§ Part VI of the Finance Act, 1947, so far as it increases any duty chargeable under or by reference to the headings "Conveyance or Transfer on Sale" or "Marketable Securities" in the First Schedule to the Stamp Act, 1891, shall not apply in relation to the conveyance or transfer of any stock or marketable security as defined by section one hundred and twenty-two of the Act where the amount or value of the consideration for the sale does not exceed five hundred pounds and the instrument contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration exceeds five hundred pounds.—[Mr. Wade.]
§ Brought up, and read the First time.
§ 5.15 p.m.
§ Mr. Wade
I beg to move, That the Clause be read a Second time.
This Clause relates to the Stamp Duty on transfers of shares and other similar securities. It is another example of an attempt on the part of my hon. Friends and myself to achieve a more widespread distribution of ownership. Last year, we put forward a number of proposals which would have led to an extension of widespread share ownership. Unfortunately, they were not accepted by the Chancellor. I hope that we shall be more fortunate over this Clause and more fortunate than we were regarding the Clause which the Committee has just been discussing.
As hon. Members will be aware, substantial relief regarding Stamp Duty has been made in the case of conveyances of property, and it seems to me illogical that a similar policy should not be applied to the transfer of shares. I am suggesting a very modest step. I do not suggest that the duty on the transfer of shares should be abolished altogether at once, although that is a step which should be taken. For the time being, I am asking for this relief up to a figure of £500 consideration on a particular 70 transfer. This would be a step forward to the abolition of this duty, which I hope we shall eventually achieve. There was an interesting article in the Midland Bank Review last May which was headed, "The nuisance of Stamp Duties". The article stated:Once again a Budget has been opened without disclosing any attempt at or intention of rationalising Britain's agglomeration of taxes levied by way of adhesive or impressed stamps. We are still encumbered by a list of Stamp Duties that fills over eleven pages of the Annual Report of the Commissioners of Inland Revenue but produces little more than 1 per cent. of the total tax revenue.Later in the article, it is stated that these taxes:were introduced in 1694—a remarkable year in Britain's financial history—as also were Death Duties, to help in carrying on war against France. Like the then Sovereign, William III himself, the Stamp Duties came from Holland, where they had been introduced seventy years previously.That early history is very interesting, but I must not pursue it now. This tax dates back to the Stamp Act, 1891, but the idea is very much older. About seventy years before William of Orange came over to this country, the Government in Holland were looking for new ways of raising revenue and offered a prize for the best new idea for a tax. Apparently the winner was the inventor of Stamp Duty. Times have changed very much since then, and I think that the Stamp Duty on transfers is more than a nuisance, as is suggested in the Midland Bank Review. It is in fact an indirect obstacle to the wider distribution of share ownership.
Removal or reduction of the tax would be one way of facilitating a wider ownership of shares in industry. Any convenience there may be in collection is more than offset by objections which were not foreseen when Stamp Duty was originally introduced. For example, when firms introduce employees' shareholding schemes they find themselves faced with a number of obstacles. In 71 the first place, the dividends on shares are provided after payment of Profits Tax whereas a cash bonus is allowed in arriving at the tax payable. Similarly, on any transfer which takes place Stamp Duty is payable.
Whether intentionally or not, the policy of the Treasury seems to me to encourage cash bonuses rather than the holding of shares, which is a form of saving. Furthermore, it would seem to have been Government policy for a good many years to encourage the general public to invest directly in Government securities rather than in industry. On the question of whether that is a sound policy, presumably the idea is that there is less risk if one invests in gilt-edged securities. I very much doubt that. There has been great risk in some gilt-edged securities since the war, and we have also learned a great deal about risk-spreading in industrial shares.
It may be that Stamp Duty could have been halved as an alternative to the proposal which I am putting forward, but I think that under the proposal put forward by my hon. Friends and myself the amount of revenue lost would be less than in the case of other proposals. For that reason, I am suggesting that there should be a relief from tax on any transfer where the consideration is less than £500. There is no practical difficulty about that.
It would be quite a simple matter to have endorsed on the back of a transfer the usual kind of certificate which has long been customary in the case of the conveyance of property. There is set out in the Clause the customary wording. It talks about a consideration not exceeding £500 in a particular transaction or series of transactions. I believe that the effect of this would be to encourage small savers to invest in industry.
I am putting forward my arguments for the Clause very briefly, because I know that there are still many new Clauses to be considered tonight. I hope that what I am proposing will be taken very seriously, because I think it is true that at the present time the Stamp Duty on transfers, which was imposed at a time when circumstances were so very different, is impeding the wider distribution of ownership of industrial shares.
§ Mr. Austen Albu (Edmonton)
The hon. Member for Huddersfield, West (Mr. Wade) was not, it seemed to me, quite sure of the objects of the new Clause. The first of its objects, I think, we can support. There is no doubt that there are far too many Stamp Duties, on cheques and so forth, which may have been a proper method of raising taxation in the days before Income Tax, Purchase Tax, Petrol Duty and Beer Duty, but which today raise comparatively little revenue and are really no more than a nuisance.
The object of the Clause is, of course, the object which the Liberal Party are frequently putting forward and which is now supported by the Conservative Party, particularly in the proposals put forward by the right hon. Member for Blackpood, North (Sir T. Low) and others for getting a much wider ownership of shares by workers and those with relatively small incomes. We have to consider whether it is really desirable that people with very small incomes should put relatively small amounts of money into equity shares. Even if they do so, it is certainly highly undesirable that they should use those shares for speculative purposes.
It seems to me that the reduction of these duties would mainly assist those who wish to buy and sell shares frequently, because Stamp Duty cannot really be a serious deterrent to anyone buying shares in the hope that they will rise in value and which the person concerned intends to hold for a lengthy period of time. I say, therefore, that the Clause would in no way encourage the ownership of shares by small investors who wish to build up a portfolio of shares during their lifetime. It would, of course, help much more those who wish to buy and sell shares continuously, which is, of course, not an activity that can be undertaken with any success by amateurs operating without any knowledge and with practically the whole of their savings. It would be a very dangerous thing and something to be discouraged.
In any case, I do not know whether the Clause is a practical one. How can one distinguish individual transactions from a series of transactions which do not exceed £500? Over what period of time, for instance, is this condition to 73 operate, and what is to be the sort of total value over the period of time, and so on? It seems to me that it will be extremely difficult to operate a Clause of this type with these conditions. I should not have thought that there was much of a case to be made out for the Clause at present.
On the second ground which the hon. Member for Huddersfield, West put forward for making this change, there may well be a case for abolishing many of the Stamp Duties on the ground that they are an irritation and a nuisance and do not bring in any great revenue.
§ Mr. John Diamond (Gloucester)
There is very little that I wish to add to what has been said by my hon. Friend the Member for Edmonton (Mr. Albu) in his short speech. I should, perhaps, preface my remarks by saying that I feel a good deal more at home in talking on this Clause than I did on the previous one, which, I gather, had to do with rented suits—[Interruption.]—my owner-occupied suit.
As far as the Clause is concerned, I understand that the objections to the present system are, perhaps, three in number. The first is that it is a great nuisance. Those who are more experienced practitioners than I in this field will perhaps know more about it. My impression is that of all the Stamp Duties which work smoothly this duty works the smoothest of all. There is a simple machinery by which it is collected, and I should not have thought that the objection could be sustained on the nuisance of collecting the revenue. Those of us who are interested in spending revenue on good social purposes are also interested in raising revenue painlessly.
Another objection was that dealt with by my hon. Friend the Member for Edmonton, the objection that the present system prevented the wider ownership of shares of industrial companies, particularly of equity shares. I should have thought that precisely the opposite could be argued—that not only is it no deterrent, but, in fact, it is an encouragement to people once they have invested their money not to sell the shares in order to use the money for other Purposes.
Once a person has paid the additional cost of the Stamp Duty on acquiring shares, he is deterred from selling them 74 because they would have to go up considerably in order to cover not only their original cost but the brokerage and Stamp Duty as well. Therefore, one is encouraged to hang on to the shares.
There are all sorts of good reasons why there should be a wider ownership of shares. I gather that this was just a way in to the usual scheme which the Liberal Party was putting forward. The proposed method does not commend itself to me particularly, nor, I am quite sure, will it commend itself to the broad masses in the trade union movement. There are far better methods of achieving the object the Liberal Party has in mind than the one it is putting forward. It would not be appropriate to go into the details at the moment, although I would be delighted to do so. So far as the Liberals are concerned, one must not be very worried about the present problem of Stamp Duty.
At present Stamp Duty is an effective deterrent to gambling. There are gambling transactions in very small amounts, and the limit of £500 would not exclude the majority of them. It is also quite impossible to find exactly what the transactions are, or to have any means of ensuring that a series of transactions is not involved. Normally it is the practice of those who gamble in any way to have large numbers of names of so-called investors who may all be acting for the same person, or there might be slightly different interests, and, therefore, one could justify a declaration falling within the proposal in this new Clause.
The new Clause would encourage gambling and not achieve the purpose of eliminating the majority of gambling. Even its reference to a series of transactions would not do that. Far from discouraging the retention of investment, retention of investment is encouraged. As the reasons put forward for the new Clause do not commend themselves to me, and as I hope others will find themselves of the same view, this Clause should be resisted.
§ The Economic Secretary to the Treasury (Mr. F. J. Erroll)
I shall not follow the hon. Member for Huddersfield West (Mr. Wade) into a general discourse on the subject of Stamp Duties and whether they are right and proper 75 at present or not, but I thought it rather naive for him to describe—albeit by means of quotation—Stamp Duties as a nuisance. Of course, all tax collection seems a nuisance to a greater or lesser degree to the person who has to pay.
§ Mr. Erroll
No, but I think the use of the word "nuisance" in a Review of this sort might be described as a somewhat naive description of Stamp Duties. That was reinforced somewhat by the hon. Member for Huddersfield, West. The question of whether Stamp Duty should be used to raise revenue to such an extent was, I think, admirably dealt with by the hon. Member for Gloucester (Mr. Diamond) in his owner-occupied suit, who pointed out that it was a very easy way of receiving revenue—which, of course, is one of the main advantages of maintaining Stamp Duties.
I am glad that the hon. Member for Huddersfield, West, in moving the new Clause, pointed out that relief for small transactions other than in stocks and marketable securities was already available and has always existed. The reliefs now in force were improved, in 1952, in 1956, and again in 1958. The improvements in the reliefs for small transactions, as hon. Members will know, were designed to encourage home ownership. The proposal of the hon. Member would, however, not be appropriate for marketable securities. It would be impossible to supervise and the duty could only too readily be avoided. As I think he pointed out, in the case of convey, ances and transfers on the sale of property other than marketable securities, it is a condition of applying the reduced rates of duty that the instrument should contain a certificate 'that the transaction does not form part of a larger transaction, or a series of transactions in which the total consideration exceeds the specific amount for which the reduced rate of duty is applied.
76 This procedure could work satisfactorily in the case of a single piece of property such as a house or land or whatever type of property attracts the relief, but everyone will agree that such a requirement would not suffice to control the application of relief to marketable securities where the consideration is not more than £500. There would be nothing to stop a purchaser of a given stock or security buying some more of the same stock or security by means of a separate transaction shortly afterwards, or alternatively, perhaps buying a second lot of the stock through another dealer and transferring both parcels containing the necessary certificates. So the proposal would not be satisfactory in practice because of the opportunities of avoidance.
I was rather surprised that the hon. Member should put the new Clause forward. A Liberal Party pamphlet entitled "Ownership for All" was published as recently as May this year—a pamphlet which acknowledges the assistance it has received in the form ofvaluable advice from Mr. Donald Wade, M.P.It is interesting to find some of his advice enshrined on page 13. Under the heading "Removal of tax obstacles", the pamphlet makes reference to the difficulty and inequity of any attempted relief for small transactions and says:e.g. Unit Trusts' investment deals would gain no benefit from relief limited to small parcels only; and …Here is the important point—evasion would also be easy.Here we have the spectacle of a respectable Liberal Member of Parliament offering one sort of advice to Liberal headquarters when a pamphlet is being drawn up and offering totally different advice to this Committee. On reflection, I am sure he will agree that the former was the right advice and he will agree that we ought to reject the proposed new Clause.
§ Mr. Wade
I am sure the hon. Gentleman will agree that the recommendation in the booklet was the abolition of this Stamp Duty. I made it clear in my opening remarks that I should welcome total abolition. However, I foresaw the difficulties in taking a step towards that objective. If we have 77 learned anything from this debate it is that there are some difficulties in taking this step and the total complete abolition would be simpler. I agree that that would be simpler.
The other purpose in bringing forward the new Clause was to ascertain whether the Government had any intentions on this matter. So far as I understand, the Government have no intention of doing anything to facilitate the transfer of shares. I do not propose to press this new Clause to a Division, but I am disappointed that no helpful information has been forthcoming from the Government.
§ Question put and negatived.