§ (1) As from the beginning of August, nineteen hundred and sixty-two, and in relation to any trade or business carried on by a society registered under the Industrial and Provident Societies Acts, 1893 to 1961, or under the Industrial and Provident Societies Acts (Northern Ireland), 1893 to 1955, the rate at which the profits tax is to be charged shall be three per cent.
§ (2) This section shall have effect notwithstanding any enactment to the contrary whether in this Act or elsewhere.— [Dr. Dickson Mabon.]
§ Brought up and read the First Time.
§ 3.41 p.m.
§ The Chairman
I think that it will be convenient to discuss also the new Clause— Exemption of building societies from income tax and profits tax— the new Clause—Income tax and profits tax: exception of building societies— and the new Clause—Building societies to be exempt from income tax and profits tax.
§ Dr. Mabon
I hope that because of what we have heard recently from the Prime Minister we may have a change of heart by the Treasury. The Prime Minister has been saying that the class war is dead. I hope that that is true, and if it is we ought to see to it that the postures of the class war are ended. I wish that the Conservative Party would realise that co-operative societies— and by co-operative societies I do not mean only the agricultural ones— are extremely valuable and play an excellent part in our economy both in a retail and wholesale form.
The object of the Clause is to restore the position which existed for seven years under Conservative rule. In fact, it existed from 1947, when Labour introduced the matter, to 1958. At that time 1367 the Finance Bill introduced by Lord Amory increased the rate of Profits Tax on co-operative societies from 3 per cent. to 10 per cent, while, at the same time, the tax on private companies was reduced from 30 per cent. to 10 per cent.
The basic argument of those who believe that this change to uniformity is a fair thing in relation to co-operative societies is that there is no fundamental difference between a co-operative and a limited liability company. I submit that this is not true and that there is a fundamental difference between the shares of the co-operative society and the shares of a joint stock company.
If Conservatives accept that it is logical that they should impose this tax, and reject this Clause or any variant of it which seeks to make such a distinction, I can only interpret the Government's refusal to do this as being due either to a lack of understanding, or because they wish to maintain this posture of the class war.
In discussing the distinction between co-operative societies and limited liability companies, there are two fundamental points to bear in mind. Cooperative societies do not distribute profits in the same way as do limited liability companies. This is known to all who are members of a society, and ought to be known by hon. Gentlemen opposite in case they are not members of a society. The rate of interest which shareholders get in relation to their share capital is decided not by co-operative societies, but by the Registrar of Friendly Societies and it is not, therefore, the mechanism of the market by which the rates of interest are laid down in relation to cooperative societies. Here lies the fundamental difference between the joint stock company and the co-operative society.
In addition, one has only to look at the structure of shareholding in cooperative societies to realise that this is mainly an imposition on working-class savings; an imposition on the savings of middle and lower class people. In 1960, the average member of a cooperative society held £ 19 6s. share capital and £ 3 loan capital. Average share interest in 1960 was 2. 95 per cent. Surely this is indicative that this is an organisation dealing with people in the lower income groups, an organisation 1368 which stimulates thrift, and an organisation which, on the basis of these figures, is not concerned with seeking to get out of its taxation responsibilities. A further point is that co-operative society shares do not attract speculative interest. They remain at par, and, therefore, cannot result in capital gains.
Surely those two fundamental distinctions between the shareholders of cooperative societies and the shareholders of private companies are in themselves enough to show that there ought to be different fiscal treatment afforded to the co-operative societies as distinct from the limited liability companies? The aim of co-operative societies is to minimise profit for shareholders and to maximise the benefits to consumer members. This is the aim not only of retail societies— and this is clear to anyone who studies the position— but also of wholesale societies, because if one looks at the constitution of the wholesale societies one sees that they are interlocked with the retail societies. There are about 15 million people in this country who are members of co-operative societies and nearly 850 societies.
Those who believe that this change in taxation in 1958 was unjust are all the more concerned because they see that as a result of changes made in 1960 and 1962 there has been a further imposition of tax on the lower income groups in relation to those who are members of the co-operative society. In 1958, there was an increase in tax from 3 per cent. to 10 per cent., which meant that £ 1. 3 million was raised in extra taxation from incomes mainly of wage earners. In 1960, by changing the level of Profits Tax, while making no fiscal discrimination between co-operative societies and joint stock companies, the amount of tax raised by Profits Tax was £ 500,000 more than in 1960. In this Budget an additional £ 0. 45 million is to be raised, which means that since this change was made in 1958 additional taxation on lower middle and working class savings in the co-operative societies amounts to £ 2¼ million.
Surely it is reasonable to ask the Treasury to look at this again. It seems to many of us that this tax is most unjust. It can be truly said that since 1958, under a Conservative Government, the joint stock companies have been 1369 paying half the pre-1958 rate, while the co-operative societies have been paying five times the pre-1958 rate. This is most unjust, and I hope that we will not be treated to the briefs that were read in the past when Lord Amory and his assistants refused to listen to our pleas in this matter, and refused to recognise the effects that this tax would have on co-operative trade and development.
I hope that we shall have some enlightened thinking from the Treasury this time, and that the Treasury Ministers will bear in mind the Prime Minister's view that we ought to look at these projects of social endeavour, these alternative ways of organising society, not in a hostile way but in a way that seeks to find a society which accepts private enterprise, on the one hand, and the endeavours of the co-operative movement, on the other. I hope that the Treasury will give us a favourable reply to the new Clause.
§ Mr. William Clark (Nottingham, South)
We are discussing with this new Clause, the new Clause—Exemption of building societies from income tax and profits tax— which has been drafted to exclude "Special advances" because, obviously, building societies have two types of business, namely, owner-occupier, and special advances, which include some commercial business. It is only that part of their business relating to owner-occupiers with which my new Clause deals.
This is an endeavour to give some assistance to the hard pressed owner-occupier who is paying for his house— the man in the income range of £ 800 to £ 1,800 or £ 2,000 a year. Without aid, obviously, building societies must charge their borrowers a rate of interest which allows them to borrow from the public, and, obviously, the rate of interest which they charge on mortgages is dependent upon economic circumstances and the economic conditions affecting the Bank Rate and other sorts of interest.
I do not think that it is any argument to say that because a man is an owner-occupier buying his own house, and because the rates of interest have increased, he is necessarily getting an advantage because the capital value of the house is rising every day. The 1370 owner-occupier is not, in fact, in business to buy and sell houses. He sells his house only if his employment changes or if, because of certain circumstances, he has to move. Surely, if he does move, the expense of buying a new house, together with the legal expenses and stamp duties involved in selling his own, more than equal the profit which he may have had. I hope, therefore, that we shall not hear very much of the argument that, because mortgage interest rates have gone up, the capital value of the property has also gone up.
In 1961– 62, the total amount of Income Tax and Profits Tax paid by building societies was £ 54 million, but if we exclude the special advances— and, quite obviously, I have taken an arbitrary figure here— £ 9 million of that £ 54 million is income from Profits Tax. If the new Clause— Exemption of building societies from income tax and profits tax— were accepted, the cost to the Exchequer would be about £ 45 million, and I readily accept that this would be a tremendous burden on the Exchequer.
Anything that is done would be a political decision, but I would remind the Committee that a political decision had been given in regard to houses before building society interest rates were changed. We should remember that council house subsidies— and I am not saying this in any way to suggest that council house subsidies should necessarily be reduced— are costing the country about £ 75 million a year. That is a political decision that £ 75 million of the revenue should go towards the assistance of council house tenants.
Pre-war, the building of council houses was a social service but, postwar, this idea of social service has been rather lost. It was a definite political decision to continue building houses with subsidies. I appreciate the fact that my right hon. Friend the Minister of Housing and Local Government has changed the subsidies on council houses, but, nevertheless, the fact remains that today we are paying £ 75 million a year in those subsidies.
The simple argument about building societies is that they are not in the same position as ordinary limited companies or trading companies. They are a sort of mutual trust. They are not in business for profit, and I think that there is some 1371 justification for considering whether we could not give more help to this sort of mutual trust in order to further the provision of houses for would-be owner occupiers. We must remember that any relief that is given by the Government, either this year or in a subsequent Finance Bill, must be passed on to the borrower. This is of paramount importance, and I am sure that the building societies throughout the country would accept it.
If building societies alone were exempted from Profits Tax, it would mean that interest rates would come down by only about a quarter of 1 per cent. Although this would be some help to owner-occupiers buying their own houses, it is not such a great help as if Income Tax were exempted. If Income Tax and Profits Tax were exempted, it would mean that interest rates could come down by 1¾ per cent. Instead of being 7 per cent., the interest rate would be about 5¼ per cent.
I appreciate that a political decision has to be taken, but I also appreciate that in the circumstances in which this Finance Bill was drafted, £ 45 million would be a tremendous charge on the Exchequer. I ask the Minister to give sympathetic consideration to a scheme that would assist owner-occupiers throughout the country, through a reduction either in Profits Tax or Income Tax for building societies, so that these societies would be able to reduce their rates of interest, and, therefore more and more people would be able to afford to buy their own houses.
§ Mr. Donald Wade (Huddersfield, West)
You have indicated, Sir William, that the new Clause—Income tax and profits tax: exemption of building societies— in the names of my right hon. Friend, my hon. Friends and myself, may be discussed with the new Clause now before the Committee. There are three new Clauses, all with similar intent, and the third is that in the name of the right hon. Member for Colne Valley (Mr. Glenvil Hall), so that each of the three parties is represented and the Chancellor will be able to take his pick.
I think that I am right in saying that in all cases the object is to abolish Income Tax and Profits Tax on building 1372 society surpluses. In former debates on this subject, it has been argued from the Treasury Bench that if there is a liability to Income Tax it is unreasonable to ask for the reduction or abolition of Profits Tax from building society surpluses. Today, we are asking for the removal of both those taxes on surpluses, so that we are, at any rate, being logical, according to the views expressed in other debates in past years from the Treasury Bench.
This does not affect the tax payable in respect of interest paid to investors in building societies, which is dealt with separately, and there is no suggestion that that should be altered. The arrangements as between the building societies and the Treasury will continue regarding the interest paid out to depositors. I think that that is clear, and that we are only concerned with Income Tax and Profits Tax on building society surpluses. I think that "surpluses" is the right word, because I do not think that they are profits in the strict sense. If we abolished Income Tax on these surpluses, we should be reverting to the position prior to 1932, when Income Tax was first introduced on building society surpluses.
There is some difference in the wording of the three new Clauses now under consideration, but I do not think that they are of major importance. In the new Clause in the name of the hon. Member for Nottingham, South (Mr. W. Clark), which has already been referred to, profits on special advances are excluded. I appreciate that point, and if the Chancellor were to accept that new Clause, I should be quite content. In regard to the new Clause in the name of the right hon. Member for Colne Valley, which has not yet been referred to, there is a specific reference to the arrangement under Section 445 of the Income Tax Act, 1952. That wording is quite appropriate, and I have no objection to it.
As I understand it, the Treasury's argument is that to relieve building societies in this way would create a dangerous precedent; that once this concession had been made all kinds of other bodies would ask for similiar concessions. I do not regard that as a fair point. Building societies are in a special 1373 class. We are discussing the subject of building societies together with cooperatives, and we must, therefore, consider the distinction between them. I am not opposing the proposal put forward by the co-operatives; I appreciate the arguments, and I have no reason to oppose their case. I merely point out that there is a distinction between co-operatives and building societies, which has been clearly recognised in earlier debates. There is a dictum of the late Lord Simon on the subject, which as far as I know has never been controverted.
Building societies are not in competition with bodies engaged in trade. Their nearest competitor is the savings movement. The removal of this tax on surpluses would mean the removal of an anomaly. It is not so much a concession for which we are asking as a request for fairer taxation treatment of building societies.
We must, therefore, consider the subject on its merits, without regard to any other trading concern or any other kind of body. I look on the building society movement as part of the general National Savings movement, and there are four points to be made in favour of this request for relief. First, the tax which we are now discussing was imposed more by chance than by design. It is not necessary to go over the history of the matter; it has been referred to in earlier debates. The way in which building societies came to be subject to Profits Tax in addition to Income Tax was very fortuitous.
Secondly, to the extent that the surpluses are not used to reduce the rates of mortgage interest they have to be invested in Government securities, and are therefore a form of savings. They are either savings invested in Government securities or the savings of individuals who are buying their houses through the building society movement. We are therefore here concerned with taxing savings.
Thirdly, the method of taxing building societies at present is a contributory factor in keeping up the interest rates charged to borrowers. I am not sure that I agree with the hon. Member for Nottingham, South about the amount of benefit that would accrue to the home buyer if Income Tax and Profits Tax on surpluses were removed. I understand 1374 that the benefit would amount to ¼ per cent. I question the larger figure which the hon. Member mentioned.
But this is the aspect in which the general public is interested. We often have complaints from people who are buying their own homes about the high rate of interest they have to pay. They complain about the way in which it adds to the burden of buying the homes in which they live. Building societies cannot do very much about this, because they have very little room to manoeuvre. If their interest rates are high, it is the direct or perhaps indirect— consequence of Government policy. It is due partly to the ruling level of interest rates, which affects the amount which the building societies must charge to their borrowers and it affects the cost of raising money.
Fourthly, the tax on surpluses has some effect on the rates charged to borrowers, and to that extent it is the home buyers who suffer. Furthermore, this form of tax is bound to restrict to some extent the expansion of the building society movement, since it affects the amount of the reserves and therefore the building up of the reserves.
Yesterday, the Chief Secretary to the Treasury— if I understood him correctly — made a distinction between voluntary savings and compulsory savings. He said that he preferred voluntary saving, but that where that was not sufficient it was necessary to use the method of compulsory saving— in other words, taxation. This is a form of compulsory saving, but not one which should be welcomed. It would be very much better if more money were put voluntarily into the building society movement and if more people bought their own homes without having to pay such high rates of interest. In the long run, the effect of Government policy is to increase the amount of compulsory saving and thereby, to some extent, to handicap voluntary saving. I would have thought that it would be worth while, from every point of view, to abolish both Income Tax and Profits Tax on the surpluses. The only question is whether there should be any limitation.
We can obtain some interesting information from other countries. For example, in Queensland building societies in general are not liable to tax. They are liable in respect of 1375 incomes such as rent, which are considered to be outside the societies' normal functions. In the United States of America, building societies are exempt from tax until their reserves exceed 8 per cent. of their total assets. My view is that the American solution is better than the method of taxation here. If I were in the Chancellor's position I would abolish Income Tax and Profits Tax on surpluses and would give careful consideration to the introduction of provisions similar to those which operate in America.
I am not very worried as to which of the three Clauses affecting building societies should be accepted. If the wording of any one is better than the wording of mine I shall be content to accept the advice of the Treasury. But there is a strong case for abolishing both Profits Tax and Income Tax on building society surpluses, and I hope that the Chancellor will appreciate the way in which the case has been put forward by hon. Members on both sides of the Committee.
§ Mr. John M. Temple (City of Chester)
I support the new Clause—Relief of Income Tax and Profits Tax on Building Societies— which has been so ably put forward by the hon. Member for Nottingham, South (Mr. W. Clark). This new Clause would exempt building societies from Income Tax and Profits Tax under certain circumstances. I am under no delusions as to the difficulty of getting my right hon. and learned Friend the Chancellor to accept any new Clauses, and I shall, therefore, seek to do two extraordinarily difficult things. First, I shall seek to prove to my right hon. and learned Friend that there is a special case to be argued for building societies and, secondly, that, as Chancellor of the Exchequer, he might gain by accepting this Clause.
Building societies have an extremely good record over the last ten years in respect of the collection of savings from the community. In that period they have attracted twice as much in savings as the whole of the National Savings movement, and to that extent my right hon. and learned Friend owes a deep debt of gratitude to the building society movement. It is performing an immense social service. It has no equity share- 1376 holders to share in any of the profits, should profits be made. Without its help the great Conservative housing programme, which has been so successful over the last ten years, would have been nothing like so successful. We look to the building society movement in the future to carry a great part of our housing drive.
It is right that my right hon. and learned Friend should give positive encouragement to home ownership. During the last few months the Bank Rate has fallen from 7 per cent. to 4½ per cent., but the borrowing rate from building societies has not fallen. If I were Chancellor I should be very concerned about that, and about the long-term rate of interest on irredeemable Government securities.
It is a tragedy that War Loan is standing at about 55, giving a return of over 6 per cent., and the same return is demanded when borrowers obtain advances from building societies. In July, my right hon. and learned Friend, no doubt for very good reasons, withdrew that part of the House Purchase and Housing Act under which building societies could grant loans to those people who wanted to buy the older properties. In my opinion, this is not positive encouragement to prospective home owners. If my right hon. and learned Friend accepts our new Clause, or only part of it, he will be giving the positive encouragement to home owners which I believe to be so vital today.
I draw my right hon. and learned Friend's attention to the fact that the £ 100 million which was advanced under the House Purchase and Housing Act was not money lost to the Treasury, but money which will come back to him in course of time. I have stated what the Chancellor might gain by accepting this Clause, and also that there is a special case for building societies. May I mention two particular facets in this Clause? First, the standard rate of Income Tax is charged on that section of building society surpluses— not profits — which they are placing to reserves. That allocation of money now attracts a tax of about £ 9 million a year. In addition, Profits Tax is charged on these surpluses, and that charge is about £ 3 million a year.
1377 I read with the greatest possible interest the address by Sir Harold Bellman, Chairman of the Abbey National Building Society, on 27th March, in which he referred to the fact that twenty-five years ago he was a member of a deputation which waited on the then Chancellor of the Exchequer, Sir John Simon, and that as a result of the representations of that deputation Sir John Simon accepted that building societies were in a special position and exempted them entirely from the National Defence Contribution. I should like to quote from the. speech, in which he referred to the Chancellor's action by saying:Sir John Simon, then Chancellor of the Exchequer, justified the concession by stating that in the opinion of the Government, building societies stood in a class by themselves.Time went by, and in 1947 the National Defence Contribution was replaced by Profits Tax, and at that time a decision was taken by the then Government to bring building societies within the ambit of Profits Tax. I believe that that was a most unfortunate decision, bringing building societies for the first time within the ambit of Profits Tax, whereas the Chancellor of the Exchequer in 1937 had accepted that they were in a special position.
§ 4.15 p.m.
§ Mr. Douglas Jay (Battersea, North)
When they were brought into tax in 1947 it was at the lower rate of Profits Tax. It was because the present Government abolished the discrimination in Profits Tax that they have found themselves in difficulties.
§ Mr. Temple
I am very surprised that the Labour Party claims any credit for such a very bad precedent.
I am prepared to do a deal with the Chancellor of the Exchequer. I have mentioned two facets of this new Clause, and I am prepared to sit down at once if my right hon. and learned Friend will rise and say, "I will accept those two narrow facets of the Clause". But my right hon. and learned Friend has not jumped to his feet. I will make him a further offer— a bargain offer— and say that if he jumps to his feet at once and says, "I will accept the Profits Tax section of this new Clause alone", costing him only £ 3 million a year, I will sit down.
1378 I am extremely disappointed that my right hon. and learned Friend has not responded, and I must, therefore, deploy the remainder of my case. It would be highly desirable to exempt the building societies movement from all Income Tax. In that case, my hon. Friend the Member for Nottingham, South (Mr. W. Clark) is quite right in saying that building societies would be able to lower interest rates by 1½ per cent. or more.
We are all agreed that houses for future generations must be built. My right hon. Friend the Minister of Housing and Local Government has estimated that 6 million houses must be built in the next twenty years. This is the point on which my right hon. and learned Friend the Chancellor of the Exchequer might well gain from our new Clause. I believe that if he does not accept a new Clause of this nature, exempting building societies and encouraging home ownership, then we shall have to build more council houses, and if more council houses have to be built then the subsidy which will have to be borne by the Exchequer will increase. The cost to the ratepayers will also increase. To that extent, little loss would, in fact, be involved to the Chancellor of the Exchequer by accepting a Clause of this nature, and it would give positive encouragement to more home ownership.
I am very disappointed that my right hon. and learned Friend has not risen to respond to either of my offers. I very much hope that he will remember that the building society movement is an extraordinarily powerful movement, doing an immense social service. I trust that he will give encouragement to that movement and to owner-occupiers throughout the country.
§ Mr. Glenvil Hall (Colne Valley)
I, too, have a new Clause on the Notice Paper, in much the same terms as those in the names of the Liberal Party and the hon. Member for Nottingham, South (Mr. W. Clark). As the hon. Member for Huddersfield, West (Mr. Wade) said, this is not a party matter. This is pressure by all parties, and it has been going on to my knowledge for the best part of ten years. Year after year we have attempted to get the Chancellor of the Exchequer to do justice to the building societies. Instead of his doing so, the right hon. and learned Gentleman 1379 has made the burden upon them infinitely worse.
As the hon. Member for the City of Chester (Mr. Temple) said, in 1932 a deputation from the building societies went to see the Chancellor of the Exchequer, the late Lord Simon, then Sir John Simon, and he admitted quite definitely that building societies came into a different category from ordinary trading concerns. It was easy for him to reach that conclusion, because they are in a class apart, as are co-operative societies. They pay no dividends, although I know that co-operative societies do on purchases. They make a surplus; but they do not distribute the surplus. They declare no dividend, and they do not trade in the ordinary way, and any surplus which they make is used for the benefit of the members of the society which makes the surplus.
In addition, if it were not for the societies the Government would have to step in and do something to help people to buy their houses. At the moment, they borrow largely in the open market at current rates of interest and then re-lend to house purchasers, and this takes a burden from the Government. The Government, instead of penalising building societies, should recognise their value. I could, I think, outline the speech which the Economic Secretary will make, because it has been made from that Box year after year. He will say, first, that the Government are only following the decision of the Royal Commission, which was in favour of building societies being taxed. When the hon. Gentleman replies to this debate, perhaps we can be told where in the Report of the Royal Commission there is any indication that the Commission came down on the side of taxing building societies in the way that they are now taxed.
As my right hon. Friend the Member for Battersea, North (Mr. Jay) said, when Labour was in office the Government made a special rate applicable to building societies. A few years ago, when the difference between the dividend distributed and the non-distributed profits rates were made one, the building societies found themselves paying as much as any trading concern. I put this to the Economic Secretary. It has been 1380 put to him year after year, but I put it to him once more. Is it not grossly unjust to treat building societies in this way. They help people to save and provide houses for those who need accommodation. They assist the Government in every possible way. It is unfair that these societies should be mulcted in this fashion. Previous Government have realised that building societies are quite definitely in a different category from trading concerns.
There is a feeling in some quarters that building societies do not pay Income Tax. That is partly due to the fact that they pay a composite rate direct. I am not one who thinks that that special rate helps building societies to pay less than they should. It is an arrangement which suits the Inland Revenue very much. A large number of those who have money in building societies are people of small means who do not pay Income Tax anyway. The arrangement must mean that, on balance, the Inland Revenue gets more than it would otherwise get. It certainly is saved a great deal of trouble. But for this arrangement, people would have to have sums they had paid refunded to them, and that would involve a great deal of work for the Inland Revenue.
I am positive that the pressure now being brought to bear on the Government is a proper one. The fact that all parties are sharing in it underlines what I and others are saying. I hope that on this occasion the Economic Secretary will agree with the hon. Member for the City of Chester, who has spread himself in trying to put the case to the Government. He obviously feels deeply. I think that he made an exceedingly good one. If the Chancellor cannot see the light after what has been said so far in this debate, I am afraid that he never will see it.
§ Mr. Raymond Gower (Barry)
The case for this series of new Clauses has been put with great clarity and moderation by my hon. Friend the Member for Nottingham, South (Mr. W. Clark) and other hon. Members. They have emphasised that the function of the building societies since the last war has been of invaluable help. The notable expansion of home ownership would have been quite inconceivable without their 1381 work. Undoubtedly, they have increased the scale of their operations. They have had to do that in response to increased demand.
Nevertheless, there has been evidence in most parts of the country at different times of the tremendous strain on the resources of the societies. It must be within the experience of hon. and right hon. Members on both sides of the Committee that prospective purchasers of houses are frequently unable to obtain the mortgage advances which they need. In some parts of the country, for reasons which I deplore, local authorities do not use the powers conferred on them by Parliament to grant mortgages. They could do so and have all their administrative expenses covered and make a small profit. Why some local authorities have stopped doing that is quite inconceivable. In those areas building societies have rather strictly to ration the amount of money they advance. There is almost a standstill except in the minority of cases in which people can find the cash or make private arrangements for mortgages to buy private houses.
Everyone who buys a house in some degree relieves the community of a possible burden. In the absence of such self-provision, a large number of these marginal cases would have to be provided with council houses in the manner which was described by my hon. Friend the Member for the City of Chester (Mr. Temple). In many cases that would lead to an increase in public expenditure. It would increase even further the annual sum of £ 75 million for council houses in all parts of the country. On both sides of the Committee we have proved by our policies that we deem it legitimate for sums of public money to be expended on the provision of council houses in that way. That being so, there is an exceedingly strong case for giving some help to an agency which provides the person of modest means with the opportunity of home ownership.
Other things being equal, the modest acquisition of property, particularly of a house in which one lives, while not necessarily creating a better citizen, is likely to inculcate the virtues we seek to encourage. We on these benches have constantly said that we favour a wider dispersion of property ownership, par- 1382 ticularly in houses. In this country we have achieved a great deal in that direction, but we still lag very much behind other countries, particularly North America. We have still a long way to go before we can say we have achieved our goal. The main agency to assist us in this laudable ideal is the movement that we are discussing, the building societies.
The services which building societies render have never been needed to a greater degree by a large number of people of comparatively modest means than today. I therefore hope that my right hon. and learned Friend will listen to the request made by several of my hon. Friends that he should ascertain how he can take a practical step— if he cannot accept our Clause in full— towards helping building societies, and thereby house purchasers, more than has been done so far.
§ 4.30 p.m.
§ Mr. John Rankin (Glasgow, Govan)
The hon. Member for the City of Chester (Mr. Temple) said that he found it very difficult to move the Chancellor, and I could not agree with him more. Some of my colleagues and I have been engaging in that unrewarding occupation for more years than we would now like to count. The hon. Gentleman even offered to sit down in the middle of his speech if his right hon. and learned Friend would rise to the fly that he was casting. No hon. Member could make a greater sacrifice than to indulge in a voluntary silence to accomplish his end and, of course, silence has been shown as one method of achieving an end. It is now engaged in for other purposes that are somewhat remote from the present discussion.
The hon. Member for Huddersfield, West (Mr. Wade) chose, perhaps properly, to indicate that there were differences between us. I imagine that to be one of the best ways of playing into the Chancellor's hands. Last evening, when we were engaged in a similar venture to this, the Chief Secretary of the Treasury immediately seized on little differences that had cropped up during the debate—
§ Mr. Rankin
That is not very good salesmanship. We should not let the Chancellor have his pick, because he might pick wrongly. He might ignore the plea that Co-operative Members have made during the last five years. If he has to take a pick, we must ask him to pick ours—
§ Mr. Rankin
We have now made it quite clear that for this purpose we are one united body, and that just as last night we joined together to advance the cause of the savings movement and to ask the Chancellor to encourage it by a preferential tax, so today we join together to ask him to encourage the new Clauses relating to such important businesses as the co-operative movement and the building societies. I hope that we shall press the Chancellor unitedly for the achievement of our common purpose.
I support entirely what has been said about the building societies. I am a member of the Co-operative Building Society and, largely because of that, I am living in a house bought with the savings that I invested month by month over many years. I therefore support the aim of the hon. Member for the City of Chester, and I ask for his support of our new Clause relating to Profits Tax on co-operative societies.
The right hon. and learned Gentleman does not give an encouraging nod to that, but, after all, the big challenge here is whether or not, if he refuses to listen to our plea on Profits Tax— as he did on savings last night— hon. Members opposite who make powerful speeches in support of their nostrums will go into the Lobby with us to register our disapproval of and dissent from the policies which the Government is now pursuing.
I want, in particular, to support what my hon. Friend the Member for Greenock (Dr. Dickson Mabon) has said so impressively and eloquently. That, of course, comes naturally to him. As a Scotsman, it is born in him, and as one who breathes the free air of Greenock, it comes from him, naturally, 1384 rhythmically and, at times, almost poetically. I am certain that his arguments will have a powerful effect on the Chancellor. Incidentally, with all due respect to the Economic Secretary— whom I love to hear— and who has so often said "No", I hope that he will today, as a variation, say "Yes" to our request.
Our claim is fairly simple. We in the co-operative movement want to restore the tax position which operated up to the passing of the Finance Act of 1958. Until then, the co-operative trading side was assessed as though it made no distribution of profits to shareholders. The result was that the 3 per cent. rate was applied to surpluses. That was done because the Government accepted that co-operative trading methods were not patterned after those of the limited liability companies. The Government accepted that the cooperative purpose in trading was to minimise profits to shareholders and maximise benefits to consumers. Cooperatives still follow the business plan of pre-1958 days although, of course, it is naturally expressed in modern terms.
It is not the co-operatives' way of creating their surpluses that has changed, but the Chancellor's attitude to those surpluses. Formerly, he regarded them as undistributed profits; he now taxes them as though they were distributed. Formerly, they were regarded as not being earned, utilised and treated like big business profits; now they are regarded in exactly the same light, for taxation purposes, as big business profits.
If that were all, it might not be so bad but, in practice, the co-operative movement is being taxed ever so much heavier than it was prior to 1958. Compared with conditions then, the Chancellor has increased by five times the tax rate paid by the trading side of the co-operative movement. Instead of paying 3 per cent. Profits Tax on surpluses, as we did in 1958, we now pay 15 per cent. The tax on limited liability companies has been reduced by 50 per cent. and that is not following a very fair principle in taxation affairs.
It is quite wrong. Some people call this political discrimination. I hope that the Chancellor will take note of these 1385 facts, because it is well known that a large slice— I do not wish to be offensive in these remarks— of the Tory Party income in carved from the juicy roasts provided by their Government. On the other hand, the co-operative movement is known to lean closely towards the Labour movement; but the Co-operative Party has scanty political funds. I could put these two acknowledged facts together and make them add up to six or seven. I will content myself, however, by saying that I hope the Chancellor will seriously consider this aspect, for a great many people consider that there is obvious discrimination between the two different forms of business and that this discrimination is at least rather strange.
We have the first form of business— the co-operative form— with a working-class origin offering a co-operative way of trading. It is being harshly treated. The other system creates profit from the public need for private purposes. That system is being preferentially treated as I have shown by the figures I have quoted.
§ Mr. John Hall (Wycombe)
For the guidance of hon. Members who have been interested in the argument being adduced by the hon. Member, would he quote the respective rates of Profits Tax now borne by private industry— little and big businesses— and the rate borne by the co-operative trading concerns? Would he refer more specifically to the figure which, he says, has been reduced by 50 per cent.?
§ Mr. Rankin
I thought that the figures were well known. In 1958, the Profits Tax imposed on co-operative trading surpluses was 3 per cent., while the other tax was 30 per cent. They were collapsed into a general tax of 10 per cent. and, thus, the co-operatives had to pay 10 per cent. instead of 3 per cent. while the tax on limited liability companies was reduced from 30 per cent. to 10 per cent. Since that time Profits Tax has gone up to 12½ per cent., then 15 per cent. and therefore the tax on cooperative surpluses has risen five times while the tax on limited liability companies has been reduced by 50 per cent.
That is by no means fair treatment. Preference has obviously been shown and one naturally wants to know what 1386 arguments there are in favour of this discrimination. I have been told that the Chancellor acted on a recommendation in the Report of the Royal Commission. That may be true and, for the moment, I shall accept the Chancellor's statement on its face value for whatever it may be worth. In my view, it is only an excuse, because there are so many recommendations of the Royal Commission which the Chancellor has disregarded for so many years that I naturally wonder why he should place so much reliance on this particular recommendation.
The Economic Secretary put forward a second reason last year when he said that the Government were bound to treat the co-operative trading movement in this way because they wanted to be fair to their trading competitors. I do not regard that as a genuine reason. The co-operative movement sells the great mass of its goods at prices which are comparable— and, in some cases, regulated— or exactly the same as private traders.
In addition, from the surpluses created by its trading, the co-operative movement provides a great range of social and educational activities which the private trader simply does not venture to engage upon. Therefore, if there is any unfairness, it is not against the private trader but against the co-operative movement and it is because of that that I am asking the Chancellor seriously to consider this matter.
There is now a common purpose uniting both sides of the Committee in seeking an allevation of Profits Tax for the co-operative movement, and the building societies as specified in the other proposed new Clauses. I hope that hon. Members who sponsored those Clauses, assuming that the Economic Secretary will not give a promise either of acceptance, even partially, or of reconsideration, will unite with us in marching into the Lobby to support them.
§ Sir Cyril Black (Wimbledon)
I am sorry to strike a discordant note, but I must count myself out as far as the one united body to which the hon. Member for Glasgow, Govan (Mr. Rankin) referred is concerned. I have been actively engaged in the building society 1387 movement for over twenty-five years and I agree with everything that has been said about its social purposes, for it plays an invaluable part in the economic and social life of the country.
But when we examine the case dispassionately, we discover that what we have been listening to is special pleading on behalf of building societies which could not, with consistency, be granted without being applied to a considerable range of other business enterprises.
It ought to be clear to the Committee that the three new Clauses dealing with building societies, which are being debated together, do not seek to achieve the same object, if, indeed, they achieve the objects described by those who put them forward. The hon. Member for Huddersfield, West (Mr. Wade) made it clear that he was seeking exemption for the profits of building societies from Income Tax which they bear at the standard rate and from Profits Tax, whereas my hon. Friend the Member for Nottingham, South (Mr. W. Clark) also desired to extend the concession to that part of the tax which relates to interest paid to shareholders and depositors and is paid not at the standard rate but at a specially agreed composite rate settled with the Inland Revenue. That was the purpose which my hon. Friend commended to the Committee, and it is, of course, quite different from the purpose of the hon. Member for Huddersfield, West.
I do not want to deploy all the arguments in this matter. It was debated at great length last year and has been debated in previous years. I made a speech of considerable length on the last occasion. Last year and in previous years the plea was for a concession related to Profits Tax only, whereas on this occasion it is desired to extend the concession to include Income Tax. This year's proposal has perhaps the merits of greater consistency than the claims put forward in former years, but it becomes less realistic because of the very much larger loss which would be incurred by the Treasury if this year's demands were met.
I think that hon. Members are familiar with most of the arguments, but I want to deal with one which has been mentioned by two or three speakers today 1388 and which is an argument that I cannot for one moment accept. It is, stated, quite simply, that building societies are not profit-earning organisations and that nothing they earn can properly be described as a profit. One of my hon. Friends used the phrase that building societies are not really in business for profit, and the right hon. Member for Colne Valley (Mr. Glenvil Hall) said that he preferred to use the word "surplus" as he did not consider that building societies earned profits. It is that point of view only that I want to combat today.
I want to read to the Committee a paragraph from a recent article on building society operations, written by a well-known financial journalist. It puts the case very clearly. It says:Just as the butcher, the baker and the candlestick-maker have their wares to sell, so have the building societies their commodities to sell. The tradesmen have to face the problems of their jobs squarely and take such action as will enable them to buy their raw materials and to sell them at the market rate. So building societies, dominated as they arc by the money market rates, should get down squarely and honestly to the job of buying and selling money.Building societies are not philanthropic or quasi-benevolent organisations; they are businesses, just as much as are the businesses of the butcher, the baker and the candlestick-maker. The difference between the profits of the former and those of the latter is more imaginary than real; the tradesmen put their profits into their own pockets, while building societies credit their profits to the societies themselves… The profit motive, no matter how much we may blether about 'non-profit making organisations' and raise our hands in horror at the mention of the word, is active in both cases.I have yet to meet a butcher, baker or candlestick-maker who does not wish to make a profit and expand his business, or a building society which does not wish to make its 10 per cent. increased growth each year.I would not have stated the functions of building societies in quite those terms, not because I do not believe that they earn profits— I am quite persuaded that they do— but because I think that this is a rather crude way of describing the business in which building societies are involved.
I would say, however, and on this note I conclude, that if hon. Members are inclined to quarrel with this definition they may be interested to know that it appeared in the issue of October of last year of theBuilding Societies Gazette, 1389 which is generally regarded as the mouthpiece of the building society movement. Whatever the arguments may be on general political as distinct from fiscal grounds for making a special concession in the case of building societies, the argument that they do not earn profits and do not exist to earn them is an argument that just does not bear examination.
§ Mr. Sydney Irving (Dartford)
The hon. Member for Wimbledon (Sir C. Black) has accused us of special pleading. I deny that absolutely. The co-operative movement has never claimed for itself anything which it would not give to any similar organisation. In our consideration of small savings last night we were quite happy that any concession accorded to the movement should be granted to any similar form of small savings. What we feel to be unjust is that organisations which are dissimilar should be treated in like fashion and that the co-operative movement should be considered in the same way as joint stock companies when its whole aim is totally dissimilar.
While not dissenting in any way from the views of my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall), I should like to confine my remarks to the new Clause moved by my hon. Friend the Member for Greenock (Dr. Dickson Mabon). This exposes another example of discrimination against the co-operative movement. In a democratic society one would expect that one object of Government policy would be to assist voluntary and democratic organisations, especially those with the history of the co-operative movement in encouraging thrift and self-help among workpeople. Yet in 1958 the Government made this punitive imposition on the co-operative movement which, to date, has cost the movement £ 2¼ million.
I am sorry that the hon. Member for Wycombe (Mr. John Hall), who intervened when my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) spoke, did not agree that this is a double penalty, because at the same time as this has created an additional burden on the co-operative movement the Chancellor has improved the position of the joint stock companies by reducing the tax on distributed profits from 30 per cent. to 1390 10 per cent. Government action has reduced the pool from which dividend is paid and this has placed a burden on the many millions of consumers who draw upon that pool.
We believe that it is grossly unfair to treat co-operative shares in the same way as those of joint stock companies. In joint stock companies there is no limit to the potential dividends paid on ordinary shares and no limit to the individual person's holding, whereas in the co-operative movement the dividend is limited to 2½ per cent. to 3½ per cent. by the Registrar. There is also no possibility of capital appreciation, and there are no one-for-one bonus issues as there are in many joint stock companies. The holding of shares in a co-operative society is limited by Statute and, in any case, about 32 per cent. of the total share capital of co-operative societies is invested in Government securities. We believe that there is no case in equity for the continuation of this imposition and I hope that the Chancellor will be able to end it by accepting the new Clause.
§ 5.0 p.m.
§ Mr. Nigel Fisher (Surbiton)
I will not follow the hon. Member for Dartford (Mr. Irving) into the co-operative argument because I do not know anything about it. I merely wish to support the building society Clauses in this batch of new Clauses which we are now discussing.
I suppose that I ought to make the usual declaration of interest, as I have done for many years, as a director of and an investor in a building society and as a vice-president of the Building Societies Association, although the latter interest is honorary rather than financial.
Many of us have argued this case so often over the years that it is becoming quite difficult to think of new ways of stating the same arguments. They have been put excellently again today, from both sides of the Committee. I think it is significant— I believe it was the right hon. Member for Colne Valley (Mr. Glenvil Hall) who pointed this out— that this case is always argued from both sides of the Committee by representatives of all three political parties and there is therefore no party motive whatever. Indeed, what actuates us in this sort of debate is simply a desire to put 1391 right an injustice and correct an anomaly. I do not think I am overstating the position when I say that.
We base our argument on the fact that the building societies are not engaged in trade and do not make commercial profits, although my hon. Friend the Member for Wimbledon (Sir. C Black) may say they do. They have no equity shareholdings. Surpluses put to reserve could not benefit any shareholders. Building societies began as savings organisations, and that is what they still are today. I maintain that they are non-profit-making institutions, with a social as opposed to a commercial purpose. My hon. Friend the Member for Wimbledon said that building societies want to grow. Of course they do, but they do not want to grow by making profits, because they do not make them. They want to grow by making more advances on mortgage, which is the purpose for which they exist and for which they were started.
All this used to be admitted by the Treasury. For sixty years building societies were not taxed. But now the tax privileges which are still given to other forms of savings, such as life insurance, are no longer given to building societies. Last year my hon. Friend the Economic Secretary acknowledged that building societies have no equity shareholdings and that the surpluses put to reserve could not benefit any investors as capital gain and could only benefit would-be home-owners. Yet in the same breath he claimed to rely on the view of the Royal Commission that building societies carry on a commercial business and make profits. That was simply asserted. There was no evidence produced. It was simply an assertion by my hon. Friend because the Royal Commission had said so.
We all know how Profits Tax came to be imposed upon building societies. We all know the story of the National Defence Contribution. Most of us feel that when this tax was replaced by Profits Tax in 1947 the original position of building societies should have been restored at that time.
The second argument on which the Economic Secretary relied was that building societies could not be considered in isolation, and on this point 1392 the Chief Secretary to the Treasury in the debate last night on small savings was, I thought, rather clever from his own point of view. He lumped all these different forms of savings institutions together. He said that if we gave the cooperative societies a tax relief it would cost £ 2½ million. He said that was not very much but that if we put them all together it would cost a great sum of money which the Treasury could not possibly afford.
That is rather clever political gamesmanship, but that is all it is. One says first of all that no particular case can be considered in isolation. Then one says that if all the cases are taken together it becomes much too expensive for the Treasury to consider. So it is never necessary to argue the merits of any particular case which is being advanced. I call that political gamesmanship. Not that I decry it. I think this is about the only argument that the Treasury can possibly deploy against the clear equity of the case which my hon. Friends and hon. Members opposite have submitted.
I do not feel it is right to lump these different pleas together. It is not right to consider the building societies with the co-operative societies and say that because relief is accorded to one it must necessarily be accorded to the other. They are not in the same category. Co-operative societies are, after all, engaged in trade. Building societies are not. We have often heard the dictum of Lord Simon, when Chancellor of the Exchequer, that building societies are in a special position. He said that they were in a class apart for taxation purposes because they are non-profit-making organisations and savings organisations with a social as opposed to a commercial purpose.
I should like to know whether Lord Simon's dictum is now denied by the Treasury and, if so, why? If building societies were in a special position in those days, what has happened in the operations of building societies in the last quarter of a century to make them no longer in that special position? I would say that there has been no basic change in the operation of building societies, and if there has been no change why has there been this change in Treasury thinking? How much longer have we to go on year after year with 1393 this flat, barren, unsupported negative from a series of Treasury Ministers who, I suppose, would all claim to support the concept of a property-owning democracy but who do very little in practice to bring it about when they are in office?
I cannot feel hopeful, in a Budget of this sort which can make no overall tax deductions of any size, that we shall get far with these new Clauses this year. I do not think there is a spirit of optimism on either side of the Committee with regard to the outcome of this debate. I can only draw a little crumb of hope and comfort for the future from a comment that my hon. Friend made last year when he promised that when the structure of taxation comes to be altered, with possibly the amalgamation of Income Tax and Profits Tax, the special position of building societies would certainly be considered. He made my point on that occasion that building societies are in a special position. I think I have quoted his words accurately. I hope it will in fact he considered during the current year and before the next Budget.
I hope my hon. Friend will at least be able to tell us that this afternoon. And I hope that one day in the not too distant future a Treasury Minister will defy all the precedents created by his predecessors and will come down to the House of Commons and give practical recognition— not just lip-service— to the value of building societies to the community by restoring to them the tax position which they once enjoyed and which, I believe, they are entitled to enjoy again.
§ Mr. Frank Tomney (Hammersmith, North)
According to my logic, a surplus by any other name is still a profit. One thing that the hon. Member for Wimbledon (Sir C. Black) did very effectively this afternoon was to shed a lot of crocodile tears about building societies. In political thinking— and this is, after all, a political forum— it is best to put first things first. What we are arguing about principally, although we have not said so, is the complete failure of the Government's economic policy in the last ten years to control rises in interest rates throughout the country, which has led directly to the imposition of high interest rates on would-be borrowers who, by borrowing money to provide the 1394 country with a capital asset in the form of bricks and mortar, are rendering a service to the country.
If there is one lesson which has surely been learned in the country by now, it is that in times of consumer and inflationary pressures there has got to be something of a managed economy. That is what has not been done, and that is why there has been this outcry by the people for whom these crocodile tears are being shed this afternoon.
The kernel of this debate is the interest rates which people cannot afford to pay. In moving new Clause 12—Reduction of rate of profits tax on co-operative societies, & c.— the hon. Member for Greenock (Dr. Dickson Mabon) made reference to people who have to move from job to job and from house to house. Prices are not constant; jobs are not constant; wages are not constant, and housing prices are not constant. I know of cases where Rolls Royce engineers who were out of work in Scotland moved to London and had to pay £ 1,000 more for the same type of house than they did in Scotland. The difficulty which young people have is not that they are unable to make the repayments to building socieies out of income; it is to acquire the initial capital to put down as a deposit for the purchase of a house.
The hon. Member for Wimbledon is quite right when he says that building societies are trading concerns. They trade in money. They borrow money and they lend it at the best rates, and the fact that they have an arrangement with the Treasury regarding dividend payments does not divorce them one iota from commercial practices. Therefore, if we take the words of the Minister of Housing that we are faced with a prospect of getting 6 million houses in the next ten or fifteen years, one is led to ask, who is going to provide them and at what rates?
This country has a permanent housing problem. Of course the building societies render a great service— no one denies that— and of course the person buying his own house is adding to the capital resources of the nation. The prime difficulty arises from the Government's economic policies. The framing of these policies and their execution prevent people in the first place from being able to acquire the capital with which to buy a house.
1395 This is the real argument, and all the crocodile tears will not wash it away. In Finance Bill after Finance Bill hon. Members exercise their function as Members of Parliament to promote interests, sectional or otherwise. But when the economy is running away the effect of all this always comes back to the people least able to bear it. If one is clever enough, rich enough and mentally agile enough one can usually get out of one's difficulties.
In the main, it is the productive workers, the sheet anchor of the nation's economy, who have to face this recurring burden year after year. There are at least 800,000 marriages each year. The London County Council has a waiting list of 150,000, 50,000 of which are dire cases. Government policies have forced up prices of land and rents, and they have made the position of those on housing waiting lists and local authorities wishing to deal with the problem more difficult.
Let us start where we should start— on the Government's interest rates. They are the prime reason for the present difficulty. If the Government are to solve this problem some economic thinking must be done in the Treasury about how it is to be done, because we may be entering a period of intense competition in world markets. Unless something is done we are going to make our industrial population immobile because a man cannot transfer his home and family elsewhere unless he has a house to go to. The necessary houses cannot be built within measurable time and they will never be built unless special arrangements are entered into, either through the building societies or otherwise, to take the burden off the backs of the people who cannot bear them.
§ 5.15 p.m.
§ Mr. Alan Brown (Tottenham)
With reference to new Clause 12—Reduction of rate of profits tax on co-operative societies, & c.— I wish to say a few words in support of small shopkeepers. I prefer, as did the hon. Member for Huddersfield. West (Mr. Wade), to keep quite separate the question of building societies, as dealt with in new Clause 27 —Exemption of building societies from income tax and profits tax— because I 1396 understand that in this respect the Cooperative Building Society is quite separate from the other business trading activities of the co-operative societies. The hon. Member for Greenock (Dr. Dickson Mabon), who moved Clause 12, implied that the co-operative societies are not in the nature of being big business. The paid-up capital of the Co-operative Wholesale Society alone— that is not counting the 850 other societies involved— is no less, according to the Stock Exchange Manual, than £ 30,600,000. Therefore, the question arises, what exactly constitutes big business?
I see no valid reason why the Committee should accept Clause 12 as it stands. I have no objection to Clause 27. I am talking only about Clause 12. I am of the opinion that it would be right and proper for us to reject Clause 12 because we are being asked to say that the retail trading section of the already gigantic co-operative society should be given the privilege of enjoying special financial concessions which, in my view, are clearly calculated to enhance its profits.
Is it right that these large trading concerns should be given preferential treatment which is denied to small shopkeepers? Britain, as has been said so often, is a nation of shopkeepers. How can the proposition of equality of treatment for all be upheld if the interest of the many is to be subjected in the interest of the few?
§ Dr. Dickson Mabon
Is the hon. Gentleman aware that his figures do not really substantiate his case? He mentioned the figure of £ 30 million, but may I tell him that the share capital is well over £ 200 million? What he has to take into account is the fact that 13 million members participate in the ownership of that capital. The figures which I gave averaged and amounted to — and let us remember that these are accumulations over years— less than £ 20 in actual share capital per head. The hon. Gentleman talks about allowing these moneys to be made from that capital. The co-operative societies are enjoined by the Registrar of Friendly Societies not to pay high rates of interest but only a fixed rate of interest, which, as I said, was less than 3 per cent. in 1960.
§ Mr. Brown
I will deal with the main points at the end of my speech. Suffice to say that I was only taking the figure given by the Stock Exchange Manual when I mentioned £ 30 million. The fact that the figure is really £ 200 million is a measure of how little we know about the whole business.
Let all those who embark willingly into the hazardous field of trading for profit— as I have myself done that in the past— do so on equal terms and not seek to obtain, as the co-operative societies are doing for themselves, advantages which they deny to others.
§ Mr. Brown
We have heard a great deal of late about the demerits of monopolies and of big business. Certainly, among all those who have been loud in their denunciation of the so-called threats to our financial stability, it would be fair to say that the voice of the small shopkeeper has been the quietest. For all that, however, he more than anybody else has for long suffered the most.
There is absolutely no difference to the shopkeeper between the high-pressure competition sustained by the co-operative societies and the high-pressure competition sustained by the so-called privately-owned chain stores but whose shares, incidentally, are publicly owned, such as Woolworth, Sainsbury, and Marks and Spencer. To the private trader, there is no difference.
The contention made from the benches opposite that the profit of the co-operative business is distributed to co-operative shareholders is a little misleading. The fact is that the bulk of the profits are diverted, as we all know, from the trading sector of the co-operative societies and are applied to other purposes. I shall not go into those other purposes. [HON. MEMBERS: "Why not?"] Because hon. Members know what they are. Suffice it to say that the small balance which remains is returned to the customer in the form of dividends, a dividend which, however, is not regarded by the small shopkeeper as abona fidedividend in the true sense of company law but as an advanced form of price-cutting technique. Hon. Members know that this is true.
§ Dr. Dickson Mabon
On a point of order. May I ask you, Mr. Thomas, whether the assertion that the hon. Member has made is true? Are you aware of that?
§ The Temporary Chairman (Mr. George Thomas)
I think that the hon. Member did not really mean what he said.
§ Mr. Brown
There is no need to start again. The point I am making is simply this. We all know what a shareholder is in terms of company law, but in terms of co-operative trading the shareholder is the customer. Thus it is that the dividend that is returned to the customer is considered by many private traders as being in the nature of a form of price-cutting. For example, the shareholders in Woolworth's receive a dividend from head office. Perhaps we are all customers at some time of Woolworth's, but that does not make us shareholders. If we were given a rebate, it would be considered to be a form of price-cutting.
§ Mr. A. E. Oram (East Ham, South)
That is quite right. Our case is that the co-operative dividend is a reduction in price which is determined at the end of the trading period. The hon. Member is not suddenly producing a new-found truth. It is the whole base of the cooperative method that we reduce prices by the payment of consumer dividends.
§ Mr. Brown
Surely, it is our duty to maintain the principle of equality of opportunity, both in business and in other walks of life.
Let us by all means assist and encourage those who fall below a certain standard of living and help those who need assistance. Let us by all means apply sanctions to those who by reason of uninhibited greed and ambition are guilty of conduct detrimental to the well-being of our society. I am now referring briefly to monopolies. To accept the new Clause moved by the hon. Member for Greenock, and in so doing to give 1399 deliberate privileged treatment to one section of business, would be both unjust and unfair.
§ The Economic Secretary to the Treasury (Mr. Anthony Barber)
If I may say so, with respect, I thought it a little odd at first to discuss in the same debate new Clauses concerning the taxation of building societies and the taxation of co-operative societies. However, I think it is the most convenient way of proceeding, because one of the basic issues is relevant both to building societies and to co-operative societies, and, indeed, to all the new Clauses which are the subject of this debate. I should like first to deal with some aspects which are peculiar to building societies, then to consider those aspects which are relevant only in the case of co-operative societies, and finally to refer to certain basic considerations which the Committee should consider and which are relevant to both types of society.
Nobody would pretend that all the points which have been made in the debate were new. It follows that some of my remarks in reply inevitably will cover familiar ground. [Interruption.]I am sorry that hon. Members opposite are so concerned about my hon. Friend the Member for Tottenham (Mr. A. Brown), who made a very good speech.
The new Clause in the name of the Leader of the Liberal Party—(Income tax and profits tax: exemption of building societies.)— proposes that no Income Tax or Profits Tax should be charged on the profits of building societies. This Clause differs from that in the name of my hon. Friend the Member for Nottingham, South (Mr. W. Clark)—(Exemption of building societies from income tax and profits tax.)— in that his Clause would exclude from that exemption profits from special advances. Otherwise, the Clauses are more or less the same. I want to come without delay to the issues of substance involved in these new Clauses, but there are three comparatively minor points that I should place on record at the outset.
First, the definition of "'building society "in the two Clauses to which I have referred isany undertaking registered and submitting accounts to the Registrar of Friendly Societies.1400 That would include a wide range of concerns other than building societies— for example, industrial and provident societies, and co-operative societies. I am not sure whether my hon. Friends wish to exempt them also from taxation. The definition would also include benevolent societies and working-men's clubs. The third new Clause relating to building societies— (Building Societies to be exempt from income tax and profits tax.)— in the name of the right hon. Member for colne Valley (Mr. Glenvil Hall) avoids such a wide definition.
§ Mr. Temple
I had the privilege of making two suggestions to my right hon. and learned Friend the Chancellor of the Exchequer. I should like to make a third offer, that if my hon. Friend can redraft a Clause redefining building societies I am sure that it would be acceptable to us.
§ Mr. Barber
It would be helpful if my hon. Friend awaited to hear what I have to say, because I was about to deal with the broader issues. I thought it well, however, to point out the effect of the Clause.
Another important implication in the drafting of the Clause is that for technical reasons, with which I will not weary the Committee, it would not confer any effective benefit upon building societies so far as Income Tax is concerned. However, I need not trouble the Committee with that point, because it has been made clear in speeches in support of the new Clauses that the intention is to provide exemption from both Profits Tax and Income Tax, although difference of opinion has been expressed as to the extent to which it is desired to exempt them from Income Tax.
My third preliminary point is that as my hon. Friend the Member for Nottingham, South pointed out, his new Clause differs from that in the name of the Liberal Party in that my hon. Friend's Clause proposes to exclude from exemption any profits from special advances. The Committee is familiar with the definition of special advances, so I need not go over that ground. Concerning this particular exclusion I doubt very much as a matter of reality whether a distinction should be made for tax purposes between the profits of a society from its ordinary business as 1401 contrasted with those which accrue from the making of special advances. After all, both parts of the profit or surplus, whatever it is called, arise from the lending of money on interest and the arguments seem to me to favour not treating them differently for tax purposes. Moreover, special advances form only a small proportion of the total business of building societies, and the exclusion of profits and special advances from this proposed exemption would not make a very significant difference to its cost.
I come now to the substance of the matter, which is the contention that building societies should not be charged Profits Tax and Income Tax on their surplus", as hon. Members have described it. This proposal is only a natural extension of the proposal which we debated at length last year, namely, that building societies should be exempted from the increase in the rate of Profits Tax proposed at that time.
There are two broad aspects which the Committee has to consider. My hon. Friend the Member for Nottingham, South said that we should recognise that building societies were not in business to make a profit. Of course, as the right hon. Member for Colne Valley and other hon. Members have said, there is a significant difference between an institution such as a building society and what I might call an ordinary trading concern. The fact remains that the societies carry on a business and make surpluses or profits. On this point my hon. Friend the Member for Wimbledon (Sir C. Black) and the hon. Member for Hammersmith, North (Mr. Tomney) are quite right.
My hon. Friend the Member for Surbiton (Mr. Fisher) asked me a specific question— whether I agreed that building societies were in a special position. Certainly, I do. Indeed, as far as Profits Tax is concerned, the difference between a building society's shareholders and those of an ordinary limited company is already recognised in arriving at their Profits Tax liability, because share interest paid by the building society to its shareholders has been allowed as a deduction in computing its profits since the change in 1958, whereas the dividends paid to ordinary company shareholders 1402 are not allowed as a deduction in that way. The surplus, that is to say the amount which the societies put to reserve after deducting their outgoings by way of interest and other expenses is, in my submission, a true profit.
Reference has been made to the Royal Commission on Taxation. The whole matter was considered at length by the Commission. It reached the conclusion that wherever profits of a corporate body emerge they should be taxed impartially without regard to the nature of the business from which they arose. I will come back to this later, because this is an aspect that relates both to building societies and co-operative societies. Suffice it to say now that, in the light of the view expressed by the Royal Commission, my right hon. Friend does not feel that we should modify the general principle.
I know that it is sometimes contended that, because of the pressure of taxation, building societies are prevented from building up adequate reserves. It is quite true that the ratio of total reserves to total assets has fallen somewhat during the '50s when the societies' assets, as the Committee knows, have been leaping ahead year after year. But it is not irrelevant to note that in the last two years the reserve ratio has begun to rise slowly and that last year there was a record addition of reserves of £ 13½ million.
It is difficult to form any decisive opinion on the amount of the reserve required by a society. The figure fixed by the House Purchase and Housing Act, 1959, referred to by my hon. Friend the Member for the City of Chester (Mr. Temple) as the minimum required to qualify a society for trustee status was 2½ per cent., and most societies are comfortably above that level.
In view of what has been said, I hope that I can, with respect to those hon. Members who have spoken, suggest that the Committee should be realistic about the effect on mortgage rates of an exemption such as I understand the Clauses to propose for building societies. My hon. Friend the Member for Nottingham, South and my hon. Friend the Member for the City of Chester said, in effect, that if Income Tax and Profits Tax were removed this would allow for a reduction of perhaps 1¾ per cent. or 1403 2 per cent. in the rate of interest. But I think that I should point out to the Committee that in a publication calledBuilding Society Affairs,published by the Building Societies Association in February this year, it pointed out that a building society bears tax in three ways. First, it referred to the composite rate in respect of interest paid to the investors; secondly, to the Income Tax on its "surplus"; and, thirdly, to the Profits Tax on its "surplus" or profit. It went on to say:Now the time for the Budget is drawing near the Association has again appealed to the Chancellor of the Exchequer to exempt building societies from tax in the last two categories.That is to say, Income Tax and Profits Tax from charges.
I think it is the first time that I have heard it suggested that they should also be exempt from tax which is paid under composite rate arrangements. I think that the hon. Member for Huddersfield, West (Mr. Wade) certainly would not go further than the request made by the Building Societies Association. If we did no more than accede to the request of the Association, the effect which this would be likely to have on the mortgage rate would be to reduce it by only one quarter of 1 per cent. and, therefore, I think that the Committee should bear in mind what the effect of this proposal would be.
§ Mr. Glenvil Hall
I accept the figure of one-quarter of 1 per cent. The hon. Member for Huddersfield, West mentioned¼ per cent. and, as he spoke, I nodded in agreement. May I point out that, so far as my own Clause is concerned, it does not include the composite rate?
§ Mr. Barber
I had noted that point, and that is one of the ways in which it differs from the other proposed new Clause.
§ Mr. W. Clark
If the composite rate were included for exemption it would give about 1 ¾ per cent. reduction, and, as I said during my speech, that is a political decision and I am not claiming the logicality of that. If it were considered a special case and the three items for taxation were exempt it would be a reduction of 1¾ per cent.
§ Mr. Barber
My hon. Friend is quite right in what he said. I wanted only to point out that as he represented his case he was going a great deal further than, as far as I know, has ever been suggested in the past.
I would mention one further point about the societies. Despite what has been said, it is a fact that between 1950 and 1961 their total assets have increased from £ 1,256 million to £ 3,436 million. I think it is fair to say that, despite the fact that this taxation is an additional burden on building societies, they have not fared too badly in those years.
I ask the Committee and my hon. Friends in particular, and perhaps the Liberal Party also, to bear in mind one other factor when considering the broad political question of home ownership. That is that the owner-occupier of residential property is in the future to be exempt from charge of tax under Schedule A.
Before I come to the aspect common to both the building societies and cooperative societies, I should like to say something about the special position of the co-operative societies. After all, the first Clause with which we have been concerned in this debate is concerned solely with co-operative societies. It would reduce the rates of Profits Tax alone payable by co-operative societies to 3 per cent.
Before 1958, the date referred to so often during this debate, co-operative societies were liable to Profits Tax at that rate of 3 per cent., but there were, of course, at that time, two important differences. In the first place there was the two-tiered system of Profits Tax which the Royal Commission recommended should be abandoned, and secondly share interest payable by co-operative societies was not deductible in the computation of their profits for tax purposes.
Of the hon. Gentlemen who have spoken on this none of them has referred to this particular point, and indeed the hon. Gentleman the Member for Dartford (Mr. Sydney Irving) spoke as though the shares of the co-operative societies were treated in the same way as the shares of joint stock companies. In fact they were before 1958, but the whole situation was changed at that time because the Royal Commission recommended two changes. First of all it 1405 recommended that when the flat rate Profits Tax was introduced the co-operative societies should be charged in the same way as other concerns, and secondly it recommended that share interest should rank as a deduction in the computation of their profits. Both these recommendations were carried into effect.
§ Mr. Oram
The hon. Gentleman makes the point that the Royal Commission made these recommendations in connection with reduction of share interest, but does he not recall also that it said that the shares of co-operative societies were practically the same as loan capital in the case of companies? If this is accepted, surely this was not a concession to co-operative societies introduced in 1958 but something which ought to have been conceded in the earlier years. It was in this respect merely catching up with time.
§ Mr. Barber
With respect, I do not think it was merely catching up with time because the position was exactly the same in the years immediately after the end of the war, in the '50s. There may well be something in what the hon. Gentleman says about the realities of the situation. All I am trying to do is to point out to the Committee that the difference between the shares of the Co-operative societies and those of limited liability companies, pointed out by the hon. Gentleman the Member for Greenock (Dr. Dickson Mabon), has been recognised, and was recognised in the legislation of 1958.
It seems to me that there is really one overriding reason for taxing Co-operative societies in the same way as other trading concerns, and that is, as my hon. Friend the Member for Tottenham said, that over a wide field they are in direct competition with other trading concerns. There is no question of treating co-operative societies, in the words of the hon. Member for Greenock, in a hostile manner, or, as somebody else said, of involving political discrimination. The object is to treat co-operative societies and other trading institutions equitably and fairly.
Profits Tax is levied on the profits of trades and businesses carried on by corporate and similar bodies, and it really cannot be denied that co-operative societies are engaged in trading 1406 activities and that they are doing so with a view to making profits. Indeed the hon. Member for Greenock admitted this. It really would be grossly inequitable if they were to have preferential tax treatment as compared with their competitors, many of them small businesses, frequently selling identical or almost identical goods to the same classes of persons. I ask the Committee what possible justification there is for tax relief directed to this one category of trader. Indeed, to use the words of the hon. Member for Dartford and the hon. Member for Glasgow, Govan (Mr. Rankin), if we accede to the request which has been made on behalf of the Co-operative societies, this would be discrimination of the most obvious kind.
This brings me finally to the important recommendation of the Royal Commission which, I believe, is relevant not only to co-operative societies but, despite what the right hon. Gentleman the Member for Colne Valley has said, also to building societies. This is so important I feel that I should remind the Committee of the words which were used. This is what the Royal Commission said:The main principle that we wish to see adopted is that a tax on the profits of corporations should apply to all profits without distinction between corporations the ownership of which is vested in the State and other corporations, or between corporations formed to serve public services and those formed to serve private purposes.I shall not weary the Committee by reading the rest of the paragraph, but it is also relevant and it supports the position which I have just read.
I am quite sure that the general principle is the right one to be applied both to building societies and co-operative societies, but in fact, if the principle were to be breached the cost would be fairly considerable. To exempt building societies alone from Income Tax and Profits Tax on their surpluses would cost some £ 15 million a year. That, as I say, as I understand it, is the cost of the Building Societies Association's proposal. But to go further, as my hon. Friend contemplated throughout, in other words to abolish also the composite rate, would involve a total cost of something like £ 60 million.
§ Mr. Temple
Would my hon. Friend tell me what it would cost not to go that far but to relieve building societies of Profits Tax alone?
§ Mr. Barber
The split between Profits Tax and Income Tax so far as building societies is concerned is £ 4 million a year in respect of Profits Tax and £ 11 million in respect of Income Tax, in each case on the building societies' surpluses. But, despite what the hon. Member for Huddersfield, West said, this would not in fact be the end of the matter. If the relevant criterion was not the profits being made but the destination of those profits and the nature of the business, then I think that my hon. Friend was quite right in suggesting that the almost inevitable consequence would be exemptions elsewhere, and the cost to the Exchequer might well be over £ 25 million or so.
With respect to my hon. Friend the Member for Surbiton, who I thought otherwise put his speech in most moderate language, to say that to bring forward the argument I am now bringing forward is a sort of political gamesmanship is not facing up to the facts, but even if we could consider building societies in isolation a considerable sum of money would be involved and then the factor of cost alone would rule it out this year, as my hon. Friend the Member for Surbiton recognised. I am sure my other hon. Friends will bear this in mind.
I must in all frankness conclude by saying that the basic objection to these new Clauses is that they run counter to the general principle propounded by the Royal Commission and accepted by my right hon. and learned Friend.
§ Mr. G. R. Mitchison (Kettering)
It is, perhaps, symptomatic of the times that the greater part of the speech of the Economic Secretary was directed to dealing with his hon. Friends behind him rather than with his enemies in front. He found it convenient that these matters should be considered together. So, I can assure him, do they. They are able to support building societies even in their somewhat extravagant claims— more extravagant than any put forward from this side— with their voices and not be compelled to do so with their votes. They will remember that the steel magnates, in propaganding on another 1408 matter some time ago, pointed out that what they wanted were not their votes but their voices. No doubt the building societies will be content with the voices which they have heard in such passionate eloquence from the benches opposite today.
I, however, would prefer to discuss for a little the subject upon which we shall shortly have to divide, and that is the question of the co-operative movement. May I tell the Committee a fairy story?
§ Mr. Mitchison
I found it in my little book of fiscal fables the other day. I opened it, and I turned over to the story about temporary Income Tax and the uses of the Road Fund and things of that sort and at last I came to the fairy story which was called "Profits Tax", and it said this. Once upon a time there was a tax on profits and it was called a Profits Tax. Then they no longer levied it only on profits but they continued to call it a Profits Tax. And so everyone lived unhappily ever afterwards— except the Treasury Ministers. That is very much what has happened in this case.
If one wishes to consider the Profits Tax in relation to the co-operative movement, one ought to consider also what the co-operative societies do. They have a broad social purpose which goes rather beyond any question of competition with private traders and which definitely merits consideration. The retail societies— I need hardly remind the Committee— began because people in the north of England found that the prices they were being charged for the necessities of life were more than they could afford. They thought that they could obtain what they wanted more cheaply by buying things for themselves and distributing them, and they formed societies for the purpose. The members of those societies were the first cooperators. In fact, they antedated the Rochdale pioneers by quite a time. That was a co-operative movement, and it is essentially in the same spirit and for the same purpose that the co-operative movement works today.
Today, the co-operative societies try to make their purchases as cheaply as they can for their members. It is a 1409 very strange view of the matter to regard the dividends which are distributed by co-operative societies as anything more than a convenient way of bringing down the price, in the long run, as far as the societies as a body can afford. I regard the co-operative societies as being essentially engaged in a job which is different from that of other trading bodies in the ordinary sense of the word.
One must not neglect this aspect of the matter. It has great practical significance. In fact, the membership of the co-operative societies was originally working-class. That is a word which I rather dislike, but the membership was originally of that character. Of course, it is much broader nowadays, but the main purpose always is to obtain the goods they need to buy as cheaply as they can.
The dividends serve another purpose, and here again there is no parallel with the ordinary shop trader. The co-operative societies are, in fact, one of the most important sources of savings in this country. We discussed this matter the other day and I shall say no more about it now except to remind the Committee that a co-operative society is a different sort of institution from the small trader, of whom one hon. Member spoke with such deep feeling, and, equally, it is a fundamentally different institution from the large department store.
The case one can make about it, if one intends to stick to the idea of profits, is that the profits in this context are not profits. That is the very simple point which the co-operative movement has always put forward. As a matter of logic, it is right. It is equally true, of course, that the Profits Tax nowadays is not levied only on what are strictly profits and that it falls on all sorts of activities like municipal trading in various forms which are distinguishable from profits in the form in which profits most commonly occur.
I look at the matter a little more broadly. Once one passes the stage of being logical about it— I can quite see the argument of any Chancellor or Royal Commission not wishing to be too logical— one comes to the question of 1410 whether one ought or ought not to accept social considerations. Here the history is important.
It is true that an anomaly was removed in 1958. That was all that that change amounted to. It arose from the use of the word "shares", which meant something quite different in co-operative societies and in ordinary limited liability companies, and this difference had, I think, led to a confusion as to what the nature of these shares really was. That was what happened in 1958, and one cannot make anything more out of it. The position used to be that Profits Tax was divided according to whether the profits were distributed or not. A co-operative society was not, in fact, distributing profits and, therefore it paid the lower undistributed rate. At the time it was, I think, 3 per cent.
The object of our proposal in regard to co-operative societies is to put matters back to that state of affairs. We have been very moderate about it. Logically, we might have said that they should pay no Profits tax at all, but I think that the fairy story has a moral to it. We have long abandoned strict logic in the matter. Therefore, although 3 per cent. is a somewhat illogical concession, all those who support the new Clause, as I do, regard it as a reasonable concession, and we do not want to be greedy about it.
I have heard no opposition, except from the Treasury Bench, to our proposal put in that way and on those grounds. I assure the Economic Secretary that his speech sounded a little better than last year's. There is something to be said for mixing a couple of things. It brightens up the business, as it were, and I quite appreciate that the hon. Gentleman took full advantage of his opportunity. We were all interested and glad to hoar him. But for sense in his argument, for meeting the position of the co-operative movement in the matter, for treating what are not in fact profits in the way they ought to be treated, his speech was really no better than it was last time. It was a little more graceful, a little more mixed, it had a little more colour, it was, perhaps, a shade longer— he had to deal with two subjects, of course— and it was a little more lively, but no more.
1411 The hon. Gentleman was quite fierce when dealing with his hon. Friends behind him. But as regards the co-operative movement his answer was as tame as the co-operative movement itself sometimes does not entirely avoid being. Co-operators are very gentle people. They are not fierce. They serve a good social purpose. The co-operative movement draws its membership from all classes of society. It ought not to be
§ given what is, in truth, rather unfair treatment because it does not fit nicely and tidily into the framework of capitalist society. It is a good social movement. It should be encouraged, and we shall support the new Clause.
§ Question put,That the Clause be read a Second time: —
§ The Committee divided:Ayes 167, Noes 234.1413
|Division No. 209.]||AYES||[5.57 p.m.|
|Abse, Leo||Healey, Denis||Paton, John|
|Albu, Austen||Henderson, Rt. Hn. Arthur(Rwly Regis)||Pavitt, Laurence|
|Allaun, Frank (Salford, E.)||Herbison, Miss Margaret||Pearson, Arthur (Pontypridd)|
|Allen, Scholefield (Crewe)||Hill, J. (Midlothian)||Peart, Frederick|
|Awbery, Stan||Holman, Percy||Plummer, Sir Leslie|
|Bacon, Miss Alice||Holt, Arthur||Price, J. T, (Westhoughton)|
|Bellenger, Rt. Hon. F. J.||Houghton, Douglas||Probert, Arthur|
|Bennett, J. (Glasgow, Bridgeton)||Howell, Denis (Small Heath)||Proctor, W. T.|
|Benson, Sir George||Hoy, James H.||Pursey, Cmdr. Harry|
|Blackburn, F.||Hughes, Cledwyn (Anglesey)||Randall, Harry|
|Blyton, William||Hughes, Emrys (S. Ayrshire)||Rankin, John|
|Boardman, H.||Hughes, Hector (Aberdeen, N.)||Rhodes, H.|
|Bowdon, Rt. Hn. H. w.(Leics, S.W.)||Hunter, A. E.||Roberts, Albert (Normanton)|
|Bowles, Frank||Hynd, H. (Accrington)||Roberts, Goronwy (Caernarvon)|
|Brockway, A. Fenner||Hynd, John (Attercliffe)||Robertson, John (Paisley)|
|Brown, Thomas (Ince)||Irving, Sydney (Dartford)||Robinson, Kenneth (St. Pancras, N.)|
|Butler, Herbert (Hackney, C.)||Jay, Rt. Hon. Douglas||Rogers, G. H. R. (Kensington, N.)|
|Callaghan, James||Jeger, George||Rose, William|
|Collick, Percy||Jenkins, Roy (Stechford)||Shinwell, Rt. Hon. E.|
|Corbet, Mrs. Freda||Jones, Dan (Burnley)||Short, Edward|
|Craddock, George (Bradford, S.)||Jones, Jack (Rotherham)||Silverman, Julius (Aston)|
|Crosland, Anthony||Jones, J. Idwal (Wrexham)||Skeffington, Arthur|
|Crossman, R. H. S.||Jones, T. W. (Merioneth)||Slater, Mrs. Harriet (Stoke, N.)|
|Cullen, Mrs. Alice||Kenyon, Clifford||Smith, Ellis (Stoke, S.)|
|Darling, George||Key, Rt. Hon. C. W.||Sorensen, R. W.|
|Davies, G. Elfed (Rhondda, E.)||Law ton, George||Sprlggs, Leslie|
|Davies, Harold (Leek)||Lee, Frederick (Newton)||Steele, Thomas|
|Davies, Ifor (Gower)||Lee, Miss Jennie (Cannock)||Stewart, Michael (Fulham)|
|Davies, S. O. (Merthyr)||Lewis, Arthur (West Ham, N.)||Stones, William|
|Diamond, John||Lipton, Marcus||Strauss, Rt. Hn. G. R, (Vauxhall)|
|Dodds, Norman||Loughlin, Charles||Stross, Dr.Barnett (Stoke-on-Trent,C.)|
|Donnelly, Desmond||Mabon, Dr. J. Dickson||Swingler, Stephen|
|Driberg, Tom||MacDermot, Niall||Taverne, D.|
|Ede, Rt. Hon. C.||McKay, John (Wallsend)||Taylor, Bernard (Mansfield)|
|Edelman, Maurice||Mackie, John (Enfield, East)||Thomas, lorwerth (Rhondda, W.)|
|Edwards, Rt. Hon. Ness (Caerphilly)||McLeavy, Frank||Thomson, G. M. (Dundee, E.)|
|Edwards, Walter (Stepney)||MacPherson, Malcolm (Stirling)||Thornton, Ernest|
|Evans, Albert||Mallalieu, J.p.w. (Huddersfield,E.)||Timmons, John|
|Finch, Harold||Manuel, Archie||Tomney, Frank|
|Fitch, Alan||Mason, Roy||Wade, Donald|
|Fletcher, Erie||Mayhew, Christopher||Warbey, William|
|Foot, Michael (Ebbw Vale)||Mellish, R. J.||Watkins, Tudor|
|Forman, J. C.||Mendelson, J. J.||Weitzman, David|
|Fraser, Thomas (Hamilton)||Millan, Bruce||Wells, Percy (Faversham)|
|Galpern, Sir Myer||Mitchison, G. R.||Willey, Frederick|
|Ginsburg, David||Monslow, Walter||Williams, D. J. (Neath)|
|Gordon Walker, Rt. Hon. P. C.||Morris, John||Williams, LI. (Abertillery)|
|Gourlay, Harry||Moyle, Arthur||Williams, w. R. (Openshaw)|
|Grey, Charles||Neal, Harold||Williams, W. T. (Warrington)|
|Griffiths, David (Rother Valley)||Oliver, G. H.||Willis, E. G. (Edinburgh, E.)|
|Griffiths, Rt. Hon. James (Llanelly)||Oram, A. E.||Woof, Robert|
|Griffiths, W. (Exchange)||Oswald, Thomas||Yates, Victor (Ladywood)|
|Hale, Leslie (Oldham, W.)||Owen, Will||Zilliacus, K.|
|Hall, Rt. Hn. Glenvil (Colne Valley)||Padley, W. E.|
|Hamilton, William (West Fife)||Pannell, Charles (Leeds, W.)||TELLERS FOR THE AYES:|
|Harper, Joseph||Pargiter, G. A.||Dr. Broughton and Mr. Redhead.|
|Hayman, F. H.||Parkin, B. T.|
|Agnew, Sir Peter||Barlow, Sir John||Bidgood, John C.|
|Altken, W. T.||Batsford, Brian||Biffen, John|
|Allan, Robert (Paddington, S.)||Bell, Ronald||Biggs-Davison, John|
|Ashton, Sir Hubert||Bennett, F. M. (Torquay)||Bingham, R. M.|
|Atkins, Humphrey||Berkeley, Humphry||Birch, Rt. Hon. Nigel|
|Barber, Anthony||Bevins, Rt. Hon. Reginald||Bishop, F. P.|
|Black, Sir Cyril||Hay, John||Page, John (Harrow, West)|
|Bossom, Clive||Heald, Rt. Hon. Sir Lionel||Panned, Norman (Kirkdale)|
|Bourne-Arton, A.||Henderson, John (Cathcart)||Partridge, E.|
|Box, Donald||Hiley, Joseph||Pearson, Frank (Clitheroe)|
|Boyd-Carpenter, Rt. Hon. J.||Hill, Dr. Rt. Hon. Charles (Luton)||Peel, John|
|Boyle, Sir Edward||Hill, Mrs. Eveline (Wythenshawe)||Percival, Ian|
|Brewis, John||Hill, J. E. B. (S. Norfolk)||Pickthorn, Sir Kenneth|
|Bromley-Davenport,Lt. -Col. Sir Walter||Hinchingbrooke, Viscount||Pike, Miss Mervyn|
|Brooke, Rt. Hon. Henry||Hirst, Geoffrey||Pilkington, Sir Richard|
|Brown, Alan (Tottenham)||Hocking, Philip N.||Pitman, Sir James|
|Browne, Percy (Torrington)||Holland, Philip||Pitt, Miss Edith|
|Bullard, Denys||Hopkins, Alan||Prior, J. M. L.|
|Bullus, Wing Commander Eric||Howard, John (Southampton, Test)||Prior-Palmer, Brig. Sir Otho|
|Burden, F. A.||Hughes Hallett, Vice-Admiral John||Profumo, Rt. Hon. John|
|Butler, Rt.Hn.R.A. (SaffronWalden)||Hughes-Young, Michael||Pym, Francis|
|Campbell, Sir David (Belfast, S.)||Hulbert, Sir Norman||Ramsden, James|
|Campbell, Gordon (Moray & Nairn)||Hurd, Sir Anthony||Rawlinson, Peter|
|Carr, Robert (Mitcham)||Hutchison, Michael Clark||Redmayne, Rt. Hon. Martin|
|Cary, Sir Robert||Iremonger, T. L.||Rees, Hugh|
|Channon, H. P. G.||Irvine, Bryant Godman (Rye)||Rees-Davies, W. R.|
|Chataway, Christopher||James, David||Renton, David|
|Chichester-Clark, R.||Jenkins, Robert (Dulwich)||Ridley, Hon. Nicholas|
|Clark, Henry (Antrim, N.)||Johnson, Dr. Donald (Carlisle)||Ridsdale, Julian|
|Clark, William (Nottingham, S.)||Johnson, Eric (Blackley)||Robertson, Sir D. (C'thn's & S'th'ld)|
|Clarke, Brig. Terence (Portsmth, W.)||Johnson Smith, Geoffrey||Robinson, Rt. Hn. Sir R. (B' pool, S.)|
|Cole, Norman||Jones, Rt. Hn. Aubrey (Hall Green)||Rodgers, John (Sevenoaks)|
|Cooke, Robert||Kerans, Cdr. J. S.||Roots, William|
|Cooper, A. E.||Kerby, Capt. Henry||Ropner, Col. Sir Leonard|
|Cordeaux, Lt.-Col. J. K.||Kitson, Timothy||Scott-Hopkins, James|
|Cordle, John||Lancaster, Col. C. G.||Seymour, Leslie|
|Corfield, F. V.||Leather, E. H. C.||Shaw, M.|
|Costain, A. P.||Leavey, J. A.||Skeet, T. H. H.|
|Courtney, Cdr. Anthony||Leburn, Gilmour||Smith, Dudley (Br'ntf'd & Chiswick)|
|Craddock, Sir Beresford||Lewis, Kenneth (Rutland)||Smithers, Peter|
|Currie, G. B. H.||Lilley, F. J. P.||Smyth, Brig. Sir John (Norwood)|
|Dalkeith, Earl of||Litchfield, Capt. John||Spearman, Sir Alexander|
|Dance, James||Lloyd, Rt.Hn. Geoffrey (Sut'nC'dfield)||Stodart, J. A.|
|d' Avigdor-Goldsmid, Sir Henry||Lloyd, Rt. Hon. Selwyn (Wirral)||Stoddart-Scott, Col. Sir Malcolm|
|Deedes, W. F.||Longden, Gilbert||Storey, Sir Samuel|
|de Ferranti, Basil||Loveys, Walter H.||Studholme, Sir Henry|
|Digby, Simon Wingfield||Lucas-Tooth, Sir Hugh||Summers, Sir Spencer|
|Donaldson, Cmdr. C. E. M.||McAdden, Stephen||Tapsell, Peter|
|Doughty, Charles||MacArthur, Ian||Taylor, Sir Charles (Eastbourne)|
|du Cann, Edward||McLaren, Martin||Taylor, Frank (M'ch'st'r, Moss Side)|
|Duncan, Sir James||Maclay, Rt. Hon. John||Teeling, Sir William|
|Eccles, Rt. Hon. Sir David||Maclean, SirFitzroy(Bute& N.Ayrs.)||Temple, John M.|
|Elliot, Capt. Walter (Carshalton)||McLean, Neil (Inverness)||Thomas, Leslie (Canterbury)|
|Elliott, R. w, (Nwcastle-upon-Tyne,N.)||Macleod, Rt. Hn. lain (Enfield, w.)||Thorneycroft, Rt. Hon. Peter|
|Emmet, Hon. Mrs. Evelyn||Macpherson, Niall (Dumfries)||Thornton- Kemsley, Sir Colin|
|Errington, Sir Eric||Maddan, Martin||Tiley, Arthur (Bradford, W.)|
|Farey-Jones, F. W.||Maltland, Sir John||Tilney, John (Wavertree)|
|Farr, John||Manningham-Buller, Rt. Hn. Sir R.||Touche, Rt. Hon. Sir Gordon|
|Finlay, Graeme||Markham, Major Sir Frank||Turner, Colin|
|Fisher, Nigel||Marshall, Douglas||Turton, Rt. Hon. R. H.|
|Fraser, Ian (Plymouth, Sutton)||Marten, Neil||Tweedsmuir, Lady|
|Freeth, Denzil||Mathew, Robert (Honiton)||Vickers, Miss Joan|
|Galbralth, Hon. T. G. D.||Matthews, Gordon (Meriden)||Vosper, Rt. Hon. Dennis|
|Gammans, Lady||Maxwell-Hyslop, R. J.||Wakefield, Sir Wavell|
|Gardner, Edward||Maydon, Lt.-Cmdr. S. L. C.||Walker, Peter|
|Gibson-Watt, David||Mills, Stratton||Ward, Dame Irene|
|Gilmour, Sir John||Miscampbell, Norman||Wells, John (Maidstone)|
|Glyn, Dr. Alan (Clapham)||More, Jasper (Ludlow)||Williams, Dudley (Exeter)|
|Clyn, Sir Richard (Dorset, N.)||Morgan, William||Wills, Sir Gerald (Bridgwater)|
|Gower, Raymond||Morrison, John||Wise, A. R.|
|Grant, Rt. Hon. William||Mott-Radclyffe, Sir Charles||Wolrige-Gordon, Patrick|
|Grant-Ferris, Wg. Cdr. R.||Nicholls, Sir Harmar||Wood, Rt. Hon. Richard|
|Green, Alan||Nicholson, sir Godfrey||Woodhouse, C. M.|
|Hall, John (Wycombe)||Nugent, Rt. Hon. Sir Richard||Woollam, John|
|Harris, Frederic (Croydon N.W.)||Oakshott, Sir Hendrie||Worsley, Marcus|
|Harris, Reader (Heaton)||Orr, Capt. L. P. S.||Yates, William (The Wrekin)|
|Harrison, Col. Sir Harwood (Eye)||Orr-Ewing, C. Ian|
|Harvey, Sir Arthur Vere (Macclesf'd)||Osborne, Sir Cyril (Louth)||TELLERS FOR THE NOES:|
|Harvie Anderson, Miss||Page, Graham (Crosby)||Mr. Whitelaw and|
|Mr. Michael Hamilton.|