HC Deb 31 May 1960 vol 624 cc1345-55

Motion made, and Question proposed, That the Clause stand part of the Bill.

Mr. Crosland

I am sorry that these Clauses of the Bill are receiving such little examination from hon. Members opposite—so far, at any rate—although judging from the Economic Secretary's reply on a previous Clause, a closer examination would not have achieved very much if it had been made. I should like to ask one or two questions on the Clause.

I should like to reply to a speech made on Second Reading by the right hon. Member for Flint, West (Mr.Birch), which seemed to me an extremely powerful plea, which was not then answered and which should be answered now. The right hon. Gentleman pointed out that the whole system of concessions on National Savings has got almost completely out of control. The object of these concessions in the first place was to attract small savings for people of modest means on the assumption that unless they were made the savings would not occur. At present levels of taxation, however, the main attraction of National Savings today is not for the small saver but for the Surtax payer.

The right hon. Member for Flint, West, on Second Reading, gave a number of fantastic examples of what the grossed-up yield of certain kinds of National Savings were after the concessions which the Chancellor has made in this and other Clauses. Certainly judging by Press reactions to this Clause and various other concessions, it is clear that the main effect of these additional concessions is to aid the Surtax payer. For example, the Investors Chronicle, commenting on this point, and on concessions generally to National Savings, said: As usual, these concessions are, because of the tax angle, very appealing to the Surtax payer, and those in the higher tax bracket will no doubt take full advantage of them. Two questions arise. I should like them answered, but preferably not by the Economic Secretary, who has not once given any information in replying to any Clause on the Bill. I ask the Chancellor to answer these two questions. Does he or does he not agree that these additional concessions on National Savings are now going to the wrong people—that is to say, not to the small saver but to the Surtax payer? Secondly, it is highly probable, as the right hon. Member for Flint, West said, that these savings are not attracting significant amounts of new net savings; all they are leading to is a transfer on the part of the Surtax payer from one kind of saving to another, doing the country very little good. I agree with the right hon. Member for Flint, West on this point, although on practically nothing else—that we are getting to the point where we are paying an excessive amount of Government money for very little result indeed in terms of National Savings.

Mr. Edward du Cann (Taunton)

I do not wish seriously to interrupt the excellent progress which the Committee is making on the Bill, nor shall I make a long speech in answer to the, I think, unnecessary jibes of the hon. Member for Grimsby (Mr. Crosland), but I want to refer briefly to the rates of interest which are being paid on the Premium Bond scheme and to repeat a point which I made in my maiden speech on the Budget four years ago.

When my right hon. Friend the Prime Minister, then Chancellor, introduced this scheme the rate of interest which was being paid on the total amount of money subscribed by purchasers to these bonds to provide the total amount of the prize fund was 47¼ per cent., tax-free. This rate of interest has now been increased to 4½ per cent., tax-free. I should like to ask my right hon. Friend with some diffidence—I am sure that he has studied the matter—whether he feels it necessary to pay out quite so much money by way of prize fund. I do not doubt that he has taken account of the reduction in taxation, the standard rate having gone down from 8s. 6d. to 7s. 9d., but there is a body of opinion—and here I agree with the hon. Member for Grimsby—which feels that perhaps too much money is being paid by the Government from National Savings. Some comparisons may well be relevant. The yield on ordinary shares at the moment, according to the Financial TimesOrdinary Shares Index, is £4 4s. per cent. That is, of course, gross. The return on War Loan is £5 12s. 6d. We can talk of other forms of investment and can give a long catalogue.

On the Post Office Savings Bank, ignoring tax concessions, the return is a mere 2½ per cent. We have heard figures in the past concerning Premium Bonds, but 4½ per cent. grossed up at the rate of 7s. 9d. in the £ gives a return of 7.3 per cent. This is substantially above the rates. If we take 4½ per cent. grossed tip at the rate of 17s. 9d. in the £ that gives a return of 40 per cent.

It is perhaps fair to take these averages rather than to take the extreme averages stated in such publications as the Investors' Chronicle which suggest that a tax-free prize of £5,000 on an £800 investment is equal to 625 per cent. tax free. If grossed up the return is 1,020 per cent. for the 7s. 9d. in the £ taxpayer and 5,500 per cent. to the 17s. 9d. taxpayer. It is quite clear that this high rate might well affect the rates which others have to pay for savings—for example, the co-operative societies, building societies and others.

The Committee may well feel that this is a subject which requires attention at this time even though the hour is very late. There is a body of opinion which feels that the Government pay very heavily for the amount of money that they gather in by way of National Savings. Let me make it quite clear at once that I am a most strong supporter of the Savings Movement. I always have been, and I hold office in certain National Savings associations and institutions. I have always been a supporter of the Premium Bond scheme. I think it remarkable that in three years some 12 million people have been encouraged to hold these bonds. They amount to some £250 million outstanding and about £20 million has been paid out in prizes.

I wonder—and I hope that my right hon. Friend will say whether he agrees or not—if we could not, perhaps, raise the same amount of money, or may be a little less, and pay less dearly for it.

Mr. Amory

I will, if I may, reply very briefly to the questions that have been put to me. I will not attempt to answer on this occasion the whole of the interesting speech of my right hon. Friend the Member for Flint, West (Mr. Birch), to which I listened with great care. in general, I would say that the figures which he quoted were correct. It is true that if we attempt to analyse them in the case of Surtax, the return on them, allowing for tax, is very high indeed. That in itself does not necessarily mean that it is an extravagant way from the Government's point of view of attracting those savings. In other words, it may be a very good yield to the Surtax payer, but at the same time it may not necessarily be a very expensive way of the Government borrowing.

Our information does not enable us to say with any degree of accuracy what proportion of new savings comes from the different income groups, but the information that we have enables me to say in reply to the hon. Member for Grimsby (Mr. Crosland) that we are certainly satisfied that a considerable proportion of the net increase in savings comes from people in relatively low income brackets. It is perfectly true that a proportion comes from very wealthy persons indeed, and from their point of view it gives them a high return. It is difficult to single out that particular category. We have not been able to think of any scheme which would enable us to do that.

One has to look at these National Savings fairly broadly and consider the average effect. Certainly from the average point of view we do not feel that we are paying an excessively high price, or an undesirably high price, for the savings that we are getting. I think that that is about the best answer that I can give my hon. Friend. We watch these things carefully, and, of course, the results of National Savings have been good over the last year or two right across the board. Certainly the savings in Trustee Savings Banks and Post Office Savings Banks are in the main those of small savers.

I think that a good many of the Premium Bonds are held by people in fairly low income brackets. I am bound to admit that I have not as full information about that as I should like, but we are watching the situation to see whether we can gradually gain more information and so add to our experience. It may be that in the future we may find that some of these forms of saving should be altered for the better, and if so, we shall endeavour to do that. Before I made the changes which I have recommended this year I considered all these points and got as much information as I could. The broad conclusion I came to was that the rates and limits we are proposing this year are not extravagant from the point of view of the Government.

Mr. H. Wilson

Despite the lateness of the hour, I think I speak for all hon. Members on this side of the Committee and, perhaps, some hon. Members opposite when I say that the Chancellor's reply was perfunctory in the extreme. I do not say that we should debate this Clause at the length that we debated the subject when Premium Bonds were introduced by the Prime Minister when he was Chancellor of the Exchequer four years ago. On that occasion we debated the matter from the beginning of business until 7.30 or 8 o'clock in the evening. I do not say that that would be appropriate on this occasion, but the Chancellor has not begun to answer the points raised by my hon. Friend the Member for Grimsby (Ms. Crosland) and the hon. Member for Taunton (Mr. du Cann.)

It is quite clear that the figures achieved by Premium Bonds are related to these excessive rates of interest and the Chancellor made no comment at all on the figures quoted by the hon. Member for Taunton. I am sure they are accurate and they have been widely quoted in different newspapers. They are something like 7½ per cent. for the investor, if that is the right word, who is on the standard rate of Income Tax and up to 40 per cent. for those on the top rate of Surtax. These are very high rates of interest. Earlier today my hon. Friend the Member for Sowerby (Mr. Houghton) was complaining about the charges levied by the Board of Inland Revenue in respect of interest on sums that are outstanding, and he said that 3 per cent. was pretty low. Here we have the Chancellor paying a much higher figure than that on the Premium Bond Scheme.

I do not think it necessary to go into the rather more extreme figures referred to by the hon. Member for Taunton, because they assume a certain degree of success or luck in the winning of prizes. But the figures he quoted and the figures more widely quoted in the Press are based on an average chance on a calculation of the total prize fund. We can assume, and we are told, that "Ernie" works fairly, and I have no reason to doubt that he does. That represents an average rate of interest to the average investor even though a lot of investors in the scheme do not manage to get an average in terms of getting a prize every three or four years.

When the scheme started we were told that the Surtax payer who went to the limit in investment in Premium Bonds had a one-in-four chance of getting a prize. I think the odds have lengthened since that time for reasons we all know. But whatever the average odds may be, if the money is kept in long enough it still represents a figure of from 7½ per cent. up to 40 per cent according to the rate of tax paid.

The Chancellor said that he could not give any estimate of the proportion of Premium Bonds held by investors in the different brackets regarding the payment of tax. I do not know whether the right hon. Gentleman recalls that early in the scheme I put a Question to the then Chancellor. Obviously he could not give the number of the Surtax payers and my Question related to the number of people who bought Premium Bonds up to the limit at one go. I think that they were identified by a special code number or a grouping of letters—"ZZ"—which indicated that they were bought in blocks of 500. At that time we were told that 40 per cent. of all Premium Bonds bore those letters.

11.45 p.m.

Obviously anyone who had £500 to invest in Premium Bonds all in one block could be assumed to be either someone who had been very thrifty in the past or more likely someone who was in the Surtax bracket. We should like to know whether the figure of 40 per cent. still applies. Perhaps it has fallen a little. Perhaps the scheme has become more generalised. If anything like that figure still applies, the point made by my hon. Friend the Member for Grimsby is fully justified and confirmed.

The hon. Member for Taunton was right. If the Chancellor of the Exchequer extended this kind of interest rate to other forms of saving, he would probably have got in total at least as much as he has got from Premium Bonds plus the other forms of saving. After all, the right hon. Gentleman is very mean about the Post Office Savings Bank. Although the 2½ per cent. interest on Post Office savings enjoys a £15 exemption, it is only an exemption from the standard rate of Income Tax and it is grossed up for Surtax. A very different rate of interest is obtained in the Post Office Savings Bank scheme from the high figures quoted by the hon. Member for Taunton.

I am not sure that the right hon. Gentleman could not have increased the flow of National Savings, if National Savings are a flow and not a transfer of already saved amounts, if he had been a little more generous with certain other forms of saving and a little less generous with Premium Bonds. If it is the prospect of a prize in a lottery which causes many people to invest in Premium Savings Bonds, the right hon. Gentleman would have attracted just as much money at a more reasonable rate of interest and one far less costly to the taxpayer.

In addition to the interest, one must remember the very high cost of administration of the scheme. No branch of National Savings is advertised so lavishly as the Premium Savings Bond scheme. These costs, added to the interest rate, must take us up to a very high figure. It is, therefore, an extremely expensive form of savings, and the right hon. Gentleman should by this time have considered whether he could cheapen it. I do not know how much is spent on advertising. The right hon. Gentleman should have told us that tonight. I see that my hon. Friend the Member for Kilmarnock (Mr. Ross) is here. He has always taken a great interest in the movements of the Dagenham Girl Pipers in connection with the Premium Savings Bond scheme.

Is it a fact that this scheme is now languishing, and that the right hon. Gentleman feels that it must be given some kind of boost, some kind of shot in the arm? All along some of us have suspected that the scheme, introduced with a flourish of trumpets, or at any rate bagpipes, by the Prime Minister on 1st November, 1956, when he ought to have been concerned with the effects of Suez on our economic situation, has had to be boosted at an excessive cost to the tax- payer for the sake of saving the face of the Prime Minister. I do not suggest that the face of the Prime Minister is as expensive as the face of the Minister of Aviation, whose activities we debated recently.

The total cost of this scheme must have been enormous. Someone said that £20 million had been paid out in interest. There is the cost of advertising on top of that. Then there is the cost of "Ernie" and the cost of administration. This has been an extremely expensive operation.

I have one last question to put to the Chancellor of the Exchequer. Is it not a fact, to judge from the weekly returns of savings, that while a few months ago the right hon. Gentleman was saying how well savings had gone in the last few years —

Mr. W. R. Rees-Davies (Isle of Thanet)

Does the right hon. Gentleman appreciate that he has lost the interest of the entire Committee? If he can be nothing but merely repetitive, he might as well resume his seat.

Mr. Wilson

In these circumstances, I am quite prepared, Sir Gordon, to move that you report Progress and ask leave to sit again, and leave our discussion of this Bill to go on after the Whitsun Recess. It is certainly by no desire of this side of the Committee—

Mr. Nabarro

On a point of order, Sir Gordon. Is it in order for the right hon. Gentleman to threaten to move that you report Progress and ask leave to sit again when he is supported by only 19 of his hon. Friends out of 257?

The Chairman

The right hon. Gentleman is perfectly in order.

Mr. E. Fernyhough (Jarrow)

On a point of order, Sir Gordon. I think it would help the Committee if you were to say whether or not it would be in order for my right hon. Friend to move that you report Progress and ask leave to sit again.

The Chairman

It would be in order for the right hon. Gentleman so to move.

Mr. Wilson

Because we are all concerned about the difficulties of the Chancellor and the Patronage Secretary, Sir Gordon, we have refrained from the usual tactic during a Finance Bill of moving to report Progress more often than we have done. I do not think that it has been moved frivolously at any time during our discussion of this Bill, and the only time that it has been moved from this side at all it has been accepted by the Chancellor of the Exchequer.

When, however, the hon. Member for the Isle of Thanet (Mr. Rees-Davies) has the impertinence to suggest during the discussion of this very important Clause that the manners of his own hon. Friends are such as to suggest that I have lost their interest and that, therefore, I should sit down and let the Clause go through, he is acting in a manner completely unworthy of the House of Commons in relation to a Finance Bill. Earlier, we heard a lot from some hon. Gentlemen opposite, including the hon. Gentleman himself, about the control of Government expenditure. It is, therefore, about time that more hon. Gentlemen opposite faced up to the—

Mr. Nabarro

The right hon. Gentleman will hear a lot more about it tonight as well.

Mr. Wilson

If the suggestion is that we on this side should forgo our rights in order to have the pleasure of hearing still more from the hon. Member for Kidderminster (Mr. Nabarro), he is really asking a lot of us. For five days in this Committee we on this side have sat back listening to hon. Members opposite—

Mr. Anthony Fell (Yarmouth)

This is all out of order.

Mr. Wilson

It is not for me, Sir Gordon, to comment on whether or not that interruption was a reflection on the Chair, but I would say that if the hon. Member who interrupted me a few moments ago was in order, my reply to him is in order.

As I was saying, we on this side have for five days deferred many of our comments, compressed others, and shown very great restraint—more so than I remember any Opposition doing on the Finance Bill since the war. We have done so because I think the whole House was bored with the Finance Bill and wanted to get it through its Committee stage fairly quickly—

Viscount Hinchingbrooke

The right hon. Gentleman agreed with most of it.

Mr. Wilson

It is not true that we agreed with most of it, and still less did we agree with the concessions made by the Chancellor to please his hon. Friends—

The Chairman

Order. We are dealing with the Question, "That the Clause stand part of the Bill"

Mr. Wilson

I was dealing with that, Sir Gordon, when I was interrupted by the hon. Member, but if there is to be difficulty in making these points perhaps you will consider later that I might move that you report Progress and ask leave to sit again. But I will confine myself to the one point in reply to the hon. Member for the Isle of Thanet by saying that for a whole day we listened to hon. Gentlemen opposite moving Amendments to make the tax dodger's life easier. He must not, therefore, object if for a few minutes we address ourselves to this important Clause which imposes additional charges on the taxpayers—a point that the hon. Gentleman and others do not seem to have taken. Perhaps I can now put my point to the Chancellor, who can then answer, and we can pass on to another Clause.

The question I put to the right hon. Gentleman is this. He told us, quite rightly, that National Savings had been running at a fairly high level during the past few years, but is it not a fact, as I would judge from, perhaps, a rather cursory reading of the weekly returns of National Savings, that in this present financial year, the one starting last April, National Savings from both Premium Bonds and other sources have fallen very considerably indeed compared with the same period last year? Will he tell us whether that is so, and if it is, why, in his view, this is occurring, particularly in Premium Savings Bonds, the subject of the Clause?

Mr. Amory

I think there have been eight weeks of this financial year so far. Last year, during those eight weeks, savings were running at an exceptionally high level both in comparison with other weeks shortly before and, of course, in comparison with the previous year. This year, they are still running at good levels, but in total they are quite substantially down on last year. There have been good weeks and bad weeks

During the past week, even though the total is £4½ million down on the previous week, I think that the results compare very well with the comparable week of last when there was a minus quantity before the Whitsun holiday.

Premium Bonds sales have been down this year compared with last year but up considerably compared with before the Budget. The average net weekly sales of Premium Bonds during the first 13 weeks of this calendar year, that is to say, before the Budget, were £386,000, and the average net weekly sales since the Budget have been £764,000. The latest weekly figure was £880,000. I think that the trend is all right, but the weeks vary considerably one from another. Substantially, the answer is that they are not running at as good a level, taken in total, as they were during the exceptionally favourable period at this time last year.

Question put and agreed to.

Clause ordered to stand part of the Bill.