HC Deb 07 June 1956 vol 553 cc1448-68
Mr. Cyril W. Black (Wimbledon)

I beg to move, in page 9, line 2, to leave out "wholly" and insert "mainly".

This Amendment raises a comparatively simple point which I think I can deal with in a very short speech. If I understand aright the Chancellor's object in this Clause, I am not unfavourable to that object. But it seems to me that the Clause as drawn goes very much too far, and in a limited number of cases of a kind to which I want briefly to refer would, if left unaltered, impose very grave hardship.

Let me take two simple illustrations to make clear the difficulty which seems to me would arise if the Clause were left unaltered. Let us take first the case of a citizen of this country who is employed whole-time by a company or business in Paris. We will assume that the individual concerned lives in Paris for eleven months of the year, and for one month in the year, on his annual holiday, he comes to the United Kingdom.

During the period of that month he receives a telephone call or a letter from the firm or company in Paris, requiring him to give an opinion on some urgent matter which has arisen during his absence. What is the position if he answers that telephone call or if he replies to that letter? It might very well be contended—and I think on a strict interpretation of this Clause it would be argued by the Inland Revenue—that he has not performed the duties of his office wholly outside the United Kingdom, because he has dealt with a matter connected with his employment while in the United Kingdom, although the duty that he may have undertaken represents an infinitesimal part of the whole work that he undertakes on behalf of his employers.

Let me take a second case, in which the director of a company with its headquarters and its registered office in Paris goes over to Paris once a fortnight to attend the board meeting of the company. But while in this country, between two board meetings, the same situation arises—he may receive a telephone call or a letter requiring him to give a decision on some matter connected with his employment, but at a time when he is in the United Kingdom. If that were to happen, it is quite clear that he would be caught by this Clause as it is drawn. and it would be contended by the Inland Revenue that he has not performed the duties of his office or employment wholly outside the United Kingdom.

I suggest that this difficulty can quite simply be cured by the substitution of the word "mainly" for the word "wholly," and I feel certain that with that alteration the Clause would more perfectly carry out the object which I think the Chancellor has in view. I feel sure he cannot intend to catch by this Clause the kind of case I have mentioned, and I hope very much that he will see his way to accept this very moderate and reasonable Amendment.

Mr. H. Brooke

This Clause is largely founded on the Report of the Royal Commission on the Taxation of Profits and Income, and my hon. Friend may have noted one particular passage in paragraph 300 of the Report, where the Commission said: We recommend that work is not the less to be treated as performed wholly in one country because certain merely incidental duties, such as returning for report, to acquire samples, etc., are carried out in another. We accept that, and the point which my hon. Friend is putting is whether this word "wholly" should be amended to make quite sure that the intention of the Royal Commission is carried out. He said that, on a strict interpretation of the word, it would be held by the Inland Revenue that if a man were in this country, perhaps on leave, for a month during the year, and were called to the London office to give an opinion on something, or received instructions, that might conflict with the word "wholly."

We are cognisant of that point and I can assure my hon. Friend that that is not the interpretation which the Inland Revenue would put upon it. I can fortify that assurance by telling him that this same point arises from time to time in the existing law. I can conceive, for instance, that it might arise in the case of a non-resident, an overseas agent of a United Kingdom company, who might be called to London for a consultation. The tax position of that person might have to be settled under the existing law, and in such a case it is the established practice of the Inland Revenue to disregard any incidental duty of that kind.

That was what we were proposing to continue in the administration of this Clause, but I will give my hon. Friend an undertaking to look carefully at the matter afresh in the light of what he has said and in the light of the two cases he mentioned; and indeed of any other similar cases which may be brought to our notice, because we want to get this right.

If, between now and the Report stage, we can evolve a form of words which will define the position with even greater precision, we will bring that forward on Report. But I wish to be perfectly frank with my hon. Friend. It may be that we shall come to the conclusion that any attempt further to define the type of marginal case which might give rise to difficulty, were the Inland Revenue to be super-strict, would create ever greater difficulties than to leave the matter as it is.

I can assure my hon. Friend that we intend to continue to interpret the word "wholly" in the manner in which we have interpreted it when it occurs in a somewhat similar context in the existing law. With that assurance, and the further assurance that we will examine this again before the Report stage, I hope that my hon. Friend will not press the Amendment, because I must advise him that it would be impossible to go so far as to substitute the word "mainly."

Sir Herbert Butcher (Holland with Boston)

I hope that in making that review to which my right hon. Friend has referred he will bear in mind that this is a context in which the words "wholly," "necessary" and "exclusively" have a special connotation in terms of decisions by the Commission and the judges.

Mr. Black

In view of the reply of my right hon. Friend, which, at any rate. partially reassures me in this matter—[HON. MEMBERS; "Not wholly?"] I still prefer the word "mainly in this context—I beg to ask leave to withdraw the Amendment.

12 m.

Mr. Gordon Walker (Smethwick)

I hope that the right hon. Gentleman will be able to find better words, because, otherwise, we shall be in the position in which we accept the word "wholly" but do not mean "wholly." That is not the right way to legislate if we can avoid it.

Amendment negatived.

Mr. John Foster (Northwich)

I beg to move, in page 9. line 18, at the end to insert: Cases I and II shall not apply to any person who satisfies the Commissioners of Inland Revenue that he is neither domiciled in the United Kingdom nor a British subject or a citizen of the Republic of Ireland. This Amendment is designed to deal with the position of persons who are not domiciled in the United Kingdom but who are in receipt of remuneration from some office or employment in this country. A small word of explanation is necessary as to the present law. Put generally and not absolutely correctly from the technical point of view, the persons in that category at present pay tax on their remuneration which is remitted to this country, the assumption being that they are paid outside the United Kingdom. Clause 9 as it stands will make them liable to pay tax on the whole of their salary. The object of the Amendment is to restore the position with regard to persons who are neither domiciled in the United Kingdom nor British subjects.

It has been drawn to my attention that in one respect the Amendment is too narrowly drawn because the position of Canadians, for instance, would not be safeguarded. Therefore, I commend the Amendment to my right hon. Friend in its principle, but recognise that probably if he saw any merit in the principle behind it he would have to recast it to make it fit in better with the existing law.

The main reason why I commend the principle behind the Amendment is that it would be unfair to these people in this sense. A person, usually a foreigner, not domiciled in the United Kingdom but who is working in the United Kingdom. is apt to leave quite a proportion of his remuneration in the country from whence he comes, because he has various commitments there. He might want to educate his children there; he may have dependants there; there may be insurance premiums to be paid, and various obligations of that sort. It is, therefore, quite reasonable that he should bring only a part of his salary to this country. It is also reasonable that on that part that he brings here he should pay tax. I submit that it would be unfair to tax him on the whole of that remuneration.

If the Clause were to go through as it is now, taxing these persons who are not domiciled in the United Kingdom, I fear there would be very grave practical results. The grave practical results which I fear would be that in many cases a Canadian company, for example, which has its European headquarters in this country, would decide to move to some other country where the incidence of taxation would not be so high.

Also various news agencies and foreign newspapers which have their European head office in this country would inevitably go to some place where they were not so heavily taxed. This would be a grave disadvantage to this country in the case of these information services and agencies, because the presentation of the case to persons in North America often depends on the calibre and standing of the correspondents in this country. It would be a great source of regret to all of us if they were forced to move to the Continent of Europe.

With regard to companies trading in Europe who have their headquarters here, they spend large sums of money in this country which they would not spend if their headquarters were not here. For instance, let us imagine that there is a foreign company with its headquarters here which has on charter perhaps £100 millions worth of shipping. It would use British brokers because it is here; but, if it was in Brussels or Paris, it would use Belgian or French brokers. If a company is a buying concern for raw materials, it will use this country if it is here, but mainly foreign markets if it is on the Continent of Europe.

I do commend this Amendment. The Chancellor may not approve of the exact wording at present, but I hope that my right hon. Friend will agree to restore the legal position of these persons who live and work in this country and who contribute a very great deal of foreign exchange for Britain.

Mr. Beswick

The hon. and learned Member for Northwich (Mr. Foster) has advanced his case most carefully and persuasively, and in a very short time, which might lead the Committee to think that there is not really any great issue here. In this atmosphere, the hon. and learned Gentleman might expect the Amendment to go through quite speedily. He may think that the Committee is fully convinced of the justice of his case, but I hope that the Chancellor will not accept, in the letter or in the spirit, this Amendment which has been moved so capably.

What is proposed in the Clause as it now stands? For one thing, I think that the Chancellor is accepting a proposal of the Royal Commission on Taxation. This is a good thing, and it is refreshing to see the right hon. Gentleman accepting one of its proposals. He is trying to apply a very sound principle of taxation, namely, to collect taxation on money in the country where that money is earned. That is what he proposes, and I suggest that it is a proposal which the Committee ought to accept unamended. The position of various foreign citizens resident and working in this country has been mentioned, and it has been suggested that if this Clause goes through as it is, they will in some way be unfairly treated. In fact, that is not the case at all.

If this Clause goes through, these citizens will be treated in precisely the same way as their fellow citizens in their own country and as British citizens are treated, for example, in the United States. One of the first tests to apply to the Amendment is this. Is the policy it is now proposed to follow the same as that which is followed for British citizens in foreign countries? The Chancellor's policy is precisely that applied to British citizens working in the United States; and I mention the United States because that is the best example to give. If there were any question of reciprocity in this matter, then I would certainly suggest that the hon. and learned Member's Amendment should be accepted. But there is no question of reciprocity at all. We are asked by the hon. and learned Gentleman to make out a special case for those citizens resident in this country. I suggest that the circumstances of the situation are such that we cannot afford to make this concession on the grounds, again, of expediency.

I admit that certain sums of money are spent by foreign firms and citizens resident in this country. It may well be that if the Clause went through there might be some immediate loss, but if we act upon the motive of expediency, as proposed by the hon. and learned Member, our position as a country will eventually be worsened rather than improved.

I agree that, on occasion, there are grounds for conceding a principle. Indeed, later Amendments suggest that tax concessions should be made in the case of certain companies pioneering in underdeveloped parts of the world in return for the pioneering work done in, say, the Colonies. But are we to accept now that we in this country are to be placed on the same footing as some of those underdeveloped areas and colonial countries? Are we now in such a bad way that we have to make concessions which are wholly against principle and which are known by the hon. and learned Member to be against principle?

By making a tax concession in the case of these individuals, a number of companies may be induced to open up in this country. We may encourage them to do that or to remain here. If we place them in a special position of this nature, however. will it not in the long run weaken our own position? Will not these foreign enterprises, given special concessions, so strengthen their hold on this country that we see more of the kind of proposals that were discussed in the House earlier in the afternoon?

Will there not eventually be more and more proposals on the part of, say, American firms to take over British enterprises in this country? If we make them these concessions, give them this encouragement and put them in this specially privileged position, I suggest that we run the danger of seeing more of our enterprises pass under foreign control. The reaction of the House this afternoon to the proposal to hand over the Regent Oil Company to American interests would, I should have thought, have been a warning to the Chancellor. That is the kind of thing that would be facilitated by the concession for which the hon. and learned Member is asking.

There is one relevant point. It is suggested that foreign citizens resident in this country should pay tax only on that part of the money which is handed over to them in this country, but it is, of course, possible to make arrangements under which only a limited amount is paid to them here. If only a limited proportion of their salaries is paid over in this country and the rest is stored or salted away in some other country, they do not pay tax on that at all, for the United States principle of taxation says that the tax should be levied on the amount earned in the place where it is earned. The citizens concerned, therefore, would escape tax in this country because the money is not paid to them here, and they would escape tax in the U.S.A. because it is earned in this country.

12.15 a.m.

It is possible to work. to do business and to earn money over here because certain conditions operate in this country, but those conditions are created only by virtue of certain Government expenditures. For example, defence expenditure enters into the matter. It is possible to earn those sums and do that business the hon. and learned Member was talking about only because we have defence. If this tax concession is to apply, those individuals will be enabled to earn money without making any contribution to that or the other services which are common to us all and which benefit us all equally. Companies working in Britain are able to do so partly because they call upon the services of British citizens on whose education and training money has been spent, to which British firms contribued. Foreign residents working here are to make no contribution to the educational or other social services of our country, services which make it possible for those foreign residents to operate so successfully.

I put it to the hon. and learned Member. Does he really think that a large-scale organisation in this country which has to make great decisions, probably about the spending of millions of pounds, upon, say, the hiring of ships, will make those decisions in accordance with whether or not their principal executives get a tax concession or not? Is that what the hon. and learned Member is suggesting? They will hire ships according to the value of the service they get from shipping companies. Is it not the case that British shipping concerns are giving them good value for money? If they are not, those hirers will go to the Continent. The fact that some of their principal excutives get a tax concession or not cannot enter into the higher policies of the companies in the way the hon. and learned Member suggested.

In any case, going overseas will not put them into a more favourable position, because the payments made to them will attract tax anyhow because of the taxation laws of the other European countries. There are one or two exceptions, I know. Switzerland is a case in point. It is possible for a foreign concern opening up there to make a special arrangement about taxation. I can well imagine it may be considered fair to make some arrangement, some compromise, for, say, American citizens, so that they do not have to pay higher tax than they would have to pay in the United States. There would be some element of justice in such a compromise, but that is not the compromise sought by the Amendment. Beyond that kind of concession I hope the Committee will not go.

Sir Patrick Spens (Kensington, South)

I support the Amendment. I agree entirely with the pure taxation view put forward from the other side, but I think that the question raised by the Amendment is an entirely practical one, and I think that hon. Members who oppose the Amendment forget altogether what is the position of the City of London and this country. There are thousands of foreigners in this country representing foreign firms bringing to this country millions of pounds' worth of business every year. Those foreigners at present are being taxed only in respect of part of the remuneration which they bring over here, and on which they live, and in respect of which they pay the full rates of taxation in this country, and so contribute to the services of this country.

If this Clause goes through as it stands, all those foreigners will have their tax liability enormously increased. The Clause will impose an enormous burden of taxation on all those persons, and that, I think, has not been realised in the Committee or elsewhere. It was for that reason that I raised the matter on Second Reading; not because of any outside pressure, but because I realised what the tax situation of those people would be. If the House of Commons were not to allow an Amendment in the form proposed by my hon. and learned Friend, we would be dealing a grievous blow against the trade and prosperity of this country.

I want to emphasise the point that, as drafted—I am sorry that I did not spot it myself—we have not covered the cases of those who come from Canada or elsewhere and who are British citizens. If I may say so with respect, they are at least as important as those who come from foreign countries, and they bring us at least as much trade and prosperity. Therefore I hope that the Committee will have no hesitation in urging my right hon. Friend to grant this concession.

Mr. H. Macmillan

This Amendment raises the general question of the position under Clause 9 of persons who are domiciled overseas but work in the United Kingdom for overseas employers. It does not deal with firms, but with persons. It proposes a concession for such persons if they are not British subjects or citizens of the Republic of Ireland, whereas my hon. and learned Friend the Member for Northwich (Mr. J. Foster) explained that this was really an oversight of drafting, and he intended it to deal with British subjects—perhaps more especially with British subjects than with others—who might come from the Commonwealth countries or the Colonies. But the Clause, as drafted, affects British subjects domiciled in Commonwealth countries overseas as well as subjects of foreign States. I want to make it clear that their position must be considered at the same time.

The issue is simple. What Clause 9 does in the case of a person domiciled overseas who is resident in the United Kingdom and works here for an overseas employer is to make him liable to our tax on his full pay for the work done here, whether that money is received here or overseas. Under the existing law, as the Committee knows, such a person has up to now been liable only on that part of his salary which is received in or remitted to this country. He has not been liable on salary credited to him abroad and left there. Since the Bill was published, this proposal has been widely and fairly discussed in the Press and elsewhere, and we have all been conscious of the existence of a real difficulty.

The hon. Member for Uxbridge (Mr. Beswick) has recalled to the Committee that this proposal was based on a recommendation of the Royal Commission on the Taxation of Profits and Income. It has been admitted, even by those who criticise the Clause, that in essence it accords with the treatment of British subjects in corresponding cases, or broadly so; for instance, under the United States tax system. It accords also with the general rule adopted in double taxation agreements that the source of income from employment is where the work is done. Therefore I think that, as a matter of logic and as a matter of principle, there was a very good case for the proposal of the Royal Commission. Indeed, it was so good a case that I adopted it and put it into this Clause.

Nevertheless it has been represented to me with some force that the effect of the Clause may be to put obstacles in the way of investments and trading in this country and from this country by overseas concerns. It might even lead to the establishment elsewhere of the overseas concerns of business undertakings which now operate or might in future come to operate from this country. There is no doubt that we gain a great deal from that fact.

Developments of that kind—it might not be confined only to business employees; it might be wider than that—might have an adverse effect upon our general position. The question that the Committee, and I in advising the Committee, have to weigh is whether a reform in the tax code which is logical and can be defended on logical grounds can be bought at too high a price.

Sir Spencer Summers (Aylesbury)

Would not my right hon. Friend agree that the logic to which he refers would be more valid if the level of taxation in the other countries were more or less the same as ours?

Mr. Macmillan

I was coming to that. Even that is rather a difficult point to establish accurately. It depends on the different countries. I think that those who would be affected by the Clause as it stands feel some concern that the tax rate which they would have to pay here is higher than they would have to pay at home Thus, the tax bill presented to them might be appreciably greater than their saving in their own country. It would vary according to the country, but that might be, and is, felt.

Broadly speaking, what the Committee has to weigh in this sort of position is where the balance of advantage lies. I have thought this over and tried to study it impartially, and I have reached the conclusion that the general considerations to which my hon. Friends have referred and which I have been studying make it on the whole wise that in this case logic should yield to expediency and that some Amendment to the Clause is necessary.

The hon. Member for Uxbridge, who is a very gallant officer with a great record, told us that we could not afford to yield to expediency. I am not sure that it is not the other way round, that we cannot afford not to yield to it.

Although I have not studied the precise form, I would therefore propose to bring forward on Report Amendments which would have the general effect of restoring the existing position for persons domiciled overseas who work in the United Kingdom for overseas employers. Such persons who have hitherto been liable on what has been called the remittance basis will continue to be liable on that basis and not on their full pay.

These Amendments would apply to persons domiciled in Commonwealth countries overseas as well as to persons domiciled in foreign countries. There is one exception. They would not apply to persons resident here who work for employers in the Republic of Ireland, for such persons are already liable under existing arrangements in respect of work done in the United Kingdom, and that position ought not to be changed.

I cannot say precisely what form the Amendments will take. I am sure it is felt that this should not be rushed through at a late hour. I am not really asking the Committee to come to a decision, except that I am asking it not to accept the present Amendment. There will be a full discussion on Report when the fresh proposals come before us, and the House will then be able to come to a decision.

I hope that, on that assurance, my hon. and learned Friend will be prepared to withdraw the Amendment. If hon. Members think that this is a mistaken action on my part, their position will be fully safeguarded because there can be a full discussion on Report when my Amendments have been tabled.

Mr. Beswick

So that we may consider these matters fully, will the right hon. Gentleman in his researches and reconsideration of the matter find out how many countries have this bait or inducement to foreign nationals to go and work there? Is this unique to this country?

12.30 a.m.

Mr. Macmillan

I would not put it like that. We have to weigh the matter. We will argue it out. It is the difference of tax levels which is one of the great difficulties. Also I would put it this way. It is true that there is no reciprocity. When I have said to some of my friends in other countries, "We are only proposing to treat you as you treat us", many have said "Then perhaps we must put it right". If we set this example it might well be that they will follow.

Mr. L. M. Lever (Manchester, Ardwick)

I usually do not agree with many of the things which the Chancellor submits to us, but I feel that on this matter he is 100 per cent. right. Many on this side of the Committee will not share my view, but I feel that on the general basis of taxation we can take cognisance only of what is received in this country. Although we have had a recommendation from the Royal Commission that a Clause of this nature should be included in the Bill, I think that it is on a mistaken basis which has no regard to the situation as it exists.

There are working in this country thousands of citizens of the United States of America and the Dominion of Canada. We must have regard to their position. Our financial position is such that we must encourage citizens of other countries to come here to use our country as their centre, to engage in business. I have no hesitation in saying that I should like this country to be the focal corner of the globe. I should like all countries, East and West, to send representatives to this land to do business here and to attract as much business as possible. It will be of advantage not only to those countries but to this country which, after all, is an island country.

There are different levels of taxation in other countries, in the United States and in Canada, which would make it unjust for us to tax the complete incomes of those citizens of the United States or Canada who happen to live here. They do not receive the money here. They do not expend the money here. I say to the hon. Member for Uxbridge (Mr. Beswick) that it is outside our jurisdiction whether or not they are taxed in their own countries. We are concerned only with monies coming into this country which the Chancellor intended to tax. If the money is paid to some other country outside our jurisdiction then it is outside the realms of our system of taxation. In any event, that is their business. Our business is to tax people who are ordinarily resident here and whose income is received here as distinct from money paid outside the country.

This would be a retrograde step. I want to encourage American, Canadian and continental firms to come here and make this country their centre. We should be ready to receive them.

Apart from that consideration, there is the question of expediency. We cannot ignore the fact that we are all expedient at some time or other, especially politicians. We must adopt a practical view of this matter. I hope that the Committee will accept the Chancellor's recommendations. [Interruption.] I wish my right hon. Friend the Member for Huyton (Mr. H. Wilson) would listen to me on some occasions. [An HON. MEMBER: Why?]—Never mind why, I am on my feet and I am talking, and I speak for the people of Ardwick, in Manchester. Much of their livelihood depends upon people coming from other countries, and upon the general intercourse between them and us. I am not prepared to drive foreigners out of this country when they have made it their business centre and have brought business to it. I do not want them to leave and set up their centre in France or Switzerland, so that they become the centres of contact with their countries.

I want this country to be the centre of the globe, and I make no apology for saying so. I hope, therefore, that the Chancellor's recommendation will be adopted. All these foreigners have their responsibilities in their own countries. They have the education of their children to think of; their insurances, and their home responsibilities. I should like to see the Clause withdrawn altogether. [Interruption.] Never mind about "Rubbish." I would remind my hon. and learned Friend the Member for Northampton that I am doing the talking.

Mr. Mitchison

I rise only to say that I never said anything about rubbish. I had no intention of making any criticism whatever of my hon. Friend's speech, and I do not know what he thinks he heard; it certainly was not that.

Mr. Lever

I am very sorry—

Mr. Mitchison

Further, I represent Kettering, and not Northampton.

Mr. Lever

At any rate, there seems to be a lot of talk on this side of the Committee. I am supporting the Chancellor's very wise suggestion, and I do not think there should be any untoward references to a matter to which I attach a very great deal of importance. I hope that the Committee will accept the Chancellor's very wise proposal.

Sir Ian Horobin (Oldham, East)

I want to put a completely different point for the Chancellor's consideration. I am extremely glad that he has accepted the proposal in principle, but I would ask him, when the technical drafting of these matters is taking place, to bear in mind the following point. This matter has been discussed so far from the point of view of its direct effect upon America and Canada—two rich countries, but there is also an indirect effect, which has been brought to my attention in recent weeks.

There are other parts of the world, in particular the Far East, where British firms are in rather the same position as are American and Canadian firms in this country. One of the most urgent and serious problems of all our great trading undertakings in Japan, for instance, is on the tax question. For several years we have had most difficult negotiations on this matter with the Japanese Government, and on a number of occasions when I have been in Tokyo almost the most important thing raised by our great trading firms and shipping companies has been the tax question, because we are rather in the position of the Americans; when we put our incomes into Yen we get into the millionaire bracket, much as Americans do here.

I am asking the Chancellor to make sure when he is drafting his proposals that we do not give any opening by way of precedent for the Japanese to say, "Ah! You have now admitted you were wrong in making these representations to us. We will now go ahead and tax your people out of Tokyo, because you are busy taxing Americans out of London." The Chancellor should bear in mind that we should not give to countries like Japan such an opportunity when this Clause is put through in its amended form. We should not give them any excuse for refusing what we have been for so long endeavouring to secure for our British and Commonwealth nationals in Tokyo. It is a matter of careful consideration, because the conditions are not the same—domicile is not the same, and so on. I think I have made the point clear. We must not only consider this matter as between Americans and Canadians here, but in relation to our tax interests in the Far East.

Mr. Jay

I think that even at this late hour we must make a brief protest at the way in which the Government have handled this whole issue. After all, the Chancellor presumably advisedly put this Clause in the Finance Bill. He scared the American Embassy out of its wits. A number of important American firms here—and I cannot agree with my hon Member the Member for Uxbridge (Mr. Beswick) that it was not a serious matter—were seriously considering moving to other parts of Europe. I believe the New York Times headquarters, which spends 300,000 dollars a year in this country, was going to move across the Channel if this Clause went through, and this was common knowledge among Americans here. Now if it was right, if this had to be done, and there was an unanswerable case, it may have been worth while causing all this commotion. But the Chancellor now tells us that he has changed his mind and does not think it is worth while after all. I think that is an extraordinary way to handle a matter of this kind, with all these international repercussions.

The hon. and learned Member for Northwich (Mr. J. Foster), spoke very mildly tonight, and the Chancellor spoke in a very solemn fashion, as indeed he often does. But the real truth, of course, is that the Chancellor did not really know what he had put into the Finance Bill. I think he had not read the documents which came before him, or, if he had read them, he did not really understand what he was doing. This is becoming all too common with the present Government.

We all know now that the previous Chancellor, last October, put into his Budget then a lot of proposals relating to Purchase Tax because he had not really studied what he was doing and never really meant to have done it at all. We rather expected that under the present Chancellor this would not happen again. But precisely the same thing has happened with this Clause as happened with the Purchase Tax under the previous Chancellor. The fact is that he did not understand what he was doing and has now got out of it as best he can. I can only hope that the whole of our economic policy will not be conducted in this muddled and blundering fashion in the months ahead.

12.45 a.m.

On the merits of the issue I will only say this, since the hour is now so late. I cannot believe that it would be wise to push the logic of this matter to the extent of expelling a lot of highly important American and other overseas organisations from this country. On the other hand, I do not see why all these foreign nationals living in this country should pay no tax at all in either country. It seems possible to me to find some sort of compromise between those two extremes. It is too late now to discuss what that compromise should be. Since in effect, though not very gracefully or candidly, the Chancellor has confessed his error and is proposing to put down detailed Amendments for Report stage, I suggest that we conduct our detailed examination during the Report stage rather than now.

Mr. J. Foster

In view of the assurance given by my right hon. Friend, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

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

Mr. H. Wilson

As a Committee we are in some difficulty about this Motion. We have heard eight or ten speeches from hon. Members opposite saying what a bad Clause this is. The Chancellor has finally convinced himself of that, even if he did not understand when the Bill was produced that this was a bad Clause, and he has undertaken to bring forward Amendments on Report. Yet we are being asked to accept the Clause. I am not suggesting that at this time of night we should debate at any length whether the Clause should stand part of the Bill, much less that we should divide against it. If we did, we should make nonsense of ourselves. The Government would have to vote that the Clause should stand part of the Bill and, on Report, that it should be taken out, so that the whole Committee would be contradicting itself.

I must reinforce the point made by my right hon. Friend the Member for Battersea, North (Mr. Jay) that here is an obvious case where the Government did not know what they were doing. This Clause was put into the Bill without proper consideration. When they realised what had been done, and because of the outcry which has occurred, the Government had to propose to alter it. This means that during the Report stage we shall have little time to discuss this question, because we shall have to wait until the Chancellor tables down his Amendments.

I ask the Chancellor to agree to table his Amendments as quickly as possible, so that the Committee may know what he proposes. They might be as objectionable as the original Clause and it would be serious if, on Report, we had either to reject or accept something like that. There will not be a further stage at which the right hon. Gentleman could clear up the mess he might make on Report stage. This is the kind of Bill which cannot be amended in another place. Therefore I hope that, before we accept this Clause the Chancellor will agree to let the Committee and the country know—because the outcry which has created this difficulty has come from the country—of his proposed Amendments as soon as possible.

Mr. H. Macmillan

I do not begrudge our mournful friend opposite, the right hon. Member for Battersea, North (Mr. Jay), the opportunity of a little fun at my expense, nor the right hon. Member for Huyton (Mr. H. Wilson), though I did not gather from his speech whether he was in favour of the Clause or not.

Clause 9 covers a wide range of topics besides this particular point. Since it clears up the law on a number of aspects, it would obviously be right that we should let it stand part of the Bill and then present Amendments on this topic. I will certainly give the right hon. Gentleman the assurance for which he asks. I will do my best to see that we get our Amendments on to the Notice Paper as soon as possible, so that the greatest amount of time may be given to the study of them.

Since I am glad to feel that, with the exception of the hon. Member for Uxbridge (Mr. Beswick), on the whole the Opposition feel that we have taken the right course, I am sure that we will have their co-operation in securing that the Amendment is a good one and carries out our joint purpose.

Mr. H. Wilson

I thank the right hon. Gentleman for that assurance. I should not like him to jump to the conclusion too readily that we accept that Clause 9 is a good Clause. After all, we do not know what it will look like when it reaches the Report stage.

I think the right hon. Gentleman is probably right in saying that the other parts of the Clause are valuable. Certainly, they follow the Report of the Royal Commission, and, as far as I recall, the Commission was unanimous on this part of the matter. Therefore, I think there should be a general disposition in favour of accepting it. But it is very difficulty for us to say whether we shall approve Clause 9 as a whole when we do not know exactly what Amendments are to be put down in the right hon. Gentleman's name.

I do not ask the Chancellor for an answer tonight, but I hope he will consider this between now and the Report stage. Obviously, the Chancellor feels that by accepting the principle of the Amendment moved by his hon. and learned Friend, he is sacrificing what he called logic for expediency. I have no doubt that he has given a great deal of thought to this question since the Amendment was tabled—and even earlier, since the outcry began.

I wonder, however, whether the Chancellor really feels that he has solved the problem in the best possible way with the Amendments which he proposes to put down. It is clear that the Royal Commission did not approach this problem with the thoroughness and wisdom that characterised most of its recommendations. It was a fine Royal Commission, but it turns out that on this point it misjudged some of the consequences of its recommendations.

Therefore, I hope that, perhaps on Report the Chancellor will say whether he is satisfied that the position as a result of his Amendments will be what he would like it to be. After all, he has told us that he is sacrificing logic for expediency. If not, would he consider referring this relatively narrow question to a further commission, or committee of inquiry, to see whether it would be possible to meet what the Chancellor had in mind when he drafted the Bill, without causing the serious con- sequences which result from the particular form of words which are still in this Clause which we are asked to agree shall stand part of the Clause.

Question put and agreed to.

Clause ordered to stand part of the Bill.