HC Deb 22 June 1960 vol 625 cc423-57

(1) Subsections (1) and (2) of section nine of the Finance Act, 1956 (which provide relief from income tax on certain savings bank interest) shall, subject to the provisions of the next following subsection, apply in respect of dividends on shares of a society registered under the Industrial and Provident Societies Acts, 1893 to 1954, or under the Industrial and Provident Societies Acts (Northern Ireland), 1893 to 1955, and in respect of interest on deposits with such a society or with a registered friendly society, as they apply in respect of interest on deposits with the Post Office savings bank.

(2) Where by virtue of the last foregoing subsection the amount of surtax payable by an individual would exceed the sum of—

  1. (a) the amount of surtax which would have been payable by him, if that subsection had not been passed, and
  2. (b) the amount of relief, if any, to which he is entitled by virtue of that subsection, that excess shall be disregarded for all the purposes of the Income Tax Acts.—[Mr. Sydney Irving.]

Brought up, and read the First time.

3.45 p.m.

Mr. Sydney Irving (Dartford)

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

The Temporary Chairman

It will be for the convenience of the Committee to discuss with this new Clause the new Clause in the name of the hon. Member for Twickenham (Mr. Gresham Cooke) and other hon. Members—Relief from Income Tax on investment income.

Mr. Irving

The purpose of the Clause is to extend the Income Tax concession given in 1956 to certain Savings Bank interest to interest on Co-operative shares and Penny Bank accounts. It is not proposed to ask that the concession should be extended to Co-operative loan capital, because there is a statutory limit on Co-operative shares of £500 and of £50 in Penny Bank accounts. There is none on loan capital, and for this reason no special treatment is asked for.

At the moment, the first £15 of interest on savings in the Post Office Savings Bank and in the ordinary departments of Trustee Savings banks is exempted from tax. It is specifically provided for this purpose that a man and wife should be treated separately. Therefore, it is possible for a married couple to hold £1,200 without paying Income Tax on interest.

At the end of 1958 savings in the Co-operative movement amounted to £301 million. This included £251 million in share capital. But these savings, although large in total, are, in effect, the small savings of 12½ million members of the Co-operative movement with an average shareholding of £20.

Both the present Chancellor of the Exchequer and his predecessor, in 1956, were and are anxious to encourage small savings, but this discrimination against Co-operative investment in the matter of Income Tax concessions not only places a handicap on the Co-operative movement, but—which is worse—it may well cause a transfer of past savings to savings banks. We believe that this is not what either the Chancellor or his predecessor intended.

The present system is unjust, because it discriminates against certain types of small savings. There is already a further discrimination against Co-operative members, in that when a person applies for a supplementary old-age pension, or for National Assistance, only the first £125 of Co-operative investment is counted as an exemption for assessment of means, whereas for investment in the Post Office and in Trustee Savings banks this sum is £375.

The Bill raises the limit of holdings of the Tenth Issue of National Savings certificates from £750 to £900, from 1,000 units to 1,200 units. It was pointed out that, in addition to these holdings, a person may have as much as £2,175 in earlier issues of National Savings certificates. This form of investment is tax free.

An interesting analysis was made for the Radcliffe Committee. It showed that there were 10 million live holdings in National Savings certificates in 1957 and that the average holding was £189, but 42 per cent. of the total amount was in holdings of more than 1,000 units. National Savings certificates, if held for the whole period of seven years, have a yield of roughly 4½ per cent. tax-free. If they are held by people paying the standard rate of tax, this is the equivalent to a true cost to the Government of 6⅞ per cent. and for people paying Surtax the yield is equivalent to 37.3 per cent.

Mr. Gerald Nabarro (Kidderminster)

What rate of Surtax?

Mr. Irving

That is the top rate.

Therefore, under the present law a person with £20 in Co-operative shares will have to pay tax on the interest up to £15, while a wealthy person with thousands of pounds invested may get off scot-free in this respect.

For over 100 years co-operative societies have encouraged thrift, have canalised the small savings of the working class, and have followed the practice of investing their capital surplus to trading requirements in Government securities. At the moment, nearly 30 per cent. of Co-operative investment is in Government securities.

The Royal Commission on the Taxation of Profits and Income had something to say about this problem, and recognised the two points I have made. In paragraph 67, page 21, it says: We do not see our problem, therefore, as that of deciding whether there should be any relief for personal saving if there cannot be relief for all such saving. It seems to us rather that we should consider how far the present reliefs are justified as a departure from a general equitable principle. At any rate, we can take as our starting point the view that the tax system, if it does give relief for saving, should aim at securing that whatever reliefs are given should be carefully controlled, so as to avoid the risk of relief for what is really delusive saving— in talking of "delusive saving", the Royal Commission obviously had in mind this kind of transfer saving— and should be available to as wide a range of taxpayers as possible, so as to minimise unfairness in the distribution of the benefit of the relief. The Royal Commission was obviously concerned that there should be fairness in the incidence of this tax or relief from it.

The Co-operative Congress, in 1956, had a prolonged debate on this matter, and speakers from all parts of the country deplored the action of the Chancellor in excluding Co-operative share capital. The Congress unanimously passed the following resolution: That this Congress deeply regrets the failure of the Government to include Co-op share interest in the Budget concession exempting from Income Tax the first £15 of interest on deposits in the Post Office and in ordinary departments of trustee savings banks. We feel that it is wrong in principle to introduce further discrimination between different forms of saving which will result in the transfer of savings rather than the encouragement of new savings. The congress went on to deplore this discrimination, and urged the Government to include in this concession Cooperative share capital and, indeed, the Penny Bank savings account because it said, in particular, that the interest was limited and a holding of such share capital was limited to £500.

Co-operative societies continue to play an important part in promoting thrift. The amount returned in dividend in 1958 amounted to £59 million, and over the last fifty years or so the amount returned by way of dividend on purchases has run to over £1,000 million. Apart from that contribution, 760 retail societies maintain small savings departments, and in 1958 the total amount of small savings was £7.8 million—quite a remarkable contribution.

In many cases, this capital has been painstakingly accumulated, year by year, from the dividend on purchases, and in our view there is a very strong case for extending this tax concession to Cooperative share capital and to the Penny Bank account. We hope that the Chancellor, who is a fair man, will be able to accept the new Clause, and so end an injustice that co-operators have suffered since 1956.

Mr. R. Gresham Cooke (Twickenham)

While some people would like special privileges for shareholders of co-operative societies, I and my hon. Friends who have tabled the new Clause—Relief from income tax on investment income—would like to see a much wider approach to the subject, so that all investment income up to £15 per annum from stocks and shares should be tax-free in the hands of the taxpayer. We are really more concerned with the general position, and with the shortage of capital that is evident in British industry, both nationalised and private.

Some of us are concerned about the statement in the World Economic Survey, recently published, which shows that the rate of growth of capital investment in the United Kingdom—and, indeed, in the West generally—is no greater in the 'fifties than it was in the 'twenties. I myself cannot help being alarmed by the fact that Britain does not figure at present, nor has she during the last few years, among the top ten industrial nations with regard to the growth of capital investment. It is, therefore, quite obvious that we have to re-establish the virtue of thrift and saving.

We have to bring back to the country once again a Victorian sense of thrift and saving. That feeling, of course, was grievously slaughtered in the first few years after the war by high taxation, by inflation, and by people feeling it was not worth saving because they did not know what their money would be worth in a few years' time. Fortunately, saving is now going on at a much higher rate than it was a few years ago, but I believe that the savings of the man in the street are all being canalised in one direction.

A solicitor constituent of mine has a very wide practice among the occupiers of houses in both council housing estates and owner-occupier estates. Those living there include manual workers, clerical workers and, ordinarily speaking, the lower-grade workers. My friend deals with the winding-up of a large number of estates of small people. He tells me that the interesting thing is that in all those estates there are only five forms of property that a man possesses when he dies. They are cash in hand and at the bank, a small insurance policy, money in Post Office savings, money in National Savings, and, possibly, if he is an owner-occupier, his own house or bungalow.

That means that, generally speaking, the man in the street, although he may want to invest in British industry, is not doing so at present. My solicitor friend also tells me that a man who owns under £5,000 of capital does not invest in stocks and shares. One of the deterrents there is that he has to pay the full standard rate of Income Tax on all the interest from his holding, whereas, by investing in his Post Office Savings Bank, he has the advantage of getting the first £15 of interest tax-free, and on National Savings he does not have to pay any tax at all.

I should, therefore, like to see my right hon. Friend the Chancellor bring in a provision which gives equity of treatment for the shareholder and the stockholder vis-à-vis the owner of Post Office Savings and National Savings. We have to help the small saver to come into British industry—and not only the nationalised industries, but private industry as well. We want to see him investing in, perhaps, his own company, in unit trusts and in companies generally. We also want to see companies assisting their employees to invest not only in National Savings, but in industrial companies. In short, we really want to see a Tory property-owning democracy not only of houses but of industrial shares and investments as well, and I have much pleasure in asking my right hon. Friend to bear this in mind.

4.0 p.m.

Mr. J. Grimond (Orkney and Shetland)

I am very glad to follow the hon. Member for Twickenham (Mr. Gresham Cooke) on the note of encouraging small savings. Earlier in the Committee proceedings on this Bill we had a short discussion about the nature of small savings, and I think that it is apparent that what we call small savings do not necessarily come from small savers. A great deal of them are now contributed by people who find the savings schemes, originally designed for small savers, of great assistance to them when they come to reckon their liability for Surtax. Those people are not, in the strict sense, small savers at all.

This type of provision would give a general encouragement to the small saver. We, as Liberals, had tabled a new Clause, which has not been selected and which it would be improper to discuss, in which we suggested that special accounts might be opened for those who are prepared to save some of their income. I agree that it is important today both to spread property and also to encourage more people in the country to take an interest in the running of the country's business, whether it be Cooperative, private or nationalised business. We have a mixed economy and we have to look to all sides and make its awards more fairly shared than they are at present. I am well aware that this proposed new Clause applies only to certain institutions, but I like it none the worse for that. It goes only a small way, but that is better than going no way at all.

This afternoon we have heard the famous phrase—a Tory property-owning democracy. It rings round the country at election times, but it is usually rather muted during Finance Bill debates. I hope that in spite of the setback yesterday over Schedule A, the Chancellor may be in a more forthcoming mood today. He has, no doubt, been reading the enormous volume of the many speeches he has made, both to his own company and at many elections, pressing for the savings of the small saver and encouraging the workers to save.

We look forward to hearing the battle cry of a Tory property-owning democracy and the demand for Tory philosophy, which we hear a good deal about, being translated into an actual enactment on the Statute Book.

Mr. Denzil Freeth (Basingstoke)

I gather that we shall have an occasion later today to discuss the Liberal attitude to property owning and shares, so perhaps I may reserve comments on the speech of the hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond) until then.

It is worth remembering, when discussing this proposed new Clause, exactly why the concession of the first £15 of interest on Post Office Savings Bank and Trustee Savings Bank accounts was introduced by my right hon. Friend the Prime Minister and my right hon. Friend the Chancellor of the Exchequer. The reason is twofold. First, it was to encourage savings, but it was particularly to encourage those forms of savings where the money was lent to the Government of the day. I remember the debates in which particular attention was paid by both sides of the Committee to trying to find a form of wording to cover every kind, so to speak, of trustee savings bank where the bank lent its assets to the Government.

If I remember those debates aright, it was because the co-operatives did not come within these terms of definition that they were excluded. I should, therefore, be rather doubtful whether it would be right and proper to depart from the canons, if I may so call them, of 1956, unless one goes to the extent proposed in the Clause of my hon. Friend the Member for Twickenham (Mr. Gresham Cooke). I should very much like to see the Clause of my hon. Friend translated into the law of the land. I believe that it would do nothing but good.

I know that it is always possible to argue that the Stock Exchange is having a fairly prosperous time and, therefore, we need do nothing to encourage it. I know that it is also possible to say that the unit trust movement is having such a great success that there is no need to take this step. But I should have thought that it was a step for the good of the country as a whole, both for increasing savings in the widest possible sense to cover industrial savings and for increasing share ownership throughout our people, to have this on the Statute Book. I do not know what the Clause of my hon. Friend would, in fact, cost. It may well be that the cost puts it out of court this year, but I hope that the Chancellor will remember it when framing future Budgets.

Mr. Norman Dodds (Erith and Crayford)

Will the hon. Member, having stated that he is in support of the proposal of the hon. Member for Twickenham (Mr. Gresham Cooke), say whether he is also as enthusiastic in his support of the proposition put forward by my hon. Friend the Member for Dartford (Mr. Sydney Irving) in connection with the co-operative societies?

Mr. Freeth

I am sorry if I did not make myself clear to the hon. Gentleman. I think that it would be probably wrong just to widen the exemption from the tax to bring in the co-operatives, and if I were to depart from the principles laid down by the Prime Minister and the Chancellor of the Exchequer in 1956 I would prefer to include all manner of income.

Mr. John Rankin (Glasgow, Govan)

The debate so far has shown a measure of agreement on both sides of the Committee, including agreement with the point of view expressed by my hon. Friend the Member for Dartford (Mr. Sydney Irving) and, I think, explicity stated by the hon. Member for Twickenham (Mr. Gresham Cooke) when he demanded for his Clause the privileges which were extended to the Post Office and to those holding National Savings certificates. Of course, that is one of the points which we are making in our new Clause. We differ from him in that he seemed to say—I think that he used the words exactly, that we were, in the proposed new Clause before the Committee, seeking special privileges for the Co-operative investor. We are not doing anything of the kind.

We are protesting against the discrimination which is exercised by the Government against the Co-operative movement and which has been exercised by this Government for a very long time. We are asking not for a special privilege of any kind. We are merely asking to be treated in the same way as the Government, in the 1956 Act, decided to treat the Post Office. I do not want to go too far into the hon. Member's speech, but he made one or two very interesting statements.

I agree with him—I think that we all do—that we want to see a balanced attitude in regard to investment, whether it is for domestic purposes or any other purpose. But we do not want to see people today investing more of the weekly or monthly income coming into the household than is advisable. It happens, unfortunately, very often that too big a strain is put on the weekly income by investing too much. That is my view. We want to see more savings, but the country will not get more savings if we discriminate against a particular form of savings as the Government are now doing.

The hon. Member referred to the fact that the rate of the growth in capital investment today was no better than it was in the 1950s.

Mr. Gresham Cooke

The 1920s.

Mr. Rankin

We wonder how far that attitude has been created and fostered by the Government who have gone on preaching to the people, "You have never had it so good." If we instil into their minds that sort of philosophy they seek to live up to it by not saving so much as we should like to see them save and spending, in many cases, perhaps more than they ought to spend in relation to their income.

The hon. Gentleman concluded by asking for equality of treatment—pre- cisely what we on this side of the Committee are seeking. I hope that, unless the Chancellor changes his mind as a result of the arguments which will he presented, the hon. Gentleman and his hon. Friends who support him will march through the Lobby with us to emphasise our attitude on both of these Clauses.

Mr. Gresham Cooke

May I make it clear that I asked for equality of treatment of all invested income and not only of dividends from the co-operative societies?

Mr. Rankin

The hon. Gentleman will not deny that Co-operative savings are part of all invested income, and, therefore, his support must be given to the new Clause which we have proposed.

The hon. Member for Basingstoke (Mr. Denzil Freeth) said that the reason for excluding the co-operatives from the Finance Act, 1956, was that the Chancellor wanted to give the privilege only to those who invested their savings with the Government. He must surely know that out of total savings of £250 million in the Co-operative movement, about £80 million goes in Government gilt-edged. Therefore, since the hon. Gentleman wants to help those who help the Government, I hope that he, too, will march, if necessary, with his hon. Friend the Member for Twickenham through the Division Lobby.

Mr. Denzil Freeth

indicated dissent.

Mr. Rankin

The hon. Gentleman says things, and immediately he is pinned down he moves his head in the wrong direction. He ought to be moving it vertically and not horizontally.

Of course, the Chancellor may save us a great deal of trouble, and I hope he will, by agreeing to the proposition put forward by the hon. Gentleman as well as to the new Clause which we are advancing. He is tremendously interested in the problem of savings. In his Budget speech he told us that he was faced with an overall deficit of £331 million this year. But it should be recognised that that £331 million does not meet all the expenditure outside the Budget. That is only the deficit in budgetary terms. There is considerable expenditure outside the Budget altogether and, while we do not know what that is for this year, perhaps before we leave the Report or Third Reading we shall be able to get an idea of what that expenditure is.

But if I take last year's Budget, where there was a deficit of £181 million which had to be met by borrowing, the extra budgetary—

The Temporary Chairman

Order. The hon. Member is straying a little wide of the subject of relief under Section 9 of the Finance Act, 1956.

Mr. Rankin

I know that patience is a great virtue, Mr. Arbuthnot, and I am straining it a little, but I am coming to a very important point and am using this argument as an illustration to advance that point. That is all. I am not going too far. I was merely pointing out that in last year's Budget there was a deficit of £181 million—

The Temporary Chairman

I was pointing out that the hon. Member was going too far.

Mr. Rankin

I shall be very brief, Mr. Arbuthnot.

The Temporary Chairman

That does not put the hon. Member in order.

4.15 p.m.

Mr. Rankin

It may be permissible to point out that there is extra budgetary expenditure which the Chancellor has got to meet, and in the previous Budget it reached £425 million which was met to a large extent by the small saver for whom we are speaking today. There are many contributions to that expenditure, but the most important one was the £303 million which the small saver gave to the Chancellor in that financial year to meet this expenditure, of which we heard nothing at all in the course of the Budget and about which we only hear as a result of investigations that go on from time to time within the Department for which the right hon. Gentleman speaks.

The right hon. Gentleman himself, in his Budget speech, emphasised savings as an important factor in the attainment of the expansion which we all want to see. Since there is this importance attached to savings by the Chancellor—in fact, by the Government and their supporters as a whole—it is strange that they should discriminate against one organisation alone which is seeking to provide the Chancellor with some of the money that he needs.

One example of discrimination has already been given by my hon. Friend the Member for Dartford—the discrimination in favour of the Post Office and the trustees savings banks which is denied to the Co-operative movement. That is one example of the discrimination which exists today. Of course, we do not object to the first £15 of money in the Post Office being free of tax. We welcome it. But we would like to see the Chancellor taking similar action with regard to Co-operative investments.

Then again, my hon. Friend mentioned the case of the old-age pensioner who applies to the National Assistance Board for supplementation. We argued this matter very strongly last year. The first £125 of his Co-operative savings are exempted from the assessment of his means, but if they happen to be in the Post Office the amount is stretched to £375, which is exempted from that assessment. My hon. Friend properly mentioned the extraordinary case which was pointed out by the Radcliffe Committee where people of great wealth are completely exempted from paying any tax whatsoever while the person who owns £20 in a co-operative society is compelled by the right hon. Gentleman, a very kindly gentleman, to pay tax on the interest yielded by that small sum.

Mr. Denzil Freeth

Would not the hon. Gentleman agree that the very rich man with money in the Post Office Savings Bank is not exempted from tax altogether?

The Temporary Chairman

Order. I think that this is going a little wide of the new Clause under discussion.

Mr. Freeth

With all due respect, Mr. Arbuthnot, are we not discussing the extension of the £15 tax-free investment to other forms of saving?

The Temporary Chairman


Mr. Freeth

I was trying to suggest to the hon. Member that he was a little inaccurate in what he was saying, since the very rich man would have to pay Surtax on the £15 grossed up.

Mr. Rankin

We do not, of course, object to him doing that if we in the Co-operative movement can have the equity and fairness which the hon. Gentleman and his hon. Friend the Member for Twickenham say that they want for the particular group about which they are speaking.

I will give another example of discrimination. The joint stock companies have been particularly favoured by the Chancellor because he has reduced their rate of Profits Tax during the last two years from 30 per cent. to 10 per cent. and then up to 12½ per cent. For the Co-operative investor, he has increased taxation from 3 per cent. to 12½ per cent. In my view, it is very difficult to defend that kind of discrimination, and I shall be interested to hear whatever defence is advanced.

In limited liability companies, Profits Tax falls only on the shareholders, not on the purchasers. Taxation falls on both shareholder and purchaser in the case of co-operative society members who shop at the co-operative stores. This, again, is unfair and discriminatory. The latest example is in this Budget, where the pool from which dividend is to be paid will be reduced by £1¾ million as a result of the overall increase in the Profits Tax which I mentioned. Again, there is no limit whatever to the potential dividend payable upon ordinary shares in a limited liability company. There is a limit to the interest paid on Co-operative shares imposed by the Government through the Registrar of Friendly Societies.

The right hon. Gentleman has said that he wants savings. Hon. Members on the Government side say that they want more savings. We wish to help in providing those savings which are essential for the purposes which I sought to outline, Mr. Arbuthnot, but with insufficient co-operation from the Chair. I am puzzled to know why the Chancellor treats the Co-operative movement as he has been treating it for several years. The discrimination against it—I say this with hesitation—is frigid and calculated. It is no error of judgment, because it has been continued.

I wonder whether the right hon. Gentleman realises that the Co-operative movement is more than just a trading organisation. It is a movement which devotes some of its trading surplus to fostering within the community those higher ideals, those higher loves and nobler cares, to which the Chancellor and all his hon. and right hon. Friends subscribe.

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

The hon. Gentleman is very good, but, although he has been talking a great deal about discrimination against the Co-operative movement, there is no discrimination against it whatever. I have often paid tributes to the good qualities of the Cooperative movement. There is no discrimination against it of which I know.

The hon. Gentleman reminds me of the Aberdonian I once heard of who, when the bus fares in Aberdeen were reduced, complained of discrimination against him because he would not in future save so much as he had done by walking.

Mr. Rankin

The Chancellor has a very easy way out of the charges which, with the best motives in the world, I am launching against him and his Government. His easy way out is to accept the new Clause to which I have been speaking. I have given examples of discrimination to show that the difference in treatment between, shall I say, the Post Office Bank and trustee savings banks and the co-operative societies is unfair. The right hon. Gentleman says that he has paid tribute to the co-operative societies. The greatest tribute he can pay is now within his grasp. Let him accept the new Clause which I am supporting and give to the great Cooperative movement the justice which has been so long delayed.

Mr. Maurice Macmillan (Halifax)

I am very happy to join in the all-party tribute to the property owner-investor. I agree with a part of the speech of the hon. Member for Glasgow, Govan (Mr. Rankin) which seemed relevant to what we are discussing. To encourage savings at this time, it is necessary to encourage and help the small saver to invest. Perhaps I ought to make clear at once that it is new Clause No. 73—Relief from Income Tax on investment income—which I support, not new Clause No. 17—Extension of relief under section 9 of Finance Act, 1956.

I and my hon. Friends wish to remove all discrimination and to give encouragement to all small investors. I really cannot agree with hon. Gentlemen opposite who suggest that merely by extending the number of privileged people one necessarily does the same thing as abolishing privilege. Indeed, in my view, to do so would really remove the Co-operative supporter from the general principle that the small saver should be helped.

I should be out of order, and probably repetitive, if I went into great detail to explain why I think that it is very important at this moment to encourage savings, but there is one comment which I ought to make. We all agree that there is a shortage of capital. Only yesterday, in the Evening Standard, the Chancellor of the Exchequer was reported as saying that We do well to bear in mind that the demand for capital is likely to be greater than the supply over the years ahead. The Government cannot, without distortion of the whole economy, insulate itself from the effects of this basic factor". I urge the Chancellor to remember that one method of dealing with this matter would be to increase the supply, not just to restrict the demand. Whether the need arises from our balance of payments, because of shortage of capital overseas, or for home development, it is by increasing the supply that we can help to achieve expansion without the danger of inflation. This principle was even more strongly behind the other new Clauses which my hon. Friends and I had put down, but which I should be out of order in mentioning now. It is behind the new Clause to which I am speaking and, in my view, it has so far been somewhat ignored by those who have spoken from the Treasury Bench.

Yesterday, the Chancellor said: I made it clear in my Budget statement that in present conditions of brimful demand it would be irresponsible to add to purchasing power by a net decrease in taxation, and that such a conclusion—which has not been really seriously disputed—puts out of court this year acceptance of any of these new Clauses."—[OFFICIAL REPORT, 21st June, 1960; Vol. 625, c. 267.] It certainly would not put out of court the new Clauses put down by my hon. Friends and myself, because the loss of income to the Treasury would arise only to the extent to which the purchasing power of the individual would be reduced by savings.

4.30 p.m.

The same principle lies behind the proposed new Clause No. 73. I admit that it leaves a small extra amount of purchasing power in the hands of the small investor in that the first £15 of his income from investments are tax-free, but I think that the Committee will agree that this is more than outweighed by the extra incentive and inducement to save. I cannot understand why the admitted impossibility of adding to the purchasing power means that we must have a negative and restrictive approach to the problem in this Budget. I wish that the Chancellor could have taken the opportunity to clear up this anomaly—he does not like the word "discrimination"—together with some of the others which have been mentioned.

The new Clause to which I am speaking is one of what might be called "the £15 Clauses". There are three of them altogether. The first asks for relief on Schedule A to the tune of £15. The new Clause under discussion asks for relief on investment income from certain specified sources. New Clause No. 73 asks for relief on investment income from all sources. New Clause No. 73 would probably provide the biggest extra inducement to save, because it is framed not to be alternative but additional to income derived from trustee savings banks and the Post Office Savings Bank.

That was done deliberately to meet the sort of objections raised by my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth), to the effect that to get the maximum relief the investor has to invest both in ordinary shares and trustee savings banks or the Post Office Savings Bank.

I should like to add my plea to the Chancellor to cease discrimination. I cannot believe that the Government think it wrong to invest in industry, or that it is wrong that the public should be encouraged to own shares individually instead of collectively. I am glad that this is a completely non-party point. I am sure that hon. Members opposite, however much they may wish to restrict investment in the private sector of industry, would like to see that sector owned by small shareholders to the greatest possible extent.

Too often the home owner is the only man who strikes the public imagination. The hon. Member for Loughborough (Mr. Cronin) yesterday made a moving plea to help those sheltering their wives and children and even their ailing and aged relatives. I agree that they deserve support, but what about those who send money to their aged and ailing relatives and whose job keeps them on the move? I do not think that it is right to prescribe the free choice of the individual to this extent. Not everyone wants to own his own home or to invest in co-operative societies. I think that those of us who support this new Clause would want to see a freer choice given to all—in other words. to remove all discrimination.

It was the present Prime Minister, when Chancellor of the Exchequer, who, in 1956, introduced the provision which freed from Income Tax the first £15 of interest from Trustee Savings banks and the Post Office Savings Bank. It was also the present Prime Minister who introduced the Premium Savings Bond, which added an element of capital gain to the inducement offered to the small saver. I urge that this extra inducement to the small saver should be extended by encouraging him to invest in industrial equities. I am not suggesting that he should be encouraged to gamble either on the Stock Exchange, or on football pools, but I suggest that that is an element of extra inducement which would help people to save and encourage them to put their money not only into the more conventional outlets of the small saver, but also into industrial equities.

I do not think that we are asking for very much. We are not asking for more purchasing power, or for preferential treatment in any way. I hope that the Minister will give a sympathetic answer, because I do not think that it is a great deal to ask a Conservative Government to demonstrate their belief in freedom by giving the maximum possible freedom of choice to the small investor.

Mr. Laurence Pavitt (Willesden, West)

Throughout this debate there has been a remarkable degree of unanimity on both sides although we are discussing two separate Clauses. I am not so optimistic as I might have been a few months ago, having seen yesterday in the House what appeared to be a minority of one, the Financial Secretary, and yet, when it came to the vote, the figures showed that unanimity did not follow into the Division Lobbies.

In discussing both Clauses I think that we have been concerned with the extent of small savings and with the encouragement of that particular sector of the economy. The hon. Member for Halifax (Mr. Maurice Macmillan) will, I think, carry us with him to a great extent in asking for more investment on the part of small savers in industry. I am particularly concerned to support the New Clause No. 17. Therefore, I want to put the emphasis rather on the mutual and the co-operative industry rather than private industry. It is a matter of emphasis rather than difference.

In moving his new Clause, the hon. Member for Twickenham, (Mr. Gresham Cooke) struck a note very much in accord with what we on this side have in mind When he referred to the basic Victorian virtue of thrift. This is something on which the British Co-operative movement was built in the Victorian age. It is a basic thing which we have succeeded in extending to every village and town in the country and upon which the Co-operative movement has been successful.

I agree with my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) that this is a question of discrimination against a large organisation, an institution enabling small savings to accumulate. The Finance Acts make it so that one large institution, the national institution of the Post Office Savings Bank, has certain facilities whereas another institution, a voluntary mutual association, is excluded from those advantages.

The Government have an ambivalent attitude towards the Co-operative movement because they do not understand it. The Secretary of State for Commonwealth Relations and the Colonial Secretary fully understood the important part of active participation in thrift organisations overseas. The hon. Member for Orkney and Shetland (Mr. Grimond) stressed the importance of participation, and I agree with him. In the early part of the century, the Government took action in India to encourage thrift through co-operative societies throughout that country. In 1897, Sir Frederick McLaglan produced his famous report on village credit and thrift which led to the whole of a Government Department being devoted to promote co-operative societies throughout India and subsequently Asia. Colonial Office ordinances are at present issued through official channels to encourage officials in the Colonial Service to promote co-operative societies with the idea that the indigenous population shall have thrift and self-help organisations to enable them to develop economically and socially from their own resources.

In this country, as my hon. Friend the Member for Dartford (Mr. Sydney Irving) so ably said, we have 12½ million people who co-operate in their own institutions. But whereas the Government are fair in trying to encourage this type of development overseas, and at various times in recent history have gone out of their way to enable people to participate in local organisations in order to govern themselves through this "grass roots" democracy, when it comes to our own country, which is the home of this movement, Government actions, particularly those of the Treasury, dampen down endeavour and prevent the natural and continual growth of the Co-operative movement.

I do not understand why the Chancellor cannot see the natural advantages of this national organisation whereby ordinary people are encouraged to save. It is not merely an exhortation of encouragement to save—it is automatically done for them. The accumulation of their dividend on purchases is really a deferred discount. At the end of the half year there is a tendency not to take the trouble to draw it out, but to leave it there to accumulate as part of the small savings movement. Yet the action of the Chancellor in 1956 and 1957 discouraged this. We could redress the balance and encourage people to leave their dividends to accumulate, if only they have the same facilities there as they would have if they put the money in the Post Office. They should have the same advantages from the point of view of supplementary pensions.

The acceptance of our Clause would stop the present trend towards the dispersal of savings. The social system under which we live today means that there is a constant pressure for the purchase of consumer goods. We cannot turn on television without being encouraged to buy a washing machine, or other durable consumer goods. The brake is being applied on hire purchase, but, nevertheless, the tendency is still for people with small savings in the cooperative society, instead of leaving the money there to help buttress the nation's economy, to take it out and use as deposits for hire-purchase of these goods.

It is in the nature of co-operative societies that they invest their accumulations in Government gilt-edged. About 28 to 30 per cent. is invested in this way today. This is because of the basically different structure of Co-operative capital compared with joint stock or public limited liability company capital. It is withdrawable. and if a person has a £1 share he will only get £1 out. Company capital is only transferable, not withdrawable. The average is only £20 per member among the 12½ million members. That small figure means that what a person has is inevitably under pressure to purchase consumer goods.

If Co-operative members were able to sell on the Stock Exchange it would not be necessary for a co-operative society to hold large stocks of gilt-edged securities. As it is, it must always hold sufficient gilt-edged so that it can meet its commitments in case of a run of withdrawals. We thus have these millions of pounds invested in Government securities and the Co-operative movement is doing the Chancellor's job for him. It is doing it by channelling small investment into Government securities.

A society near here has nearly 48 per cent. of its total accumulation reinvested, not used in trade, and nearly 37 per cent. of that is in gilt-edged. In view of the present fiscal policy of this Government, I wonder whether we are not reaching a stage where the tendency is against gilt-edged securities and rather for equities. I do not think that it can be the Chancellor's intention in the long term to channel more and more money into speculative ventures rather than into solid, easily realised investments.

I hope that the right hon. Gentleman will accept our Clause. Here is a ready-made national network which could absorb, every six months, as the dividends of purchases became due, a large amount of small savings. It needs the same encouragement that he gives to Post Office savings and to the Government side of affairs, in order that it can do its job efficiently and well. The facilities are there and we ask him to use them.

4.45 p.m.

Mr. Dodds

My intervention arises from the delightful intervention of the Chancellor of the Exchequer, who once again came to the Box—and we welcomed his doing so—and testified to the value of the Co-operative movement. Then he proceeded to show that he does not understand it very much, and I suggest that he is such a champion of the Co-operative movement at the Box, he should try to understand the point I propose to make.

He made his intervention because of what my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) had been saying about discrimination, and he told us a delightful Aberdonian story which, although it was enjoyable, did not seem to fit. The question of discrimination is used, and, I suggest, quite rightly, in this sense: in 1956 the Chancellor of the Exchequer introduced this concession for Post Office savings, and for ordinary—I emphasise ordinary—savings in the trustee savings banks. As a result of the experience gained it has been shown that small savings accumulated by dividends in co-operative societies have been withdrawn and put in to these other funds. It is believed, therefore, that this is discrimination, because, at the least, it is handicapping the Co-operative movement in regard to small savings. It is felt that the Co-operative movement, which channels much of its small savings into Government securities—and that fact is not denied—is handicapped as a consequence of that concession given to the Post Office and to the trustee savings banks.

I support the claims made by the hon. Member for Twickenham (Mr. Gresham Cooke) on behalf of all small savers, and agree that it would be a good thing. But I say to him that there is a better case on behalf of the Co-operative movement in the sense that he and his hon. Friends have referred to all small savings, whether or not they are channelled into Government securities. A very big percentage of the small savings of the Co-operative movement is channelled into Government securities.

It was on that line that in 1956 this concession was given to these other two bodies, which also put the money into Government securities. On that point I feel that Members opposite must support our new Clause, which was ably moved by my hon. Friend the Member for Dartford (Mr. Sydney Irving). I believe that there is unanimity in the Committee—except on the Treasury Bench—that both Clauses would be a jolly good thing for the country. I hope that the Chancellor will show his regard for the Co-operative movement by accepting our Clause, because a little assistance is better than a lot of praise from the Dispatch Box.

The Economic Secretary to the Treasury (Mr. Anthony Barber)

The proposed new Clause moved by the hon. Member for Dartford (Mr. Sydney Irving) and the new Clause in the name of my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) differ in certain material respects, to which I will refer later, but they both raise a common question of principle. They or their implications cannot be understood without considering, first, the limits of the present exemption and the reason for those limits.

In 1956, my right hon. Friend the Prime Minister, then Chancellor of the Exchequer, introduced what was known popularly at that time as a savings Budget. One of the proposals which he put to the Committee was to relieve from Income Tax the first £15 of income accruing to individuals from deposits in the Post Office Savings Bank and in the ordinary departments of the trustee savings banks. This proposal was limited to those two institutions for the two reasons which have been mentioned by my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth), and I was somewhat surprised that the hon. Member for Dartford did not refer to those two important reasons for applying the relief only to those two institutions. It may be that he did not do so because he set such an admirable example by making a very short speech.

The two reasons were that the rate of interest was fixed for these two institutions at 2½ per cent. and the savings passed automatically to the Exchequer because they were invested with the National Debt Commissioners.

Mr. Rankin

The hon. Gentleman will realise that the rate of interest is also fixed by the co-operatives.

Mr. Barber

Not at 2½ per cent.

Mr. Rankin

There is not a single but a variable fixing between 2½ per cent. and 3½ per cent. That is the variation allowed.

Mr. Barber

Yes, but the point was that in these two institutions the rate of interest was fixed at 2½ per cent. Indeed, in the case of the trustee savings banks it has been so fixed since the last century.

The reasons for this exemption have not changed since the time when the concession was made. I should like to quote a passage from the Prime Minister's speech, as Chancellor, in Committee in 1956, when he was emphasising the need to restrict the concession to savings institutions which had these two features. He said: First, that the rate of interest should be static at 2½per cent., and that the money saved would pass directly to the Government. It would therefore assist the Government's monetary policy because more of the State's borrowing needs would be met without increasing the liquidity of the joint stock banks."—[OFFICIAL REPORT, 7th June, 1956; Vol. 553, c. 1437–8.] The reasons which were given then are Just as cogent now.

There is nothing arbitrary about the two criteria which were adopted. In fairness, and in view of what has been said, I should remind the Committee that in debates at that time the Government said that they were prepared, in principle, to extend the relief to any savings institutions which were ready to accept the two essential features of a 2½ per cent. rate of interest and direct investment on deposit with the State.

Mrs. Harriet Slater (Stoke-on-Trent, North)

The concession was not made to the co-operatives.

Mr. Barber

I would remind the hon. Lady that the Bill was amended at that time so that advantage could be taken of that offer by the Birmingham Municipal Bank. This relief was intended as a specific inducement to the small saver to lend to the Government and for that reason it was confined to individuals and to deposits which attracted 2½ per cent. It did not extend to corporate bodies.

The purposes of the new Clause proposed by the hon. Member for Dartford is to extend relief to dividends or deposit interest from societies registered under the Industrial and Provident Societies Acts and friendly societies. Far and away the most important societies included in the Clause are the co-operative societies and about three-quarters of the cost of the hon. Member's proposal would be in respect of those societies. The hon. Member for Glasgow, Govan (Mr. Rankin) said, "We are asking for the co-operative societies to be treated in the same way as the trustee savings banks". In 1956, when this matter was discussed and that very point was considered, Mr. Frank Beswick, who spoke in the Committee at that time for the co-operative societies, said that that would be, to use his own words, "absolutely unworkable".

I would say, with great respect to those who have spoken, that it is absolute nonsense to say that there is discrimination against the co-operative societies. It is perfectly true, as has been said, that part of the surplus funds of cooperative societies are invested in Government securities but that may merely involve the purchase of those securities from other holders. In any case, money invested in co-operative societies is used primarily to finance trading. These societies are not purely savings agencies.

The proposal in the new Clause is really discriminatory and I would have thought that it was quite impossible and, indeed, unfair to withhold a similar concession from a wide range of other institutions whose case is equally strong. I ask the Committee, for these reasons, not to accept the proposal.

Mr. Rankin

The hon. Gentleman quoted Mr. Frank Beswick, a former Member for whom we 'have the greatest possible respect, but he quoted him in reference to something which I assume Mr. Beswick said in 1956. The hon. Gentleman has taken the remark out of context. I assure him that practically all that has been said by my hon. Friends today has the full approval of the Cooperative movement.

Mr. Barber

There may well have been a change, but in that event it is a little surprising that the hon. Member for Dartford did not refer to the two essential criteria which were the whole basis of that Section of the 1956 Act which it is proposed to extend by means of this Clause.

Mr. G. R. Mitchison (Kettering)

Will the hon. Gentleman tell us What the new Clause would cost? I remind him that the information was asked for in 1956 and 1959 and it has not been given.

Mr. Barber

It would cost £2 million in a full year.

Mr. Sydney Irving

Will the hon. Gentleman deal a little more fully with the dangers of the transfer of past savings from the Co-operative movement, or any other small savings organisation of that sort into Government channels, particularly in view of the reference in the Royal Commission's Report to delusive saving? Is there not this danger? Has it not happened and cannot the hon. Gentleman do something about it?

Mr. Barber

I made inquiries today about that point and I was told that there was no evidence that depositors or shareholders in co-operative societies had switched on a large scale.

Mr. Dodds

This is important. Since the hon. Gentleman has made inquiries, will he give us the source of his information, so that we may assess it?

Mr. Barber

I have not the details with me, but that was the conclusion drawn by those who advised me quite fairly from the facts.

The Clause in the name of my hon. Friend the Member for Twickenham is much bolder. It raises an issue of principle and is of a more general nature. As my hon. Friend the Member for Halifax pointed out, the Clause at least avoids the discrimination which exists in the new Clause moved by the hon. Member for Dartford. The purpose of my hon. Friend's Clause is to exempt from both Income Tax and Surtax the first £15 of an individual's income from investments other than interest in the Post Office Savings Bank and trustee savings banks. I should remind the Committee that the present relief applies only to Income Tax and not to Surtax, because, as I said earlier, its purpose was to attract small savings. Consequently, as my hon. Friend the Member for Halifax pointed out, this Clause gives exemption to the first £15 of investment income in addition to the existing relief which applies to the Post Office Savings Bank and the ordinary departments of the trustee savings banks.

5.0 p.m.

Both my hon. Friends the Members for Twickenham and Halifax referred to the shortage of capital which exists in this country today, and I would not disagree with anything they said on that point. Both of them referred also to the fact that we should do everything possible and reasonable to encourage savings, and I can assure them—indeed, I would assume that they know already—that my right hon. Friend would certainly not disagree with them in any way when they say that the more savings we have in this country the better, because this is certainly one of the surest ways of helping the policy which my right hon. Friend is carrying out—doing his best to contain inflation.

It is at least doubtful, and I do not put it any higher than that, whether the sort of tax concession which is suggested in this Clause is the right way. I say that—and I do not put too much upon it—because the Radcliffe Committee, in its final Report, said that the tax system would be making— …as much concession to savings as it is reasonable or proper that it should. As I understand it, the object of the new Clause, together with the others which have either not been selected or not been called, is to encourage the wider spread of share ownership, and certainly with that object I am in wholehearted agreement. I think that I shall have a further opportunity tomorrow to deal more fully with this general question, but, in view of what my hon. Friend the Member for Halifax said, I should like to say now that I believe that the more widely spread is the money invested in any form of ownership, including industrial shares, the better for this country.

I am sure that my hon. Friend the Member for Twickenham is also very pleased indeed that he has managed to convert the Leader of the Liberal Party on the subject, if I understood him aright, of a property-owning democracy being translated into action. I am sure that we shall all be waiting eagerly to see him translate his views into action in support of my hon. Friend at the next General Election.

Mr. Grimond

I hope that we shall have the opportunity to do so in the Lobby. I take it that there will be a Division. After all, the Minister made a most impassioned plea for savings and the wider spread of property ownership, and, no doubt, he will be in the Lobby, too.

Mr. Barber

I was coming to that very point. All the general arguments which I mentioned at the beginning also apply to the Clause in the name of my hon. Friend the Member for Twickenham, but now we come to the real crux of the matter.

My hon. Friend the Member for Basingstoke asked what this new Clause would cost, and the answer is that in a full year it would cost £40 million. As I think the whole Committee will realise, this is the overriding reason why we could not, in any event, contemplate such relief at this time. I hope that my hon. Friends will appreciate this point. I do not want to waste the time of the Committee by going over again all the arguments regarding the state of the economy and taxation which my right hon. Friend deployed during the Budget debate and during the Second Reading of the Finance Bill. I would only say that to give relief to the extent of £40 million in this way would run completely counter to the view which my right hon. Friend has taken of the economy.

This is the overriding reason why we could not, in any event, advise the Committee to accept this new Clause at this time. I hope that my hon. Friends will appreciate the point, and will agree that we have, in any event, had a most useful discussion, which, to some extent, we can continue and expand tomorrow.

Mr. Nabarro

Before my hon. Friend sits down, he has said that we can continue this debate tomorrow. Does he mean that we are to sit all night and in the morning?

Mr. Barber

I am sorry. I meant Friday.

Mr. Nabarro

That is better. My hon. Friend put the fear of God into me.

Mr. Barber

I am sorry.

Mr. Mitchison

What the Economic Secretary has said really will not do as an answer to our new Clause. I am not going to say much about the new Clause in the name of the hon. Member for Twickenham (Mr. Gresham Cooke). I go this far with the Economic Secretary. After all, if he were to concede £40 million to investors of all classes and of all magnitudes, and, at the same time, take £40 million by increasing the duty on tobacco, he would make the Tory Party look even more ridiculous than it sometimes makes itself look.

What we are concerned about on this side of the Committee is not a property-owning democracy at the moment, but something very much simpler than that. It is the effective savings of people working for weekly pay packets. The hon. Member for Twickenham gave a list—very suitable for Twickenham—of the uses to which a friend of his had found that savings were put in that salubrious part of the country, and they consisted of the Post Office Savings Bank, the trustee savings banks and forms of life insurance. I simply point out to the Committee that all these forms of investment are already getting fiscal aid and fiscal advantages. The first £15 in the Post Office Savings Bank, the trustee savings banks and life insurance get, and for a long time they have got, a concession by way of Income Tax.

Twickenham is not an absolutely typical part of the country. There are a great many other parts of England in which everybody would be shocked and surprised if the local Member got up and said where the local savings were put and did not mention the co-operative societies. I can assure him that in my own constituency, which, in many ways, is a rather typical part of the country, this is probably the most important place in which to find small savings, and if that goes for the Midlands, I am sure that it goes for the north of England, too. It is perfectly true that in a great many parts of the London area—

Mr. Gresham Cooke

Perhaps I should make it quite clear that the solicitor to whom I was referring has a very large practice around Twickenham, including a large industrial area which is represented by the hon. Member for Feltham (Mr. Hunter).

Mr. Mitchison

Having experience of solicitors, I think that even they can sometimes learn something, and perhaps the hon. Gentleman's friend would not deny—or, if he does deny, would find out—that a very large part of working-class savings goes into this particular channel.

After all, the figures are good enough. They were given by my hon. Friend who moved the new Clause, and we all know, as a matter of ordinary common sense, that deposits in co-operative societies are a typical form of working-class savings. Very often, the wives make the deposits and use them for something in the house or something of the sort later. It is a very good thing indeed, and I am sure that every hon. Member in this Committee knows about it. Therefore, there is really a social case why that form of savings should be treated in the same way as other typical forms of saving which already receive a fiscal concession.

We are told that it would cost £2 million. What are the real objections of the Government to it? The Economic Secretary fished out of the appropriate drawer in the Treasury, dusted and used again exactly the same words which the Prime Minister used in 1956 and which were quoted again by the present President of the Board of Trade in 1959. Does the Tory Party never change? Do hon. Members opposite not think it possible that at some time or other they might revise their views on a matter of this sort? After all, what was said in 1956 was said in a different context, although I would not suggest that we have gone that far since 1956. I thought part of the case of the party opposite was that the country was getting on better. If it is getting on better, then surely one of the most useful things that hon. Members opposite could do would be to give encouragement to this channel of working-class thrift on this occasion even if they have refused to do so twice before.

I have one other point to make, and I will make it quite shortly. I wonder if the Committee has noticed that this form of investment shares with the Post Office Savings Bank and the trustee savings banks one peculiarity which is that it is not going to bring any capital gain with it. One can call the reward that one gets when Ernie draws the number of one's Premium Bond a capital gain, or, if one likes, the result of a successful gamble. In that field as in others they are not always easy to distinguish, but certainly one gets something which is not taxed.

Even a Defence Bond has an accretion of £2 or £3 which is not taxed. National Savings continue entirely on accretions from year to year, increasing as the life of the bond goes on and those accretions are not taxed. They all get this element of an increase of capital or, if one likes, a gambling increase, which is not subject to tax.

Of course, if the party opposite had its way with new Clause No. 73 the matter would become even more obvious. Look at the unit trust advertising nowadays. The first thing which it does is to point out that its shares have gone up and may go up again. Why should a form of investment which shares with the Post Office Savings Bank and the trustee savings banks the fact that it has no untaxed capital gain attaching to it be denied the fiscal gain in the other case? It is said, of course, "Well, it goes straight to the Government if it is the Post Office Savings Bank or the trustee savings banks." I am not going into a long argument about that, but my hon. Friends are perfectly right in saying that a considerable part of it filters through to the Government in that form.

We are considering savings, particularly the savings of working people in this country. I find an element of discrimination in this refusal to give the Co-operative movement what it wants in this respect. It is a form of saving which resembles more closely than any other the Post Office Savings Bank and the trustee savings banks investments which get their £15 free of tax. I regard it as discrimination, too, because it is primarily the working man's and woman's saving that is concerned.

After all, look at the party opposite. What did hon. Members opposite do? They put forward a new Clause that would cost £40 million, but they refused to support that part of it which would cost £2 million only. What they are practising is a form of fiscal apartheid, a kind of preference for the Clores and what-not of this world and a discrimination against those who save very little because they cannot save more and who run a democratic movement—because that is what the Co-operative movement is—which does not depend on capital increments and the like but which does depend on savings of this sort.

I am sorry that the Government go on year after year taking this very narrow view of what they are asked to do here. It is not a very large sum which is involved and it would be for the good of the country to do it. It would be fair to the Co-operative movement. We shall go into the Division Lobby to support the new Clause, because it is a step to encourage thrift and is democracy in practice.

5.15 p.m.

Mr. Geoffrey Hirst (Shipley)

I do not intend to detain the Committee for more than a few seconds. I rise to ask my hon. Friend only one question because I was a little astounded by the figure of £40 million which he gave. I feel that my hon. Friends and I are unconsciously rather responsible for that because of the wording of Clause 73 where we use the words: …shall be disregarded for all the purposes of the Income Tax Acts…

I think that I can carry my hon. Friends with me in saying that what we had in mind was that the concession for which we asked should be precisely on the same basis as that existing in the case of the Post Office Savings Bank and the trustee savings banks, for Income Tax only. I should therefore be glad if my hon. Friend could answer that question or at least give some indication of what the difference is because it is rather misleading—although it is our fault—on the matter of the estimate of cost.

Mr. Barber

I am afraid, as I told my hon. Friend a moment ago, that the cost of the new Clause would be £40 million. I am also afraid that I do not know offhand by how much that amount would be reduced if it did not apply to Surtax. However, I will certainly find out and let him know, and also my hon. Friend the Member for Twickenham (Mr. Gresham Cooke).

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

The Committee divided: Ayes 178. Noes 252.

Division No. 113.] AYES [5.16 p.m.
Abse, Leo Edelman, Maurice Jones, Jack (Rotherham)
Ainsley, William Edwards, Rt. Hon. Ness (Caerphilly) Kelley, Richard
Albu, Austen Edwards, Robert (Bilston) Kenyon, Clifford
Allaun, Frank (Salford, E.) Evans Albert Key, Rt. Hon. C. W.
Awbery, Stan Fitch, Alan King, Dr. Horace
Bacon, Miss Alice Foot, Dingle Ledger, Ron
Baxter, William (Stirlingshire, W.) Forman, J. C. Lee, Frederick (Newton)
Beaney, Alan Fraser, Thomas (Hamilton) Logan, David
Bellenger, Rt. Hon. F. J. Gaitskell, Rt. Hon. Hugh Loughlin, Charles
Bonn, Hn. A, Wedgwood (Brist'I, S.E.) George, Lady Megan Lloyd Mabon, Dr. J. Dickson
Benson, Sir George Ginsburg, David McCann, John
Blyton, William Gordon-Walker, Rt. Hon. P. C. MacColl, James
Boardman, H. Greenwood, Anthony McInnes, James
Bowden, Herbert W. (Leics, S.W.) Grey, Charles McKay, John (Wallsend)
Bowles, Frank Griffiths, David (Rother Valley) Mahon, Simon
Boyden, James Griffiths, Rt. Hon. James (Llanelly) Mallalieu, E. L. (Brigg)
Braddock, Mrs. E. M. Grimond, J. Manuel, A. C.
Brockway, A. Fenner Gunter, Ray Mapp, Charles
Butler, Herbert (Hackney, C.) Hamilton, William (West Fife) Marsh, Richard
Butler, Mrs. Joyce (Wood Green) Hannan, William Mayhew, Christopher
Callaghan, James Hart, Mrs. Judith Mellish, R. J.
Chapman, Donald Hayman, E. H. Mendelson, J. J.
Chetwynd, George Healey, Denis Millan, Bruce
Cliffe, Michael Herbison, Miss Margaret Mitchison, G. R.
Corbet, Mrs. Freda Hill, J. (Midlothian) Monslow, Walter
Craddock, George (Bradford, S.) Hilton, A. V. Morris, John
Cronin, John Holman, Percy Mort, D. L.
Cullen, Mrs. Alice Holt, Arthur Moyle, Arthur
Darling, George Houghton, Douglas Noel-Baker, Francis (Swindon)
Davies, Rt. Hn. Clement (Montgomery) Hoy, James H. Oliver, G. H.
Davies, Harold (Leek) Hughes, Cledwyn (Anglesey) Oram, A. E.
Davies, Ifor (Gower) Hughes, Emrys (S. Ayrshire) Oswald, Thomas
Davies, S. O. (Merthyr) Hughes, Hector (Aberdeen, N.) Owen, Will
Deer, George Irvine, A. J. (Edge Hill) Padley, W. E.
Delargy, Hugh Irving, Sydney (Dartford) Pannell, Charles (Leeds, W.)
Dempsey, James Janner, Barnett Parkin, B. T. (Paddington, N.)
Diamond, John Jay, Rt. Hon. Douglas Pavitt, Laurence
Dodds, Norman Jeger, George Pearson, Arthur (Pontypridd)
Dugdale, Rt. Hon. John Jenkins, Roy (Stechford) Peart, Frederick
Ede, Rt. Hon. Chuter Johnson, Carol (Lewisham, S.) Pentland, Norman
Popplewell, Ernest Slater, Mrs. Harriet (Stoke, N.) Thorpe, Jeremy
Prentice, R. E. Slater, Joseph (Sedgefield) Timmons, John
Price, J. T. (Westhoughton) Small, William Tomney, Frank
Probert, Arthur Smith, Ellis (Stoke, S.) Wade, Donald
Proctor, W. T. Sorensen, R, W. Warbey, William
Pursey, Cmdr. Harry Soskice, Rt. Hon. Sir Frank Watkins, Tudor
Randall, Harry Steele, Thomas Wells, Percy (Faversham)
Rankin, John Stewart, Michael (Fulham) Wheeldon, W. E.
Redhead, E. C. Stonehouse, John White, Mrs. Eirene
Reid, William Stones, William Willey, Frederick
Reynolds, C. W. Strauss, Rt. Hn. G. R. (Vauxhall) Williams, D. J. (Neath)
Roberts, Albert (Normanton) Stross, Dr. Barnett (Stoke-on-Trent, C.) Willis, E. G. (Edinburgh, E.)
Roberts, Goronwy (Caernarvon) Summerskill, Dr. Rt. Hon. Edith Wilson, Rt. Hon. Harold (Huyton)
Robinson, Kenneth (St. Pancras, N.) Swingler, Stephen Winterbottom, R. E.
Ross, William Sylvester, George Woodburn, Rt. Hon. A.
Royle, Charles (Salford, West) Symonds, J. B. Woof, Robert
Shinwell, Rt. Hon. E. Taylor, Bernard (Mansfield) Yates, Victor (Ladywood)
Silverman, Julius (Aston) Taylor, John (West Lothian) Zilliacus, K.
Silverman, Sydney (Nelson) Thompson, Dr. Alan (Dunfermline)
Skeffington, Arthur Thomson, C. M. (Dundee, E.) TELLERS FOR THE AYES:
Mr. Rogers and Mr. Lawson.
Agnew, Sir Peter Donaldson, Cmdr. C. E. M. Johnson, Dr. Donald (Carlisle)
Aitken, W. T. Drayson, G. B. Johnson, Eric (Blackley)
Allan, Robert (Paddington, s.) du Cann, Edward Johnson Smith, Geoffrey
Alport, Rt. Hon. C. J. M. Duncan, Sir James Joseph, Sir Keith
Amory, Rt. Hn. D. Heathcoat (Tiv'tn) Duthie, Sir William Kerans, Cdr. J. S.
Ashton, Sir Hubert Eden, John Kerby, Capt, Henry
Atkins, Humphrey Elliott, R. W. Kerr, Sir Hamilton
Barber, Anthony Emery, Peter Kimball, Marcus
Barlow, Sir John Emmet, Hon. Mrs. Evelyn Kirk, Peter
Barter, John Errington, Sir Eric Lagden, Godfrey
Batsford, Brian Farey-Jones, F. W. Lambton, Viscount
Baxter, Sir Beverley (Southgate) Farr, John Lancaster, Col. C. G.
Beamish, Col. Tufton Fell, Anthony Leather, E. H. C.
Bell, Ronald (S. Bucks.) Fisher, Nigel Leavey, J. A.
Bennett, F. M. (Torquay) Fletcher-Cooke, Charles Legge-Bourke, Maj. Sir Harry
Bennett, Dr. Reginald (Gos & Fhm) Fraser, Ian (Plymouth, Sutton) Lewis, Kenneth (Rutland)
Berkeley, Humphry Freeth, Denzil Lilley, F. J. P.
Bidgood, John C. Gammans, Lady Lindsay, Martin
Biggs-Davison, John Gardner, Edward Linstead, Sir Hugh
Birch, Rt. Hon. Nigel George, J. C. (Pollok) Litchfield, Capt. John
Bishop, F. P. Glover, Sir Douglas Longbottom, Charles
Bossom, Clive Glyn, Sir Richard (Dorset, N.) Longden, Gilbert
Box, Donald Goodhart, Philip Loveys, Walter H.
Boyd-Carpenter, Rt. Hon. John Goodhew, Victor Low, Rt. Hon. Sir Toby
Boyle, Sir Edward Gower, Raymond Lucas, Sir Jocelyn (Portsmouth, S.)
Braine, Bernard Grant, Rt. Hon. William (Woodside) Lucas-Tooth, Sir Hugh
Brewis, John Grant-Ferris, Wg Cdr. R. (Nantwich) McAdden, Stephen
Bromley-Davenport, Lt.-Col. W. H. Green, Alan McLaren, Martin
Brooke, Rt. Hon. Henry Gresham Cooke, R. McLaughlin, Mrs. Patricia
Brooman-White, R. Grosvenor, Lt.-Col. R. G. Maclean, Sir Fitzroy (Bute & N. Ayrs.)
Browne, Percy (Torrington) Hall, John (Wycombe) MacLeod, John (Ross & Cromarty)
Bryan, Paul Hamilton, Michael (Wellingborough) McMaster, Stanley R.
Bullard, Denys Hare, Rt. Hon. John Macpherson, Niall (Dumfries)
Bullus, Wing Commander Eric Harris, Frederic (Croydon, N.W.) Maddan, Martin
Burden, F. A. Harris, Reader (Heston) Maginnis, John E
Butcher, Sir Herbert Harrison, Brian (Maldon) Maitland, Cdr. Sir John
Campbell, Sir David (Belfast, S.) Harrison, Col. J. H. (Eye) Markham, Major Sir Frank
Campbell, Gordon (Moray & Nairn) Harvey, Sir Arthur Vere (Macclesf'd) Marples, Rt. Hon. Ernest
Carr, Compton (Barons Court) Harvie Anderson, Miss Marshall, Douglas
Cary, Sir Robert Henderson, John (Cathcart) Marten, Neil
Chataway, Christopher Hendry, Forbes Matthews, Gordon (Meriden)
Chichester-Clark, R. Hiley, Joseph Maudling, Rt. Hon. Reginald
Clark, William (Nottingham, S.) Hill, Mrs. Eveline (Wythenshawe) Mawby, Ray
Cooke, Robert Hill, J. E. B. (S. Norfolk) Maydon, Lt.-Cmdr. S. L. C.
Cooper, A. E. Hinchingbrooke, Viscount Montgomery, Fergus
Cooper-Key, Sir Neill Hirst, Geoffrey Morgan, William
Bordeaux, Lt.-Col. J. K. Holland, Philip Mott Radclyffe, Sir Charles
Cordle, John Hope, Rt. Hon. Lord John Nabarro, Gerald
Corfield, F. V. Hopkins, Alan Neave, Airey
Costain, A. P. Hornby, R. P. Noble, Michael
Coulson, J. M. Hornsby-Smith, Rt. Hon. Patricia Nugent, Sir Richard
Courtney, Cdr. Anthony Howard, Gerald (Cambridgeshire) Oakshott, Sir Hendrie
Craddock, Sir Beresford Howard, John (Southampton, Test) Orr-Ewing, C. Ian
Critchley, Julian Hughes Hallett, Vice-Admiral John Osborn, John (Hallam)
Crosthwaite-Eyre, Col. O. E. Hughes-Young, Michael Osborne, Cyril (Louth)
Crowder, F. P. Hutchison, Michael Clark Page, A. J. (Harrow, West)
Cunningham, Knox Iremonger, T. L. Page, Graham
Curran, Charles Irvine, Bryant Godman (Rye) Panned, Norman (Kirkdale)
Currie, G. B. H. Jackson, John Pearson, Frank (Clitheroe)
d'Avigdor-Goldsmid, Sir Henry James, David Peel, John
Deedes. W. F. Jenkins, Robert (Dulwich) Percival, Ian
de Ferranti, Basil Jennings, J. C. Peyton, John
Pickthorn, Sir Kenneth Skeet, T. H. M. van Straubenzee, W. R.
Pike, Miss Mervyn Soames, Rt. Hon. Christopher Vane, W. M. F.
Pilkington, Capt. Richard Spearman, Sir Alexander Vaughan-Morgan, Sir John
Pott, Percivall Speir, Rupert Vickers, Miss Joan
Powell, J. Enoch Stanley, Hon. Richard Wakefield, Edward (Derbyshire, W.)
Price, David (Eastleigh) Stevens, Geoffrey Ward, Dame Irene (Tynemouth)
Prior, J. M. L. Stoddart-Scott, Col. Sir Malcolm Watkinson, Rt. Hon. Harold
Prior-Palmer, Brig, sir Otho Storey, Sir Samuel Watts, James
Profumo, Rt. Hon. John Studholme, Sir Henry Whitelaw, William
Ramsden, James Summers, Sir Spencer (Aylesbury) Williams, Dudley (Exeter)
Rawlinson, Peter Sumner, Donald (Orpington) Williams, Paul (Sunderland, S.)
Redmayne, Rt. Hon. Martin Talbot, John E. Wills, Sir Gerald (Bridgwater)
Rees, Hugh Teeling, William Wilson, Geoffrey (Truro)
Renton, David Thomas, Leslie (Canterbury) Wise, A. R.
Ridley, Hon, Nicholas Thomas, Peter (Conway) Wolrige-Gordon, Patrick
Ridsdale, Julian Thompson, Kenneth (Walton) Wood, Rt. Hon. Richard
Robinson, Sir Roland (Blackpool, S.) Thompson, Richard (Croydon, S.) Woodhouse, C. M.
Robinson Brown, Sir William Thornton-Kemsley, Sir Colin Woodnutt, Mark
Roots, William Tiley, Arthur (Bradford, W.) Woollam, John
Sharples, Richard Tilney, John (Wavertree) Worsley, Marcus
Shaw, M. Turner, Colin
Shepherd, William Turton, Rt. Hon. R. H. TELLERS FOR THE NOES:
Simon, Sir Jocelyn Tweedsmuir, Lady Mr. Finlay and Mr. Gibson-Watt.