HC Deb 08 July 1960 vol 626 cc861-926

Order for Third Reading read.

11.5 a.m.

The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory)

I beg to move, That the Bill be now read the Third time.

Mr. Ellis Smith (Stoke-on-Trent, South) rose

Mr. Speaker

I observe the hon. Member for Stoke-on-Trent, South, on his feet, but I did not feel able to select his Motion for recommittal of the Bill: That the Order be discharged; that the Bill be recommitted to a Select Committee— to which there is attached an Instruction in the name of the hon. Member: [That it be an Instruction to the Select Committee on the Finance Bill that they consider what Amendments are required in the Bill which would by taxation prevent a repetition of the large-scale expenditure which took place prior to the last General Election, the object of which was to prevent the natural expression of democracy.]

Mr. Ellis Smith

I am surprised to hear that, Mr. Speaker, because if we study Erskine May we find that we have behind us centuries of Parliamentary practice, centuries of the usage of this House—

Mr. Speaker

One of them is, unfortunately, that I cannot allow the hon. Member to make a speech at this time, when there is no Question before the House. It is not the practice of the Chair to give reasons for not selecting, but I can assure the hon. Member, as a matter of courtesy, that he is being fairly dealt by. Perhaps the hon. Member will contemplate this: unless the recommittal Motion is directed to the Instruction that he has on the Order Paper, it is a manifest abuse of the process of the House. If it is re- lated to the Instruction, he is in grave difficulty, because if the Instruction is not related to taxation it is beyond the scope of the Bill and is, therefore, out of order. If it is related to taxation it is out of order because it imposes a charge. The hon. Member is in a dilemma. I hope that we need not take up time about it.

Mr. Ellis Smith

With all due respect to you, Sir, my submission is based upon a long experience and careful study of the procedure. I want to make out a reasoned case and to ask you to consider it so that we can give reasons to show why, on this occasion, we have Parliamentary practice on our side.

Mr. Speaker

Order. I am sorry. I have tried to exercise the maximum possible courtesy to the hon. Member. I am not allowed, consistently with my duty, to let him argue with me about my reasons for not selecting his Motion.

Mr. Ellis Smith

I am not arguing with you, Sir. What I am doing is asserting a private Member's right to interpret the procedure and Parliamentary practice so that we can deal with a serious challenge to democracy with which we are faced in this country.

Mr. Speaker

Order. I am sorry, but I must insist, in the interest of the House as a whole. I cannot allow the hon. Member to argue, or to make submissions about this. The fact is that his recommittal Motion has not been selected.

Mr. Ellis Smith

On a point of order, Mr. Speaker. I want to put the point of order so that you can consider it. That has been the custom in the past—

Mr. Speaker

Order. If the hon. Member, under the guise of a point of order, is inviting me to select his recommittal Motion, I cannot hear him. I have exercised the utmost courtesy. If the hon. Member has a point of order I would like to hear it, but I do not know what it is.

Mr. Ellis Smith

With all due respect, Mr. Speaker, my record is such that I do not do anything under the guise of anything. I was brought up to be too straightforward to try that one on. I can assure you that I am not doing that.

I have had a little experience in life and, like you, have studied Parliamentary practice and usage. I am not arguing with you, Sir, for I have too much respect for your position to do that, but Mr. Speaker asserted himself to defend the five Members, and based upon the defence of those five Members is the constitutional right of the House of Commons to be the supreme authority in this country in dealing with finance.

I am asking for the support of Mr. Speaker today so that, in accordance with long established Parliamentary rights, individual hon. Members can make a reasoned case, before we go into the merits and demerits of the matter, for discussing the Motion. We seek Mr. Speaker's support so that we can bring up to date, in the mid-twentieth century, Mr. Speaker's defence of the five Members.

Mr. Speaker

I have enjoyed this very much, but I am not entitled to enjoy it at the expense of the House in general. This has nothing to do with the five Members. It is to do with whether or not I should select the recommittal Motion. The fact is that I have not selected it. With the greatest respect and affection for the hon. Member, I cannot hear him further on this point.

Mr. Stephen Swingler (Newcastle-under-Lyme)

May I ask a question about your Ruling, Mr. Speaker? I understand that you have ruled the recommittal Motion out of order on account of the Instruction, which I understood you to say was out of order if it dealt with taxation in that it raised a charge, or was out of order if it did not deal with taxation.

As it stands, the Motion for recommittal is a separate Motion. I know that my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) has gone into this matter with great care, and there are precedents for such Motions for recommittal being accepted at this stage of the Finance Bill. Are you ruling a Motion such as this out of order?

Mr. Speaker

I am not ruling anything at all. Just as a matter of courtesy to the hon. Member for Stoke-on-Trent, South, I tried to explain the difficulty attached to his recommittal Motion. It is not the practice of the Chair to give reasons for not selecting a Motion, and nor do I wish to create a precedent against myself by doing so, but, just as a matter of courtesy to the hon. Member for Newcastle-under-Lyme, (Mr. Swingler), I will explain.

Unless the recommittal Motion related to the Instruction, I should not be prepared to call it, as it would be a manifest abuse of the process of the House. I will explain why simply so that the hon. Member can quickly understand. The House itself, in Committee of the whole House, has been right through the Bill. It would be an abuse of the process of the House then to invite a Select Committee to go right through the Bill again. That is to what, without the Instruction as a specific reason for the recommittal, the recommittal Motion would relate. It would be an invitation for that to be done and I would regard that as an abuse of the process at this stage and would not, on that ground, select the Motion in these circumstances.

I hope that we can now get on. I have tried to be as courteous as possible and I have departed from the proprieties to explain my reasons.

Mr. Ellis Smith

Further to that, Sir. If you will be good enough to look at the Order Paper you will see that we are not asking that the Select Committee should go all through the Bill. I have studied this matter much too closely to make a proposal of that kind. What we are asking is that the Select Committee should deal only with the need to prevent a recurrence of what happened last year. Those would be the narrow limits.

I know how long we spent on the Finance Bill in Committee and it would be outrageous to suggest that we should go all through the Finance Bill again. However, Erskine May provides for the procedure, which has been followed in the past, and Mr. Speaker has called upon at least two hon. Members to state their case for asking for the recommittal. With due respect, I ask you now to consider that aspect of Parliamentary practice.

Mr. Speaker

It is not my practice and it is not going to be my practice to allow argument with the Chair about its reasons for selecting or not selecting. I have enjoyed this very much, but it must come to an end.

Mr. Ellis Smith

Mr. Speaker—

Mr. Speaker

No. I am sorry, but I cannot hear the hon. Member further.

Mr. Ellis Smith

I have not enjoyed it, Sir. Life with us is too serious for us to enjoy a thing like this. We are asserting our rights and we have had the example of previous practice in this sort of thing. Whenever we have been able to state a case to Mr. Speaker, or to other authorities of the House, we have been heard with the maximum courtesy—and nobody appreciates that more than I do—and consideration has been given to the points which we have raised.

I am the very last to create difficulties, or to wish to be thought to be doing so, but we know our rights and that is all that we are asserting this morning. It is the long-established right of the House to control finance, and in that contention we have the whole of Parliamentary practice and generations of usage on our side. If we are to be ruled out of order, then we have to accept that, but, having regard to Parliamentary usage and practice, by which the conduct of the House is governed, I would have thought that you, Mr. Speaker, would at least have asked for two hon. Members, as has always been the practice in the past, to state their case for the recommittal.

Mr. Speaker

I hope that neither the hon. Member nor anybody else will ever have reason to complain of want of courtesy from me in the discharge of my duties, but, unfortunately, I have also the rights of the House as a whole to protect at the same time. If the Recommittal Motion were selected, then I would comply with Standing Order No. 50 and there would be speeches about it; but it has not been selected and I am very sorry to have to insist that, in the interests of the House as a whole, I cannot hear the hon. Member further on this point.

Mr. Ellis Smith

That means to say—

Mr. Speaker

It means that I cannot hear the hon. Member further. The Chancellor of the Exchequer.

Mr. Ellis Smith

Mr. Speaker—

Mr. Speaker

The Chancellor of the Exchequer.

11.17 a.m.

Mr. Amory

We have reached the ultimate stage of another Finance Bill and I think that we can feel something of the enthusiasm and relief of Xenophon's soldiers who, when mounting the final crest and coming at last within sight of the end of their travels, cried, "eaaccr-rx kavr-ra"; or, like stout Cortés, when, with eagle eyes, he gazed upon the Pacific; or, coming rather nearer to the present time, Dr. Barbara Moore herself cannot have been more relieved when Land's End, or, I believe, now New York, hove into her view, than I am to utter these sweetly musical words, "I beg to move, That the Bill be now read the Third time."

The Bill to which we are giving final consideration today is, indeed, a lengthy Bill—in its final form no fewer than 79 Clauses. It grapples with some very difficult subjects. It is, admittedly, in some of its detailed provisions, distressingly complicated, inevitably so, I believe and, owing to the nature of the matters with which it deals, abstruse and tiresome to digest.

The Parliamentary draftsmen, on whose patient skill and ingenuity we depend so much were set a formidable problem this year. Indeed, in retrospect, I feel some measure of blame for having, by the number of proposals which, in my zeal, I put forward, some-what overestimated the digestive capacity of the Committee and the House. If that be so, I express my regret, but I have no regret whatever to express about the choice of contents of the Bill in the circumstances of the year, apart from their volume.

Before I come to the contents of the Bill I wish to express my thanks to hon. Members on both sides of the House for the many hours of patient and careful consideration which they have given that their task. I have been grateful for their criticism and for their support. Hon. Members opposite have subjected us to a stern cross-examination of the contents of the Bill. I remember reading, in an author's preface, a tribute to his wife in these words: I must pay tribute to my wife, without whose devoted co-operation this book would have been completed in half the time. I hasten to say that I wish to use no such words about the Opposition this year, because although they have carried out their duties thoroughly I gladly acknowledge that at no time have they held up or extended discussion beyond reasonable bounds. The right hon. Member for Huyton (Mr. H. Wilson), at an early stage of our deliberations, assured me that he and his hon. Friends approved of more than they disapproved of in the Bill, and would not obstruct its progress. As I have always found in the case of the right hon. Member, he has fulfilled the assurances that he gave me.

In particular, I would express my thanks for the invaluable assistance of my colleagues in the Government, including the Law Officers, who, this year, have performed prodigies of lucidity in exposition. It is not easy to pick out hon. Members to mention, when so many have participated, but I would refer to the analytical skill and wisdom of my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) and to the technical expertise of my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) who, like many a great man at times of intense intellectual pressure, found at one moment, so I understand, relief and relaxation attired in a dressing gown—but without a nightcap. Then there was my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) who made some very constructive suggestions for improvement at various points in the proceedings.

Among hon. Members opposite I would pay a respectful tribute to the forensic skill and invariable courtesy of the hon. and learned Member for Kettering (Mr. Mitchison). No one can put a Minister where, no doubt, he occasionally ought to be put more disarmingly than the hon. and learned Member. The hon. Member for Sowerby (Mr. Houghton) has once more demonstrated his encyclopaedic knowledge of tax law and practice in an instructive and agreeable manner.

The hon. Member's hon. Friends, on both sides of the House, will not wish to quarrel with the tremendous triumph he achieved at 12.56 yesterday morning when, by sheer force of his eloquence, he compelled the Government to adopt his policy and not the Government's policy on the final Clause. Those words: in page 83, line 18, column 3, at end insert: 'In section one hundred and seventy, in sub- section (3) the words from "and if" to the end of the subsection'".—[OFFICIAL REPORT, 6th July, 1960; Vol. 626, c. 647], can be framed in letters of gold as a tribute to the distinguished service that the hon. Member has rendered, on the wrong side of the House, during the past eleven years.

It would also be churlish not to recognise the tenacity of purpose and mental agility of that formidable partnership, the hon. Member for Gloucester (Mr. Diamond) and the hon. Member for Glasgow, Craigton (Mr. Millan). I see the hon. Member for Gloucester sitting in an unaccustomed place today, on the Opposition Front Bench, and if that justifies congratulations I warmly extend them to him. Those two Members, in partnership, competed in rivalry for the title of the hon. Member with the profoundest comprehension of the least instantaneously comprehensible passages of the Bill. The distinguished society of which they are ornaments—and to the membership of which I at one time had impertinent ambitions—would have been well satisfied with their display of professional prowess.

I am restricted by the rules of order, in moving the Third Reading, to dealing only with what is contained in the Bill. This still leaves me with a modicum of room for a prolonged oration, but were I to pass in review everything in the Bill I fancy that I should have for my audience only yourself, Mr. Speaker, and those officers of the House whose duties forbid them to escape. So I should like to take a brief look at the Bill as a whole. For the past few weeks we have been immersed in a mass of complex detail, and before leaving the Bill it may be useful to look once again, but in a much more general way, at what we have been doing.

The House will remember that the economic background of the Budget this year was one of significant though not alarming pressure on our resources. It seemed to me to demand some measure of restraint if stability was to be maintained. I shall not examine that matter further today, for we are to debate it on Monday. Suffice it to say that—leaving aside measures outside the Budget—the implication for the Budget was that I had to balance any reliefs I felt able to make by increases in taxation rather more than big enough to offset them.

That has set the pattern for the Clauses relating to taxation. On the one hand, there is a number of reliefs, particularly in allowances for dependants and Estate Duty, which are not large but which have been generally welcomed as giving a measure of help in justifiable directions—and the final abolition of Entertainments Duty in respect of cinemas has been universally approved. On the other hand, there are the limited but necessary tax increases, which are not popular. No increases are likely to be.

But these have been generally accepted as just and reasonable, and as involving neither an undue burden on business nor hardship to the individual I say this in spite of the—as some of us thought—rather synthetic indignation of the Opposition about the increased duty on tobacco, which has been effectively answered by the continued rise in sales—in volume as well as value —since the Budget.

One Clause slightly apart from the main topics of the Bill deserves a brief mention, namely, Clause 19. None of us wanted a flat-rate allowance for the great majority of National Insurance contributors. Yet the Clause affords a practicable solution to a vexatious administrative problem, even if it falls slightly short of a precisely accurate distribution of relief. The truth is that a prerequisite of the great benefits that flow to the State and to taxpayers alike from the system of deduction of tax at source known as P.A.Y.E. is a system not so complicated that the machine cannot cope with it. Some minor inequalities between different taxpayers must be accepted as the price we have to pay for the necessary simplicity.

Apart from the few small measures of adjustment, which I shall not review in detail, there remain the two big blocks of Clauses which make up the bulk of the Bill. I refer to those dealing with tax avoidance and to Part III dealing with penalties. The Clauses on penalties—20 of them—could have been dealt with at another time and in another Bill, but the Government felt that we should not defer the implementation of this overdue set of reforms, and I am sure that the House will agree— now that its work is done—that this decision was right.

This thorough-going reform of the penalties code is one of the main achievements of this year's Finance Bill, and it is one which we may consider with some satisfaction. I am grateful to my right hon. and learned Friend the Attorney-General for the deep thought that he gave to this matter before the penalty provisions were drafted.

I think that it is generally agreed that the old code has been administered wisely and discreetly; but it was a shocking muddle and parts of it were really hardly defensible. All that has been swept away, and in Part III of the Bill we have a new scheme, a rational and coherent one. We have greatly reduced the maximum penalties. We have made all penalties open to mitigation by the High Court as well as by the other authorities concerned. We have instituted a now right of appeal to the courts in penalty proceedings.

At the same time—and it is important to emphasise this—we are not giving ground to the tax evader. That would have been the wrong thing to do. On the contrary, the Bill expressly provides, subject to proper safeguards for the taxpayer, that tax which has been lost to the Revenue through the taxpayer's fault shall be recoverable by assessments outside the normal six years and shall be recoverable with interest.

The part of the Bill which has attracted most attention and comment is that large block of Clauses in Part II dealing with devices for the avoidance of tax. I have been vigorously attacked on these Clauses, both for going too far and for not going far enough. When this happens it leaves me occasionally with a virtuous feeling that I have managed to hold the balance between severity and leniency about right. That is what I feel about these Clauses. I only want to make two general comments on them.

The first is that they have been much criticised for their complexity and obscurity. I am as keen as anyone that the law should be expressed clearly and in plain words whenever possible, but I have to admit that in this sort of fiscal legislation this ideal cannot, in fact, be completely attained. The devices which we are trying to counter are themselves so intricate and involved that brevity and simplicity in describing them is, I believe, humanly impossible.

Further, the operators are so ingenious in twisting to their advantage the slightest ambiguity in the law that we have to seek precision in matters which, as my hon. Friend the Financial Secretary pointed out yesterday, I think, or the day before, would often really better be put in mathematical formulae than in words. That has to be done at the expense of simplicity in drafting. The result, I admit, involves at times a painful misemployment of the English language.

My second comment is that the debates on Clauses 20 to 27 have demonstrated how hopeless our task would have been had we attempted to deal with the field covered by Clause 28 by provisions designed to deal with specific avoidance devices. We were in these earlier Clauses dealing with a small number of devices, of limited scope though serious in their effects. But to deal with them we have had to produce a series of Clauses of immense complexity, to which we have had to make additions and amendments right up to the end of our deliberations.

It is hardly surprising that in the more complicated field of dividend stripping and bondwashing we were quite unable in our legislative processes to keep pace with the ingenuity of the avoiders so long as we tried to deal with each new device after it had been put into practice and thereby, in due course, come to notice. I am sure that these Clauses, however distasteful, are absolutely essential.

Whether we like to acknowledge it or not, there are many people who are willing to go to great lengths to escape from their tax liabilities in these ways, and the sums involved are large. Furthermore, they are skilful people who make it their business to devise new methods of avoidance and to profit by instigating others to use them, and even to create schemes for extracting tax from the Revenue till.

This habit of tax avoidance has become so ingrained in certain limited quarters that it is pursued over the years as a settled way of behaviour and almost as an established business on its own. It is absolutely necessary that we should be stern in countering these activities. If they are allowed to persist not only could the loss of revenue be very great, but the effect on the rest of the public is most unfair.

In general, the British taxpayer is honest and straightforward; our system really would not work if he were otherwise. But I say to the House that we must safeguard that honesty and frankness by securing that the public faith in the fairness of our system is not shaken. Nothing, I am sure, could be so corrosive of those qualities of which we are proud as a feeling that large numbers of individuals are engaged in tax avoidance on a substantial scale and are getting away with it. I therefore make no apology for the very extensive part of the Bill which is concerned with anti-avoidance measures.

Complexity is increasingly a basic feature of modern life. Business organisation and activities are no exceptions. We cannot get away from it. The other day I heard of someone who went to the Motor Show and asked for a car with one cylinder. It was explained to him that there was not one. He was asked why he wanted one. He said, "Well, if anything goes wrong I know where to look for the trouble". One sympathises with that view. This growing complexity pervades every branch of our life.

Hon. Members must recognise that the tax code in every modern State has now to be so elaborate and wide-embracing to keep pace with these developments that any attempt to deal in any serious way with substantial problems such as avoidance is bound to involve long, complicated and contentious provisions.

Most of the provisions follow the tradition of anti-avoidance legislation in this country, namely, to deal specifically with the particular manifestations which have come to light. But clause 28, on the other hand, breaks rather new ground. Developing ills may need new remedies, though not, we must see, unjustifiable ones. I am sure that this remedy is the only possible way to fit the circumstances.

Clause 28 deals with bondwashing, dividend stripping and related devices, not by specifying each one separately and precisely but by setting out the essential ingredients of all such schemes and rendering liable to counter action cases that fall within the description. Thus, it is designed to be effective not only against schemes of which we are already aware, but also against others of the same sort and having the same purpose which might be devised.

I hope that in this field it may be an answer to those who complain that the Revenue is apt to be well behind the avoider. But equally, on the other hand, the Clause as it stands certainly gives no sweeping or arbitrary power to the Revenue authorities. On the contrary, we have left as little discretion as possible to the executive Department concerned.

The main function of the Board of Inland Revenue will be the executive one of indicating how the tax advantage is to be denied to the taxpayer in appropriate cases. Hon. Members will remember that we have provided full facilities for appeal at more than one stage against the Board's decision, including the right to resort to an entirely new tribunal specially set up for the purpose.

Obviously, the operation of this Clause will want close watching and careful scrutiny as time goes on. If in practice it should prove either too harsh or ineffective it can be discussed on an appropriate occasion in this House with a view to further amendment if any further amendment is required. But having given with my right hon. and hon. Friends' assistance this subject my very best consideration—in the light of all the comment that has been made since I opened my Budget—I believe that the Clause as it stands represents a reasonably balanced approach to a hitherto intractable problem.

This, then, is the Bill as we now survey it. It enacts a Budget which after three months I still regard as about right in its impact on the economic circumstances of the day. It embodies a number of worthwhile reforms in the field of taxation and introduces valuable improvements in the new penalty code. Finally, as I have said, it takes comprehensive, and I trust, an effective series of steps to bring under control the sort of abuses which, if left unchecked, would not only mean a loss of revenue on a big scale, but also strike at the roots of that confidence in the fairness of the impact of our taxation which is so fundamental to the way in which we conduct our affairs. It represents an achieve- ment which, I think, we can regard with satisfaction as the result of our labours.

In taking leave of the Bill I think that we shall do so to some extent with the feelings that Gibbon must have had when he penned the last few lines of his great work, a wistful feeling that life may seem a trifle empty and flat and purposeless without it.

11.41 a.m.

Mr. John Diamond (Gloucester)

I well remember an occasion when the late Dick Stokes, whose memory is affectionately regarded by so many of us, was appearing at this Box for the first time as a new Minister. After he had gone some way through his speech he got rather mixed up between his papers and his argument and, in his typically bluff, attractive and candid manner, he said to the House, "I realise I am not doing very well, but I hope to do better next time." I can offer my apologies in advance. I cannot, unfortunately, go beyond that and make any promise. Dick Stokes was, after all, a Minister and had reasonable expectations of coming to the Box a second time.

In the circumstances, I think it would be right for me to start off by being as non-controversial as I possibly can. Nothing is easier at this stage, because what I want to say—what I want to say very much—is something which I am sure the whole House would like me to say; namely, how conscious are hon. Members on this side of the House of the extremely patient, enduring courtesy of the Chancellor and all his team which permeated from the beginning to the end all the discussions we have had on this enormously complicated and lengthy Bill.

It is something which those outside can hardly appreciate if all they do is read the reports of some of the discussions and arguments. They would be unable to be aware of the tone of the debate underlying the arguments, or of the personal good will which leaps across the Table at the same time as the antagonistic argument which is put in the interests of arriving at the truth as one may see it. I particularly wish to congratulate those who served under the Chancellor, because their task must be almost beyond human endurance.

To have to come here year after year, dealing with loopholes in the tax law and maintaining that the suggestions they are making are likely to close the loopholes, refusing Opposition Amendments which will improve the wording and saying, "No, what we have is just about right" and then having to come back again year after year to swallow their words and admit that everything they said a year ago was wrong and that they have to do something more about it—this is really almost beyond human capacity to endure. That they have done it with typical patience and courtesy and have read their briefs in a most attractive manner, is something for which we should all be most grateful.

If I may have the indulgence of the House a little further, I should like to thank those who sit patiently in our midst, who are not, of course, allowed to take part in any of these debates but who help enormously. They listen hour after hour, without any chance of protest or reply, to speeches by backbenchers on this side of the House who are searching vigorously for any stick with which to beat the Government arising from faulty drafting or something of that kind, who, having advanced with the stick firmly grasped in their right hand, find that at the end of the argument they have got hold of it at the wrong end. They listen to speech after speech from Ministers explaining something which before they got up was as clear as a bell—and pretty clear to most of us—but which by the time the speech is finished has been blanketed in impenetrable fog. This must be a trial which I hope I never have to endure, although I realise that, notwithstanding the fact that they are unable to take part in our wordy battles, it would nevertheless be true to comment that it is indeed they who have the last word.

I come now to the Chancellor who, above all, has been considerate so far as be could and patient in the extreme. He has not always been supported as well by his own side as he might have been. On an occasion, which for all we know may not be repeated next year, I should like to assure the right hon. Gentleman of our personal good will and appreciation. I personally wish to pay tribute to someone who, as one would expect, has kept the standard of Chancellors in this Parliament and country as high as it ever has been.

Because of my personal warm feelings towards the Chancellor, I was concerned when I heard various remarks about him overworking himself and perhaps even getting a little tired. On one occasion recently when we were about to have an all night sitting—as I feared by the length of the Notice Paper—I thought it would be right if I slipped across to the chemist and got something which might come in handy in case the Chancellor, as happened on a previous Budget occasion, showed signs of having driven himself too hard. I explained my difficulty to the chemist who, in a most helpful way, said, "We have the very thing you want." He showed me a box on which was written very plainly, "Dr. Geoffrey's Tip-Top Tablets for Tired and Toil-Worn Treasury Ministers; Protects equally against Tiresome, Truculent Tories and Tormenting Tax Experts on t'other side." Armed with these we listened to the debate.

I hope I have paid full tribute, as I wished, to the right hon. and hon. Gentlemen opposite who have taken part in this debate. I think, therefore, that at his stage it would not be wrong for me to claim some little credit for my own side for the great effort shown with regard to this Bill. I claim that my parity had shown itself, as ever, knowledgeable, hardworking and united in its determined opposition and its attempts to improve the Bill, to keep Ministers alert and to play a full part as co-trustees of the nation's resources.

As the Chancellor said, this has been a long and difficult Bill. The right hon. Gentleman referred to the 79 Clauses, but he did not mention the eight Schedules or refer to the 2,693 pages on the Notice Paper dealing with Amendments and new Clauses which had to be read from time to time. Indeed, it was an extremely complex and highly technical Bill, as the Chancellor said. At one stage anyone coming into our deliberations and not having heard what went before and hearing us talking about "top slicing" and even "multiple top slicing" might well have wondered whether we were discussing fiscal affairs or some kind of ritual murder.

My right hon. and hon. Friends, as I think will be accepted by the whole House, and as was to be expected, contributed to the fullest of their qualities, abilities and talents. I hope I may be excused for mentioning only one hon. Member on this side of the House. He is not here and so I am permitted to do so. I refer to my hon. Friend the Member for Glasgow, Craigton (Mr. Malan). He brought to his work extreme knowledge, great industry and a modesty which was appropriate to his years and length of membership of this House. It was very acceptable to all of us and demonstrated beyond any doubt how the House is enriched and the interests of the nation best served when a General Election produces an additional Labour Member of Parliament.

I am in a little difficulty as to whether I am in order in mentioning the hon. Member for Gloucester. If the hon. Member for Kidderminster (Mr. Nabarro) were here, I am sure he would agree that there could be nothing to prevent one in any circumstances giving oneself a little pat on the back. His motto in life is that under no circumstances should you hide your light under a bush. Therefore, with apologies, I want to say that I did my job as well as I could. I worked very hard and put down lots of Amendments. I achieved very considerable success, because I was able, with the help and co-operation of the Chancellor, to have the first "has" from "has has" removed, although no arguments I could produce were able to take out the first "off" of "off of".

Mr. Amory

The hon. Member struck at the very heart of Government policy.

Mr. Diamond

It is nice to know the reason. As at this stage we are dealing with the subject in a somewhat light-hearted fashion, may I refer to a matter outside this House which caused a little anxiety, a reference by my right hon. Friend the Member for South Shields (Mr. Ede), my hon. and learned Friend the Member for Kettering (Mr. Mitchison) and myself to the organisation called the International Fiscal Association. Those who were present at the time will realise that this was a very light-hearted affair and that no malice was involved, but apparently on a reading of HANSARD—and more particularly on a reading of Press reports—it might be that a misinterpretation was put on this. Therefore, I should like to make it quite clear that nothing sinister was intended. I accept that that is a very high-powered body whose object is to keep capital gains free of tax.

To deal with the contents of the Bill, this is a Bill which, as the Chancellor is no doubt aware, we finished discussing yesterday morning. It was printed for the first time yesterday evening, and we are now debating it this morning. I do not think anyone could complain that the House of Commons is dilatory in the way in which it gets on with its job. Equally, I do not think anyone can feel satisfied that we have had time to give this Bill that careful final review which is the whole purpose of Third Reading. I hope, therefore, that on future occasions it will be possible to have a further interval of time between the close of Report stage and the start of Third Reading so that those of us who want —or, I put it this way, who have to have —an opportunity of reading it and studying it may do so other than at four or five o'clock in the morning.

I am, of course, limited on Third Reading to discussing what is in the Bill. Therefore, I cannot mention anything about the current economic situation because there is nothing in the Bill which deals with the problem of exports, there is nothing in the Bill which deals with the economic division of Western Europe, there is nothing in the Bill which deals with the high rate of interest, and nothing in the Bill which deals with the fantastic increase in the price of building land. All those matters, apparently, were not thought to have any relevance at the time the Bill was prepared.

Two parts of the Bill have caused a great deal of interest, as the Chancellor has said. In addition, there is in Part I the repeal of Entertainments Duty. The Chancellor was right in saying that that is acceptable in all parts of the House. All one may say about that is that it is at least two years late and, as the excited orator said, it represents an attempt to unbolt the cinema door long after the patrons have fled. The main interest centres on Part II, the Part described by the Chancellor as the anti-avoidance section, but which I would describe as the "fair shares in tax" section. That endeavours to see that all subjects pay their fair share as intended by Parliament.

It takes up a very large portion of the Bill, eighteen Clauses, and there is among them one Clause which deals with the Stock Exchange fraud which came to light during our debates. The other seventeen deal fundamentally with the devices which have been brought into being and have the effect of turning taxable trading profits into tax-free capital gains. I shall not weary the House with all these Clauses, although I have an analysis of them, except to deal with one of the group, Clause 27. By Clause 27, I mean Clause 26 as it was yesterday and Clause 25 a few days before. Clause 27 deals with fraud and is quite separate, but the others in this group are concerned fundamentally with the devices which the Chancellor well described on Second Reading as attempting to disguise trading profits as capital gains which, of course, would go free.

Special interest in this section, as the Chancellor said, is devoted to the new Clause 28, dealing with various kinds of stripping, dividend stripping, forward stripping, stock stripping and so on. In answering the many questions which have been put to me on this subject by some of my hon. Friends, I ought to make it quite clear that, so far as I read the Clause, it deals with the case where a taxpayer strips the dividend from the company to the detriment of the Revenue, but does not deal with the opposite case where the Government by disposing of the equity shares only of steel companies, strips the dividend to the detriment of the nation. That is not in the Clause. This Clause has nothing whatever to do with steel companies or strip mills.

Two important questions arise on the consideration of Part II and all these anti-avoidance measures. The Chancellor touched on one of them. Have the Government done all they reasonably could be expected to do about tax avoidance? The other question is, why are we faced with this proliferation of tax avoidance Clauses? On the question of whether the Government have done everything they could, I refer first to the one separate case, the Stock Exchange fraud, which is dealt with under Clause 27. I am bound to say that many of us feel the Government have not discharged the duty laid upon them when they brought this matter to light of satisfying public opinion that everything that could have been done in this connection has been done.

It is perfectly true that the Government may have seen to it that for the future this kind of fraud will be prevented. One does not know anything like enough about it to know whether that is a reasonable statement, but one hopes it is. I should have thought the Government would have felt bound to have had some kind of inquiry and report to satisfy public opinion that this kind of fraud, which could not have been perpetrated except with the knowledge of brokers, I am informed—except through the knowledge of some approved brokers, I do not say all brokers, of course—on the London Stock Exchange, and perhaps dealing brokers of provincial exchanges. I should have thought the Government would have though it right to have had some sort of full inquiry and statement to satisfy public opinion in that regard.

I am told that this kind of transaction could not take place without the co-operation of an authorised broker. Every broker that I have spoken to says that he has never heard of this kind of transaction. It is quite clear, therefore, that it is probably very few brokers indeed, and very few individuals operating in consultation with brokers, either in this country, or—judging by the way the Clause has been amended—abroad, who have been responsible for what all of us feel—because on this point I sense no difference in atmosphere on either side of the House—has been a plain fraud which, according to the Attorney-General, cannot be proceeded against in common law because of the difficulties of the case and cannot be proceeded against for conspiracy because of the difficulties of proving conspiracy. I should have thought that the Government felt themselves under some obligation to satisfy public opinion a little more before they left this matter.

On all the other tax avoidance Clauses, I feel that the Government have been too generous. Let me say straight away of the argument of the Chancellor that, by being pushed one way on one side and one way on the other he must be right, nothing could be further from the truth. The Chancellor is like a man being offered a chair here and a chair there and who, with his great sense of balance and compromise, carefully avoids either of them and sits flat on the floor. He has avoided doing either job sufficiently well either to satisfy his back benchers, in the views that they expressed, and certainly to satisfy us that the Government really mean business with regard to stopping tax avoidance.

The Chancellor has tackled the tremendously difficult problem of the "golden handshake", and I recognise that it is a very difficult problem indeed. He has not tackled it sufficiently thoroughly. It is not now quite a "golden handshake", in the words of my right hon. Friend the Member for Huyton (Mr. H. Wilson), but is still a handshake with a silver lining to it. There is still a large amount of tax-free benefit to be gained from it. He has been much too lax in dealing with tax avoidance which depends on associates, and on associated companies. Associates who are formally associated are governed by these Clauses, with the result that their manipulations do not benefit them taxwise but all associates not formally and technically associated can go on as before. All that they have to do is to rely upon one another and not have any kind of formal association in order to carry on with what they regard as the good work.

We object very strongly to the way in which hobby farmers have been left in the Bill to enjoy future tax relief on buildings bought in the future and on equipment bought in the recent past. We object to the treatment of dividend strippers who entered into transactions during the three years from 1955 to 1958 when the Government's policy, we now know, was that of retrospection. Dividend strippers entered into their transactions during those three years, and we object to them being allowed under this Bill to continue to have the benefit of their transactions after the six-year period notwithstanding that the possibility of entering into transactions in the future with that benefit has been withdrawn from them.

We feel that the Government have absolutely leaned backwards in their attempts to be fair to tax dodgers. It will still be possible, as will be seen from my reading of the Bill, for the financier's daughter, when mulling over her cherry stones and considering who she is to marry, to count them over one by one: "Stripper, washer, hobby farmer, landowner, rich man hand-shaker, associate dealer, thief—stripper, washer, etc." I do not know where it is likely to finish. Wherever it finishes, she is likely to keep in the standard of life to which she has been accustomed during the Conservative Government's régime.

The second question which I want to address to the House and on which I want to offer some answer is, why have we seen this large increase in the number of Clauses dealing with tax avoidance, and the implied increase in tax avoidance behind it, which is certainly true? The first reason I would give is the change in policy with regard to retrospection which, as the Financial Secretary frankly made clear to us, took place in 1958. From 1955 to 1958 and until after the Budget of 1958 and after the introduction of the Finance Bill of 1958 —from 1955 to that period—the Government's policy clearly was a precise warning covered by retrospective legislation later on.

Many of the people, to whom the Chancellor so properly referred in his remarks earlier, who would have sought to help themselves at the expense of the honest taxpayer were, of course, deterred by the knowledge that there was no certainty whatever that what they were about to do would involve them in any profit, and that if it did not involve them in profit it would involve them in considerable losses, stamp duty, fees and so on. That change of policy, which was made dramatically clear by the withdrawal of the provisions of the Finance Bill between the Second Reading and the subsequent stage, so far as I recollect it, has given a tremendous impetus, as one would expect, to the business of tax avoidance.

It is not surprising, therefore, that we are faced with all these Clauses this year and will continue to be faced with them in future years until the Government tackle the problem fundamentally, because it is now accepted by the Government that there will be a gap of about two years and probably more before tax dodging devices become fully known to the Revenue. During that period the tax dodger can rely on present Government policy, so precisely explained at the Treasury Box by the Financial Secretary, and know that all that he has to do is to enter into his transaction and reap the benefit so long as he can get it through and finalised preferably within one year, but at a fair bet within two years, and if it is very worth while within three years.

As we all know, many of these transactions proceed on the basis that if the tax law is altered all those concerned will have their affairs put back to what they would otherwise have been. There is no problem, therefore, in dealing with it. I repeat as seriously as I can that I regard this as the main impetus towards the increase in tax avoidance with which we are now faced in this Bill.

The second reason is that it is still possible to say that the Government are not serious about stopping tax avoidance. I have indicated earlier why we regard the measures in the Bill as inadequate. Moreover, there are many other devices which are not touched at all by the Bill. To mention only two, as a passing reference, the Government have not attempted to touch the problem of the expense account or the problem of the loss companies. Those are two devices which come to mind immediately and which I think cause a loss of revenue every day of the week.

Beyond this is the Government's refusal to tackle the fundamental problem. I have referred to the essential factor in Clauses 20 to 38, excepting Clause 27, which gives rise to the desire for tax avoidance. Apart from charities, which could easily be dealt with separately and present no problem, we have an inherent illogicality within our tax structure; we have spending money derived from certain sources which is taxed heavily, and with Surtax very heavily, and we have spending money which is derived from other sources and is not taxed at all. In those circumstances, is it surprising that any number of people wish so to arrange their affairs that their spending money derives from the tax-free source rather than from the highly-taxed source?

Unfortunately, as a result of the Government's refusal to deal with this fundamental, inherent illogicality in our tax structure, we have been driven to the delegation of Parliament's authority in one major respect and one respect not quite so major. Clause 28 is the major delegation. It is a bitter pill for either side of the House to swallow. It is a Clause which depends on defining what is a tax advantage and which depends on some other body deciding what the taxpayer's bona fides are and what his intentions were at the time. Those are very difficult things to define, and they are being left to others to decide only because Parliament, under the Government, have been unable to tackle the responsibility of legislating in the fiscal code in the way in which it has always legislated—in precise terms so that people knew precisely where they stood.

The minor delegation can be found by referring to several Clauses in which we find references to such phrases as "such proportion as may be just" and "such expenses as may be just." Who will determine what is just? I say to the hon. Member for Portsmouth, Langstone (Mr. Stevens) that businessmen and taxpayers generally who in future want to know where they stand will not consult their accountants but will presumably consult a justice of the peace to find out.

As long as we are in this difficulty of having a system which divides so sharply tax-free spending money from highly-taxed spending money, we shall inevitably continue to see more and more tax avoidance, with its resultant feelings of social tension, the diversion of energies from constructive work to anti-social activities and, as the Chancellor said, a general lowering of moral standards.

Is it too much to hope that soon the Government will match their responsibilities? They can be assured of our support, although I do not suppose that that will be the final argument. Is not the necessary remedy within the modern Tory interpretation of the theory of the electoral mandate? Was not the ending of tax avoidance and the revision of the tax base specifically mentioned in the Labour Party manifesto?

12.13 p.m.

Mr. Hugh Molson (The High Peak)

This is the first year since 1951 that I have had an opportunity of speaking on the financial policy of the year. During the time that the long and protracted discussions on the Bill have been taking place, which we have heard about this morning, I have been with the Monckton Commission in Africa, and I should, therefore, like to take this opportunity of making a few remarks on the Finance Bill.

I have another reason, too, for doing so. Unfortunately, I cannot altogether disbelieve all the rumours which appear in the newspapers about the Chancellor's future. I should, therefore, like on this occasion to stand up and say what a remarkable tenure of office I believe he has had and what a courageous and wise Finance Bill I believe this to be. I do not know whether my right hon. Friend noted a little chart in this week's Economist. He has reason to congratulate himself upon it. Whereas in the last ten years, sterling, with the French franc, had the worst word of depreciation, during the past year the £ sterling, with the Swiss franc, has the best record of all currencies, with no depreciation at all in value. That is a remarkable record, and it is largely due to my right hon. Friend's 'policy.

No one can expect his record to be regarded as without blemish or blame, and one cannot help noticing the great increase in public expenditure which has taken place. I am reminded of the circumstances in which my right hon. Friend came to office and the resignation of my right hon. Friend the Member for Monmouth (Mr. Thorneycroft). At that time, his resignation was said to be over a small matter of £50 million. My right hon. Friend said that it was not that, but was over the prospect of ever-increasing expenditure by the Government. Looking back upon what has happened, one can say that my right hon. Friend the Member for Monmouth had accurate vision of the future.

I was, I believe, the first Conservative to publish a pamphlet—I did it in 1944—called, "Full Employment and the Budget." In it I urged that it would be possible, by Keynesian budgeting, to even out the booms and slumps of trade. I said that that would be one of the principal ways in which a Conservative Government, like any other kind of Government, would be able to give effect to the declared policy of maintaining, after the war, a high and stable level of employment.

At that time, when we said that what should be done was to budget for a deficit in time of slump and to impose heavier taxation in time of prosperity, the answer which was ordinarily given to me was, "You will find plenty of Chancellors who will budget for a deficit in time of depression, but you will not find one with the courage and integrity to increase taxation in time of prosperity." We can say that the present Chancellor has faced great unpopularity this year in doing what he has done to increase taxation, despite the fact that there was not a deficit upon the Budget.

I am sure that that was the right thing to do economically and also educationally. So much increased expenditure is being pressed for by hon. Members on both sides of the House that I think that my right hon. Friend's action will have a valuable educational effect upon our colleagues in the House. It may have an equally valuable educational effect upon my right hon. Friend's colleagues in the Cabinet.

Whatever may be the ups and downs from week to week and month to month, the ever-pressing danger in this century is of inflation. There are inflationists on both sides of the House. They do not normally call themselves inflationists: they call themselves expansionists, and they are always urging that what is necessary is to increase production, even though we may have almost every man and women in the country employed.

They are not apprehensive of a slight, annual, steady increase in the level of prices. Two prominent hon. Members of the Opposition Front Bench told me in conversation not very long ago that so that the economy should be healthy and vigorous it was desirable that there should be an increase of about 1 per cent. per annum in prices. I pointed out that we reckon that a boy will enter our insurance scheme at the age of 15 and begin to draw a pension at the age of 65; and that an incease of 1 per cent. per annum in the cost of living would mean that the pension for which he begins to contribute at the age of 15 will, by the time he reaches 65, be worth only half that which he expects.

It is for that very reason that the pension scheme put forward by the party opposite at the last General Election contained a built-in element to provide against inflation.

Mr. Speaker

Order. I am sorry to have to interrupt the right hon. Gentleman, but if I allow him to go on in this way I shall have to allow others to do it. I know that there were difficulties about his being here to deliver a Second Reading speech on the Bill this year, but this is Third Reading.

Mr. Molson

I am obliged, Mr. Speaker. The purpose of my argument was to show that the increase in taxation which is provided for in this Finance Bill will have the effect of decreasing the inflationary tendencies in the country, giving confidence abroad, and maintaining thereby the value of sterling in terms of foreign currency.

I was going on to say—I hope that this will be in order—that if the Finance Bill had provided for a deficit, and were not an honest attempt to meet the expenditure which has been increased, it would undoubtedly have the effect of bringing about inflation at home, with all the social injustice that that results in, and the danger of international crisis, such as we have had on so many occasions in the past when the Finance Bill of the spring has been insufficiently severe and it has been necessary for emergency measures to be taken in the autumn.

It is for those reasons that I say that the stability of the £ sterling is of more importance than either increased production or the maintenance of full employment.

In the matter of all-out production, can it be said that this Finance Bill is unduly depressing upon industry? It is so often said that we must go for all-out production regardless of costs. It is often argued by hon. Gentlemen opposite that increased production will have the effect of decreasing costs of production. That is very frequently not the case—for instance, with coal, bricks, and in agriculture.

Does this Finance Bill provide for a sufficiency of savings at home? Will it have the effect of making it impossible for our own economy here to save sufficient and provide for sufficient investment within our own borders? I suggest that at present, with savings of 16.7 per cent. invested in this country, we are doing fairly well. It is very close to what is being done in the United States of America at 17.9 per cent., and almost exactly the same as what is being done in France. When we consider also what is being done in the way of grants by the Exchequer to the Commonwealth, in addition to private investment, it can be claimed that we are making an entirely adequate contribution to the expansion of our economy in the future.

But I say to my right hon. Friend that expenditure is still too high. When the Conservatives came into office in 1951, 31.8 per cent. of the gross annual national product was taken in taxation. It was brought down to 25.7 per cent. last year. I am sorry to say that it is up to 26.6 per cent. in the coming year. I believe that what Mr. Colin Clark has said is true, namely, that any level of taxation over about 25 per cent. must necessarily have the effect of bringing about inflation.

Mr. Amory

I am most interested in everything my right hon. Friend is saying, but I must tell him that I do not know whether that will be the percentage for the present year. As he realises, we do not yet know what the gross national product will be for the present year, so there must be some little doubt about how the percentage will work out.

Mr. Molson

Yes. I realise that there is not much difference between 25 per cent. and 26.6 per cent.

We are still at a point of very considerable danger. I should like to say, in answer to my right hon. Friend's intervention, that, while I hope for an increase in the gross national product, I should have been even happier if his intervention had been to tell me that he thought that there was still a possibility of reducing expenditure, even during the current year.

I am quite sure that there is still scope for very considerable economy. I am not one of those who say that we should not have good social services.

Mr. G. R. Mitchison (Kettering)

On a point of order. I find this extremely interesting, but I am experiencing some difficulty in relating it to the Third Reading of the Bill. I should be very grateful, if I have the chance of catching your eye later, Mr. Speaker, to know that it is all in order.

Mr. Speaker

I share the hon. and learned Gentleman's difficulty. I often do, but I thought that I had better hear exactly what the right hon. Member is founding upon this passage before I interrupted him again.

Mr. Molson

Mr. Speaker, I thought that it was in order on the Third Reading of the Finance Bill. In dealing with the expenditure which has to be provided for, I thought that it would be in order to refer to the expenditure which it is required to cover.

Mr. Speaker

I do not think that is quite right. The right hon. Gentleman must relate his observations to the provisions of the Bill. If we are to follow the argument he is submitting, we shall be able to discuss the whole range of expenditure, because the Bill provides for taxation. That cannot be right.

Mr. Molson

I confine myself to saying that quite obviously the fact that the Finance Bill has had to provide for increased taxation is due to the fact of increased expenditure. I therefore hope that every effort will be made by my right hon. Friend and his successor to bear that in mind and try to bring about a reduction.

This Bill is, in all the circumstances, a rigorous and honest Finance Bill, which will mean that the position of my right hon. Friend's successor will be a relatively easy one. All of us on this side of the House would like to congratulate my right hon. Friend upon a very distinguished tenure of office. This Finance Bill is a worthy termination.

12.28 p.m.

Mr. B. T. Parkin (Paddington, North)

There is one part of the speech of the right hon. Member for The High Peak (Mr. Molson) with which I can heartily concur and which I am sure is entirely in order, namely, the personal tribute he paid to the Chancellor of the Exchequer.

I have had no personal contact with the Chancellor of the Exchequer since he reached Cabinet rank, but from what I knew of him years ago I never had the slightest doubt that to whatever office, however exalted, he was called he would discharge his duties with the same ability and distinction as he has, in fact, done. He will certainly carry with him, to whatever new sphere he goes, the very warm good wishes of those who have ever had any personal dealings with him.

I did not intend to continue to join in the felicitations which have been flying backwards and forwards across the Chamber this morning about the progress of the Bill. While not dissenting from any of the things which hon. Gentlemen have said about one another and about the way they have improved the Bill, the Bill still remains a Measure which is intended to operate and sustain a social and financial system which many people passionately believe to contain a distorted range and sense of values which they believe cannot long survive in its present form. That view is not limited to one side of the House.

I thought that the House would tolerate at least one hon. Member, at this stage of the Bill, saying that, however much the Bill has been improved, it still will not do, because it does not tackle any of the fundamentals—

Mr. Speaker

Order. As the hon. Member knows, we cannot on Third Reading, refer to omissions from the Bill. The hon. Gentleman seems to be seeking to travel a rather difficult line at the moment.

Mr. Parkin

Thank you, Mr. Speaker. I have no intention of travelling a dangerous line. I want to limit myself entirely to the content of the Bill, at which one looks with a fresh mind on the eve of its Third Reading, to see what, in fact, has been achieved by all these hours of polishing and improvement.

I glance down the arrangement of the Clauses, and see, for instance, that Clause 8 has carried out what is considered to be a desirable reform in the matter of licences for playing cards. In other years, this subject might have aroused a dynamic opposition on the ground that it was encouraging an immoral practice in society. One can conceive it possible that you, Mr. Speaker, would have ruled it in order had numbers of hon. Members come to the House determined to fight this to the last ditch, and to make a protest that the cheapening of playing cards even by 3d. would do harm to the established moral standards of the country.

Although I do not share those views, I suspect that either the Chancellor or some of his hon. Friends have their doubts about this. They seem to entertain the gravest suspicions of the morals of those who deal in playing cards. They make the most astonishing provisions to protect themselves against being "done" out of 3d. by the use of an out-of-date wrapper. If the wrapper was sent out before the date mentioned, the person concerned has to remove it "in his presence". I do not know whether that means the Chancellor's presence, the Commissioner's presence, or that of the proper person, but, obviously, there is still in the minds of those who framed the Bill some recognition of the notion that one is dealing with a rather sleazy section of the population.

That, however, is not my main point. I want to turn to that part of the Bill that deals, not with making life easier for those whose private morals might, in some cases, be criticised but with an aspect of public morality which, in these days, I think is appalling. I refer to Part IV, which is concerned with Estate Duty.

I cannot allow to go through without protest a part of the Bill, however neatly devised and generally agreed, that improves the operation of a tax that ought to excite criticism. The way in which this Bill improves the operation of Estate Duty is such as to encourage the continued acceptance by hon. Members opposite of a duty that ought to be looked at again.

I would like to cast the minds of hon. Members back to the days when our social services were administered out of a different form of Estate Duty; when those who owned the great estates voluntarily and personally dedicated on their death a proportion of those estates to the Church; when the Church accumulated that capital provision out of which the social services were then administered. That system excited the greed of the ruling classes at the time of the Reformation, and set them to work, as it almost invariably does, to attack and dismantle the country's capital resources and to dissipate them in immediate expenditure.

The result of that is still seen in the ruins there are in this country, where it is proudly said that families of the greatest distinction, whose names today decorate Debrett and Vacher, "having acquired this abbey—

Mr. Speaker

Order. I think that the right thing to say is that the hon. Member will have observed that there is no Henry VIII Clause in the Bill.

Mr. Parkin

There is a Clause, Mr. Speaker, dealing with the use of money that is in the nature of a capital accumulation and which, unfortunately, is now to be used, as it now always is, for immediate expenditure instead of for saving. My opposition to the Bill is based on an opposition to these Clauses in so far as they facilitate, and make acceptable to the public, a system that ought to be looked at again.

Whatever the intentions of those who introduced Estate Duty in its present form—and, of course, there have been important arguments about redistributing wealth and passing it to the poorer sections of the community—I do not believe that there is a single hon. Member who would defend a system by which Estate Duty is paid into ordinary revenue and dissipated in ordinary expenditure in the current year. It should go below the line, in some form or other, but doctrinal opposition to the accumulation by the State of these capital resources has enabled those who wish to do so, to loot the country's accumulated capital in a way that is fundamentally immoral in a public sense. It is against that that I wish to protest.

This is the annual renewal of the "Termites' Charter"; the charter of those who are allowed to loot, as they have looted in centuries before, capital accumulations that ought to be preserved intact for the benefit of the nation. The community ought to hold them. It was not wrong that in the past there were many ways by which private wealth could be conveyed in part for the use of the community.

I protest against Part IV, however ingenious it may be, however helpful it may be to the tax collector, and however acceptable to the taxpayer, because in the long run it is harmful, as it makes the system easy, and puts off the day when hon. Members opposite will have to say that Estate Duty must go below the line, and must not be used for annual expenditure. That is my main point, but one could go through the Bill and find that other unhelpful aspects of our financial structure have been bolstered this year in a way that, in the long run, is not to the good of the country.

I was more than a little irritated to find in Part V—Miscellaneous—these three or four Clauses where the Chancellor seems to have been brought in to make life easier for what he calls … a member of a visiting force of a designated country.… I cannot think that it was necessary to bring into the Finance Bill provisions that might provoke any normal person to try to intervene with comments on foreign policy. Nor can I see what connection N.A.T.O. has to the Stamp Act of 1891.

It is all there, however, and it reads very depressingly. It is very like the card that one gets when one attends a conference at Margate, telling one what facilities the town offers free of charge. It is rather fawning on what is called "a civilian component." I do not know what a civilian component of a visiting force is. It might even include Mr. Allen Dulles, who is to be excused from Stamp Duty on anything that he does here. As I say, it is like the card a conference delegate gets at Margate, excusing him from the fee payable for a round of clock golf, or some other amenity or facility that is on offer. I thought it rather below the level of the dignity of a Finance Bill.

I do not pursue that point—I just mention it in passing—but I do renew my protest on behalf of those who, while filled with the utmost good will towards hon. Members on both sides of the House who have worked so hard on the Bill, feel that the fundamentals must be thought out again. In so far as the Bill delays that rethinking, I must technically oppose it and refuse to vote for it.

12.40 p.m.

Sir Thomas Moore (Ayr)

Judging by the number of hon. Members sitting on the Opposition benches, we seem to have a most unusual situation. When I am showing visitors round the House and explaining our Division system I tell them that Divisions occur at certain definite periods. One category consists of Divisions prearranged with the Whips, another consists of those when a time limit has previously been set, and the third is those when there are no more hon. Members present to speak. I always point out that I have never known a case in the third category to happen during my experience, but it looks as though that record will be broken today. I am grateful for the lack of opposition this morning, because it gives me an opportunity to make a few comments on the Bill.

Now that the storm of conflict has blown itself out and the opposition to various proposals by the Chancellor—or the lack of them, as one hon. Member has said—has subsided, I think that it is a good thing that we should have an opportunity to consider the Bill as it now stands and see just where it has got us and where it has got the country. I admit, however, that examination of its effects is somewhat complicated or blurred by the very recent changes in our financial policy. I must confess that I have not found myself in complete agreement with those changes. Still, there are certain salient factors which stand out and upon which I should like to make a comment or two.

As we have all agreed, it was not an exciting Budget, and, therefore, this is not an exciting Finance Bill. Consequently, the debate lacks that atmosphere in which so many of our colleagues like to disport themselves. However, I say from my own conviction—I imagine that that conviction is shared by many of my hon. Friends—that in the existing circumstances—I stress "in the existing circumstances"—it was a wise, sound and good Budget. The essence of a good Budget is accurate timing, and it was the timing on this occasion which marked the excellence of this Finance Bill. What I have said about the Budget extends to the Bill.

I am sorry that the right hon. Member for Huyton (Mr. H. Wilson) is not present today. He had his fun and games on the Second Reading over the reduction in the Beer Duty before the General Election and the increase in the Tobacco Duty after the General Election. I think that we all enjoyed his gay buffoonery almost as much as he himself did. I am sorry that we shall not have a contribution from him today. However, the right hon. Gentleman evaded the real justification for both alterations. The reason, of course, was a revenue one. If the right hon. Gentleman had explained the reason as he himself knew it to be, it would probably have deprived him of his fun and deprived some of his somewhat moronic admirers of a good howl of applause.

Anyone who has watched the changes in our economic and social climate during the past year or two will appreciate that the tax was taken off beer last year simply because the people thought beer was too expensive and were not drinking it, and the Chancellor had to encourage them to do so. The increase in the Tobacco Duty was for exactly the same reason—revenue. After all, the Chancellor has to find a great deal of money to maintain the many ramifications of the welfare State—more hospitals more schools, more barracks, and increased pay for soldiers, doctors, railwaymen and the rest of the queue.

As the Chancellor found out, and as every other Chancellor has found out—the Chancellor said this this morning—neither the fear of lung cancer nor the price which people are called upon to pay for tobacco will deter our people from smoking. Consequently, it was an obvious way to support the increased expenditure with which my right hon. Friend found himself faced. After all, the payment of the tax rests on the will of those who pay it; if they do not smoke they do not pay the tax, and so they have no complaint. Yet the only Budget Resolution against which the Opposition voted was that dealing with the Tobacco Duty—the most urgent Resolution if they are keen on maintaining the social services to their full extent.

To continue with the good parts of the Budget and possibly the not-sogood—all Budgets are like the curate's egg—I feel that it was absolutely right to punish those who deliberately evade paying their due tax. We know it means that others who are not so clever or unscrupulous must pay more, but, as the Chancellor and as the hon. Member for Gloucester (Mr. Diamond) pointed out, the danger lies—this has often been said —in confusing evasion with avoidance. As my hon. Friend the Member for Kidderminster (Mr. Nabarro) has pointed out in numerous articles and Press interviews, avoidance is reasonable and legitimate. My hon. Friend has told us how to do it, and so I will not go into that matter further. However, I think that the enthusiastic but, at the same time, fair-minded gentlemen of the Inland Revenue should be warned against any such confusion.

I thought that the hon. Member for Gloucester was a little niggardly in acknowledging the abolition of the Entertainments Duty. Judging by the number of letters which I have received from cinema managers in my constituency since the Resolution was introduced, I certainly feel that they fully acknowledge the debt of gratitude which they owe to the Conservative Government for removing that incubus which has prevented them from paying their way.

Mr. Diamond

I do not know of a single cinema manager—I am in contact with many—who would not have preferred the abolition to have taken place two years ago—

Mr. William Shepherd (Cheadle)

Or ten years ago.

Mr. Diamond

—nor do I know of a single case where a cinema which has been closed as a result of the continuation of the tax will be reopened at this late stage.

Sir T. Moore

Only time will tell. There has not yet been much opportunity to ascertain the full effects of the abolition of the tax.

There is one point about Clause 77 on which I have some doubts. Perhaps the Financial Secretary will remove those doubts for me. In his Second Reading speech, the Chancellor, according to my recollection, referred to the fact that there were to be substantial increases in Premium Bond prizes. I have examined the Clause in the current edition of the Bill, but I find no definite reference to such an increase. The phraseology of the Clause is rather complicated and it may mean that there will be a substantial addition to the prizes, but I should like to be assured that that is so.

I have for long advocated this policy. I once said to the Chancellor—he did not agree with me on that occasion—that no one wanted the fantastic football prizes because they were so bad for the recipients, but that, invariably, one could do with £5,000 or £10,000, which would be very handy sums for buying houses or cars or expanding a business. Consequently, I should like to be reassured that there will be a reasonable increase. There are some people who fear that if the prizes are increased the chances of the original holders of Premium Bonds may be jeopardised. Perhaps that point could be cleared up.

Mr. Glenvil Hall (Colne Valley)

Is the hon. Gentleman referring to an increase in the number of prizes as a whole, or those of higher amounts?

Sir T. Moore

I am referring to the value.

Mr. Glenvil Hall

I take it that the hon. Member realises that the more prizes there are of a higher value the fewer prizes there can be of a lower value.

Sir T. Moore

That is just the point I have asked my right hon. Friend to explain.

My next comment is that, although I cannot oppose the increase in the Profits Tax, I hope that it will be for this year only. It is hard, but it is not unfair, for this reason. Most well-managed—I stress that—businesses have had a good year. They have had increased profits, due, no doubt, to the Tory freedom they now enjoy, and, after all, the Prime Minister in his election manifesto said that all should share in the nation's increasing prosperity. I suppose it is only fair that the Treasury should share, too, and have its crack of the whip. The workers have shared through increased wages. Executives have had increased salaries and, as I note from company reports, shareholders have had a share through increased dividends. So let us be fair to the taxpayer or, as we may call him now, the Treasury.

I come now to a few criticisms. I know that it is not in the Bill, but I should have liked to have seen the 10s., with which the Leader of the Opposition tried in vain to bribe them at the last General Election, given to the old-age pensioners. But it will come, and, as my right hon. Friend the Chancellor and my right hon. Friend the Member for The High Peak (Mr. Molson) have reminded us, old-age pensioners have had the great advantage of a steady price level—even reduced in some cases —in satisfying their daily needs, and we all know that that is much the best way of helping them. The Opposition, of course, lamentably failed to do anything of the kind when they were in power.

I want to be very careful not to come under your rebuke or anger, Mr. Speaker, by straying for one second out of order, but I feel strongly that it is a criticism of the Bill that it does, by implication, condone the continuation of the penalising tax on effort through the present rate of Surtax and the equally penalising tax on success through the existing death duties. I cannot understand why anyone should take on the increased burdens and responsibilities which almost all executives and directors in these days have to undertake when the only return is worry and anxiety.

I think that the Chancellor would be interested in a personal experience which I had the other day. A friend of mine, a Scot, an exceedingly shrewd, wise and experienced man, was offered a seat on a board in London, and the remuneration was to be £1,000 a year. That was not too much for a man of his long and valuable experience, nor was it too little; but, when he worked out what the net amount he would receive would be, he found that it was £65. That was the fault of Surtax.

The fault of death duties, of course, is even more unforgivable. Any man who wants to work hard, or harder, usually does it because he wishes to benefit those whom he cares for or who depend on him or who may follow him. But what a fool the Chancellor makes of such a man. He takes everything he has earned, up to 80 per cent., anyhow. He has given of his brain, his energies and, sometimes, his life for the benefit of others, but that it the reward he gets. It is really quite monstrous and totally inconsistent with all Conservative philosophy. I suppose it is easy for any Chancellor to carry on with what has been done before, but one day he may find that the goose has died and there will be no more golden eggs laid for him. That is my final word on death duties and Surtax. I hope to raise the matter on the Second Reading of the next Finance Bill at greater length.

I assume that I should be out of order if I discussed two later decisions of the Chancellor, the limited credit squeeze and the restrictions on hire purchase, so I will not risk your displeasure, Sir, by commenting on them except to say that I think they were necessary and desirable and I hope that they will have the result that the Chancellor envisages. I have my doubts, but I am still hopeful.

If we had not swept away all hire-purchase restrictions in 1958, I do not think my right hon. Friend would have had the trouble he is having today. We have witnessed the results of that lapse in 1958. The total hire-purchase debt in 1958 was £490 million, when the restrictions were swept away, and in 1960 it was £889 million, almost double in two years. Let us not forget that it was largely hire purchase that hastened the collapse of the American economy in 1931. I think that we should be careful in seeing that it does not happen here.

I know that the House will let my right hon. Friend have his Finance Bill on this occasion. I only hope that, in the year of prosperity which, I believe, lies ahead, he will be more forthcoming in the concessions he gives to those who work so hard to pay the taxes on which the country's economy depends. I conclude with this personal word to him. I hope that he will be in his place to introduce the next Finance Bill.

12.56 p.m.

Mr. William Shepherd (Cheadle)

In a debate of this kind, when the business of the House is expedited by the rigid application of the rules of order, it would be very convenient to be able to say that the last speaker from the benches opposite, the hon. Member for Paddington, North (Mr. Parkin), gave me some grounds for comment; but, if I were to pursue his Marxian philosophy about the crumbling of capitalist society, I feel that you, Mr. Speaker, would immediately apply your injunction to me. I am, therefore, left to my own devices.

Everyone will, I think, agree that the speech of the hon. Member for Gloucester (Mr. Diamond) was a most agreeable one. This Finance Bill is no laughing matter, and to be able to extract so much humour from what is a very complicated and distressing document in many ways, is I think, a considerable achievement. I feel sure that everyone will wish to associate himself with that view.

Many hon. Members have said something about my right hon. Friend the Chancellor because of certain events which have been forecast. I have heard remarks which distressed me, particularly remarks suggesting that the reduction in tax last year was motivated by election prospects. In my view, that suggestion is grossly unfair. I know of no one in this House or in politics who can be more depended upon rigidly to maintain a code of honour than the present Chancellor of the Exchequer. He has demonstrated what is, perhaps, the most difficult characteristic to maintain in office in this country; the courage to do the unpopular thing in the fact of one's own party.

On the whole, it is very easy to defy an Opposition, particularly an Opposition like the one we have today. Real courage is needed when one has to do things which will not command the popular assent of one's own party, but which one feels to be absolutely necessary in the broad interests of the community.

Mr. Marcus Lipton (Brixton)

Is it not very much easier to take an unpopular line a few months after a General Election than before one?

Mr. Shepherd

I have no doubt that the hon. Gentleman is an authority on that kind of practice.

As I have said, no one in the House commands more confidence and admiration than my right hon. Friend, and I hope that what has been said this morning will be in some measure a counteraction to some of the things which were unwisely and impetuously said during earlier stages of the Bill.

I want to say a word or two about Income Tax as it appears in the Bill and to deal with the question whether the rate of tax is too high or too low. A great deal has been said about the rates of tax shown in the Bill, and some of it has been rather misleading. Hon. Members opposite have said that the present rates of tax on personal income are higher than they were some years ago. Two or three right hon. Members opposite have made statements about the percentage of personal income taken in tax being higher than it was.

I think that we should consider this for a moment, because I do not think that it is true. What is true is that as a result of increases in income levels more people have been dragged into the tax net. This means that the percentage of personal income taken in tax has tended to be rather higher than the general level of reductions over the years would have led us to believe. But if one looks at individual incomes in relation to the present level of tax one finds that there has not been an increase in the amount of Income Tax taken in respect of personal incomes.

Let me give an example. In 1952, a man with an income of £1,500 paid 19 per cent. of it in tax. In 1959, the same man would have paid 18 per cent. in tax, assuming that he had received in the interval an increase of one-third on his income, thereby raising the £1,500 to £2,000. But if one looks at personal incomes and makes an allowance in respect of the drop in the value of money, or a greater allowance than the drop in the value of money, one sees that personal incomes have not had higher but lower levels of taxes ranged against them.

It may be said that the larger Income Tax payer does not do so well, but if one takes a man earning, in 1952, £3,000 the amount of tax which he pays has been reduced from 35 per cent. to 30 per cent. in 1959, again assuming a third increase in his income to £4,000. Therefore, I hope that what I have said will do away with the idea that in some extraordinary way, despite successive reductions in the rates of tax and increases in personal allowances, there has been an increase in the percentage of tax taken out of any man's personal income. That is just not true, and I do not think that we ought to allow the Opposition to get away with it.

It is true to say that our present rate of tax is fairly high. Of course, we would all like to see it measurably reduced. I have expressed in this House the view that, in the light of our existing commitments as a small nation, with great responsibilities, the present level of tax is not inordinately high. Although I would have liked to see a lower rate of Income Tax written into the Bill, I do not think that it is possible to do anything materially different from what is being done today.

Taxes in other countries, with very much lower responsibilities, are not much lower than ours. The total percentage of taxation taken by local and central Government expressed as a percentage of the gross national product at factor cost is 30 per cent. in this country and 28 per cent. in both Western Germany and France. Therefore, the level in this country does not very materially differ from that in these other countries. I think that when one bears in mind the tremendous burdens which this country carries, both internally and externally, the rate of tax from which we now suffer is not as unreasonable as some people would like us to believe.

Some hon. Members have commended the abolition of the tax on cinemas. I do this myself, because I have had some contact with the cinema industry over a number of years and I rejoice that this burden on it during a difficult time has been removed. I am, however, concerned about the 'balance shown in the Bill between direct and indirect taxation. Although I cannot, in this speech, without incurring your displeasure, Mr. Deputy-Speaker, deal with the prospects for the future, I hope that it is realised that the growing disparity between the levels of direct and indirect taxation must be dealt with in future. One of the essential differences between most other countries and ourselves is that they tend to draw a much larger proportion of their income from indirect taxation than we do. I believe that we shall have to persevere with more indirect taxation and, therefore, reduce the figure of Income Tax in Finance Bills of the future.

There are many ways in which this can be done, although it is not any part of my purpose to mention them today. But it means renouncing a view which I have held for some time, which is that we ought to get rid of Purchase Tax. I now have no hesitation in saying that I think that that view is wrong and that we have to stick to Purchase Tax but do certain things to make it more acceptable. We shall not only have to stick to it but broaden its basis.

In considering candidates, I cannot see why soft drinks and sweets should not be taxed—

Mr. Mitchison

On a point of order. I find on page 803 of Erskine May that On third reading of a Finance Bill, debate and amendment must be strictly relevant to the contents of the bill, and the expenditure of the year and alternative methods of providing revenue may not be discussed.

Mr. Deputy-Speaker (Major Sir William Anstruther-Gray)

I think that the hon. and learned Member for Kettering (Mr. Mitchison) is entitled to raise his point of order, and I am sure that the hon. Member for Cheadle (Mr. Shepherd) will take note that it has not passed by the notice of the Chair.

Mr. Shepherd

That I do, Mr. Deputy-Speaker, but I must say that I am rather surprised that a passing reference of a few words should have driven the hon. and learned Member to his feat. Perhaps I shall be able to reciprocate when I have to endure some of the lengthy orations with which the hon. and learned Member not infrequently addresses the House.

Mr. Ellis Smith

We had it earlier.

Mr. Shepherd

I want now to comment on the provisions relating to death duties. I voted for the changes which are enshrined in this Finance Bill because I accepted them as an interim measure, but I was by no means happy about them. The provisions which we have enacted are in many respects inequitable in broad principle and I hope that in giving a Third Reading to the Bill we shall make it clear that some radical change is necessary, and that in acceding to this amelioration some of us take the view that this is the wrong direction in which to proceed. I hope that those who have the responsibility of framing future Finance Bills will bear this in mind.

The Finance Bill which we have before us for Third Reading today broadly represents the needs of the present day. It has not been a popular Finance Bill. It could not in any circumstances have been a popular one if it dealt with matters of tax avoidance or tried to make issues which were one time tax avoidance issues of tax evasion.

I have had some quarrel with the provisions in the Bill relating to tax avoidance. At the same time, I recognise the intense complexity of the issues. I realise how ingenious are those who seek to devise the means by which taxation can be avoided. On the whole, the weapons used inside the Treasury are not quite as good as those used outside and I should like to see the Treasury a little more ready to accept assistance from outside in defeating the efforts of those who wish to engage in tax avoidance.

Mr. Mitchison

I have been listening to the hon. Member's speech. He was good enough to say, with his usual courtesy, that my speeches were long. So is his speech. I just do not understand a great many of the things he is saying. Will he explain?

Mr. Shepherd

I have to remind the hon. and learned Gentleman that length is relative. I have not been speaking for more than a quarter of an hour, which the hon. and learned Gentleman would probably regard as a brief intervention. If he cannot understand what I am saying, I cannot help him. I am responsible only for the mode of expression. I have no control over the manner of understanding.

Mr. Mitchison

May I put the question more specifically? The hon. Member is inviting the Treasury to get help from outside. What is "outside"?

Mr. Shepherd

Had the hon. and learned Member been more explicit, I could more readily have answered. What I am saying is that outside men are employed and earning very large sums of money for the purpose of erecting and directing the processes of tax avoidance. Inside the Treasury, we have those men in the midst of many other occupations whose task is to try to stop up these loopholes. I am suggesting that it might be worth while for the Treasury to pay some of the men who specialise in this field, and who earn large sums of money, to get their advice on the manner in which these matters might best be dealt with.

Mr. Ellis Smith

Such as the Institute of Directors.

Mr. Shepherd

I do not think that the Institute of Directors is capable of doing anything in the matter. There is, however, the possibility that the Treasury might be well advised to try to get advice from outside, if only in a limited field. I am not being critical of the Treasury —I readily recognise that in the Treasury are very able men; but they at least have a great number of other occupations and they may not be as highly specialised as some of those on the other side.

Mr. Diamond

I am interested in what the hon. Member is saying, because at an earlier stage I suggested to the Chancellor of the Exchequer—it received a courteous but, beyond that, negligible response—that it might be possible to have some kind of consultative committee, however original this might seem, in terms of taxation, because the Revenue is working two years or so behind those to whom the hon. Member is referring; and as everybody knows, a short conference with two or three of the leading tax counsel would bring the Revenue up to date in an amazing way.

In addition, as the hon. Member might like to add to what he is saying, people from inside leave the Revenue, go outside and set up as tax consultants. It never happens the other way round. I can only say that I am extremely interested in what the hon. Member is saying and hope that he will strongly press this point of view on the Chancellor.

Mr. Shepherd

I am grateful to the hon. Member for making that point. It is worthy of consideration. As some of us know, those who are working outside on schemes of tax avoidance are highly skilled, highly paid and highly specialised. In the battle against them the Treasury might, from time to time, invoke their aid.

I approve the principle and the idea behind stopping tax avoidance. It has been taking place in the past five or six years on too large a scale. I should have been happier with some slightly different methods than have been employed, but I recognise the problem involved and, while I do not agree with all the methods, I nevertheless honour my right hon. Friend the Chancellor of the Exchequer for having the courage to deal with it.

1.18 p.m.

Mr. John Rankin (Glasgow, Govan)

I should like to join with those who have said so many kind things about the Chancellor of the Exchequer, despite the fact that he confessed that his Finance Bill was distressingly complicated. So distressingly complicated is it that it left many of us outside completely admiring him at the way in which he seemed to progress like a Newton of the financial world, voyaging at times through strange seas of thought, almost alone, but accompanied occasionally by a small number of daring adventurers on this side.

The Chancellor seemed generally to justify his Bill on the ground that it was not too incisive in its action nor too lenient, but held a nice balance which, in his view, would enable the expanding economy to function as effectively as he claimed it does, and as the Prime Minister has claimed, so to make the world of our people in the ordinary exercise of daily living better than it is alleged to have been for a long while.

It is interesting to look at some of the things which the Chancellor said when introducing the Bill. He referred to the fact that we had been enjoying a very satisfactory economic expansion, and that one of his purposes was to enable that expansion to continue at the highest rate which could be maintained. He indicated that he did not depend simply on fiscal measures, but on a combination of monetary and fiscal measures, to maintain that expansion.

At that time it was, in a way, almost a recent occurrence—because the Chancellor referred to it—that he had introduced credit restrictions a few months before he made his speech. He was compelled to introduce those restrictions because of certain fears about the stability of the economy. It is interesting to notice that the Finance Bill had hardly reached its final stages when the expanding economy to which the Chancellor referred in introducing the Bill was beginning to get a little shaky. He then had to introduce still further restrictive measures—the increase in the Bank Rate, a further call on special deposits, and the general restricting facilities as to credit which he announced.

Now we have reached the end of the first half year. Already, the people of knowledge, the economists who write in our weekly and daily papers, are warning us that even more serious consequences may lie around the corner. One of these eminent persons has been saying that our balance of payments this year will reveal a situation which is worse than any that has faced us in the post-war period. He points out—I am giving his words from recollection—that the general aim has been a balance of about £300 million to enable us to meet our obligations, but in his view that will certainly not be achieved this year.

We are, therefore, forced to wonder, because the second half of the year does not allow of such a large surplus as the first half in the second period we must buy in the harvest that is required to see us through the winter and the rest of the year—whether or not we are to meet with further restrictions before the winter is entered upon. Of course, there is a special interest in that to me.

Mr. Amory

I am interested in what the hon. Gentleman is saying, but I wonder whether I should invite my hon. Friend the Financial Secretary, when he winds up the debate, to respond to these observations, or whether you, Mr. Deputy-Speaker, think that they go rather wider than our debate today and perhaps would be more appropriate for our debate on Monday.

Mr. Deputy-Speaker

I think that the right hon. Gentleman's mind is moving in the same direction as mine. I must invite the hon. Member for Glasgow, Govan (Mr. Rankin) to restrict his speech very carefully to what is in the Finance Bill, the Third Reading of which we are now debating.

Mr. Rankin

I am obviously in a minority of two to one. When I have both the Chancellor of the Exchequer and you, Mr. Deputy-Speaker, against me, then that certainly does not ease the problem that presents itself to me. I am trying to put across a case very briefly—just as briefly as the hon. Member for Cheadle (Mr. Shepherd) who preceded me—instead of, of course, as he would have wished, following me. But I thought that merely by referring to certain matters, as he did to the topics that he raised, such as direct and indirect taxation—

Mr. Mitchison

My only comment was on the unnecessarily discourteous speech of the hon. Member for Cheadle (Mr. Shepherd).

Mr. Rankin

It is bad enough finding oneself between two fires, but I did have the feeling that the intervention of my hon. and learned Friend the Member for Kettering (Mr. Mitchison) had somewhat restricted the hon. Member for Cheadle in his references to the incidence of direct and indirect taxation, which I had proposed to follow but, deterred by the intervention of my hon. and learned Friend, I escape Scylla to land in Charybdis.

The opposition in this case seems much heavier, and because of that I shall not engage it now, except perhaps, with the patience of the Chancellor and with a momentary co-operation from the Chair, to present the point to the Chancellor, because as a Scottish Member I am vastly interested in the problem of how he can reconcile the restriction of credit facilities with the expansion which he claims is taking place.

Mr. Deputy-Speaker

The difficulty which the hon. Member for Govan is bringing to the House is that if he spoke along that line a reply would be required and the whole of our debate would be out of order. I would ask him to keep within the terms of the debate.

Mr. Rankin

I conclude because I think that I have directed the Chancellor's attention to the main point, which is how he reconciles those apparent irreconcilables, credit restrictions and economic expansion, particularly as it applies in Scotland today.

1.29 p.m.

Sir Henry d'Avigdor-Goldsmid (Walsall, South)

Having sat through all stages of the Bill, I should like now to make a small reference to the few—that happy few—the survivors of the initial stages. The Chancellor said, in the words of Horatius Now who will stand on either hand, And keep the bridge with me? He was indeed fortunate in his assistance both from the Financial Secretary and the Economic Secretary, and more fortunate even than the gallant Horatius, because he had the advantage of having heavy artillery slightly behind him in the shape of the Attorney-General and the Solicitor-General.

Mr. John Hall (Wycombe)

My hon. Friend will remember that Horatius had to jump into the Tiber.

Sir H. d'Avigdor-Goldsmid

I am glad to say that, although at a certain stage in our history the River Nile was said to roll through No. 10 Downing Street, the Tiber has not yet crossed the Floor of the Chamber, and I am sure that if it ever did my right hon. Friend would be the first to stem its flow.

I pay genuine tribute to the hon. Member for Gloucester (Mr. Diamond) and his companion-in-arms, the Member for Glasgow, Craigton (Mr. Milian). They put up a stunning performance which made all back benchers envious and which we have all applauded. I have appreciated it, and whether the hon. Member for Gloucester has had his appropriate reward by being moved to the Front Bench, where he is now sitting, I do not know, but it suits him very well.

Having been kindly treated, I suppose that I should say that I feel like a competitor in a child pony class who has not received a red rosette for victory, or a blue rosette for coming second, or even a rosette of another colour for coming third, but who has had a white rosette for competing. As the wearer of such a rosette, I feel, as little children of six do, very pleased and proud.

We have taken part in long debates, and I do not think that it can be said that we have enjoyed the Bill. On Second Reading, I used the words of The Times to describe this as a "Somerset House Bill" and I do not think that "Somerset House" has made a very good job of it. After all, between Second Reading and the Committee stage there was only one week, but in that time we had a set of Government Amendments to what might be called the "Somerset House Clauses". In Committee, there were very long arguments, several more Amendments, and finally we had a further fresh set of Amendments before Report. Great tributes have been paid to "Somerset House", but I do not share in those tributes. I do not know whether these are first, second, third or fourth thoughts, but a more concise and clear picture should have been given to us before the Bill came to Second Reading, because these technical Clauses have had a long background in history and were clearly not suddenly improvised in a few days.

The hon. Member for Gloucester spoke a great deal about tax avoidance. Tax avoidance is not a crime in our statutes, and I hope that no message will go forth from here which in any way modifies an Englishman's inalienable right to manage his affairs in such a way as to attract the least tax disadvantage. That is his right, and the Bill should not be considered to interfere with it in any way.

The Bill has been designed to oppose what I describe as the tax avoidance and reclaiming industry, which has undoubtedly grown up first through high levels of taxation and, secondly, through the very sophisticated nature of our tax code. In that tax code there are many different kinds of individuals, some domiciled abroad and, therefore, escaping British taxes altogether; some domiciled here but as charities escaping taxation here; some who, as gross funds, have special privileges in escaping taxation; and some who, as dealing companies, have a special right to offset capital losses against capital profits.

All that makes a very complicated and sophisticated conception. It is not very surprising that, nurtured on high rates of taxation, combinations have grown up which groups of people have organised themselves—probably guided by a former expert from the Inland Revenue, as the hon. Member for Gloucester suggested—to produce devices which have two results—first, enabling many people, by a series of devices and subterfuges, not all honourable, to escape proper taxation on their earnings and, secondly—and I think more important—to attack the revenue and seize from it sums of money on which tax was already paid by other people many years ago.

I regard the second as an ingenious activity, but one which we must stop, because there is no limit to the amount of tax which has been paid in the past, as, equally, there is no limit to the ingenuity of people who, having discovered one device, can continue to find a reason for reclaiming, for their own purposes, taxation paid by other people in different circumstances and, in some cases, many years previously.

Having said that, I again say, because I do not want there to be any mistake about it, that the Englishman keeps his rights, despite the Bill, to order his affairs taxwise to the best advantage and I hope that my hon. Friend the Financial Secretary will give an assent to that proposition.

I want especially to refer to the Estate Duty Clauses. I have always taken the view that the higher rates of Estate Duty are not taxation, but confiscation. Many people will argue that confiscation of large capital sums is proper, but I do not share that view and I do not think that hon. Members on this side of the House would agree with it.

In the view that the higher levels of Estate Duty are confiscation, there has grown up the practice, among people subject to those high levels, of going to the courts and asking for a special concession or provision to permit a plan to enable their heirs to enjoy the benefit of the estate free of duty, and many ingenious plans have been suggested in that respect.

I think, with regret, that the gradation Clauses will not lessen but increase such applications to the courts and that more and more people will apply in the determination that their estates shall not suffer the confiscatory rates of Estate Duty.

To me and to many other people the mantle of Lear is not lightly assumed. That is to say, most people in full possession of their faculties do not willingly divest themselves of their own assets and possessions, even for the benefit of their nearest and dearest. As I have said several times, a reduction in Estate Duty rates might have resulted in no loss to the Exchequer, for the simple reason that whereas with an estate subject to duty at 50 per cent. or more the owner will divest himself in order to transfer the share to his children in their lifetime free of duty, he will be very much less inclined to do so if the rate instead of 50 per cent. is 30 per cent. or something similar.

I still think that the yield from Estate Duty bears very little reference to the amount of property in this country and to the amount of property which annually changes hands. We shall not get an effective rate of Estate Duty which catches the transfers of estates until such time as Estate Duty rates cease to be confiscatory as they are now.

I usually speak during the dinner hour. On this occasion I am speaking in the luncheon hour, but the attendance is the kind to which I am used on these occasions. Attendance throughout the debates has been thin, because we have been discussing technical points, but interest in the Bill has been sustained, throughout the country. It has caught the eye and attention of many newspaper commentators. Our debates have been well carried out. Points have been fully argued, and I am satisfied that the Measure which we now have before us is a substantial improvement on that which was presented a few months ago.

1.40 p.m.

Mr. G. R. Mitchison (Kettering)

I imagine that two things are in order in this debate. First, by long tradition there is a certain polite and sincere exchange of compliments, and, secondly, on a stricter interpretation of the rules, the Bill itself is discussed. I shall try to keep within those bounds, because we shall have an economic debate very shortly into which those hon. Members who have already dealt with the economic state of the country may find a little more difficulty in intruding.

I would say first, and most sincerely, that I feel that I am not the only person to be grateful to the Chancellor of the Exchequer, not only for his kind words but for the singular felicity with which he expresses himself. He seems to know what will appeal to those to whom he wishes most to be kind. He was good enough to give me a few kind words upon the subject of attacking Ministers. It is a pastime that I thoroughly enjoy, and I am not the only person to do that. On personal grounds, I hope that the Chancellor may introduce another Budget. I do not know whether that is possible or not. I am merely saying that he will be missed as much by hon. Members on these benches as by those opposite.

I would also thank the rest of the team, who, for the purposes of the Bill, we can regard as the "courtesy cops." They have been very courteous to the House. They have had most troublesome stuff to explain, but I have always felt that the way in which they did it could not be improved on. This is not to say that hon. Members on this side did not frequently—in fact, usually—disagree with them. But that is another matter.

The ordinary citizen who has to deal with the Bill will consider the provisions of Part I as those which most affect him, and those provisions still contain an increase in the price of tobacco and a decrease in the price of port wine and champagne. Many of our people will regard those as the outstanding features of the Budget. The right hon. Gentleman must forgive me for putting that forward as another curious instance of the direction in which Tory policy leads us. I am not saying that that is the whole of the Bill, but it is no answer to the objections to the increase in the Tobacco Duty to say that the consumption of tobacco has continued to increase. It always has, with every successive increase in tobacco duty—or, at any rate, it has not fallen. None the less, it is a form of indirect taxation which is not progressive. It has a harsher effect upon the less well-off part of the population. In this instance I am sure that we all have in mind the older people, who have very often smoked all their lives and find it matters a very great deal to them.

I object to the phrase "the synthetic indignation of the Opposition ". There is no foundation for this. In the nature of the case we are concerned with many people who are among the classes and types that I have just been describing. We feel this indignation and it is right that we should express it. Not all opposition to the Government is synthetic—nor are all the views of the Government other than synthetic. In this case I thought the epithet singularly ill-chosen.

I now want to turn to the penalties. I agree that this part of the Bill represents a very great and overdue improvement. It is only when an obsolete part of Income Tax legislation is put right that the Government say that it was a shocking muddle, and hardly defensible. There are plenty of other shocking muddles in Income Tax legislation which are hardly defensible. There is a long list of them in the Report of the Commission which considered these matters. Many of them still remain to be put right.

I turn next to what I would call the "Somerset House" part of the Bill—the tax avoidance provisions. It is undoubtedly true that in a Budget which contained not much relief; which made no change in the rate of Income Tax; which made the changes that I have already indicated in indirect taxes, and which made a change in the Profits Tax but was otherwise a very small one, the right hon. Gentleman has been able to find the opportunity to introduce a number of penalty provisions. He told us that tax avoidance has now become almost a business on its own. Listening to the debates we had very little doubt about that, and I feel inclined to suggest to the right hon. Gentleman that if tax avoidance is a business it is about time he taxed its profits. Has he ever considered the matter on those lines? I would add at once that that suggestion should not be taken too seriously, but it illustrates the difficulty that exists in this matter.

As always, I listened with repect and attention to the speeches of the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) drawing a line between what he called the inalienable right of the British citizen to manage his own affairs so as to attract the minimum tax disadvantage, on the one hand, and, on the other, the kind of thing which I have just been describing—the business of tax avoidance, of which the hon. Member disapproves as much as anybody. All through these debates I kept thinking that this inalienable right is not a general right. It is confined to quite a small number of people.

Sir H. d'Avigdor-Goldsmid

Without wishing to cast any aspersions, I would say that one of the greatest tax avoiders is the jobbing gardener. He works for one employer during the day and then, after hours, for another, so as to avoid paying additional P.A.Y.E. We do not legislate for that type of case, but the hon. and learned Member knows that it occurs, as do all people who live in the country.

Mr. Mitchison

The jobbing gardener ought to pay tax, and if he fails to do so it is not a matter of tax avoidance but a question of the Inland Revenue authorities failing to catch him out. That is a rather different question, which does not affect what I was going on to say —which the hon. Member, with his usual foresight, anticipated. This inalienable right belongs to a comparatively small number of people. Generally speaking, they are Schedule D taxpayers and, moreover, Schedule D taxpayers who are fortunate enough, financially, to be able to employ expert advisers, or few enough to have a very special knowledge of this rather peculiar aspect of our tax system.

What we on this side of the House—and, I think, the House as a whole—always resent about this tax avoidance business is that there is no way in which the ordinary salary earner or wage earner who is taxed under P.A.Y.E. arrangements can possibly manage his own affairs so as to attract the minimum tax disadvantage. It seems to contain a certain element of unfairness.

I agree at once that the line is not an easy one to draw, but it should, I feel, be our duty in the matter to lean towards a stiffness against tax avoidance, a stiffness that I found in the speech of the Chancellor today. I welcomed it. But I feel, when one looks at the Clauses in the Bill, that they are open to one comment. It is that there are a number of Clauses which contain no reference to motive at all but which provide most elaborate pieces of machinery for catching particular cases and which have been added to as we go along—in some cases they are themselves additions to previous legislation—so as to cover more and more cases.

As I see it, we can go on doing this almost indefinitely but equally, as I see it, we are never going to catch all the people whom we ought to catch and to catch in time. The very complication of the Clauses which we have been considering today confirms me in that opinion.

On top of those, there is one Clause which refers to motive, which covers a rather wider class and which leaves it open to the taxpayer to show that he is merely conducting ordinary business and that it was not his object to get a tax advantage. That is a somewhat new type of provision—quite new, I believe, in the Income Tax law, though not new in connection with the Profits Tax.

What strikes me is that both that and the other provisions have had to be introduced in the same Budget. Therefore, the conclusion to which we come is that the motive Clause, if I may so describe it, is within too narrow a field to cover the specific Clauses, and the specific Clauses, for all their complications, are accordingly still necessary as a supplement to the motive Clause.

I am beginning to feel more and more —and I think that I speak for all my right hon. and hon. Friends on this side of the House—that these specific provisions are increasingly inadequate. It may be, as the right hon. Gentleman himself said, that the increasing complexity of our life is reflected in the increasing complexity of our tax provisions. But, in a way, the more complex a tax provision, the easier it becomes to avoid, and the confidence expressed year after year in the adequacy of these provisions always proves to be mistaken.

In those circumstances there is the possibility of motive Clauses. I agree that they need most careful watching, but I do not think that the Chancellor of the day ought to regard them as something that must be used with quite all the caution displayed in respect of this Clause, the effect of which has been narrowed as we went along.

There is one other matter that I wish to mention in connection with these Clauses. We were told time and time again that they were not retrospective. I feel that retrospective legislation after a warning on financial matters is a very different matter from retrospective legislation in other events. I will say no more about it since there is no express provision about it in the Bill.

Having said that, I turn to the Estate Duty provisions. We do not like the Estate Duty arrangements, the catching of gifts inter vivos being whittled down as they are in the Bill. I recognise that there is a case for that, but we do not share the view expressed, again by the hon. Member for Walsall, South, that Estate Duty—and the hon. Gentleman referred particularly to the higher levels of it—amounts to confiscation. It depends on the view that one takes about the social—I was almost going to say the philosophical—merits of inherited wealth. I certainly could not go into the matter on the Third Reading of the Finance Bill, but we must not be taken to agree with it.

I will conclude by saying this about the Budget. The Chancellor said that it contains a number of proposals which may have strained the digestion of Members. I felt that it was only out of courtesy to the House that, after saying that, the right hon. Gentleman refrained from calling it a dog's dinner. It is a bit of a dog's dinner as regards the avoidance provisions. But at the end of the day the actual taxing effect is quite remarkably small.

It may be unintentional—again, I cannot discuss that—but when we come to an economic debate, and if any reference is to be made to this Bill, I suggest that hon. Members should bear in mind that whatever the effect of the tax avoidance provisions may prove to be the actual taxation proposals are really very small indeed.

The increase in the Tobacco Duty which will produce an extra £40 million is much the largest increase for the coming year. There are a number of small increases, and there is, of course, the Profits Tax increase which, though small this year, will, after a time, amount to about the same as that of the Tobacco Duty.

The Financial Secretary to the Treasury (Sir Edward Boyle)

A little more.

Mr. Mitchison

Yes, a little more after a time. But it is rather small, of course; this is a small Budget and the rate of Income Tax remains constant.

I will reply very shortly to one observation which was made in the course of the debate. It was suggested that some of the comments made from this side of the House about the rate of Income Tax were misplaced. I make one comment which seems to me to be quite unanswerable. If we look in the Report of the Inland Revenue as to the number of people who year by year pay Income Tax and the number of people who under successive Tory Governments have received exemption from paying Income Tax we find that the number who pay Income Tax remains pretty steady—there are very small alterations indeed—but that the number who receive exemption falls year by year.

I see that the hon. Member for Wolverhampton, South-West (Mr. Powell) is looking very puzzled. I should hate to say anything of which he disapproves as a statement of fact. I think he will find what I say on page 39 of the 102nd Report of the Commissioners of Inland Revenue. Table 24 and the first two heads of that table will perhaps help to relieve the hon. Gentleman's doubts about what I am saying.

I come to the conclusion, therefore, that the reliefs in Income Tax for this year are really insufficient and that that is a matter which ought to merit the attention of future Chancellors.

2.0 p.m.

The Financial Secretary to the Treasury (Sir Edward Boyle)

I should like, first, to thank the hon. Member for Gloucester (Mr. Diamond) and the hon. and learned Member for Kettering (Mr. Mitchison), on behalf of my right hon. Friend, for their extremely kind and courteous comments to my right hon. Friend and those of us who have been helping to be in charge of this Bill in its process through the House.

I should like, secondly, to congratulate in my turn the hon. Member for Gloucester on his extremely competent and pleasant speech. I think it was his maiden speech from the Opposition Front Bench. The hon. Gentleman referred to the comments of a former Minister in his own party, Mr. Richard Stokes. I can well remember that speech, in which one of the members of his party interrupted him and said. "The right hon. Gentleman said 30 per cent. —30 per cent. of what?". Mr. Stokes replied, "I have not the slightest idea," and went on with his remarks. I remember that episode very well. I think that the sternest critics of the firm of "Gloucester and Craigton" during our discussion on these debates would never —neither partner of the firm—have been guilty of any intellectual imprecision of that kind.

I was glad to hear the hon. Member's compliment to those silent persons in the Chamber without whom these debates could not go on at all. Sometimes we tend to forget the debt we owe to those who do so much work preparing Ministers for debates and also sometimes sorting out the ideas of hon. Members on both sides of the House so that they may be put in a rather more positive form.

Mr. Mitchison

May we also add the people who were responsible for getting this very long Bill completely reprinted since Wednesday?

Sir E. Boyle

I entirely agree. I am glad that the hon. and learned Gentleman mentioned that, and I think that the co-operation of the printers in connection with this Bill has been something that we should all remember.

The House will also agree, I think, that there has been a rather noticeable difference in the atmosphere in today's debate from the atmosphere during some of the early stages of the discussions on the Budget and the Finance Bill, and about that I should like to say a word. My hon. Friend the Member for Kidderminster (Mr. Nabarro) sent me a personal letter explaining that because of a personal engagement he could not be present today. Having listened to some of the speeches and, still more, to some of the interruptions during the early stages of the debates on the Finance Bill, as I remarked to my right hon. Friend at the time, I can understand what Archbishop Laud meant in the seventeenth century when he referred to Parliament disrespectfully as "that noise". I think it only right that should be—

Mr. Ede (South Shields)

And Parliament dealt effectively with him.

Sir E. Boyle

It did, and I think very rightly. In particular, may I say that they dealt with him effectively at a time when one could be put into the pillory simply for being rude about him.

Today we have had a number of speeches from hon. Members on this side of the House, all of them in qualified but none the less clear terms, saying that they think my right hon. Friend has produced a sound and wise Budget. I am absolutely certain that that is the view of the overwhelming majority of my hon. Friends. During the last few months, as is very natural, the critics have obtained a much greater share of the space in the national Press, and perhaps they have contributed a larger number of decibels to this House. But I am certain that the speeches made today are much more representative of the view on the Government side—both the comments on the fundamental wisdom of the Budget and also the perfectly understandable and properly detailed reservations.

The hon. Member for Gloucester referred to his right hon. Friend the Member for South Shields (Mr. Ede) in connection with the International Fiscal Association. I am sure that point will be taken note of outside. An occasional comment in our debate is often given more significance than was really intended. As I happened to be present and in charge of the Amendment when the point came up I should like to underline what the hon. Member said.

Naturally today on the Third Reading and throughout the passage of the Bill a great deal of attention has been given to the tax avoidance Clauses. I sympathise with some hon. Members about their complexity, and I congratulate so many hon. Members who have not only taken the trouble to try to understand these Clauses but in many cases have moved practical and important Amendments to them. The difficulty which confronts many of us on these occasions is not just with the Clause, or with the subject, but in trying to fit many of the expositions by one of the learned Law Officers with the text of the Clauses actually as printed. Sometimes when I listened to my hon. and learned Friend the Solicitor-General giving one of his particularly lucid expositions, which I for one admire very greatly, I was reminded of the verse of a former Eton headmaster, Dr. Alington, about an earlier headmaster whose very obscure handwriting kept his colleagues … working far into the night With faith and hope and charity Deciphering the disparity Twixt what he means to say to them And what he seems to write. That is a difficulty which many hon. Members feel from time to time regarding the Finance Bill.

I wish to make these comments on the tax avoidance Clauses, and I think this should be said unequivocally. In matters of this kind my right hon. Friend depends to a considerable extent on the advice of his skilled advisers both in the Treasury and, still more, within the Inland Revenue. I sometimes think that among the critics in the Press there is a tendency to speak of the Treasury when in fact the Inland Revenue is the body with which they are primarily concerned. I know that my right hon. Friend would like me to emphasise the extent to which on this occasion as on all other occasions, he and the Government take the fullest personal responsibility for these Clauses.

There is sometimes more misunderstanding, even in university circles, about the relationship between the Ministry and the Civil Service than about any other organisation in our national life. These matters 'have been considered fully, both the policy implied and the drafting of the Clauses, at Ministerial level, and there is no question of these Clauses having been, as it were, foisted on my right hon. Friend without sufficient consideration at Ministerial level. I ask the House to consider this because I think it a matter of great importance. Do we really want to reach a state of affairs in which the advisers of the Government are unwilling to bring certain matters to the attention of the Government—or, having brought them to their attention, to bring ways of dealing with them to the attention of the Government—simply because the consequences might prove politically a little awkward? I can only say that were Government advisers to act in such a way I should think that would be a much graver abuse of power than anything that could possibly arise under Clause 28 of the Bill.

I think it of the highest importance that when advisers of the Government see something happening which they feel is amiss, it is not only their right but their duty to bring it to the attention of the Government and for the Government to take political decisions about what is to be done.

There are one or two particular points I wish to make about the tax avoidance Clauses on which we have spent so much time. The hon. Member for Gloucester I know still thinks that Clause 27 in its present form may not be sufficiently wide. To my mind the hon. Gentleman exaggerates the amount of blame which can accrue to stockbrokers over the Clause. Since the Committee stage debates I have been trying to look at the matter again, and I am sure that the vast majority of stockbrokers have been completely guiltless in connection with this practice. I think that this is one of the worst examples of tax avoidance that we have had, and I repeat what I have said before, that this is a scandal at the expense of the honest taxpayer which I hope we have rooted out this time once and for all.

There is one thing which people in business in the City can rightly ask of the Government and it is something which we have tried to do. I think it very important that Ministers considering these matters should make sure that they understand how the present financial system works. If we are to draw a distinction between what has been called subterfuge on the one hand, and perfectly legitimate practices on the other, it is important for a Minister to have a good grasp of how the present financial machinery works, and so I welcome discussions and representations arising out of particular Clauses, which all help in that direction.

Here we are not only dealing on the one hand with perfectly legitimate transactions and on the other hand with gross cases of tax avoidance. There is a middle possibility, that is to say, a practice which cannot be called immoral but which at the same time gives a small number of people a wholly disproportionate tax advantage. I think the real difficulty in dealing with all these matters is getting clear in one's mind where the boundaries come between the perfectly legitimate transactions, gross subterfuges, and in the middle a rather large range of practices where one might feel that a quite small number of people are getting unfair tax advantages. We have tried to deal with this problem, and I believe that on the whole the Clauses in this Finance Bill as they have emerged from our discussion will prove beneficial for the purposes for which they have been devised.

The fact that so many Clauses in this Bill have been passed dealing with tax avoidance does not in any way alter the constitutional position of the subject. Certainly I should not at all dissent from the general proposition which my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) laid down, that within the limits of what I have said none the less the taxpayer is perfectly entitled to lay out his tax affairs so as to benefit his position as much as possible. We want to remember—on the one side just as much as on the other side—what my right hon. Friend said in his opening speech today—"We must be stern in counteracting these activities. If they are allowed to persist, not only could the loss to the Revenue be very great, but the effect on the rest of the public would be most unfair". Both those factors have to be kept in mind This year we have been dealing with matters in which tens of millions of revenue are at stake. Today it is more necessary than ever not to breed any cynicism about the taxation position. I hope and believe that in this Finance Bill we have held the balance fairly between the rights of the subject and the need to deal sternly with tax avoidance activities.

I should like to add one or two other points which have been raised in the debate. The hon. Member for Paddington, North (Mr. Parkin), in a speech which covered rather different ground from most of the speeches which have been made, asked about what I might call the N.A.T.O. Clauses of the Bill. As a broad statement, the N.A.T.O. Clauses merely give statutory effect to the exemptions from tax which are due under this country's international obligations. Of course, the granting of these exemptions on a statutory basis cannot be achieved without legislation in this Bill. They do not in themselves, I believe, involve any changes or great issues of policy, although I would not have put beyond the bounds of possibility that if the hon. Member for South Ayrshire (Mr. Emrys Hughes) had heard the speech of his hon. Friend he might have been moved to make a speech which would at any rate have just skirted the rules of order.

My hon. Friend the Member for Ayr (Sir T. Moore), who made such a very agreeable speech this morning, asked about Premium Bond prizes. I can tell him that there is no need for the exact amount of Premium Bond prizes to be put in the Finance Bill. There is a reference to series A and B, in other words to the old and the new Premium Bond schemes, but there is no need for the prizes to come in. Hon. Members mathematically inclined will agree that it is possible to have rather more big prizes, or at any rate one or two more larger prizes, and considerably more very small prizes, and yet for the total amount of prize money not necessarily to be bigger than the old total; but I shall not pursue that matter now.

For the rest of my time—and I promise not to detain the House very much longer—I should like to go back to the main economic purpose of this Budget and Finance Bill. In particular, I should like to commend the most interesting and extremely helpful speech of my right hon. Friend the Member for The High Peak (Mr. Molson) and to say how pleased we all were to hear him speaking in an economic debate after so long a lapse of time. My right hon. Friend, referred to a pamphlet of his "Full Employment and the Budget" published in 1944. I can tell him that I still have a copy of that pamphlet in my collection. The House should remember, since my right hon. Friend referred to it, that he was a Keynesian before the publication of Lord Keynes' General Theory. I seem to recall a speech he made in 1934, in his earlier incarnation as the hon. Member for Doncaster, which anticipated with very considerable intellectual brilliance a point of view which I think would now be regarded as fairly orthodox on both sides of the House. Of course, he is absolutely right when he says that many people like the idea of increasing Government expenditure when we have spare capacity, but do not like the idea so much of a tighter budget and increases of taxation at a time when we have excess pressure on resources.

That complaint has even sometimes been heard from some wise people within the Treasury. I think we have to remember that if we accept the idea of the Keynesian analysis—the idea that we want to keep the balance between the total of productive resources and of monetary claims made on them—we have to accept the need for tighter Budgets at a time of prosperity, just as we have to accept that we can have more generous Budgets at a time when we have capacity to spare.

I quite agree with my right hon. Friend's later economic analysis, on which it would not be quite in order to enlarge and about which I shall, therefore, add only one sentence. I was glad that towards the end of his speech he referred to the importance of capital investment. Perhaps, Mr. Deputy-Speaker, without incurring your wrath, I may be allowed to say that I am sure the whole House is very glad that the investment allowances, reintroduced in last year's Finance Bill, have not been removed in this year's Finance Bill. We are here getting on to a field which, I agree, we shall be discussing next Monday. Therefore I shall not proceed any further on those lines.

My hon. Friend the Member for Ayr referred to Profits Tax. I am glad that he did. Do not let us forget Profits Tax in the context of this Budget. It does not yield any revenue this year, but will yield about £65 million, one-and-a-half times as much as tobacco tax, next year; and I think it will make some effect on the economy even before it yields revenue. My right hon. Friend is perfectly correct in saying that, at a time when profits and dividends are increasing pretty rapidly, this was not an unreasonable increase in tax, particularly when one remembers that two years ago my right hon. Friend brought the rates of tax together. I know there is controversy about this, but in my view 12½ per cent. is not an unreasonable rate of Profits Tax.

One of the strong arguments for this Budget and this Finance Bill is that fiscal and monetary weapons work better if they are working in the same direction, and it is much easier for monetary methods to work effectively if companies as a whole are not too liquid.

My hon. Friend the Member for Cheadle (Mr. Shepherd) made a very helpful speech. He referred, rightly, to the courage of my right hon. Friend in being unpopular with his own party over the Budget. As he also very correctly said, it is much easier for a right hon. Gentleman to engage in political controversy with the Opposition on matters on which passions are easily aroused than to be unpopular with his own party. That leads me to the concluding words I want to say to the House. I often feel it is rather suitable that some of our financial discussions should take place at the same time as the Wimbledon Championships take place. There are the same performers here year after year on both sides of the House, but I do not think there would be very much dispute in the House today that in the championship this year, the title of victor of the men's singles has, as on earlier occasions, been won by my right hon. Friend the Chancellor of the Exchequer.

I think I would be expressing the view of a very great many hon. Members when I say that nothing would give greater pleasure, as we finally part with the Finance Bill, than to feel that my right hon. Friend may be back with us to defend his title next year.

Question put and agreed to.

Bill accordingly read the Third time and passed.

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