§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bryan.]
§ 11.2 p.m.
§ Mr. J. B. Hynd (Attercliffe)
I think it is desirable that this opportunity should be taken to raise once again the effects of the Cheques Act, 1957. I would like to preface my remarks by saying that I am not complaining at all about the purposes of the Act or of its provisions.
Its purpose was to avoid the necessity for millions of bank clerks turning over millions of cheques every year to see whether they were endorsed on the back. It was described in another place as the culmination of many years' work. I am afraid that the culmination of these many years of work and the savings achieved for banks and their clerks has resulted, unfortunately and unjustifiably, in the imposition of a mass of inconvenience and confusion for, and even insults to, a large number of ordinary citizens by business firms, nationalised industries, local authorities and small traders.
There has been a considerable saving to the banks. We were told when the Bill was going through the House that there are 730 million endorsed cheques per annum and that the effect of the Act would mean the saving of about 2 million man-hours. Subsequently, questions were raised in the House and many questions have been raised in another place about the effects of this Act and also about the loss of Stamp Duty to the Exchequer arising from the quite unjustified side effect of the Act, which has been the dropping of receipts by many firms.
The Government, however, told us that the total Stamp Duty on receipts was about £5 million a year and that the loss to the Exchequer through the dropping of receipts for amounts over £2 could be accepted as between £1 million and £2 million a year. For 2 million man-hours saved in the banks the Government accepts the loss of a minimum of £2 million a year, which represents £1 per hour paid by the Inland Revenue, or the Government, for the time saved by bank clerks. On a 40-hour week that represents a salary of £40 a week. It seems to me a curious sort of economy.
1105 The loss to the Exchequer from stamps is probably the least evil. The chaos and confusion to the public is the main thing I want to raise. I want to ask whether something cannot be done to correct this situation under which many thousands, if not millions, of firms are now refraining from providing receipts in a manner which has been accepted as customary, efficient, polite and convenient for many generations. It is not the Act which has affected the necessity of giving receipts or given firms any greater justification for not providing receipts. But that has been the result. How it arose is difficult to imagine. Someone started it and other firms took it up.
The result of this failure to provide receipts has had a large number of very deplorable effects. In the first place, if a receipt is not given for an amount paid then there is no evidence that the amount has been paid. I know it is said that if an account is paid by cheque the unendorsed cheque itself will be taken as evidence of payment. But that can give rise to a great many difficulties.
There was a case quoted in another place of a gentleman who had a bill for £15 from his tailor. His tailor said that it had not been paid and sued. When the man produced the £15 unendorsed cheque, which he had obtained from his bank and attached it to the Bill, the tailor claimed that it was not the £15 for the payment of his account, but was the £15 which the gentleman had asked him to give him in return for a cheque because he wanted to go to the races.
That ties up with the Question asked in the House on 12th November, 1957, by the hon. Member for South Angus (Sir J. Duncan), who drew the attention of the Chancellor of the Exchequer to the fact thatup to new receipted vouchers have had to be produced in support of maintenance claims, claims under Section 314 of the Income Tax Act, 1952, and other similar claims, and that in view of the passing into law of the Cheques Act this is no longer possible; and if he will make a comprehensive statement on the procedure to be adopted in the future, and arrange for this to be circulated to all those who may be concerned.The Chancellor replied:The Inland Revenue will accept an unendorsed paid cheque together with the unreceipted accounts or invoice."—[OFFICIAL REPORT, 12th November, 1957; Vol. 577, c. 762.]1106 As the hon. Member for South Angus pointed out, this simply means that if an unendorsed cheque and a bill which bears no evidence of payment on it are brought together presumably they will be accepted ipso facto by the authorities as evidence that the bill has been paid by that cheque, when there is no evidence at all.
The amount of time and effort which has been wasted by millions of ordinary people in trying to connect their accounts with the counterfoils of cheques, or having the banks send them the cheques so that they can attach them to bills, is enormous, and there is a great risk of duplicating payments. Many business friends of mine have found that on some occasions, after their secretaries have paid an account, the account had already been paid and had been sent back without a receipt from the firm which received payment in the first place. This has to be adjusted, all for the sake of avoiding the normal, sensible and convenient practice of stamping or receipting the account before it is returned.
Within the last few days I have received from the Eastern Electricity Board the following notice:Final Application: May I remind you that, according to our records on 21st July, 1958, the above account had not been paid. I should be glad if you would give your immediate attention to this matter. In the interests of economy, no further application for payment will be sent to you, and if the amount due for electricity is not paid within ten days of the date referred to above, the supply may be disconnected without further notice. In that event, the supply will not be reconnected until the amount due is paid, together with the costs of disconnecting the supply. The costs of reconnecting the supply will also be payable by you. The Board's representative who calls to disconnect the supply is not authorised to accept payment of the account.That is due to the fact that this Board did not provide a receipt on the last occasion on which I paid my electric light bill. I had to ask for a receipt, and if I send my subsequent bill back to them and do not ask for a receipt I will get the bill back unreceipted. I will have no evidence whether or not it has been paid, and on returning from holiday I might find a man at the door waiting to cut off the electricity supply, and be faced with a charge for disconnecting and reconnecting the supply.
It may be said that all the customer has to do is to write, "Receipt required" 1107 when he sends back the bill with his payment, but anybody with any experience knows that hundreds and thousands of firms are taking no notice of that comment. Many of my business friends are having bills sent back with no receipt, although they have themselves either written or printed on the account, when sending it back with the cheque, "Receipt required". In other cases, which have been cited here and in another place, many firms are trying to avoid paying Stamp Duty by stamping on the bill the single word "Paid", or "Paid by cheque" or some other formula.
Steps should be taken to make public the fact that the provisions of the Stamp Act, 1891, still apply and have in no way been affected by the 1957 Cheques Act. I would remind the House of the definition in that Act of a receipt:the expression 'receipt' includes any note, memorandum, or writing whereby any money amounting to two pounds or upwards, or any bill of exchange or promissory note for money amounting to two pounds or upwards, is acknowledged or expressed to have been received or deposited or paid, or whereby any debt or demand, or any part of a debt or demand, of the amount of two pounds or upwards, is acknowledged to have settled, satisfied, or discharged, or which signifies or imports any such acknowledgement, and whether the same is or is not signed with the name of any person.As I said at the beginning of my remarks, this monstrous imposition upon the public has been imposed by many thousands of firms and I am not clear who started it. Once when I received my demand for rates from my local authority, I wrote to the authority and pointed out that the Cheques Act made no difference to its liability to provide me with evidence that my account had been paid. I asked for an assurance that I should receive a receipt in future. The authority wrote to me:It would probably have been administratively more convenient to have continued the practice of issuing receipts for all payments.That is a plain statement of fact, and should be self-evident to all businessmen. The letter continued:But the widespread adoption in commercial life of the practice of not issuing receipts for payments by cheque unless a receipt was requested would have subjected local authorities, if they had not followed suit, to a charge that they were incurring needless administrative expense and stamp duty.1108 In other words, because industries, nationalised industries, the Electricity Board and others, 'have adopted this practice, local authorities, despite the fact that they would prefer the simple and efficient method of giving a receipt, find that they would be about the only people paying Stamp Duty, and, therefore, they are trying to fall in with the common practice.
This obviously causes a tremendous amount of inconvenience and annoyance to the public, and, in the case of the final notice sent out by the Electricity Board, insolence to the customers is added. Something should be done by the Minister to make clear that a receipt is still required in these cases; that a stamp is still required if the amount is over £2, and that the Cheques Act makes no difference at all.
I should like business firms to appreciate that so long as they continue this practice of refraining from giving receipts and pleading the Cheques Act in justification their customers can react by withholding payment of accounts which otherwise would be paid promptly, necessitating the firm sending a repeat notice costing another 3d. stamp and finally, in any case, having to provide a 2d. stamp on a receipt. What is the purpose of that and what have the traders to gain?
The Government have repeatedly drawn attention to this in answer to Questions. The Lord President of the Council, in another place, referred to this as an inconvenient and unjustified practice. But there are still firms pursuing this practice, and there are still firms—I would like to ask whether it is possible for the Inland Revenue to check on this matter—which formerly provided receipts for their customers, but which, since the Cheques Act, have stopped giving receipts or give receipts for sums of over £2 without putting on the necessary stamp.
I suggest that the Government, if they cannot do anything more, should consider making a statement in the Press, such as we have seen about National Savings, drawing the attention of traders and the public to the undesirability of this practice and the confusion caused to the country. Perhaps by these methods, or others which the Minister can think of, the position can be put right, and we may revert to the old, sensible, commercial practice 1109 of giving people receipts to show that accounts for which they are responsible have been properly paid.
§ 11.15 p.m.
§ Mr. Graham Page (Crosby)
I am glad to have this opportunity of intervening briefly to say that I am also glad that the hon. Gentleman the Member for Sheffield, Attercliffe (Mr. J. Hynd) has drawn attention to the main purpose of the Cheques Act, namely, the abolition of the need for endorsement of cheques, and the savings which have resulted from that. The hon. Gentleman mentioned the savings in unproductive hours on the part of clerks in banks; but that is not the only saving. There is the saving of the time wasted in making more than 700 million signatures every year by people in industry, commerce, and so on.
§ Mr. Page
Practically never, if one carries out the proper procedure.
However, what I have mentioned, and what the hon. Gentleman has mentioned, is the direct result. The indirect result is that people have abandoned the practice of sending receipts when bills are paid by cheques. The hon. Gentleman says that that results in a loss. The only loser is the Exchequer; but who worries about that? There are many people who gain; and they include Government Departments, local authorities, industry, commerce, the professions, and even the individual who does not have to run about looking for a 2d. stamp to put on the receipts which used to be printed on the backs of cheques.
There are some interesting figures which I can give the House. To send out a receipt, one has to remember the cost of printing it, of completing it, of addressing it—and that brings in the cost of the envelope—and posting it. On the average, including the 2d. stamp and the postage, that costs 8d. If half of the over 800 million cheques which are drawn each year required a receipt before this practice was adopted of not sending receipts, then the saving now is about £13 million a year. The hon. Member for Attercliffe shakes his head, but he should calculate on the basis of 8d. for each receipt. It is not an exaggerated sum 1110 if one takes account of the printing, the postage, and so on.
This has been a great saving to industry in general, and the only thing which was needed to make that saving was a slight alteration in the established practice of dealing with paid cheques. One has only to get them back from the bank and retain them for reference in case payment is at any time queried. So many people have told us of what might happen; but it is very infrequently that a payment is, in fact, queried. One has only to put the paid cheque against the account, and there it is. I hope that the new practice will continue and increase and that the great savings already made by industry and commerce will be enlarged in the future.
§ 11.18 p.m.
§ Mr. George Jeger (Goole)
The hon. Gentleman the Member for Crosby (Mr. Page) must justify the Act for which he is responsible. It would be a very bad parent who would not praise his own child; but this child has turned out to be a great nuisance in the world of industry, and even to some private citizens.
It is all very well for the hon. Member to whirl statistics around the Chamber and try to dazzle us, but in practice the symbols are meaningless, and the savings in the world of bank clerks by not having to check endorsements must be set against the fact that there has been a great waste of time and confusion in the checking up of accounts which, as my hon. Friend the Member for Sheffield, Attercliffe (Mr. J. Hynd) has mentioned, have come back unmarked.
I have here a batch which arrived only last week. One is marked, "Paid by cheque". That is for a £14 bill, but for several smaller amounts the statements have been sent back without any marking whatever to show that the accounts have been settled, despite the fact that printed slips were stuck on asking for a receipt. In no case has a 2d. stamp been put on. These are absolutely illegal, and a direct result of this Act.
§ Mr. Jeger
There has, therefore, been a loss to the Treasury which may be regarded as negligible, but which 1111 amounted to £1 million. If the Exchequer had received that £1 million and decided to devote it to the Arts Council for the extension of the artistic side of our life that would have been very valuable indeed.
I do not want to prevent the Minister replying to the points made by my hon. Friend, but I want to reinforce them with the practical evidence I have here, not statistics worked out in an office, but in the actual facts I hold in my hand.
§ 11.20 p.m.
§ The Financial Secretary to the Treasury (Mr. J. E. S. Simon)
I think that the hon. Member for Sheffield, Attercliffe (Mr. J. Hynd) was quite right when he said that there is a great deal of misunderstanding about the giving of receipts in consequence of the Cheques Act.
As hon. Members know, the Cheques Act originated as a result of a recommendation of the Mocatta Committee and owed its piloting through this House to my hon. Friend the Member for Crosby (Mr. Page). The principal recommendation of that Committee was that there should be a new statutory provision to the effect that when a payee passed a cheque into his bank for collection no endorsement was needed. Effect was given to that by Section 1, 2, and 4 of the Cheques Act. Those Sections have worked smoothly and there has been no controversy about their operation. I think that my hon. Friend the Member for Crosby is justified in claiming that they have resulted in substantial savings of time and effort, and probably actual expense, in commerce and industry.
Section 3 of the Act is the one to which the hon. Member for Attercliffe referred. The view of the Mocatta Committee, presided over by a very eminent commercial lawyer—one of the most eminent in the country—was that it was really no more than declaratory of the existing law. The giving of a receipt is merely one method of proving payment. Ultimately, it can be proved perfectly well by oral evidence accepted in a court of law and that becomes stronger as the coincidence between the sum demanded and the sum paid becomes closer. Section 3 provided that an unendorsed cheque which appears to have been paid by the banker on whom it is drawn is evidence 1112 of the receipt by the payee of the sum payable by the cheque. The Mocatta Committee said, and I am advised that it is correct, that that is probably declaratory of the pre-existing law. And that is the full extent of the connection between the Cheques Act and receipts.
The hon. Member for Attercliffe quoted the very wide definition of a receipt under the Stamp Act. I do not think that I need go into that at this stage. I would emphasise that there is nothing in the Cheques Act which disturbs the right of the debtor paying by cheque to insist on a stamped receipt as a separate document in accordance with the provisions of the Section 103, subsection (2) of the Stamp Act, 1891. Those provisions are entirely unaffected by the Cheques Act. There are certain exempted transactions, in any event, from the operations of the Stamp Act. The most important, as hon. Members are aware, are receipts given on account of salary, pay or wages.
Apart from those exempted provisions, where there is a payment of £2 or more, whether paid by cash or by cheque, it is still the requirement that a receipt must be given, if requested by the payer—
§ Mr. Simon
I have been left with only ten minutes in which to reply to the debate, and if the hon. Member will try to contain his ebullience and excitement he may get an answer, if I am allowed to proceed.
Secondly, when, a receipt is given, it must be duly stamped. These pre-existing requirements of the law remain as they stood, unimpaired by the Cheques Act. I go further. There is no requirement under the Stamp Act to give a receipt in cases where the receipt, if given, would not be liable to duty, either because the payment is under £2 or because the receipt is in respect of an exempt transaction. Even in cases where a receipt would be liable to duty, there is no legal obligation on the payee to give one, unless the payer requests it. That is the position, and I am grateful for the opportunity of making it clear.
I am asked: what is the position if a firm disregards a request for a receipt? The answer is that a firm doing so commits an offence under the Stamp Act, 1113 and the remedy is to report the matter to the Inland Revenue, which will proceed for a penalty. Any person paying over £2 in any transaction that is not an exempted one can today, as he could before, demand a receipt. He has exactly the same power to demand a receipt, and to get one, as he ever had. The power is that of reporting the matter to the Inland Revenue, which can proceed with the remedy—
§ Mr. J. Hynd
But the point is that he did not have to ask or demand before. And what will be the trading relations between creditors and debtors if they are to threaten to sue each other each time?
§ Mr. Simon
The hon. Gentleman has not done me the courtesy of following what I have been saying—probably because of the excitement of the hon. Member for Goole (Mr. G. Jeger), who interrupted me earlier when I was dealing with precisely that point. The power to demand a receipt is exactly the same. There is no difference about the requirement to give a receipt, or the power to require one. As I have said, if a firm disregards a request for a receipt the matter should be reported to the Inland Revenue. It is no good writing complaints to the newspapers, or making speeches about it.
The situation is no different from what it was before the Cheques Act, the remedy is the same, and it is available. In point of fact, reputable traders continue, and will continue, to give a receipt 1114 if one is requested, whether or not they are legally required to do so. In matters like this, a great deal depends on the natural desire of traders to retain the goodwill of their customers rather than on the precise character of the legal provisions. But if one is not content with that, if one does not get the right sort of trader with whom to deal, the remedy is simple, and it is the same as it was before the Cheques Act was enacted.
Many firms and organisations have developed a new form of account, with a detachable counterfoil, and the following instructions:If paid by cheque detach and return the counterfoil with cheque and retain the rest, and no receipt will be given unless requested.Ever since the Stamp Act was passed, there is a binding obligation, unimpaired by the Cheques Act, to give a receipt, and the failure to give one is an offence which can be damnified with the sanction of the penalty recovered by the Inland Revenue.
§ Mr. R. E. Winterbottom (Sheffield, Brightside)
May I ask a question? In an ordinary retail business cash transaction, where a sum exceeding £2 is paid, a receipt has still to be given with a stamp on it. Therefore—
§ The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at half-past Eleven o'clock.