we made registration automatic we should need more staff to police the tax." He waved aside my representations, without showing any concern for the legitimate entitlement of a wholesaler to be able to pursue his business with reasonable advantage.

At that time, I pointed out the serious drawbacks to the policy which Customs and Excise has been following in this increasing deregistration of wholesalers against their will. One of the obvious drawbacks is that it is desirable that the tax point should be as near the valuation point as possible, the valuation point being the price on the sale to a retailer. It is obvious that the more one moves the tax point back to the manufacturer further away from the price to the retailer, the more one raises the problem of uplift and the fixing of a notional wholesale price, and so on.

Another serious drawback is that it puts the wholesaler who is denied registration at a serious competitive disadvantage. For example, if times become bad, the wholesaler who has been refused registration or has been deregistered and has had to buy his goods with the tax upon them already paid, may run into heavy weather. He has bought his goods with a certain level of tax already paid upon it, and then his competitors start cutting their selling price to the retailers.

If they are registered, they have to pay Purchase Tax only at the point at which the selling price of the wholesaler to the retailer operates. They may not only be cutting their selling price but also, at the same time, reducing the amount of Purchase Tax payable. The unregistered or deregistered wholesaler cannot do that because the Purchase Tax has already been paid on a notional figure which may not be the market price obtaining during a period of depression. The whole of the process of deregistration is fraught with drawbacks to the wholesaler. It is based upon a very bad principle.

The only way in which the Financial Secretary attempted to justify the policy of Customs and Excise was on the grounds that enforcement would be more difficult and that it would require more staff if wholesalers got automatic registration. This afternoon we are facing a very different situation from that to which I referred two years ago. I was told that automatic entitlement to registration by a wholesaler was impossible administratively. However, in Clause 6 (1) we are facing the exact opposite of that situation.

I am profoundly apprehensive that what Clause 6 will do, unless we amend it on the lines which I suggest, is to open the floodgates to wholesale deregistration by Customs and Excise and will give a tremendous stimulus to the process which has so far been held in reasonable check, with a reasonable balance perhaps being struck between the trading rights of the wholesaler and the adiministrative convenience of Customs and Excise.

Customs and Excise is at present carrying out the process of deregistration under Section 12 of the 1944 Finance Act. Under that Act it is entitled to deregister a wholesaler if it is satisfied that the community will not lose money. To come to its estimate it has to assess the tax that it will get if it registers a wholesaler and he puts the tax on his sales, and compare it with the tax which it will get if it deregisters him and collects the tax from his suppliers instead. If it is satisfied that the deregistration of the wholesaler will not result in the State losing money, it can deregister him quite arbitrarily under that Section.

4.15 p.m.

I now turn to the point which arises under this Clause. At present, when Customs and Excise is doing its little sum in respect of the two amounts of tax, it is obviously taking into account the tax which it would lose on the wholesaler's stocks if it deregistered him. As the Financial Secretary pointed out, if it deregisters a wholesaler—this is what the Clause is altering—at present it collects no tax on his stocks. If the Clause goes through in its present form, Customs and Excise will be able to collect tax in future on the stocks of the man whom it deregisters against his will.

If the stock-in-trade of a wholesaler is substantial, the loss of tax on deregistration at present is obviously a matter of some seriousness which Customs and Excise has to take into account. At present, it thinks twice about deregistering wholesalers on a large scale. Unless we amend the Clause on the lines which I suggest, it will open wide the door to deregistrations on a very large scale. We all know that Customs and Excise would rather the manufacturer was registered, for it can then police him more easily, and it would rather that the tax was collected at that point. It will, therefore, be encouraged by the Clause.

On Second Reading, the Financial Secretary said that the Government's only purpose in introducing the provision was to stop fraudulent firms from evading tax. I suggest that it is in keeping with that argument that the Financial Secretary should accept the Amendment and exempt from the operations of the Clause the wholesaler who is being deregistered against his will for the convenience of State apparatus.

Unless the Financial Secretary is prepared to do that, I am afraid that the suspicious side of my nature, which is normally slumbering, will awake, and I shall be driven to the conclusion that his secret purpose is not to stop at tax evasion but to take from the wretched wholesaler the protection which the present system gives him against wide-scale and arbitrary deregistration. The Financial Secretary should read what he told us on that earlier occasion. The Amendment will help him to carry out the purpose which he then said he wanted to achieve.

Mr. Hylton-Foster (York)

I am very glad that the hon. Lady the Member for Blackburn, East (Mrs. Castle) has again raised this subject, because hon. Members on both sides of the Committee are somewhat anxious about the disastrous effects upon wholesalers of enforced deregistration or withholding of registration.

Perhaps the hon. Lady was a little optimistic in supposing that any Chancellor of the Exchequer could accept the Amendment. She did not give any estimate of the cost to the Revenue. If we leave out the exercise of the powers under Section 12 of the Finance Act, 1944, to which the hon. Lady referred, I am not certain what other cases of ceasing to be registered exist. One could think of the trader whose takings from chargeable sales fell below the minimum, and one could also think of manufacturers who carry out chargeable processes, whatever they may be. Otherwise, it is difficult to see what case there is.

I think that the hon. Lady will have done great service to the public and this Committee if, by reason of putting down this Amendment, she does at last get from the Department, through my right hon. Friend, some explanation of what Customs and Excise deem to be its powers under this Section of the Act of Parliament. I am well aware that in saying this I am subject to the riposte, "Go to any competent lawyer and he will look at the Section of the Act of Parliament and tell you what the position is." But it does not work out like that.

If an imaginary person looks at the Section of the Act he finds, in effect, the Section saying: it is to the public advantage to have Customs and Excise collecting its revenue cheaply—I pay tribute to the economic way in which it does that—and it would be more expensive for it, says the Section by implication, if it had to register more people than it has need to; and there is no point in registering a person if you are extorting in respect of his purchases as much as you would be extorting in respect of his sales. If you get as much out of him as you like on purchases you need not bother to register him if you cannot get more out of him by dealing with his sales.

No other criterion is suggested. We are told that deregistration is going on to the tune of more than 6,600 a year and all kinds of grounds are now referred to—policing the revenue, change of address, etc. There is nothing in Section 12 of the Act to say that Parliament was proposing to give powers to the Department to deregister or withhold registration on criteria of that kind.

I believe that if the hon. Lady extracts some explanation it will be of great assistance to all of us, in judging how to vote on this Amendment, if we can find out what these powers are really supposed to be. I do not know whether I am right—I hope I am—in saying that it is now conceded that the Commissioners do not regard a change of address as a ground. It is difficult to find how that can conceivably be a ground under the terms of the Section of the Act of 1944 for deregistering anybody.

Indeed, this will not be any the less important if this Clause is enacted in the law as it stands. I can only speculate as to what Amendments are to be called, but if subsection (2) is left as it now stands this will be imposing a tax on transactions which no one ever thought from the beginning would ever be taxed.

It will catch the transaction in goods which are ultimately to be exported or ultimately to be sold to a registered person as stock and trading materials, and that is the kind of goods that everyone on every side was, I believe, led to suppose would be relieved of tax. If they are now to be caught especially to the disadvantage of the person deregistered under these powers, there is all the more reason to discover what these powers are supposed to be. I think we should then be better placed to judge the merits of the hon. Lady's Amendment and be able to shorten discussions on other stages of the Bill if the Chancellor or the Financial Secretary could find it convenient to indicate what these powers are.

Mr. Leslie Hale (Oldham, West)

I have read the Clause with the greatest care, which involves the interest of my constituents, and I have completely failed to understand what it means. I have also read the appropriate section in the Finance Act (No. 2), 1940, and have tried to find enlightenment without success. I have tried to consider the Amendment and to understand what its effects would be.

I am in rather a difficulty in discussing this matter, because I do not know whether what I shall be saying will be in order. It would, perhaps, be better if I adopted a scientific attitude and based my remarks on a working hypothesis, as the scientist does, in trying to find out what the Clause means by considering what the Financial Secretary, in his speech on Second Reading, indicated he thought it meant and my hon. Friend the Member for Blackburn, East (Mrs. Castle) has indicated she thinks it means.

I propose, as a working hypothesis, also to consider whether the Amendment would carry out the intentions which my hon. Friend has so clearly expressed and desires to carry out. As a scientist, I work on the basic assumption that both these working hypothesis are almost certainly false and that time may well expose their falseness. Having put the position clearly I should like to contribute one point of certitude which I have obtained in my research on this matter, and that is the answer to the question of what Mr. Gladstone said in 1865. I find that it is enshrined in the report of the committee which considered this question of Purchase Tax on stocks and reported to this House about 12 months ago. That was, I think, the Hutton Committee and I will enlighten the House in a moment.

Being something of an individualist, I should like to say that I am very much in support of the hon. Lady's Amendment not merely because of her Amendment but because I am doubtful about the morals of this Clause. The Financial Secretary comes here and says that it is found that some ingenious people are evading the law. Therefore, steps are to be taken to stop it. Therefore, we will penalise all the people who are not ingenious and have not evaded the law and bring them into the ambit of some new punitive and almost penal provisions. That is the fact: I want to be fair in this matter. I am told that this debate has been conducted in a spirit of immense amity in my absence and I would not like to disturb that now. Let us, therefore, concede that views like that have been expressed by Chancellors on both sides of the House for a good many years.

I am told that there was a time when the Financial Secretary, in my early day when I was learning the elements of politics, used to come here in Simonite robes of financial purity and lecture the House on questions of financial rectitude. I remember his speeches. They impressed me and I have been thinking over them. He has finally convinced me that what he said proves conclusively that what the Chancellor is now doing is fundamentally improper. It may be that in more enlightened decades a Chancellor will come to the House and tell the real truth of this matter, and say that tax evasion is now our largest industry and the Government propose to support it; but we have not got to that point yet.

The Hutton Committee did consider this particular matter. It considered the whole question of how to face this problem of Purchase Tax on stocks which has always been an intractable problem and in which it quoted some very classic examples, things like refrigerators on which the tax one year was 33⅓ per cent., the next year nothing and then up to 100 per cent. and then down to nothing again. I promised that I would express Gladstone's remarks, which are extremely relevant. To quote from the report of the Committee: We have been told that Mr. Gladstone, when Chancellor of the Exchequer, refused for a request for a rebate of duty on stocks of tea when the duty was reduced in 1865, with the words 'such a process is quite unknown to our usages.' The implication of that is that we have always had complaints when the tax has gone down or up that it is a hardship on stocks.

The Temporary Chairman (Wing Commander N. J. Hulbert)

I must ask the hon. Gentleman to keep to the Amendment.

4.30 p.m.

Mr. Hale

The Amendment deals with the question of Purchase Tax on existing stocks. What my hon. Friend the Member for Blackburn, East suggests is that the deregistered people will have Purchase Tax put on to stocks which would not have borne Purchase Tax, that some of those stocks may have come from other sources, and that the deregistered people will suffer great hardship.

The next paragraph in the Committee's report covers the matter with precision, because it points to exactly the principle I am putting. Successive Chancellors of the Exchequer have said, "There is only one way out of this. It may not be equitable or just, but it is practicable. One has to take the swings and roundabouts principle and say, 'When the tax goes up on something you are handling, you get the benefit, and when it goes down on something on which tax has been paid, you have to face a loss.' "Successive Chancellors have said, "You get it one way, you do not get it the other way, and that is all we can do." What is happening now is that the de-registered people are being hit both ways. The swings and roundabouts principle is being abandoned, and we are making selective legislation to deal with a limited class of case.

So far as people who have the tax imposed are concerned, the Committee which considered this precise matter said: We take, by way of illustration, a tobacco manufacturer faced with the increase in duty in 1947. Because of the higher duty, he sold the tobacco he had in stock at a price correspondingly higher than it had cost him: but, provided he continued in his business of manufacturing tobacco, and on the same scale as before, he needed all the extra funds which he obtained in this way in order to pay the higher duty on his replacement stocks. That was the problem. That is the situation that these people have had to face.

I have read the Clause carefully. I am not sure that the Amendment carries out my hon. Friend's intention, but she has made her intention abundantly clear. The Financial Secretary, in his speech on Second Reading, said this quite clearly, and used only a few words about it. He said he was dealing with the people who had put in extra stocks to get a benefit by deregistering and were using processes of deregistration by transfers to another associated company, and so on, to avoid their obligation.

Very well; let that be done. But if, as the hon. Lady thinks, the provisions of the Clause include and penalise wholesalers who do not come within the ambit of the operations which the Financial Secretary has described, surely he ought to accept such an Amendment, however drafted, as would protect them from that exploitation and loss, particularly when on every representation they have made in the last 10 years on these fluctuations they have had the assurance that they do not get it one way but get it the other way and that that is all the Government can do for them.

Mr. F. A. Burden (Gillingham)

It has been evident on several occasions that hon. Members on this side are just as worried about this matter as are hon. Members opposite. I join my hon. and learned Friend the Member for York (Mr. Hylton-Foster) in thanking the hon. Lady the Member for Blackburn, East (Mrs. Castle) for giving us an opportunity to express our views this afternoon. We are anxious to elicit from my right hon. Friend the Chancellor of the Exchequer what powers the Commissioners of Customs and Excise are considered to have by Section 12 of the 1944 Act.

The hon. Lady referred to the fear that the Clause, if accepted, would open the floodgates to wholesale deregistration. I assure my right hon. Friend that that is a sincere fear which is held, I would say, by every wholesaler in the country. As far as I can see, the only power that was given under Section 12 of the 1944 Act was power to accept a person from registration when the tax on purchases would not be less than the tax on sales. Every time a wholesaler is to be registered, to ensure that that condition shall operate, his goods must be uplifted at the time of purchase so that there shall be no loss of revenue on sales.

If one refers to the speech of the then Chancellor of the Exchequer, when Purchase Tax was introduced shortly after the beginning of the war in the Finance (No. 2) Act, 1940, it was evident that he regarded it as a tax only for the duration of the war. Section 12 of the 1944 Act, on the substance of which the deregistrations have taken place, was not discussed at any stage when it was introduced into the House of Commons; it was not given even the most cursory discussion or explanation. That might well be symptomatic of the view of Members of the House at that time—

The Temporary Chairman

The hon. Member must not discuss the merits of the 1944 Act.

Mr. Burden

The Clause is based upon, and is intended to extend, the terms of that Section of the Act, and I suggest that in those circumstances it is germane to the Clause and to the Amendment on the question of registration.

The Temporary Chairman

The Committee is dealing with an Amendment to this year's Bill. While the hon. Member is in order in making a passing reference to the 1944 Act, he cannot discuss everything that happened 10 years ago.

Mr. Burden

I leave that point by saying that it was not discussed at the time because it was considered that the end of the war would mean the end of the tax, and the end of the war was well in sight. That Section was intended as a relieving section, and this whole question has now arisen because it has been interpreted as a taxing section.

I have had recently—and, I know, the hon. Lady has had—a considerable number of complaints, from both sides of the House, expressing the concern of firms and Members at the number of registrations that have been withdrawn and cancelled. I have pursued this matter, as the hon. Lady the Member for Blackburn, East has pursued it, in an Adjournment debate on 18th March this year and also, before and since then, in Questions to my right hon. Friends the Chancellor of the Exchequer and the Financial Secretary.

I have quoted cases in which withdrawals of registration were made for reasons other than those indicated in the Act. They were made for changes of address, to which my hon. and learned Friend has referred, for changes of legal status, and for other reasons. But where were these powers given by Parliament? I hope that, as my hon. and learned Friend and as the hon. Lady have asked, we shall have some enlightenment.

As the hon. Lady has said, the Clause in its present form would open the floodgates for still greater deregistrations. Before the Committee agrees to accept the Clause, it would be well to state again the very grave circumstances and difficulties that come down upon wholesalers if the Clause is not amended.

The Temporary Chairman

The hon. Member cannot discuss the whole Clause on this Amendment.

Mr. Burden

Surely I am in order in pointing out what ill-effects will arise if the Amendment is not accepted. That is what I was proposing to do, because it is difficult to argue why an Amendment should be accepted—or that at least some undertaking should be given—if one cannot point out the grave consequences which follow if it is not accepted. That was what I was hoping to do.

Where registration is taken away from a wholesaler he must pay Purchase Tax on his purchases, as is indicated in the Clause—unless there is some relief on the lines suggested by the hon. Lady—and, therefore, finds the finance for the tax on any stock of chargeable goods he may have on hand. If the rate of tax is reduced, or the tax withdrawn on any chargeable goods, he must immediately carry the entire loss of that tax, a contingent loss now imposed on retailers, and trade margins have to recognise this. But trade margins for wholesalers are very much smaller than they are for retailers, and therefore this tax will rest much more heavily upon the wholesalers than upon the retailers.

The Temporary Chairman

Order. The hon. Member is directing his remarks to what will happen if the Clause is carried. I must ask him to direct his remarks to what will happen if the Amendment is carried.

Mr. Burden

If the Amendment is carried, some relief will be given to manufacturers and they will not suffer the same financial loss as they do today, because it will ensure that the narrow terms as laid down in the 1940 Act for de-registering will then operate. Indeed, where manufacturers are uplifted at the moment on this basis they must pay a fixed rate of uplift, whereas with registered traders it is on a percentage basis.

If it restricts deregistration the suggestion of the hon. Lady would arise because, if we maintain the registrations as they are today, the traders who are registered will continue to pay a percentage of Purchase Tax on their goods whatever the selling price may be; whereas, where they are deregistered, even if the traders have to sell their goods at a lower price, they must pay Purchase Tax on what is assessed to be a full and high wholesale value.

There are many other points which relate to this matter, but my main point is the question of the withdrawal of registration, which has concerned my hon. and learned Friend seriously. In answer to a Question, the Financial Secretary informed me that in the year ended 31st December, 1953, 6,679 traders were deregistered. He added: This figure includes the many cases where a registration is cancelled on a change of address or legal status and reissued."—[OFFICIAL REPORT, 1st April, 1954; Vol. 525, c. 2233.] But where are these powers to deregister on those terms? If we refer to the Grant Committee we find that a year ago there were 70,000 traders registered; so that in one year almost 10 per cent. of those registrations has been wiped out. Indeed, we find from statistics that there are just over 14,000 wholesalers and it is those people who are the butt of this attack. If we accept that some of them have been re-registered, it would appear that approximately a quarter of the wholesalers were de-registered during the year ended 31st December, 1953.

This is a serious matter, and the difficulties that it imposes have been made perfectly clear. In this connection, I want to refer to an answer given to me by the right hon. Gentleman in the Adjournment debate which I had on 18th March, because it is very apposite to this case about registrations. Referring to Her Majesty's Customs and Excise he said: There is no question of personal convenience here, because it does not matter a rap to the officials concerned how many people are registered. The only question is the convenience to the public in regard to the size of staff. Now comes the essence of this, because it shows that the Financial Secretary realises the injustice of this matter— For that reason, new registrations have not been granted to wholesalers"—

The Temporary Chairman

Order. I must remind the hon. Member that this Amendment deals only with traders de-registered under the 1944 Act, and I must ask him to keep to that point.

4.45 p.m.

Mr. Burden

I am dealing specifically with the question of traders deregistered under the 1944 Act and so was the Financial Secretary. He went on to say: 'Special circumstances' means, for example, actual or potential export trade of some substance which makes it necessary for them to handle goods free of tax. This refers to the people who have been deregistered or sales to other registered manufacturers. The right hon. Gentleman went on to say that the matter had been complicated because, under the Act of 1940, everybody was exempted. He was replying to my point that this registration should not be removed. He went on: If we did what my hon. Friend wants us to do, leaving that position unchanged, virtually anybody who happened to be in business in 1940 would have the advantages of registration, Mark that, "advantages of registration." He continued: while the new up-and-coming wholesalers would not get it, unless they satisfied such conditions as I indicated a moment ago. It is equally true that if, in fairness to the new wholesalers we deregistered the pre-1940 traders, we should cause great dislocation, because one of the consequences of de-registration is to impose a legal liability to pay tax on all the goods in stock. I suggest that this shows that, if this Clause is adopted, it will lead to great inequity, and I suggest that equity is one of the most important things in law. With regard to the withdrawal of registrations, the right hon. Gentleman then said: The third course is the one that has been followed under the present Administration and its predecessor—the choice of deregistration as and when a change takes place in the case of a trader whose circumstances would not justify a new registration."—[OFFICIAL REPORT, 18th March, 1954; Vol. 525, c. 743–5.] Now, who is the judge as to whether a registration is or is not justified? We have had no guidance on that point and I suggest that we should have some. I suggest also that a trader who is to be deregistered should have the right of appeal to a referee.

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

That has nothing to do with the point of the Amendment.

Mr. Burden

I am sorry. I shall endeavour to keep much closer to the point. One of the reasons, we were told, why the deregistrations were taking place was that there would be economy of administration.

The Temporary Chairman

Order. The hon. Member must not discuss why the deregistrations took place.

Mr. Burden

The people who have been deregistered have been deregistered because by deregistration it would be possible, we were told, to economise in the administration of the Customs and Excise Department. Therefore, I think we are justified in asking my right hon. Friend to tell us exactly what economies have been made. I understand that that branch of the service is undertaken—

The Temporary Chairman

This Amendment is in very narrow limits, and deals with what happens to traders when they are deregistered.

Mr. Burden

I leave that point.

Mr. Anthony Greenwood (Rossendale)

Surely, Wing Commander Hulbert, the hon. Gentleman is entitled to point out that unless the Chancellor of the Exchequer accepts the Amendment the hon. Gentleman will find it quite impossible to support the Clause in the Division Lobby later.

Mr. Burden

My hon. and learned Friend the Member for York (Mr. Hylton- Foster) and the hon. Lady the Member for Blackburn, East have made it perfectly clear that traders who are deregistered have had considerable difficulties imposed on them, and because of that I sincerely hope that, unless my right hon. Friend can show that there are very substantial reasons for the Clause as it is, he will not press again a Clause that extends deregistering.

It is a very serious matter, and because of the hardship inflicted upon the de-registered traders, we are, I think, entitled to ask for a full explanation by my right hon. Friend. I ask him for an assurance that the powers that are given certainly will not be abused in future. I ask him to try to ensure in equity that the registered traders do not have great advantages over those traders it is proposed should be deregistered.

Mr. Anthony Greenwood

We have heard two very forceful and anxious speeches from hon. Gentlemen opposite. We always listen to the hon. Member for Gillingham (Mr. Burden) on these themes with great interest, because he has had a long and intimate experience of retail trade.

I think the Chancellor of the Exchequer really ought to take notice of what the hon. Member has said. One of the features of our debates on the Finance Bill every year is the anxiety and apprehension felt by hon. Gentlemen opposite. We on this side of the Committee find ourselves asking every year how much more anxious they will have to be before any action results from their anxiety.

It is two years now since my hon. Friend the Member for Blackburn, East (Mrs. Castle) pressed this question of de-registration on the Chancellor of the Exchequer. During the two years the right hon. Gentleman has come some small way towards meeting my hon. Friend. If hon. Gentlemen opposite were even more anxious perhaps the Chancellor might be more amenable, and, this year, meet the case put so very well by my hon. Friend and backed up magnificently by the hon. Member for Gillingham.

It appears quite clear from what hon. Members have said that traders may be deregistered in large numbers for administrative purposes only. The hon. Member for Gillingham reminded us that on a number of occasions he has brought instances of such deregistrations to the notice of the Chancellor of the Exchequer. If the claim of the hon. Gentleman can be substantiated, as, no doubt, it can, then there can be no doubt that the situation is a very serious one indeed and fully justifies the somewhat colourful language used by my hon. Friend the Member for Blackburn, East.

I think all of us should ask ourselves where this process will stop. Any additional uncertainty introduced into the world of trade at the present time cannot but do damage to the long-term interests of the country. Nobody in the Committee would wish to question the fact that the Commissioners of Customs and Excise are an admirable body of men, but I think it would be quite wrong if the Committee left too much to the discretion of a body of men who are, after all, civil servants.

I hope that the Financial Secretary, who, I gather, in view of the absence of the Chancellor of the Exchequer, is to reply to the debate, will tell the Committee what are the powers in this respect of the Commissioners. In view of what the hon. Gentleman the Member for Gillingham has said, it seems to me that they are able to say, I'll be Judge, I'll be jury. It would be quite indefensible if we allowed any section of the Civil Service to start taking powers unto itself that it could exercise for purely administrative reasons, and, apparently, quite remote from any decision the Committee may have taken. That I take to be the point of view of the hon. Gentleman the Member for Gillingham. It would be particularly indefensible if we placed upon the trading community an additional anxiety and burden of this kind merely for the convenience of officers of the State.

It is worth pursuing a little the question of the number of registered traders who would be affected by the Amendment. We know from Appendix E of the Grant Report on Purchase Tax (Valuation) that there were at the time the Report was drawn up 10,800 manufacturing retailers registered; 36,000 other manufacturers; 14,300 wholesalers; and 6,700 manufacturers and processors registered under the Finance Act, 1946.

The hon. Member for Gillingham gave some rather disturbing figures about the number of deregistrations that have taken place since that time. I gather from him that since that time about 10 per cent. or over 6,000 of these registered traders have been deregistered, apparently by the arbitrary decision of the Commissioners of Customs and Excise. I hope that the Financial Secretary will be able to tell us in which of the categories described in the Grant Report those deregistrations have taken place and to what extent the number of wholesalers, which was then 14,300, has been reduced since the Grant Report was put before Parliament.

The Financial Secretary told us on Second Reading that the purpose of the Clause, which we appreciate, is to prevent evasion of payment of Purchase Tax, but I think that if we are to take a step which many of us regard as being a retrograde step we ought to be told by the Financial Secretary to what extent evasions of the kind that the Clause is designed to remove were prevalent until the date to which he referred on Second Reading and what the loss was to the taxpayers. If the right hon. Gentleman cannot convince the Committee on that point I think it will be more than ever necessary to give the fullest support to the Amendment.

The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter)

This debate has, as you yourself, Wing Commander Hulbert, from time to time have indicated, ranged rather wide. As, I think there is some misunderstanding on both sides of the Committee as to the effect of the Amendment it may be of assistance to the Committee if I say a word or two about it. As I said on Second Reading, and the hon. Lady the Member for Blackburn, East (Mrs. Castle) was good enough to quote what I said, the purpose of the Clause is to prevent a form of evasion, the means of effecting which have recently become known.

5.0 p.m.

It is a means of evasion which arises from the fact that, as we are now advised, on registration ceasing, stock in hand ceases to be liable to tax. The hon. Lady the Member for Blackburn, East made an admirably clear speech on a subject which, of its very nature, is not always particularly clear. She made it perfectly clear that the effect of her Amendment would be that where registration was withdrawn in the exercise of powers under Section 12 of the Finance Act, 1944, such stocks as the trader might then have would be wholly free from tax.

Bearing that in mind, we must address our minds to what the consequences of that would be.

Mr. Eric Fletcher (Islington, East)

rose—

Mr. Boyd-Carpenter

It would be extremely inconvenient at this stage if the hon. Member intervened. He knows that I give way frequently.

The hon. Lady the Member for Blackburn, East said very fairly that she had no more wish to assist the evasion of tax than anybody else. Therefore, it is relevant to consider what effect the removal of this part of the Clause would have on the methods of preventing tax evasion. That is the nub of the argument on the Amendment. The Committee will appreciate that the holding of a Purchase Tax certificate with its consequence that the trader holds tax-free goods, quite clearly gives an opportunity for evasion to anybody who may be so disposed. The holding of any stock of goods which normally bear tax in a tax-free state offers opportunities to gentlemen or ladies who so desire to dispose of them through illicit channels to avoid tax.

Therefore, one of the matters which, very properly, have concerned successive Governments and their servants in connection with the granting of a Purchase Tax certificate has been whether or not the applicant is the sort of person who can be safely entrusted with privileges which can be dangerous to the Revenue. What happens in the case of a person of that kind who has obtained a Purchase Tax certificate? The position now is that either the registration can be continued, which means that persons who have shown themselves to be prepared to abuse it are allowed to continue dealing in tax-free goods, or the registration is cancelled in exercise of the powers under Section 12 of the 1944 Act and the stock of goods immediately becomes tax-free.

It is perfectly clear that in those circumstances, where a fraud is discovered, those who administer these provisions are placed in an awkward dilemma. Their duty is to protect the Revenue against abuse and fraud, and I am sure that the Committee support them in that duty. What are they to do in a case where a registered trader is found to be disposing of goods without payment of tax? If they cancel his certificate and he has a large stock of goods they are presenting him with the advantage of having that stock of goods tax-free. Alternatively, they must go on supplying him with goods when, ex-hypothesi, he is prepared to continue the abuse.

This is not a fiction of the imagination of either Ministers or officials. I have with me particulars of a number of cases where this precise dilemma has presented itself to those who have to administer these provisions.

Mr. E. Fletcher

I wanted to intervene at a convenient point, and I now ask the right hon. Gentleman whether he is really saying that this dilemma has only just become apparent? Does he not know that it has always existed and that hitherto it has always been the case that where the Commissioners have decided to deregister they have known that one of the consequences was that the trader could dispose of stock in hand without Purchase Tax?

Mr. Boyd-Carpenter

It has been generally believed by all concerned that deregistration would impose tax liability. It was believed that that was the law, and that is what it will be if the Committee accepts this Clause. After taking legal advice the Commissioners have taken the view, which it is difficult to controvert, that the consequences of de-registration is to free traders' stocks of liability to tax.

The Clause as a whole tries to restore the position which was deemed until quite recently to exist. Everybody concerned took that view before.

Mr. Fletcher

No.

Mr. Boyd-Carpenter

That being so, we come to this dilemma. I ask the hon. Lady the Member for Blackburn, East whether it makes sense in cases where tax is being evaded by such expedients as false returns and where prosecution has successfully taken place, to go on entrusting the trader, found guilty by a competent court, with tax-free goods? Yet may we not feel that it would be wrong to deregister him if the consequences of deregistration is inevitably to present him with the advantage of all his stocks being made legally tax-free?

Mrs. Castle

Is the right hon. Gentleman now trying to say that the bulk of deregistrations which have taken place under the Commissioners' powers under Section 12 of the 1944 Act have been deregistrations as a result of the wholesalers' abuse of the registration? Is it not a fact that cases of abuse are very occasional and the bulk of deregistrations were deregistrations made for the administrative convenience of the Customs and Excise, as the right hon. Gentleman admitted to me two years ago?

Mr. Boyd-Carpenter

The hon. Lady knows perfectly well that the vast majority of traders, in this as in other spheres, are wholly honest and that a substantial majority of deregistrations have nothing whatever to do with any misconduct on the part of the traders concerned. They take place either on cessation or change of business.

The hon. Lady, however, must face the fact that in cases where deregistration has to be effected, then, in order to prevent the defrauding of the Revenue by one or other of the methods that I have mentioned, deregistration almost invariably takes place under Section 12 of the 1944 Act. Therefore, if the Amendment were accepted we should place those responsible for the protection of the Revenue in a hopeless position

Mr. Hale

The right hon. Gentleman has given us some important additional information. So far from the Revenue being defrauded, those responsible for the Revenue have been defrauding registered wholesalers for years, not with intent but because they did not understand the law themselves, with all their resources. They have been collecting Purchase Tax from unfortunate people who were not liable. The Committee is now being asked, not to make the law retrospective—because people apparently have acquiesced in this extortion and there is no threat yet of applications for reimbursement—but to make legal now what has been illegal. The right hon. Gentleman's almost ritualistic observations about the Revenue being defrauded seems singularly inappropriate when applied to transactions by which the Revenue has been enriched by unknown scores of thousands of pounds of illegal money.

Mr. Boyd-Carpenter

I think the hon. Member is getting a little unduly excited.

If the Revenue has been enriched by large quantities of illegal money it was also during the term of office of his hon. Friends. [An HON. MEMBER: " "And before."] Yes, and before.

The position, as I said on Second Reading, and as the hon. Member for Oldham, West (Mr. Hale) may recall, is that in general the provisions of Purchase Tax law which were enacted in the difficult summer of 1940 and the almost equally difficult summer of 1944 were obviously not so perfectly adjusted as they would have been in normal times. The pressure of events in a more competitive society into which our freer economy is moving, has revealed technical legal difficulties. This is not the only one. I do not think there is any need to get excited.

I must bring the Committee back to the dilemma that, if we accepted the Amendment—while I am glad to say I believe our trading community to be generally honest—in the case of a comparatively limited number a trader, having obtained a certificate of registration, would either be in the position of having to be allowed to continue the use of the certificate which on these very assumptions he has abused, or be presented with a considerable tax-free benefit. The Committee must face that.

Mr. Burden

On a point of information, which I believe to be a very important point, because no one would like it to go out that this House was in favour of people abusing their position as registered traders, is it not a fact that in the case of evasion there are very heavy penalties, which include three times the cost of the default or evasion and/or imprisonment? In addition, the Commissioners of Customs and Excise are empowered, where the integrity of a trader is questioned, to demand a surety in lieu of Purchase Tax.

Mr. Boyd-Carpenter

My hon. Friend is quite right. The penalties are severe, but my hon. Friend must recall the words of Mrs. Beaton, "First, catch your hare," and also that it is one thing to impose massive fines and another thing to enforce their payment in the case of people with remarkably small means. The Committee must be realistic about this matter and not drift into a position in which it is said that it is quite all right to acquiesce in the commission of fraud because in the long run a man can be hauled before the court and punished. That is not the way to safeguard the public revenues, and my hon. Friend knows it.

There is this further consequence, which will be of some consolation to my hon. Friend. I must not incur the displeasure which your predecessor in the Chair indicated, Sir Charles, and go widely into registration policy, but I think I shall be in order if I indicate that there is one very clear connection between the matter we are discussing and the powers for carrying out the policy of registration. One of the reasons why it is necessary to be cautious in the grant of a Purchase Tax certificate is that, if we make the mistake of granting it to some dishonest person, we are faced with the difficulty I have frankly described to the Committee.

Once we are in the position of knowing—as we shall be if the Committee is good enough to accept this Clause—that in case of fraud it is possible to cancel the certificate without presenting the trader concerned with a tax-free benefit, it becomes easier to be freer in the granting of registration because, in granting registration where otherwise we might hesitate, we would then not necessarily be running into this difficulty. One of the purposes which may be served by this Clause as it stands and which, if it were amended as the hon. Lady suggests, would not be served, is that it will be possible in this way to be a little easier in the grant of certificates than has been thought desirable under a series of Governments.

Mrs. Castle

rose—

5.15 p.m.

Mr. Boyd-Carpenter

I will give way in a moment, but I want to add something in this context which may interest her. This is material to the subject under discussion. At this moment discussions are taking place with some of the trade interests concerned with a view to seeing whether it will be possible to become a little easier in the grant or retention of Purchase Tax certificates than has been found possible in the past. It is, I think, clear that if we are to move in that direction without acting irresponsibly in relation to our duty to see that the Revenue is not defrauded, the provisions of the Clause should be enacted so that the difficulties that I have described will not arise.

I may be on the verge of order, Sir Charles, but I hope that I am on the inner rather than the outer verge. No one could have sat on either of the Front Benches in this Committee without realising the difficulties and friction which this whole question of Purchase Tax registration inevitably involves, and which it would inevitably involve whichever of the alternative policies were pursued. But, as I indicated in the Adjournment debate a few months ago, and further indicate now, we are trying to move to a somewhat freer position in this respect, and we are hopeful of doing so if the Committee gives us this Clause.

Mrs. Castle

Is the right hon. Gentleman really telling the House that his Department and the Customs and Excise have now reversed the policy which he described to me two years ago as administratively desirable—that is, to decrease the number of tax points because of the need to police the law? Is he now saying that he wants this Clause to enable the Customs and Excise to register more wholesalers and not fewer?

Mr. Boyd-Carpenter

The purpose of this Clause is the very converse of what the hon. Lady said in her speech when she said that it would open the floodgates to deregistration. The purpose lying behind our general attitude in this matter is not a reversal of the position, in the dramatic phrase of the hon. Lady, but an easing of the position and a somewhat freer grant of new certificates, coupled, as I indicated in the House a month or two ago, with a somewhat less restricted attitude on deregistration policy. As has been made clear, although my hon. Friend the Member for Gillingham (Mr. Burden) did not understand it, it is no longer the case that the mere change of address of an existing company automatically involves deregistration, as was the case for many years.

Perhaps I have strayed a little from the subject of the debate, but I am not the only offender, Sir Charles, and there is at any rate a connection between the provisions of this Clause and the general questions of deregistration and registration which have been matters of very sincere and deep concern to us. I am afraid that if we were to accept this Amendment it would inevitably restore the difficulty I have described of dealing with that small, but not altogether insignificant, minority who take advantage of the difficulties of policing the tax in order to evade it. I hope I have explained that, far from there being any justification for the use of the phrase—on both sides of the Committee— "opening the floodgates to deregistration," the effects are likely to lead in the opposite direction.

Mr. Hugh Gaitskell (Leeds, South)

The Financial Secretary has thrown further light on the motives of the Government in introducing this Clause into the Bill. But he did not deal at all adequately with the point raised by my hon. Friend the Member for Blackburn, East (Mrs. Castle). Indeed at one or two points the right hon. Gentleman appeared to be in a self-contradictory position. On the one hand he based most of his argument on the illegal or criminal activities of certain traders, and the next moment he was at pains to impress upon the Committee how few there were of them, while nevertheless admitting that a large number of other people—apparently completely honest people—would be affected by this Clause.

I make no apology for reverting to the purpose of the Amendment. This is a complicated business and it is not easy to keep completely in order, but I will do my best. As it stands, the Amendment intends to exempt from this Clause certain classes of persons who have been deregistered, that is, persons who are deregistered and cease to be registered under Section 12 of the 1944 Act.

That Section relates to the powers of the Commissioners themselves to take people off the register, to deregister them or to refuse registration. It is, therefore, dealing with a class of person who, not of their own free will, but because of what the Commissioners decided, are deprived of the opportunity to behave in business as can registered persons, in other words, to hold tax-free goods.

During his Second Reading speech the Financial Secretary gave as an illustration for this Clause the case of a firm which defrauded the Revenue by changing its name and transferring its plant and material to some other firm and then, left with a stock of unfinished commodities, was able to dispose of that tax free. That is a situation which no one would defend. That clearly is a deliberate decision by the firm to deregister in order to avoid taxation and to make the profit which it will no doubt obtain as a result of being able to sell tax-free goods.

It is a totally different situation from that of a firm which is deregistered by the Customs and where the initiative is on the side of the officials. The Financial Secretary says, "Oh yes, but these people who are deregistered by the Customs—or at any rate some of them—are very wicked. They have been breaking the law. They have been entrusted with power and freedom to hold tax-free goods and they have abused that trust and, therefore, it is only fair that when they are struck off the register they should not be allowed to make any gain out of it."

That may be true of a limited number, but again it seems to me no argument whatever for penalising all the others who are deregistered, not because they are doing anything illegal, but because of conditions which are satisfied under Section 12 of the 1944 Act—in other words, that the Revenue does not lose any tax as a result of their being taken off the register. If the Financial Secretary says that it is not reasonable that a firm which has actually been convicted in a court of law of evading tax should be allowed to get away with it, I am disposed to agree with him. But that could be taken care of, surely, by limiting the application of this Clause to convicted persons.

There is no reason why the net should catch all the innocent people as well. I find the argument of the Financial Secretary unconvincing.

Mr. Boyd-Carpenter

Leaving aside the case of a convicted person, which I gather the right hon. Gentleman does not propose to defend, is his argument that in all other cases where deregistration is effected in the exercise of powers under Section 12 of the 1944 Act it should automatically give them exemption from tax?

Mr. Gaitskell

That is the purpose of the Amendment, and I am saying that if these people were innocent and were taken off the register merely because of the conditions laid down in Section 12 of the 1944 Act in the first place that might possibly involve them in considerable losses.

There have been many complaints about this matter. The Financial Secretary is familiar with the trouble there has been in the trade about this matter. Now the intention is that they are to be deprived of what was admittedly the advantage—I concede that—of being able to dispose of stocks they held without payment of tax.

Mr. Boyd-Carpenter

However large.

Mr. Gaitskell

However large. That, of course, is necessarily involved, and I concede it at once.

This is a matter of balance, however. Although it is our duty to assist the Government to strengthen the law against the wrongdoers, it is also our duty to protect those who do no wrong, and in our vigour to carry out the first of these principles we must not ignore the second. No one more than the Financial Secretary, when he was in Opposition, was more concerned with the second of these principles.

There is a great deal in what was said by my hon. Friend about the opening of the floodgates, although that may have been a rather picturesque phrase. But it is clearly laid down in Section 12 of the 1944 Act that the decision whether or not to deregister turns on this arithmetical calculation, whether on balance the Revenue will lose or gain tax. There can be no doubt that as a result of the new Clause, if it is not amended, there will be a result from that arithmetic likely to be more favourable to the Revenue if deregistration is contemplated. Therefore, if they are carrying out the provision of Section 12 of the 1944 Act, it surely follows that there is real danger, with the sum coming out in this way, that a lot mroe people will, in fact, be deregistered.

I confess that a lot of what the Financial Secretary said sounded very well, but it did not seem to me to relate at all to the 1944 Act, and we are left in an extremely difficult position. We do not know on what basis the Customs will operate. If we take the law as it stands we are driven to the conclusion that the result of this Clause, in its present form and without the Amendment, will be to do harm to a lot of perfectly respectable and reasonable people. It may also not only do harm to them in the sense that they have to pay tax where they have not done so before; many more people also will be put in the position of being deprived of the benefit of registration. I remain quite unconvinced by the reply of the Financial Secretary to my hon. Friend, and I hope that she will continue to press this matter.

Mr. Boyd-Carpenter

Perhaps it would be courteous for me to endeavour to reply to the two points made by the right hon. Gentleman. I understand that he is not prepared to argue the case of the convicted trader, but in the case of the innocent trader he thought it would be a good thing that deregistration should automatically carry with it tax immunity on stock, however large.

Mr. Gaitskell

That is the case.

Mr. Boyd-Carpenter

The right hon. Gentleman, of course, will be aware that, as was said by his hon. Friend the Member for Oldham, West (Mr. Hale) liability on stocks was thought to be the law and it was apparently not thought necessary by the previous Administration to alter what was thought to be the law.

The second point made by the right hon. Gentleman is more important—the point about the effect on registration and deregistration. As I told the Committee, it is our view that the enactment of this Clause will make it safer and easier to grant registration more freely because, as I tried to explain, under the position as it will be under this Clause, if we register someone who turns out to be a rogue—

Mr. Hale

rose—

Mr. Boyd-Carpenter

No, I must answer the points of the right hon. Gentleman.

The position is that, under the existing law, if we register someone who turns out to be a rogue we are in the dilemma that we either have to present him with a tax-free benefit on the stocks or, alternatively, we have to continue the registration, thus enabling him to continue to get away with it.

Mr. Gaitskell

Surely the third possibility is to prosecute him.

5.30 p.m.

Mr. Boyd-Carpenter

It may well be that in due course we shall be able to do so, but the right hon. Gentleman knows perfectly well that sometimes there is a considerable interval between the discovery of a fraud and the initiation of a prosecution.

It is, in fact, easier to grant registration if we know that deregistration will not have these possibly embarrassing consequences to the Revenue, and it is, therefore, our intention to use the safer position—not, as the hon. Lady put it, to reverse the general policy which has been followed under Socialist Governments, but to be somewhat easier both in the granting of new registrations and, as a corollary, somewhat easier in the continuation of registrations which might otherwise be cancelled.

It is for that purpose that discussions on these highly technical matters are taking place at the moment between some of the trade organisations concerned and the officials for whom I am responsible.

Mr. Hale

The reason I asked the question was that the Financial Secretary, in answering an interjection, said that the position of the wholesalers, when this Clause was passed, would be what he and his predecessors in office had always thought it to be. If that is so, what is the change which now permits him to say that there will be an improvement in the registration position?

Mr. Boyd-Carpenter

It has been ascertained in recent months that the position was not as it was thought to be, and that must have repercussions upon registration policy. I should have thought the hon. Member would follow that.

Mr. E. Fletcher

I hope that my hon. Friend the Member for Blackburn, East (Mrs. Castle) will press the Amendment, because I regard the Financial Secretary's speech and his subsequent intervention as thoroughly unsatisfactory. The Financial Secretary must face the fact that either he has been singularly misinformed, which I am bound to say is rare, or that he has been less than frank with the Committee, which is also something which I hesitate to suggest.

A great deal has emerged during this remarkable debate today and we have learned much more about the Govern- ment's intentions under the Clause than was revealed by the Financial Secretary in his Second Reading speech. If we look again at what the right hon. Gentleman said on Second Reading, in the light of what has been said this afternoon, we find a totally different picture of the Government's real intentions in introducing the Clause. Those intentions would not have been disclosed had the Amendment not been put down.

On Second Reading, the Financial Secretary recommended the Clause to the House on the ground that quite recently a particularly ingenious method of tax evasion had been discovered and that it was necessary to close the loophole. He said that one or two very ingenious people had discovered that, by closing down their business and perhaps forming a subsidiary or related company, they could escape liability to Purchase Tax on the whole of their stocks. He said that was a shocking thing to permit and, it having been discovered, the loophole must be closed; and it was closed on the Saturday before he spoke.

But it has now been revealed that that was not the Financial Secretary's intention at all. He had a far more sinister intention. We all approved of what he said on Second Reading, for we are all in favour of stopping tax evasion, and if that had been the only reason it would have had our wholehearted support. The Amendment was put down because it seemed to us that, as the Clause stood, it would cause considerable hardship to honest traders. But what has been revealed this afternoon is that the Financial Secretary knew on Second Reading that the object of the Clause was not merely to stop tax evasion but was also to make it easier for the Commissioners of Customs and Excise to deregister persons under Section 12 of the Act of 1944.

Mr. Boyd-Carpenter

I thought I had indicated that it was the very opposite. It was to make it easier to grant and to maintain registration.

Mr. Fletcher

The object which the right hon. Gentleman now outlines is different from that which he gave on Second Reading. He is now saying that it is not merely to deal with tax evasion. I say that it is to enable deregistration to be carried out more easily.

The Financial Secretary says that his secondary object was to make it easier for the Commissioners to register people, because it would give them an additional power of deregistration. It is no use the right hon. Gentleman shaking his head. We must probe this matter, for it is not something which the Financial Secretary can laugh off. I am glad to see that he is explaining it to the Chancellor of the Exchequer, because if he does not explain it to the Chancellor, I propose to do so. With great respect, I would rather do it my own way.

We have now seen that behind the Clause and behind the reasons which the Financial Secretary gave there was a secondary and hidden reason for the Clause, which I regard as a very sinister reason. It has been revealed during this debate. It is to enable the Customs to have freer agency in the use of their powers of deregistration under Section 12 of the 1944 Act. As my hon. Friends have pointed out, there has been considerable concern in the past about the powers which the Commissioners have used in deregistering certain wholesalers. That point has been mentioned by several hon. Members opposite, including the hon. Member for Gillingham (Mr. Burden) and the hon. and learned Member for York (Mr. Hylton-Foster).

There is no doubt about this: a number of wholesalers, through no fault of their own, were deregistered for Purchase Tax purposes because it suited the administrative convenience of the Customs. I do not object to that. Until a certain date, it was not realised that deregistration enabled the trader who had been de-registered to sell his stock without liability to Purchase Tax. The Financial Secretary was courageous enough in his speech to say that he found himself in a dilemma.

Now that it has been discovered that on deregistration the trader can sell his stock in hand without liability to Purchase Tax, what had previously been regarded as the Commissioner's powers of deregistration are circumscribed by the obvious sanction that if they are used the trader concerned will be able to sell his stock without paying Purchase Tax. Where the Financial Secretary was less than frank was in suggesting by implication that this was something which had only just been realised. My information, which I have taken steps to verify, is quite to the contrary.

It has been known to the Commissioners for two or three years at least that whenever they exercised their powers of deregistration under Section 12 of the 1944 Act, it enabled the trader, in law, to sell his stock without paying Purchase Tax. Whether all the traders who have been deregistered have been equally conscious of that fact is another matter. Some of them may have been left in ignorance.

The Financial Secretary even admitted that for years the Treasury has been deliberately collecting much Purchase Tax to which it was not in law entitled, and that one of the objects in putting down this Clause was to remedy that defect of the law. I am not for the moment arguing whether that is a good or a bad thing to do, but if that is the object behind this Clause, then it is something which ought to have been explained on Second Reading, and ought not to be slipped into the Finance Bill under cover of an attempt to stop tax evasion, which we all support.

Mr. Sydney Silverman (Nelson and Colne)

Is my hon. Friend saying that the Clause would be retroactive so as to legalise the collection of Purchase Tax which otherwise would have been illegal?

Mr. Fletcher

That is another matter. It is a very interesting suggestion which my hon. Friend has made concerning the legal position regarding those traders who, without being compelled or without being liable to do so, paid the Purchase Tax. Whether they have the right to recover it is another matter, and it is perhaps a matter on which my hon. Friend can speculate.

What I think we must get clear is that, if we have now discovered what is the real object of the Government in this matter, namely, to enable them to take powers to deregister without the consequence of enabling the trader to escape the Purchase Tax, that is a matter which should have been provided for in a Clause specially designed for that purpose. They ought to discriminate between the dishonest trader, who has been accused of some fraud, convicted and found guilty, and who ought properly to be deregistered, and, in that case, ought not to be allowed to have his stock free of Purchase Tax, and all other cases, of which some of my hon. Friends have given a number of illustrations.

There is no reason whatever why, under the cover of an attempt to stop tax evasion, bona fide genuine traders, who have been registered for a long time, and who, purely for reasons of administrative convenience, the Government now want to deregister, should be penalised in this way. That is just McCarthyism. It is trying to do by sinister, obscure administrative machinery something which the Government are not prepared to put in a straightforward manner in their legislation.

I hope that my hon. Friends, and those on the Benches opposite who have listened to this argument—and many of them have supported it—will realise the overwhelming justice of this Amendment. The only way in which the Financial Secretary and the Chancellor can extricate themselves from the thoroughly dishonourable position in which they have placed the Committee is by accepting the Amendment, and, if they feel that they have a further problem to tackle, by dealing with it in a separate Clause.

Mr. Douglas Jay (Battersea, North)

I think this has been a very valuable debate, and that it has revealed a very unsatisfactory state of affairs. In the first place, apparently, the Government have been illegally raising taxation for some years, and their only defence is that they did not know they were doing it. In the second place, we have now ascertained that the Financial Secretary had a purpose in this Clause which he did not reveal on Second Reading; that is to say, to make it easier to deregister traders.

I think both sides of the Committee are anxious about the extent of de-registration. It is a complex matter, and it may be that the Amendment which we have proposed is not entirely satisfactory to the Government. I should like to ask the Chancellor, now that he has had time to read his brief, even if he has not listened to the whole of the debate, if, in order to meet the anxieties on both sides of the Committee, he will give an assurance that he will reconsider the whole problem and recommend some solution to us on Report stage that will meet the point of view that we have put forward.

If he can do that, I do not think it will be necessary to press the matter now, but, if the right hon. Gentleman is not able to undertake to reconsider the problem completely, I think I must advise my hon. Friends to press the matter to a Division.

5.45 p.m.

Mr. R. A. Butler

I am afraid that I cannot give any such undertaking to the right hon. Gentleman. The object of the Clause is as was stated by my right hon. Friend the Financial Secretary. Owing to very pressing business, I was obliged to leave the Chamber for half an hour, but I was aware of what my right hon. Friend has said, because he discussed it with me before he said it, and, in my experience, he usually says what he intends to say. Therefore, I must stand by the arguments which he used. The object of the Clause is as the Financial Secretary stated. Hon. Members opposite have said that they are behind the Government in seeking to stop tax evasion, and I think we must all support methods designed to that end.

The hon. Member for Islington, East (Mr. E. Fletcher) talked about McCarthyism, which is a gross exaggeration and should not be accepted by the Committee.

Mr. S. Silverman

A gross exaggeration of McCarthyism.

Mr. Butler

I accept the correction of the hon. Member for Nelson and Colne (Mr. S. Silverman)—a gross exaggeration of McCarthyism.

The right hon. Member for Battersea, North (Mr. Jay) referred to the fact that the Government have been drawing in taxation quite deliberately when they should not have done so. I cannot accept the extreme position which he describes. So far as there has been any difficulty, I think the right hon. Gentleman himself and his own Administration would have to take their share in the situation which arose in those circumstances. The only thing that we can do now is to ask the Committee to come to a decision on this matter.

Mrs. Castle

I think none of us would blame the Chancellor for having to be elsewhere while these matters are being discussed, and I am not blaming him for not having been here during the whole of the debate, though it really does make the right hon. Gentleman's comments in reply to the remarks of my right hon. Friend very unsatisfactory. The Chancellor said that he had seen the arguments of the Financial Secretary, but, of course, what he has not heard has been the demolition of those arguments by my hon. Friends on this side of the Committee, and the failure of the Financial Secretary to answer the points which we have put to him.

Mr. Butler

I have not been able to hear every speech, but the hon. Lady's speech was so beautifully clear and comprehensive that, when I had heard it, I had heard all.

Mrs. Castle

The Chancellor always misjudges my sex when he imagines that we are deflected from our purpose by casual compliments, and, of course, the Chancellor was quite wrong.

There have been many points of great substance put by my hon. Friends in this debate which have not been answered by the Financial Secretary. I am sorry, but it really is quite impossible for me to accept the Financial Secretary's claim that one of his purposes in this Clause is to make the registration of wholesalers easier and enable the Commissioners to register more. If only the Financial Secretary could have seen the look of blank incredulity on the face of his hon. Friend the Member for Gillingham (Mr. Burden) when he was making those remarks, I think the right hon. Gentleman would have been really shocked.

Those of us who have discussed this problem with the trade in preparation for this debate have found no evidence of any kind of such a practice as the Financial Secretary mentioned. The argument is entirely the other way. I am not making a party point on this matter, but the Financial Secretary should be aware that the danger is all the other way, as I explained in my speech. In view of the refusal of the Chancellor to try to meet the anxieties on both sides of the Committee between now and Report stage, I must press this Amendment to a Division.

Sir Herbert Williams (Croydon, East)

I find the situation unintelligible. I have read the Amendment several times, and I have read Section 12 of the Finance Act, 1944, and I am still not clear about it. I missed the speech by the hon. Lady because I was busy on the telephone to my constituency, but I think I have heard all the arguments in favour of the Amendment.

It is clear that certain people have been getting away with money improperly, and that the Treasury has also been getting away with money improperly. This matter concerns both the payers of Purchase Tax and the collectors. Both have been charged with infamous conduct this afternoon. We have been told that the object of the Clause is to enable the registration of more people, but we do not know where we are.

This is an issue that I do not understand, and which I think most hon. Members around me do not understand. There ought to be further investigation and explanation by the Chancellor of the Exchequer or the Financial Secretary. Usually I can understand the Financial Secretary, but I did not understand him today. I hope there will be further examination of this difficult problem, about which a great many traders are gravely perturbed.

Mr. Burden

The hon. Lady has emulated Eve in a most attractive manner, but, so far as I am concerned, although she and her hon. Friend, in a very bland manner, suggested that I should go with them into the Division Lobby, she will be disappointed, in view of my right hon. Friend's categorical assurance that the Clause will be used for relief and not for additional taxation, and that very considerable care will be exercised in future in withdrawing registration from traders. I am very hopeful, as I know many of my hon. Friends are, that such care will be taken and that the undertakings given will be carried out. I am sure that my hon. Friends feel as I do on this matter, and will join me now in supporting the Government.

Mr. S. Silverman

Will the hon. Member explain how he reconciles the confidence which he has just expressed with the declaration of the Government that they and previous Governments have for 10 years been collecting a lot of money to which they were not entitled, together with the implication that they propose to retain it?

Mr. Burden

There are occasionally difficulties of that sort. I find it far less difficult to support my right hon. Friend in this matter than the hon. Member for

Nelson and Colne (Mr. S. Silverman) has sometimes found it in his own case to support his own leaders.

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

The Committee divided: Ayes, 219; Noes, 233.

Division No. 118.] AYES [5.52 p.m
Acland, Sir Richard Hall, Rt. Hon. Glanvil (Colne Valley) Paling, Will T. (Dewsbury)
Adams, Richard Hall, John T. (Gateshead, W.) Palmer, A. M. F.
Allen, Scholefield (Crewe) Hamilton, W. W. Pannell, Charles
Anderson, Frank (Whitehaven) Hannan, W. Pargiter, G. A.
Awbery, S. S. Hargreaves, A. Parker, J.
Bacon, Miss Alice Hastings, S. Parkin, B. T.
Balfour, A. Hayman, F. H. Pearson, A.
Bellenger, Rt. Hon. F. J Henderson, Rt. Hon, A. (Rowley Regis) Plummer, Sir Leslie
Bence, C. R. Herbison, Miss M. Porter, G.
Benson, G. Hewitson, Capt M. Price, J. T. (Westhoughton)
Beswick, F. Holman, P. Proctor, W. T
Bing, G. H. C Holmes, Horace Pryde, D. J
Blackburn, F. Holt, A. F. Rankin, John
Blenkinsop, A. Houghton, Douglas Reid, Thomas (Swindon)
Blyton, W. R. Hoy, J. H. Reid, William (Camlachie)
Boardman, H Hudson, James (Ealing, N.) Rhodes, H.
Bowen, E. R. Hughes, Cledwyn (Anglesey) Roberts, Albert (Normanton)
Bowles, F. G Hughes, Emrys (S. Ayrshire) Roberts, Goronwy (Caernarvon)
Braddock, Mrs. Elizabeth Hughes, Hector (Aberdeen, N.) Robinson, Kenneth (St. Pancras, N.)
Brockway, A. F. Irving, W. J. (Wood Green) Rogers, George (Kensington, N.)
Brook, Dryden (Halifax) Isaacs, Rt. Hon. G. A. Ross, William
Broughton, Dr. A. D. D. Janner, B. Royle, C.
Brown, Thomas (Ince) Jay, Rt. Hon. D. P. T. Shackleton, E. A. A.
Burke, V. A. Jeger, George (Goole) Shinwell, Rt. Hon. E.
Carmichael, J. Jeger, Mrs. Lena Short, E. W.
Castle, Mrs. B. A Jenkins, R. H. (Stechford) Shurmer, P. L. E.
Champion, A. J. Johnson, James (Rugby) Silverman, Julius (Erdington)
Chapman, W. D. Jones, David (Hartlepool) Silverman, Sydney (Nelson)
Clunie, J. Jones, Frederick Elwyn (West Ham, S.) Simmons, C. J. (Brierley Hill)
Coldrick, W. Jones, Jack (Rotherham) Skeffington, A. M.
Collick, P. H. Jones, T. W. (Merioneth) Slater, Mrs. H. (Stoke-on-Trent)
Corbet, Mrs. Freda Keenan, W. Slater, J. (Durham, Sedgefield)
Cove, W. G. Kenyon, C. Smith, Ellis (Stoke, S.)
Craddock, George (Bradford, S.) Key, Rt. Hon. C. W. Smith, Norman (Nottingham, S.)
Crosland, C. A. R. Kinley, J. Snow, J. W.
Crossman, R. H. S. Lawson, G. M. Sorensen, R. W.
Cullen, Mrs. A. Lee, Frederick (Newton) Soskice, Rt. Hon. Sir Frank
Daines, P. Lee, Miss Jennie (Cannock) Sparks, J. A.
Dalton, Rt. Hon. H. Lewis, Arthur Stewart, Michael (Fulham, E.)
Darling, George (Hillsborough) Logan, D. G. Stokes, Rt. Hon. R. R.
Davies, Ernest (Enfield, E.) MacColl, J. E. Strachey, Rt. Hon. J.
Davies, Harold (Leek) McGhee, H. G. Strauss, Rt. Hon. George (Vauxhall)
Deer, G. McInnes, J. Stress, Dr. Barnett
Delargy, H. J. McKay, John (Wallsend) Summerskill, Rt. Hon. E.
Ede, Rt. Hon. J. C. McLeavy, F. Sylvester, G. O.
Edwards, Rt. Hon. John (Brighouse) MacMillan, M. K. (Western Isles) Taylor, Bernard (Mansfield)
Edwards, Rt. Hon. Ness (Caerphilly) Mainwaring, W. H. Taylor, John (West Lothian)
Evans, Albert (Islington, S.W.) Mallalieu, E. L. (Brigg) Taylor, Rt. Hon. Robert (Morpeth)
Evans, Stanley (Wednesbury) Mallalieu, P. P. W. (Huddersfield, E.) Thomas, Iorwerth (Rhondda, W.)
Fernyhough, E. Mann, Mrs. Jean Thomas, Ivor Owen (Wrekin)
Finch, H. J. Manuel, A. C. Timmons, J
Fletcher, Eric (Islington, E.) Marquand, Rt. Hon. H. A. Tomney, F.
Follick, M. Messer, Sir F. Turner-Samuels, M.
Foot, M. M. Mikardo, Ian Ungoed-Thomas, Sir Lynn
Forman, J. C. Mitchison, G. R. Viant, S. P.
Fraser, Thomas (Hamilton) Monslow, W. Warbey, W. N.
Freeman, Peter (Newport) Moody, A. S. Watkins, T. E.
Gaitskell, Rt. Hon. H. T. N Morrison, Rt. Hon. H. (Lewisham, S.) Wells, Percy (Faversham)
Gibson, C. W. Mort, D. L. Wells, William (Walsall)
Glanville, James Moyle, A. West, D. G.
Gooch, E. G. Mulley, F. W Wheeldon, W. E.
Gordon-Walker, Rt. Hon. P. C. Nally, W. White, Mrs. Eirene (E. Flint)
Greenwood, Anthony (Rossendale) Neal, Harold (Bolsover) White, Henry (Derbyshire N.E.)
Grenfell, Rt. Hon. D. R. Noel-Baker, Rt. Hon P J Whiteley, Rt. Hon. W.
Grey, C. F. Oldfield, W. H Wilcock, Group Capt. C. A. B
Griffiths, David (Rother Valley) Oliver, G. H. Wilkins, W. A.
Griffiths, Rt. Hon. James (Llanelly) Orbach, M. Willey, F. T.
Griffiths, William (Exchange) Oswald, T. Williams, David (Neath)
Grimond, J. Paget, R. T. Williams, Rev. Llywelyn (Abertillery)
Hale, Leslie Paling, Rt. Hon. W. (Dearne Valley) Williams, Ronald (Wigan)
Wiliams, Rt. Hon. Thomas (Don V'll'Y) Wilson, Rt. Hon. Harold (Huyton) Yates, V. F.
Williams, W. R. (Droylsden) Winterbottom, Richard (Brightside)
Williams, W. T. (Hammersmith, S.) Woodburn, Rt. Hon. A. TELLERS FOR THE AYES:
Willis, E. G. Wyatt, W. L. Mr. Wallace and Mr. Arthur Allen.
NOES
Aitken, W. T. Gough, C. F. H. Noble, Comdr. A. H. P
Allan, R. A. (Paddington, S.) Gower, H. R. Nugent, G. R. H.
Alport, C. J. M. Graham, Sir Fergus Odey, G. W.
Amery, Julian (Preston, N.) Grimston, Hon. John (St. Albans) O'Neill, Hon. Phelim (Co. Antrim, N.)
Amory, Rt. Hon. Heathcoat (Tiverton) Grimston, Sir Robert (Westbury) Orr, Capt. L. P. S.
Anstruther-Gray, Major W. J. Hall, John (Wycombe) Osborne, C.
Arbuthnot, John Harden, J. R. E. Page, R. G.
Assheton, Rt. Hon. R. (Blackburn, W.) Hare, Hon. J. H. Peake, Rt. Hon. O.
Astor, Rt. Hon. J. J. Harris, Frederic (Croydon, N.) Peto, Brig. C. H. M.
Baldock, Lt.-Cmdr. J. M. Harris, Reader (Heston) Peyton, J. W. W.
Baldwin, A. E. Harvey, Air Cdre. A. V. (Macclesfield) Pilkington, Capt. R. A.
Banks, Col. C. Harvey, Ian (Harrow, E.) Pitt, Miss E. M.
Barber, Anthony Hay, John Price, Henry (Lewisham, W)
Barlow, Sir John Heath, Edward Prior-Palmer, Brig O. L.
Baxter, A. B. Higgs, J. M. C. Raikes, Sir Victor
Beach, Maj. Hicks Hill, Dr. Charles (Luton) Rayner, Brig. R.
Bell, Philip (Bolton, E.) Hinchingbrooke, Viscount Redmayne, M.
Bennett, F. M. (Reading, N.) Hirst, Geoffrey Rees-Davies, W. R.
Bennett, Dr. Reginald (Gosport) Holland-Martin, C. J. Remnant, Hon. P.
Bevins, J. R. (Toxteth) Hopkinson, Rt. Hon. Henry Renton, D. L. M.
Birch, Nigel Hornsby-Smith, Miss M. P. Roberts, Peter (Heeley)
Bishop, F. P. Horobin, I. M. Robertson, Sir David
Black, C. W. Horsbrugh, Rt. Hon. Florence Rodgers, John (Sevenoaks)
Boothby, Sir R. J. G. Howard, Gerald (Cambridgeshire) Roper, Sir Harold
Boyd-Carpenter, Rt. Hon. J. A. Hudson, W. R. A. (Hull, N.) Roper, Col. Sir Leonard
Boyle, Sir Edward Hurd, A. R. Russell, R. S.
Braine, B R. Hutchison, Sir Ian Clark (E'b'rgh, W.) Ryder, Capt. R. E. D.
Braithwaite, Sir Albert (Harrow, W.) Hyde, Lt.-Col. H. M. Sandy's, Rt. Hon. D.
Braithwaite, Sir Gurney Hylton-Foster, H. B. H. Savory, Prof. Sir Douglas
Bromley-Davenport, Lt.-Col. W. H. Iremonger, T. L. Schofield, Lt.-Col. W.
Brooke, Henry (Hampstead) Jenkins, Robert (Dulwich) Scott, R. Donald
Browne, Jack (Govan) Jennings, Sir Roland Scott-Miller, Cmdr. R.
Buchan-Hepburn, Rt. Hon. P. G. T. Johnson, Eric (Blackley) Shepherd, William
Bullard, D. G. Jones, A. (Hall Green) Simon, J. E. S. (Middlesbrough, W.)
Bullus, Wing Commander E. E. Joynson-Hicks, Hon. L. W Snadden, W. McN.
Burden, F. F. A. Kaberry, D. Soames, Capt. C.
Butcher, Sir Herbert Kerby, Capt. H. B. Spearman, A. C. M.
Butler, Rt. Hon. R. A. (Saffron Walden) Kerr, H. W. Speir, R. M.
Cary, Sir Robert Lambert, Hon. G. Stanley, Capt. Hon. Richard
Channon, H. Lambton, Viscount Stevens, Geoffrey
Clarke, Col. Ralph (East Grinstead) Langford-Holt, J. A. Stewart, Henderson (Fife, E.)
Clarke, Brig. Terence (Portsmouth, W.) Leather, E. H. C. Stoddart-Scott, Col. M.
Clyde, Rt. Hon. J. L. Legge-Bourke, Maj. E. A. H. Storey, S.
Cole, Norman Lindsay, Martin Strauss, Henry (Norwich, S.)
Conant, Maj. R. J. E. Linstead, Sir H. N. Sutcliffe, Sir Harold
Cooper, Sqn. Ldr, Albert Llewellyn, D. T. Taylor, Sir Charles (Eastbourne)
Cooper-Key, E. M. Lloyd, Rt. Hon. Selwyn (Wirral) Taylor, William (Bradford, N.)
Craddock, Beresford (Spelthorne) Lockwood, Lt.-Col. J. C. Teeling, W.
Crookshank, Capt. Rt. Hon. H. F. C Longden, Gilbert Thomas, Rt. Hon. J. P. L. (Hereford)
Crosthwaite-Eyre, Col. O. E. Lucas, Sir Jocelyn (Portsmouth, S.) Thomas, Leslie (Canterbury)
Crouch, R. F. Lucas, P. B. (Brentford) Thomas, P. J. M. (Conway)
Crowder, Sir John (Finchley) Lucas-Tooth, Sir Hugh Thompson, Lt.-Cdr. R. (Croydon, W.)
Crowder, Petre (Ruislip—Northwood) Lyttelton, Rt. Hon. O. Thornton-Kemsley, Col. C. N.
Darling, Sir William (Edinburgh, S.) McCallum, Major D. Tilney, John
Davidson, Viscountess McCorquodale, Rt. Hon. M. S. Touche, Sir Gordon
Deedes, W. F. Macdonald, Sir Peter Turner, H. F. L.
Donaldson, Cmdr. C. E. McA Mackeson, Brig. Sir Harry Turton, R. H.
Doughty, C. J. A. McKibbin, A. J. Tweedsmuir, Lady
Drayson, G. B. Mackie, J. H. (Galloway) Vaughan-Morgan, J. K.
Drewe, Sir C. Maclean, Fitzroy Vosper, D. F.
Dugdale, Rt. Hon. Sir T. (Richmond) Macleod, Rt. Hon. Iain (Enfield, W.) Wakefield, Edward (Derbyshire, W.)
Duncan, Capt. J. A. L. MacLeod, John (Ross and Cromarty) Wakefield, Sir Wavell (St. Marylebone)
Duthie, W. S. Macpherson, Niall (Dumfries) Walker-Smith, D. C.
Eden, J. B. (Bournemouth, West) Maitland, Comdr. J. F. W. (Horncastle) Wall, P. H. B.
Elliot, Rt. Hon. W. E. Manningham-Buller, Sir R. E. Ward, Hon. George (Worcester)
Erroll, F. J. Markham, Major Sir Frank Ward, Miss I. (Tynemouth)
Finlay, Graeme Marshall, Douglas (Bodmin) Waterhouse, Capt. Rt. Hon. C.
Fisher, Nigel Maude, Angus Watkinson, H. A.
Fort, R. Maudling, R. Webbe, Sir H. (London & Westminster)
Foster, John Maydon, Lt.-Comdr. S. L. C. Wellwood, W.
Fraser, Hon. Hugh (Stone) Medlicott, Brig. F. Williams, Gerald (Tonbridge)
Fraser, Sir Ian (Morecambe & Lonsdale) Meller, Sir John Williams, Sir Herbert (Croydon, E)
Galbraith, T. G. D. (Hillhead) Moore, Sir Thomas Williams, Paul (Sunderland, S.)
Gammans, L. D. Morrison, John (Salisbury) Williams, R. Dudley (Exeter)
Garner-Evans, E. H. Nabarro, G. D. N. Wills, G.
George, Rt. Hon. Maj. G. Lloyd Neave, Airey Wood, Hon. R.
Glover, D. Nicholls, Harmar
Godber, J. B. Nicholson, Godfrey (Farnham) TELLERS FOR THE NOES:
Mr. Studholme and Mr. Legh.
Mr. Jay

I beg to move, in page 3, line 28, to leave out from "shall," to "be," in line 29.

The previous debate showed, I think, that it is very desirable that we should examine this Clause carefully. The Chancellor yesterday rather implied that he disliked any discussions on this Bill at all, but I think that he is in a more accommodating mood today, no doubt in view of the heavy defeat of the Government on the question of beer earlier this afternoon and following their previous defeat on Monday.

This Clause was introduced by the Financial Secretary as a measure against evasion. He explained then—and we have discussed it again this afternoon—that it has now been discovered that when a trader ceases to be registered, or, more literally, ceases to require to be registered, his stocks of goods are no longer subject to the tax and he can dispose of them tax free. Incidentally, we have had from the Financial Secretary this afternoon the interesting admission that deregistration, at any rate in quite a number of cases, is carried out with the main objective of preventing fraud. Nevertheless, the Financial Secretary told us that in the great majority of cases where deregistration occurs, its purpose does not imply any fraud or abuse on the part of the trader, but is done for the convenience of the Customs.

If the great majority of traders in this case are perfectly honest and are in a sense the victims of the Administration, it is essential—though we all want to prevent tax evasion—that we should see that the interests of the honest majority of traders are protected. The Financial Secretary said on Second Reading that the purpose of subsection (2) of the Clause, an Amendment to which we are now considering, was to ensure that there was no resulting hardship because the taxpayer had insufficient time in which to pay the tax following deregistration, or, indeed, following the cessation or change of business which also might, as I understand, place the taxpayer in this situation.

Therefore, to avoid that hardship, subsection (2) lays down that the Customs may defer the time at which tax has to be paid in a situation of this kind. But the subsection also contains these words: Payment of tax due by virtue of the foregoing subsection shall"— and these are the words to which we want to draw attention on this Amendment"— subject to any conditions the Commissioners may impose for the purpose of protecting the revenue … Those words, which we here seek to omit from the Clause, would apparently legally enable the Commissioners of Customs and Excise to impose any conditions whatsoever which they choose to impose on the taxpayer before allowing him—though in the majority of cases he is honest and blameless—the benefit of this deferment from paying tax.

The Clause does not even say that payment shall be subject to any reasonable conditions that the Commissioners may impose for the purpose of protecting the revenue. I wish to ask the Financial Secretary whether there is any good reason why we should not include the word "reasonable" in the Clause at some stage. Presumably, the Clause as drafted would enable the Commissioners to take a view, and to enforce a view, as to how the goods were to be sold, when they were to be sold, or in what form and to whom they were to be sold, and in other circumstances of that kind which one might care to mention.

It is quite true, of course, that according to the Clause, all these conditions have to be imposed for the purpose of protecting the Revenue. It is, however, the Commissioners themselves who are the judges of whether or not the conditions which they impose do protect the Revenue. Therefore, that does not seem to me to be a very great safeguard.

It is very difficult to see why the Government, if they had certain conditions in mind, could not have specified the actual conditions in the Clause. In fact, they do specify some conditions because the Clause says that the payment may be deferred for such period as the Commissioners may allow having regard to the said purpose of protecting the Revenue, and so on. As the Chancellor has included at least one precise condition in the Bill it is very hard to understand why he could not have specified the conditions he had in mind rather than put in this sweeping form of words: … subject to any conditions the Commissioners may impose … You will recall, Sir Rhys, that in Opposition the Financial Secretary was always the greatest critic of giving sweeping powers to the bureaucracy, and enabling the Executive to override the subject without any remedy—and all the rest of it. He is now giving the widest possible power to the tax collector. It would have been quite possible to define them in the Bill.

I know that one can always say, "That may be true but though the Bill enables the Customs and Excise to do almost anything it likes in this case, we all know that it is very reasonable and public-spirited and can be trusted never to abuse its powers." I fully agree that in all cases I have come across it has shown itself reasonable and public-spirited, but it is not our duty to pass bad laws and trust that they will be carried out properly.

I do not think that we should say that it can all be left safely to the Customs and gaily pass the Clause in a thoroughly unsatisfactory form. It is our duty to see that the statutes are good and are carried out by a reasonable and public spirited Department as a whole. It seems to us that we should not this afternoon leave in the Bill sweeping and vague words of this kind.

I should like the Financial Secretary to tell the Committee exactly what the objection is to leaving out these words. It would still be possible, as I understand the subsection, for the Commissioners to defer payment of tax … for such period as the Commissioners may allow having regard to the said purpose and to the time when tax in respect of the goods might have been expected to become payable … One would have thought that a reasonable enough safeguard without having this sweeping provision.

6.15 p.m.

Mr. E. Fletcher

Because of the extraordinary statement which we have had from the Financial Secretary on the last Amendment, this one is even more serious than I thought when it was put down.

When this Clause was first commended to the House we were told that it was merely intended to stop tax evasion and to catch the crook. Even then the Financial Secretary said, "But you can still have reasonable safeguards. You must make provision to avoid hardship." Even in those circumstances the Financial Secretary said it was right to prevent hardship to the crooks whom the Clause was designed to catch.

We now know, on the Financial Secretary's admission, that that is not its only object. It is intended, also, to enable the Commissioners to deregister honest traders. It is against that background that we must decide whether the proposed safeguards against hardship are adequate. From that standpoint the criterion as to whether the safeguards are reasonable must be judged on a higher plane, and my right hon. Friend's remarks on the totally inadequate nature of the safeguards in the subsection become most important.

What did the Financial Secretary say? He said: Provision is made, therefore, in subsection (2) for the actual payment to be deferred subject to reasonable safeguards and, in particular, for account to be taken for this purpose of the general way and speech at which goods can be disposed of in the trade concerned."—[OFFICIAL REPORT, 3rd May, 1954; Vol. 527, c. 31.) There are no reasonable safeguards at all. Subsection (2) leaves everything to the arbitrary conditions which the Commissioners may think fit to impose.

The Deputy-Chairman (Sir Rhys Hopkin Morris)

It seems to me that all that this Amendment is concerned with is whether the conditions should be left to the Commissioners or not.

Mr. E. Fletcher

Exactly, Sir Rhys. I am saying that they should not, because it deprives the taxpayer of any safeguard at all if it is left … subject to any conditions the Commissioners may impose for the purpose of protecting the revenue … It is proper to protect the Revenue. It is equally proper that the honest trader should not be penalised.

Perhaps I may give an example. If a trader is deregistered either because he has been evading tax or for administrative convenience, his stock, which has been free of tax, will, at the moment of deregistration, become subject to tax. The Government therefore say that it is reasonable that he should have adequate time to pay. He should have adequate time to dispose of his stock either to a registered dealer or by exporting it.

One of our objections is that under this Clause the Commissioners are enabled to defer the time within which the Purchase Tax is payable. subject to any conditions which the Commissioners choose to impose. I should have thought that if a man sells his stock to a registered trader or exports it then, if he has already paid Purchase Tax because he has not been allowed enough deferred time the Government would have conceded that at least he was entitled to a refund.

As it stands the Clause recognises that he is entitled to a remission to purchase duty if the goods are exported in a particular time. Why should not he be entitled to a refund of his purchase duty at any time if he exports the goods? If he exports the goods at any time no Purchase Tax is payable. Why should there be any conditions of that kind imposed by the Government?

The Deputy-Chairman

I think that the argument of the hon. Member might very well arise on the Question, "That the Clause stand part of the Bill." It does not arise on this Amendment.

Mr. Fletcher

I appreciate your Ruling, Sir Rhys. I thought this was part and parcel of the same objection and I did not wish to repeat the argument later. I appreciate, however, that it will be open to develop this then. I support my right hon. Friend. To me it seems a very sweeping provision that the Commissioners should be given complete carte blanche in this way. It is unreasonable, and inconsistent with what the Financial Secretary said.

Mr. Douglas Houghton (Sowerby)

I see that my name stands to this Amendment, which rather surprises me, because I am all in favour of protecting the Revenue. Let me also say that I do not easily lend my support to anti-bureaucracy Amendments, and that, although I hold no brief for the Customs and Excise, some rather hard things have been said about the Commissioners in this debate. On the opposite benches, they have been described as rogues and guilty of misconduct. An hon. Member on this side of the Committee said that they have been defrauding the taxpayer, and it seems to me that it is about time a word was said in their defence. If this had been the Inland Revenue and not the Customs and Excise, I should have been more passionate in my defence.

The Amendment proposes to leave out the words: subject to any conditions the Commissioners may impose for the purpose of protecting the revenue. I think the Committee will agree that the Commissioners of Customs and Excise must be responsible for protecting the Revenue when they give time to pay under the provisions of this subsection. The question is whether written into the statute there shall be words which give them the power to impose any conditions for the protection of the Revenue.

At present, I am very annoyed with the Chancellor of the Exchequer, because powers in the hands of the inspector of taxes not similarly written into the Act in terms, when exercised in a manner which brings forth a whiff of grapeshot from the Institute of Directors, immediately lead the Chancellor or the Financial Secretary to apologise and to let down the whole lot of inspectors with a bump.

Mr. R. A. Butler

The hon. Gentleman has no right whatever to say that. He cannot point to a single public statement by me as Chancellor of the Exchequer where I have not stood squarely behind the Revenue. The sole occasion when my hon. Friend has apologised was when there was a reason to apologise and when, as everybody knows, in a particular case there was something which had gone a little too far. Please do not think that this Administration is not behind the very distinguished service which the hon. Member represents so ably.

Mr. Houghton

I am very grateful to the right hon. Gentleman for that intervention. I should be out of order if I pursued the matter further. All I can say is that I had very good reason, in my own judgment, for the statement that I made, but this is not the moment to pursue it. In any event, what the Chancellor of the Exchequer said is great comfort indeed to a large body of men and women who have been anxious in recent days.

To get back to the Amendment, what I think is important is that if powers of this sweeping nature are given to the Customs and Excise Department, the Committee should stand behind the Department if it imposes any conditions for the protection of the Revenue. If the Committee does not really intend that the Commissioners shall have the power to impose any conditions for the protection of the Revenue, then I think that in the interests of both the Department and the taxpayer, we should be careful to say what we mean and what powers we intend them to have. That is why I think the Financial Secretary should tell the Committee just what is intended by the words which are sought by this Amendment to be omitted.

I intend to keep an open mind on the matter until I hear what the Financial Secretary has to say, because it is easy to give Departments certain powers and taxpayers certain rights, and we have no idea what safeguards can be imposed when it comes to protecting the Revenue. Obviously, if people are going to hold taxable goods on which the tax is not to be paid in a lump sum but, as the subsection says, Payment of tax due by virtue of the foregoing subsection shall … be deferred because it is reasonable that tax shall not be collected while the goods are still in stock, and if the payment of the tax is to be deferred as laid down here and the Revenue is to be protected, the question is: what are the conditions which can reasonably be imposed by the Commissioners?

The subsection says "any conditions." Do the Government really mean" any conditions "and are they prepared to stand by "any conditions"? I should much prefer that either we should substitute the word "reasonable" for the word "any," as suggested by my right hon. Friend, or the words should be left out altogether. But I do not feel desperately strongly about it as long as the Committee is clear what powers are to be given to the Department in this subsection.

Mr. Boyd-Carpenter

The point raised in this Amendment is comparatively simple and straightforward, and I do not think it lends itself to the very complex arguments which arose on the previous one.

Subsection (2) makes provision for the deferment of payment of tax after de- registration and, as the Committee will see, it provides that tax may be deferred—leaving out the words which are sought to be left out— for such period as the Commissioners may allow having regard to the said purpose. … The point, and indeed the justification, for the words which it is sought to leave out is this. It is desired to give reasonable time to pay in all proper cases. But there may arise cases in which if, without safeguard, the power to defer payment is exercised, real risk of loss to the Revenue may arise, and it may, therefore, well be the case that if we had no power to impose safeguards it would not be possible to allow deferment of payment. It is to be able safely to defer payment that I suggest that it is necessary to have these words—that is to say, to allow the imposition of conditions for deferment.

The hon. Member for Sowerby (Mr. Houghton) asked what sort of conditions were contemplated. Broadly, they are of two categories. One is the actual giving of security, and that is perhaps the most obvious and easy one. It might, however, be that there would be cases in which it would not be reasonable to ask for that as a condition, because the trader concerned might not have the cash available to do it. In those circumstances, it might be desirable to have some arrangement under which the trade undertook to notify the Customs of details of his stock fairly frequently so that a check could be kept to ensure that the stock was not being disposed of without payment of tax.

All that is involved in these few words which we are discussing is the provision of a power to impose conditions to allow us to grant deferment of payment more easily than would be the case if these powers were not included. I hope I have made it clear to the Committee that the point of imposing conditions is that the Customs may be able to defer payment rather generally in these cases. I must say that if the Committee, in its wisdom, thought that these words should be taken out, it would be much more difficult for the Customs to defer payment as generously as they and we would wish.

I therefore suggest to the Committee that these words are important, not least from the point of view of the traders concerned, and I hope that the Committee will agree to leave them in.

6.30 p.m.

Mrs. Castle

In a matter of this kind I should always expect to form a united front with my hon. Friend the Member for Sowerby (Mr. Houghton) because I am the daughter of an inspector of taxes. As such, I have a profound respect for the judgment and integrity of the Inland Revenue Department. I have never heard anything about the work of the Commissioners of Customs and Excise which has led me to believe that their standards are anything but equally high.

I therefore agree with my hon. Friend that our purpose in putting down the Amendment is not merely to bait officials who cannot answer back. It is the duty of the Committee to protect officials who are doing a job of public importance on behalf of us all. It is also our duty, in discussing the Clause, to do our utmost to protect the honest trader—and during the course of our debate this afternoon it has been clear that the honest trader is in need of protection, because the Clause was originally introduced—

The Deputy-Chairman

I do not think that that arises on the Amendment.

Mrs. Castle

With respect, I think it does, Sir Rhys, because I am suggesting that these words remove from the trader a protection to which he is entitled.

We have already had it made perfectly clear this afternoon that the Clause is not related purely to wholesalers who are being deregistered because they have been discovered in some undesirable or dishonest activity. It is recognised that subsection (2) covers honest as well as dishonest wholesalers—in fact, it covers predominantly honest wholesalers—who, for some reason or another, have been deregistered, a large number of them having been deregistered at the instigation of the Commissioners of Customs and Excise for purposes of administrative convenience.

These traders are entitled to the consideration of the Committee in the handling of their affairs when they are compulsorily deregistered by the Customs and Excise. During Second Reading, the Financial Secretary told us that the Clause was designed to mitigate the hardship which may arise. If he is prepared to do that when we are discussing subsection (1), which is purely in terms of dishonest traders, how much more should he be prepared to do it when we are discussing predominantly honest wholesalers.

Despite what the Financial Secretary has said, I suggest that the words in the Clause are unreasonable. He has given us a couple of illustrations to interpret what these words could mean, but we must look at words as they are, not as they might be interpreted. Let us see what they say. The right to have payment of tax deferred shall be "subject to any conditions," however unreasonable those conditions may be, which are laid down by the Customs and Excise. Once we use the phrase "any conditions," we nullify the entire protection which it was intended to give to the trader under subsection (2).

I think my hon. Friend the Member for Sowerby will agree that this is giving an unusually wide latitude to officials, who may then come under attack for having operated it. From that point of view, as well as from the point of view of protecting the trader, we ought to have words which are less wide, less open, and which do not completely nullify the intention which the Financial Secretary himself gave in introducing the Clause.

Mr. Jay

May I put two brief questions which might enable us to avoid dividing the Committee on this issue? We have been told that there are two specific types of conditions which the Government seek to impose under the Clause. Why should those two types not be specified in the Bill, instead of asking the Committee to grant powers which, by virtue of the use of the word "any," clearly go far beyond the powers which the Financial Secretary says that he needs?

Secondly, why does the Chancellor think it right under this subsection to give "any powers" to the Commissioners of Customs and Excise, whereas in the other case, concerning the Inland Revenue, he equally definitely took the view that the Inland Revenue had gone beyond the powers which in that case he thought it appropriate to exercise?

Mr. Boyd-Carpenter

In reply to a direct question by the hon. Member for Sowerby (Mr. Houghton), I gave two examples of the way in which the powers would generally require to be used. I did not say that in all conceivable circumstances they would necessarily be the only two ways, although they will generally be the normal ways. It would be difficult to design a form of words which could apply to every conceivable circumstance.

The right hon. Member for Battersea, North (Mr. Jay) will realise that if we failed to design words to cover any conceivable circumstance, the consequence would not be a benefit to the trader but the reverse of a benefit, because it would not then be possible for the Commissioners to give him the deferment which, as the Clause is drafted, they will be able to give.

Dealing with the right hon. Gentleman's second question, if it is in order, I suggest that he has the wrong end of the stick. The very fact that in an extreme, isolated case my right hon. Friend thinks that the action which has been taken by any Revenue Department has gone too far should surely be an assurance that my right hon. Friend will continue to exercise properly the powers which he is given in the Clause. I hope that the very example which the right hon. Gentleman has given will, out of his own mouth, reassure him.

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

The Committee divided: Ayes, 221; Noes, 211.

Division No. 119.] AYES [6.35 p.m.
Allison, W. T. Doughty, C. J. A. Jones, A. (Hall Green)
Alpert, C. J. M. Drayson, G. B. Kaberry, D.
Amory, Rt. Hon. Heathcoat (Tiverton) Drewe, Sir C. Kerby, Capt. H. B.
Anstruther-Gray, Major W. J. Dugdale, Rt. Hon. Sir T. (Richmond) Kerr, H. W.
Arbuthnot, John Duncan, Capt. J. A. L. Lambert, Hon. G.
Assheton, Rt. Hon. R. (Blackburn, W.) Duthie, W. S. Lambton, Viscount
Astor, Hon. J. J. Elliot, Rt. Hon. W. E. Langford-Holt, J. A.
Baldock, Lt.-Cmdr. J. M. Erroll, F. J. Leather, E. H. C.
Baldwin, A. E. Finlay, Graeme Legge-Bourke, Maj. E. A. H.
Banks, Col. C. Fisher, Nigel Legh, Hon. Peter (Petersfield)
Barber, Anthony Fort, R. Lindsay, Martin
Barlow, Sir John Foster, John Linstead, Sir H. N.
Beach, Maj. Hicks Fraser, Hon. Hugh (Stone) Llewellyn, D. T
Bell, Phillip (Bolton, E.) Fraser, Sir Ian (Morecambe & Lonsdale) Lloyd, Rt. Hon. Selwyn (Wirral)
Bennett, F. M. (Reading, N.) Fife, Rt. Hon. Sir David Maxwell Lockwood, Lt.-Col. J. C.
Bennett, Dr. Reginald (Gosport) Galbraith, T. G. D. (Hillhead) Longden, Gilbert
Bevins, J. R. (Toxteth) Gammons, L. D. Lucas, Sir Jocelyn (Portsmouth, S.)
Birch, Nigel Garner-Evans, E. H. Lucas, P. B. (Brentford)
Bishop, F. P. George, Rt. Hon. Maj. G. Lloyd Lucas-Tooth, Sir Hugh
Black, C. W. Glover, D. Lyttelton, Rt. Hon. O
Boothby, Sir R. J. G. Godber, J. B. McCallum, Major D.
Boyd-Carpenter, Rt. Hon. J. A. Gough, C. F. H. Macdonald, Sir Peter
Boyle, Sir Edward Gower, H. R. McKibbin, A. J.
Braine, B. R. Graham, Sir Fergus Mackie, J. H. (Galloway)
Braithwaite, Sir Albert (Harrow, W.) Grimston, Hon. John (St. Albans) Maclean, Fitzroy
Braithwaite, Sir Gurney Grimston, Sir Robert (Westbury) Macleod, Rt. Hon. Iain (Enfield, W.)
Bromley-Davenport Lt.-Col. W. H. Harden, J. R. E. MacLeod, John (Ross and Cromarty)
Browne, Jack (Govan) Hare, Hon. J. H. Maitland, Comdr. J. F. W. (Horncastle)
Buchan-Hepburn, Rt. Hon. P. G. T. Harris, Frederick (Croydon, N.) Manningham-Buller, Sir R. E.
Bullard, D. G. Harris, Reader (Heston) Markham, Major Sir Frank
Bullus, Wing Commander E. E. Harrison, Col. J. H. (Eye) Marshall, Douglas (Bodmin)
Burden, F. F. A. Harvey, Air Cdre A. V. (Macclesfield) Maude, Angus
Butcher, Sir Herbert Harvey, Ian (Harrow, E.) Maudling, R.
Butler, Rt. Hon. R. A. (Saffron Walden) Hay, John Maydon, Lt.-Comdr. S. L. C.
Cary, Sir Robert Heath, Edward Medlicott, Brig. F.
Channon, H. Higgs, J. M. C. Mellor, Sir John
Clarke, Col. Ralph (East Grinstead) Hill, Dr. Charles (Luton) Moore, Sir Thomas
Clarke, Brig. Terence (Portsmouth, W.) Hirst, Geoffrey Morrison, John (Salisbury)
Clyde, Rt. Hon. J. L. Holland-Martin, C. J. Nabarro, G. D. N.
Cole, Norman Hopkinson, Rt. Hon. Henry Neave, Airey
Conant, Maj. R. J. E. Hornsby-Smith, Miss M. P. Nicholls, Harmar
Cooper, Sqn. Ldr. Albert Horobin, I. M. Nicholson, Godfrey (Farnham)
Cooper-Key, E. M. Horsbrugh, Rt. Hon. Florence Noble, Comdr. A. H. P.
Craddock, Beresford (Spelthorne) Howard, Gerald (Cambridgeshire) Nugent, G. R. H.
Crookshank, Capt. Rt. Hon. H. F. C. Hudson, W. R. A. (Hull, N.) Odey, G. W.
Crosthwaite-Eyre, Col. O. E. Hurd, A. R. O'Neill, Hon. Phelim (Co. Antrim, N.)
Crouch, R. F. Hutchison, Sir Ian Clark (E'b'rgh, W.) Ormsby-Gore, Hon. W. D.
Crowder, Sir John (Finchley) Hyde, Lt.-Col. H. M. Orr, Capt. L. P. S.
Crowder, Peke (Ruislip—Northwood) Hylton-Foster, H. B. H. Osborne, C.
Darling, Sir William (Edinburgh, S.) Iremonger, T. L. Page, R. G.
Davidson, Viscountess Jenkins, Robert (Dulwich) Peake, Rt. Hon. O.
Deedes, W. F. Jennings, Sir Roland Peto, Brig. C. H. M.
Donaldson, Cmdr. C. E. M.A. Johnson, Eric (Blackley) Peyton, J. W. W.
Pitman, I. J. Soames, Capt. C. Tweedsmuir, Lady
Pitt, Miss E. M. Spearman, A. C. M. Vaughan-Morgan, J. K.
Price, Henry (Lewisham, W.) Speir, R. M. Vosper, D. F.
Prior-Palmer, Brig. O. L. Stanley, Capt. Hon. Richard Wakefield, Edward (Derbyshire, W.)
Raikes, Sir Victor Stevens, Geoffrey Wakefield, Sir Wavell (St. Marylebone)
Rayner, Brig. R Stewart Henderson (Fife E.) Walker-Smith, D. C.
Redmayne, M. Stoddart-Scott, Col. M. Wall. P. H. B.
Remnant, Hon. P. Storey, S. Ward, Hon. George (Worcester)
Robertson, Sir David Strauss, Henry (Norwich, S.) Ward, Miss I. (Tynemouth)
Rodgers, John (Sevenoaks) Sutcliffe, Sir Harold Waterhouse, Capt. Rt. Hon. C.
Roper, Sir Harold Taylor, Sir Charles (Eastbourne) Watkinson, H. A.
Ropner, Col. Sir Leonard Taylor, William (Bradford, N.) Webbe, Sir H. (London & Westminster)
Russell, R. S. Teeling, W. Wellwood, W.
Ryder, Capt. R. E. D. Thomas, Rt. Hon. J. P. L. (Hereford) Williams, Gerald (Tonbridge)
Sandys, Rt. Hon. D. Thomas, Leslie (Canterbury) Williams, Sir Herbert (Croydon, E.)
Savory, Prof. Sir Douglas Thomas, P. J. M. (Conway) Williams, Paul (Sunderland, S.)
Schofield, Lt.-Col. W. Thompson, Lt.-Cdr. R. (Croydon, W.) Williams, R. Dudley (Exeter)
Scott, R. Donald Thornton-Kemsley, Col. C. N. Wood, Hon. R.
Scott-Miller, Cmdr. R. Tilney, John
Shepherd, William Touche, Sir Gordon TELLERS FOR THE AYES:
Simon, J. E. S. (Middlesbrough, W.) Turner, H. F. L. Mr. Studholme and Mr. Wills.
Snadden, W. McN. Turton, R. H.
NOES
Acland, Sir Richard Gibson, C. W. Manuel, A. C.
Adams, Richard Glanville, James Marquand, Rt. Hon. H. A.
Albu, A. H. Gooch, E. G. Messer, Sir F.
Allen, Arthur (Bosworth) Gordon-Walker, Rt. Hon. P. C. Mikardo, Ian
Allen, Scholefield (Crewe) Greenwood, Anthony (Rossendale) Mitchison, G. R
Anderson, Frank (Whitehaven) Grenfell, Rt. Hon. D. R. Monslow, W.
Attlee, Rt. Hon. C. R. Grey, C. F. Moody, A. S.
Awbery, S. S. Griffiths, David (Rother Valley) Morrison, Rt. Hon. H. (Lewisham, S.)
Bacon, Miss Alice Griffiths, Rt. Hon. James (Llanelly) Mort, D. L.
Balfour, A. Griffiths, William (Exchange) Moyle, A.
Bellenger, Rt. Hon. F. J. Grimond, J. Mulley, F. W.
Bence, C. R. Hall, Rt. Hon. Glenvil (Colne Valley) Nally, W.
Benson, G. Hall, John T. (Gateshead, W.) Neal, Harold (Bolsover)
Beswick, F. Hamilton, W. W. Noel-Baker, Rt. Hon. P. J
Bing, G. H. C. Hannan, W. Oldfield, W. H.
Blackburn, F. Hargreaves, A. Oliver, G. H.
Blenkinsop, A. Hastings, S. Orbach, M.
Blyton, W. R. Hayman, F. H. Oswald, T.
Boardman, H. Henderson, Rt. Hon. A. (Rowley Regis) Paling, Rt. Hon. W. (Dearne Valley)
Bowen, E. R. Herbison, Miss M. Paling, Will T. (Dewsbury)
Braddock, Mrs. Elizabeth Hewitson, Capt. M. Palmer, A. M. F.
Brockway, A. F. Holman, P. Pannell, Charles
Brook, Dryden (Halifax) Holt, A. F. Parker, J.
Broughton, Dr. A. D. D Houghton, Douglas Pearson, A.
Burke, W. A. Hoy, J. H. Porter, G.
Carmichael, J. Hudson, James (Ealing, N.) Price, J. T. (Westhoughton)
Castle, Mrs. B. A. Hughes, Cledwyn (Anglesey) Proctor, W. T.
Champion, A. J. Hughes, Emrys (S. Ayrshire) Pryde, D. J.
Chapman, W. D. Hughes, Hector (Aberdeen, N.) Rankin, John
Clunie, J. Irving, W. J. (Wood Green) Reid, Thomas (Swindon)
Coldrick, W. Isaacs, Rt. Hon. G. A. Reid, William (Camlachie)
Collick, P. H. Janner, B. Rhodes, H.
Cove, W. G. Jay, Rt. Hon. D. P. T. Roberts, Albert (Normanton)
Craddock, George (Bradford, S.) Jeger, George (Goole) Roberts, Goronwy (Caernarvon)
Crosland, C. A. R. Jenkins, R. H. (Stechford) Robinson, Kenneth (St. Pancras, N.)
Grossman, R. H. S. Johnson, James (Rugby) Rogers, George (Kensington, N.)
Cullen, Mrs. A. Jones, David (Hartlepool) Ross, William
Daines, P. Jones, Frederick Elwyn (West Ham, S.) Royle, C.
Dalton, Rt. Hon. H. Jones, Jack (Rotherham) Shackleton, E. A. A.
Darling, George (Hillsborough) Jones, T. W. (Merioneth) Shawcross, Rt. Hon. Sir Hartley
Davies, Ernest (Enfield, E.) Keenan, W. Shinwell, Rt. Hon. E.
Davies, Harold (Leek) Kenyon, C. Short, E. W.
Deer, G. Key, Rt. Hon. C. W Shurmer, P. L. E.
Delargy, H. J. Kinley, J. Silverman, Julius (Erdington)
Dodds, N. N. Langford-Holt, J. A Silverman, Sydney (Nelson)
Ede, Rt. Hon. J. C. Lawson, G. M. Simmons, C. J. (Brierley Hill)
Edwards, Rt. Hon. John (Brighouse) Lee, Frederick (Newton) Skeffington, A. M.
Edwards, Rt. Hon. Ness (Caerphilly) Lee, Miss Jennie (Cannock) Slater, Mrs. H. (Stoke-on-Trent)
Evans, Albert (Islington, S.W.) Lewis, Arthur Slater, J. (Durham, Sedgefield)
Evans, Stanley (Wednesbury) Logan, D. G. Smith, Ellis (Stoke, S.)
Fernyhough, E. MacColl, J. E. Smith, Norman (Nottingham, S.)
Finch, H. J. McGhee, H. G Snow, J. W.
Fletcher, Eric (Islington, E.) McInnes, J. Sorensen, R. W.
Follick, M. McKay, John (Wallsand) Soskice, Rt. Hon. Sir Frank
Foot, M. M. McLeavey, F. Sparks, J. A.
Forman, J. C. MacMillan, M. K. (Western Isles) Strachey, Rt. Han. J.
Fraser, Thomas (Hamilton) Mainwaring, W. H. Strauss, Rt. Hon. George (Vauxhall)
Freeman, Peter (Newport) Mallalieu, J. P. W. (Huddersfield, E.) Stross, Dr. Barnett
Gaitskell, Rt. Hon. H. T. N. Mann. Mrs. Jean Summerskill, Rt. Hon. E.
Sylvester, G. O. Wells, Percy (Faversham) Williams, Rev. Llywelyn (Abertillery)
Taylor, Bernard (Mansfield) Wells, William (Walsall) Williams, Ronald (Wigan)
Taylor, Rt. Hon. Robert (Morpeth) West, D. G. Williams, Rt. Hon. Thomas (Don V'll'y)
Thomas, Iorwerth (Rhondda, W.) Wheeldon, W. E. Williams W. R. (Droylsden)
Thomas, Ivor Owen (Wrekin) White, Mrs. Eirene (E. Flint) Williams, W. T. (Hammersmith, S.)
Timmons, J. White, Henry (Derbyshire, N.E.) Willis, E. G.
Tomney, F. Whiteley, Rt. Hon. W. Wilson, Rt. Hon. Harold (Huyton)
Turner-Samuels, M. Wigg, George Winterbottom, Richard (Brightside)
Ungoed-Thomas, Sir Lynn Wilcock, Group Capt. C. A. B. Woodburn, Rt. Hon. A.
Viant, S. P. Wilkins, W. A. Yates, V. F.
Warbey, W. N. Willey, F. T.
Watkins, T. E. Williams, David (Neath) TELLERS FOR THE NOES:
Mr. Holmes and Mr. John Taylor.

Question put, and agreed to.

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

6.45 p.m.

Mr. E. Fletcher

I think the Financial Secretary must be the first to agree that the Committee cannot possibly leave this Clause in its present state, having regard to the debates which have already taken place and the very unsatisfactory answers we have had from the Treasury Bench. There are certain Amendments which have not been selected and I take it, Sir Rhys, that it would be open to me in debating this Question, to indicate broadly the nature of the Amendments which I would have sought to have made in subsection (2).

The Deputy-Chairman

The hon. Member can discuss them now only in so far as they relate to the words in the Clause.

Mr. Fletcher

Unfortunately, the words are in the Clause and my objection to the Clause is that they are in the Clause because I would have preferred a number of words in the subsection to have been omitted.

I am sure that the Financial Secretary is anxious to do what, on Second Reading, he said he wanted to do, namely, in subsection (2) provide reasonable safeguards for traders who will be adversely affected by subsection (1). May I, therefore, ask the Financial Secretary whether, between now and the Report stage, he would consider the following points, which seem to require consideration on subsection (2)? I will come back to subsection (1) in a moment. Some of them are more by way of drafting points than substantial points, but I think they are all points which need attention. I think they are all points deserving the Government's attention between now and the Report stage.

The first point is this. We get some traders who are deregistered or cease to be required to be registered, and, as a result, Purchase Tax becomes payable on their stocks subject to such provision for deferment as the Treasury may make. In some cases stocks will be exported. Purchase Tax may have already been paid because the time which the Commissioners allow may have not been long enough. As the Bill stands, it provides that, in the case of goods which have been exported and tax has been paid, if they were exported under the time limit prescribed by the Commissioners the Purchase Tax paid by the trader could be remitted. Why need there be any time limit in such a case as that? Why is it not reasonable, regardless of any time limit, if goods on which Purchase Tax is paid are exported, the trader should not automatically be entitled to have the Purchase Tax remitted?

The second point is, I think, more a drafting point. Lines 31 and 32 provide that regard shall be had to the time when tax in respect of the goods might have been expected to become payable. Expected by whom? Expected by the trader, expected by the Commissioners or expected by a reasonable person? I have never seen the word "expected" used in that context in an Act of Parliament. It is not an intransitive, but a transitive, verb. It is no use saying that something is expected unless we say by whom it is expected; otherwise, it does not make sense.

The third point of detail arises in line 30. Surely it is desirable to provide that when the Commissioners stipulate a time limit for the deferred payment of Purchase Tax, circumstances might arise in which it is reasonable that the time should be extended and further extended. Subsection (2) does not seem to be wide enough to give power to the Commissioners to extend the time.

The major point which has emerged from our discussion on the Clauses arises on subsection (1). I must ask the Financial Secretary some direct questions which, in justice to himself and to the Committee, I am sure he would wish to clear up before we pass from the Clause. On Second Reading, we all assumed that Clause 6 applied only to the tax evading trader who ceased by a voluntary act of his own to be registered. Today, we have learned that the Clause is intended also to apply to the trader whose registration is cancelled under the operation of Section 12 of the 1944 Act.

Does the Financial Secretary still think that the assumption on which our discussions hitherto have been based—namely, that the Clause does apply to a trader whose registration has been cancelled—is correct? After all, the opening lines of the Clause say: when a person ceases to be required to be registered … It does not specifically say that when a person's registration is cancelled under Section 12 of the 1944 Act, Purchase Tax shall become payable. Therefore, to say the least, there is ambiguity. My hon. Friend the Member for Blackburn, East (Mrs. Castle) put down her Amendment to remove any possible doubt.

The argument proceeded on the basis that unless that Amendment was accepted, the case of the deregistered trader would be caught by the Clause. My hon. Friend's Amendment has been rejected by the Committee. We must, therefore, apart from the question as to what is desirable, which we have debated, now consider whether, as it stands, the language of the Clause does cover the deregistered trader. If not, I should be delighted and, I suppose, the Financial Secretary would be correspondingly disappointed. If there is any ambiguity, I could be equally glad, because that would enable the registered trader to take advantage of the situation; because, as I contended earlier, if it is the question of the de-registered traders that the Government want to deal with, they should do it by a new Clause specifically addressed to that purpose and should not try to introduce it in this backstairs fashion. Perhaps the Financial Secretary will tell us.

When the Financial Secretary made his Second Reading speech, was he aware of the object behind the Clause? We may leave aside for the moment whether that objective was achieved by the draftsman or not. If the right hon. Gentleman was not aware that the intention was that the Clause should catch the 1944 Act, Section 12, class of case, that would be some personal justification to him for having so studiously refrained from mentioning this point to the House in his Second Reading speech.

I want now to approach the second major question which arises on subsection (1). There has been considerable alarm among traders at the Government's process of deregistration. If the Clause is intended to cover the Section 12 class of case, we find ourselves in the position that since the Government discovered the legal position as they now state it to be—whether it was early this year, last year, or, as I am convinced, two or three years ago—it has obviously been difficult for the Commissioners to carry out their process of deregistration, to which so much objection is taken. From the moment when they knew that one of the consequences of deregistration was to enable the trader to have his stock free of Purchase Tax, there was a natural prohibition against their carrying out that unpopular deregistration. That sanction will disappear if the assumption on which we have been proceeding—that the Clause covers the 1944 Act—is correct.

I hope we find, as a result of the researches which, I gather, are now going on, that the Government will be able to claim credit for the integrity of the intentions which the Financial Secretary expressed on Second Reading. I hope we shall find that, after all, the Clause is limited to the tax evasion class of case and that the Government will find it necessary to introduce a new Clause, which can be debated on its merits, to deal with the honest traders who otherwise would be affected so adversely by the Clause.

Mrs. Castle

One thing which has emerged quite clearly from our debate is that the Financial Secretary made a misleading Second Reading speech on the Clause. It is thanks to the vigilance of the Opposition in the House that we have unearthed a good deal of information about the Clause, its purposes and effects which we would never have guessed from the Financial Secretary's beguilingly simple explanation on Second Reading.

Far from simply closing a loophole in the enforcement of Purchase Tax. the Clause will have far-reaching consequences in the trading world; and as we have found during our debates that subsection (1) and its application must be interpreted much more widely than the Financial Secretary was at first prepared to admit, we ought to examine very closely the operations of subsection (2). I am sorry that we have not gone into it in more detail, line by line, because it is full of phrases which, if we are not careful, lay the trader open to all kinds of disadvantages and difficulties.

As my hon. Friend has emphasised, we must now all bear in mind something which may not have been so clear when subsection (2) was drafted, namely, that this procedure is to apply not to criminals but to a large number of honest traders who are to be put at grave trading disadvantage by action of the Commissioners of Customs and Excise taken against their will. Therefore, they are entitled to the fullest protection in the handling of their affairs following compulsory deregistration.

7.0 p.m.

My hon. Friend the Member for Islington, East (Mr. E. Fletcher) has given some examples to the right hon. Gentleman and I want to give another example of the possible working of this subsection to the disadvantage of an honest man who has been deregistered against his will. I am thinking particularly of the second half of subsection (2), which deals with the wholesaler who normally sells some of his goods to another registered person and who, therefore, is not in the normal way expected to pay tax on those sales. Under compulsory deregistration, the Commissioners of Customs and Excise may have levied that tax on his stock under this Clause, and the Clause says that he is entitled to a refund if, in the event, he sells that stock to another registered person.

My example is that of a woollen merchant selling to a bespoke tailor who is registered. The tax is not levied on that sale but the Commissioners may have collected it as part of the deregistration process and, therefore, the merchant is entitled to a refund in due course. Yet the words in this subsection make it clear that the period during which the refund may be claimed shall be quite arbitrarily decided once again by the Commissioners. In effect, that is the same as saying that they can make this man have an enforced sale of his goods at a time which suits them and not his business needs.

Taking that example from the textile world, it is obvious that if there is a depression, and prices fall, the man may want to hold on to his stock and wait for a more favourable selling moment, while the Commissioners are quite entitled under this Clause to say, "It is all very well, but we cannot keep our books open indefinitely. If you want a refund you must stake your claim by the end of the month." That is a forced sale, or the equivalent of it.

The Financial Secretary may look a bit scornful, as though we are straining the interpretation of the Clause, but it is possible for cases to arise which are quite insupportable. I can also give an example of where such a merchant dies and the business is being wound up and the stock gradually liquidated on behalf of his widow. Those operating on her behalf naturally want to get the best possible return for the stock in order to see that she is as comfortably off as possible, so they want the right to choose the moment when the stock shall be sold.

Under subsection (2) as it is worded that right is denied to them and given to the Customs and Excise. However anxious they may be to operate fairly, all the pressure of their administrative convenience is on speed, so there is a direct conflict of interest there. I ask the Financial Secretary to remember that we now know that we are dealing with a Clause which is handling the affairs of honest traders. We are saying that the Customs and Excise may take away from them a right of registration which they have enjoyed, not because they have broken the law, not because they have tried to fiddle the tax, but simply because it suits those responsible for collecting the tax. So the affairs of this man are disorganised because of some arbitrary administrative decision, and his trading affairs will suffer as a consequence.

In that situation, I ask the right hon. Gentleman to look again at subsection (2) before the Report stage, and to put himself in the place of that man who thinks he has done a good, honest day's work and is told that he cannot have a registration. He will begin to wonder whether he can buy stock and then, when it comes to winding up his tax position under this Clause, he finds that the decision as to when the stock is sold, when the tax is levied, when refund can be claimed—all these are put out of protection, and without appeal, in the hands of the Commissioners of Customs and Excise. I suggest to the right hon. Gentleman that he owes it to the Committee and to the business community to look again at this Clause and to make quite sure that the procedure is such as we ought to employ in the case of honest men.

Mr. Austen Albu (Edmonton)

When this matter was debated the year before last I was not clear what it was all about. Since then, however, I have had a number of cases brought to my notice which make me see the extreme importance of the argument put forward by my hon. Friend. I regret that having been absent on other business of the House, I did not hear the debate on her Amendment to subsection (1), which I understand the Committee has rejected. However, bearing in mind one case brought to my notice, a serious one, I can see the dangerous trap this Clause might well be, especially subsection (2).

The case is that of a man who buys a substantial wholesale business, who perhaps did not realise that he would not receive registration, and who lost it on acquiring that business. Whether he did so in ignorance or not does not seem to matter because, since somebody wanted to sell the business, presumably somebody was expected to buy. I presume that the object of the Financial Secretary is not that businesses should be ruined.

Buying a business and losing a registration makes a considerable difference to the capital position. The business in the case I have in mind has substantial stocks and, therefore, the owner will be very much at the mercy of the Commissioners under this Clause. I suppose that they will act reasonably, but if the owner was financially tight, and they were to become impatient with him in the payment of the tax to which he is liable, this could be serious in the case of substantial stocks.

It is sometimes the case that a man acquires a business in which the stock has been moving rather slowly, perhaps because the previous owner was very old or not very active and energetic and the man who acquires the business wants some time to build it up and clear the stock. If I were in that man's position I should be rather anxious if, all the time that I was doing that, perhaps extending to two or three years, there was behind me pressure to get rid of stock or to acquire enough finances to pay off the very substantial tax that might be involved.

I hope that when he replies to the debate the Financial Secretary will not under-estimate the anxiety of some traders on account of these provisions. We on this side of the Committee have no desire to impede the collection of revenue and to assist those who are trying to evade payment by any kind of tricks, but we feel that these provisions may make it extremely difficult for honest traders, who are not particularly well off financially, when they are trying to acquire capital for the business which they are undertaking.

Mr. Boyd-Carpenter

If I follow the hon. Member for Edmonton (Mr. Albu) correctly, he is contemplating the case of a purchaser of a business which, as from the time of purchase, has become deregistered and, therefore, is concerned with tax liability on the stock. The hon. Member has raised a point of substance and importance, but he will be very considerably reassured if he studies the words in Clause 6 (2).

Those provide that in coming to a decision as to the extent of time for which a tax can be deferred the Commissioners must have regard … to the time when tax in respect of the goods might have been expected to become payable if the said person had continued to be required to be registered; … If the purchaser had purchased the business and the business had continued to be registered he would have had to pay tax more or less for the same period of time as he would have to pay in the circumstances in which he purchased the business as having been deregistered. I hope that that gives the hon. Member some reassurance.

Other points raised by the hon. Member for Islington, East and the hon. Lady the Member for Blackburn, East (Mrs. Castle) to some extent covered the same ground. The hon. Member for Islington, East asked what was largely a rhetorical question, because if the answer was anything but what he expected it to be the debate on the first Amendment would have been a sheer waste of time. It is the fact that the Clause applies to stocks where registration ceases as a result of the operation of the Commissioners' powers under Section 12 of the 1944 Act.

The hon. Member asked how that could be in view of the phraseology at the beginning of the Clause. The answer is a complex one that depends upon reading the Clause with Section 12 (2) of the 1944 Act. I do not know whether the Committee wants me to follow the chain of reasoning. It is legal, complex but I think comprehensible. The short answer is that the Clause does so apply.

Mr. E. Fletcher

I was aware of what the answer would be, but it is desirable that the answer should be stated for the record at length because, as the right hon. Gentleman says, it is complicated and involved. No ordinary trader will understand it. Nobody who looks at the Clause will understand it. Our complaint is that if this matter is covered by Section 12 of the 1944 Act it should be abundantly clear and not be so involved that it requires all this research to find the answer.

Mr. Boyd-Carpenter

I do not think it involves research in that sense and had the answer been otherwise we should have been wasting the time of the Committee on the first Amendment. A person to whom the Commissioners apply Section 12 of the 1944 Act is a person who ceases to be required to be registered within Clause 6. The answer lies in Section 12 (2) of the 1944 Act, which says that the trader shall be treated for the purposes of the enactments relating to the tax, other than the provisions of subsection (2) of the said section twenty-three, as being a person not required by the said subsection (1) to be registered. The said subsection (1) is that under which persons are registered. I hope that that pellucidly clear explanation will satisfy the hon. Member.

7.15 p.m.

The hon. Member and his hon. Friend the Member for Blackburn, East referred to the observations that I made on Second Reading. It is no duty of anyone moving the Second Reading of a long Bill such as this to describe all the variations and details of every Clause. Indeed, if he did so he would probably talk out the Second Reading. The whole object of the Committee stage is to discuss matters which, quite properly, are not dealt with on Second Reading. I see that the hon. Member for Islington, East who asked me a question about certain refunds has left his seat. I hope that he will pay me attention and that he is not like the lady who is mentioned in the Bible who would not stay for an answer, even though the right hon. Member for Battersea, North (Mr. Jay), to whom the hon. Member is speaking, no doubt has charms which would exceed anything that I might say.

Mr. Jay

It was not a lady, it was Pontius Pilate.

Mr. Boyd-Carpenter

I hesitate to compare the hon. Member for Islington, East with Pontius Pilate even though, of course, he was a lawyer.

Mr. Hale

Pontius Pilate asked "What is truth?", which is something we are seeking here.

Mr. Boyd-Carpenter

And if the hon. Member will listen he will hear it.

The hon. Member for Islington, East inquired about the position in respect of certain refunds. There is here a balance of considerations. It is clear that there must be some limit and some end as to when these matters can be wound up. The hon. Member knows perfectly well that in tax legislation almost universally, and particularly perhaps on the Inland Revenue side, time limits are prescribed for common sense and practical reasons. He will notice, however, that in lines 36 and 37 there occur the words: … or within any further period which they may allow, … That is designed to deal with extremely hard cases which the hon. Member has in mind and enables extensions to be granted if circumstances justify it.

The hon. Member also mentioned a grammatical point which I will consider. I have the greatest confidence in those who advise me on drafting, but it may be that the hon. Member has a point there. He also asked whether the Clause provided power to extend the time for deferment of payment of tax due. I am under the impression that there is power, but I will gladly look into the matter before the next stage of the Bill. If the hon. Member takes a different point of view that in itself is a reason for examining it. I hope that the Committee will now be prepared to proceed to debating further Clauses.

Mr. Jay

The Financial Secretary told us that on Second Reading he did not say more about some of these Clauses because he expected them to be very fully discussed in the Committee. That is a reason why we should not be unduly sketchy in our discussion of these Clauses this afternoon.

There is one question put by my hon. Friend the Member for Islington, East (Mr. E. Fletcher) which the Financial Secretary did not seem to answer satisfactorily. That is why a trader who is deregistered and subsequently either exports the goods, or sells them to a registered trader should not be allowed to have the tax refunded at whatever time he exports or after whatever period he sells the goods. Let us be quite clear on exactly what is involved. Suppose we were dealing with the hon. Member for Edinburgh, South (Sir W. Darling), who is an experienced trader, I am sure the Committee would be very anxious to protect him from any oppression by the Financial Secretary—

Sir William Darling (Edinburgh, South)

The hon. Member for Edinburgh, South is able to look after himself.

Mr. Jay

I do not think the hon. Member is fully aware of where he stands under the law which we are discussing. Suppose the hon. Member were deregistered by the right hon. Gentleman and his officials on 1st January, I am sure that it would be purely for the convenience of the Customs and Excise and not any reflection on the hon. Member.

Sir W. Darling

I am a Scottish trader and 1st January is a dies non for this purpose.

Mr. Jay

That shows how necessary it is to discuss these matters fully. If he were deregistered in London it would be on 1st January, but suppose it happened on 2nd January. The Customs and Excise would say that he had two months in which to sell his goods to a registered trader or to export them. If he sold them within two months he would have to pay the tax during the period, and the question is whether he would get it back. If he sells the goods within two months he is able to put in a claim for a refund. But if, through no fault of his own but no doubt for some perfectly good business reason, he takes three months and then exports them or sells them to a registered trader, although he has lost money on the transaction, just because he did not do it in time, he would be deprived of the facility of getting the refund.

I can see no justification for that whatever. The Financial Secretary said that we have to wind up the transaction at some time. If the situation was that the tax which was due had not been paid and he was arguing that six months had gone by during which he had not been able to sell the goods, there would be some reason for the Financial Secretary to say, "We must wind up the affair some time or other."

But that is not the situation. The Financial Secretary would have the money from the start, from 2nd January if not 1st January. The trader would have carried out a perfectly reasonable transaction and sold the goods but would lose this money. Why on earth, in those circumstances, should not the Government say that the tax should be refunded when the goods are exported or sold, at whatever time that may be?

It is no answer to that for the Financial Secretary to say that according to the Bill the goods have either to be sold or exported within the period so allowed or within any further period which may be allowed. That does not seem to me to be substantially different. The trader may be given two months in which to carry out the transaction, and then the Customs and Excise may give him another month. But that is no comfort to the trader if, when he is able to sell the goods at a later period, it is beyond the total time he was allowed. I do not see why the Bill should not say in a perfectly straightforward manner that the tax should be refunded at the time when the goods are sold or exported. I do not think we have had a substantial answer, and I hope that if we do not get it from the Financial Secretary we shall perhaps get it from the hon. Member for Edinburgh. South.

Sir W. Darling

The right hon. Member for Battersea, North (Mr. Jay) is anxious to give advice to the working classes but as I see it there is a justification for this Clause. If given an unlimited time the trader could have a stocktaking and as a result he would easily deal with these imposts thrown upon him by the Chancellor of the Exchequer. His new balance sheet would show that he was quite able to meet them. Consequently the Chancellor would put a time limit on these machinations.

I do not like it; I like to be a free citizen, but it would be quite out of order for me to discuss the single tax theory—a tax whereby there would be no Income Tax, Surtax or Customs. That would be quite out of order, but, if we are to get the revenue I think the Chancellor is right in insisting on this Clause and having a time limit in it. It would be impossible for the Customs and Excise to conduct its duty if it did not have a time limit. In spite of the advice of the right hon. Member for Battersea, North, I shall support the Government on this Clause.

Clause ordered to stand part of the Bill.