§ Mr. Roy JenkinsI beg to move, in page 8, line 11, after "bank", to insert:
or with the Birmingham Municipal Bank.
§ The Temporary ChairmanI think it will be convenient if this Amendment and that in page 8, line 29, at end insert:
Provided that, where by virtue of this subsection the amount of surtax payable by an individual would exceed the sum of
- (a) the amount of surtax which would have been payable by that individual, if this subsection had not been passed, and
- (b) the amount of relief, if any, to which that individual is entitled by virtue of the foregoing subsection,
that excess shall be disregarded for all the purposes of the Income Tax Acts.(3) The two foregoing subsections shall apply in respect of interests on deposits with a municipal bank as they apply in respect of Interest on deposits with the Post Office savings bank.were taken together, and a separate Division taken on each if desired.
§ Mr. JenkinsYes, Mr. Bowles.
It may seem that this is a slightly parochial Birmingham Amendment, but there is no reason for thinking that. The Birmingham Municipal Bank is to some extent a unique institution, in that it is not incorporated under the Companies Act, as are other municipal banks, but under the Birmingham Corporation Act, I919. No other corporation has exactly such powers, although I believe that Cardiff and Birkenhead have slightly more 1366 restricted powers under an Act of 1929, which, I believe, they have not used.
The Birmingham Municipal Bank, therefore, stands in a position slightly different from that of any other institution. It was founded in 1919 and has since had a very successful 37 years of history. Its deposits at present are approximately £88 million. That is a very large sum indeed, because it is equivalent to an average deposit of practically £80 for every man, woman and child in the area which it serves, and that does show for a bank for small savers of that sort a high rate of coverage. There are 720,000 depositors.
There is a great deal of civic pride in the fact that this is, to some degree, a unique and very successful institution, and it is also, without doubt, a most important part of the savings movement in Birmingham. School savings groups and factory savings groups are to a large extent conducted through the Birmingham Municipal Bank. There is a further important point which to some extent underlines the uniqueness of the Birmingham Municipal Bank. There is within the city of Birmingham not a single branch of the trustee savings banks. They do not exist in Birmingham. The Birmingham Municipal Bank acts in their place.
The large question which then arises is as to what department of the trustee savings banks is the Municipal Bank more akin. Is it more akin to the ordinary department of the trustee saving banks, to which the Chancellor's concession applies, or to the special investment department to which the concession does not apply? It is my belief that the Birmingham Municipal Bank is a great deal more analogous to the ordinary department of the trustee savings banks. Those banks get £2 17s. 6d. per cent. from the National Debt Commissioners and pay 2½ per cent., the Municipal Bank earns a little more—£2 19s. per cent. and pays depositors slightly more, 2¾ per cent.
There can be no question, however, of the Birmingham Municipal Bank, with its present investment policy—which is pretty tightly controlled by the Treasury—earning substantially more and getting round the disadvantage of not being able to offer the Income Tax concession by offering a higher rate of interest to 1367 depositors. The ordinary department of the trustee savings banks automatically has all its deposits with the National Debt Commissioners.
This is not the theoretical position with the Birmingham Municipal Bank, but the practical position is not very different. Of the £88 million of assets, more than £60 million—£66 million, I believe—are held in the form of Government securities. The remainder is partly cash, partly small amount advances to house purchasers in Birmingham—£6 million—and the rest is represented by loans to the Birmingham municipality which are backed by physical assets
This last item has not increased for many years. There is no question of increasing it at present, and, indeed, except for that small proportion of advances to house purchasers, all surplus money goes, as with the trustee savings banks, into Government securities. Over this investment policy generally there is, as I indicated earlier, a close degree of Treasury control. It therefore seems to me that as the position now stands the Municipal Bank is at least 90 per cent. analogous to the ordinary department of the trustee savings banks rather than to the special investment department.
I think that there is a most strong case for the inclusion of the Municipal Bank, as it stands, within the Chancellor's present concession, but I and those associated with me in this Amendment recognise the Chancellor's difficulties here. One of the difficulties about making the concession is that a lot of others would want it as well. Therefore, in order to try to make the Chancellor's position rather easier, the Birmingham City Council is prepared—if we cannot get this direct inclusion, for which, as I have said, there is a very strong case, and which would be much more welcome than anything else—to go further and to set up a new department to which it is suggested that the tax concession should be applied and which would in all relevant respects be the equivalent of the ordinary department of the trustee savings banks.
The essence of such a scheme would be this. In the first place, the interest to depositors in this new department would be only 2½ per cent., and all excess deposits would be automatically paid over to the 1368 National Debt Commissioners. The Municipal Bank would receive from the National Debt Commissioners the same return, £2 17s. 6d. per cent., which the ordinary department of trustee savings banks at present gets. There would be a limit to deposits, whether new or transfers from the existing department of the Municipal Bank of, perhaps, £1,000—or whatever figure was thought to be appropriate. With the exception of these new regulations as to investment policy, interest on deposits and limitation of deposits, which would, I think, meet all the Chancellor had in mind when he first introduced the concession, all the present regulations of the Municipal Bank would continue to apply equally to the new department.
That is to say, for the purpose of every consideration relevant to what the Chancellor had in mind when he introduced the general concession, the department would be an ordinary department of the trustee savings banks, but it would not be one in name or for considerations really irrelevant from this point of view. To make it one in name would raise great complications about the ownership of buildings and the showing of administrative expenses, and would also destroy a very real feeling of civic pride in the particular traditions of the Birmingham Municipal Bank.
There is another point. If the scheme were accepted, I think it swould be the assumption that, of course, some of the assets backing the existing deposits would need to be taken over by the National Debt Commissioners. The assumption and the hope would certainly be that a fair cross-section of the marketable securities at present held would be taken over at book value, which is, broadly speaking, at cost, so that there would be no loss involved. On this assumption, the Birmingham Municipal Bank would be willing to negotiate a detailed scheme with representatives of the Treasury or with the National Debt Commissioners.
I hope very much that the Chancellor will be able to say that he agrees that this could be done and that any necessary Amendment can be made on Report. At the same time, I hope that the Chancellor and the Committee will be left in no doubt that from the point of view of the interest in the Bank at Birmingham of all shades of political opinion the outright application of the concession to the 1369 Bank as it stands would be a great deal more acceptable and would cause a great deal less trouble.
If necessary, however, we would have this compromise arrangement, to which I greatly hope the Chancellor will be able to agree, as there is an urgent practical problem here. There is a real danger that if the concession is not extended to the Municipal Bank, fulfilling as it so largely does in Birmingham the normal functions of the trustee savings banks, there will be withdrawals of money in order to get the Income Tax concession elsewhere.
8.0 p.m.
I am afraid that the figures which are already available provide a certain amount of evidence that this is happening. For instance, in the two months April and May, 1955, there was in the municipal bank an excess of deposits over withdrawals of £70,000. In April and May this year there was an excess of withdrawals over deposits—the very opposite to 1955—of £328,000. Those are very serious figures. It may possibly be suggested that they have more to do with short-time working in the motor industry than with the tax concession. I thought of that myself when the figures were first put before me. I do not think that is so, however, because a closer examination of the figures shows that the withdrawals have taken place to a greater extent than elsewhere in those parts of the city where one would expect most depositors to be taxed fairly highly and therefore to be most sensitive to tax concessions. That is where one would also expect them to be most aware of the alternative investment opportunities.
I expect that a large part of this change since 1955 is due to the difficulty created by the Chancellor's partial concession. This is, and might become to a still greater extent, a very serious matter for the bank. But it is also to a greater extent a very serious matter for the Government, because the Chancellor's Budget was intended to be a savings Budget. When this money was withdrawn from the Birmingham Municipal Bank, we did not know where it was going. Some might go to the Post Office Savings Bank and would, therefore, get a concession. Other parts might go into building societies. That is less suitable from the Chancellor's point of view than the 1370 municipal bank. Some, in rather exceptional cases, might go into industrial ordinary shares. A lot might be spent, after being withdrawn from the bank, without being invested anywhere.
I put it to the Chancellor that this is a very serious practical problem. Paradoxically there is a real danger that his concession—no doubt, intended to help—because of a peculiar local condition in the second city of this country, far from helping savings may actually strike a very severe blow at the savings movement. I wish the Chancellor could accept the Amendment as it stands. If he cannot do that, I hope that at least he will indicate that on the basis which I have put forward, having discussed the matter with the representatives of the Birmingham City Council, discussions can go ahead and a compromise solution may be possible.
§ Sir E. BoyleI think it might be for the convenience of the Committee, as will emerge in the course of my remarks, that I should rise at once on this matter.
The hon. Member for Stechford (Mr. Roy Jenkins) has raised a matter of great local importance to the City of Birmingham and, I quite agree, of considerably wider import as well. I should like to explain first why Clause 8 was drafted as tightly as it is, and secondly why my right hon. Friend could not accept the Amendments that we are now discussing; and finally I should like to make a proposal to the Committee which, in view of what the hon. Gentleman has said, I think may be accepted.
My right hon. Friend has already received a deputation of Birmingham Members of Parliament from both sides of the Committee, who presented very ably the case for including the Birmingham Municipal Bank within the scope of the proposed relief. Of course, there are also a number of other smaller municipal banks, most of them in Scotland. I think I should go through the arguments as I understand them, and try to meet them as fairly as I can.
The first argument put forward is this: these municipal banks are the most important savings institutions in their neighbourhood, and they play a leading part—as they certainly do—in the work of the National Savings Movement by accepting the deposits of savings groups and schools, and also selling National 1371 Savings certificates to their depositors. That is perfectly true. At any rate, it is true of the Birmingham Municipal Bank.
The special investment departments of the trustee savings banks may have been properly regarded as part of the National Savings Movement because their deposits are included in the National Savings figures. Nevertheless, they are excluded from the scope of the proposed tax relief.
I think the other argument that has been advanced by the hon. Gentleman, who put this point with some force and perfect justice, was that if these municipal banks are excluded from tax relief they are liable to suffer withdrawals which may result in their having to realise securities at a loss, and, after all, they do invest part of their deposits in Government securities.
Money invested in the Post Office Savings Bank and in the ordinary departments of the trustee savings banks is not only saved but it is effectively lent to the State. If I may use an illustration which the Chancellor has occasionally used before in speeches and in conversations, if we think of the volume of money in the country as water in a bath, this is water which is frozen by being lent to the State. Accordingly, the tax relief proposed for interest on these deposits is intended to enable more of the State's borrowing needs to be financed in ways which do not increase the liquidity of the joint stock banks.
Deposits in the municipal banks are lent to local authorities or are used to buy market securities in a number of places. The mere fact that part of a bank's deposits may be invested in marketable Government securities does not mean that an increase in their deposits necessarily helps the Government's monetary policy. This is important; indeed, it is the kernel of the matter. My right hon. Friend's Budget is a savings Budget, and in a wider sense it is a funding Budget. The aim of a large number of the proposals of my right hon. Friend is to keep a curb on the supply of money. That is why we want money not only to be saved but also to be lent to the Government.
The hon. Member for Stechford proposed that the Birmingham Municipal Bank might secure the benefit of this Clause by forming a separate department, 1372 as a trustee savings bank, which could lend its deposits to the Exchequer, or even by transforming itself into a trustee savings bank if this were practicable.
§ Mr. Roy JenkinsI am not sure whether there was a slip of the tongue, but the proposition which I meant to put was that the Birmingham Municipal Bank should set up a separate department which, from all relevant points of view, would be the same as a trustee savings bank but would not be called a trustee savings bank.
§ Sir E. BoyleI think the best thing would be if I spoke on behalf of my right hon. Friend at this point, explained what my right hon. Friend would be prepared to agree to, and then left it to hon. Members to see if this squares with what they are proposing. I do not want there to be any ambiguity about this. The suggestion has been made that a possible solution might be for the Birmingham Municipal Bank to form a separate department which could lend its deposits to the Exchequer, and the practical value of the suggestion is that a separate department of this kind could get the benefit of Clause 8 without any change in its present scope if the department were formed as a trustee savings bank.
My right hon. Friend sees no objection to the proposal that the formation of a separate unit as a trustee savings bank should be examined, and the Controller-General of the National Debt Office would be happy to go into the question with the City Treasurer or the General Manager of the Birmingham Municipal Bank. It is also open to other savings banks or societies to examine their position in the same way. This is the proposal which my right hon. Friend makes to the Committee, and I hope that in the light of what I have said, hon. Members opposite may agree to withdraw the Amendment.
§ Mr. ShurmerDoes the hon. Gentleman mean that the Chancellor is prepared to accept this proposal put forward by my hon. Friend the Member for Stechford (Mr. Roy Jenkins) and that as a result of negotiations with the Municipal Bank officials, the bank would continue to be run by the same committee, or would there be two separate departments?
§ Sir E. BoyleThe point is that the Municipal Bank should form a separate department which should lend its deposits to the Exchequer.
§ Mr. Julius Silverman (Birmingham, Aston)I should like to be quite clear about that last point. If it simply boils down to this, that the Birmingham Municipal Bank should create a separate department, at a rate of interest standard with that in the Post Office Savings Bank and the trustee savings banks, and should lend that money to the Government—if that is the economic substance of what the Chancellor wants—I am sure there could be agreement on that basis.
The only point is this. There is some difficulty, as regards the form of it, in the creation of a trustee bank. As I think the right hon. Gentleman appreciates, we have this Municipal Bank, which is an important and integral part of the life of the city. I am sure the right hon. Gentleman knows this, because a very large number of its depositors, some 66,000 I understand, are in his own constituency. In all, there are, throughout the city, 68 branches of the bank, and it is quite true to say that it is an integral part of the life of Birmingham and of the savings movement in Birmingham. I do not want to go into detail as to the part which the bank has played in the National Savings Movement. I think the Chancellor will agree that it has been regarded as an integral part of the National Savings Movement. During the war, a sum of about £38 million was raised for the Government and deposited, through the instrumentality of the National Debt Commission, in Government securities. In view of what has been said, I will go no further into that.
The difficulty which has attended the form of this suggestion so far, that of the trustee bank, is this. There is, obviously, a great municipal and civic pride in the bank, and a desire that the citizens of Birmingham, through the bank committee, should have a complete and democratic control over the institution. If a trustee bank, in what I understand to be the usual form, were created, inevitably there would be trustees and other people who would control the detailed administration. This would create all the difficulties which my hon. Friend the Member for Stechford (Mr. Roy Jenkins) has already referred to.
1374 If I understand aright, it has been indicated by the Chancellor already, and, I think, by the Economic Secretary, that the Treasury will be content with the economic substance of what we want. On that basis, I am quite sure that agreement could be reached. I am sure that Birmingham will welcome that concession very much, and I am quite sure that the details of negotiation, with good will on both sides, can be agreed.
§ Sir E. BoyleI thank the hon. Gentleman the Member for Aston (Mr. J. Silverman). I am sure we agree about the economic substance, which is the rate of interest and that these deposits should be lent to the Exchequer. I have every hope that the procedural points, to which the hon. Gentleman has rightly referred, can be ironed out, as it were, through negotiation.
Until we are agreed on those procedural points, I hope that hon. Gentlemen opposite will agree to withdraw their Amendment. We will try to get this finally tidied up on the Report stage.
§ Mr. ChapmanAs the Economic Secretary knows, this is the compromise which I put forward a few months ago, and I have therefore been very interested to see it worked out. I am very grateful to him for accepting it.
Could he say whether, in this scheme, it will be possible to make some arrangement about the covering of existing deposits by the securities already held by the bank? In other words, I take it there will not be any need to start new deposit accounts for people moving in as from now, but the thing can be taken over on its past basis?
§ Sir E. BoyleThe hon. Gentleman has raised a very fair point. My right hon. Friend has taken a strong interest in this matter ever since the subject was first raised.
§ Mr. G. R. Mitchison (Kettering)On a point of order. I understand that we are at the moment referring to, or discussing, also the Amendment which concerns not only Birmingham but some other places as well, namely, the Amendment which appears at the bottom of page 3365, standing in the name of my right hon. Friend the Member for Rochester and Chatham (Mr. Bottomley). If the Birmingham Amendment, if I may so call it, 1375 is withdrawn, shall we then be able to discuss my right hon. Friend's Amendment?
§ 8.15 p.m.
§ The Deputy-ChairmanIn view of the way the proceedings are going, I think that I will allow the right hon. Gentleman the Member for Rochester and Chatham (Mr. Bottomley) to move his Amendment. What I was told to do by the Chairman of Ways and Means was to have a debate on both these Amendments together and then, if the right hon. Gentleman wished, he could have a separate Division. But I think the situation has changed now.
Does the hon. Member for Stechford (Mr. Roy Jenkins) wish to withdraw his Amendment?
§ Mr. Roy JenkinsIn view of what has been said, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
§ Mr. A. G. Bottomley (Rochester and Chatham)I beg to move, in page 8, line 29, at the end to insert:
Provided that, where by virtue of this subsection the amount of surtax payable by an individual would exceed the sum of
- (a) the amount of surtax which would have been payable by that individual, if this subsection had not been passed, and
- (b) the amount of relief, if any, to which that individual is entitled by virtue of the foregoing subsection,
that excess shall be disregarded for all the purposes of the Income Tax Acts.(3) The two foregoing subsections shall apply in respect of interests on deposits with a municipal bank as they apply in respect of interest on deposits with the Post Office savings bank.Perhaps I ought to disclose at once that I have an interest. As a matter of fact, in one of the banks mentioned in a subsequent Amendment, the Walthamstow Savings Bank Limited, I was a founder member and, in addition, a director. Perhaps I ought to explain that the shareholders, as such, were members of the borough council, forty-eight of them, and they were the only shareholders. They were allowed one 1s. share only. From the shareholders, directors were elected and I was one of those fortunate persons. But on no account was profit to be paid, either to shareholders or to directors, or remuneration of any kind. The town clerk was made secretary, and the borough treasurer was the finance officer.1376 The purpose of municipal banks—I cite the Walthamstow Bank as an example, though it applies to others—was to encourage ratepayers to deposit their money with these local savings banks in order to avoid the necessity of the borough treasurer going outside the town to borrow money at much higher rates of interest than would apply if the sums could be lent at a cheaper rate of interest within the borough. By that means, the ratepayers received a two-fold benefit. They were able to invest and get interest on their money from the local savings bank, creating local civic pride and enterprise, and, in addition, by lending the money to the local authority, they obtained a benefit by lower rate charges, because the authority could avoid going outside and paying higher interest rates.
These savings banks are a very good means of encouraging local patriotism. All of us, as democrats, I am sure, appreciate the importance of having local democracy as strong as possible, and this is one way in which it can be fostered, and by which greater interest in an area can be created. I should hate to see anything done which would destroy this kind of savings movement. I am bound to say that, at the moment, as a result of the Chancellor's decision in the Budget. there is a general trend to take money away from local savings banks, or there will be, as soon as it becomes known that interest in the Post Office and the trustee savings banks is tax-free.
It would be wrong to destroy this local initiative and patriotism, and I hope that the Economic Secretary will see some way in which the savings banks named in this Amendment can receive the benefit of the arrangements which have been made in the case of the Birmingham Municipal Bank. I am quite sure that if that were done he would be doing a service to all who want to see the successful development of local government, and I know that it would please all those banks which are named in my Amendment.
§ Mr. MitchisonI want to urge a rather broader point than has been answered so far. The Amendment raises two matters. The first is under the proviso at the beginning of the Amendment. The reason that proviso is there is that the Clause, which is supposed to confer benefit on everyone, is so drawn that in 1377 most exceptional cases a taxpayer can actually be a loser under it. Accordingly, either that matter has to be put right or there has to be a Money Resolution to support any Amendment. This and other Amendments appear on the Order Paper in this form because of that difficulty.
I said "most exceptional cases." The exceptional circumstances in this case appear to be a highly philoprogenitive Surtax payer. If such a gentleman had managed to have twenty children and, therefore, Income Tax allowances amounting to £2,000, he would not benefit by the Income Tax concession and would be made to pay more Surtax because the £15 with which we are dealing is grossed up.
Such a gentleman appears to me to be a very remote possibility. I propose to christen him "Mr. Money Resolution". Mr. Money Resolution, of course, would have to have rather more than twenty children and we had better give him a housekeeper's allowance, or make him, at the end of his arduous efforts, dependent upon his daughter, or something of that sort; or possibly Mrs. Money Resolution is given to having twins or triplets.
It is rather regrettable that the procedure of the House of Commons is such that a very remote possibility of that sort impedes the Amendments which we can put down, and makes us add to them additions that really ought not to be necessary. I always regard the Treasury as knowing everything, but I am inclined to think that if I were to ask the Chancellor of the Exchequer how many Surtax payers have twenty children qualifying for children's allowance, he would probably say that the information was not available or could not be obtained at any cost that made it worth while obtaining it. That is why the proviso is included and what is intended to be a purely beneficial concession might in some cases lead to this rather remarkable result.
To turn to something, if I may so put it, rather more serious, I come to the main point in my right hon. Friend's Amendment. This is really an attempt to get the Government to consider in this matter something more than the question whether the funds of these banks are invested in Government funds or in some 1378 form or another lent to the Government. A concession has just been made to one of them, the Birmingham Municipal Bank, which depends entirely on that assumption. I quite agree that during Second Reading the right hon. Gentleman himself, and even more clearly the Economic Secretary at a later stage, made it clear that that was one, at any rate—the main and, perhaps, the only one foundation for this limitation of the concession with regard to the £15.
I now ask the right hon. Gentleman to consider what these banks are doing. First, there can be no doubt that they are undoubtedly promoting savings. Secondly, they are unlikely to exist unless the facilities for promoting savings in the places where they are have not in practice proved quite sufficient. With the exception of the Birmingham Municipal Bank, which we have dealt with, the others are, I believe, all in the form of private companies—companies, at any rate—formed without any formal connection with the local authority, but formed at the wish of the local authority, with directors and shareholders who are, in effect, the nominees and, in effect though not in form, the trustees of the local authority. Their purpose is to collect the local savings and to lend them to the local authority. They no doubt do other things too. Their investment, I am sure, is not confined to that, but that is the main purpose of them.
That, too, was the original purpose of the Birmingham Municipal Bank, and I do not think it has been wholly departed from. I believe that the Birmingham Municipal Bank still lends considerable sums of money to the corporation. These other small banks, however, are in a different kind of place. The lead in this matter was given by Kirkintilloch. It was followed by a number of other Scottish banks and, finally, by Walthamstow and Barnsley, in England; and there may be others. I say frankly that I hope, particularly if this concession is extended to them, that more of these banks will be formed. The Amendment is so drawn as to allow of their admission, if they are formed, to the benefit of this tax-free £15.
The point I have in mind about them is this. It is, after all, not only the Government who stand in need of money 1379 lent to them, and not only the Government that is at present spending public money. The local authorities are in sore need of any money that they can raise locally and use for their purposes. Be it remembered that those purposes are not just at the discretion of the local authority. These loans are primarily in respect of capital expenditure, for which the local authorities concerned will have to get loan sanction. They are, therefore, a closely controlled expenditure. Their revenue expenditure is normally met out of the rates. These loans serve a different purpose.
I should like to remind the right hon. Gentleman and the Economic Secretary of the difficulties to which local authorities have been put, and I do it for this reason. The effect of this concession, unless it is extended to banks of this type, will be that money will be withdrawn from them and passed, perhaps, into the Post Office Savings Bank or, at least, into some other form of Government investment where it will get a tax-free concession of some sort.
Is that really desired? At present, local authority expenditure is running at the rate of about £400 million a year, three-quarters of which is raised through the Public Works Loan Board. Recourse to the Public Works Loan Board has, by the policy of this Government, been limited considerably in recent months. The result is that all local authorities are finding it difficult and expensive to raise the money that they need to do their duty. That, of course, is no news to the Government.
The present position is that the large local authorities, and only the large ones, can go to the public market. They can make public issues. They can, as happened in the case of Newcastle, place some stock on the market. That is possible in practice only for the large local authorities. Kirkintilloch, Clydebank, Airdrie, Motherwell, Walthamstow, Barnsley—none of them, I should think, is a local authority which would be in a position to have recourse to that method of borrowing.
I am talking about the capital expenditure of local authorities during an average year, which I put at round about £400 million, and in the last four months, since this matter became practicable and 1380 necessary, borrowings on the market, as compared with that expenditure, have amounted to between £14 million and £15 million. Roughly speaking, only about one-tenth of the requirements of local authorities can be raised at that rate on the market, and the only local authorities which will be able to raise money in that way will not be the ones which have these small banks. They will be the large local authorities. I am not referring to Birmingham when I say "small". I mean the others.
8.30 p.m.
What else can they do? They must have this money. They have to carry on their duties. They have to get loan sanction for it, and, therefore, they are spending money for purposes of which the Government approve, and to an amount of which the Government approve. Yet at this moment one method of raising that money will be taken away.
What are the alternatives? One alternative, which is, I understand, encouraged by the Government, at any rate approved of by the Government so far as it goes, is for these smaller local authorities to raise money by mortgages. In effect, that means raising money on local market. A local market has two disadvantages. It is very often the small authorities which find the greatest difficulty in raising money which want it most, and they are just the authorities that will not be able to raise it at all easily in the form of mortgages locally. Another difficulty is that, on any view of the matter, the mortgage market is hopelessly insufficient.
What are they to do? They are told they cannot raise the money in any other way. They can go to the Public Works Loan Board. Their borrowing is very tightly tied there. Moreover—I call the attention of the Economic Secretary to this—the rates which they have to pay, whether on mortgages, which are running at from 5 per cent. to 6 per cent. nowadays, or to the Public Works Loan Board, whose rates are also about 5 per cent. and 6 per cent. are exceedingly high. They are cramping the activities which these local authorities ought to be able to undertake.
Here is an instance of a real bit of public enterprise, which has been going on for some time, which was started under municipal auspices in the way I 1381 have described. Whether we look at this question from the point of view of economics or from the point of view of the social advantage of the country, it is exceedingly short-sighted at the moment to limit the concession merely to those banks which lend directly to the Government and to refuse to concede it to those institutions which, in a small way and in some cases, are lending for the benefit of the local authorities.
If the Government want to limit the activities of local authorities, to make it difficult or impossible for them to do some of the things which they are doing and which they, as elected bodies, believe to be for the good of the people in their areas, then the right way to do it is to say so. I cannot believe that to be the specific intention of the Bill. Surely, these are small savings, exactly what the Government intend to encourage? I thought that this was meant to be a savings Budget. The purpose of lending the savings to the local authorities is just as justifiable, and in present circumstances, caused largely by Government policy, as necessary and as advantageous to the country as lending them to the central Government, in the case of trustee savings banks and the like.
I therefore ask the Chancellor and the Economic Secretary whether it is really wise or quite fair to restrict concessions in the way in which they have said they are going to do. Is it too late—I hope not—to look at the matter a little more widely and, having regard to the need to encourage saving and the difficulties of local authorities, to extend the concession rather further than perhaps was at first intended?
§ Sir E. BoyleI may be able to save the time of the Committee, provided that I do not get out of order in doing so. I have explained, in our debate on an earlier Amendment, the concession that my right hon. Friend the Chancellor has felt able to agree to in the case of Birmingham. There is no reason why a similar suggestion should not be made to the other savings bodies in whose favour Amendments have been placed on the Order Paper.
The suggestion made by the hon. Member for Stechford (Mr. Roy Jenkins), to which, on behalf of my right hon. Friend, 1382 I agreed, could equally well have been accepted from the right hon. Member for Rochester and Chatham (Mr. Bottomley), if the co-operative societies had chosen to ask for it, from the right hon. Member for Huyton (Mr. H. Wilson), who has an Amendment on the Order Paper dealing with societies registered under the Industrial and Provident Society Acts, or from the right hon. Member for South Shields (Mr. Ede), who has a special interest in friendly societies. That is to say, it is open to other savings banks or societies to examine their position in the same way, and to consider the forming of a separate department as a trustee savings bank which could lend its deposits to the Exchequer.
I should like to make two points in reply to the hon. and learned Member for Kettering (Mr. Mitchison). On procedure, as he knows, we have done our best at the Treasury to allow a debate. We are grateful to him and to Parliamentary counsel for the work which they have done to enable us to debate the subject. My right hon. Friend was anxious not to avoid a debate by reason of a technicality.
I explained that we want this money to be lent to the Government in accordance with my right hon. Friend's general policy of funding, of trying to limit the volume of money in circulation. I take the hon. and learned Member's points about local authorities, and I am sure that they will be carefully considered, but that does not alter the question of principle, which is that money should not merely be saved but lent to the Government. In view of my explanation, I hope that the Amendment will be withdrawn.
§ Mr. MitchisonWe regard that reply as quite unsatisfactory. We have been offered a Procrustean bed into which some banks may, to some extent, be able to fit, but we see no reason to cut the beneficent activities of these banks in this way. We see no reason to deprive local authorities of the advantages of equality which they have hitherto had. Having regard to the Government's financial policy and its effect upon local authority finance at the moment, to the need to encourage local authorities, and to the general need not to discourage some form of saving because it does not happen to fit into the Procrustean bed, we propose to divide the Committee.
§ Question put, That those words be there inserted:—
1384§ The Committee divided: Ayes 177, Noes 229.
1385| Division No. 202.] | AYES | [8.40 p.m. |
| Ainsley, J. W. | Hamilton, W. W. | Parker, J. |
| Albu, A. H. | Hannan, W. | Parkin, B. T. |
| Allen, Arthur (Bosworth) | Hastings, S. | Paton, John |
| Allen, Scholefield (Crewe) | Hayman, F. H. | Price, J. T. (Westhoughton) |
| Baird, J. | Henderson, Rt. Hn. A. (Rwly Regis) | Price, Philips (Gloucestershire, W.) |
| Bellenger, Rt. Hon. F. J. | Hobson, C. R. | Probert, A. R. |
| Benn, Hn. Wedgwood (Bristol, S. E.) | Holmes, Horace | Proctor, W. T. |
| Benson, G. | Howell, Charles (Perry Barr) | Pryde, D. J. |
| Beswick, F. | Howell, Denis (All Saints) | Randall, H. E. |
| Blackburn, F. | Hoy, J. H. | Rankin, John |
| Blyton, W. R. | Hubbard, T. F. | Redhead, E. C. |
| Boardman, H. | Hughes, Emrys (S. Ayrshire) | Reeves, J. |
| Bottomley, Rt. Hon. A. G. | Hunter, A. E. | Reid, William |
| Bowden, H. W. (Leicester, S.W.) | Hynd, H. (Accrington) | Roberts, Albert (Normanton) |
| Boyd, T. C. | Irvine, A. J. (Edge Hill) | Roberts, Goronwy (Caernarvon) |
| Braddock, Mrs. Elizabeth | Irving, S. (Dartford) | Robinson, Kenneth (St. Pancras, N.) |
| Brockway, A. F. | Isaacs, Rt. Hon. G. A. | Rogers, George (Kensington, N.) |
| Broughton, Dr. A. D. D. | Janner, B. | Ross, William |
| Burton, Miss F. E. | Jay, Rt. Hon. D. P. T. | Shinwell, Rt. Hon. E. |
| Butler, Herbert (Hackney, C.) | Jeger, George (Goole) | Short, E. W. |
| Butler, Mrs. Joyce (Wood Green) | Jeger, Mrs. Lena (Holbn & St. Pncs, s.) | Shurmer, P. L. E. |
| Castle, Mrs. B. A. | Jenkins, Roy (Stechford) | Silverman, Julius (Aston) |
| Champion, A. J. | Jones, David (The Hartlepools) | Skeffington, A. M. |
| Chapman, W. D. | Jones, Jack (Rotherham) | Slater, Mrs. H. (Stoke, N.) |
| Chetwynd, G. R. | Kenyon, C. | Slater, J. (Sedgefield) |
| Clunie, J. | Key, Rt Hon. C. W. | Sorensen, R. W. |
| Coldrick, W. | King, Dr. H. M. | Sparks, J. A. |
| Collick, P. H. (Birkenhead) | Lawson, G. M. | Steele, T. |
| Collins, V. J.(Shoreditch & Finsbury) | Ledger, R. J. | Stewart, Michael (Fulham) |
| Corbet, Mrs. Freda | Lever, Leslie (Ardwick) | Stokes, Rt. Hon. R. R. (Ipswich) |
| Cove, W. G. | Lewis, Arthur | Stones, W. (Consett) |
| Craddock, George (Bradford, S.) | Lindgren, G. S. | Strachey, Rt. Hon. J. |
| Cronin, J. D. | Logan, D. G. | Summerskill, Rt. Hon. E. |
| Crossman, R. H. S. | MacColl, J. E. | Sylvester, G. O. |
| Cullen, Mrs. A. | McGovern, J. | Taylor, Bernard (Mansfield) |
| Darling, George (Hillsborough) | McInnes, J. | Taylor, John (West Lothian) |
| Davies, Stephen (Merthyr) | McKay, John (Wallsend) | Thomson, George (Dundee, E.) |
| Deer, G. | McLeavy, Frank | Thornton, E. |
| de Freitas, Geoffrey | Mahon, Simon | Tomney, F. |
| Delargy, H. J. | Mallalieu, E. L. (Brigg) | Turner-Samuels, M. |
| Dodds, N. N. | Mallalieu, J. P. W. (Huddersfd, E.) | Ungoed-Thomas, Sir Lynn |
| Dugdale, Rt. Hn. John (W. Brmwch) | Mann, Mrs. Jean | Viant, S. P. |
| Ede, Rt. Hon. J. C. | Mayhew, C. P. | Warbey, W. N. |
| Edwards, Rt. Hon. John (Brighouse) | Messer, Sir F. | Weitzman, D. |
| Edwards, Robert, (Bilston) | Mitchison, G. R. | Wells, Percy (Faversham) |
| Edwards, W. J. (Stepney) | Morris, Percy (Swansea, W.) | Wells, William (Walsall, N.) |
| Evans, Albert (Islington, S.W.) | Mort, D. L. | West, D. G. |
| Moyle, A. | Wheeldon, W. E. | |
| Fienhurgh, W. | Neal, Harold (Bolsover) | White, Henry (Derbyshire, N.E.) |
| Fletcher, Eric | Noel-Baker, Francis (Swindon) | Wilkins, W. A. |
| Forman, J. C. | O'Brien, Sir Thomas | Willey, Frederick |
| Fraser, Thomas (Hamilton) | Oliver, G. H. | Williams, W. R. (Openshaw) |
| Gaitskell, Rt. Hon. H. T. N. | Oram, A. E. | Williams, W. T. (Barons Court) |
| Gibson, C. W. | Orbach, M. | Willis, Eustace (Edinburgh, E.) |
| Gordon Walker, Rt. Hon. P. C. | Oswald, T. | Wilson, Rt. Hon. Harold (Huyton) |
| Grey, C. F. | Owen, W. J. | Woof, R. E. |
| Griffiths, Rt. Hon. James (Llanelly) | Paling, Rt. Hon. W. (Dearne Valley) | Yates, V. (Ladywood) |
| Griffiths, William (Exchange) | Paling, Will T, (Dewsbury) | Younger, Rt. Hon. K. |
| Hale, Leslie | Palmer, A. M. F. | |
| Hall, Rt. Hn. Glenvil (Colne Valley) | Pargiter, G. A. | TELLERS FOR THE AYES: |
| Mr. Pearson and Mr. Simmons. | ||
| NOES | ||
| Agnew, Cmdr. P. G. | Biggs-Davison, J. A. | Channon, H. |
| Alport, C. J. M. | Birch, Rt. Hon. Nigel | Clarke, Brig. Terence (Portsmth, W.) |
| Amery, Julian (Preston, N.) | Bishop, F. P. | Cole, Norman |
| Anstruther-Gray, Major Sir William | Black, C. W. | Cooper, Sqn. Ldr. Albert |
| Arbuthnot, John | Body, R. F. | Cooper-Key, E. M. |
| Armstrong, C. W. | Bossom, Sir A. C. | Cordeaux, Lt.-Col. J. K. |
| Ashton, H. | Boyle, Sir Edward | Corfield, Capt. F. V. |
| Atkins, H. E. | Braine, B. R. | Craddock, Beresford (Spelthorne) |
| Baldwin, A. E. | Brooke, Rt. Hon. Henry | Crouch, R. F. |
| Barlow, Sir John | Brooman-White, R. C. | Crowder, Sir John (Finchley) |
| Barter, John | Bullus, Wing Commander E. E. | Cunningham, Knox |
| Bell, Philip (Bolton, E.) | Butcher, Sir Herbert | Currie, G. B. H. |
| Bell, Ronald (Bucks, S.) | Campbell, Sir David | Dance, J. C. G. |
| Bennett, F. M. (Torquay) | Carr, Robert | D'Avigdor-Goldsmid, Sir Henry |
| Bevins, J. R. (Toxteth) | Cary, Sir Robert | Deedes, W. F. |
| Digby, Simon Wingfield | Keegan, D. | Powell, J. Enoch |
| Dodds-Parker, A. D. | Kerby, Capt. H. B. | Prior-Palmer, Brig. O. L. |
| Donaldson, Cmdr. C. E. McA. | Kerr, H. W. | Profumo, J. D. |
| Doughty, C. J. A. | Kershaw, J. A. | Raikes, Sir Victor |
| du Cann, E. D. L. | Kimball, M. | Ramsden, J. E. |
| Duncan, Capt. J. A. L, | Kirk, P. M. | Rawlinson, Peter |
| Eden, J. B. (Bournemouth, West) | Lagden, G. W. | Redmayne, M. |
| Elliot, Rt. Hon. W. E. | Lancaster, Col. C. G. | Rees-Davies, W. R. |
| Errington, Sir Eric | Langford-Holt, J. A. | Remnant, Hon. P. |
| Fell, A. | Leavey, J. A. | Renton, D. L. M. |
| Finlay, Graeme | Leburn, W. G. | Ridsdale, J. E. |
| Fisher, Nigel | Legge-Bourke, Maj. E. A. H. | Rippon, A. G. F. |
| Fleetwood-Hesketh, R. F. | Legh, Hon. Peter (Petersfield) | Roberts, Sir Peter (Heeley) |
| Foster, John | Lindsay, Hon. James (Devon, N.) | Robinson, Sir Roland (Blackpool, S.) |
| Freeth, D. K. | Lindsay, Martin (Solihull) | Roper, Sir Harold |
| Galbraith, Hon. T. G. D | Linstead, Sir H. N. | Russell, R. S. |
| Garner-Evans, E. H. | Lloyd, Maj. Sir Guy (Renfrew, E.) | Schofield, Lt.-Col. W. |
| Gibson-Watt, D. | Longden, Gilbert | Sharples, R. C. |
| Glover, D. | Low, Rt. Hon. A. R. W. | Simon, J. E. S. (Middlesbrough, W.) |
| Godber, J. B. | Lucas, Sir Jocelyn (Portsmouth, S.) | Smithers, Peter (Winchester) |
| Gomme-Duncan, Col. Sir Alan | Lucas, P. B. (Brentford & Chiswick) | Smyth, Brig. Sir John (Norwood) |
| Gower, H. R. | Lucas-Tooth, Sir Hugh | Soames, Capt. C. |
| Graham, Sir Fergus | McAdden, S. J. | Spearman, Sir Alexander |
| Grant-Ferris, Wg Cdr. R. (Nantwich) | Macdonald, Sir Peter | Speir, R. M. |
| Green, A. | Mackie, J. H. (Galloway) | Spens, Rt. Hn. Sir P. (Kens'gt'n, S.) |
| Gresham Cooke, R. | Maclay, Rt. Hon. John | Stevens, Geoffrey |
| Grimston, Sir Robert (Westbury) | Maclean, Fitzroy (Lancaster) | Steward, Harold (Stockport, S.) |
| Grosvenor, Lt.-Col. R. G. | Macmillan, Rt. Hn. Harold (Bromley) | Steward, Sir William (Woolwich, W.) |
| Gurden, Harold | Macpherson, Niall (Dumfries) | Stoddart-Scott, Col. M. |
| Hall, John (Wycombe) | Maddan, Martin | Studholme, Sir Henry |
| Harris, Frederic (Croydon, N.W.) | Maitland, Hon. Patrick (Lanark) | Summers, Sir Spencer |
| Harris, Reader (Heston) | Manningham-Buller, Rt. Hn. Sir R. | Taylor, Sir Charles (Eastbourne) |
| Harrison, Col. J. H. (Eye) | Marlowe, A. A. H. | Teeling, W. |
| Harvey, Air Cdre. A. V. (Macolesfd) | Marples, A. E. | Thomas, Leslie (Canterbury) |
| Harvey, Ian (Harrow, E.) | Marshall, Douglas | Thomas, P. J. M. (Conway) |
| Harvey, John (Walthamstow, E.) | Mathew, R. | Thompson, Lt.-Cdr.R.(Croydon, S.) |
| Hay, John | Maudling, Rt. Hon. R. | Thornton-Kemsley, C. N. |
| Heald, Rt. Hon. Sir Lionel | Maydon, Lt.-Comdr. S. L. C. | Tiley, A. (Bradford, W.) |
| Heath, Rt. Hon. E. R. G. | Medlicott, Sir Frank | Tilney, John (Wavertree) |
| Hicks-Beach, Maj. W. W. | Milligan, Rt. Hon. W. R. | Touche, Sir Gordon |
| Hill, Mrs. E. (Wythenshawe) | Moore, Sir Thomas | Turner, H. F. L. |
| Hill, John (S. Norfolk) | Morrison, John (Salisbury) | Turton, Rt. Hon. R. H. |
| Hinchingbrooke, Viscount | Mott-Radclyffe, C. E. | Vane, W. M. F. |
| Holland-Martin, C. J. | Nabarro, G. D. N. | Vaughan-Morgan, J. K. |
| Holt, A. F. | Nairn, D. L. S. | Vickers, Miss J. H. |
| Hope, Lord John | Neave, Airey | Wakefield, Edward (Derbyshire, W.) |
| Horobin, Sir Ian | Nicholson, Godfrey (Farnham) | Wall, Major Patrick |
| Horsbrugh, Rt. Hon. Dame Florence | Nicolson, N. (B'n'm'h, E. & Chr'ch) | Ward, Hon. George (Worcester) |
| Howard, John (Test) | Nield, Basil (Chester) | Ward, Dame Irene (Tynemouth) |
| Hughes-Young, M. H. C. | Noble, Comdr. A. H. P. | Waterhouse, Capt. Rt. Hon. C. |
| Hulbert, Sir Norman | Nutting, Rt. Hon. Anthony | Webbe, Sir H. |
| Hutchison, Sir Ian Clark (E'b'gh, W.) | Oakshott, H. D. | Whitelaw, W. S. I.(Penrith & Border) |
| Hylton-Foster, Sir H. B. H. | O'Neill, Hn. Phelim (Co. Anrim, N.) | Williams, Paul (Sunderland, S.) |
| Iremonger, T. L. | Ormsby-Gore, Hon. W. D. | Williams, R. Dudley (Exeter) |
| Orr-Ewing, Charles Ian (Hendon, N.) | Wills, G. (Bridgwater) | |
| Irvine, Bryant Godman (Rye) | Osborne, C. | Wilson, Geoffrey (Truro) |
| Jenkins, Robert (Dulwich) | Page, R. G. | Wood, Hon. R. |
| Jennings, J. C. (Burton) | Pannell, N. A. (Kirkdale) | Woollam, John Victor |
| Johnson, Dr. Donald (Carlisle) | Partridge, E. | Yates, William (The Wrekin) |
| Johnson, Eric (Blackley) | Pickthorn, K. W. M. | |
| Jones, Rt. Hon. Aubrey (Hall Green) | Pilkington, Capt. R. A. | |
| Joseph, Sir Keith | Pitt, Miss E. M. | TELLERS FOR THE NOES: |
| Joynson-Hicks, Hon. Sir Lancelot | Pott, H. P. | Mr. Bryan and Mr. Barber. |
§ Mr. F. Beswick (Uxbridge)I beg to move, in page 8, line 29, at the end to insert:
Provided that, where by virtue of this subsection the amount of surtax payable by an individual would exceed the sum of
- (a) the amount of surtax which would have been payable by that individual, if this subsection had not been passed, and
- (b) the amount of relief, if any, to which that individual is entitled by virtue of the foregoing subsection,
that excess shall be disregarded for all the purposes of the Income Tax Acts.(3) The two foregoing subsections shall apply in respect of dividends on shares of or interest on deposits with a society registered 1386 under the Industrial and Provident Societies Acts, 1893 to 1954, as they apply in respect of interest on deposits with the Post Office savings bank.The purpose of the Amendment is simple, straightforward and sensible. It is to bring all small savings invested in societies registered under the Industrial and Provident Societies Acts into line with the other small savings already mentioned in the Bill and treat them the same in relation to taxation.I will not argue on any technical point. I want to take the matter on a broader principle than the arguments deployed about the Birmingham Municipal Bank. 1387 If one area of small savings is to be exempt from tax, we believe that all other similar small savings should also be exempt.
The Amendment is a limited one. It is designed to prevent discrimination against the Co-operative movement. Although I am especially concerned with the co-operative societies, because I believe they nave an exceptionally strong case here, I want to make it clear that my right hon. and hon. Friends associated with the Amendment would be only too pleased if the Government could grant exemption of tax to all small savings. We are not arguing in favour of the cooperative societies alone. During the debate we have already had, and on the Second Reading, it has been said that the justification for limiting this concession to the Post Office and trustee savings banks was that these deposits had a return limited by Statute and that the sums invested went directly to the Government. I want, first of all, to deal with the point about limitation of interest.
It is quite true that the shareholdings and the deposits to which I make reference are not limited by Statute to any fixed sums—not to 24 per cent. Nevertheless, in practice, by tradition and, indeed, by the rules in the main agreed by the Registrar of Friendly Societies, the cooperative societies limit their interest rates, and the average now paid is in fact about 3 per cent. Speculation and usury—high interest rates—are completely alien to co-operative principles.
The whole purpose of the Co-operative organisation is to ensure that the benefits of hard and useful work should be enjoyed by the consumer. We have always maintained that while fair and good rewards and maximum rewards should go to the consumer and to labour, the rewards to capital should be limited to a reasonable, moderate and fixed amount, so there is no reason, under the arguments advanced by the Economic Secretary and the Financial Secretary on the Second Reading of the Finance Bill, why tax concessions on deposits attracting 2½ per cent. in the Post Office Savings Bank should not also be extended to the deposits with the retail societies of the Co-operative movement or to their penny banks which earn a modest return of 2½ per cent. to 3 per cent., or possibly 3½ per cent.
1388 I add this—I think that it is a relevant point—that although the interest yield is not limited or fixed by Statute the fact is that the amount of deposits is limited by Act of Parliament to £500 in the case of shareholdings or £50 in the case of penny banks, so it is not possible for these societies to go out and attract unlimited capital simply by stepping up interest rates.
I come to the second point which has been advanced earlier this afternoon, that in the case of Post Office Savings Bank or the special branches of the trustee savings banks the money goes directly to the Government. I was much surprised by the emphasis put on the virtue of small savings going directly to the Government because, hitherto, the whole of the arguments put forward from the Treasury Bench have been in favour of small savings as such. We have wanted to encourage the small saver. Although I appreciate what has been said about the money accumulated by the Post Office Savings Bank being in some way a funding operation, nevertheless, I should have thought that the Chancellor's main concern was to damp down immediate consumption and to encourage small savings of all kinds. That, I would have thought, would have been a help in his campaign against inflation. His intention, therefore, must be—and he has stated this on several occasions—to encourage all small savers.
If that is so, I would have thought that the 1d. or the £1 handed over the counter to a retail co-operative society, or to the co-operative penny banks, was just as valuable in the fight against inflation as money paid over the counter into the Post Office, or trustee savings banks. Moreover, it is a fact, as my hon. Friend the Member for Bristol, North-East (Mr. Coldrick) mentioned in the speech on Second Reading, which I hope the Chancellor has taken into account, that, although money is deposited with co-operative societies, or with the penny banks, a great proportion of it goes to the Government. In fact at present about £130 million of the £290 million invested through the Co-operative movement is re-invested in Government securities. Some sort of offer has been made by the Economic Secretary that if arrangements are made by the co-operative societies to make over to the Government the whole of the small savings invested with them to 1389 be invested in Government securities, he is prepared to exempt shareholders of the co-operative societies from taxation on the first £15 of interest.
Really, I was surprised at the Economic Secretary mentioning this proposal on another Amendment, but I was even more surprised that he was able to put that over as a serious proposition. He must have known that it was quite irrelevant to the problem of the co-operative societies. He must have known that it would be impossible for money invested with a retail society to be made over en bloc to the Government in the shape of investment in Government securities. It is quite impossible to accept a proposition of that kind.
I do not want to put it too strongly, but I feel that the offer was almost an insult to those of my hon. and right hon. Friends who had put down the Amendment. Administratively, it would be quite unworkable to get the one thousand different organisations, working independently, to agree to such a proposal. But even if they could speak together it would be unacceptable. One cannot take money already used in the day to day business of a society, disregarding its economic or trading position, and put it immediately into Government securities. As an administrative proposal that is absolutely unworkable. I am surprised that it was put forward in any serious way by a Government spokesman.
We ask the Chancellor to consider again extending the concession to cover the co-operative retail societies or all societies registered under the Industrial and Provident Societies Acts. It is absolutely unthinkable even to start considering the kind of proposal that was made. I still ask the Chancellor to remember that this movement is probably the biggest single recruiting agent of small savings for the Government and that unless he accepts something of the spirit of the Amendment he will be giving it a slap in the eye for the pains it has taken to accumulate Government savings.
So far, I have spoken of the effect of the Clause, as it stands, upon the Co-operative movement. As a matter of fact, the effect will be made all the more serious because the Economic Secretary has now announced some concessions to 1390 a certain municipal bank. The fact that the concession has been widened slightly will, quite obviously, be more hurtful to those organisations which have not been included in the concessions.
The Clause will hurt the Co-operative movement, and I suggest that in hurting it it will also hurt the country. The fact is that the proposed limited concession is an expedient. It is in line with the long history of wretched expedients that we have had from the Government. They have advanced from one expedient to another along a broadening path of increasing economic difficulties. It is possible that this limited concession, now extended slightly, will result in an apparent temporary increase in savings.
9.0 p.m.
In this respect the present concession is in line with the proposal for premium bonds. It may well appear to he attracting more small savings, and they may gain an immediate temporary improvement, but only at the price of eventual permanent damage, because these proposals will not build up a bigger amount of genuine small savings. I do not wish to dwell upon this point overmuch, but I am sure that the Committee was impressed by the figures given by my hon. Friend the Member for Stechford (Mr. Roy Jenkins) about the moneys withdrawn by the Birmingham Municipal Bank, and the Economic Secretary admitted that this was a serious matter.
If there have been withdrawals in that case, it is quite clear that those responsible for the direction of the Co-operative movement must be extremely anxious about the possibility of a transfer of funds from their societies, from the taxed area to the tax-free area described in the Bill. That can be of no advantage to anyone, and it can be to the serious disadvantage of the Co-operative movement. I would ask the Financial Secretary whether he contemplates with any degree of satisfaction the possibility of a serious transfer of funds from an organisation of the standing of the Co-operative movement.
For some possible illusory advance in one form of savings the Chancellor is risking damage to one of our oldest and finest thrift institutions, and I beg him earnestly to consider the deeper implications of what he is doing. Wittingly or 1391 otherwise, he is discouraging an institution which is now world-wide in its growth, although born in this country, and whose values and principles are now bound up with the whole pattern of our social life.
Significantly, this Government and its predecessors—the previous post-war Labour Governments—have recognised the part which co-operation can play in developing a working democracy in the Colonies. Many hon. Members will have seen how co-operative credit organisations and trading societies are enabling Africans and Asians to develop the possibilities of thrift, self-reliance, tolerance and collective effort for the common good. Recently, in Malaya, I was deeply impressed by the way in which co-operative credit societies were helping the natives to get out of the grip of the moneylenders.
In the Colonies we are helping to develop new democracies and laying the foundations of a new form of society; we are helping to build up life there upon certain acceptable principles, and are using the co-operative idea as an instrument to that end. We are officially using and encouraging the co-operative idea as part of the democratic pattern of society there, but in this country we are now officially discouraging co-operation. It is possible that this is one of those little symptoms of a more serious decline, and that this kind of effort to gain some temporary advantage by the sacrifice of principles is one of the reasons why more and more people are talking about a democracy in decline, under Toryism.
I do not believe that the Chancellor wishes to buy a temporary short-term advantage at the expense of a long-term injury to one of our established social institutions, but the Government are building up a record of discrimination against the Co-operative movement. They have already refused to put small savings in co-operative banks upon the same footing as other savings when calculating benefits for old-age pensioners in their applications for supplementary benefits. We have recently had the example of Clause 20 of the Restrictive Trade Practices Bill and we now have this additional discrimination.
1392 The offer made to us so far is a derisory one. The Chancellor must know that it is quite unacceptable. The fact that it is acceptable to a limited number of other institutions only makes the co-operative case stronger, and will worsen its position if this goes through. I warn the Chancellor that he is rousing the hostility of the Co-operative movement in this country by his continued discrimination. At the Whitsun Congress, where representatives of 12 million individual members gathered, a decidedly hostile resolution was passed. It is in the name of those 12 million members, as well as in the name of hon. Members on this side of the Committee, that I have pleasure in moving this Amendment which I hope the right hon. Gentleman will consider with much more sympathy than he has hitherto displayed.
§ Mr. Coldrick (Bristol, North-East)I wish to support the Amendment. Although during the debate on Second Reading I endeavoured to the best of my ability to make plain the case for the Co-operative movement, obviously my efforts were ineffective, and therefore I welcome this opportunity to reinforce the arguments adduced on that occasion.
We are all generally agreed about the desirability of saving, and the Chancellor prides himself that one of the purposes of his Budget is to provide an incentive to save. But I think hon. Members will agree that first we must decide whether we are interested in saving or in particular savings. It seems to me that although the Chancellor is paying lip-service to savings in general, in practice he is discriminating and confining the incentive to savings in the Post Office and trustee savings banks. I have already made it clear, and there will be no misapprehension, that as one connected with a trustee savings bank I welcome any encouragement which the right hon. Gentleman gives in that direction. But I submit that the Chancellor is ignoring the recommendations of the Royal Commission by his present policy. If the right hon. Gentleman takes the trouble to read the Commission's Report, he will find this relevant paragraph:
We do not see our problem therefore as that of deciding whether there should be any relief for personal saving if there cannot be relief for all such saving. It seems to us rather that we should consider how far the present reliefs are justified as a departure from a general equitable principle. At any rate we 1393 can take as our starting point the view that the tax system, if it does give relief for saving, should aim at securing that whatever reliefs are given should be carefully controlled, so as to avoid the risk of relief for what is really delusive saving, and should be available to as wide a range of taxpayers as possible, so as to minimise unfairness in the distribution of the benefit of the relief.It is clear that the Commission was bitterly opposed to any discrimination. I submit that in the context of the economic difficulties confronting us at present, and as my hon. Friend the Member for Uxbridge (Mr. Beswick) pointed out, if we want to fight inflation, all savings should be welcomed for the purpose. It seems to me a matter of indifference as to the form of saving. If savings in other institutions are effected outside the Post Office and trustee savings banks, they must be put to some useful purpose. Whereas those particular savings may benefit the Treasury, one recognises that in the long run they are of no greater advantage to the nation than savings in general. Consequently, regarded from the point of view of the Co-operative movement, we must recognise that this is calculated to effect the transfer of savings from co-operative societies to Post Office and trustee savings banks, and consequently to create the impression of savings when, to use the term of the Royal Commission, they are delusory.It is true, of course, that the Economic Secretary has said that he is prepared to make a concession with regard to the municipal bank. It is abundantly clear to him and to everybody who knows the co-operative societies that, although we talk about a Co-operative movement, that movement is made up of a thousand separate autonomous societies, and lest some hon. Members opposite may be under a misapprehension, let me make it abundantly clear that some of the small societies are not much larger than the corner shop that so endears itself to so many. Consequently, the amount of capital which such a society has at its disposal cannot possibly be placed under the direction of some outside body.
As my hon. Friend the Member for Uxbridge pointed out, in practice the management of even the smallest society knows perfectly well that the capital entrusted to it in the form of shares cannot possibly be engaged entirely in trade because the people in the locality look upon the local society as their savings bank. 1394 As a result, at least 80 per cent. of the share deposits in local and large societies must be retained in a fairly liquid form in order to meet the immediate needs of people who may be suffering some financial difficulty.
In order to meet such requirements, the co-operative societies do, in practice, precisely what the trustee savings banks and the Post Office Savings Bank do. They proceed to put the major portion of the 80 per cent. which cannot be reinvested in industry either in Government or in local government securities. Therefore, in practice, the net result is almost identical with what we experience in the Post Office Savings Bank and the trustee savings banks. For that reason, it seems to me that if the Chancellor does not wish to render a very distinct disservice to 11 or 12 million small savers in the country, he should accept the Amendment.
If we look at the equity of the matter, I submit that it is literally indefensible that any one of us who can afford, together with his wife, to put £1,200 into the Post Office Savings Bank or into the trustee savings banks, thereby securing interest amounting to £30, should have that interest exempted from tax whereas the small person who has only £20 or, for that matter, only £1 in the co-operative society should have to pay tax on the limited interest which he receives. There is no justice or equity in that discrimination, and I submit that it is contrary to all the canons of taxation in this country for that method to be employed.
In the context of present circumstances, it is interesting to compare the attitude now being adopted towards savings with the theories preached in pre-war days. When I listened to the hon. Member for Louth (Mr. Osborne) earlier this afternoon, I felt that he had a nostalgic delight in trying to create a world which we hoped had perished for ever. In those days, we in this country believed sincerely in the teachings of the economist J. B. Hobson and in the theory of underproduction.
Owing to the inequalities in income, the assumption was, of course, that no matter how prodigal the rich might be they could not spend the whole of their income and that, consequently, a large part of it was being saved and put into capital investment. The result was that 1395 we were producing far more goods than could be consumed and so had unemployment and poverty in the midst of plenty.
9.15 p.m.
There is this justification for Hobson, that in consequence of the policy of a Labour Government, even though wealth is not evenly distributed, incomes are more evenly distributed today than at any time in this country's history. Consequently, instead of making it possible for only the extremely wealthy to provide all the capital necessary to develop this country and the Commonwealth and to do all the things necessary not only to fight inflation but to guarantee prosperity in the future, it is imperative that savings shall be encouraged in all quarters.
It is for that reason that I beg of the Chancellor that, while encouraging those forms of savings which he has already indicated, he should be generous enough to include the Co-operative movement by granting the same concession to those savers as he is prepared to grant to those depositing with the Post Office Savings Bank and the trustee savings banks.
§ Sir Frederick Messer (Tottenham)As very little remains to be said after the two excellent speeches we have heard, I shall concentrate on only one aspect of principle. Those who know the Cooperative movement realise that it is not just a trading concern but is regarded by large numbers of members as being their own savings bank. Reference has been made to shares, but the shares in this connection bear no relationship to the world of stockbrokers. What happens is that a working man or woman takes one share in the local co-operative society. That is not done in order to use that share as a commodity which can be sold at a time when shares rise. As shareholders, members benefit from whatever dividend there is and it is a limited dividend.
Whilst it is true that the shares are not available for sale, the holder can at any time, without any notice beyond the necessity of writing for it, withdraw his share capital and, as has already been said, that capital is limited. It means, therefore, that large number of members of co-operative societies look upon this as an opportunity for savings. Many would never be able to go on a holiday were it not for the fact that during the 1396 year they were able to add their dividend to their shareholding and then draw it out when they wished to do so.
I can conceive of nothing more worthy of encouragement than this peculiar, particular and very valuable form of thrift amongst the workers. I realise that it occupies a place different from that taken by the Post Office Savings Bank and the trustee savings banks. We have to remember that the co-operative societies, as banking institutions, are peculiar institutions. The Co-operative movement has its banking side, but what is happening in effect is that the consumer is receiving back the difference between the cost of the commodities and what he pays for them. There is no profit. Nobody gets any profit out of it at all.
I want to raise the question of equity here. Why should a man who puts his money in the Post Office Savings Bank, for instance, be exempt from Income Tax on the first £15 of interest, whereas he puts it into his own bank, the co-operative society, he is denied that exemption? Not merely is it unfair, but in the end it is going to be harmful because the attraction of getting that remission of tax will mean greater difficulty on the part of the Co-operative movement in getting that shareholding that is necessary to run its business.
For these and many other reasons which could be advanced, but on which I feel it would be unfair to dwell as there are so many others who want to speak, I appeal to the Treasury to reconsider this matter in the interests not only of the Co-operative movement and its members but of the country itself.
§ Mr. RankinI should imagine that the Financial Secretary has now abandoned the suggestion which he made a little earlier when we were discussing the municipal banks. From what he has heard already, I think he realises that the effect of his proposal would be disastrous on the trading side of the Co-operative movement, and because of that, as my hon. Friends have already made clear, the offer which he made cannot be entertained.
Earlier in today's proceedings we discussed an Amendment moved by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), who is no longer in his place, supported by a large 1397 body of argument from the Government benches. The purpose of that Amendment was to raise the level at which Surtax becomes operative from £2,000 to £3,000. We were dealing then with the large income groups. It was maintained by the Government supporters that unless the noble Lord's Amendment were accepted, we should not provide incentive to those groups. and would be creating injustice. I think it is only fair to say that in certain of its aspects the argument which was advanced had a good measure of support on these benches.
It is just that argument which we are advancing now. We hope that when we are dealing with the lower income groups—and it is mostly people in the lower income groups who belong to the Co-operative movement—the Government supporters will show as much concern for them as they showed for the larger income groups earlier in the evening. The argument of injustice applies here. I do not think it will be denied that there is injustice when a person who is holding, as most co-operative members hold on the average, about £20 in co-operative savings, is penalised by having his interest taxed; when at the same time the person who is holding perhaps £600 in the Post Office or a trustee savings bank receives his interest completely tax free. I think that will generally be recognised as a wrong which I hope hon. Members opposite will support us in terminating tonight. They received some support for their argument from this side of the Committee, and I hope that they will now give a measure of support to arguments of a similar nature which come now from this side of the Committee, on behalf of a lower income group.
The other point, apart from the one of injustice, is that of incentives. No one will deny—and it has been made clear by previous speakers—that the Co-operative movement is not merely a trading movement but is also a great thrift organisation. One could spend a long time detailing to hon. Members what the thrift aspect of the Co-operative movement has meant in helping to build the life of this country, in providing careers for boys and girls in working class homes, and, in some cases perhaps, in helping to send one or two Members to the House of Commons.
1398 The incentive which derives from the trading side of the Co-operative movement cannot be denied. I feel that the Government, in the proposals which they are putting forward tonight, will destroy this incentive towards trading with the Co-operative movement which is provided by the dividend. That dividend, when it becomes savings, as it inevitably does, is a very important matter. Since the war, about £400 million have been paid out to members of the Co-operative movement in dividend. A large amount of that, almost half of it, I think, has gone into savings, and a great deal of those savings have, in turn, gone into Government securities. This is what the Government are asking us to do—to save—and yet they tell us tonight that if we do so, they will inflict a discriminatory tax upon those savings which are co-operative.
However they may ultimately decide to lodge their votes, I am sure that all hon. Members of this Committee will feel in their hearts that to punish, by discriminating against such savings, particularly working class savings, as the Chancellor wishes to do, is something that ought not to be tolerated. All I am asking now is that hon. Members opposite will accept the arguments which they advanced earlier in favour of providing incentives for the higher income groups, when we now want to provide similar incentives for the lower income groups. I ask them, accepting those same arguments, to support us in putting a stop to the injustices which we are concerned, by this Amendment, to prevent. Since they accepted those arguments earlier on behalf of one section of the community, I hope that they will now accept them for the other section of the community, and support us in the Lobby.
§ Mr. Sydney Irving (Dartford)I should like to say from this side of the Committee that we are very happy that our Birmingham friends have been able to secure some accommodation from the Chancellor. We certainly do not begrudge them that.
Notwithstanding that concession which has been made, we must say at the outset that the limit which has been set upon the Chancellor's concession throughout is an arbitrary one, and one which is completely out of harmony with the spirit of his Budget, which has been for the encouragement of small savings.
1399 9.30 p.m.
For some hundred years the Co-operative movement has been one of the main instruments in the encouragement of working-class savings. Although we have a Chancellor of the Exchequer who has two main aims, one to cut the cost of living and the other to increase small savings, not only does he not give any encouragement to the Co-operative movement in its task of encouraging savings, but he has made an unjust and discriminatory attack upon the Co-operative movement.
Only last week, the Chancellor himself was asking the workers to help maintain a plateau of stability. What confidence does he think the workers can have in him or his Government when in the recent past they have made two definite and hostile attacks on the Co-operative movement, first concerning restrictive trade practices, and now, by the refusal of this concession, in discriminating against the Co-operative movement?
Several of my hon. Friends have shown how socially valuable is the work of the Co-operative movement in this connection. I want to bring my example a little nearer home. There is in my constituency a society, the Dartford Industrial Co-operative Society—quite a small one in relation to many of the thousand societies in the country—with 25,000 members and a capital of £750,000. In that one society, approximately 55 per cent. of the members habitually leave in their dividend after the half-yearly distribution. This constitutes 45 per cent. of the total dividend declared by the society and is a considerable contribution to the small savings of the country.
It is a progressive and efficient society and in the recent past it has done a great deal of development. Nevertheless, of its £750,000 capital it is still able to set aside 35 per cent., or approximately £250,000, to invest in Government and local authority funds. That society, like many others, is desperately afraid that this discrimination against the Co-operative movement will mean that some of the funds which have been carefully built up in this and other societies will be transferred to other organisations so that depositors will be able to get the concession.
1400 That fear is very real and has already been justified in other directions, particularly concerning the discrimination against the Co-operative movement in supplementary benefits when the first £375, although it may be ignored in the Post Office, is taken into account as far as Co-operative societies are concerned. We feel that the transference which took place on that occasion may again take place as a result of the denial of this concession to the co-operative societies.
The work of the co-operative societies is valuable to the small savings movement, and it is totally unjust and inequitable that when a depositor has £15 of interest accruing in a co-operative society, he should be refused this concession while it is possible to obtain the concession on a holding of up to £600 in Government savings. I therefore ask the Chancellor to reconsider this matter, not to arouse the hostility of the 12 million consumers who represent the Co-operative movement, and to accept the Amendment.
§ Mr. Arthur Palmer (Cleveland)It will have been noticed that the emphasis of most of us in the Committee this evening is on the subject of savings, but the interesting thing is that the emphasis of Government spokesmen is simply on State saving. I should have thought that the real problem now facing the country in the matter of savings was to attract and interest the small wage and salary earner, especially in these days of full employment, the Welfare State and social security.
The larger saver, whether an individual or an institution, looks upon saving in a practical, business way, according to the yield it will bring, and the larger saver needs no conversion to the principle of saving. He calls it investment, and treats it with the same respect he does the other institutions of life and morality. It seems to me that the small saver is different, because for him saving means going without, going without some comfort, amenity, or necessity which is due to him and his family, and saving for him involves sacrifice and, on occasion, even family disagreements, accusations of meanness, and so on. I hope that the Economic Secretary will appreciate this point. Hence small saving, to succeed in these circumstances, must appeal to 1401 the imagination, and probably to the emotions also, because the purely materialistic argument tends to be all against it.
The great power of the Co-operative movement is that it links savings with other sanctions, with the interest and opportunity afforded by a social movement in which the saver can himself play an active part to secure success. I know that there are hon. and right hon. Members on the other side of the Committee who dislike this social interpretation of the Co-operative movement because it finds its reflection in political principles and policies. They look on the co-operative stores as a kind of poor man's Harrods or the poor man's Fortnum and Mason, but the Co-operative movement—I emphasise this briefly, because I know that we are anxious to proceed to a Division on this matter—is a successful agent in promoting thrift exactly because it adds to self-interest the deeper interest of democratic association for a group purpose which is seen to be good.
I suggest to the Economic Secretary that he should seriously take that into consideration, if he sincerely believes in saving. This is supposed to be a savings Budget. I should think it the strangest of all strange arguments coming from a Conservative Government if he were to argue that the only saving good for the country is State saving. I should have thought that the Co-operative movement could and should have been regarded as a great collector of savings, particularly of working-class savings, and worthy of the consideration this Amendment, if agreed to, would give it.
§ Sir E. BoyleWe have heard a number of distinguished speeches from the other side of the Committee, and I can assure the Committee that my right hon. Friend will pay careful attention to what has been said. I should like immediately to take up one thing which the hon. Member for Cleveland (Mr. Palmer) said. My right hon. Friend certainly does not say that saving is of no value unless the money is lent to the State.
However, that is not quite what is at issue here. The point is that this tax relief should be limited to money invested in the Post Office Savings Bank and the ordinary departments of the trustee savings banks because that money is lent to the State. As I will explain, 1402 the cost of what is proposed would be very considerable, and it is for that reason that this Amendment could not be acceptable. If the Government were to agree to admit the dividends on shares of co-operative societies it would be impossible to stop there. It would be impossible to exclude building societies. My hon. Friend the Member for Wimbledon (Mr. Black) knows a good deal about that.
They would have a strong plea to the included. It would be very difficult to leave out the joint stock banks as well, and it might very well be, if we included the building societies and co-operative societies, according to the best estimate I can give the Committee, that the cost of the concession would be very considerably above £10 million in a full year, and might very well be something like £40 million. That is a measure of what we are discussing.
I tried to explain when we were debating an earlier Amendment exactly why Clause 8 has had to be drawn in a fairly narrow way. We are discussing here a defimte tax concession by my right hon. Friend to encourage saving, and my right hon. Friend thinks that this concession must be limited to those savings where the money is not only saved but lent to the State and effectively frozen. After all, the whole point of saving is precisely that we should be able to finance the necessary investments in the community without inflation, and the whole point of this proposal for this tax relief is precisely in the form that my right hon. Friend should be able to make his Budget surplus larger still. If we made all these concessions, the cost would be very much greater and would defeat my right hon. Friend's purpose. I have listened to the arguments and they will be considered, but I ask the Committee to reject the Amendment.
§ Mr. BeswickIf the hon. Gentleman is saying that the reason for limiting the concessions is the question of cost, what will be the position if there is a diversion of saving from one institution to another in order to save tax? Will not the cost be the same in the long run?
§ Sir E. BoyleThat is a hypothetical question which I cannot answer. I adhere to the argument that there is a limit to what we can allow the concession to cost this year.
Mr. H. WilsonThe Economic Secretary's speech is not only extremely disappointing in view of the request made to the Government by my hon. Friends, but it disposes finally of any lingering suspicion there might have been that this is a savings Budget. It is clear that the Budget, with the one exception of the Millard Tucker proposals which may bring forward some increased savings, is not designed—or if it is designed it fails in its purpose—to achieve an increase in savings, especially small savings. On the arguments presented by the Economic Secretary, the Budget will not bring forward more savings but will merely divert them from one place to another, not necessarily in the most helpful manner. A number of my hon. Friends have produced very strong arguments to show that one of the sources of diversion will be the extremely important areas represented by the Cooperative movement.
There is a very great difference between the Amendment which we are now debating and the one debated earlier, relating to municipal banks. We are not talking here about savings banks but about capital which is urgently required to finance the essential work of distribution. The Committee will have noted the restraint which my hon. Friends have shown in debating the Amendment. Not only was it clear that at least twenty or thirty of my hon. Friends wanted to speak, but those who spoke rationed themselves very severely in the matter of time. I have heard my hon. Friend the Member for Uxbridge (Mr. Beswick) expatiate on this subject, and he is worth two hours at any time, and I should not like to tell the Committee of the potentialities of others of my hon. Friends who have not risen at all.
§ Mr. RankinThere was a bigger restraint on the other side of the Committee.
Mr. WilsonIt is very interesting that when this afternoon we debated the welfare of 219,000 Surtax payers, hon. Members opposite kept the debate going for two and a half hours, whereas this evening, in debating the interests of nearly 12 million co-operators, we on this side of the Committee have already dismissed the subject in less than an hour, with not a bark out of any hon. Member opposite.
1404 9.45 p.m.
Therefore. I think that if the Government Front Bench required any proof of the extent to which we are faciliating the passage of this Bill, they have it in this Amendment. I put it to my hon. Friends that it is important for us to come fairly quickly to a decision on this Question, though I hope that none of them will go to bed tonight feeling frustrated, because they will have another opportunity when we debate the Question "That the Clause stand part of the Bill".
In the event of the Economic Secretary not being fully convinced of the strength of our arguments, I feel that he may have a better chance of being convinced by the eloquence of my hon. Friends after we have reached a decision on this Amendment. I hope that the hon. Gentleman will then report the fact of being convinced to the Chancellor, so that when we reach the Report stage, the necessary concession will be made.
What is the real issue here? The Chancellor has set out in this Budget to encourage savings, especially small savings. We on this side of the Committee are doubtful whether he can get any small savings, because the average family in this country has not very much margin out of which to save because of the present cost of living. We know that for millions of our families savings through the medium of the Co-operative movement are not only personally essential to them, but are essential to the economic well-being of the country.
In the dark years before the war the only saving made by most families in this country—I am probably right in saying the majority was by keeping in the co-operative society to which they belonged the dividends to which they were entitled in those cases where they could afford to leave them there. I put it to the hon. Gentleman that for over a century the banking of co-operative dividends has been one of the most important sources of saving in this country.
There are many people, especially in the northern and Midlands industrial distrists who today own their own houses, and probably vote Conservative, because their fathers or grandfathers had never drawn out their dividend over a period of twenty or thirty years. Indeed, the house next door to the one in which I 1405 was born in Yorkshire was bought completely out of the banking of co-operative dividends.
That seems to amuse the Economic Secretary, but I can tell the hon. Gentleman that it is a fact. Does the hon. Gentleman wish to murmur something?
§ Mr. DoddsIs my right hon. Friend aware that if one of the hon. Gentlemen opposite does speak, he will be the first one on the Conservative side to do so on this important matter?
Mr. WilsonI am afraid that if any hon. Gentlemen opposite do so, they will speak with much less knowledge of the subject than when they were discussing Surtax earlier this evening.
Here we have the Government ostensibly encouraging saving, yet they provide no incentive for this important method of working-class saving, which surely the hon. Gentleman wants to encourage?
§ Sir E. BoyleYes.
Mr. WilsonOne understands that he does. [An HON. MEMBER: "Does he want it?"] The hon. Gentleman said that he did. Not only are the Government failing to provide an incentive to this important sector, but, what is more important, they are providing an incentive for draining savings away into the Post Office Savings Bank. Of course it is desirable to get all we can into the Post Office Savings Bank, but I put it to the hon. Gentleman, who is a distinguished economist, that that will only be of value to the extent that it represents net saving and not a diversion from other saving.
So far the hon. Gentleman has not grasped that point. He spent some time in saying how difficult it would be to give way on this Amendment because there would be discrimination against other forms of saving. Yet it was the hon. Gentleman himself who started the discrimination with Clause 8. It just shows what a tangled web he weaves when first he practises to discriminate in respect of a certain form of saving. Had the hon. Gentleman not done so in respect of the Post Office Savings Bank, had he taken our advice on that point, we should not have the difficulty which we face on this Amendment.
1406 I do not think that the Economic Secretary will disagree that most of the experts who have examined the Chancellor's so-called "savings Budget" have said that it will mean only a diversion of savings and not a net increase. My hon. Friends have produced some very strong reasons for stating that one of the major diversions will be from co-operative societies. In this instance we are talking not about the co-operative bank but about the working capital of the co-operative societies.
I should have thought that the Economic Secretary could have given us a full reply. He gave us a very perfunctory reply, much more perfunctory than that on the subject of Surtax. It repays ill, not only the restraint that the Opposition have shown in enabling a decision to be reached at a reasonably early hour, but also the service which the Co-operative movement has given to the country in the matter of savings, not only since the war, but for a century.
I hope that the hon. Gentleman will tell us before we have to challenge him on the point that not only will he report our arguments to the Chancellor but that he can give us some real hope that the discrimination introduced by Clause 8 will be removed, and that he is prepared to accept the Amendment in principle. He may not like the wording of our Amendment. I appreciate that the Treasury draftsman, who is very ingenious, could devise a form of words to give us what we seek. We are not concerned about the form of words. What we want to do is to see an end put to the most damaging discrimination which is inherent in Clause 8. Unless the hon. Gentleman is willing to inform us that there will be an end to the discrimination, I am afraid that my hon. Friends and I—there are many more powerful arguments which we could have deployed—must vote against the Government in the Lobby.
§ Sir E. BoyleI cannot add to what I have already said. I should like to point out that the reason why I did not deploy the argument at greater length was that I should have had considerably to cover the ground which I had already covered in reply to an earlier Amendment. Certainly it was not due to any lack of interest on my part in the Co-operative 1407 movement or to any doubts about the sincerity of hon. Members opposite in the matter.
Mr. WilsonI must inform the hon. Gentleman—I am convinced that for once he has not grasped the point; it is rarely that he does not do so—that if he thinks the argument in replying to this Amendment is the same as the reply to the Amendment about savings banks, he has not understood the arguments that have been put forward. It is not a question of a diversion from one form of bank to another. It is wrong and misleading to say that if he gave way here he would have to give way in respect of the joint stock banks and the rest. They are not on a par at all. This is a question, not of bank savings, but of working capital,
§ and one of the major forms of working-class savings.
§ We are very disappointed at the hon. Gentleman's reply. It is clear that he is in need of further economic education on this point, and I have a feeling that he will get it when we debate the Clause as a whole. As a result of the education that he will receive in that debate, I hope that we shall get a much fuller reply than the one given to this Amendment. I appeal to my hon. Friends to let us come to a decision, however strongly they may wish to speak. I appeal to them—not that an appeal is needed—to go into the Lobby against the Government on this Amendment.
§ Question put, That those words be there inserted:—
§ The Committee divided: Ayes 174, Noes 228.
1411| Division No. 203.] | AYES | [9.54 p.m. |
| Ainsley, J. W. | Forman, J. C. | Messer, Sir F. |
| Albu, A. H. | Fraser, Thomas (Hamilton) | Mitchison, G. R. |
| Allen, Arthur (Bosworth) | Gaitskell, Rt. Hon. H. T. N. | Morris, Percy (Swansea, W.) |
| Allen, Scholefield (Crewe) | Gibson, C. W. | Mort, D. L. |
| Baird, J. | Gordon Walker, Rt. Hon. P. C. | Moyle, A. |
| Bellenger, Rt. Hon. F. J. | Grey, C. F. | Neal, Harold (Bolsover) |
| Benn, Hn. Wedgwood (Bristol, S.E.) | Griffiths, Rt. Hon. James (Llanelly) | Noel-Baker, Francis (Swindon) |
| Benson, G. | Griffiths, William (Exchange) | O'Brien, Sir Thomas |
| Beswick, F. | Hale, Leslie | Oliver, G. H. |
| Blackburn, F. | Hall, Rt. Hn. Glenvil (Colne Valley) | Oram, A. E. |
| Blyton, W. R. | Hamilton, W. W. | Orbach, M. |
| Boardman, H. | Hannan, W. | Oswald, T. |
| Bottomley, Rt. Hon. A. G. | Hastings, S. | Owen, W. J. |
| Bowden, H. W. (Leicester, S.W.) | Hayman, F. H. | Paling, Rt. Hon. W. (Dearne Valley) |
| Boyd, T. C. | Healey, Denis | Paling, Will T. (Dewsbury) |
| Braddock, Mrs. Elizabeth | Henderson, Rt. Hn. A. (Rwly Regis) | Palmer, A. M. F. |
| Brookway, A. F. | Hobson, C. R. | Pargiter, G. A. |
| Broughton, Dr. A. D. D. | Holmes, Horace | Parker, J. |
| Burton, Miss F. E. | Howell, Charles (Perry Barr) | Parkin, B. T. |
| Butler, Herbert (Hackney, C.) | Hoy, J. H. | Paton, John |
| Butler, Mrs. Joyce (Wood Green) | Hubbard, T. F. | Price, J. T. (Westhoughton) |
| Castle, Mrs. B. A. | Hughes, Emrys (S. Ayrshire) | Probert, A. R. |
| Champion, A. J. | Hunter, A. E. | Proctor, W. T. |
| Chapman, W. D. | Hynd, H. (Accrington) | Pryde, D. J. |
| Chetwynd, G. R. | Irvine, A. J. (Edge Hill) | Randall, H. E. |
| Clunie, J. | Irving, S. (Dartford) | Rankin, John |
| Coldrick, W. | Isaacs, Rt. Hon. G. A. | Redhead, E. C. |
| Collick, P. H. (Birkenhead) | Janner, B. | Reeves, J. |
| Collins, V.J.(Shoreditch & Finsbury) | Jay, Rt. Hon. D. P. T. | Reid, William |
| Corbet, Mrs. Freda | Jeger, George (Goole) | Roberts, Albert (Normanton) |
| Cove, W. G. | Jeger, Mrs.Lena(Holbn & St.Pncs,S.) | Robinson, Kenneth (St. Pancras, N.) |
| Craddock, George (Bradford, S.) | Jones, David (The Hartlepools) | Rogers, George (Kensington, N.) |
| Cronin, J. D. | Jones, Jack (Rotherham) | Ross, William |
| Crossman, R. H. S. | Jones, J. Idwal (Wrexham) | Shinwell, Rt. Hon. E. |
| Cullen, Mrs. A. | Jones, T. W. (Merioneth) | Short, E. W. |
| Darling, George (Hillsborough) | Kenyon, C. | Shurmer, P. L. E. |
| Davies, Harold (Leek) | Key, Rt. Hon. C. W. | Silverman, Julius (Aston) |
| Davies, Stephen (Merthyr) | King, Dr. H. M. | Skeffington, A. M. |
| Deer, G. | Lawson, G. M. | Slater, Mrs. H. (Stoke, N.) |
| de Freitas, Geoffrey | Ledger, R. J. | Slater, J. (Sedgefield) |
| Delargy, H. J. | Lever, Leslie (Ardwick) | Sorensen, R. W. |
| Dodds, N. N. | Lewis, Arthur | Sparks, J. A. |
| Donnelly, D. L. | Lindgren, G. S. | Steele, T. |
| Dugdale, Rt. Hn. John (W. Brmwch) | Logan, D. G. | Stewart, Michael (Fulham) |
| Ede, Rt. Hon. J. C. | MacColl, J. E. | Stokes, Rt. Hon. R. R. (Ipswich) |
| Edwards, Rt. Hon. John (Brighouse) | McKay, John (Wallsend) | Stones, W. (Consett) |
| Edwards, Robert (Bilston) | McLeavy, Frank | Strachey, Rt. Hon. J. |
| Edwards, W. J. (Stepney) | Mahon, Simon | Summerskill, Rt. Hon. E. |
| Evans, Albert (Islington, S. W.) | Mallalieu, E. L. (Brigg) | Sylvester, G. O. |
| Fienburgh, W. | Mann, Mrs. Jean | Taylor, Bernard (Mansfield) |
| Fletcher, Eric | Mayhew, C. P. | Taylor, John (West Lothian) |
| Thomson, George (Dundee, E.) | Wells, William (Waisall, N.) | Wills, Eustace (Edinburgh, E.) |
| Tomney, F. | West, D. G. | Wilson, Rt. Hon. Harold (Huyton) |
| Turner-Samuels, M. | Wheeldon, W. E. | Woof, R. E. |
| Ungoeth-Thomas, Sir Lynn | White, Henry (Derbyshire, N.E.) | Yates, V. (Ladywood) |
| Viant, S. P. | Wilkins, W. A. | Younger, Rt. Hon. K. |
| Warbey, W. N. | Willey, Frederick | |
| Weitzman, D. | Williams, W. R. (Openshaw) | TELLERS FOR THE AYES: |
| Wells, Percy (Faversham) | Williams, W. T. (Barons Court) | Mr. Pearson and Mr. Simmons. |
| NOES | ||
| Agnew, Cmdr. P. G. | Grosvenor, Lt.-Col. R. G. | Milligan, Rt. Hon. W. R. |
| Alport, C. J. M. | Gurden, Harold | Moore, Sir Thomas |
| Amery, Julian (Preston, N.) | Hall, John (Wy[...]ombe) | Mott-Radclyffe, C. E. |
| Arbuthnot, John | Harris, Frederic (Croydon, N. W.) | Nabarro, G. D. N. |
| Armstrong, C. W. | Harris, Reader (Heston) | Nairn, D. L. S. |
| Ashton, H. | Harrison, Col. J. H. (Eye) | Neave, Airey |
| Atkins, H. E. | Harvey, Air Cdre. A. V. (Maoolesfd) | Nicholson, Godfrey (Farnham) |
| Baldwin, A. E. | Harvey, Ian (Harrow, E.) | Nicolson, N. (B'n'm'th, E. & Chr'ch) |
| Barber, Anthony | Harvey, John (Walthamstow, E.) | Nield, Basil (Chester) |
| Barlow, Sir John | Hay, John | Noble, Cmdr. A. H. P. |
| Barter, John | Heald, Rt. Hon. Sir Lionel | Nutting, Rt. Hon. Anthony |
| Bell, Philip (Bolton, E.) | Heath, Rt. Hon. E. R. G. | Oakshott, H. D. |
| Bell, Ronald (Bucks, S.) | Hicks-Beach, Maj. W. W. | O'Neill, Hn. Phelim (Co. Antrim, N.) |
| Bennett, F. M. (Torquay) | Hill, Mrs. E. (Wythenshawe) | Ormsby-Gore, Hon. W. D. |
| Bevins, J. R. (Toxteth) | Hill, John (S. Norfolk) | Orr-Ewing, Chares Ian (Hendon, N.) |
| Biggs-Davison, J. A. | Hinchingbrooke, Viscount | Osborne, C. |
| Birch, Rt. Hon. Nigel | Holland-Martin, C. J. | Page, R. G. |
| Bishop, F. P. | Holt, A. F. | Pannell, N. A. (Kirkdale) |
| Black, C. W. | Hope, Lord John | Partridge, E. |
| Body, R. F. | Hornsby-Smith, Miss M. P. | Pickthorn, K. W. M. |
| Boothby, Sir Robert | Horobin, Sir Ian | Pikington, Capt. R. A. |
| Bossom, Sir A. C. | Horsbrugh, Rt. Hon. Dame Florence | Pitt, Miss E. M. |
| Boyle, Sir Edward | Howard, John (Test) | Pott, H. P. |
| Braine, B. R. | Hughes-Young, M. H. C. | Powell, J. Enoch |
| Brooke, Rt. Hon. Henry | Hulbert, Sir Norman | Prior-Palmer, Brig. O. L. |
| Brooman-White. R. C. | Hutchison, Sir Ian Clark (E'b'gh,W.) | Profumo, J. D. |
| Bullus, Wirg Commander E. E. | Hyde, Montgomery | Raikes, Sir Victor |
| Butcher, Sir Herbert | Hylton-Foster, Sir H. B. H. | Ramsden, J. E. |
| Butler, Rt. Hn. R. A. (Saffron Waiden) | lremonger, T. L. | Rawlinson, Peter |
| Campbell, Sir David | Irvine, Bryant Godman (Rye) | Redmayne, M. |
| Carr, Robert | Jenkins, Robert (Dulwich) | Rees-Davies, W. R. |
| Cary, Sir Robert | Jennings, J. C. (Burton) | Remnant, Hon. P. |
| Channon, H. | Johnson, Dr. Donald (Carlisle) | Renton, D. L. M. |
| Clarke, Brig. Terence (Portsmth, W.) | Johnson, Eri[...] (Blackley) | Ridsdale, J. E. |
| Cole, Norman | Jones, Rt. Hon. Aubrey (Hall Green) | Rippon, A. G. F. |
| Cooper-Key, E. M. | Joseph, Sir Keith | Roberts, Sir Peter (Heeley) |
| Cordeaux, Lt.-Col. J. K. | Joynson-Hicks, Hon. Sir Lancelot | Robinson, Sir Ronald (Blackpool, S.) |
| Corfield, Capt. F. V. | Keegan, D. | Roper, Sir Harold |
| Craddock, Beresford (Spelthorne) | Kerby, Capt. H. B. | Russell, R. S. |
| Crouch, R. F. | Kerr, H. W. | Schofield, Lt.-Col. W. |
| Crowder, Sir John (Finchley) | Kimball, M. | Sharples, R. C. |
| Crowder, Petre (Ruislip—Northwood) | Kirk, P. M. | Simon, J. E. S. (Middlesbrough, W.) |
| Cunningham, Knox | Lagden, C. W. | Smithers, Peter (Winchester) |
| Currie, G. B. H. | Lancaster, Col. C. G. | Smyth, Brig. Sir John (Norwood) |
| Dance, J. C. G. | Langford-Holt, J. A. | Soames, Capt. C. |
| D'Avigdor-Goldsmid, Sir Henry | Leavey, J. A. | Spearman, Sir Alexander |
| Deedes, W. F. | Leburn, W. G. | Spelr, R. M. |
| Digby, Simon Wingfield | Legge-Bourke, Maj. E. A. H. | Spens, Rt. Hn. Sir P. (Kens'gt'n, S.) |
| Dodds-Parker, A. D. | Legh, Hon. Peter (Petersfield) | Stevens, Geoffrey |
| Donaldson, Cmdr. C. E. McA. | Lindsay, Hon. James (Devon, N.) | Steward, Harold (Stockport, S.) |
| Doughty, C. J. A. | Lindsay, Martin (Sollhull) | Steward, Sir William (Woolwich, W.) |
| du Cann, E. D. L. | Linstead, Sir H. N. | Stoddart-Scott, Col. M. |
| Duncan, Capt. J. A. L. | Lloyd, Maj. Sir Guy (Renfrew, E.) | Studholme, Sir Henry |
| Eden, J. B. (Bournemouth, West) | Longden, Gilbert | Summers, Sir Spencer |
| Elliot, Rt. Hon. W. E. | Low, Rt. Hon. A. R. W. | Taylor, Sir Charles (Eastbourne) |
| Errington, Sir Eric | Lucas, Sir Jocelyn (Portsmouth, S.) | Teeling, W. |
| Fell, A. | Lucas, P. B. (Brentford & Chiswick) | Thomas, Leslie (Canterbury) |
| Finlay, Graeme | Lucas-Tooth, Sir Hugh | Thomas, P. J. M. (Conway) |
| Fisher, Nigel | McAdden, S. J. | Thompson, Lt.-Cdr.R.(Croydon, S.) |
| Fleetwood-Hesketh, R. F. | Macdonald, Sir Peter | Thornton-Kemsley, C. N. |
| Foster, John | Mackie, J. H. (Galloway) | Taney, John (Wavertree) |
| Freeth, D. K. | Maclay, Rt. Hon. John | Touche, Sir Gordon |
| Galbraith, Hon. T. G. D. | Maclean, Fitzroy (Lancaster) | Turner, H. F. L. |
| Garner-Evans, E. H. | Macmillan, Rt. Hn. Harold (Bromley) | Turton, Rt. Hon. R. H. |
| Gibson-Watt, D. | Macpherson, Niall (Dumfries) | Vane, W. M. F. |
| Glover, D. | Madden, Martin | Vaughan-Morgan, J. K. |
| Godber, J. B. | Maitland, Hon. Patrick (Lanark) | Vickers, Miss J. H. |
| Gomme-Duncan, Col. Sir Alan | Manningham-Buller Rt. Hn. Sir R. | Vosper, D. F. |
| Gower, H. R. | Marlowe, A. A. H. | Wall, Major Patrick |
| Graham, Sir Fergus | Marples, A. E. | Ward, Hon, George (Worcester) |
| Grant-Ferris, Wg Cdr. R. (Nantwich) | Marshall, Douglas | Ward, Dame Irene (Tynemouth). |
| Green, A. | Mathew, R. | Waterhouse, Capt. Rt. Hon. C. |
| Gresham Cooke, R. | Maudling, Rt. Hon. R. | Webbe, Sir H. |
| Grimston, Sir Robert (Westbury) | Maydon, Lt.-Comdr, S. L. C. | Whitelaw, W.S.I.(Penrith & Border) |
| Williams, Paul (Sunderland, S.) | Wilson, Geoffrey (Truro) | |
| Williams, R. Dudley (Exeter) | Woollam, John Victor | TELLERS FOR THE NOES: |
| Wills, G. (Bridgwater) | Yates, William (The Wrekin) | Nr. E. Wakefield and Mr. Bryan. |
§ Dr. Horace King (Southampton, Itchen)I beg to move, in page 8, line 29, at the end to insert:
Provided that, where by virtue of this subsection the amount of surtax payable by an individual would exceed the sum of
- (a) the amount of surtax which would have been payable by that individual, if this subsection had not been passed, and
- (b) the amount of relief, if any, to which that individual is entitled by virtue of the foregoing subsection,
that excess shall be disregarded for all the purposes of the Income Tax Acts.(3) The two foregoing subseotions shall apply in respect of interest on deposits with a society registered as a friendly society under the Friendly Societies Act, 1896, as they apply in respect of interest on deposits with the Post Office savings bank.I like the Government's original proposition to exempt certain savings up to £15 a year from Income Tax. I think that that will help a lot of people who are just above the National Assistance level, but I cannot see why only the Post Office and the trustee savings bank savings should be considered. Surely the Chancellor does not argue that other savings will not help him in his economic problems.The Amendment seks to extend the concession to friendly societies, and I want to say something about these societies, and especially about one that I know very well, the Teachers' Provident Society. First, let me give the Committee an idea of the size of the problem and of the sums of money involved. Let us be quite clear. We are not dealing with Surtax payers, but with people who have lived all their lives on small incomes and have been thrifty and built up a few savings.
There are six deposit friendly societies, whose total savings amount to a mere £20 million. Last year they saved just over £900,000 and, as there are over 900,000 members, there is an average saving of £1 per person a year. The average total savings of the members of these friendly societies are between £20 and £25. The biggest average is that of the teachers, which amounts to about £75 a year. We must remember that the relief for which we are asking deals not with the total savings but the interest upon them, so that the kind of annual 1412 income from savings which the Amendment seeks to benefit is a matter of shillings rather than pounds; indeed, the average income from the interest on deposit savings would be under £1 a year.
Let me put it another way. The interest on deposits last year was £478,000 for the six societies. Of this, three-quarters was earmarked in a peculiar way for sick benefits, so that only £150,000 of that interest, spread over nearly 1 million people, is the kind of unearned income upon which income tax has any right to be levied.
The method of working the Teachers' Provident Society is that a member pays in regular contributions which entitle him to sick benefit. At the end of the year, the amount of money paid out to members in sick benefit is deducted from the income, and the balance is shared out among the members and placed to their deposit accounts. One might say that that is the amount they save during the year.
It is not as simple as that. however. The amount of money in their deposit accounts is a source from which a part may be drawn for sick benefit if members have been sick for so long that they have outstayed their right to ordinary sick benefit. This means that about one-third of these savings cannot be called savings in the ordinary cash sense. Incidentally, such sick benefit may save the Government money which it would otherwise have to pay in National Assistance benefit. In spite of this, the members are charged Income Tax on whatever is in their deposit account, including that which, if they fell ill for a long time, could be used for further sick benefit.
Roughly speaking, the Teachers' Provident Society is a kind of sickness insurance, with the addition that a member 'is encouraged to save as well in order to extend the period during which he can draw sick benefit. It has been argued by the Financial Secretary that the Government wish to make this concession only in respect of money invested in.Government securities or in the Government's own hands, but the money of friendly societies is all in trustee securities, by law, and that means that most of 'the money is invested in Government securities.
1413 I have here particulars of the investments of the Teachers' Provident Society. They amount to roughly £4 million, in mortgages—the Government believe in a property-owning democracy and they surely would not want the Society to foreclose on its £4 million mortgages and put the money into the Post Office Savings Bank—£1 million in loans to local authorities; £5 million in Government securities; £300,000 in municipal securities; £1 million in colonial securities—and the Government surely do not want to discourage that—£100,000 in public boards and waterworks, and only £150,000 in debenture stocks. That kind of investment of a society's money is the kind which the Chancellor would want to encourage rather than discourage.
If the provident friendly societies are left without this concession, there may be a switch of their money over to the Post Office, in which case their members will receive the benefit of the concession which the Government are at present refusing them. But there will be no addition to National Savings. Surely the Chancellor does not want merely a switching of money from one to the other inside bona fide savings organisations which are of value to the country.
Who are the people for which the Amendment seeks to plead? Again, I speak of what I know—the average member of the Teachers' Provident Society. It consists largely of teachers who have lived on small salaries all their lives. They have watched their pensions dwindle in value despite the various Measures designed to increase them. If amended, the Government proposal will mean a few extra pounds for them or possibly in some cases even a few extra shillings. But that extra little amount can mean a lot to the thrifty retired public servant, the person who has been thrifty all his life. Surely, these are people whom the Chancellor would wish to include in the provision he has made under Post Office Savings?
I have spoken briefly out of consideration for the Committee, but I urge the Government to accept this as a valuable and useful Amendment to a valuable and useful proposal on the part of the Chancellor.
§ Mr. MitchisonAgain we come to the proviso, and I say no more about it than 1414 that I hope the right hon. Gentleman and his hon. Friends did not mistake my growlings about the House of Commons procedure for any lack of appreciation for what they have done to help the Committee to get these matters discussed in substance. I am most grateful to them, as I am sure are all hon. Members, for allowing us to get to the real point instead of being bunkered by minor procedural matters.
As to the substance of this Amendment, it raises one general point which we have had before and I do not propose to stress again. There is no doubt that the money on deposit with friendly societies represents to some extent the savings of the weekly workers of this country. That has been argued. But it has another purpose also. There are many friendly societies, and the Teachers' Provident Society is not the only one, nor is it the largest. It is a very good instance of a professional society for a particular purpose among a group of people who are certainly by no means over-paid or over-secure as to their illness and old age.
Friendly societies for the general public have existed since 1793, and ever since that time they have served a valuable purpose, whatever the Government of the day may have done or omitted to do. Broadly speaking, they have been one refuge, sometimes the only refuge, for a very large number of people in the event of illness, bereavement or death, or in the case of accidents which occur to many of us in the course of a human life. They are a very well tried bit of machinery for the purpose.
Some of these societies require members to have certain moneys on deposit, and yet the interest on that money, which is required really for the purpose of providing these benefits, is taxable. The distinction between that and some allocation or distribution out of the funds of the society is a very fine one indeed, and I shall not try to define it tonight. But I assure the Committee that it is exceedingly difficult to draw the line, and I am not at all certain that the line is drawn at exactly the same point all over the country, though no doubt theoretically that is so, and should be so. It illustrates the extreme difficulty of drawing any distinction whatever in principle between these quite small funds, which should be 1415 treated in a different way for tax purposes, and are in fact required for more than one object.
10.15 p.m.
These are not like the investments in savings banks, not even like the investments in the Post Office Savings Bank, and though, in fact, as my hon. Friend has so clearly pointed out, there can be no doubt that a very large proportion of them, probably practically all of them, so far as they are invested at all are invested in Government securities, it does not at all follow that they will be invested for the reason that they are, in effect, the working capital of these friendly societies and that if they were not there the societies could not perform their function and continue to perform it securely.
Whatever prejudices hon. Members opposite may have about municipal savings banks, and whatever prejudices they may have and not admit to having about co-operative societies, a friendly society is really something that I should not have thought any hon. Member could possibly wish to discourage in any way. It is true that, on the whole, friendly societies serve rather poorer people than the average, but they do a service which, whatever a Government does or does not do, clearly ought to be done, and a large part of that service enures, as my hon. Friend pointed out, to the saving of Government funds whether in the way of National Assistance or, in some cases, in connection with the Health Service. Therefore, they really ought to commend themselves to the House.
That is the first point about it, the nature of the service, the extreme difficulty of discovering what really is taxable and what is not taxable in these cases and the complete lack of principle other than the barest, nastiest, driest legal distinction between one kind of interest and another. From a human point of view, I should have thought that there could be no doubt about it.
I go one stage further. What is going to happen? These societies like others which we have been discussing tonight will be at risk if this concession is confined to the very strict limits which the Government have put on it. I believe that they will be quite particularly at 1416 risk. After all, the banks about which we were talking earlier, though widespread, were local matters. The Co-operative societies, though they will be cramped and seriously cramped by the refusal to them of the concession, still have a trade to carry on, but these friendly societies are, in effect, doing a money business and nothing else. What they are doing is providing for the things I have mentioned and doing it out of funds provided by their members.
If those funds are going to be withdrawn and transferred to the Post Office Savings Bank, the Government are going to do themselves far more harm in the long run than they think they will gain by confining the concession strictly to bodies which necessarily invest the whole of their funds in Government securities. Through a piece of cowardice and from a lack of facing up to this question and considering what it really involves, the Government are in the long run going to involve themselves in far more expenditure by way of having to carry on through public channels something which is at present being done by a form of co-operation among the depositors concerned.
I repeat for the last time that this is something that has gone on since 1793, the need of which was recognised then, has been found useful and increasingly useful all through the changes of the nineteenth and twentieth centuries and which ought not to be crippled because on a small point of this sort the Chancellor refuses to recognise the true character of what the societies are doing. I suggest that this is a case that merits quite particular attention and that if, in fact, the concession is refused here the damaging effect on the activities of these friendly societies will be even greater than it would have been in any of the other cases we have mentioned. Serious, very serious, though I think the refusal to the co-operative societies was, this one, though it may affect a smaller number of people, is, I believe, in its own way—a different way—just as serious. I do hope that the Chancellor will say that he will accept either this Amendment or its substance.
§ The Financial Secretary to the Treasury (Mr. Henry Brooke)The hon. and learned Member for Kettering (Mr. Mitchison) really must rub up his history. 1417 He says that friendly societies started in I793. There were friendly societies in this country in the sixteenth century—and may be earlier, but certainly the evidence goes back as far as that. He is speaking like one of those boys who happen at school to learn history only from the French Revolution onwards.
§ Mr. MitchisonI am very glad that the right hon. Gentleman is supporting my case so generously. I can assure him that what I have said comes from being a lawyer and not a historian. Friendly societies were first recognised in the Statute Book under what is called Rose's Act in 1793.
§ Mr. BrookeThe hon. and learned Member is speaking as though friendly societies depended upon the action of this House, but they grew from the people. They were a natural product of the British genius, and hundreds of years passed before Parliament decided to regulate them by legislation. I hope, therefore, that as my first point I have shown that I know at least as much about friendly societies as does the hon. and learned Gentleman.
The hon. Member for Itchen (Dr. King), who eloquently moved this Amendment, spoke on behalf of the friendly societies, and spoke of them in particular connection with one profession but, as the hon. and learned Gentleman added, the subject goes much wider than that. I hope that I can speak about it with some authority, because earlier in this Session I myself piloted through this House the Friendly Societies Bill. It was such a good Bill that it almost went through both Houses of Parliament without Amendment, but in another place it was discovered that the printer had left out the word "the" so we had to have a Lords Amendment here to put it in.
This Government certainly cannot be successfully accused by hon. Members opposite of having ignored or failed to help the friendly societies. The friendly societies were grateful for that Bill; much more grateful, if I may say so, than they were for the effects of the National Health Service Act, 1948, which created very grave problems for them.
The hon. Member for Itchen has argued eloquently, as I say, that this tax-free concession should be extended to the friendly societies. The difficulty is 1418 that however sympathetic one is towards those societies or towards the case which the hon. Member has made, it appears to us quite impossible to draw the line anywhere except at that point between those bodies which lend their funds wholly to the Government and those which exercise their freedom to invest their deposits otherwise. The friendly societies enjoy that freedom. I did not hear from either the hon. Member for Itchen or the hon. and learned Member for Kettering any suggestion that the friendly societies were willing to give up that freedom.
If that is so, and I am sure that it is, it seems to me that it would be quite impracticable to accept this Amendment and include them without including as well so many other bodies—those which we were discussing a few minutes ago; the building societies and a number of other bodies which, equally, have grown from the native genius of the British people, have accepted deposits and used them in the public interest and for the public good.
§ Dr. KingThe right hon. Gentleman talks of drawing a line, but surely the line here is quite patent to be drawn. Everything is invested in trustee securities, and the whole financial policy is subject to Government control through the Registrar-General.
§ Mr. BrookeFriendly societies are not obliged to confine the use of their deposits to lending to the Government. Nor are they under statutory limitation as to the rate of interest that they pay, as the savings banks are. We are extremely anxious to do the right thing in this matter and to treat everybody fairly, but, as my hon. Friend the Economic Secretary has explained earlier, if we do go beyond the line which we have drawn in this Clause, we do not think that we could in fairness and without discrimination stop short of including all sorts of other bodies, so that eventually we would be giving a £15 tax exemption for investment income generally.
I fully understand the case which the hon. and learned Gentleman has made for the friendly societies. I think I am known among the friendly societies as having taken a personal interest in their activities, and nobody is more interested than I in this House that they should expand those activities.
§ Mr. MitchisonI am most grateful to the right hon. Gentleman for giving way. Apart from that point, and apart from the general merits of the matter, do I understand him to say that if binding arrangements could be made with a friendly society confining its investment to investments in Government stock or Government funds generally, the Chancellor of the Exchequer would be prepared to extend to the friendly society in that case the same treatment that has been offered to the Birmingham Municipal Bank?
§ Mr. BrookeIt would have to be on the same conditions, and my information is that the friendly societies have no desire whatever to be limited in using their deposits exclusively in lending to the State or to put themselves under any other of the statutory restrictions under which the savings banks operate. That is the simple case that I am putting. It is not a matter of sympathy or lack of sympathy. It is a matter of trying to do something that is practicable and fair. Those are the sole reasons why I have to advise the Committee that it would not be reasonable to accept this Amendment.
§ Mr. MitchisonMay I press the right hon. Gentleman for a moment? It is quite obvious that large parts of these deposits will not be invested at all. What is invested is invested in trustee securities—at any rate in many, if not most,
§ cases. If it were arranged that such investment as can properly be made were confined to Government securities or Government funds in some form, would that meet the point and allow the exemption to be extended to friendly societies?
§ Mr. BrookeI do not think we can make provision for things which friendly societies do not want to do. There is not the slightest indication from anywhere that the friendly societies are willing so radically to change their policy as to confine the use of their deposits to direct lending to the State or put themselves under other statutory obligations. These questions are, therefore, entirely hypothetical.
It is certainly not for Parliament in a Finance Bill to give any sort of directions to the friendly societies. The hon. and learned Member is asking what would happen if the friendly societies were to do something which we know they do not want to do. That question is entirely hypothetical, and I do not think I can carry the matter further than I have. I have been very frank with the Committee.
§ Question put, That those words be there inserted:—
§ The Committee divided: Ayes 153, Noes 204.
1423| Division No. 204.] | AYES | [10.29 p.m. |
| Albu, A. H. | Deer, G. | Hunter, A. E. |
| Allen, Arthur (Bosworth) | de Freitas, Geoffrey | Hynd, H. (Accrington) |
| Allen, Scholefield (Crewe) | Delargy, H. J. | Irvine, A. J. (Edge Hill) |
| Baird, J. | Dodds, N. N. | Irving, S. (Dartford) |
| Bellenger, Rt. Hon. F. J. | Donnelly, D. L. | Isaacs, Rt. Hon. G. A. |
| Bann, Hn. Wedgwood (Bristol, S. E.) | Dugdale, Rt. Hn. John (W. Brmwch) | Janner, B. |
| Benson, G. | Ede, Rt. Hon. J. C. | Jay, Rt. Hon. D. P. T. |
| Beswick, F. | Edwards, Rt. Hon. John (Brighouse) | Jeger, George (Goole) |
| Blackburn, F. | Edwards, Robert (Bilston) | Jeger, Mrs.Lena (Holhn & St. Pncs, S.) |
| Blyton, W. R. | Edwards, W. J. (Stepney) | Jones, David (The Hartlepools) |
| Boardman, H. | Evans, Albert (Islington, S.W.) | Jones, Jack (Rotherham) |
| Bottomley, Rt. Hon. A. G. | Fienburgh, W. | Jones, J. Idwal (Wrexham) |
| Bowden, H. W. (Leicester, S.W.) | Fletcher, Eric | Jones, T. W. (Merioneth) |
| Boyd, T. C. | Forman, J. C. | Kenyon, C. |
| Braddock, Mrs. Elizabeth | Gaitskell, Rt. Hon. H. T. N. | Key, Rt. Hon. C. W. |
| Broughton, Dr. A. D. D. | Gibson, C. W. | King, Dr. H. M. |
| Burton, Miss F. E. | Gordon Walker, Rt. Hon. P. C. | Lawson, G. M. |
| Butler, Herbert (Hackney, C.) | Grey, C. F. | Ledger, R. J. |
| Butler, Mrs. Joyce (Wood Green) | Griffths, Rt. Hon. James (Llanelly) | Lever, Leslie (Ardwick) |
| Champion, A. J. | Griffiths, William (Exchange) | Lewis, Arthur |
| Chapman, W. D. | Hale, Leslie | Lindgren, G. S. |
| Chetwynd, G. R. | Hall, Rt. Hn. Glenvil (Colne Valley) | Logan, D. G. |
| Coldrick, W. | Hamilton, W. W. | MacCoIl, J. E. |
| Collick, P. H. (Birkenhead) | ||
| Collins, V. J. (Shoreditch & Finsbury) | Hannan, W. | McKay, John (Wallsend) |
| Corbet, Mrs. Freda | Hayman, F. H. | McLeavy, Frank |
| Cove, W. G. | Healey, Denis | Mahon, Simon |
| Craddock, George (Bradford,S.) | Henderson, Rt. Hn. A. (Rwly Regis) | Mallalieu, E. L. (Brigg) |
| Cronin, J. D. | Hobson, C. R. | Mann, Mrs. dean |
| Grossman, R. H. 8. | Howell, Charles (Perry Barr) | Mayhew, C. P. |
| Darling, George (Hillsborough) | Hoy, J. H. | Mitchison, G. R. |
| Davies, Harold (Leek) | Hubbard, T. F. | Morris, Percy (Swansea, W.) |
| Davies, Stephen (Merthyr) | Hughes, Emrys (S. Ayrshire) | Mort, D. L. |
| Moyle, A. | Pryde, D. J. | Taylor, Bernard (Mansfield) |
| Neal, Harold (Bolsover) | Randall, H. E. | Taylor, John (West Lothian) |
| Noel-Baker, Francis (Swindon) | Rankin, John | Thomson, George (Dundee, E.) |
| O'Brien, Sir Thomas | Redhead, E. C. | Tomney, F. |
| Oliver, G. H. | Reeves, J. | Turner-Samuels, M. |
| Oram, A. E. | Roberts, Albert (Normanton) | Warbey, W. N. |
| Orbach, M. | Robinson, Kenneth (St. Pancras, N.) | Weitzman, D. |
| Oswald, T. | Rogers, George (Kensington, N.) | Wells, William (Walsail, N.) |
| Owen, W. J. | Ross, William | Wheeldon, W. E. |
| Paling, Rt. Hon. W. (Deame Valley) | Short, E. W. | White, Henry (Derbyshire, N.E.) |
| Paling, Will T. (Dewsbury) | Shurmer, P. L. E. | Willey, Frederick |
| Palmer, A. M. F. | Silverman, Julius (Aston) | Williams, W. R. (Openshaw) |
| Pargiter, G. A. | Skeffington, A. M. | Williams, W. T. (Barons Court) |
| Parker, J. | Slater, Mrs. H. (Stoke, N.) | Wilson, Rt. Hon. Harold (Huyton) |
| Parkin, B. T. | Sorensen, R. W. | Woof, R. E. |
| Paton, John | Sparks, J. A. | Yates, V. (Ladywood) |
| Pearson, A. | Stewart, Michael (Fulham) | |
| Price, J. T. (Westhoughton) | Stones, W. (Consett) | TELLERS FOR THE AYES: |
| Probert, A. R. | Summerskill, Rt. Hon. E. | Mr. Simmons and Mr. Wilkins. |
| Proctor, W. T. | Sylvester. G. O. | |
| NOES | ||
| Agnew, Cmdr. P. G. | Grant-Ferris, Wg Cdr. R. (Nantwich) | Marlowe, A. A. H. |
| Allan, R. A. (Paddington, S.) | Green, A. | Marples, A. E. |
| Amery, Julian (Preston, N.) | Gresham Cooke, R. | Marshall, Douglas |
| Arbuthnot, John | Grimston, Sir Robert (Westbury) | Mathew, R. |
| Armstrong, C. W. | Grosvenor, Lt.-Col. R. G. | Maudling, Rt. Hon. R. |
| Ashton, H. | Gurden, Harold | Maydon, Lt.-Comdr. S. L. C. |
| Atkins, H. E. | Hall, John (Wycombe) | Milligan, Rt. Hon. W. R. |
| Baldwin, A. E. | Harris, Frederic (Croydon, N.W.) | Mott-Radclyffe, C. E. |
| Barber, Anthony | Harris, Reader (Heston) | Nabarro, G. D. N. |
| Barlow, Sir John | Harrison, Col. J. H. (Eye) | Nairn, D. L. S. |
| Barter, John | Harvey, Ian (Harrow, E.) | Heave, Alrey |
| Bell, Philip (Bolton, E.) | Harvey, John (Waltharnstow, E.) | Nicholson, Godfrey (Farnham) |
| Bell, Ronald (Bucks, S.) | Hay, John | Nicolson, N. (B'n'm'th, E. & Chr'ch) |
| Bevins, J. R. (Toxteth) | Heald, Rt. Hon. Sir Lionel | Nield, Basil (Chester) |
| Biggs-Davison, J. A. | Heath, R. Hon. E. R. G. | Noble, Comdr. A. H. P. |
| Birch, Rt. Hon. Nigel | Hill, Mrs. E. (Wythenshawe) | Nutting, Rt. Hon. Anthony |
| Bishop, F. P. | Hill, John (S. Norfolk) | Oakshott, H. D. |
| Black, C. W. | Hinchingbrooke, Viscount | O'Neill, Hn. Phellm (Co. Antrim, N.) |
| Body, R. F. | Holland-Martin, C. J. | Ormsby-Gore, Hon. W. D. |
| Boothby, Sir Robert | Holt, A. F. | Orr-Ewing, Charles Ian (Hendon, N.) |
| Bossom, Sir A. C. | Hope, Lord John | Osborne, C. |
| Boyle, Sir Edward | Hornsby-Smith, Miss M. P. | Page, R. G. |
| Braine, B. R. | Horobin, Sir Ian | Pannell, N. A. (Kirkdale) |
| Brooke, Rt. Hon. Henry | Horsbrugh, Rt. Hon. Dame Florence | Partridge, E. |
| Brooman-White, R. C. | Howard, John (Test) | Pickthorn, K. W. M. |
| Bullus, Wing Commander E. E. | Hughes-Young, M. H. C. | Pilkington, Capt. R. A. |
| Butcher, Sir Herbert | Hulbert, Sir Norman | Pitt, Miss E. M. |
| Butler, Rt. Hn. R. A. (Saffron Walden) | Hutchison, Sir Ian Clark (E'b'gh, W.) | Pott, H. P. |
| Carr, Robert | Hyde, Montgomery | Powell, J. Enoch |
| Cary, Sir Robert | Hylton-Foster, Sir H. B. H. | Prior-Palmer, Brig. O. L. |
| Channon, H. | Iremonger, T. L. | Profumo, J. D. |
| Clarke, Brig. Terence (Portsmh, W.) | Irvine, Bryant Godman (Rye) | Raikes, Sir Victor |
| Cole, Norman | Jenkins, Robert (Dulwich) | Ramsden, J. E. |
| Cooper-Key, E. M. | Johnson, Dr. Donald (Carlisle) | Rawlinson, Peter |
| Cordeaux, Lt.-Col. J. K. | Johnson, Eric (Blackley) | Redmayne, M. |
| Corfield, Capt. F. V. | Jones, Rt. Hon. Aubrey (Hall Green) | Rees-Davies, W. R. |
| Craddock, Beresford (Spelthorne) | Joseph, Sir Keith | Renton, D. L. M. |
| Crouch, R. F. | Joynson-Hieks, Hon. Sir Lancelot | Ridsdale, J. E. |
| Cunningham, Knox | Keegan, D. | Rippon, A. G. F. |
| Currie, G. B. H. | Kerby, Capt. H. B. | Roberts, Sir Peter (Heeley) |
| Dance, J. C. G. | Kerr, H. W. | Robinson, Sir Roland (Blackpool, 8.) |
| D'Avigdor-Goldsmid, Sir Henry | Kimball, M. | Roper, Sir Harold |
| Deedes, W. F. | Kirk, P. M. | Russell, R. S. |
| Digby, Simon Wingfield | Lagden, G. W. | Schofield, Lt.-Col. W. |
| Dodds-Parker, A. D. | Lancaster, Col. C. G. | Sharples, R. C. |
| Donaldson, Cmdr. C. E. MeA. | Leavey, J. A. | Smithers, Peter (Winchester) |
| Doughty, C. J. A. | Legge-Bourke, Maj. E. A. H. | Soames, Capt. C. |
| du Cann, E. D. L. | Legh, Hon. Peter (Petersfield) | Spearman, Sir Alexander |
| Eden, J. B. (Bournemouth, West) | Lindsay, Martin (Solihull) | Speir, R. M. |
| Elliot, Rt. Hon. W. E. | Linstead, Sir H. N. | Spens, Rt. Hn. Sir P. (Kens'gt'n, S.) |
| Fell, A. | Longden, Gilbert | Stevens, Geoffrey |
| Finlay, Graeme | Lucas, Sir Jocelyn (Portsmouth, S.) | Steward, Harold (Stockport, S.) |
| Fisher, Nigel | Lucas, P. B. (Brentford & Chiswick) | Steward, Sir William (Woolwich, W.) |
| Fleetwood-Hesketh, R. F. | Macdonald, Sir Peter | Stoddart-Scott, Col. M. |
| Foster, John | Mackie, J. H. (Galloway) | Studholme, Sir Henry |
| Freeth, D. K. | Maclay, Rt. Hon. John | Summers, Sir Spencer |
| Garner-Evans, E. H. | Maclean, Fitzroy (Lancaster) | Taylor, Sir Charles (Eastbourne) |
| Gibson-Watt, D. | Macmillan, Rt. Hn. Harold(Bromley) | Teeling, W. |
| Glover, D. | Maddan, Martin | Thomas, P. J. M. (Conway) |
| Godber, J. B. | Maitland, Hon. Patrick (Lanark) | Thompson, Lt.-Cdr. R. (Croydon, S.) |
| Gower, H. R. | Manningham-Buller, Rt. Hn. Sir R. | Thornton-Kemsley, C. N. |
| Graham. Sir Fergus |
| Tilney, John (Wavertree) | Wakefield, Edward (Derbyshire, W.) | Wills, G. (Bridgwater) |
| Touche, Sir Gordon | Wall, Major Patrick | Wilson, Geoffrey (Truro) |
| Turner, H. F. L. | Ward, Hon. George (Worcester) | Woollam, John Victor |
| Turton, Rt. Hon. R. H. | Ward, Dame Irene (Tynemouth) | Yates, William (The Wrekin) |
| Vane, W. M. F. | Waterhouse, Capt. Rt. Hon. C. | |
| Vaughan-Morgan, J. K. | Whitelaw, W. S. I. (Penrith & Border) | TELLERS FOR THE NOES: |
| Vickers, Miss J. H. | Williams, Paul (Sunderland, S.) | Mr. T. G. D. Galbraitb and |
| Vosper, D. F. | Williams, R. Dudley (Exeter) | Mr. Bryan. |
§ Motion made, and Question proposed, That the Clause stand part of the Bill.
§ Mr. BeswickIt would be quite wrong to let the Clause pass without some comments being made on the entirely unsatisfactory answer given to us by the Economic Secretary to the Treasury about the possibility of extending the tax concession to those societies which are registered under the Industrial and Provident Societies Acts. This Clause is completely unsatisfactory. There can be no doubt about that. It gives a limited concession in an arbitrary manner, and draws a line which has not been justified by any speech by the Government spokesmen tonight.
The Economic Secretary, in attempting to justify the line which has been drawn, said that, if he went any further, concessions would have to be extended to such organisations as building societies and the joint stock banks, but when he says that he shows how he has completely failed to understand the case which we have endeavoured to put to him. For a start, a concession has already been made to the building societies about Income Tax, and the compounding arrangements that have been made—
§ The Temporary Chairman (Sir Austin Hudson)Order. The hon. Member can only discuss what is in the Clause. We have dealt with the things which hon. Members wanted to put into it, and they have been voted upon. Now the hon. Member can only go into the question whether the Clause should stand part of the Bill or not.
Mr. H. WilsonOn a point of order, Sir Austin. We are now being asked to decide on the question whether these things which are in the Clause ought to be there or not, and there has been no possibility of debate so far. The Clause deals mainly with the Post Office Savings Bank. I put it to you, with great respect, that the question whether the Clause, as it emerges from the Amendments, provides discrimination against 1424 other forms of saving is relevant to the question as to whether we should allow this Clause to go through, providing, as it does, certain facilities for Post Office savings.
§ The Temporary ChairmanThat is not quite accurate because no Amendments have been made to the Clause. All that can be argued is that the Clause, as such, shall stand part of the Bill, not that other things should be put in.
§ Mr. BeswickI accept what you say, Sir Austin, and as one reason for arguing that the Clause shall stand part in this way, the Economic Secretary said that if he had to widen the concession at all, he would have to widen it progressively to include certain other forms of saving. I am simply endeavouring to state that he completely misunderstood the arguments that we advanced against the Clause standing as it is now drawn, when the hon. Gentleman brought forward arguments about building societies and joint stock banks.
I was about to say that the building societies have already a compounding arrangement which gives them some advantage, and which it can be proved has in the past attracted a certain degree of small savings to them which previously has been invested in other worthy undertakings. It is precisely because I believe that the Clause as it stands will aggravate that kind of diversion of small savings that I am expressing by objections against it.
We have not had a single word from the speakers on the Government Front Bench about the question of diversion. They have not attempted to meet our complaint that this Clause will not increase the total amount of small savings in this country. They have not attempted to answer a single argument that has been put forward under that head. Indeed, when my hon. Friend the Member for Stechford (Mr. Roy Jenkins) made that argument, and gave some figures to show how it had affected the Birmingham Municipal Bank, the Economic Secretary to the Treasury naturally, because he is 1425 familiar with matters inside his own constituency, said he appreciated that some diversion would follow. Yet when we put forward the same argument about other savings institutions, the Government spokesmen are completely silent, and they do not endeavour to answer the criticisms and anxieties that we voiced.
I must also say that I was a little surprised in the course of this discussion to hear the Economic Secretary throw off, as it were incidentally, a proposal about one of the Amendments when we were discussing another one. I felt that it was a little discourteous that the hon. Gentleman should have made this proposal incidentally—
§ The Temporary ChairmanOrder. We really cannot re-discuss the Amendments. The hon. Member can discuss what is in the Clause at the present moment. I agree that it is a narrow discussion.
§ Mr. BeswickNaturally I accept your Ruling, Sir Austin.
I still feel that as the Clause stands the problem of the diversion of savings from one savings institution to another is still with us, and I am hoping that we shall have a better reply from the Government spokesmen than we have had so far.
§ 10.45 p.m.
§ Mr. DoddsFollowing up the point made by my hon. Friend the Member for Uxbridge (Mr. Beswick), this is a matter of fundamental importance to a movement in which millions of people are concerned. It would be a matter of grave injustice if the Clause, as at present drafted, were allowed to stand part of the Bill.
Pressed as to the cost if the concession were granted, the Economic Secretary introduced the fact that if the Clause were altered it would mean a loss to the Treasury of between £10 million and £40 million. Asked how he knew, the hon. Gentleman clearly revealed the attitude which he and his colleagues on the Front Bench have adopted all the time. Their attitude is that they could not care less about the subject, and want to dispose of it without giving adequate reasons for rejecting a Clause which would have been improved if our Amendments had been accepted. I ask the 1426 Economic Secretary to explain what effort the Government have made to ensure that the Clause is improved in view of their rejection of one of our Amendments earlier.
There is ample evidence to indicate that there will be a transference of savings from one organisation to another. There seemed to be acceptance by the Government Front Bench of the case that already money had been transferred from the Birmingham Municipal Bank and was likely to go into the other forms of savings. Throughout the land there are indications that savers are going to transfer their savings, if they have not already done so, from the savings department of the Co-operative movement to the Chancellor's new form of saving. I hope the Chancellor will take note of the fact that it is a matter of transferring not £1, £2, £3, £5 or £10, but sums of £80, £100 or £150. The Chancellor and many of his hon. Friends pay lip service to the great social work of the Co-operative movement, and I ask the Chancellor very seriously to consider the implications—
§ The Temporary ChairmanThe hon. Gentleman cannot again go into the question of the Co-operative societies. We have discussed that subject already.
§ Mr. DoddsSurely, Sir Austin, I must specify where harm will be done if the Clause is passed. There is evidence for rejecting the Clause which the Government have not taken the trouble to obtain. I ask them to take the point about savings seriously.
It takes a great deal to stir the Co-operative movement. Unless there are second thoughts on this point, it will mean not one nail but many nails in the Tory coffin as a consequence of this grave injustice.
§ Mr. ArbuthnotI very much regret, as do many of my hon. Friends, what we feel to be the totally unnecessary and pinpricking action of taking the whole of a subsection to delete the Surtax payer from the benefit of the Clause. There is no money to speak of involved in that. It is most regrettable that the Surtax payer should not be granted exemption from Surtax on the £15 in the same way as exemption is being allowed to the Income Tax payer.
§ Mr. Ron Ledger (Romford)This Clause is extremely bad because it is a discriminatory Clause. In this respect I am sure that I will not be out of order every time I mention the Co-operative societies because the "Co-op," among many others, will be discriminated against. If you rule me out of order, Sir Austin. then the Chancellor will lose some useful education, because he did not think fit to be here when we were discussing the savings of two-thirds of the families in the country.
§ The Temporary ChairmanI am afraid that the hon. Gentleman is out of order. We have disposed of the Amendment about the Co-operative societies. The Committee has come to a decision on that.
§ Mr. BeswickAlthough we have disposed of the Amendment which suggested that Co-operative societies should be brought within the Clause, surely we can deal with the position of the Co-operative societies under the Clause as it stands. The fact is that the Clause will have a direct effect on the Co-operative movement. Surely, therefore, we are entitled to point out what the effect will be before we accept the Clause.
§ The Temporary ChairmanThe hon. Member would have been in order if Co-operative societies had been dealt with in the Clause. They are not in the Clause. They have been left out deliberately by the Committee.
Mr. H. WilsonFurther to that point of order. It would be a pity if an acrimonious note were to enter into our proceedings at this late hour, the more so as my Co-operative society friends have been so very co-operative during the earlier stage of our proceedings. With the greatest respect I suggest that what we are debating is whether the Clause should or should not stand part of the Bill. I fully agree that it would be wrong for my hon. Friends at this stage to propose that Co-operative societies should be included in the benefits which will accrue to the Post Office under the Clause, but I submit that one of the considerations governing the Committee's decision on the Clause is whether it is now too narrow. I submit that it is legitimate that my hon. Friends should be able to say, if that is what they feel, that this 1428 is a bad Clause because the Co-operative societies have been kept out of it.
§ The Temporary ChairmanThat is a very ingenious argument. I have to follow the rules of the Committee, and it has always been the rule that if a decision has been taken on an Amendment it cannot be debated again. In this case I thought the hon. Member was debating the question of the Co-operative Society again. If he narrows the argument down to the fact that this is a bad Clause because it is against the Co-operative Society then, within reason, I will allow him to proceed.
§ Mr. LedgerI do not feel that you are conceding a considerable amount, Sir Austin, because we have made the argument. The point is that it is Co-operative Society money which will be concerned. That is the reason why I argue that this is a bad Clause. We feel that we have been somewhat misled by the Chancellor, because he gave every indication that he intended to encourage savings. What he did not do was to tell us that in actual fact he was going to arrange for a transfer of savings, and that he was going into business against the Co-operative movement and similar savings institutions. He did not make that clear.
Now the Economic Secretary has told us that he was most concerned that money that was saved should be loaned directly to the Government. We feel that the Chancellor has deliberately attempted to filch from other savings organisations money which he wants to go into the Post Office Savings Bank.
Although the Chancellor cannot possibly be here all the time, we noticed that the Chamber was fairly full when we were discussing the problem of a few hundred thousand Surtax payers. When we began to discuss the matter of the savings of the 11 million members of the Co-operative movement, however, the Chancellor was absent. It should be remembered that those savings are the savings of two-thirds of the families in the country. We were all the more concerned because this provision may defeat the Chancellor's objective. Let us assume that he gets extra money into the Post Office Savings Bank, and that that money comes, in part, from the Co-operative movement. What, then, if the Co-operative movement, in order to obtain capital, has to go elsewhere?
§ The Temporary ChairmanThat is exactly what we were discussing upon the Amendment. The hon. Member must return to the subject of the Clause as it stands.
§ Mr. LedgerWith due respect, Sir Austin, I was here throughout the debate and I did not hear this point being made.
§ The Temporary ChairmanThat has nothing to do with me. It is not relevant to the Clause.
§ Mr. LedgerYou are certainly making it difficult for me, Sir Austin.
§ Mr. LedgerI am being confined in a way which will not allow me to defend an institution which is being affected by the Clause. It is all very well for hon. Members opposite to yell "Order," but they are completely disinterested, as they have shown this afternoon and this evening.
§ The Temporary ChairmanThe hon. Member is merely making his speech at the wrong time. He should have spoken, if he had caught the Chairman's eye, during the debate on the Amendment, and not on the Question, "That the Clause stand part of the Bill". On this Question I have to carry out my duty of making Members keep to the point of what is in the Clause, and not what they hoped would be in it but is not because the Amendment has been defeated.
§ Mr. LedgerIf, then, the finances of an organisation are affected by the Clause, is it out of order for me to discuss those finances and the movement to which they belong?
§ The Temporary ChairmanCertainly, if the matter has already been discussed and decided by the Committee.
§ Mr. JayIt would be in order, would it not, Sir Austin, for my hon. Friend to argue that the Clause, as it stands, discriminates in favour of certain institutions and against others, and that that discrimination will have certain effects upon one or many of those institutions? If he argues upon those lines would not he be in order?
§ The Temporary ChairmanHe would on a general discussion of the point. I am sorry, because there is a difficulty on occasions such as this. I do not want to make the hon. Member sit down, but it is clearly laid down by the House that if an Amendment has been discussed and voted upon, or disposed of in some other way, it cannot again be argued; it is finished with. The hon. Member can deal with what is in the Clause now, butt not what has gone before. That is a clear Ruling of the Chair, and I must adhere to it.
§ Mr. LedgerYou may not want to make me sit down. Sir Austin, but you are making it extremely difficult for me to stand up. I am very pleased to receive the advice you have given about the time at which I should have raised this matter. It appears that I, being co-operative earlier, accepted some advice which was not quite so good as I thought. I wanted to make the point earlier, but I was assured that, as the funds of the Co-operative movement were going to be affected by the Clause. I would be in order in discussing them.
It is very important that every Member of the Committee should bear in mind the fact that it is not just a question of my not being allowed to voice an opinion here tonight but that, in fact, I am being denied the right to voice the opinion of the 11 million members of the Co-operative movement. In fact, you are denying the right of a Member to protect the savings of two-thirds of the families of this country.
§ 11.0 p.m.
§ The Deputy-Chairman (Sir Rhys Hopkin Morris)Order. The Chair has already ruled that matter to be out of order. and therefore the hon. Member cannot return to it.
§ Mr. LedgerThis situation is not being made any easier by the fact that the number of Chairmen seems to have been increased by a number of hon. Members on the opposite benches.
§ The Deputy-ChairmanOrder. The hon. Member really must try to observe the rules of order and to direct himself to the Question before the Committee.
§ Mr. LedgerI apologise if I have gone outside the bounds, but it was not intended. Difficulties seem to have been created for me.
It appears that there is very little else that one can say, and my speech has been very effectively put to an end by the limitations which have been placed on me, even before I started. So I shall have to content myself with saying at this stage that of course I regret that I am unable to defend the Co-operative movement from this attack because in doing so I shall be ruled out of order on the discussion of this Clause.
Mr. H. WilsonWe have had some difficulty, Sir Rhys, in establishing on our side of the Committee what is and what is not in order on this Question, and I hope that in the moment or two in which I wish to address the Committee I shall contrive to keep entirely within order, as I usually try to do.
The first point that I want to make relates not to the Co-operative movement or to the Kirkintilloch Municipal Bank, or to any of the matters which have been debated in the Amendments which we have had before us. I first wish to ask the Chancellor of the Exchequer whether he will deal with the question of joint accounts in relation to the Post Office Savings Bank. As we understand it, and I think that this was explained at an earlier stage, in the Budget debate itself, this new concession will apply to each separate account in the Post Office Savings Bank, to the limit of one account per individual.
In other words, a man and wife are able to claim £30 interest-free concession, and, as I understand it, if there were two or three children in the family, also with Post Office Savings Bank accounts, the same would be true—a £15 concession would apply in respect of each of them. Perhaps that could be made clear, because it does rather govern our attitude on whether this Clause should stand part of the Bill or not. Some of my hon. Friends and I felt that the Clause was rather imperfectly drafted in that respect. I sought to move an Amendment to clarify the position of the joint accounts, but that particular Amendment was not selected, so I think it would be improper of me to attempt to debate it at this point, but I hope that the Chancellor will give us a clear ruling on this question.
1432 The second question relates to Surtax. I am in some difficulty as, like the Chancellor, I was out of the Chamber for a few moments. There was an Amendment on the Order Paper in the name of the hon. Member for Dover (Mr. Arbuthnot), which somehow seems to have got squeezed out, or perhaps it was not called.
§ Mr. ArbuthnotPerhaps it will help the right hon. Gentleman if I say that I have referred to it on the Question, "That the Clause stand part of the Bill."
Mr. WilsonI was aware of that. I was wondering why it was not moved earlier. I did not know whether the hon. Member withdrew it because he did not believe in it, or whether it got squeezed out in the rather unusual proceedings which took place in respect of the double Amendments on the Birmingham Municipal Bank and the other municipal banks, which caused some difficulties for members of the Committee.
Even though that Amendment was not moved, I want to assure the Chancellor that so far as Surtax is concerned we are in full agreement with the Government on that particular point. After all, the motive of Clause 8 is to increase small savings and not to provide any advantage to the Surtax payer.
I now turn to the broad question, which I am sure is in order, of whether this Clause will help to increase small savings, which is the Chancellor's intention, and whether it will do it without too much harm to the economic situation generally and the various institutions that contribute to the economic situation, including not only the Co-operative movement but the banking system generally.
When the Committee decides, as we shall be called upon to do in another hour or two, whether it is right that this Clause should stand part of the Bill, we shall have to ask ourselves, first, whether the Chancellor is justified in introducing this new and novel form of discrimination. This is not the only way in which he could have increased Post Office savings. For example, he might have increased the interest rate. I know that I should be out of order were I to move an Amendment or to suggest that at any stage of the proceedings on this Bill, though I think it 1433 fair to mention that as a possibility. It might have been a better thing to have done, because, of course, the Clause as it stands applies only to the savings of those who pay Income Tax.
There are many potential savers in this country who do not pay Income Tax and who get no incentive under this or any other Clause in the Bill. I well understand the motive of the Chancellor. It is, of course, that he fully realises that, with the present cost of living, it is impossible for them to save anyway, and so it is no use making an appeal to them to do so. But I am not sure that the right hon. Gentleman was right to keep the interest on Post Office savings artificially low—I say artificially low in relation to the present level of Bank Rate, which I do not propose to discuss, as I am sure that I should be out of order in so doing—and then to try to get the same result as an increase in the interest rate so far as a small class, or at any rate, a section of the community, is concerned by this concession with regard to Income Tax.
The Chancellor realises—and this has become very clear from the speeches of the Economic and the Financial Secretaries—that we have a very uncomfortable form of discrimination introduced. When we proposed that the discrimination should be extended to cover other forms of saving—I will not say what they are as I do not want to be out of order—it was put to us that that would open wide the door to all kinds of other forms of saving; building societies, joint stock banks and many others. That is true and, of course, the result is that we now see that the Chancellor has created a deliberate system of discrimination as between the Post Office Savings Bank on the one hand it is reinforced by the Birmingham Municipal Bank—and the whole system of other kinds of saving.
This is something new. It is now nearly a hundred years since William Ewart Gladstone, the then Chancellor—and what he would have thought about the right hon. Gentleman's Budget and this Bill defies imagination and also the rules of order, so I will not proceed to enlarge upon that—with a very imaginative gesture, proposed the establishment of the Post Office Savings Bank as one means of channeling small savings 1434 into the service of the State for State dealing. In the more than ninety years since that was done no Chancellor, so far as I know, has ever proposed this form of discrimination, so far as the fiscal system is concerned, between the Post Office Savings Bank on the one hand and all the other forms of saving on the other.
Therefore, I think that we should have some very strong justification put forward before we can agree that this Clause should stand part of the Bill. We have not had that justification at this or any other stage of the Bill. There must be some strong and clear advantage put forward, if we are to accept Clause 8.
It will not have escaped the attention of the Committee, indeed the point has been made once or twice, that other institutions will feel themselves severely prejudiced by the fact that they cannot participate in this discrimination. Not only will they feel prejudiced by being left out in the cold, it is bad enough to be denied a concession, but it will become clear—with respect I do not think that in saying this I am trespassing into the forbidden territory in which my hon. Friend found himself recently—that these other savings institutions are not merely denied the concession—obviously, I cannot press that they should get the concession because that would be out of order—but they will also be prejudiced by the fact that some of the savings in them will be taken away and put into the Post Office Savings Bank. That would not happen if Clause 8 were not part of the Bill. Therefore, I submit, Sir Rhys, that it is in order to discuss that point.
In other words, if I am right about this—and this may be of guidance to my hon. Friends—if it is wrong to suggest that the Co-operative societies should get concessions, it is not wrong to suggest that the Clause should not stand part of the Bill, because it has a serious effect on diverting savings from the Co-operative societies into the Post Office Savings Bank.
It has been said that this Clause is unlikely to lead to an increase in the total volume of small savings but will lead to a diversion of such savings. I am now talking about the broader issue. The Chancellor of the Exchequer is right to 1435 hope for an increase in small savings. One might say that he is gambling on an increase in savings in this Finance Bill. But quite apart from the issue of the Co-operative societies and the other institutions which have been mentioned, I should have thought—and it seems to be a view generally held in the City; it was mentioned in the April issue of the Banker, I believe—that such increases as we may expect to see in Post Office savings as a result of this concession will be the result purely of diversion.
I do not know whether the Chancellor feels that a diversion of savings at present lying idle and dormant in joint stock banks into the Post Office Savings Bank is of itself disinflation. It will be interesting to hear the Chancellor's views, even at this time of night. There are some who argue that a diversion of savings at present lying dormant in joint stock banks to the Post Office Savings Bank does not increase the volume of savings. There are some who might say that it would be disinflationary.
This is really the point of what the Chancellor called the private funding operation in his Budget speech. The Chancellor was rather befogged by all the arguments in the City about funding and Treasury Bills, but he came out at one point with the argument that the more people saved the more private funding would be going on, and I am sure that that statement was unexceptionable and was generally welcomed.
I wonder whether the Chancellor regards as funding a mere transfer of money lying idle in the joint stock banks to the Post Office Savings Bank. In so far as it enables him to suspend all Treasury bill borrowing, it will be to some extent disinflationary. I should think that that thought is probably in his mind already. It might be argued that that would have an effect on the deposits of the joint stock banks. It might be argued that it would have an effect on the cash base of the general stock banks and that that of itself, in so far as any banks these days pay any attention to the cash ratio, would affect their advances, and therefore would be more successful, in relation to the Chancellor's policy of reducing bank advances, than all the other weapons such as the Bank Rate.
1436 It would be interesting, in order that we could decide whether or not Clause 8 should stand part of the Bill, if the Chancellor or the Economic Secretary would tell us whether he would be satisfied or gratified by a pure transfer from the joint stock banks into the Post Office Savings Bank. We all feel that by introducing this element of discrimination he has done a potentially dangerous thing, and we want to be convinced that it is really worth doing. We are in no doubt that it will prejudice severely a number of important bodies including the friendly societies and the Co-operative societies, and I suggest that it is up to the Chancellor to justify as necessary and desirable the proposition contained in the Clause.
If the right hon. Gentleman can convince us that it will bring great benefit to outweigh the harm that we have established will occur in other directions, perhaps his time will not have been wasted, and we may be able to feel that the Clause can really stand part of the Bill.
§ 11.15 p.m.
§ The Chancellor of the Exchequer (Mr. Harold Macmillan)I will not venture too deeply into the philosophic thoughts of the right hon. Member for Huyton (Mr. H. Wilson) as to what Mr. Gladstone might have said in 1956; but I would point out to him, when he claims that no justification has been made for this Clause from the Treasury Bench, that there is no provision under our rules of procedure for justifying it before the Question "That the Clause stand part of the Bill." Amendments are considered, and then we come to discussion on the broad theme of the Clause; and, therefore, his claim that no justification for it has been made out represents a complete misconception of the way in which we conduct our debates.
I do not think that I need bother myself about the remarks of the hon. Member for Romford (Mr. Ledger). I have been thirty years in this House, and I do not think that I have ever been accused of discourtesy in the matter of my attendance here. I have been present since half-past three today, except for a short absence for a meeting of Ministers and for some refreshment, and I do not think there is really any obligation for one to sit through more than nine out of ten hours of a debate.
1437 This proposal, in its broad theme—and having dealt with the Amendments—is one which for years has been pressed upon successive Chancellors of the Exchequer by the great National Savings Movement. Indeed I know of no concession which has given more pleasure or encouragement to that movement than this concession. Every delegate in any conference I have been to—and hon. Members who play a great part in the movement will agree with me—has thought that this is something which should be done. It is something which it has long asked for, and which has given great encouragement to it.
It is, of course, one of the many encouragements in this Budget. It would be out of order to discuss it, or to go too far into the monetary problems to which the right hon. Gentleman the Member for Huyton referred. The National Savings Movement has asked for this concession, and is glad to have got it. For my part, I have to ask myself, "Is it right to give this concession?" I think that there is this very clear distinction—and nobody put it better than the hon. Member for Stechford (Mr. Roy Jenkins), in moving his first Amendment—between this and saving generally. The hon. Gentleman put it much better than I could hope to; he understood the point perfectly. The justification for this concession, limited in this way, is that it is not intended as a general encouragement. We have other proposals to do that; the new bonds scheme—Clause 35—and all sorts of ideas in this package deal.
What we are here concerned with is to encourage that particular form of saving which the right hon. Member for Huyton rightly says will greatly assist the Government's monetary policy. The hon. Member for Stechford understood perfectly when he asked about the Birmingham Municipal Bank, and my hon. Friend the Economic Secretary agreed that if it brought itself within the two main features of this kind of savings institution, it could have the advantage of the concession.
What were those two features? First, that the rate of interest should be static at 2½ per cent., and that the money saved would pass directly to the Government. It would therefore assist the Government's monetary policy because more of the State's borrowing needs would be met 1438 without increasing the liquidity of the joint stock banks.
That is the dual aspect of this form of saving upon which I have given this kind of concession: first, the statutory limitation to the 2½ per cent., and, secondly, the automatic passing of the money saved in such a way as most to benefit the broad monetary policy which we are pursuing, and to finance Government borrowing without automatically increasing the liquidity of the joint stock banks.
Therefore, when I had to draw the line, it was here that I had to draw it. Some may say it is a bad policy, but it is a perfectly sensible line. That was why the hon. Member for Stechford quite properly accepted that position, and asked, "If we can bring our institution within that line, shall we get the concession? "We said, "Yes." I say again that if any other institution will bring itself within that line, this concession and this form of encouragement to saving will become available.
Mr. H. WilsonAre we to understand, then, from what the Chancellor has said about the liquidity of the banks, that this major change in taxation—and it must be regarded as such—has been introduced by the Chancellor and accepted by him just because he accepts conventional ideas and bank conventions about their standards and canons of liquidity? If he was making a major change, why did he not make a change in the bank conventions rather than in the taxation law?
§ Mr. MacmillanThe right hon. Gentleman knows quite well that, whether the liquidity ratios are worked on a conventional or upon an imposed basis, this form of saving must of itself be beneficial from the general monetary point of view; and it was accepted by, I understand, the greatest economic expert in the party behind the right hon. Gentleman—the hon. Member for Stechford.
That leads to the reason why we have drawn the line. It is not because we have any personal feelings about the Co-operative societies—the accusations of the hon. Member for Romford have no meaning at all—or the building societies, friendly societies or any other discrimination. There are simply the two conditions, the 2½ per cent. and the direct passing of this form of saved money to the Government.
§ Mr. BeswickWill the right hon. Gentleman answer two questions? He is saying why he has drawn the line in this way. Are we now to understand that this is not simply a device to help us out of a difficult temporary situation but will become a permanent part of our taxation principle and policy?
§ Mr. MacmillanI think it will be a permanent part—the hon. Member calls it taxation, but I would call it non-taxation policy—that the people who make savings and are content with a statutory rate of 2½ per cent. and no other possibilities of benefit by way of interest, and who are content that their money should pass directly to the Government, will, within the limitation of this proposal in the Clause, receive this Income Tax relief.
§ Mr. BeswickWill the right hon. Gentleman, then, be good enough to answer a further question? If, as he envisages, this becomes a permanent part of our system—he has outlined what he conceives to be the advantages of drawing the line in this way—has he taken into account the disadvantages which follow from drawing the line in this way: namely, the diversion of savings from one institution into another? Does he really think there will be a net addition to the total of small savings?
§ Mr. MacmillanI was coming to that matter; it is the second point to which I was addressing myself. The hon. Member used the word "permanent". I think it will be for the remaining four years of this Government and, I suppose, for the five years of the next Conservative Government. I cannot make any absolute promise for more than the next ten or fifteen years.
Now, I wish to refer to the effect. It is undoubtedly true that some money may be attracted from other savings agencies. That is true of all these plans. If we make a whole lot of these methods of saving attractive we cannot be certain there will not be some switching, but I think that the broad effect, if we have these different forms of saving, will be attractive in different ways to different types of people, and that we shall increase the total volume of saving. That is the object of the exercise. If we do not do that, we shall have failed.
In many forms of commerce and industry—and I have been in many of them 1440 —the greater the range of goods made available for the different classes of purchasers, the greater is the likelihood of increasing the total volume of sales. I am not, of course, denying that there may be some switching here and there. Of course, it cannot be done beyond a limit, but I think that the total volume will tend to increase.
I am encouraged in thinking that, not because it is my view, but because it is the view of those who have given their lives to unpaid, voluntary service for the Savings Movement. It is what they, the people I have confidence in, the leaders of the Savings Movement, have asked for. I think, therefore, it is well worth while our having a try, to see if it will succeed. I want to make it clear that the drawing of the line is not discriminatory in the sense of being due to ill-feeling, or malevolence towards the friendly societies or the building societies, which we all in different ways support. It is based on the two conditions that I have tried to set out.
§ Mr. DoddsWill the right hon. Gentleman answer one question? In drawing this line, what consideration did he give to the harm it can do to the Co-operative movement, this people's movement? Has he given any consideration to that? Or has he not? If he has not, is it because he thinks it does not count in the economic and social life of the country?
§ Mr. MacmillanOf course, and as I mentioned, all these movements, the building societies, the friendly societies, the Co-operative societies. the different types of trustee bank, are claimants for this concession, but they cannot, in my view, be participants because they do not conform to the two conditions which I have laid down in making this concession.
§ Mr. DoddsThe question I asked was, has the right hon. Gentleman given any consideration to the harm it will do to the Co-operative movement and the others?
§ Mr. MacmillanThe hon. Member is very fond of making assertions—
§ Mr. MacmillanOf course I have given consideration to this matter. That 1441 is what we are discussing tonight, and there have been four or five months of discussion of it. No doubt, there will be some switching—I have said it twice, and I say it again. There will be some, of course, but I say that in my view the greater the range of attractive opportunities for saving that we present to the people the greater will be the hope of increasing the total volume, and that is, after all, the great national concern and interest.
There are one or two points of detail which the right hon. Gentleman asked me on the subject of separate or joint accounts. It will, of course, be possible for a man and his wife to have separate accounts. If they have a joint account, I am informed, the joint account can be, where necessary, apportioned between the joint holders in accordance with the way in which they have agreed to divide it between them. Since the Surtax question does not arise, of course, it has not quite the importance that it would have had had this concession been made to apply tc Surtax also.
Here I should like to say just one word about that aspect. We have not extended this concession to cover Surtax. I will be frank about it. It is really very simple. It is not because I think there would be queues of excited tycoons standing outside the post offices wishing to invest, say, £300 to save £2 10s. or so a year on their Sur-taxable income. It is not really necessary; I do not think they would attempt to do it. It is because this proposal conforms to the principle which has been followed in the past, which I think it is right to follow now.
11.30 p.m.
Let us take the mathematical computation. Everyone will receive Income Tax exemption on £15. The £15 will not be taken into account at all in computing Income Tax liability. Supposing, for the mathematical point, that a man paid tax at 8s. 6d., the 2½ per cent. tax free would means a 4½ per cent. return, subject to tax. But if we were to make the Surtax concession, then for a payer at the top rate, to illustrate the argument, the 2½ per cent. tax free would be equal to 33½ per cent. gross return, and I should have difficulty in granting a tax exemption on that scale.
1442 Therefore what we are doing is to apply exactly the same procedure here as applies to interest received tax free from building societies today. That is to say, it is grossed up, the £15 becomes £26 for Surtax purposes. So we are doing nothing new. It is exactly the same procedure as where there is a tax-free return from a building society. After all, the proposal in the Clause is intended for the small or moderate saver, and it would be wise to follow the precedent and not to create what would be an anomaly if we were to introduce a Surtax concession also.
I hope that what I have said will make the Committee feel that it would be wise to give this Clause a chance. I am bound to say—and I have had but short experience of it—that when one starts to make concessions one gets into a lot of trouble. First one set of people say that it is a bad concession. Then, having said that, they say, "Yes, but we want to get in on it". Between one thing and another one gets terribly harried by making concesssions
Nevertheless I think that this is a right one to make. I am confirmed in that thought by the attempts over many years of the National Savings movement to obtain it. As I said in the Budget, it is a challenge to the National Savings movement to make good use of it.
Mr. H. WilsonBefore the right hon. Gentleman leaves that point, I want to put another question to him, on which he has given a partial answer, but not, so far as I am concerned, a very clear answer, and I hope that he will clarify the position before we go further on this point. I am referring to the question of separate accounts in the Post Office held by different members of the same family. The right hon. Gentleman explained what would be the position of a joint account, namely that there will be some attempt to apportion, where necessary, between the joint holders. Am I right in assuming that if one individual has two Post Office books he is entitled to a concession on only one?
§ Mr. Macmillanindicated assent.
Mr. WilsonOne individual is entitled only to one concession? Is that right? Secondly, where a man and his wife both have books and each has an account, which is very common, would I be right in assuming that the total concession for 1443 husband and wife comes to £30 or only to £15? Furthermore, what is the position where a child has an account, or where a number of children have an account? To give a practical illustration to the Chancellor, on which he might care to give a ruling, in my family I have two accounts, my wife has one, my son has one. Suppose we have five savings accounts—I am afraid that we have not—to the tune of £15 a year each—which is ex hypothesi impossible at the moment—would the Chancellor say whether the total concession would be in respect of £15, £30, £45 or £60? It appears as though the occupants of the Treasury Bench are in some doubt about this question, but perhaps the right hon. Gentleman will give us a clear answer?
§ Mr. MacmillanI am sorry if I was obscure. There were two points. One was about a separate account, the other about a joint account. The right hon. Gentleman is satisfied with what I said about the joint account. I said that one could have any number of separate accounts, so long as they are all for separate people. The right hon. Gentleman can have a separate account for himself and his wife can have an account, and his twenty children also, but with this proviso, that the children's account must not have been provided by the parents. [Laughter.] What it amounts to is that, in practice, there will be either a joint account, which some people choose to have, or a separate account for a man or a woman, and then there will be separate concessions.
Mr. WilsonOn a point of order. I disclaim having twenty children. Let us have that upon the record.
§ Mr. H. Hynd (Accrington)It has been very interesting to listen to the Chancellor praising those worthy citizens who are going to be content with a return of 2½ per cent. interest on their savings. By implication, he is condemning the other people, whom he described as tycoons, who are not satisfied with 2½ per cent. and want a great deal more. I do not know what hon. Members behind him thought when they heard him make that statement.
The Chancellor has not answered the Opposition's criticisms. The Clause should not be allowed to stand part of 1444 the Bill for two main reasons: first, it creates an anomaly, and, second, it will do harm to other forms of saving. The Chancellor has told us that, in his opinion, there will be very little switching from one kind of saving to another. I think he is wrong. In fact, I would go so far as to say that he is basing his hope for the success of the Clause on a great deal of switching, and that, unless there is a great deal of it, he will not achieve what he seeks through the Clause.
I believe that he has framed the Clause on the basis of the experience which he gained as Minister of Housing and Local Government. He is playing the same trick with savings as he played with housing. He made a temporary transfer of building labour from certain types of building to house building and thus achieved a certain amount of popularity. He is playing the same trick by having transfers from the Co-operative societies and other forms of saving to the Post Office and trustee savings banks.
I am about to say something which I am sure will not be supported by hon. Friends of mine such as the hon. Members for Erith and Crayford (Mr. Dodds), Romford (Mr. Ledger) and Uxbridge (Mr. Beswick). I do not altogether blame the Chancellor. He has been aided and abetted by many members of Co-operative societies and others who mistakenly gave him their votes at the General Election, believing that they would not be doing anything politically harmful. I hope that one of the results of the trick that he is now playing will be that some of those Co-operators will wake up and cast their votes differently at the next General Election.
§ Mr. MitchisonJust now I heard the Chancellor say that if parents give a child some money put by one or other of them into the Savings Bank, the money, because it has been given to the child, will not benefit from the concession if one of the parents is also getting the concession. I suggest to the Chancellor that, if he said that, he must have made for the moment one of those slips which even the best people make at times. Surely the child must be entitled to the concession if the money is its property. It is true that it may not make much difference unless the child has other property, but if the child has other property—such things happen—it would 1445 make a difference. May I ask the Chancellor to clear that point up, if possible?
§ Mr. H. MacmillanI said it because I believe it to be correct. In the tax year at the beginning of which a child is a minor and unmarried any interest received by it on deposits given to it by its parents will rank as income of the parent and not of the child for this and other taxation purposes. That. I think. is provided for. I think I am correct. I will have that point carefully checked to see whether the information I am providing is right or wrong.
§ Mr. H. HyndIs that possible administratively? A parent gives a child a certain amount of pocket money. As part of the pocket money ls. or 2s. 6d. a week may be put into the child's savings account. How can one say whether that money belongs to the child or not? Surely, in practice the money will belong to the child, and however many children open savings accounts they will get the benefit of the Clause.
§ Mr. MacmillanI think that that is the law, not of this Bill, but of the Income Tax Acts. I think that under those Acts interest on deposits provided by the parent would rank as part of the income of the parent.
Question put and agreed to.
Clause ordered to stand part of the Bill.
Mr. H. WilsonI beg to move, That the Chairman do report Progress and ask leave to sit again.
I am sure that we have reached a time when it would be suitable to "pack up". I know that it is a disappointment to the Chancellor, just as it is to hon. Members on this side of the Committee, that we have not made more progress. I should have thought it reasonable to say that we should have got a little further. I remind hon. Members opposite who have shown signs of impatience in the last few minutes that if we had not spent two or three hours this afternoon debating the position of the Surtax payers we should have been able to make further progress. Hon. Gentlemen opposite who objected to my hon. Friends pressing the argument about the 11 million Co-operators in this country are really not in a position to complain in view of the fact 1446 that we spent so long discussing mainly the position of the 290,000 Surtax payers. I do not object to that discussion. I think it perfectly fair that we should have spent time on that.
§ Viscount HinchingbrookeThere were five speeches.
Mr. WilsonThere were far more than five speeches. As the Lord Privy Seal said earlier, this House of Commons is free. We are free to move Amendments. Some day we may get free votes on some of these matters, and then we shall get different results.
I think that we might have reached Clause 11. I am afraid, however, that the time taken earlier has made that impossible. Even so, my hon. Friends who wanted to say a lot more about the Co-operative movement feel that they have not had the opportunity that they would have liked. I hope that we make better progress next time, and I should like to ask the Chancellor whether he thinks that it would be convenient to report Progress now.
§ Mr. H. MacmillanI am grateful to the Opposition—to all sides of the Committee—who have co-operated to make as good progress as we can with the Bill. At the same time, I think it would be to everybody's convenience if we could make a little more progress tonight. There is very little of importance in the next Clause. I think it will go very rapidly—[HON. MEMBERS: "No."]. We might try it, at all events. Clause 10 is not of great importance. There is no Amendment proposed to Clause 11.
I thought that it might be convenient if we could start our proceedings on Monday with consideration of Clause 12. which is a very big Clause. There are a large number of issues on that. I cannot conceive of a Division on Clauses 9, 10 and 11. If we could dispose of them, then we could start with Clause 12 at the beginning of our work on Monday.
§ 11.45 p.m.
Mr. H. WilsonThis has placed us in some difficulty but I know that the Government are also in some difficulty, because there had been hopes that we should get a little further tonight. Clause 9 is a very important one, which has aroused a great deal of controversy. It is almost the father of an international 1447 incident, so far as we are aware. To listen to various remarks made about it, one would almost expect an American gunboat to sail up the Thames at any time. It is therefore a matter which we might take a considerable time to debate.
We know that the Chancellor is going to give way to the pressures to which he has been subjected, and it seems to us a very late hour at which to start, but I find it very difficult to object if he insists upon going on. I cannot say that we shall refuse to co-operate in the matter, or that we shall press the matter to a Division—it is rather late for doing that—but I cannot give the Chancellor any undertaking that we shall get to the end of Clause 9 in what he might consider a reasonable time.
If we do not make quick progress upon it, I hope that he will not feel that there is any bad faith upon our side of the Committee. We shall want to examine the Clause, or any changes which he proposes to make in it, very fully and carefully. I am sorry if that takes us past midnight; the Chancellor will probably have heard from his predecessor that debates on Finance Bills which go beyond midnight are not very profitable undertakings for the Government. If he insists, however, we can only acquiesce in the situation; but we may wish to return to the subject at another stage in the Bill, and have a fuller examination of some of the points, and an opportunity of voting upon them, especially if the Chancellor is going to make changes in the Clause, because we shall then need to give even fuller consideration to it. Having moved to report Progress it would be wrong for me to withdraw the Motion, and I suggest that the Committee should now come to a decision upon it.
§ Mr. BeswickI must express some surprise at what the Chancellor has said, namely, that in his view there should be no great delay in dealing with Clause 9. That can only mean that he intends to give way to pressure which has been brought to bear upon the Government from outside the House. It can only mean that he is going to make some concession, which will be to a limited body of foreign residents in this country. We have just had the Chancellor refusing 1448 to give way upon a point concerning the 11 million co-operators in this country. He has refused to make a tax concession to them, and yet from what he now says he has already made up his mind to yield to the pressure brought upon him—
§ The Deputy-ChairmanThe Motion before the Committee is, "That the Chairman do report Progress and ask leave to sit again."
§ Mr. BeswickIt is upon that Motion that I wish to speak, Sir Rhys. I said that we ought to report Progress, and sit again so that we have more time to consider Clause 9, because it concerns a matter which should be very fully examined. I am most surprised that the Chancellor should take it for granted that this concession is going to be accepted so speedily—
§ The Deputy-ChairmanThe hon. Member is not in order in discussing that.
§ Mr. BeswickI am not discussing that; I am discussing what the Chancellor said upon the Motion. He said that he saw no reason why we should be unduly delayed upon Clause 9, and I am replying to that suggestion, and the implications of it, which I think are most important.
Question put and negatived.