HC Deb 11 June 1959 vol 606 cc1305-33

(1) Section twenty of the Income Tax Act, 1952 (which relates to returns of current year's chargeable income), shall be amended by inserting after subsection (4) the following subsection:— (5) (a) Every person, who has delivered a statement under subsection (4) of this section and upon whom a notice has been served by the surveyor requiring him to verify by affidavit any deductions of expenses shown in or relevant to the statement, shall, within such time as may he required by the notice, swear and deliver to the surveyor, an affidavit in which the person—

  1. (i) sets out the items of expenditure, by which the gross amounts of any profits, gains or income have been reduced to the respective amounts shown in the statement;
  2. (ii) indicates how much of any such item consisted of expenditure for the provision of entertainment, hospitality, gifts or other benefits for other persons or for the person and other persons (which expenditure is hereinafter called 'entertainment expenditure');
  3. (iii) gives such further or fuller information as to entertainment expenditure as may be required by the notice; and
  4. (iv) states that, to the best of the knowledge, information and belief of the person and after due and proper inquiry made by him, the entertainment expenditure (or such parts of it as may be specified for the purpose in the notice) was incurred, so far as it was deducted in relation to a charge under Schedule D, wholly and exclusively for the purposes of the trade, profession or vocation to which it relates, or, so far as it was deducted in relation to a charge under Schedule E, wholly, exclusively and necessarily in the performance by the person of the duties of his office or employment;
(b) this subsection shall apply to expenditure by or on behalf of a corporate body as it applies to expenditure by or on behalf of an individual or individuals and in the case of an incorporated body or a partnership such an affidavit as is mentioned in the last foregoing paragraph shall be made by the individual who made or signed the statement under subsection (4) of this section and shall be made by him either solely or jointly with such individual or member of a class of individuals as the said notice may require; (c) nothing in this subsection shall prevent the withdrawal at any time of any claim to deduct expenditure (but without prejudice to any penalty or other consequence of the claim) and any claim so withdrawn and the subject-matter thereof may be omitted from an affidavit made under paragraph (a) of this subsection".—[Mr. Houghton.]

Brought up, and read the First time.

Mr. Houghton

I beg to move, That the Clause be read a Second time.

This new Clause has been moved before and there have been debates on it. The Clause, in terms, gives the Inland Revenue statutory powers to call for more information than is at present possible under Section 20 of the Income Tax Act, 1952, which gives the Inland Revenue power to call upon persons who may be liable to Income Tax to make a declaration of their total income. It is the conventional Clause in the Act which gives overriding power to call for returns under the several Schedules.

The Inland Revenue has fewer powers by law to call for information than is generally supposed. The Royal Commission drew attention to this in paragraph 1051 of its Report, which says: Every person is under a legal obligation to notify the tax authorities if he is in receipt of any taxable income: to make a return of that income if he gets a notice requiring him to do so. But there his obligation stops. He is not obliged to verify the figure that he returns by the production of vouchers, records or accounts. There is a legend that many years ago a Cabinet Minister who made a return of his total income omitted one year an item of income which had appeared in previous years. The Inland Revenue asked him what had happened to it and, if he had disposed of it, what he had done with the money. The Cabinet Minister wrote back saying, "Please mind your own business. Section 20, Income Tax Act, 1918", or whatever date it was then. I have never had the nerve to do that myself, although I have received queries of a similar kind.

The Inland Revenue has no direct and statutory powers to call for the information set out in the Clause. I should make it clear that the new Clause does not alter the basis of assessment. It does not change the admissibility or otherwise of expenses or deductions. It does nothing but give the Inland Revenue power to call for more information, to call for it in the more solemn form of an affidavit and to render a taxpayer making a false statement liable to the penalties of the law, which can be heavier than, or perhaps in addition to, the penalties already prescribed under the Act.

It may be asked what the purpose is of giving the Inland Revenue more statutory power to call for this information if it will make no difference to the liability of the taxpayer when the Inland Revenue has received it. It may also be asked whether this information cannot be obtained now by one means or another, direct or indirect—directly by inquiry, and indirectly by raising estimated assessments or disallowing deductions or claims, or by one of the various ways and means which the Inland Revenue has of persuading the taxpayer to treat with it.

It must be admitted that this new Clause does not do what we on this side would like. We would like to add to the power to call for more information, considerable change in the admissibility of some forms of expenses from tax liability. We would like to limit the kind and the amount of expenditure now chargeable against business and professional profits for tax purposes

9.45 p.m.

I think I heard the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) ask "Why do you not do it?" That would be a perfectly sensible question were it not that the rules of order prevent us from doing it. The noble Lord should surely know by now that what we cannot do in Committee on a Finance Bill is to raise a charge on the taxpayer. Only the Government can do that, by the Budget Resolutions. I have, therefore, to pursue this matter, as others have done in previous years, hobbled by the rule of procedure, which prevents us from carrying this new Clause as far as we would like. Its effect is bound to be limited on that account.

The Committee may ask, "if you want more information about these things, what is it all about? Why do you want more information, and what will you do with it when it is given to you?" To that I would reply that anyone who stands outside our luxury hotels and expensive restaurants today knows what this is about. It is about commercial, professional and industrial extravagance; the use of entertainment as a means of business, heavily chargeable against tax liability.

Time and time again one can see taxpayers, obviously impoverished by the present high level of taxation, emerging from luxury entertainment and hospitality which is charged against the profits of business and industrial undertakings. We all know that motor cars, to a very large extent, are run on business expenses, and chargeable against firms' profits. At the present time, it is possible for many in the professions, in business and in industry to build into their standard of life noticeable—even ostentatious—amenities or luxuries under the guise of expenses incurred wholly and exclusively for the purposes of a trade or profession. There is no denying that. It is common knowledge.

The Royal Commission went into the more generous rule under Schedule D for the charging of expenses against profits wholly and exclusively laid out for the purposes of trade. It acknowledged that that offered scope for the deduction of expenses from taxable profits which would be ruled out under the stricter rule of Schedule E, which applies to those holding office or employment. As the Committee knows, the condition is that the expenditure must be wholly, necessarily and exclusively incurred for the purpose of the office. These are two definitions, widely different in their application, and widely different in the scope they give for the use of expenses as a supplement to normal living expenses——

Mr. Simon

The hon. Gentleman will surely recognise, if my recollection is right, that what the Royal Commission did was to recommend the widening of the Schedule E rule.

Mr. Houghton

Oh, yes—the hon. and learned Gentleman has anticipated me by a moment. I was just drawing attention to the difference between the rules under the two Schedules. The Royal Commission proposed to bring the Schedule E taxpayer on more equal terms with the Schedule D taxpayer by relaxing the rule under Schedule E, and not by tightening up the rule under Schedule D. The proposal was that under Schedule E, in place of the formula about the expenditure being wholly, necessarily and exclusively incurred, it was, speaking from memory, to be wholly and reasonably incurred. It was a relaxation of the present rather strict rule.

The minority Report proposed to deal with the matter in a different way. The minority, however, again realised the difference in practice, between the two rules, and the minority Report said that it would be just as well to acknowledge the difference, to face up to it, and to try to deal with it by a change which differed substantially from that suggested in the majority Report. The minority Report proposed that Schedule D taxpayers who wanted to have the benefit of earned income relief should submit to the stricter rule under Schedule E, but that if they preferred the more liberal rule under Schedule D they would surrender their right to earned income reliefs on their profits or gains.

As I said a little earlier, we cannot, in this new Clause, prescribe either of those remedies, or put forward alternatives to them. All we can do is to propose that the Inland Revenue shall have stronger powers to call for certain information, and the information that the Inland Revenue would be permitted to call for is set out in the new Clause. It refers especially to expenditure for the provision of entertainment, hospitality, gifts or other benefits for other persons, further or fuller information as to, entertainment expenditure and so on.

This is an attempt to attack the misuse of the reliefs given for tax purposes to this kind of expenditure, which, I am satisfied, the Committee will agree is noticeable today. How else could one account for the expenditure which is so obvious in many places, where we know that much is being had on vouchers on the firm? The Committee may then ask whether the calling for information would make any difference.

Mr. Nabarro

What does the hon. Gentleman mean by vouchers on the firm? Does he mean luncheon tickets issued to clerical staff, which my right hon. Friend the Chancellor of the Exchequer the other day said should not exceed 3s. per meal? What otherwise does he mean by these vouchers?

Mr. Houghton

The hon. Member for Kidderminster (Mr. Nabarro) is not so simple as he tries to make out.

Mr. Nabarro

I am a very simple chap.

Mr. Houghton

The hon. Member keeps on saying that he is a very simple chap, but that is merely a smokescreen for an ingenious mind.

Mr. Nabarro

Would the hon. Gentleman answer my question? What are these vouchers? Is he really suggesting that company directors and others associated with them go around with a packet of meal vouchers for 3s. each stuffed in their waistcoat pockets?

Mr. Houghton

The hon. Member is much more contemptuous of these meal vouchers than many of his contemporaries in the business world. I am referring to those who go to restaurants to entertain each other and sign the bill which goes to the firm to be paid.

Mr. Nabarro

That is exactly the explanation on which I am trying to pin the hon. Gentleman's ears back. When the invoice goes to the company it forms the subject of an investigation by the company's auditors. Then the company's auditors are required by the Income Tax Statues to declare that business expense to the Inland Revenue which will assess it to tax unless it is proved to be an expense wholly, exclusively and necessarily in pursuance of the business.

Mr. Houghton

I do not think the hon. Gentleman has the sympathy of my hon. Friends in this matter. Apart from that, let him consider the large number of director-controlled companies where the formalities of getting sanction for expenditure are much easier than in the bigger companies. In any case, if the expenditure is certified as being wholly and exclusively laid out for the purposes of the trade, the auditors cannot question it; neither can the Income Tax authorities. It is no good the hon. Gentleman suggesting that this is not being done. It is being done, and on an ever-increasing scale. We cannot do business in this country now except through the bottom of a sherry glass.

Mr. Nabarro

I am merely pointing out the inaccuracies in the hon. Gentleman's references to these 3s. meal tickets.

Mr. Houghton

It is the three guinea meal tickets that I am talking about.

I will come to my conclusion and to the only point which I am able to put forward in support of the terms of the new Clause, having regard to the limitations placed upon our action by the rules of order. It is that it can discourage expenditure of this kind which the taxpayer may think will be challenged by the Inland Revenue as not being wholly and exclusively laid out for the purposes of trade. It is a deterrent; it is not a cure for this misuse of Income Tax reliefs for expenditure which goes beyond what is legitimate for the purpose of business, profession or trade.

Mr. Nabarro

Year after year these accusations concerning a class of person who is called a company director are flung around the Committee during the consideration of the Finance Bill. I intervene only for a few moments because I am painfully aware from many engaged in industry, business and commerce of the meticulous methods of the Inland Revenue in investigating business expenses in present circumstances.

There cannot be any doubt at all—and I hope that my hon. and learned Friend the Financial Secretary will readily confirm this when he replies—that the whole of the business expenses incurred by a company director are assessed to Surtax and to Income Tax on his personal account at the time of the company's audit and at the time he has to render his own personal returns in respect of his income.

The whole of these business expenses, whether he is assessed to Schedule D or Schedule E, are added to his direct income. Then he seeks to deduct as a legitimate expense when wholly, necessarily and exclusively incurred in pursuance of the business, the sums involved in respect of the expenses. He has to prove that they are expenses. Not only has he to prove it to the company's auditors, who are chartered accountants, but later they have to prove it to the Inland Revenue.

I admit that there may be evasion of tax in this field on a relatively limited scale. Of course, it is exceedingly difficult to distinguish between legitimate business expenses for entertainment purposes, and illegitimate expenses. For example, I readily declare my interest, as a company director, as a member of the organisation much maligned by hon. Members opposite—the Institute of Directors. Why it should be maligned I cannot think.

Company directors are involved in the conduct and negotiation of business very often involving substantial sums in overseas sales. It is inescapable that they must incur expenses for entertainment. Whether those expenses are lavish or not, whether they are appropriate to the actual sum of the business in hand during the course of the negotiations, is often arguable. Whether a company director entertaining three or four Americans or Canadians over here spends £20 or £15 in giving them a good dinner is, surely, a matter for his own judgment, and it should be gauged against the background of the amount of business which results from the entertainment he has given.

10.0 p.m.

I ask hon. Gentlemen opposite, when they so readily attack company directors in this country as a class, to recall that, when those same British company directors go abroad, they are often, in foreign lands, given entertainment much more lavish than they return to the foreigner when he visits us here. But trade is a two-way business. Trade is lubricated everywhere by conviviality of every description. I myself take liquor only in small quantities, but my guests often prefer larger quantities than I. If there is a substantial order from overseas contingent upon the extent and the lavishness of the entertainment which I am prepared to give foreign buyers visiting me, I shall, indeed, be lavish in what I offer them. I should be a fool were I to do otherwise. I should be a fool also in relation to the wider public interest of earning foreign currency and promoting exports.

Much of the malign statements flowing from right hon. and hon. Members opposite on this count are ill-informed and ignorant. In earlier years, it was a right hon. Gentleman the Member for Huyton (Mr. H. Wilson) who launched these attacks, invariably late at night, when there were Government Whips buzzing around these benches calling upon Government supporters such as myself to desist from making speeches.

Mr. Diamond

Shame.

Mr. Nabarro

This evening, I could not be so temperate. I felt that a rejoinder from one engaged in business and commerce would be appropriate at this moment. I believe that the law in regard to business expenses and allowable claims for entertainment costs in industry, commerce and business generally should be widened and relaxed in the public and national interest, not made harsher as hon. Gentlemen opposite suggest.

I hope that my hon. and learned Friend, when he replies, will be careful to confirm—I shall speak again if he does not do so—the exact procedure in regard to the assessment of expenses and their treatment by the Inland Revenue according to the financial Statutes in their present condition without amendment along the lines which hon. Gentlemen opposite suggest. I trust that the new Clause will be rejected.

Mr. Cronin

It has been most helpful to have this contribution from the hon. Member for Kidderminster (Mr. Nabarro).

Mr. Nabarro

Stimulating, did the hon. Gentleman say?

Mr. Cronin

No, I said that it was most helpful to have his contribution. His excellent brief on behalf of the Institute of Directors serves to highlight our arguments. I was very impressed by the way that this particular subject has induced him to rise to his feet four times in ten minutes. Moreover, he has assured us that he will rise to his feet again——

Mr. Nabarro

If I do not get the right answer.

Mr. Cronin

—if the Financial Secretary's answer is not satisfactory to him. One sometimes wonders whether the hon. Member for Kidderminster has sworn to eternal loquacity by some sort of inverted Trappist vow. His interventions are so frequent.

Mr. Nabarro

I have not spoken for six weeks.

Mr. Cronin

It seemed to me that some of his arguments were so loose that, were I not convinced of his temperate habits, I should assume that they had been lubricated by conviviality this evening.

The hon. Member suggested that company directors were in some difficulty in that they had to prove to their auditors that their entertainment expenses were necessary. The hon. Gentleman did not stress one important point, namely, that these auditors are employed by the company directors and, therefore, are not in a position to subject the company directors to savage criticism.

Mr. R. Gresham Cooke (Twickenham)

In fact, the auditors are employed by the shareholders, not by the directors.

Mr. Cronin

That almost receives the prize for the most humorous remark this evening.

I think that we should leave the hon. Member for Kidderminster and address more serious attention to a Hydra-headed problem which has troubled the Committee for many years. As my hon. Friend the Member for Sowerby (Mr. Houghton) said, people who pay tax under Schedule E present great difficulty because their expenses have to be wholly, exclusively and necessarily in the performance of their office or employment, but people who pay tax under Schedule A, who represent the aristocracy in taxation, have the much happier rule that their expenses have to be wholly and exclusively expended for the purposes of their trade, profession or vocation.

This presents serious difficulties, and I think that the person who is in a very great difficulty is the inspector of taxes. He is often in a considerable dilemma as to whether the expenses contain very substantial elements of personal benefit rather than expenses which tend to produce increased profit in the trade, profession or vocation.

Another great difficulty, which my hon. Friend the Member for Sowerby pointed out, is that the Opposition are always severely limited in making constructive suggestions by the rules of order. What makes the question of expenses as a general principle a very difficult subject of debate is that we have to consider international trade. If we limit severely the expenses of businessmen in this country obviously they do not get the same advantages vis-à-vis visiting other countries.

Mr. Nabarro

That is my argument.

Mr. Cronin

Indeed. That is a consideration which must be taken into account, but, nevertheless, there must be some limitations put upon them.

My hon. Friend has referred to the numerous personal perquisites obtained by directors of public, private and limited companies by way of cars, chauffeurs, gardeners, servants, living accommodation, and foreign holidays. These are serious abuses, but they are not so conspicuous. Anyone who lives in the centre of London or in a large town comes across this extraordinary and excessive eating and drinking at the expense of the Inland Revenue—in other words, at the expense of all of us—in what is apparently meant to be an interest in obtaining business for the profession or vocation.

Some of my hon. Friends will agree that the most unprecedented guzzling and swizzling has taken place in London of recent years at the expense of the Inland Revenue, and that the effect on other taxpayers is very unfortunate.

Mr. Nabarro

Does the hon. Member drive a Bentley?

Mr. William Ross (Kilmarnock)

Just one.

Mr. Cronin

They feel very much less disposed to pay their taxes when they see these tremendous examples of tax avoidance. Hon. Members opposite frequently refer to the desirability of wage restraint on the part of trade unions.

Mr. Nabarro

I am glad to have the hon. Gentleman's confirmation of my argument above the importance of overseas trade, but, on the matter of expensive motor cars, does he not himself drive a Rolls-Bentley? Should not he at once declare his interest?

Mr. Cronin

I cannot see the relevance of that intervention. My car——

Mr. Nabarro

I cannot afford a Rolls-Bentley.

Mr. Cronin

—is one of extremely mature years——

Viscount Lambton (Berwick-upon-Tweed) rose——

Mr. Cronin

I cannot give way much more—which would be traded in for a modest sum. Here again, the lubrication of conviviality is arising.

It seems to me that this form of tax avoidance is conspicuous and scandalous. That is why it is desirable that the Clause should be given serious consideration. Many of my hon. Friends would say that the whole problem of expenses should be comprehensively solved, but I would not agree. This problem must be tackled piecemeal. If we can deal with one thing at a time, we will be doing very well.

Mr. Nabarro

Start with Bentleys.

Mr. Cronin

Hon. Members on both sides will be familiar with the old Chinese proverb that he who tries to catch ten fleas with all ten fingers will not catch anything at all. The same principle applies to tax avoidance.

The Clause has the advantage that it does not incommode in any way the ordinary respectable taxpayer. It is administratively simple. It does not involve any extra staff for the Inland Revenue and it does not involve much extra work. It might be argued that a fraudulent person would not object to signing an affidavit of the kind proposed, but it would have the wholesome deterrent effect of indicating to him that he was an object of suspicion.

The formality of signing an affidavit would have an impressive psychological effect on a would-be offender and there is always the sanction of a prosecution for perjury. It may be argued that already a declaration has to be verified and that a tax surveyor can disallow expenses. Then there is the procedure of appeal, when expenses can be carefully investigated. Nevertheless, it is clear from the patent nature of this abuse that these powers are inadequate.

Therefore, I hope that when the Financial Secretary replies, if he does not accept our new Clause, either in its existing or in some modified form, he will say what constructive measures the Treasury has to deal with this serious problem, which is becoming a national scandal.

10.15 p.m.

Viscount Hinchingbrooke (Dorset, South)

The hon. Member for Sowerby (Mr. Houghton) rightly said that the new Clause would not collect another penny for the Revenue. It simply devises a new set of principles in the collection of more money from Schedule D taxpayers which a Chancellor of the Exchequer, if so attracted by the proposal, would introduce in formal form in another year—or which the hon. Member's own right hon. and hon. Friends, if they are so fortunate as to get into power, will no doubt introduce.

I agree to some extent with some of the arguments put by the hon. Member. I think there is something rather disagreeable in the roaring, soaring commercial life which is now apparent in this country. It is only because it shows a marked differentiation on the side of the business man and as against the ordinary professional man that there is this complaint. It is quite natural that the complaint should arise principally from the other side of the Committee, although I assure the hon. Member for Sowerby that many of us on this side are equally disquieted by the trend.

The question is how to make the correction. Taxation, Income Tax, and Surtax, have risen to such a scale today that it is necessary to have in the export trade the processes described by my right hon. Friend the Member for Kidder-minister (Mr. Nabarro)—the giving of equivalents in entertainments in various countries overseas. It is natural that the comercial world has been allowed to escape from the consequences of taxation and has used the formula in the Income Tax Act, 1918, of "wholly and exclusively" to get away with it. That dastardly word "necessarily" which keeps the Schedule E taxpayer down to a comparatively lowly state of existence has not been applied to the commercial world, and it is entirely due to a sort of fortuitous occurrence, aided and abetted by the Inland Revenue and various Governments who have not proposed any changes, that the commercial world today is keeping abreast of the times by living the sort of life and giving the sort of entertainment and existing on the sort of platform of society which is necessary in the modern capitalist world in which we have to compete.

But it leaves the Schedule E taxpayer very far behind. It would be out of order if I tried to use now some of the arguments which I would hope to introduce on the proposed new Clause—"Schedule E: Expenses"—standing in my name and the names of some of my hon. Friends, which would try to carry out the recommendation of the majority Report of the Royal Commission on the Taxation of Profits and Income to cut out these formal words as applied to the Schedule E taxpayer and introduce the very words which the Commission recommends in its great document, namely, all expenses reasonably incurred for the appropriate performance of the duties … I have been looking into this matter a great deal in the last few days, in the anticipation that my new Clause would be called, and I find that very little indeed can be done for the Schedule E taxpayer. Last year, the Chancellor was good enough to give us the concession that contributions to professional and other societies should stand against tax. After that, we are left with very small perquisites indeed—uniforms, books, clothes and a certain amount of expenses associated with maintaining cars—which if my Clause were allowed to go through would cost the Exchequer only £4 million a year, a mere bagatelle.

There is almost nothing that can be done for the Schedule E taxpayer to elevate him to the way of life which the great commercial world enjoys today. That is a sorry state of affairs to recognise in this day and age. I do not know what the answer can be, but perhaps it is to proceed on the downward path of lowering taxes on income, reversing the process that initiated the different way of life between Schedule D and Schedule E taxpayers. Only upon that basis will it be possible for the great class of professional men and women again to enjoy the standard of living to which they are entitled in competition and in equality with the commercial world.

Mr. MacDermot

A great deal of what the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) has been saying will command general agreement in most parts of the Committee. He has been approaching this question primarily by looking at it from the point of view of the Schedule E taxpayer, perhaps in the higher ranges, the professional man, and the bitter pills which he has to swallow when he sees the kind of existence his friend in the commercial world is able to get away with.

There is no doubt that our society today is riddled with these mutual envies in the field of taxation. Everyone who has an expense account or is able to claim expenses at all is looking over his shoulder to see how much the other fellow has been able to get away with. The vast majority of the population are merely spectators of this game that is going on, because they have no opportunity to claim expenses at all. They have their Income Tax deducted under P.A.Y.E. and that is that.

To show the injustice of how this works, we know that, as the hon. Member for Kidderminster (Mr. Nabarro) has been explaining to us, the business man who is entertaining the foreign buyer is entitled to, and sometimes may have to, entertain him at the most expensive restaurants with meals which cost about £5 a head. The whole of that expenditure is put down and allowed as a charge for tax purposes, whereas the local government official, who has to stay late at the town hall to attend the council meeting and who wants to go out and get an evening meal, is not allowed to charge the 3s. 6d. which he paid for his modest evening meal because his duties require him to remain until ten or eleven o'clock at night for the council meeting. Those are the kind of differences with which we are dealing.

The hon. Member for Kidderminster, in one of his usual rumbustious interventions, has given us the justifications for the Schedule D rules for the commercial world, but that is not what this Clause is about.

Mr. Gresham Cooke

The hon. Gentleman is talking about Schedule D as applied to industry. My interpretation is that Schedule D applies to professions.

Mr. MacDermot

In some cases; in other cases it does not.

Mr. Gresham Cooke

Generally it does.

Mr. Gordon Walker (Smethwick)

The employed professional is under Schedule E.

Mr. MacDermot

In any event, these are the questions with which this Clause is concerned. It is concerned with trying to put an instrument in the hands of the Revenue authorities to try to help to check the undoubted abuses which exist in this field, and which every hon. Member who is honest with himself will admit exist. They exist on a widespread scale, they give rise to a great deal of social disunity and they result in a severe loss to the Revenue.

We are chided with the fact that much of the criticism directed on this matter is ill-informed. That is true, and it is true for the reason that it is difficult to get at detailed facts and circumstances. It is rare that prosecutions result on these matters. It is rare partly for the reasons given by my hon. Friend the Member for Sowerby (Mr. Houghton) in opening this debate, because of the inadequate powers in the hands of the Revenue authorities. Consequently, as he said himself, they have certain powers by which they can induce the taxpayer to trade with them, and it is a disgraceful state of affairs that this should become a matter for bargaining and for trading, as it so often does, rather than for proper proof.

Mr. Nabarro

Why?

Mr. MacDermot

Because it is a matter that ought to be proved, and ought to be proved with proper evidence, instead of the kind of package deal we get at the moment between the local inspector and the local accountant trying to arrive at a compromise agreement on a large number of assessments for a large number of his clients. That is the kind of thing that goes on.

However, there is one source from which at times one can get accurate information about what goes on. That is in the divorce courts, where we get maintenance summonses between husband and wife, in which it becomes necessary to establish what is the real income of the husband. He swears an affidavit in which he puts forward the information which he probably puts forward before the Income Tax inspector, and his wife sometimes supplies a lot of additional, useful information which does not normally go to the Income Tax inspector. At times, of course, the evidence given by the wife is challenged, and then there may be some dispute about it, but on other occasions the husband or his representative does not challenge the facts given in evidence by the wife. In that case, one may assume that one is getting something like the truth of the matter.

A friend of mine who practises regularly in the divorce courts, as the hon. and learned Gentleman the Financial Secretary himself used to do, has given me two instances which illustrate the kind of thing which goes on. The first is of a case where the husband was, in fact, the owner of a private company, that is to say, he held virtually all the shares, probably all except one, which was held by his wife. The company, which was here in London, was engaged in promoting theatrical productions.

He had entered into an agreement with his company under which he was required by the company at all times to reside in the suite which the company had taken in an expensive hotel in the West End. He was also required wherever he went in London to drive about in the company's Rolls-Royce, and so on. Under that agreement he received a salary of £1,500 a year, and that was the salary which he declared to the Inland Revenue.

In fact, he paid no tax, because he borrowed large sums of money from the company and set off the interest payable against his declared income of £1,500. Of course, all that was a racket and he ought to have been assessed for a great deal more. No doubt someone certified those accounts and that was the evidence on which the accounts were passed by an inspector of taxes. Nevertheless, it was a complete and utter racket.

The second case concerned a gentleman with a private company in the Midlands. He was a director of the company holding all but a few shares. Nominally, he had a salary of £2,000 a year. He lived in a house which was owned by the company and all the normal outgoings in the way of rates and taxes were paid by the company. There was an indoor staff of three, two gardeners and chauffeur on the company's payroll. There were two cars—he had not got up to the standards of the hon. Member for Kidderminster—at his disposal which were owned by the company.

He had an expense account of £1,000 a year. The explanation put forward in support of all this was that the house had to be kept by the company so that he could entertain those overseas buyers to whom the hon. Member was referring a moment ago. The wife's evidence, which was unchallenged, was that for the past two years there had, in fact, been one visitor, who had been entertained in the house for business purposes. That husband did not stop at that: his mistress was also on the payroll of the company.

Mr. F. P. Bishop (Harrow, Central)

Should not all those benefits have been notified on a form submitted to the authorities?

Mr. MacDermot

I am sure that they should have been.

The point I am making is that those are the abuses which are going on and which are not being discovered. The intention of the Clause is to give the Revenue authorities additional powers so that such rackets will be detected and there will be power to compel these crooks to make affidavits about the sort of swindles which they are perpetrating, since that will be a severe deterrent and will prevent them from doing that sort of thing in future.

I sincerely hope that the Government will be able to accept the principle of the Clause and, if they do not like its form, to introduce one of their own. I am very doubtful about it, because it is only two years ago that there was introduced a Finance Bill whose declared purpose was to make more room at the top. If this Clause is accepted, it will cause a certain amount of contraction at the top, a contraction which is long overdue.

10.30 p.m.

Mr. Diamond

Before saying anything on this topic I think that I ought to declare my interest straight away, as I am sure that the hon. Member for Kidderminster (Mr. Nabarro) is about to ask me. May I say to him that I am, in the usually accepted term, a married man with a motor car?

Mr. Nabarro

Is it a Rolls Bentley?

Mr. Diamond

No, it is a Morris.

Having said that, I would like to consider this Clause a little more seriously than some hon. Members opposite have done. I am sorry that I cannot associate myself entirely with everything that has been said on both sides of the Committee.

The debate has covered the general question of tax avoidance, the more specific question of the comparison of Schedule D and Schedule E rules and, finally, and right at the end and to a very limited extent, the actual Clause before us. Therefore, in saying a few words about what has been said by others I make this first point. We are all against tax avoidance. If I had to decide the priority in which these tax avoidance matters should be dealt with, I would put entertainment expenses at the bottom of the list.

If one really wants to avoid tax—and there are so many methods of doing this—the least useful and profitable method is by way of entertainment expenses. A great deal of trouble is involved and negligible amounts of money are made, whereas the other opportunities open to one under existing legislation are enormous. Therefore, it is rather inappropriate to dwell at too great length on the avoidance of tax which arises from exaggerated expense claims.

As to the second point about Schedule D and Schedule E expenses, may I say to the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) that he has repeated what has been said in many other quarters—the complaint of the professional man against the standard of living of the business man. The employee is assessed under Schedule E whether he is employed in a professional or a business capacity.

The essence of the matter is that we live in a society in which we think it better to recompense business men on a higher scale than we recompense professional men, including Cabinet Ministers, Members of Parliament and all sorts of other people. This is the society in which we live, and it is a complete waste of time and indicative of the sort of envy which does not help in approaching the problem of tax collection to spend too much time on trying to indicate and prove that this stems from Income Tax and Income Tax rules. It certainly does not.

There are obvious reasons why Schedule D and Schedule E should be expressed differently. Quite obviously, if we are to have a system of tax collection whereby we get enormous amounts from profits we must leave it to the business man to arrange his business. That means that he is going to decide which are expenses and which are not. In the case of the employee, where there is no one to decide, it is quite appropriate that the inspector of taxes should have some discretion in the matter and introduce the word "necessary." On these two main issues I do not agree with everything that has been said on both sides of the Committee.

We now come to the specific Clause which is an attempt to deal with a problem that does exist. The hon. Member for Kidderminster referred to the enormous advantage of taking one's American customer out to lunch. It will be obvious to all in the Chamber that there are many restaurants into which we go in which we see many men having lunch who do not always speak with a markedly American or Canadian accent.

It is obvious that this expenditure is being incurred on a large scale. The difficulty arises in deciding whether it is being incurred for proper business reasons or not. It may be thought that there is not sufficient attention paid by those two narks of the machinery of tax collection, the tax inspector on the one hand and the accountant on the other. I can only say from my own experience, which is what most of my professional colleagues say and exactly what is said by inspectors of taxes, that I am heartily sick of having to probe expenses claims and of having to spend hours and hours on frustrating, detailed examination of them. I am fed to the teeth with it, if I may use words which indicate my feelings but are not of the best parlance in this Chamber.

I do not think that as the law is at present, and with the amount of information which is now available to the Revenue and the accountant, much more can be done to probe the reason why it seems to be that many people are able to afford a rather expensive lunch. It is thought to be the case that it is on the Revenue. I must say, with reference to the cases which my hon. Friend was mentioning and which came from the Divorce Court, that I myself have learned to adopt the simple rule that I believe in tax stories when I see them myself.

I find that only too often people like to swap stories. It even gets to this stage, that one of my clients was telling me what an accountant had done the other day for another person, and how much better an accountant he was, and what the other person had done to get away with tax—and I knowing the whole time that that other person was my own client. It is a curious sort of attitude of liking to be able to boast of what one is able to get away with from the Revenue. I doubt whether second-hand evidence of what has gone on in the Divorce Court, and given perhaps by a person who has not the best reasons for putting the most favourable interpretation on the words of actions of a spouse about to be divorced, is the most reliable guide to how we should go about improving our machinery of tax collection.

What we are concerned with is, after all, trying to arrange tax fairly as between different taxpayers. We are not setting up a moral code to say whether anyone should or should not have a three, four or five course lunch. I almost wish we were, for that would give us much more power, and might be a more sensible arrangement in tax collection. We are not deciding whether different sections of the community should have fair shares. They do not. I feel this most strongly—more than the noble Lord does. But Income Tax and details of expenses are not the method by which we can improve the sort of fair shares which I should like to see between different sections of the community and real equality of opportunity.

We must remember that all we are trying to do is trying to see that there is fair contribution of tax by different sections of taxpayers. We do have a system of tax under which, by and large, the machinery is based on the individual return, and the individual's sense of his responsibilities is a most important element in the return. It is really a self-collecting system. It would be most expensive if another way were to be adopted.

I think that a lot can be said for this new Clause. The hilarity with which the matter has been discussed—and wherever it is discussed in all sorts of circles—indicates that albeit the inspector and the accountant play their part, as far as I can see, to the full—absolutely to the full—it is a great waste of their time. It is unremunerative to the accountant. I do not know how the inspectors cost their time. Nothing is more unremunerative and time wasting than working out whether a claim for £24 16s. 2d. is justified or not and where Mr. B went to on 16th July.

Notwithstanding that, I think it is right to say that wherever this is discussed there is an hilarity which shows that the individual does not regard this topic with sufficient earnestness. Notwithstanding everything that the accountant and the inspector do—and they do everything they can in the circumstances—a further contribution could be made by the individual. If the taxpayer realised how important it was that he should play his part, and that this is a burden which rests upon all of us, there is a likelihood that the machinery would work more smoothly, and be seen to work more smoothly.

In many circumstances there is a good deal to be said for the taxpayer being asked to swear an affidavit in exactly the same way as individuals swear affidavits when making statements of return, and in many other cases where an individual takes upon himself the responsibility of collecting information and putting it before a Government Department with a view to his being taxed on it in some other form or other. There is often an affidavit to go with it. This is a regular procedure, and I think that it would help in this case.

I therefore support the principle of the new Clause and I hope that the Government, realising that I have spoken as objectively as I can, will give it sympathetic consideration.

Mr. Simon

The Committee will, I think, agree that the hon. Member for Gloucester (Mr. Diamond) has spoken objectively. The hon. Member for Sowerby (Mr. Houghton) described himself as being hobbled by the rules of procedure when he moved the new Clause, but as he went along it seemed to me that he got about rather skittishly for all his hobbles, and the debate has ranged widely beyond the substance of the Clause.

We are not concerned with the difference between Schedule D and Schedule E rules as to expenses. We are not discussing whether it is desirable to have the test of the word "necessarily" in the case of all expenses claims. We are not really concerned with the excessive eating and drinking which go on in the centre of London—if they do go on. We are not concerned with the taxation of benefits in kind. We are not concerned with the taxation of the company car in which the director drives, or the bank manager's house, or the miner's free coal. Those questions are not affected by the Clause. The Clause is concerned only with machinery.

But as the debate has ranged so widely, I would say that, in the first place, I find myself in substantial agreement with my hon. Friend the Member for Dorset, South (Viscount Hinchingbrooke), that most of the complaints that arise in connection with this matter—and I am sure that the hon. Member for Gloucester is correct in saying that they are based on envy—arise because of the high level of taxation under which we have been burdened for so many years.

Secondly, my hon. Friend the Member for Kidderminster (Mr. Nabarro) is right when he says that in the case of the company director or the higher paid employee—anybody who has a salary of over £2,000 a year—the test is far stricter. He does not escape the tax liability by describing any emolument as expenses. Indeed, money paid to him as remuneration is added to his basic salary, and the onus is on him to establish that he has incurred the expenses which he is claiming. The same consideration applies in the case of benefits in kind. The benefit in kind is added to his basic income.

Having said that, I come back to the substance of the Clause. It is concerned with none of the things over which so much of the debate has ranged. The simple question which is raised by the Clause is: are the powers of the Inland Revenue to obtain information at present sufficient? That poses a fundamental question relating to the liberty of the subject. I should have thought that all in the Committee were agreed that the State must have wide-ranging powers these days. It has to carry on the business of the State, it has to carry on the administration of justice, it has to maintain law and order, it has to collect the revenue. For all this the State needs wide powers. But surely we are all agreed that it should be given no more power over the individual than that which is absolutely necessary to carry on these functions. It is because we believe that the powers to obtain information which the Inland Revenue have at the moment are sufficient that I could not advise the Committee to accept the Clause.

We have heard a good deal about what the Royal Commission said. It is worth while remembering that neither the majority Report nor the minority Report of the Royal Commission commended this proposal. It was not part of the Commission's proposals. The reason for that is that the powers of the Inland Revenue to obtain information are very extensive. Perhaps the Committee would bear with me for a moment while I describe what they are. In the first place, if the inspector is not satisfied with the evidence produced by a taxpayer in support of any deduction, he has a very simple and very effective remedy. He can disallow the deduction. If he does that he leaves the taxpayer to establish his claim by means of an appeal, and immediately the onus is on the taxpayer, quite apart from the general onus of the taxpayer in the case of an employee with a salary over £2,000 a year or a director. Thus, by disallowing a deduction the inspector places the onus on the taxpayer.

The appeal is heard by the Commissioners. Before the Commissioners the onus is on the taxpayer to establish his case by positive and adequate evidence. Nor does it stop there by any means, because the Commissioners have power to receive evidence on oath, and they frequently do. They can receive evidence orally on oath if necessary, not merely by affidavit as the Clause proposes. They can go further; they can receive evidence on oath from the appellant or from his employees. They can summon and examine any other person whose evidence they think is likely to assist them. In the case of appeals concerning business profits, they are authorised to call on the taxpayer at their discretion to produce accounts and written statements dealing with the matter arising from their decision.

These are extensive powers. In cases where they suspect fraud or wilful default they can go still further, because they can require the production for inspection by a Revenue officer of all business books, accounts and documents containing information about transactions of the trade or profession. It seems to me, therefore, with respect, that the whole basis of the criticism from hon. Members opposite is completely misconceived. It leaves out of account the very wide powers which the Inland Revenue have to obtain information.

This is a machinery Clause. I do not doubt that we are all agreed that the State should not be given powers over the individual greater than those which are required for the necessary carrying out of the State's functions. In this respect the State has sufficient powers at the moment, and therefore the Clause should be rejected.

Mr. Gordon Walker

The Financial Secretary, naturally and inevitably, tried to narrow the debate to the exact form of the Clause, but he knows the inhibitions of the rules of order upon an Opposition, and it is certainly true that our real motive in putting down the Clause, apart from the value which we think it would have if accepted, lies in our feelings about the scandal of Schedule D expenses. I agree with my hon. Friend the Member for Gloucester (Mr. Diamond) that they are a branch of a much bigger tree, and that there are bigger and more important branches on the tree of tax-dodging. None the less, the expenses branch is an extremely important one.

Naturally, there are difficulties, and my hon. Friend the Member for Gloucester has set forth some of them, but there are two aspects which seem to me impossible to get away from. One is that the employer or the self-employed person fixes, in effect, his own expenses, which can hardly be challenged. The hon. Member for Kidderminster (Mr. Nabarro), who is not with us any more—and it is a great relief to know that he will not speak again—based his argument largely on the fact that only the employer can decide what is an expense necessary for the earning of profit and the carrying on of his business—whether it be a machine, an expensive meal, a house, or anything.

The other thing one cannot escape is that, as a result, there is an element of public subsidy in a great deal of very lavish expenditure—what the hon. Member for Kidderminster called conviviality in all directions, about which my hon. Friend the Member for Lewisham, North (Mr. MacDermot) gave a number of details. That is all expenditure in which there is an element of public subsidy, because there is tax remission in it.

The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), in a speech that impressed both sides of the Committee, expressed his grave disquiet over what we might call fiscal immorality developments that are extremely disturbing. In this matter, the standards of honesty are certainly much lower than they used to be—there is little doubt about that. The idea that tax dodging is quite a good thing is spreading, whereas not so long ago it was regarded as a very bad thing which no decent person would do. The noble Lord is perfectly right there.

It is also creating social envy. Under Schedules D and E there is injustice as between one taxpayer and another, and everyone who gets away with the expenses racket makes someone else pay more tax, as the State has to raise a given amount in taxation. That produces a great deal of social envy.

There was a lot in what was said by the noble Lord and by the hon. and learned Gentleman. This problem has, in part, arisen from the very high marginal rates of taxation. There is a tremendous incentive to commit acts of what might be called fiscal immorality, and I agree that it is better to tighten things up in the whole of this field. That would deal with capital gains and many other things. That seems to be a proper and desirable objective, but it is one that this Government are not pursuing in the slightest degree. I would be in favour of it. We would have much better public morality.

The rules of order have inhibited us putting into this new Clause all that we should have liked and we have had to do the best we could while keeping within the rule of not imposing a charge. We think that this provision would be

very useful. It is important, as one weapon in this whole battle against tax dodging, to tighten the administration, as this new Clause would. We therefore feel it necessary to carry our view into the Division Lobby, but we would, were we to come to power, bring in much more radical and more far-reaching measures to deal with the whole of this problem.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 91, Noes 146.

Division No. 132.] AYES [10.55 p.m.
Allen, Scholefield (Crewe) Howell, Charles (Perry Barr) Popplewell, E.
Beswick, Frank Hughes, Emrys (S. Ayrshire) Prentice, R. E.
Blackburn, F. Hughes, Hector (Aberdeen, N.) Price, J. T. (Westhoughton)
Bottomley, Rt. Hon. A. G. Hunter, A. E. Price, Philips (Gloucestershire, W.)
Bowden, H. W. (Leicester, S.W.) Hynd, H. (Accrington) Pursey, Cmdr. H.
Brockway, A. F. Irvine, A. J. (Edge Hill) Redhead, E. C.
Brown, Thomas (Inoe) Jay, Rt. Hon. D. P. T. Reynolds, G. W.
Burke, W. A. Jenkins, Roy (Stechford) Rhodes, H.
Butler, Mrs. Joyce (Wood Green) Johnson, James (Rugby) Rogers, George (Kensington, N.)
Champion, A. J. Jones, David (The Hartlepools) Ross, William
Collick, P. H. (Birkenhead) Jones, J. Idwal (Wrexham) Skeffington, A. M.
Cronin, J. D. Jones, T. W. (Merioneth) Slater, Mrs. H. (Stoke, N.)
Crossman, R. H. S. King, Dr. H. M. Smith, Ellis (Stoke, S.)
Davics, Ernest (Enfield, E.) Lawson, G. M. Soskice, Rt. Hon. Sir Frank
de Freitas, Geoffrey Lever, Leslie (Ardwick) Sparks, J. A.
Diamond, John McAlister, Mrs. Mary Spriggs, Leslie
Dodds, N. N. McCann, J. Stewart, Micael (Fulham)
Ede, Rt. Hon. J. C. MacColl, J. E. Stonehouse, John
Foot, D. M. MacDermot, Niall Strachey, Rt. Hon. J.
Forman J. C. McInnes, J. Stross,Dr.Barnett(Stoke-on-Trent,C.)
Gordon Walker, Rt. Hon. P. C. McKay, John (Wallsend) Thomson, George (Dundee, E.)
Greenwood, Anthony Mallalieu, E. L. (Brigg) Thornton, E.
Grey, C. F. Mellish, R. J. Ungoed-Thomas, Sir Lynn
Griffiths, William (Exchange) Mitchison, G. R. Warbey, W. N.
Hannan, W. Moody, A. S. Weitzman, D.
White, Mrs. Eirene (E. Flint)
Hayman, P. H. Neal, Harold (Bolsover) Williams, W. R. (Openshaw)
Healy, Denis Noel-Baker, Francis (Swindon) Willis, Eustace (Edinburgh, E.)
Herbison, Miss M. Oram, A. E. Wilson, Rt. Hon. Harold (Huyton)
Hilton, A. V. Owen, W. J.
Hobson, C. R. (Keighley) Padley, W. E. TELLERS FOR THE AYES:
Houghton, Douglas Parker, J. Mr. Pearson and Mr. Deer.
NOES
Agnew, Sir Peter Brooman-White, R. C. Godber, J. B.
Aitken, W. T. Bryan, P. Graham, Sir Fergus
Alport, C. J. M. Burden, F. F. A. Green, A.
Amery, Julian (Preston, N.) Carr, Robert Gresham cooke, R.
Amory, Rt. Hn. Heathcoat (Tiverton) Cary, Sir Robert Grimond, J.
Arbuthnot, John Chichester-Clark, R. Grimston, Hon. John (St. Albans)
Armstrong, C. W. Clarke, Brig. Terence (Portsmth, W.) Grosvenor, Lt.-Col. R. G.
Ashton, H. Conant, Maj. Sir Roger Gurden, Harold
Atkins, H. E. Cooper, A. E. Harrison, Col. J. H. (Eye)
Baldwin, Sir Archer Cordeaux, Lt.-Col. J. K. Heald, Rt. Hon. Sir Lionel
Bainiel, Lord Corfield, F. V. Heath, Rt. Hon. E. R. C.
Barber, Anthony Craddock, Beresford (Spelthorne) Henderson-Stewart, Sir James
Barlow, Sir John Cunningham, Knox Hesketh, R. F.
Barber, John Currie, G. B. H. Hinchingbrooke, Vitcount
Batsford, Brian Dance, J. C. G. Hirst, Geoffrey
Bell, Philip (Bolton, E.) Davies,Rt.Hon.Clement(Montgomery) Hobson, John (Warwick & Leam't'n)
Bidgood, J. C. D'Avigdor-Goldsmid, Sir Henry Holland-Martin, C. J.
Biggs-Davlson, J. A. Deedes, W. F. Holt, A. F.
Bingham, R. M. Dodds-Parker, A. D. Hornby, R. P.
Bishop, F. P. Doughty, C. J. A. Hornsby-Smith, Miss M. P.
Black, Sir Cyril Erroll, F. J. Howard, Gerald (Cambridgeshire)
Body, R. F. Finlay, Graeme Howard, John (Test)
Bonham Carter, Mark Fletcher-Cooke, C. Hughes Hallett, Vice-Admiral J.
Bowen, E. R. (Cardigan) Gammans, Lady Hughes-Young, M. H. C.
Boyd-Carpenter, Rt. Hon. J. A. Garner-Evans, E. H. Hylton-Foster, Rt. Hon. Sir Harry
Boyle, Sir Edward Glover, D. Irvine, Bryant Godman (Rye)
Brewis, John Glyn, Col. Richard H. Johnson, Dr. Donald (Carlisle)
Johnson, Eric (Blackley) Nabarro, G. D. N. Simon, J. E. S. (Middlesbrough, W.)
Jones, Rt. Hon. Aubrey (Hall Green) Nairn, D. L. S. Smithers, Peter (Winchester)
Kerr, Sir Hamilton Neave, Airey Spearman, Sir Alexander
Lambton, Viscount Nicolson, N. (B'n'm'th, E. & Chr'ch) Steward, Sir William (Woolwich, W.)
Leather, E. H. C. Noble, Michael (Argyll) Summers, Sir Spencer
Linstead, Sir H. N. O'Neill, Hn. Phelim (Co. Antrim, N.) Taylor, Sir Charles (Eastbourne)
Lloyd, Maj. Sir Guy (Renfrew, E.) Osborne, C. Teeling, W.
Longden, Gilbert Page, R. G. Tiley, A. (Bradford, W.)
Loveys, Walter H. Pannell, N. A. (Kirkdale) Vickers, Miss Joan
Lucas, Sir Jocelyn (Portsmouth, S.) Partridge, E. Wade, D. W.
Lucas-Tooth, Sir Hugh Peel, W. J. Wakefield, Edward (Derbyshire, W.)
Macdonald, Sir Peter Pilkington, Capt. R. A. Wall, Patrick
McLaughlin, Mrs. P. Pitman, I. J. Ward, Rt. Hon. G. R. (Worcester)
McLean, Nell (Inverness) Pott, H. P. Ward, Dame Irene (Tynemouth)
McMaster, Stanley Powell, J. Enoch Webster, David
Macpherson, Niall (Dumfries) Price, David (Eastleigh) Whitelaw, W. S. I.
Madden, Martin Prior-Palmer, Brig. O. L. Williams, R. Dudley (Exeter)
Manningham-Buller, Rt. Hn. Sir R. Redmayne, M. Wills, Sir Gerald (Bridgwater)
Marlowe, A. A. H. Ridsdale, J. E. Wilson, Geoffrey (Truro)
Maudling, Rt. Hon. R. Robinson, Sir Roland (Blackpool, S.)
Mawby, R. L. Roper, Sir Harold TELLERS FOR THE NOES:
Maydon, Lt.-Comdr, S. L. C. Ropner, Col. Sir Leonard Mr. Legh and Mr. J. E. R. Hill.
Medllcott, Sir Franh Sharples, R. C.