§ In relation to instruments made or executed on or after the first day of August nineteen hundred and sixty-two, the head of charge Conveyance or Transfer on Sale in the First Schedule to the Stamp Act, 1891, shall cease to apply to conveyances and transfers of stocks and shares.—[Mr. Deedes.]
§ Brought up, and read the First time.
§ Mr. W. F. Deedes (Ashford)
I beg to move, That the Clause be read a Second time.
This new Clause is directed to the Stamp Duty on the transfer of stocks and shares. We think that there is a case for the Committee and the Chan- 1512 cellor to give this matter fresh and critical attention. I do not want to trouble the Committee at this hour with the history behind this duty except to say that the duty is one of a range imposed in 1891 and doubled in 1947 by the then Chancellor, Mr. Dalton. The duty was then raised from 1 per cent. to 2 per cent. It was raised by the Chancellor in 1947 on the ground that no important change had occurred since Sir Austen Chamberlain had doubled other duties under the Act in 1920, two years after World War I. This being two years after World War II, the Chancellor thought there was a case for an increase. It was, perhaps, more symmetrical than sensible. It was then estimated that 1513 doubling the tax would yield another £20 million, and I think that today, in all, it brings in about £50 million. I am aware that property adds probably 50 per cent to that sum but does not carry the same international consideration.
It is clearly easy to collect this duty, and I have no doubt at all that that to some extent accounts for its continuance, but other considerations now sharply arise. Foremost among them is the place of the City of London as the principal international market in the world, and the place to which it aspires in the period that lies immediately ahead.
There is no question that the transfer Stamp Duty is a disincentive to overseas investment in British securities through the London market, and there now seems a strong possibility that the influence of the Common Market will lead, not to the expansion of the City's international business, but to an increasing trend to conduct transactions in British securities overseas rather than in the London market.
This was discussed last October by delegates to the Conference of European Stock Exchanges in London, when it was confirmed that foreigners not only regard the duty as a barrier to investment but that they can, and do, take steps to avoid paying it. It is a fact that foreign markets are developing in a number of British-registered securities. By remaining in the name of a foreign nominee corporation, and by the issue of subsidiary certificates, these securities can be transferred permanently without payment of the duty. According to the latest return, over 2 million shares in Imperial Chemical Industries are registered in the name of Sicovam, which is also reported to be the third largest registered holder in Courtaulds Ltd.
It could be added, of course, that this duty is an obstacle to the small invester, a fact that must be borne in mind by a Government that seeks to encourage the wider ownership of shares. But it is our position in foreign markets that is the main point that we want to press in this new Clause. I would remind the Committee of the position in another field enjoyed by the auctioneering firms of Sotheby and Christie. They occupy 1514 that position in the world of international auctioneering very much because of the fact that their terms compare favourably even with those offered by Paris and New York.
We believe that this juncture in our relations with Europe is the moment to consider afresh the handicap imposed on our international business. The removal of the duty would make sense to a lot of people, both here and abroad. Moreover, it would do much to restore confidence in London's place as an international business centre. I assure my right hon. Friend that this is not simply a plea, as many of the speeches made on a Finance Bill must be, for the relief of taxation, but a plea for a fresh assessment by him of what is at stake in this field of our international and invisible earnings. Such an assessment must show the unwisdom of this duty in present circumstances.
§ 11.15 p.m.
§ Mr. Brian Harrison (Maldon)
I rise to support the proposed new Clause. Shortly before by right hon. and learned Friend introduced his Budget I spent a fortnight in Germany, not with any politicians or military experts, but mainly with bankers. I came back absolutely convinced that in the Common Market Germany was determined to dominate the financial side. It was said to me time and again that they had no fear of any competition from the market in London as long as there was a 2 per cent. duty such as we are seeking by this proposed now Clause to remove.
It was said to me quite spontaneously time and again, and it was obvious that the psychological effect of such a charge was tremendous and would cause a great loss of business to London if and when we join the Common Market. I am not in a position to judge what the value of the City of London is as a financial institution and an invisible export to Britain. I know that in some of the commodity markets it is arguable whether it contributes a lot to our balance of payments position.
I would have thought that, in the money market sphere at any rate, there was a considerable or potential benefit to our balance of payments and to the financial strength of this country. It seems illogical, therefore, that we should 1515 cut our own throat and this possible advantage by this charge. I would also think that it was singularly appropriate that the charge should be removed when there was a compensating charge in the form of a speculative gains tax introduced in the same Finance Bill.
I ask my right hon. and learned Friend, therefore, to look carefully at this problem to see whether, on stocks and shares, apart from property, it is not possible to remove the Stamp Duty so that the City of London may be able to contribute very greatly to the prosperity and balance of payments of this country should we enter the Common Market.
§ Mr. F. M. Bennett (Torquay)
I have only a word to add to what has already been so ably said, but if it were earlier we might have a lengthy useful discussion on this subject. As has been pointed out, because of the introduction of a speculative gains tax it would seem that good domestic reasons make it opportune and desirable that the Stamp Duty were removed.
I will concentrate my remarks on one feature which has already been mentioned; our present capacity for international competition. It is not a hypothetical proposition which is contained in the proposed new Clause, because I happen to know of one instance where a short time ago a large American institution wanted to invest in Europe. That organisation's representatives came to London with the intention of investing through London. They then went to the Continent and found that they would save a considerable amount of money if they invested there rather than through London—all because of the 2 per cent. Stamp Duty.
The suggestion has been made that its removal will be important if we enter the Common Market. The whole point is that it will be equally important if we do not because, if we stay out, it will be more important than ever that we are fully competitive. At the moment someone wishing to invest in a certain market must choose between coming to London, where he pays the 2 per cent. Stamp Duty, or going to the Continent, where he pays nothing.
If one looks at the Continental Stock Exchanges one finds that they mark up 1516 prices so as to be just under the cost of buying securities, available there, and through London, with the 2 per cent. Stamp Duty. One immediately sees the advantage of buying on the Continent. It is always dangerous to prophesy, but I have no hesitation in saying that it is an absolute certainty, whether or not my right hon. and learned Friend feels able to make some concession tonight, that it will not be long before he is forced, by events, to make it. It may be this year or next but there cannot be the slightest doubt that, sooner or later, a Chancellor will have to withdraw the Stamp Duty. He will find that the remorseless course of events will make him withdraw something which is putting us in London at a disadvantage with our competitors. This will obtain whether or not we go into the Common Market.
§ Mr. Edward du Cann (Taunton)
I should like to endorse what my hon. Friends have said in their cogent arguments. One of the most striking features of our balance-of-payments position last year was the increase in overseas investment in United Kingdom securities. I speak without refreshing my memory, but I believe that during the whole year the total investment was about £186 million of which about £155 million came within the last six months of the year, which is a practical indication of interest in our market now being taken by overseas investors. It is true to say that London is potentially the finest, most efficient and effective market in the world. If we go into the Common Market we want to develop it as such.
I hope that the Chancellor will be able to tell the Committee that this is a matter which he has in mind and will continue to have in mind in the future. I hope that he will regard this as one of several related matters which require consideration at the same time. It is true to say that the incidence of the 2 per cent. ad valorem transfer duty is a brake on investment and a deterrent to home and overseas investment. Similarly it is true that the rate of duty charged on the transfer of bearer securities requires examination. It is equally true that the whole machinery of transfer requires examination and improvement, and that the rate of withholding 1517 tax is a larger deterrent to overseas investment in United Kingdom securities than any of the matters so far mentioned. I hope that my right hon. and learned Friend will be able to say that this whole matter, including the quantum of ad valorem duty, is being examined and that he will do his best to see that our hopes for the development of the London market in future will be realised.
§ Mr. Hirst
The Committee is hopelessly overdue for some concession from the Government on this Bill. It has been perfectly apalling to sit here all these days without having the slightest concession. I am the first to admit the realism of what the new Clause means and that few of us imagine that my right hon. and learned Friend can meet this item at present. I am not sure of the figures, but I think that something like £50 million would be involved.
I do not want to get into difficulties for the future, but I would be reasonably satisfied if I felt confident that the Chancellor had taken the point and realised, as my hon. Friends have made only too clear, that this will not be in future entirely a matter of choice. Therefore, my right hon. and learned Friend might as well get down to thinking that something must be done in future whether or not it unbalances his Budget.
The international aspect has been stressed and that is by far the most important. I support my hon. Friend the Member for Taunton (Mr. du Cann) in what he said about the whole system of Stamp Duty, transfers and the rest. We are behind the times. We are in no position to compete internationally. It is not the fault of the organisations concerned but of the Treasury, which has never allowed us to get into proper trim.
The Stamp Duty is also one of those other additional disincentives to saving. Whatever happens to the Stock Exchange —and a few people have learned recently that it does not always go one way—saving enables more and more people to take a larger and larger share in running the country's industry. It is by far the best way. This is a disincentive. I hope that in this context of saving my right hon. and learned Friend will realise that this is an additional factor that this Clause seeks to meet, over and above that which is involved in international competitiveness to which attention has 1518 been drawn. He not only has an obligation to this country in the international scene but a long overdue regard for the need to encourage saving which is one of the fundamentals of Tory policy which in this field—not in others—we have been neglecting.
I never expect very much on these occasions, but I hope that I shall not be disappointed, and that my right hon. and learned Friend will not need one of those unfortunate demonstrations which are sometimes needed to make the Government take notice of us.
§ Mr. Selwyn Lloyd
I am grateful to my hon. Friends for the way in which they have advocated this new Clause. Obviously I shall not avail myself of one argument to which my hon. Friend the Member for Ashford (Mr. Deedes) referred. It is true that this is the cheapest of all the Inland Revenues to collect, but I promise that I will not be unduly biased in favour of it for that reason, although it is not altogether irrelevant.
It was suggested that I should start thinking about some of these matters, and I agree with my hon. Friend the Member for Taunton (Mr. du Cann) that there are wider issues involved here. There are current considerations of the question of transfer going on, and this is part of a rather larger problem. We have been doing some thinking about those wider issues. The responsibility does not rest wholly with us, but it may be necessary for us to facilitate what other people have decided upon by a use of the legislative process. That matter is in hand and I do not think we are responsible for delays in respect of it.
The main argument in all the speeches has been the international consideration. It has been suggested that the present rate of duty is a disincentive. I must say to my hon. Friend the Member for Taunton that the figures which he gave do not show much sign of it being a disincentive. In fact, there has been a very considerable movement into stocks and shares of this country from Europe and elsewhere. Of course, it is possible to take two views about this type of business, but I do not think the Stamp Duty is a disincentive.
Nevertheless, having made these reservations, I think the arguments put forward are very persuasive and I have 1519 much sympathy with them. I promise to consider them carefully, but I say frankly that this proposal would cost £50 million in a full year. Moreover, I do not think it would be easy to stop it there, and if it were continued to conveyances of other property such as land and houses it would cost £75 million in a full year. I am afraid that anything of that sort is not possible within the framework of this Finance Bill.
I also promise to remember what my hon. Friend the Member for Taunton said about priorities when considering future action in this field. We must be careful to get the priorities right. Having said that, I hope my hon. Friend will not press this proposed Clause.
§ Mr. Jay
The Chancellor, in the course of future deliberations, should also take note of this fact. Investment by overseas persons in this country, which may or may not be desirable on other grounds, leads not to invisible exports but to invisible imports. It leads to the payment of dividends from this country to overseas, and therefore the whole of that case for this Clause is invalid.
§ 11.30 p.m.
§ Mr. Deedes
I am grateful to my right hon. and learned Friend for what, I thought, was a sprig of hope which ended his speech in reply to the new Clause. In the circumstances, I beg to ask leave to withdraw the Motion.
§ Motion and Clause, by leave, withdrawn.
§ The Chairman
In calling the next new Clause—(Allowance for travel to work)—I think that it will be convenient also to discuss the later new Clause—(Allowance for travelling expenses.)
§ Sir Charles Taylor (Eastbourne)
On a point of order, Sir William. Is it fair to call the new Clause at this time of night, at half-past eleven? It is a Clause about which many people feel strongly. Could we not move, That the Chairman do report Progress and ask leave to sit again?
§ The Chairman
I would not be prepared to accept that Motion. It is perfectly in order to move the Clause.