HC Deb 25 June 1963 vol 679 cc1155-296

Order for Consideration, as amended, read.

4.20 p.m.

Captain L. P. S. Orr (Down, South)


Mr. John Wells (Maidstone)


Mr. Speaker

In the circumstances, I am able to allow the hon. and gallant Member for Down, South (Captain Orr) to make a short statement in explanation of why he wishes to move the Motion on the Order Paper.

Captain Orr

I have on the Order Paper the Motion, That the Bill be recommitted to a Committee of the whole House.

I wished merely to say, Mr. Speaker, that, in view of the feeling in the House that there is a very great deal of business to be got through, I intended to content myself merely with saying that my object in putting the Motion on the Order Paper was to draw attention to the fact that it was not possible, in the course of this Finance Bill, to move that the Purchase Tax be removed from linen handkerchiefs, which is a matter of very great importance—

Mr. Speaker

At this point I must intervene and say that I must decline to propose the Question.

Motion made, and Question proposed, That the Bill be recommitted to a Committee of the whole House in respect of the Amendments to Clause 20, page 18, lines 32 and 38; Clause 21, page 20, lines 3 and 35; Clause 22, page 21, lines 9, 16, 26, 30 and 32; Clause 24, page 23, line 28; Clause 29, page 27, lines 24 and 37; Clause 41, page 42, line 39 and page 44, line 40; Clause 59, page 58, lines 16 and 24; Clause 67, page 64, line 18; Schedule 10, page 86, line 12; Schedule 11, page 95, line 29; and Schedule 12, page 98, line 42, standing on the Notice Paper in the name of the Chancellor of the Exchequer.—[Mr. Maudling.]

Mr. Douglas Houghton (Sowerby)

I am sorry that I must carry our protest a stage further. In introducing the complexities of Chapter 11 of the Bill the Government should have published a White Paper to assist the House in understanding the structure of the new Case VIII of Schedule D. Having failed to do that, surely they owed it to the House that when introducing numerous and complex Amendments at this stage, an explanatory statement should have accompanied the Amendments. The ill-equipment of the House to cope with the proposals of the Executive is absolutely ludicrous.

The House can move promptly and quickly when it knows what it is doing, but when it is presented with Amendments and new Clauses on the Notice Paper at short notice, it really is not fair to ask us to proceed with the business without full understanding of what we are being asked to do.

We on these benches lack the facilities of experts and civil servants. The Chancellor of the Exchequer has in his hand a brief prepared by the Inland Revenue, explaining exactly what everything is about. We on this side have no similar assistance in doing our work; nor, of course, have hon. Gentlemen on the back benches opposite.

Although I have made this protest time and time again, I will go on making it. The House of Commons cannot do its job properly in the manner in which we do our business at the present time. It is up to the Chancellor—a new Chancellor, who should understand the difficulties—to ensure that we are given the help which will enable us to co-operate with him in getting the Bill through.

I attach no blame to the Inland Revenue for much that is now incorporated in Amendments and new Clauses. It was given a tremendous job at short notice. The new Case VIII of Schedule D, covering, as the Chancellor said a few moments ago, the antiquities of Schedule A, obviously presents many difficulties. Many of the Amendments and new Clauses on the Notice Paper are due to the criticisms and helpful and constructive advice given by informed bodies outside the House as well as in it which will enable the Chancellor to make the Bill a better one. But opportunities for consultation are denied when long and complex Amendments and new Clauses are presented at the last moment. It would at least facilitate consultation if we could have explanations at the same time.

I have no doubt that some of the new Clauses are completely new drafts because the amendments to the old Clauses would be so tortuous that it would all be most difficult to follow. Therefore, apparently, the Chancellor has presented an entirely new version in order to help. But how is one to compare the old version with the new version unless greater assistance is given to us than just having the Amendments and new Clauses stuck on the Order Paper in this way?

When will this House be able to do its job properly? When will Ministers bring the procedure up to date and give hon. Members on both sides the opportunity to which we are entitled? It is an insult to the House to come and ask us to pass these Amendments and new Clauses with such little time for consideration. Is there to be no thought for the responsibilities which we have to discharge here? Is it just a rubber stamp which the Chancellor wants? Is it a kind of sausage machine in which he is going to pour Amendments and new Clauses and turn a handle and expect them to come out the other end?

It is impossible to keep one's temper when one is put in this position year after year. Year after year I make this plea, but Chancellors never do anything about it. They say that it is impossible, or awkward, or difficult. The Financial Secretary makes a speech on Second Reading which would be much more helpful if it were already written and circulated before he started his speech. Time and again we have this kind of treatment. What has the Chancellor to say? If we stay here all afternoon we will go on plugging at this in order to get some sense out of a Government long overdue for reform.

The Chancellor of the Exchequer (Mr. Reginald Maudling)

I make no complaint that the hon. Member for Sowerby (Mr. Houghton) should support the rights of the House in these matters. He said that he had been making this complaint year after year, which proves my point that this year I have been following precedent established over many years.

It may well be that our procedures can be improved. The hon. Gentleman has mentioned the idea of an explanatory memorandum. It would probably be difficult to have an explanatory memorandum about Amendments at the Report stage of a Bill. But for the future—it cannot be for the present—I am impressed by the point which he has made, that where one has a particularly complicated Measure ways and means might be found of providing an explanatory memorandum.

The hon. Gentleman is quite right in one point that he made. Schedule 4 has been put down afresh. I thought that it would be for the convenience of the House if it were done that way rather than by a whole series of Amendments.

I can only repeat what I said earlier, that we are following precedent in these matters. More Amendments than this year have been put down in the past. I have endeavoured to have all the Amendments tabled as early as possible, and the great bulk of them were. Every Amendment has been tabled as soon as it possibly could be. The House will find that a very large number of the Amendments are drafting, and that in almost every other case they are Amendments of substance to meet legitimate points made in Committee or the views of interested bodies.

I am sorry that the hon. Member used such vehemence. As he contended that I was following established practice, I can hardly cross swords with him.

4.30 p.m.

Mr. James Callaghan (Cardiff, South-East)

If the existing practice is inconsiderate, then the Chancellor is inconsiderate. The existing practice is inconsiderate. On the question of Schedule 4, for example, hon. Members will have noticed the celerity with which the Chancellor replied to our criticism. That is because we had the courtesy to give him notice that we intended to raise it. He was, therefore, able to come here armed with the figures about past years. I am very glad that he did, but, as I put to him privately on this question of Schedule 4, it is all very well—

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

Order. I am reluctant to interrupt the hon. Member, but am I not right in thinking that Schedule 4 is not, in fact, included in this recommittal Motion?

Mr. Callaghan

I do not know, Mr. Deputy-Speaker.

Mr. Deputy-Speaker

I believe it not to be included and I think, therefore, that the debate must be confined to what is included in the Motion.

Mr. Callaghan

That is all very well, Mr. Deputy-Speaker, but you did not stop the Chancellor. Is there one rule for the Chancellor and another for hon. Members of the Opposition? I should like to know.

Mr. Deputy-Speaker

The hon. Member is quite entitled to make the point. Certainly, the same rule applies to both sides of the House. I thought that the Chancellor was making a reply to a point that had been put. He did not go into detail, and I was trying to intervene before the hon. Member went into details which would, I believe, be out of order.

Mr. Callaghan

As a matter of fact, Mr. Deputy-Speaker, Schedule 4 was not mentioned until the Chancellor raised it. Am I to take it that the Chancellor has the right to put his case without our making some sort of reply?

Mr. Maudling

The hon. Member for Sowerby (Mr. Houghton) referred to Schedules. I was referring to those Schedules, and Schedule 4 is one of those to which the hon. Gentleman was referring.

Mr. Callaghan

A number of Schedules are in the recommittal Motion. Schedules 10, 11 and 12 are mentioned, and my hon. Friend the Member for Sowerby could have been referring to any one of them when he used the word "Schedules". The Chancellor of the Exchequer has specifically referred to Schedule 4. I should like to claim your indulgence, Mr. Deputy-Speaker, to put our observations on Schedule 4. If Schedule 4 is to be reprinted for the convenience of the House, it would be very helpful if, in addition, a mark could be made on the Order Paper showing us what part of it has been altered. If it could be done in italics or capital letters, or whatever it may be, I am sure that that would be of great assistance, and that every Member would appreciate it. To have to take three or four pages of a Schedule, try to compare them with the Bill, and read both at the same time is almost an impossible task.

Mr. Maudling

A lot of this is drafting.

Mr. Callaghan

The Chancellor says that a lot of this is drafting. This may well be true, but if it is drafting why have we to recommit the Bill on so many drafting points? The Chancellor has had over a year in which to prepare for this Bill. It is not as if this started last April. It started in April of the previous year. It seems to me to be intolerable if we are to have Amendments still going on to the Notice Paper and which we have to reconsider.

My hon. Friend the Member for Gloucester (Mr. Diamond), who is extremely vigilant, has pointed out to me that one of the Amendments which we are asked to recommit has been altered between last Monday and yesterday. It is not starred because the Amendment, I believe, is a very small one, but the Government have, in fact, put another three lines into the Amendment which they are proposing should be discussed now. Unless someone was watching this very vigilantly, no one would know that those extra three lines had been put in. There is no guidance to the House on these matters.

Obviously, it is the job of the Opposition to watch these things, but it is also the job of the Government to be considerate, and the Government have not been considerate on these matters. We need help on this, as hon. Members opposite may soon discover when they have this to do from the Opposition benches, if we are to do a reasonable job on the Finance Bill.

The Chancellor said that this recommittal was not exceptional. I agree that it is not. In 1960 there were about 120 Amendments, and there are now 96. In 1960, when the Government put down many of the Amendments, more than even now, their action provoked a very long debate and led to an apology from Lord Amory. I have not heard yet that the Chanceller feels that there is anything exceptional about this. Indeed, he defended himself by saying that he was following the usual practice. I do

not think that the usual practice is good enough.

Last year, the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) had down 32 Amendments and new Clauses; today, it is 99. The previous year there were 42 Amendments and new Clauses, and the Chancellor has had to go back to 1960, when an apology was made by the Government, and to 1947, the circumstances of which I do not recall at the moment, to find two examples of where there has been as much rewriting of the Bill as on this occasion. I do not accept that we should recommit the Bill on these matters in this way without a much more satisfactory explanation from the Chancellor.

We have not heard yet one single word of explanation as to why so many of these new Clauses, new Amendments, and Amendments which relate to Schedule A, should be delayed for so long, and for which the House has been given less than a week to consider them. If they are drafting points, the original drafting should have been done very much better. In so far as they meet the convenience of hon. Members generally, we can have no complaint, but the great majority of these, in the words of the Chancellor, are drafting Amendments, and that shows slipshod work on the part of the Government.

Question put:

The House divided: Ayes 225, Noes 190.

Division No. 144.] AYES [4.40 p.m.
Allason, James Bullus, Wing Commander Eric Farey-Jones F. W.
Arbuthnot, John Carr, Rt. Hon. Robert (Mitcham) Farr, John
Ashton, Sir Hubert Cary, Sir Robert Fell, Anthony
Awdry, Daniel (Chippenham) Channon, H. P. G. Finlay, Graeme
Balniel, Lord Chichester-Clark, R. Fletcher-Cooke, Charles
Barber, Anthony Cleaver, Leonard Forrest, George
Barlow, Sir John Cooke, Robert Fraser, Ian (Plymouth, Sutton)
Barter, John Cooper-Key, Sir Neill Freeth, Denzil
Batsford, Brian Cordeaux, Lt.-Col. J. K. Gammans, Lady
Baxter, Sir Beverley (Southgate) Corfield, F. V. Gilmour, Ian (Norfolk, Central)
Bell, Ronald Costain, A. P. Gilmour, Sir John (East Fife)
Bennett, Dr. Reginald (Gos & Fhm) Coulson, Michael Glover, Sir Douglas
Bevins, Rt. Hon. Reginald Craddock, Sir Beresford (Spelthorne) Glyn, Sir Richard (Dorset, N.)
Biffen, John Crosthwalte-Eyre,Col. Sir Oliver Godber, Rt. Hon. J. B.
Biggs-Davison, John Cunningham, Knox Goodhart, Philip
Birch, Rt. Hon. Nigel Currie, G. B. H. Goodhew, Victor
Bishop, F. P. Dalkeith, Earl of Gower, Raymond
Black, Sir Cyril d'Avigdor-Goldsmid, Sir Henry Grant-Ferris, R.
Box, Donald Digby, Simon Wingfield Green, Alan
Boyd-Carpenter, Rt. Hon. John Donaldson, Cmdr. C. E. M. Gresham Cooke, R.
Boyle, Rt. Hon. Sir Edward du Cann, Edward Grimond, Rt. Hon. J.
Braine, Bernard Duncan, Sir James Grosvenor, Lord Robert
Bromley Davenort,Lt.-Col.SirWalter Duthie, Sir William Gurden, Harold
Brooman-White, R. Elliot, Capt. Walter (Carshalton) Hamilton, Michael (Wellingborough)
Browne, Percy (Torrington) Emery, Peter Harris, Frederic (Croydon, N.W.)
Bryan, Paul Emmet, Hon. Mrs. Evelyn Harrison, Brian (Maldon)
Bullard, Denys Errington, Sir Eric Harrison, Col. Sir Harwood (Eye)
Harvey, Sir Arthur Vere (Macclesf'd Maddan, Martin Scott-Hopkins, James
Hastings, Stephen Maginnis, John E. Seymour, Leslie
Heald, Rt. Hon. Sir Lionel Marshall, Sir Douglas Sharples, Richard
Henderson, John (Cathcart) Marten, Neil Shaw, M.
Hendry, Forbes Mathew, Robert (Honiton) Skeet, T. H. H.
Hill, J. E. B. (S. Norfolk) Matthews, Cordon (Meriden) Smith, Dudley (Br'ntf'd & Chiswick)
Hirst, Geoffrey Maudling, Rt. Hon. Reginald Smithers, Peter
Hobson, Rt. Hon. Sir John Mawby, Ray Spearman, Sir Alexander
Holland, Philip Maxwell-Hyslop, R. J. Speir, Rupert
Hooson, H. E. Mills, Stratton Stanley, Hon. Richard
Hornby, R. P. Montgomery, Fergus Stevens, Geoffrey
Hornsby-Smith, Rt. Hon. Dame P. More, Jasper (Ludlow) Steward, Harold (Stockport, S.)
Howard, John (Southampton, Ted) Morrison, John Stodart, J. A.
Hughes Hallett, Vice-Admiral John Mott-Radclyffe, Sir Charles Stoddart-Scott, Col. Sir Malcolm
Hughes-Young, Michael Nabarro, Sir Gerald Storey, Sir Samuel
Hulbert, Sir Norman Noble, Rt. Hon. Michael Studholme, Sir Henry
James, David Nugent, Rt. Hon. Sir Richard Summers, Sir Spencer
Jenkins, Robert (Dulwich) Oakshott, Sir Hendrie Taylor, Sir Charles (Eastbourne)
Johnson, Dr. Donald (Carlisle) Orr, Capt. L. P. S. Taylor, Edwin (Bolton, E.)
Johnson, Eric (Blackley) Osborn, John (Hallam) Taylor, Frank (M'ch'st'r, Moss Side)
Johnson Smith, Geoffrey Osborne, Sir Cyril (Louth) Teeling, Sir William
Kerans, Cdr. J. S. Page, Graham (Crosby) Temple, John M.
Kerby, Capt. Henry Page, John (Harrow, West) Thatcher, Mrs. Margaret
Kerr, Sir Hamilton Pannell, Norman (Kirkdale) Thomas, Sir Leslie (Canterbury)
Kershaw, Anthony Peel, John Thompson, Sir Kenneth (Walton)
Kitson, Timothy Peyton, John Thorpe, Jeremy
Lancaster, Col. C. G. Pilkthorn, Sir Kenneth Tiley, Arthur (Bradford, W.)
Leavey, J. A. Pike, Miss Mervyn Tilney, John (Wavertree)
Leburn, Cilmour Pilkington, Sir Richard Touche, Rt. Hon. Sir Gordon
Legge-Bourke, Sir Harry Pitt, Dame Edith Turner, Colin
Lewis, Kenneth (Rutland) Pott, Percivall Tweedsmuir, Lady
Lilley, F. J. P. Powell, Rt. Hon. J. Enoch Vane, W. M. F.
Linstead, Sir Hugh Prior, J. M. L. Vickers, Miss Joan
Litchfield, Capt. John Proudfoot, Wilfred Vosper, Rt. Hon. Dennis
Lloyd, Rt. Hon. Selwyn (Wirral) Quennell, Miss J. M. Wade, Donald
Longbottom, Charles Ramsden, James Wakefield, Sir Wavell
Longden, Gilbert Rawlinson, Sir Peter Wall, Patrick
Loveys, Walter H. Redmayne, Rt. Hon. Martin Ward, Dame Irene
Lubbock, Eric Rees, Hugh (Swansea, W.) Wells, John (Maidstone)
Lucas, Sir Jocelyn Renton, Rt. Hon. David Williams, Dudley (Exeter)
Lucas-Tooth, Sir Hugh Ridley, Hon. Nicholas Williams, Paul (Sunderland, S.)
McAdden, Sir Stephen Ridsdale, Julian Wills, Sir Gerald (Bridgwater)
MacArthur, Ian Roberts, Sir Peter (Heeley) Wise, A. R.
McLaren, Martin Robertson, Sir D. (C'thn's & S'th'ld) Woodhouse, G. M.
Maclay, Rt. Hon. John Robinson, Rt. Hn. Sir R. (B'pool,S.) Woodnutt, Mark
Maclean,SirFitzroy(Bute&N.Ayrs) Ropner, Col. Sir Leonard Wooliam, John
MacLeod, Sir J. (Ross and Cromarty) Royle, Anthony (Richmond, Surrey)
McMaster, Stanley R. Russell, Ronald TELLERS FOR THE AYES:
Macpherson,Rt.Hn.Niall(Dumfries) Sandys, Rt. Hon. Duncan Mr. Frank Pearson and Mr. Pym.
Ainsley, William Davies, Ifor (Gower) Healey, Denis
Albu, Austen Davies, S. O. (Merthyr) Henderson,Rt.Hn. Arthur( Rwly Regis)
Allaun, Frank (Salford, E.) Deer, George Herbison, Miss Margaret
Allen, Scholefield (Crewe) Dempsey, James Hill, J. (Midlothian)
Awbery, Stan (Bristol, Central) Diamond, John Hilton, A. V.
Bacon, Miss Alice Dodds, Norman Holman, Percy
Barnett, Guy Driberg, Tom Houghton, Douglas
Bellenger, Rt. Hon. F. J. Duffy, A. E. P. Howell, Charles A. (Perry Barr)
Bence, Cyril Ede, Rt. Hon. C. Howell, Denis (Small Heath)
Bennett, J. (Glasgow, Bridgeton) Edelman, Maurice Hoy, James H.
Benson, Sir George Edwards, Rt. Hon. Ness (Caerphilly) Hughes, Cledwyn (Anglesey)
Blackburn, F. Edwards, Robert (Bilston) Hughes, Emrys (S. Ayrshire)
Bottomley, Rt. Hon. A. G. Evans, Albert Hughes, Hector (Aberdeen, N.)
Bowden, Rt. Hn. H. W. (Leics, S.W.) Fernyhough, E. Hunter, A. E.
Bowles, Frank Finch, Harold Hynd, H. (Accrington)
Boyden, James Fletcher, Eric Hynd, John (Attercliffe)
Braddock, Mrs. E. M. Foot, Dingle (Ipswich) Irvine, A. J. (Edge Hill)
Bradley, Tom Foot, Michael (Ebbw Vale) Irving, Sydney (Dartford)
Bray, Dr. Jeremy Forman, J. C. Janner, Sir Barnett
Brockway, A. Fenner Fraser, Thomas (Hamilton) Jay, Rt. Hon. Douglas
Brown, Rt. Hon. George (Belper) Galpern, Sir Myer Jenkins, Roy (Stechford)
Butler, Herbert (Hackney, C.) Ginsburg, David Johnson, Carol (Lewisham, S.)
Butler, Mrs. Joyce (Wood Green) Gordon Walker, Rt. Hon. P. C. Jones,Rt.Hn. A Creech(Wakefield)
Callaghan, James Gourlay, Harry Jones, Dan (Burnley)
Carmichael, Neil Griffiths, Rt. Hon. James (Llanelly) Jones, T. W. (Merioneth)
Castle, Mrs. Barbara Griffiths, W. (Exchange) Kelley, Richard
Collick, Percy Hale, Leslie (Oldham, W.) Kenyon, Clifford
Corbet, Mrs. Freda Hamilton, William (West Fife) Key, Rt. Hon. C. W.
Craddock, George (Bradford, S.) Hannan, William King, Dr. Horace
Dalyell, Tam Harper, Joseph Lee, Frederick (Newton)
Davies, G. Elfed (Rhondda, E.) Hart, Mrs. Judith Lee, Miss Jennie (Cannock)
Davies, Harold (Leek) Hayman, F. H. Lever, Harold (Cheetham)
Lewis, Arthur (West Ham, N.) Pannell, Charles (Leeds, W.) Stross,Dr.Barnett(Stoke-on-Trent,C.)
Lipton, Marcus Parkin, B. T. Swingler, Stephen
Loughlin, Charles Pavitt, Laurence Taverne, D.
McBride, N. Pearson, Arthur (Pontypridd) Taylor, Bernard (Mansfield)
McCann,,John Peart, Frederick Thomas, George (Cardiff, W.)
MacColl, James Prentice, R. E. Thomas, Iorwerth (Rhondda, W.)
Mclnnes, James Probert, Arthur Thompson, Dr. Alan (Dunfermline)
McKay, John (Wallsend) Pursey, Cmdr. Harry Thomson, G. M. (Dundee, E.)
Mackie, John (Enfield, East) Rankin, John Thornton, Ernest
MacMillan, Malcolm (Western Isles) Redhead, E. C. Tomney, Frank
MacPherson, Malcolm (Stirling) Reynolds, G. W. Warbey, William
Mallalieu, E. L. (Brigg) Rhodes, H. Watkins, Tudor
Manuel, Archie Roberts, Albert (Normanton) Weitzman, David
Mapp, Charles Roberts, Goronwy (Caernarvon) Wells, Percy (Faversham)
Mason, Roy Robertson, John (Paisley) White, Mrs. Eirene
Mayhem, Christopher Robinson, Kenneth (St. Pancras, N.) Whitlock, William
Mellish, R. J. Rodgers, W. T. (Stockton) Wigg, George
Mendelson, J. J. Ross, William Wilkins, W. A.
Millan, Bruce Royle, Charles (Salford, West) Willey, Frederick
Milne, Edward Shinwell, Rt. Hon. E. Williams, D. J. (Neath)
Mitchison, G. R. Short, Edward Williams, W. R. (Openshaw)
Monslow, Walter Silverman, Julius (Aston) Willis, E. G. (Edinburgh, E.)
Moody, A. S. Silverman, Sydney (Nelson) Wilson, Rt. Hon. Harold (Huyton)
Morris, John Skeffington, Arthur Winterbottom, R. E.
Moyle, Arthur Slater, Joseph (Sedgefield) Woof, Robert
Mulley, Frederick Small, William Wyatt, Woodrow
Neal, Harold Smith, Ellis (Stoke, S.) Yates, Victor (Ladywood)
Noel-Baker, Francis (Swindon) Sorensen, R. W. Zilliacus, K.
Noel-Baker,Rt.Hn.Philip(Derby,S.) Spriggs, Leslie
Oliver, G. H. Steele, Thomas TELLERS FOR THE NOES:
O'Malley, B. K. Stewart, Michael (Fulham) Mr. G. H. R. Rogers and
Oram, A. E. Stones, William Mr. Lawson.
Owen, Will Strachey, Rt. Hon. John

Bill immediately considered in Committee.



The Solicitor-General (Sir Peter Rawlinson)

I beg to move, in page 18, line 32, to leave out from "landlord" to "shall" in line 33.

The Chairman

I think that it would be convenient to take the following Amendment, in page 18, leave out lines 38 and 39.

The Solicitor-General

That would be convenient, Sir William.

The Amendment corrects a drafting mistake in Clause 20(2). Clause 20 deals with the transitional provisions relating to the taxation of rents and other income from real property, and the Amendment removes an unintended distinction between landlords directly assessed and landlords indirectly assessed.

Subsection (2) provides that maintenance claims cannot be made against Schedule A if the person who pays the tax is in fact recouped by deduction from ground rent. As drafted, subsection (2,b) does not apply to the position of intermediate landlords, landlords who

pay rent under long leases and who receive rents under short leases from which Schedule A has been deducted. In other words, there are two kinds of landlords, those who pay their Schedule A direct and those who pay indirectly by suffering a deduction from the rent.

This paragraph as drafted created an unintended distinction by the inclusion of the reference to Sections 109 and 110 of the Income Tax Act, 1952. If that reference is omitted by this and the consequential Amendment, the result will be that subsection (2,b) will apply to all landlords, as was clearly intended.

Mr. Houghton

Can we be told how this mistake was discovered? Was this on the representations of any outside body, or was it a domestic discovery? It is desirable, as we go along, to see how these things have come to light. What I believe to have gone wrong in a number of instances is the haste with which the new Case VIII and all the apparatus connected with it have had to be devised. I suspect that the right hon. and learned Member for Wirrall (Mr. Selwyn Lloyd) said to the Inland Revenue that he was proposing to exempt from Schedule A Tax all owner-occupiers and that the consequences of doing that should be immediately considered.

There were two alternatives. One was to exempt owner-occupiers from the operation of Schedule A more or less as it then stood, and the other was to create an entirely new tax for the profits on rents, feu duties and the rest, which is now called Case VIII of Schedule D. The basis of assessment is specially constructed by this new Case VIII of Schedule D.

A multitude of problems arising from it have had to be dealt with in the Bill. One of them is how maintenance claims should be dealt with during the transitional period, because it was impossible, so we were told, for the Inland Revenue to operate the new Case VIII of Schedule D earlier than the Income Tax year 1964–65. So we have the abolition of Schedule A, in so many words, in an earlier Clause and there is to be erected the whole of the transitional apparatus to take care of Income Tax on rents between the time of the abolition of Schedule A and the introduction of Case VIII. That is what we are dealing with in Clause 20—"Transitional provisions for Schedule A tax for 1963–64."

We have a double lot of complications, first, in the problems of the transitional arrangements, which are difficult enough in all conscience, and, secondly, the problems of the new Case itself when it comes into operation in the next Income Tax year. I am sure that the sympathies of the Committee are with the Chancellor of the Exchequer and all other Treasury Ministers in having to cope with this double set of problems, but it would be as well if, during the course of our discussions, we were told not only of the proposed change, but to what an Amendment is in response—whether it is a domestic discovery, inadvertence, or whether some representations have been made. We should then see what impact there has been on the later stages of the Bill of friendly advice and representations received from various quarters.

A lot of material has been circulated to hon. Members from various bodies urging changes of different kinds. To some extent the Chancellor may have incorporated those suggestions in Amendments and new Clauses which we have to consider, but he may have rejected some. It would facilitate matters if he could take us into his confidence and carry the Committee with him through the various Amendments and the new Clauses.

After the explanation of the Solicitor-General, these Amendments seem to be unexceptional. The provision seemed to be somewhat restrictive in its original form, but, without going back to the principal Act, the Income Tax Act, 1952, and all the changes which have taken place since, it is extraordinarily difficult to discover the effect of some of these Clauses. There is difficulty in seeing their precise significance in their original state and there is additional difficulty in seeing their precise significance in their amended state.

This is by way of a kind of preface to our debates—we have had two already and another will not come amiss and might save trouble later. In short, we should like the Treasury Bench to approach our proceedings on Report with a due sense of humility and understanding of our difficulties. I think that right hon. Gentlemen opposite will then find that the compassion of human kindness will come their way from these benches and that we shall get along in a very friendly atmosphere.

The Solicitor-General

I would never dare to debate with the hon. Member for Sowerby (Mr. Houghton) without a very high degree and large measure of humility. He is perfectly correct when he tells the Committee of the effect of Clause 20 and says that it introduces these transitional provisions, which are there because the reorganisation under the Bill will not be completed this year.

I can only tell the hon. Gentleman that it was clear that there was this drafting mistake, which was discovered and which was clearly not intended. I will assist the hon. Gentleman when I can about representations, or points made by him or other hon. Members. He will recollect that the Committee was clearly told that we were anxious to hear the views of hon. Members because of the complex nature of this legislation, but these Amendments are merely to correct a drafting mistake and the unintended consequence which flowed from it.

Amendment agreed to.

Further Amendment made: In page 18, leave out lines 38 and 39.—[The Solicitor-General.]

Clause, as amended, ordered to stand part of the Bill.


5.0 p.m.

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

I beg to move, in page 20, line 3, to leave out from "1963–64"to the end of line 24 and to insert: an allowance under section 101 of the Act of 1952 in respect of the unit of assessment for that year shall be computed as if that section required the cost of maintenance, repairs, insurance and management to be ascertained on the basis of the actual cost in the year instead of according to the average of the preceding five years, and as if subsection (2) of that section (by virtue of which 'maintenance' includes the replacement of farm buildings, etc.) were omitted". I think, Sir Robert, that it would be convenient if we were to consider also the Amendment in page 20, to leave out lines 35 to 39.

The Deputy-Chairman (Sir Robert Grimston)

If that be the wish of the Committee, so be it.

Mr. Barber

These two Amendments arise in the main from certain criticisms which were made by hon. Members on both sides when we considered Clause 21 during the Committee stage. Indeed, the point which was made by hon. Members on that occasion has also been made to us by certain learned societies, and my right hon. Friend has come to the conclusion that the criticisms were right and that we ought to deal with them in the Bill.

The provisions in question were those relating to the transition from the old five-year average basis to the new current expenditure basis of relief for maintenance costs. Under the provisions in the Bill as it stands, a landlord could go over from the five-year average basis to the current basis in any of the years 1963–64 to 1968–69 inclusive. Whichever year he chose for the change, some expenditure relating either to the five years before 1963–64 or to later years up to 1967–68 would be left out of account.

That was the point that was made when we considered the matter in Committee. Thus, either the landlord would not receive full relief on past expenditure which he had expected to write off under the five-year average system in 1963–64 and later years, or, if he chose to stick to the five-year average basis, exercising his option in that direction as long as possible, that is up to 1967–68, he would be likely to refrain from incurring further maintenance expenditure until after 1967–68 when he would get full relief for it on the current year basis. This latter point is important. Indeed, two of my hon. Friends came to see my right hon. Friend the Chief Secretary and myself about it and pointed out that the Bill as drafted would have this most unfortunate consequence that landlords would be deterred from incurring maintenance expenditure because of the way in which the Bill was drafted. The scheme which is substituted—and I must not on recommittal, go into details—by the new paragraph 11 of Fourth Schedule, as my right hon. Friend will explain later, resolves this dilemma. I hope that I might be permitted just to refer in passing to the Fourth Schedule because I think that it helps to understand the nature of these Amendments.

That Schedule now provides that the actual expenditure of the five years ending with 1963–64—which if Schedule A had remained would have formed the basis of a maintenance claim for 1964–65—shall be compared with the maintenance reliefs which are due far those years. As the Committee knows, under Schedule A repair relief is given for each year of ownership, in the amount either of the statutory repairs allowance, or of the average actual expenditure of the preceding five years, whichever is the greater.

If the landlord's aggregate repair reliefs on this basis for the five years ended with 1963–64 are not less than his aggregate actual repair expenditure in those years, he has no good claim to any further relief, because he has had full relief for those years for the expenditure incurred during those years. In such cases he will go straight on to the current year basis in 1964–65 and he will not be able to carry forward any repairs expenditure from earlier years.

I think that I can sum up the bulk of the first Amendment, and all the second Amendment, in this way: if a person's actual repairs expenditure in the five years before 1964–65—that is, the five years ending with this year of assessment—was more than the reliefs due to him for those years, then the excess is to be treated as expenditure incurred in 1964–65, and will qualify for relief in that year or, if it is appropriate, be carried forward to later years. This is in addition to the current expenditure incurred by the taxpayer concerend.

We have looked at this with great care, and I think that we have met all the criticisms made in Committee and outside. This being the case, I am sure that this will commend the Amendment to the Committee and I am grateful to hon. Members for raising the points they did.

There is one other matter which I should mention. Under Section 101(2) of the Income Tax Act, 1952, certain capital expenditure on farmhouses, farm buildings, cottages, fences, and so on, can be included in a maintenance claim. If it did not qualify for relief in this way, it would qualify under the provisions for capital allowances on agricultural land, which are contained in Section 314 of the 1952 Act. In that event they would be written off in the 10 years following that in which the expenditure was incurred, except that two-thirds of the expenditure on the farmhouse is treated under Section 314 as expenditure on a private residence and does not qualify for allowances under that Section.

The Royal Commission on the Taxation of Profits and Income recommended that Section 101(2) should be repealed and that Section 314, the second Section to which I referred, should be left to operate on this expenditure. The Bill carries out this recommendation. Briefly, the main purpose of these two Amendments is to provide that the actual repairs expenditure in the five years in question, even the five years before 1964–65 where it is more than the relief due to the taxpayer for those years, is to be treated formally as expenditure of the year 1964–65 and qualify for relief in that year or, in appropriate cases, to be carried forward.

Mr. Houghton

I thank the Financial Secretary for that explanation. I think that this is a better way of dealing with it. It is more businesslike and more straightforward. It substitutes a piece of arithmetic for an option, and I think it is a much tidier job altogether. Moreover, it seems to me to favour the taxpayer, and I think the Committee will recognise that there is a distinct concession in allowing the difference between actual expenditure in the years in question and the relief received in those years to be carried forward as expenditure incurred for the actual year 1964–65.

I think that we have to concede something to get intelligibility and a basis on which taxpayers can really deal with their tax affairs with some understanding. I therefore think that this way of dealing with this is preferable to that contained originally in Clause 1. Options are difficult because so few people are able to exercise them without advice, and one of our aims in dealing with all taxation is to reduce the need for a taxpayer to seek and pay for professional advice on matters which ought to be within their competence.

There are many matters on which it is proper that a taxpayer should seek advice, but not on these small things. I can see some glances being exchanged between hon. Gentlemen opposite and my hon. Friend the Member for Gloucester (Mr. Diamond) but I am sure that I have not said a word with which he will disagree. Professional men do not want to be troubled unnecessarily with the small beer or trivia of taxation matters. I think this will merely facilitate understanding of the change to be made.

Mr. Graham Page (Crosby)

I wish to thank my hon. Friend the Financial Secretary for introducing this Amendment. I know that the election procedure in the Bill was intended originally to bring fairness to this new system of taxation, but in fact it would not have worked fairly on the taxpayer. The Chancellor had collected the tax on money which had been expended on repairs which did not qualify for relief in past years, so this is in no way a tax bonus or concession. It is a pure repayment of tax collected on money which had not qualified in those years but which in fact radically does qualify for repayment of tax. I thank my hon. Friend, not only for his courtesy in listening to our arguments in Committee and later, but for introducing the right Amendment.

Amendment agreed to.

Further Amendment made: In page 20, leave out lines 35 to 39.—[Mr. Barber.]

Clause, as amended, ordered to stand part of the Bill.


The Solicitor-General

I beg to move, in page 21, line 9, to leave out from "lease" to the end of line 12 and to insert: exceeds what its then value would have been if the said terms did not impose that obligation on the tenant. Clause 22 concerns allowances to landlords on premiums for leases for periods not exceeding 50 years. If it had not been so provided in the Clause, and since the annual value is no longer taxed, there would be a strong incentive for landlords and tenants to enter into leases providing for the payment of a premium on which the landlord would not be taxed rather than on rent on which he would now be taxed. The principle of Clause 22 was that where a premium for a lease not exceeding 50 years exists the premium should be treated wholly or in part as rent to which the landlord becomes entitled when the lease is granted.

By subsection (2) of the Clause there is a provision that where there is an obligation to carryout work in a lease, namely, an obligation under the lease for the tenant to execute such work as, for example, to build a factory on the land, the benefit which is charged in the case of a lease of 50 years or less is an extra charge on the capitalised value, at the start of the lease, of the notional increase in rent. Representations were received from my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) and from various professional bodies that the basis of that charge, which was on a notional increase in rent, was not really sound. It was not the right way in principle to execute this tax.

The real measure of benefit is the increase, in the circumstances, in the value of the property due to the fact that there has been an obligation placed on the tenant to do certain work—I used the illustration to build a factory—which means that when the lease is completed and the time has expired the value of the land will be improved by the fact that there was a factory upon it.

It was therefore suggested that it was wrong to charge the lessor on the capitalised value of a notional increase in rent during the tenancy, when he cannot enjoy any improvement while the lease continues and while the tenant is in occupation. The true benefit, it was pointed out, consists in the fact that at the end there will be a new factory on that land. The value of the land, therefore, will have been enhanced and any increased rent the lessor might theoretically have got does not affect the price he could get when he is able to sell after the lease. This Amendment accepts the representations which were made by my hon. Friend that the original basis was not a sound basis. Therefore, we disregard any notional increase in rent and base the charge on the increase in the value of the reversion on the grant of the lease.

There may be difficult problems of valuation, but undoubtedly it is the right principle to impose a charge and to impose it at the beginning of the lease. After the lease has been granted, the lessor could have sold the reversion, or gone bankrupt, or gone abroad. Certainly it would be right, therefore, to impose the charge at the beginning of the lease. The principle contained in the Amendment, I suggest, is the right principle. The principle which was in subsection (2) was not the correct one. The principal measure of benefit should be the increase in the value of property. This Amendment seeks to base the charge on that correct principle. I should like to acknowledge with thanks the representations which were made by various professional bodies and by my hon. Friend the Member for Folkestone and Hythe. I commend to the Committee this new basis for the imposition of this charge.

5.15 p.m.

Mr. Graham Page

I appreciate that what my hon. and learned Friend has said is that this is a valuation of the improvements to the property, or the property as improved at the end of the lease, but still it is a collection of tax at the beginning of the lease. I shall give an example because my feeling is that this Amendment has not gone far enough to relieve the taxpayer of a very heavy burden.

Suppose it is part of the terms of the lease that the tenant shall put in a shop front. That is a very usual term of a lease of newly-built shop premises. The tenant may expend a very large sum in putting in that shop front. The landlord is then assessed on the increased value of the property by reason of the tenant having put in the shop front. That may be a large sum. Even though the landlord is assessed on the increased value of the property as at the end of the lease, yet that will be collected from the landlord in the first year of the lease when the landlord has not received one penny cash in respect of it. He is called upon to pay tax out of some notional sum, not out of cash which he has received.

I assure my hon. and learned Friend that I know of an actual instance of the owner of a property of this sort which, had this Bill been in operation at the time, would have forced that owner to sell in order to pay the tax. On how many occasions that will happen I do not know, but I can give an actual instance. It happened to be an elderly lady who owned the property. She was living on a pension and she would have had to sell in order to meet the tax. We should recognise that only when the benefit is realised in cash, either by a sale of the reversion or by the end of the lease, should the tax be leviable or, alternatively, the value could be spread over a period like the instalments premium, which appears later in Clause 22.

It will, I am sure, mean considerable hardship to some people who enter into these leases deliberately for the improvement of property, when the landlord perhaps has not the cash to make these improvements and therefore binds the tenant to do them. For example, it may involve putting in a shop front or putting offices in an empty floor, which is a frequent provision of a lease these days. The office building is built and the offices are let as a completely blank floor, with the tenant putting in the partitions—not just temporary partitions, but real improvements of the property.

The landlord will be charged in the first year of the lease on the whole value of that improvement, as it increases the value of the property which will fall back to him at the end of the lease. Surely the Government could have gone further in the Amendment in spreading the tax liability over the length of the lease, or saying that the tax will be leviable only when the value is realised in cash.

Mr. Houghton

This is one of the difficulties in not having an effective capita] gains tax. Clearly when property is let under the conditions described by the hon. Member for Crosby (Mr. Graham Page), the landlord appreciates the value of his asset by letting the property at a small or modest rental on condition that substantial improvements are carried out by the tenant. On the face of it, it seems hard that the enhanced value of the property should be converted into an annual income when in fact he has not received any cash consideration for the additional value. He has not received a cash consideration, and not until he realises the asset will he gain the value of the improved condition of the property under the conditions of the lease. It is possible that in those circumstances landlords may find it difficult to pay the tax on income which they have not received.

Under the Clause, the increased value of the asset is to be taken into account and reckoned as if it had been a premium. We can all see the difference between a premium which is received in cash, out of which tax can be paid, and a premium which is received in the form of the increased value of an asset which cannot be converted into cash until the property is sold.

What is the Committee to do with this problem? We could not exempt from some form of taxation this increase in resources which is ultimately represented in the higher value of the property. The hon. Member for Crosby said that the Chancellor should have gone further, and his suggestion appeared to be that there should be a longer spread, although, of course, that does not affect the principle of the matter. If the tax were spread it would assist payment, but the principle is that we are asking someone to pay tax out of money which he has not yet received.

If we had a capital gains tax which took care of the improved value of capital assets, clearly this would be a suitable subject for it, but it cannot be brought within the short-term speculative gains tax. It would not be a suitable subject for that tax, and in any case it would usually be outside the scope of that tax, because the period between the letting of the property and the realisation of the asset would be much longer than three years.

At first sight it is not easy to see what is the difference between the words in the Clause and the words which are to be substituted, but I will take the Solicitor-General's word for it that they do what he says they do. The words which are to be deleted are, falls short of what its then value would have been if the work had been carried out, but otherwise than at the expense of the tenant, and the rent were increased accordingly. If that clear and intelligible quotation from the Clause can sink in for a moment, we propose to replace it by the words, exceeds what its then value would have been if the said terms did not impose that obligation on the tenant. I suppose that there are two entirely different principles in those sets of words, but I would not say that I recognise them at first reading. But I will ignore the terms of the Amendment and confine myself to the principle of the matter. Unless there is any better solution than that which is now proposed, we shall have to let this go as being the best to be done with a difficult problem. I suppose that it would be better if landlords improved their own property and then charged an economic rent for it, instead of letting property which they want to be substantially improved to a tenant for a modest rent in return for the tenant's own expenditure on the property.

Mr. Graham Page

The landlord is not always the person who has the money, particularly when a landlord of small means is letting to a multiple shop or one of these markets with a lot of money and willing to make a beautiful shop front. The landlord is charged with the tax on that.

Mr. Houghton

I know that there are many varieties of circumstances here, but it looks as if this may be an encouragement to landlords, where possible, to carry out the improvements to their own property, charge an economic rent and pay tax on the revenue which they receive. The Income Tax will then be more equittable in their case than if they choose the alternative of requiring the tenant to carry out the improvements to the property. I can offer no preferable alternative to the Amendment, beyond that suggested by the hon. Member for Crosby that there should be a longer spread.

The Solicitor-General

As both the hon. Member for Sowerby (Mr. Houghton) and my hon. Friend the Member for Crosby (Mr. Graham Page) have pointed out, there is a practical difficulty. When a person enters into a lease as landlord and that lease entails in its provision an advantage coming to him, that is an asset. I know that he will be taxed on it from the beginning—for example, in the case of the shop window which my hon. Friend mentioned. Nevertheless, at some time he will get the shop with the shop window. There are practical reasons why not to impose the tax at the start would be very difficult. The lessor could die or go bankrupt or go abroad or sell the reversion, and all this would make the ultimate collection of the outstanding balance, or whatever it may be, very difficult indeed.

The answer to my hon. Friend is that due allowance would have to be given to the postponement of the landlord's benefit if he is not getting the benefit until the end of the lease, and that will be made in the computation of liability. The value to the landlord of a works at the end of the lease will be discounted, and further relief in that taxable amount, whatever the amount would be, will be the writing down by 2 per cent, for each year of the lease after the first, in accordance with Clause 22(1). If the landlord is an individual and if he comes into that category—not in the case mentioned by my hon. Friend—there would also be the top slicing relief referred to in Clause 25 and Schedule 5.

There is this practical difficulty. I submit that it is right that the true measure of benefit should be the enhanced value and that with the safeguards as to discounting, as to being written down by 2 per cent., and as to the top slicing relief, if the circumstances are such, it is certainly right that this charge should be imposed at the start. I commend the Amendment to the Committee.

5.30 p.m.

Mr. A. P. Costain (Folkestone and Hythe)

Sir Robert, I failed to catch your eye a few moments ago before my hon. and learned Friend spoke. I should like to thank him for the care and attention he has given to the practical point I made on this Clause. I do not pretend to be an expert on Finance Bills. We have had a good deal of discussion today on this matter. This is an example of a back bencher being able to make a practical suggestion. I do not think that I have any interest to declare. I have considered the matter, but I cannot think of one. We put forward practical suggestions as to why we thought the Bill would not work in practice. I thank my hon. and learned Friend for the care and attention he has devoted to this problem and for drafting a Clause which is beyond my comprehension. In view of my hon. and learned Friend's explanation, I am sure that it will work.

Amendment agreed to.

The Solicitor-General

I beg to move, in page 21, line 16, at the end to insert: (3) Where, under the terms subject to which a lease is granted, a sum becomes payable by the tenant in lieu of the whole or a part of the rent for any period, or as consideration for the surrender of the lease, the lease shall be deemed for the purposes of this section to have required the payment of a premium to the landlord (in addition to any other premium) of the amount of, that sum; but—

  1. (a) in computing tax chargeable by virtue of this subsection in respect of a sum payable in lieu of rent, the duration of the lease shall be treated as not including any period other than that in relation to which the sum is payable;
  2. (b) notwithstanding anything in subsection (1) of this section, rent treated as arising by virtue of this subsection shall be deemed to become due when the sum in question becomes payable by the tenant.
It may be for the convenience of the Committee if we now discuss the Amendments in lines 26, 30 and 32, and those in Clause 29, page 27, lines 24 and 37. They would be consequential if the Committee approved the Amendment in page 21, line 16.

The Deputy-Chairman (Sir Robert Grimston)

Yes, if it is convenient to the Committee.

The Solicitor-General

I am much obliged. The Amendment in page 21, line 16, deals with two methods of tax avoidance. The other Amendments are consequential on it. Clause 22(1), as I said on the last Amendment, imposes a tax liability where a premium is required under a lease. There are certain ways of avoiding such a liability. The Clause would not apply, as the provision is at present drafted, to a lease at a rack rent with an option for the tenant at any time to pay a premium and thereafter a lower or even a peppercorn rent. In other words, a tenant would be able to take premises at a rack rent, which is a rent at the full value, with no premium but with an option in the lease to pay a premium at a certain time and thereafter a lower or peppercorn rent. If the lease were so drawn, the tax liability under Clause 22 would not bite. This would be one form of tax avoidance. The Amendment in line 16 deals with this by providing a new subsection which applies Clause 22 in the case I have mentioned, where there is a rack rent, an option, a premium, and a lower rent.

The Amendment in line 16 also deals with a second method of avoidance. That is the case where, for instance, a landlord lets to a tenant on a 99-year lease at £10 a year for the first year and at £10,000 a year thereafter, with an option that the tenant can surrender at the end of the first year on payment of a premium of £500. Again, if a lease were drawn in that form, which would be a perfectly conceivable form of lease, the £500 would not attract the tax which Clause 22 sets out to attract. Therefore, I commend the Amendment in page 21, line 16, and the subsequent Amendments to the Committee as preventing two methods of tax avoidance.

Mr. Houghton

This seems very clear and desirable and, indeed, very necessary. Why was it not thought of before? It seems that the Clause was gaping with loopholes which are now to be closed, we hope. Perhaps it is unkind to chide the hon. and learned Gentleman. The Amendment does not cope with something new. There is no new discovery in the devices which are employed in the terms of leases for one purpose or another. This seems to be a very necessary safeguard.

I presume that it would also cover the type of lease which provides for a substantial lump sum payment at the conclusion of the lease. Any lump sum payment, any payment in consideration of the determination or surrender of a lease, would presumably he caught by the Clause. Perhaps, we could have an assurance on that. Would the words— or as consideration for the surrender of the lease"— cover a payment made on determination of a lease? I am aware of some agreements which provide for that.

What the Clause sets out to do is to bring within tax assessment receipts of different kinds which in ordinary circumstances would be rent. These are substitutes for rent. Can we be assured that capital payments, penalties, or other sums paid on consideration of certain things happening, will all be brought within the net? If not, there are probably some more loopholes.

My hon. Friend the Member for Ashfield (Mr. Warbey) asked earlier this afternoon what will happen to the afterthoughts of today's debate. I can give him the answer: they will be in next year's Finance Bill. Happily, there will still be time to get them in next year's Finance Rill, because Case VIII will be in operation for the first time for the year 1964–65. The determination of liability will take place at the conclusion of that Income Tax year. Therefore, there will still be time to iron out any fresh difficulties or rough edges which appear in the Bill now and to catch any additional loopholes which may be seen.

There is no doubt that all the brains will get to work on this. As soon as the Finance Bill appears in its final form, which we are due to see on Friday of this week—the printers have to be very busy between now and Friday getting the Bill into its final form—all the brains will get to work to see what can be done to get round the provisions of the new Case VIII. We want to make the Bill as watertight as possible, and I should welcome an assurance that under the Clause—which concerns the treatment of premiums for the purpose of tax under Case VIII—all devices which have been or may be introduced with a view to getting tax-free proceeds from property will be stopped.

Everybody today is trying to get tax free income. Anything that can be called a capital gain and not income is worth a great deal more than income. That is why—albeit unsatisfactory—it becomes necessary to introduce a short-term speculative gains tax. Many people are trying to find some way of getting something which will not be taxed, a benefit in kind, the occupation of a house for which rent is not paid, a bonus, a tribute, a testimonial—something that can be disguised as a non-taxable receipt. No one wants to pay straightforward tax if there is a crooked alternative to it. By "crooked" I do not mean dishonest but simply a way round it. There is a great deal of sympathy with those who are clever enough to do it.

Can we be sure, now that second thoughts have gone into this matter, that we are sewing up the holes that might otherwise be there?

Mr. Graham Page

The hon. Member for Sowerby (Mr. Houghton) said that he wanted to be assured that the Amendment caught every payment from a tenant to a landlord. I want to be sure that it does not catch one common form of payment. A very usual type of lease is that under which the tenant does not have an obligation to carry out repairs. Such a lease contains words to the effect that at the end of the lease instead of delivering the premises up in good repair the tenant shall pay a certain sum of money in lieu of paying for the repairs himself.

In such a case the tenant knows what he is in for at the end of the lease. He is not presented with a schedule of dilapidations and he can pay over £100 or whatever the sum may be to the landlord and say, "You do the repairs." I do not think that that is caught by the Clause because the sort of payment caught by it is only the one paid in lieu of the whole or part of the rent or as a consideration of the surrender of the lease. Suppose it is convenient to the landlord and tenant that the sort of lease I have described comes to an end before the term set out in the document and that, as part of the terms of surrender, the tenant agrees to pay a sum in lieu of the dilapidations. Surely that is a sum of money properly paid for repairs and should not be caught for the purposes of tax. It would be unfair to tax such a sum in the hands of a landlord, and I hope that the matter will be looked at again.

Mr. Houghton

I should like to carry that point raised by the hon. Member for Crosby (Mr. Graham Page) a little further. I drew attention to the fact that the Amendment refers to "surrender of the lease" and I am not sure whether "surrender" means the termination of the lease or some prior occurrence. The type of lease which the hon. Member for Crosby mentioned is commonplace. It is common for a lease to provide for certain obligations on the part of the tenant at the conclusion of the lease. Frequently there is an inducement to the tenant to pay money instead of carrying out redecorations and repairs.

5.45 p.m.

The landlord welcomes the opportunity of having the money instead of having the premises handed over in a proper state of redecoration and repair, because he is then going to let the premises to another tenant on condition that the new tenant carries out the necessary repairs and redecorations to the satisfaction of the landlord before he is allowed to have possession. The landlord has gained a payment at the termination of one lease, which is supposed to be in lieu of the obligations of the tenant to repair and redecorate, but which the landlord does not convert into repairs and redecorations but puts in his pocket and then lets the accommodation to another tenant on condition that he carries out the very redecorations and repairs which the preceding tenant was supposed to have done.

I am not with the hon. Member for Crosby in thinking that that sort of transaction should get off scot-free. In those circumstances it is a money payment, gratuitously given, which is not expended in repairs and redecorations because that obligation is passed on to the succeeding occupant. I will leave the matter and resume my seat so that the Solicitor-General can throw a glittering light on the subject.

The Solicitor-General

It may glitter but it may not be light. When I saw the Amendment I thought that all the instincts of the hon. Member for Sowerby (Mr. Houghton) as a gamekeeper would cause him to commend it and I looked forward to receiving from him his congratulations. I got some congratulations from him for closing two holes, but the hon. Member now asks for a great deal more.

It would be a very rash man who would stand at this Dispatch Box and give an assurance that all loopholes have been sewn up. The hon. Member for Sowerby, with his great experience of these matters, must appreciate that. Experience has shown that that would be a very dangerous hostage to give to fortune. We have sought to try to deal with those which arise out of this new system of taxation of income from real property; and the two which I hope I made clear to the Committee are quite complex in the way they arise.

I can only say to my hon. Friend the Member for Crosby (Mr. Graham Page) that if it is a capital payment it would not be taxed. If it is in the form of income it would be taxed, but there would be relief for repairs and maintenance for dilapidation as if it were a payment in respect of or in lieu thereof. In other words, if it were a payment in respect of doing repairs and that money was paid to the landlord who had to use it to effect those repairs, he would be able to set the payment of such expenses as he might have to pay against the money he received from his tenant.

The Amendment deals principally with those two matters of the option to pay a premium instead of a rack rent and also the large sum payable after the second year on the option to surrender. It deals with those because they are matters which could easily be a great breach in the principle here. It could be a source of avoidance.

As to any other matters, when they arise—as probably they can when the brains, as the hon. Member for Sowerby said, are turned upon this matter—it will be the duty of the Administration to stop those holes. We hope and believe that at present we have shown foresight and we have gone as far as we think we can towards preventing any avoidance under the Clause.

Amendment agreed to.

Further Amendments made: In page 21, line 26, leave out from "and" to second "the" in line 28 and insert: notwithstanding anything in subsection (1) of this section rent treated as arising by virtue of this subsection shall be deemed to become due when".

In line 30, leave out "or (3)"and insert "(3) or (4)".

In line 32, leave out "the said subsection (1) or (3)"and insert "that subsection".

Clause, as amended, ordered to stand part of the Bill.


Mr. Barber

I beg to move, in page 23, line 28, to leave out "following the grant of the lease" and to insert: after the lease begins to run": Provided that this subsection shall not apply if the lease is granted, and begins to run, within one month after the sale". This Amendment to subsection (3) merely carries out an undertaking that I gave in Committee on 16th May. The point was raised by several hon. Members but, in particular, by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), whom I am pleased to see in his place.

The Clause is intended to prevent possible avoidance of tax by dressing up what is, in substance, a lease at a premium as a sale of a property with right of reconveyance or lease-back later. The Clause as originally drafted, and has pointed out by my hon. Friend, applied in principle to a sale followed by an immediate lease-back, which, nowadays, is quite a common commercial transaction. It cannot be said that a sale that is followed by an immediate lease-back amounts in substance to a lease by vendor to purchaser in return for disguised premium, because it is of the essence of the transaction that the purchaser does not get possession of the property at all. This Amendment cuts out cases where the lease is granted but begins to run within one month of the sale.

I should also explain that the Amendment also corrects a flaw, as I think hon. Members will have seen, in the concluding six words of the Clause as it stands. I am grateful to hon. Members for bringing these matters to our notice, and I commend the Amendment to the Committee.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.


Amendments made: In page 27, line 24, leave out "or (3)"and insert "(3) or (4)".

In line 37, leave out "section 22(1) or 22(3)"and insert: subsection (1), (3) or (4) of section 22",—[The Solicitor-General]

Clause, as amended, ordered to stand part of the Bill.


Mr. Barber

I beg to move, in page 42, line 39, after the first "of" to insert: subsections (2) to (6) of'. This Amendment, and the Amendment in page 44, line 40, merely correct flaws of drafting. I might add that the later Amendment in Schedule 12, page 98, line 42, column 3, at end insert: in section 23, subsections (2) to (6) is consequential on the Amendment I have moved.

Amendment agreed to.

Further Amendment made: In page 44, line 40, at end insert: and this provision shall apply in relation to balancing charges as well as in relation to initial and annual allowances".—[Mr. Barber.]

Clause, as amended, ordered to stand part of the Bill.

Clause 59.—(PAYMENT OF DUTY.)

The Economic Secretary to the Treasury (Mr. Edward du Cann)

I beg to move, in page 58, line 16, to leave out from "chargeable" to "on" in line 21, and to insert: on issue in the case of the following instruments that is to say—

  1. (a) any instrument issued in Great Britain; and
  2. (b) any instrument issued by or on behalf of a company or body of persons corporate or unincorporate formed or established in Great Britain, not being a foreign loan security;
and for the purposes of this subsection 'foreign loan security' means a security issued outside the United Kingdom in respect of a loan which is expressed in a currency other than sterling and is neither offered for subscription in the United Kingdom nor offered for subscription with a view to an offer for sale in the United Kingdom of securities in respect of the loan. (2) Duty under the said heading in respect of any instrument not chargeable under subsection (1) above shall be chargeable". It might be for the convenience of the Committee if with this Amendment we discussed the Amendment in page 58, line 24, which is consequential on this one.

Under subsection (1) of this Clause, bearer instruments axe chargeable to Stamp Duty on issue if issued in Great Britain, whether by a British or an overseas concern, or, if issued outside Great Britain, by a British concern. In other cases, the instruments will become chargeable on transfer in Great Britain. These Amendments exempt from liability to duty on issue—subject to certain conditions to which I shall refer in a moment—bearer instruments issued abroad by British companies. My hon. Friend the Member for Nottingham, South (Mr. W. Clark)—who cannot be in his place at the moment, as he was good enough to explain to us—raised this whole question during the Committee stage, when I said that we would most certainly look into the matter.

The point is that it is suggested that a liability to Stamp Duty of 3 per cent. payable on the issue of securities might well constitute some deterrent to such issues abroad, and it is certainly the Government's policy, in suitable cases, to encourage such issues abroad. There must, obviously, be some relief to the balance of payments if, for example, companies engaging in operations abroad are enabled to raise at least some of their capital abroad. Hence our putting down these Amendments.

The Amendment lays down three precise conditions. The first condition is that the securities must be issued outside the United Kingdom in respect of a loan expressed in a currency other than sterling. The second is that the loan must not be offered for subscription in the United Kingdom, and the third is that the loan must not be offered for subscription abroad with a view to offer for sale of the securities in the United Kingdom. Those conditions are largely designed, not only to accord with the kind of policy I have tried briefly to describe, but also for the protection of the Revenue.

To sum up, the Amendments are designed to facilitate issues, in appro- priate and approved cases, of bearer securities by British companies abroad. The point was brought to our attention by my hon. Friend the Member for Nottingham, South, and I must tell the hon. Member for Sowerby (Mr. Houghton) that it has been reinforced by a number of representations that we have received from merchant banking houses which are very much concerned, and in such a distinguished fashion, with this kind of work. We believe that there are marginal, but nevertheless important, balance of payment reasons for accepting the proposals and suggestions made to us.

Mr. G. R. Mitchison (Kettering)

Will the Economic Secretary be good enough to go a little further? I understand the intention of the Amendment; it is that in respect of what is here called the "foreign loan security"—that is to say, a bearer instrument of the kind there denned—the duty should be payable …on transfer in Great Britain of the stock constituted by or transferable by means of the instrument. Those are the words left in at the end of subsection (1), immediately before the proviso.

What is the practical method by which this duty will be collected? We are considering a bearer instrument and, presumably, no duty having been levied on the issue of the instrument, it arrives in some form or another in this country, and for some purpose. It is then transferred, perhaps on a sale, or perhaps not. What is the exact intention, and how will the Revenue get at the transfer in Great Britain upon which the duty becomes payable? Can the hon. Gentleman tell us what machinery is proposed for that purpose?

6.0 p.m.

Mr. du Cann

There is no difficulty about it because, although the rate of duty operating at present may be different from the rate of duty which will operate in the future, the system nevertheless has endured for a long time and, as I understand, the machinery position is that if there should be a transfer of any sort the documents concerned must be presented to the Inland Revenue for stamping.

The hon. and learned Member will appreciate that these instruments have to be lodged with an authorised depository. These depositories are very closely defined. They are people of some repute. I am thinking of stockbrokers, bankers, solicitors and the rest. As the hon. and learned Member knows, the definition has been widened in recent years as a matter of practical expediency, and I think a very good thing too. It will be immediately apparent to any one of these depositories, assuming custody of one of these securities, if it has not been properly stamped. There might perhaps have been difficulty in one rather limited regard. As the hon. and learned Member will know, the method of assessment has been changed in certain cases. In the past, shares of no par value have escaped duty altogether, for duty has been leviable on nominal value and shares of no par value have no nominal value. We are not only changing the rate but in future the duty will be leviable in that case on market value.

It is not quite an exact analogy that I now give off the cuff, but it might be asked how in certain cases it would be clear to whoever was handling these transactions that a new rate of duty should be paid. It might be asked how the persons concerned would be certain that the proper rate was being paid. The answer, which has an important bearing on the point made by the hon. and learned Member, is that if an instrument has been properly stamped at the old rates, despite the fact that the Bill proposes new rates of taxation, which may be greater than what went before—and I gave an extreme example but there are others where there would be an increase—this would still mean that the old stamping would be valid and the new stamping would not now be required.

I am grateful to the hon. and learned Member for bringing up the point. He has also said by inference that these instruments are in much more common use than they were years ago and perhaps also—and I would agree with him if that is his point—that these instruments may well come into even more common use, not necessarily because of developments taking place in the United Kingdom but because of developments overseas. We therefore want to be certain that there will be no difficulty and no evasion of duty payments. We are satisfied with the system and we are satisfied that there will be no difficulty or trouble in this respect.

Mr. Mitchison

Perhaps I might adopt the phrase of the Solicitor-General and say that that was glittering, but it was not light; and the reason why it was not light was that it was all about shares, and the Amendment has nothing whatever to do with shares. It is purely a question of loans and of instruments issued to denote a loan.

I understand that what happens is that such-and-such a company borrows a large sum, for example, in Swiss francs, and instruments are issued to indicate the amounts which have been borrowed in the usual way, and that means bearer instruments. No question arises that these instruments appear somehow in this country. Do I understand the position to be that ifa banker in Switzerland, for example, sends an instrument of this sort to someone in London for consideration, or it may be for no consideration at all, that that person is thereupon, by virtue of existing exchange control legislation, bound to hand this at once to an authorised depository and therefore there is supposed to be a duty on the authorised depository, having received a foreign loan security which is unstamped to do something? To do what? So far, there has been no transfer. What is the duty of the authorised depositor? If he has a duty, why is it not put in the Amendment? What, in practice, is supposed to be the operation?

Let me take another instance. Let us suppose that a bank constituted in England or in Switzerland has a branch in the other country and that the instrument is sent from the head office to the branch, or vice-versa, in the course of banking transactions. The bank in question is an authorised depository. So far, I suppose, there has been no transfer. This is merely an arrangement within the banking company.

What is the next step if the bank sits on it and holds it and receives the interest from it in Swiss francs collected through the ordinary banking channels? Is the bank ever bound to have it stamped? Can it hold it indefinitely until the loan becomes redeemable? Is that the intention? If so, is not that rather derogatory of the interests of the Revenue and, in effect, a means of avoiding Stamp Duty? I do not mean intentionally avoiding duty, but escaping it. Can the Economic Secretary deal with this?

I do not understand why, given the obligations which the hon. Gentleman mentions, there is nothing about it in the Bill. Where is it to be found, and what happens if an authorised depository is naughty? We well know that even the most distinguished people get naughty occasionally. What if there is a transfer in the ordinary course of business, but not by way of sale, or even a transfer from one legal entity to another by way of passage in the post, for example?

Mr. du Cann

I must apologise to the hon. and learned Member and the Committee if I was not as lucid as I would wish to be. The hon. and learned Member was entirely right to upbraid me over my loose use of terminology. These terms come naturally and I did it simply to make the matter clear. Apparently, I did not succeed, and I am sorry. There is a Clause, which I must not discuss in detail, which deals with the payment of duty, but perhaps I can assist the hon. and learned Member, without referring in detail to that, by speaking again somewhat generally.

I suppose that there would be no objection in the case of a foreign owner of a British bearer security issued overseas, which had not been dutiable in the United Kingdom, depositing it in the United Kingdom for safe custody. I imagine that this could happen quite easily, and perhaps that is a case which the hon. and learned Member had in mind. In those circumstances, there seems to be no reason why the instrument should be dutiable, because it is dutiable only if it is issued or transferred in the United Kingdom. If it is left here for safe custody it would be unreasonable to expect that duty should be levied upon it. I hope that that deals with that case.

In the case of transfer, which is a matter which occurs at present or might occur in the future both with ordinary bearer instruments and with the rather narrower type of bearer instruments we are considering in this Amendment, what would happen would be that the transferor or his agent would have the duty to take the instrument to the Stamp Office with a declaration of market value. This is a regular practice. That value, obviously, would be checked by the Revenue, and on its being established that it was correctly declared, the instrument would be stamped with ad valorem Stamp Duty at the appropriate rate as designated in the Bill. There are certain penalty provisions in the Bill and our Stamp Duty legislation in general which are the sanction for this to be done.

I repeat that, in all the experience I have had, which I do not suggest is by any means exhaustive, I have not come across a case where duty has not been paid when it should have been. I am not saying that no cases have existed. All I say is that they are extraordinarily rare. I mention that simply in an effort to satisfy the hon. and learned Gentleman, as I should wish to do, that, in our opinion, it is extraordinarily unlikely that there will be any difficulty of revenue evasion in a matter of this sort.

It is true, as I said earlier, that we are introducing the Amendment to meet and satisfy what we believe to be a need; but, of course, this is a new and developing field. I tried to indicate earlier that many of these developments are at the option of overseas companies. Although this may not particularly apply to what we have in mind here, it is probably right for me to say in general, nevertheless, that we shall watch the operation of this Measure with a degree of care and, should we find any difficulty, we shall not hesitate to propose Amendments to the Committee in another year.

That would be any Government's plain duty. I say frankly that we do not see that possibility at present. Nevertheless, I am trying to make assurance doubly sure by saying to the hon. and learned Gentleman that, if there were difficulty, we should be only too ready to take it into account. We are at present satisfied that the situation is in order and is customarily a happy and satisfactory one.

Amendment agreed to.

Further Amendment made: In page 58, line 24 leave out "paragraph (b) above" and insert "this subsection".—[Mr. du Cann.]

Clause, as amended, ordered to stand part of the Bill.


Mr. Barber

I beg to move, in page 64, line 18, to leave out "it shall also" and to insert: the rent, together with any expenses incurred by the association in the period, shall". This Amendment corrects an oversight relating to the charge to Profits Tax of a housing association. All it does is to bring the Profits Tax treatment into line with the Income Tax treatment, which treatment the Committee has already approved.

Mr. Mitchison

What are the expenses contemplated in the Amendment?

Mr. Barber

Clause 67 makes changes in the Profits Tax law which are consequential on the Income Tax provisions in Part II of the Bill. The Amendment simply prevents a housing association which has been, but which has ceased to be, an approved co-operative housing association under Clause 43, for example, because it has changed its constitution or for some other reason, from getting relief against profits chargeable to Profits Tax for the period after it ceases to qualify for exemption by carrying forward expenses incurred in the period when its rents were exempt from Profits Tax.

As I said, all we are doing here is bringing the Profits Tax provisions into line with the Income Tax provisions. Perhaps I may refer the hon. and learned Gentleman to Clause 43(3) which makes the corresponding provision regarding Income Tax.

Amendment agreed to.

6.15 p.m.

Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. Mitchison

I have one question only to ask about the Clause, and it relates to subsection (4), which we have just been discussing. The subsection begins: Where rent to which a housing association was entitled for any period is by virtue of a claim made under section 42 of this Act to be disregarded for income tax purposes it shall also be disregarded for purposes of the profits tax, but if the claim has effect by reason of a direction… I have looked carefully at Clause 42, which is called "Supplemental provisions as to Chapter III". It does not appear to provide for the claim in question. I notice, however, that Clause 43 does so provide. I wonder whether, by some chance in the hustle and hurry which obviously attended the preparation of the Bill and all the Amendments relating to it, someone put the wrong number in.

Mr. Barber

The hon. and learned Gentleman is quite right. In line 17, on page 64, where the words "section 42" appear, it should read "Section 43". I am happy to tell the hon. and learned Gentleman that it was not by design that I did not draw this to the attention of the Committee. Late on Sunday afternoon, I was myself somewhat puzzled by the same point. I made inquiries and I was told that this is a printer's error. It will automatically be put right. I am grateful to the hon. and learned Gentleman for drawing attention to it.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.


Amendment made: In page 86, line 12, at end insert: (2) This paragraph shall have effect in relation to tax for the year 1963–64.—[Mr. Barber.]

Schedule, as amended, agreed to.


Amendment made: In page 95, line 29, after "in" insert: sections 153 and 162 of and".—[Mr. Barber.]

Schedule, as amended, agreed to.

Schedule 12.—(GENERAL REPEALS.)

Amendment made: In page 98, line 42, column 3, at end insert: in section 23, subsections (2) to (6)".—[Mr. Barber.]

Schedule, as amended, agreed to.

Bill, reported, with Amendments; as amended (in Committee and on recommittal), considered.


  1. (1) Where a transfer in blank relating to registered stock of any description has been delivered, pursuant to a sale of that stock, to or to the order of the purchaser or any person acting on his behalf, any person who in Great Britain parts with possession of that transfer, or who removes it or causes or permits it to be removed from Great Britain before it has been duly completed shall be liable to a fine not exceeding the aggregate of £50 and an amount equal to twice the stamp duty chargeable in respect of that transfer.
  2. (2) For the purposes of this section "transfer in blank" means a transfer in which the name of the transferee has not been inserted, and a transfer shall be treated as duly completed if, and only if, the name of the transferee is inserted therein, being the name of—
    1. (a) the purchaser of the stock under the sale;
    2. (b) a person entitled to a charge upon the stock for money lent to that purchaser;
    3. (c) a nominee holding as a bare trustee for that purchaser or for any such person as is mentioned in paragraph (b) above; or
    4. (d) a person acting as the agent of that purchaser for the purposes of the sale.
  3. (3) The foregoing provisions of this section shall apply in relation to a transfer delivered by way of or pursuant to a voluntary disposition inter vivos, being a transfer to which section 74 of the Finance (1909–10) Act 1910 applies, as they apply in relation to a transfer delivered pursuant to a sale, and as if for any reference to the purchaser there were substituted a reference to the person (in this section referred to as the donee) to whom the disposition is made.
  4. (4) In this section references to stock shall be construed in accordance with subsection (4) of section 58 of this Act, and "transfer" includes any instrument used for transferring stock; but nothing in this section applies—
    1. (a) to any instrument which is chargeable with duty under paragraph (3) of the heading "Bearer Instrument" set out in subsection (1) of that section and is duly stamped; or
    2. (b) to any instrument which is exempt from duty by virtue of exemption 3 in that heading, or would be so exempt if it were otherwise chargeable under that heading.
  5. (5) References in this section to the purchaser or donee of any stock include references to any person to whom the rights of the purchaser or donee are transmitted by operation of law; and in relation to a transfer chargeable with duty in accordance with section 58(4) or (5) of the Stamp Act 1891 (transfers to sub-purchasers) references in this section to the purchaser and a sale shall be construed as references to the sub-purchaser and a sub-sale.
  6. (6) This section shall come into force on such date as the Treasury may by order made 1196 by Statutory instrument direct.—[Mr. du Cann.]

Brought up, and read the First time.

Mr. du Cann

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

If I may so describe it, I have been pregnant with this new Clause for so long that I am delighted that the moment of delivery should at last have arrived. My mother always tells me that she was very glad to be able to see her feet after I appeared. I am very glad to be able to discuss this new Clause, which we have been inhibited from discussing for so long.

The Clause prohibits the circulation of blank transfers, so defined in subsection (2), that is to say, transfers which do not show the name of the transferee, where they have been used for the purposes of a sale or a gift, subsection (3) referring particularly to the latter point. The Clause is mainly definition and penalty, the latter being found in subsection (1).

It springs from the Stock Transfer Bill, with which right hon. and hon. Members will be familiar. This Bill provides a new procedure for transferring registered stocks and shares. It has passed through all its stages in the House of Lords and the Report and Third Reading stages were taken in this House last Friday, as the hon. and learned Member for Kettering, in particular, will remember. It has passed through all its stages in the House of Commons and in another place at a fairly rapid pace. It is now awaiting Royal Assent. I hope that it is reasonable to assume from that that it is a Measure which commands general support. Its object is to facilitate stock transfers, which, as we all know, are complicated matters, and to avoid delay and labour.

None the less, there is a need for protection of the Revenue, whose interests must be considered very carefully when new legislation of this sort is on the stocks and is passing through Parliament. During the Report stage, and in Standing Committee A on 29th March, the hon. Member for Gloucester (Mr. Diamond) drew our attention to the obvious need for Revenue protection. He said that blank transfers were perfectly legitimately employed sometimes when one has to go and see one's bank manager.

I understand that that is true. My own knowledge is entirely academic, but the longer I stay a Minister the more opportunity I shall have, perhaps, of getting practical experience of the point with which the hon. Member is no doubt professionally only too familiar—and professionally only, I do not doubt. But plainly, with a new system, it is entirely right to examine the necessity for Revenue protection, and this is what we have done.

My noble Friend Lord Denham, speaking in another place, where the Stock Transfer Bill was first introduced, said that the Government would certainly consider introducing an Amendment to take account of the position, and during the Committee stage I gave a categorical assurance to the same effect. Perhaps I can say en passant that I was asked particularly by the hon. Member for Gloucester to do what I could to get that Amendment down at an early stage. I hope that he feels in this case, at any rate, that there has been full and appropriate time for consideration.

To summarise the matter, about which we are anxious, a buyer of shares may arrange to refrain from having the name of the transferee put into the transfer. Shares may then be transferred from Mr. A. to Mr. B. and from Mr. B. to Mr C. with only the names of, say, Mr. A. and Mr. C. appearing, a single transfer thus being used to give effect to two sales. This would be entirely wrong, for on both transactions full ad valorem transfer duty must be paid. The new Clause has been tabled to stop the possibility of that kind of situation arising.

We had some discussion in Committee as to whether it was appropriate to endeavour to deal with this matter of Revenue protection during the passage of this Finance Bill or during the passage of the Stock Transfer Bill. We came to the conclusion that the former course was preferable largely because of the accidental fact that there is a number of changes in the Stamp Duty provisions in this Bill. We thought that if the House thought it appropriate to put the protection point into the Bill it would certainly obviate a large number of cross references. It is simply a matter of convenience, and, on reading the proposed new Clause, hon. Members may think that that course was justified.

I should draw attention to one further point in connection with subsection (6) of the new Clause, which states that the section shall come into force on such date as the Treasury may by order made by statutory instrument direct. The reason for a flexible provision of that sort is this. It is not yet certain when the Stock Transfer Bill will come into force, even though it is now awaiting Royal Assent. Its main provisions will come into operation only on a date yet to be determined by the Treasury.

I have made it clear, I think, that there is obviously a good deal of work for professional people and others to engage in by way of preparation to equip themselves to deal with the new system. I know that much work in that respect has already been done. Indeed, I said something to that effect last Friday.

We envisage that that order may be made in respect of the Stock Transfer Bill three months after it receives the Royal Assent, which would take us to October or November. It is the Treasury's intention, at the same time, to table an order to give effect to the provisions of this Clause so as to make the two items precisely and exactly coincident.

As I have said, I have been holding on to this new Clause for a considerable time and it is a great relief to get rid of it. I hope that it will have the approval and approbation of the House. It fulfils an undertaking which Lord Denham and I have given very clearly to both Houses and, as I say, it is something which is required by the passage of the Stock Transfer Bill into law. The Amendment to Clause 71, page 67, line 10, after "Act", to insert (except section (Prohibition of circulation of blank transfers))"— is consequential on this new Clause and no doubt we shall discuss it during our proceedings on Report, but I thought that the House would wish to have the explanation which I have given. I hope that the new Clause will find favour with the House.

Mr. Mitchison

We on this side of the House approach this new Clause with sympathy, partly because it is an anti-evasion Clause and partly because the labours of the Economic Secretary have been so unduly protracted. As he has already indicated, there was almost a premature birth on Friday. However, "all's well that ends well."

I wish to make only one point in substance on the new Clause. The Stock Transfer Bill is no doubt a very useful Measure, but when it was being discussed on Friday there was considerable doubt about how far legislation was required to give effect to the changes in it. The conclusion was that there were one or two obsolete Acts which might have presented difficulties, but there was no repealing Clause in the Bill and certainly it did not make any sweeping change which, as far as I could see, could not have been made in the majority of cases. In that respect it resembled the Truck Acts in making the law more well known rather than altering it. The hon. Member for Crosby (Mr. Graham Page) knows how much I, for my part, appreciate his labours in educating us in these matters. They have been very useful practically.

The question therefore is: why has there been no provision of this kind before? I should have thought that blank transfers did circulate, not necessarily in the form indicated by the Economic Secretary—that is, pledging something or another to a bank manager—but is there anything to prevent a blank transfer from being punted about for a bit? Why was this Clause made dependent on this new legislation, or is it simply a case of the new legislation having called the attention of the Treasury and the authorities concerned to the possibility of the circulation of blank transfers and a consequent avoidance of duty or, to use an ambiguous phrase, escape of duty?

I have always been puzzled by one matter. I understand that if a man buys a stock on the Stock Exchange and becomes, as it were, the beneficial owner of that stock for a period and then resells the stock which is resold again to somebody else, all within the period of one account, no Stamp Duty is payable. If that is the position, surely the Revenue is suffering a good deal. Or are there transfers?

6.30 p.m.

I have not experience of this myself, but the Treasury must know all about it and no doubt the Treasury Ministers can tell us about it. What is the posi- tion concerning people who get options to buy or sell shares? Is Stamp Duty payable until the option is exercised and a transfer between one person and another results from its exercise? I have an uneasy feeling—and this Clause calls my attention to it—that this resembles the case of the gendarmes who, in Offenbach's play, used to come stamping on to the tune of "toujours trop tard".

I wonder whether, in this case, the Treasury has not stopped one possible loophole and left quite a number of others open. I ask these questions because the heading of the Clause is: Prohibition of circulation of blank transfers. It no doubt prohibits them. It does so with reference to blank transfers generally as well as to the kind of transfer that was indicated or made possible, as the case may be, by the Stock Transfer Bill.

What is the position? Have there been blank transfers before? Have they circulated, and why so late? Did the Government require to have their attention called to all this by the industrious and inestimable hon. Member for Crosby? Did they need that to notice that the blank transfers were circulating? Or is it simply that blank transfers of the kind intended by the Stock Transfer Bill are hit at by the Clause? It does not read so. It reads as if there were a general prohibition of something which might well occur quite independent of the Stock Transfer Bill.

I hope that I have made that broad question clear. It has a number of ramifications that I should like the Government to answer. As the Economic Secretary has indicated, this is a Clause which, to quote his own words on Friday, would have the effect of preventing the circulation of blank transfers with consequent loss of Stamp Duty revenue. Therefore, we are glad to see it, whether it is too late or not.

Mr. Graham Page

Having regard to the opening words of my hon. Friend the Economic Secretary concerning his pregnancy with the Clause, I am very glad that it is he who was put in this interesting condition rather than myself over the Stock Transfer Bill. Having had the conduct of that Bill, I would have hated it to be obstructed by a complicated Clause of this nature. As the hon. and learned Member for Kettering (Mr. Mitchison) has said, the Stock Transfer Bill does not do anything to authorise the use of blank transfers which was not already authorised. Nor do I think that it will increase the practice of using blank transfers. Indeed, they have been used for some time for certain purposes, but not extensively.

I should like to know from my hon. Friend the Economic Secretary how the Clause will affect three of the quite normal practices which are at present in use. The first is that which occurs when transfers are delivered conditionally. This, briefly, is what happens in the case of a take-over, when those conducting the take-over collect in transfers from existing shareholders on the condition that those transfers will be used if sufficient of them are gathered together.

It may be that those who collect the transfers then pass them on, perhaps, to a finance house to finance the take-over. I wonder whether, in passing from the people who collect them together to start with to some other concern, they are caught in the process. I am not saying whether they should be, but it is a practice which is adopted and I wonder how the Clause will affect it.

It may well affect it, because the Clause comes into operation after the delivery of the transfer to a purchaser. The words in the first two lines of the new Clause are that the transfer in blank has been delivered…to or to the order of the purchaser Once it has been delivered to a potential purchaser, if he does anything with the transfer by passing it on to anybody else, I understand that it will be caught by the Clause.

The second sort of usual use of blank transfers is for qualifying shares by directors. Frequently, when the articles of a company require a director to hold a qualifying share, that share is transferred to him and he gives a blank transfer to the person who has transferred it to him so that if at any time he retires from the directorship, the transfer can be used to transfer his share to a new director taking his place, who will also require a qualifying share. When that transfer is used to provide the qualification for the new director, will it be caught by the Clause? I would think that perhaps it is, and, perhaps, it should be.

Thirdly, there is the case when blank transfers are used for ordinary mortgage purposes. The usual practice, perhaps, is that there is another document in addition to the blank transfer. There may be a mortgage of the shares to the shareholder's bank or to some other lender. Together with that charge or mortgage, a blank transfer is deposited and also the certificate for the shares. At what stage would that transfer be caught by the Clause? These are quite normal occasions when blank transfers are used. If we could have some assistance about how those normal practices are affected by the Clause, it would be helpful in understanding the Clause.

The point raised by the hon. and learned Member for Kettering about sub-purchasers has, surely, been well recognised in the law for a long time, not only in the sub-sales of shares, but in the sub-sales of property. If one as a purchaser disposes of one's interest before taking a conveyance or completing the purchase, the Stamp Duty is not paid on each sub-purchase; it is paid on the greatest amount for consideration in the transaction. That, surely, is a well-recognised process and ought not to be caught by the Clause. I do not think that it will be. The Clause recognises that sub-sales before completion of the transaction are perfectly permissible without catching Stamp Duty on each occasion. If my hon. Friend the Economic Secretary can assist us on these practical points it would be a great help.

Mr. du Cann

If I have the leave of the House, I shall be very ready to attempt to reply to the questions which I have been asked.

First, the hon. and learned Member for Kettering (Mr. Mitchison) asked two questions, and there was also a third which he asked me on Friday which I should like to answer.

The hon. and learned Gentleman's first question related to blank transfers. It is true that there is at present no legal objection to their use, and certainly they are used. The hon. Member for Gloucester (Mr. Diamond) gave one instance during the Committee stage of the Stock Transfer Bill, and my hon. Friend the Member for Crosby (Mr. Graham Page) has given two other illustrations during his speech.

The difference between the position that exists at present and the one that may exist in due course if the Stock Transfer Bill becomes an Act is that, in general, it is true to say that the use of blank transfers at present is rare. It is not customary. The ordinary habit is for the transferor's and transferee's names to be inserted in the transfer almost immediately—together, one might say—and it is the exception rather than the rule for transfers to be circulating in blank—for good and sensible reasons, I agree, but none the less rare. When we have the new Act, as it will shortly be, it will be much more usual—one might almost say that it will be the usual thing—for transfers to circulate in blank.

In other words, to put the matter at its lowest and worst, the possibility of evasion of duty might perhaps be described as dangled permanently in front of the noses of those concerned in stock transactions. So the hon. and learned Gentleman is right to call attention to the fact that blank transfers are in use occasionally today—but it is only occasionally. In the future they will be very much in use. For that reason, it seemed to us appropriate to close this gap, or, at any rate, to recognise the facts of the situation and deal with them through legislation. That is why we attach special importance to the matter. I hope that that answers the hon. and learned Gentleman's first question.

The second question related to transfers during the period of a single account. The hon. and learned Gentleman is right to say that transfers during the period of a single account would attract only one amount of duty. He has, of course, to bear in mind the kind of people who are primarily engaged in operations of this sort. They are stock exchange jobbers, It has been thought right ever since the Stamp Act of 1891—I refer particularly to Section 58(4) and (5)—to recognise this as being a special and unusual position. Stamp duty is payable in the case of more than one transfer during an account only on the final transaction, and we would not have wished to withdraw this relief as we regard it as being peculiar to these circumstances.

I should like, in courtesy, to reply to the question the hon. and learned Gentleman asked me on Friday. He made the point that if Mr. A were to purchase, say, stock to the value of £500 on the Stock Exchange in a single transaction, that would be charged duty at the rate of 2 per cent.—an easy calculation. If, on the other hand, whatever the reason for it might be, £500 worth of stock was purchased in several individual transactions, one would have a position arising because of the operation of the scale which currently involves rates substantially over 2 per cent. in certain circumstances—the worst is £25 1s., where the rate is almost 4 per cent.—where the total of the duties in each of the individual transactions expressed as a percentage duty in relation to the total consideration of £500 might be at a rate of more than 2 per cent.

The hon. and learned Gentleman suggested that somebody would lose here. He said that if transactions are aggregated there is a difference between the appropriate rate of duty of 2 per cent. on £500 and whatever other percentage it might be on £500. He asked what happened. He asked whether the differences disappeared into thin air. There was a certain amount of discussion between the hon. and learned Gentleman and the hon. Member for Oldham, West (Mr. Hale). The contributions of the hon. Member for Oldham, West to our financial debates are rare, yet none the less very welcome indeed.

6.45 p.m.

I did not wish to answer the hon. and learned Gentleman in detail at that time, because I wanted to make certain that I had the facts correctly in my mind. Perhaps I might now explain what happens. It is true that it may be the case if one wishes to buy a certain amount of stock aggregating, say, £500, more particularly in the case of large amounts, that one cannot achieve that in one single transaction. It is true that it may be achieved in a number of individual transactions. It is true that, whether under the old system or under the new, transfers for those transactions would have to be prepared—ordinary transfers in the present case and brokers transfers in the new case. It is true that if any of the individual transactions involve small amounts of stock, duty at above the rate of 2per cent. average might come finally to be paid, though, as the hon. and learned Member for Kettering pointed out, in Schedule 9 we are now introducing new steps which will mitigate the kind of difficulties that are emphasised by the present scale.

But whether we have the old system or the new precisely the same thing will occur. Individual transfers—orthodox transfers in the present case and brokers transfers in the new case—will be prepared and will have to be lodged with the stamp office for adjudication and stamping, and it may well be that the total Stamp Duty payable will be more than 1 per cent. on £500, or whatever the figure might be in any example that comes to mind. The individual purchaser will be charged that duty in his contract note at the appropriate rate, and the difference between the duty actually paid, which will be a larger sum, and the amount paid by the purchaser and shown in his contract note, is made up by the market on settlement. In other words, the jobbers pay it. That is the short answer to the hon. and learned Gentleman's question. In other words, the Revenue gets its full whack—at the time, because the transfers are stamped at the moment they are lodged.

I turn to the questions asked by the hon. Member for Crosby. Perhaps I may say how delighted we all are to see him in his place so that his contribution to the Stock Transfer Bill may once again be recorded and emphasised. I spent some time praising my hon. Friend last Friday. I am sure he would not wish us to do it all over again, but it is none the less meant and felt.

My hon. Friend asked first about takeovers—for that is what it broadly came down to. With his wealth of legal experience, he will know that it is an extraordinarily complicated matter. As I understood his question, he is anxious to ensure that the present systems which are administratively sensible and satisfactory for dealing with matters of this sort shall not be interfered with in any way. I will not go into the matter in detail. Suffice it to say that this is a matter into which we looked a little time ago.

We have noted, in particular, the things said to us—this bears on a point made by the hon. Member for Sowerby (Mr. Houghton)—by the Law Society on the subject. We are confident that there need be no difficulty whatsoever but that any difficulties which might on the surface appear to arise can be happily dealt with administratively. I do not say that that will be so in every case, for certain rules will have to be conformed to of the sort which are commonplace today, but, in general, it is true to say that administratively one is readily able to deal with the matter.

I turn to my hon. Friend's second question, relating to mortgages. This bears on a point raised by the hon. Member for Gloucester. I am advised that in the case mentioned by my hon. Friend there would be no difficulty and the position which he described would not be caught under the terms of the Clause. I should certainly like to look into the matter more closely and will readily do so if my hon. Friend will be good enough to correspond with me. It is always difficult to hear what an hon. Member is saying and, first, make certain that one has understood him correctly, and, secondly, think out all the possible consequences of what he may be suggesting. However, my advice at the moment is that that position is not caught.

I am also advised, with the same qualifications, that directors' qualifying shares are similarly not caught by this Clause. I am aware of the situation to which my hon. Friend refers. If I may be permitted a personal observation, I have never thought much of the situation where a director of a company cannot be bothered to purchase the qualifying shares of the company of which he is a director, but that is purely a personal view. I hope that I have managed to answer clearly, if not glitteringly, the questions which I was asked by the hon. and learned Gentleman and by my hon. Friend the Member for Crosby.

Question put and agreed to.

Clause read a Second time and added to the Bill.


Where, under any enactment relating to the giving of financial assistance for the provision, maintenance or improvement of housing accommodation or other residential accommodation, a payment is made to a person by way of grant or other contribution towards expenses incurred or to be incurred by that or any other person. the payment shall not be treated as a receipt in computing profits or gains for any tax purposes:

Provided that the foregoing provisions shall not apply to a payment in so far as it is made in respect of an expense giving rise to a deduction in computing profits or gains for any income tax purposes.—[Mr. Barber.]

Brought up, and read the First time.

Mr. Barber

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

Mr. Speaker

May I consult the wishes of the House? It did occur to me that we might discuss with this Clause the new Clause No. 18—Local authorities: income tax relief on credit balance of Housing Revenue Account. Clearly, the area of overlap between the two is not marked, and I must take the wishes of the Opposition and the House in the matter.

Mr. Mitchison

We should find it convenient, Mr. Speaker, and we hope that, if need be, we shall be allowed a Division later when we come to new Clause No. 18 and it is moved formally, as it would be in those circumstances.

Mr. Speaker

We can discuss it now and I will call the new Clause, if desired, when we reach it.

Mr. Barber

That would be convenient from our point of view, Mr. Speaker, and I hope, also, that I may refer to Amendment No. 121, in page 64, line 25 [Clause 67], at end insert: (5) An amount which by virtue of section (Exemption from tax on housing grants) of this Act is to be excluded in computing profits or gains for any income tax purposes shall also be excluded in computing profits for purposes of the profits tax. It is a minor Amendment and more or less consequential on this new Clause.

I can put before the House the reasons for this Clause very simply and briefly. As the House knows, in general annual grants payable by the Exchequer or by a local authority to assist the provision of housing have hitherto not been chargeable to Income Tax. It has been pointed out that under the provisions of the Bill as drafted housing grants will become chargeable under Case VIII of Schedule D. Of course, this was never the intention of my right hon. Friend or, I am sure, of any hon. Member, and accord- ingly this new Clause restores the position.

That, I think, is all that I need say, though I shall be willing, with the leave of the House, at a later stage to deal with any points that hon. Members may wish to raise. I think—and, here again, I am willing to comply with whatever the wishes of the Opposition may be—that it might also be as well, although we are discussing the new Clause No. 18 with this, if I were to defer my observations on it until the hon. and learned Member for Kettering (Mr. Mitchison) has spoken.

Mr. Mitchison

May I deal, first, with what the hon. Gentleman said in support of the Government's new Clause. It seems to me to go a long way beyond what he stated. He spoke of the Clause as though it were only about grants to local authorities. It seems to me to go far beyond that, because it refers to a payment made by way of a grant towards expenses incurred by the grantee or any other person.

Accordingly, if one takes the case of an improvement grant, it would cover, on the one hand, the Exchequer contribution towards such a grant and, on the other, the grant made by the local authority itself to the individual improver, if I may use the word. Therefore, it relates not merely to local authorities, but to anyone. While I see the point of it, it is, in fact, a far broader Clause than was indicated.

Moreover, I am a little puzzled by the statement that grants have never hitherto been taxed. I have here a document, which I believe has no statutory force, but which represents the practice about the taxation of local authorities. It is called, according to its cover, Income Tax Rules. It is sometimes referred to as the agreed rules. They are exceedingly complicated. I hope that I shall have the agreement of the hon. Gentleman if I put them in this way: the practice has been that against grants there could be a set-off of expenses incurred—that is, in Rule 55(d)—and after that there was the question of a set-off as between the grants, on the one hand, and the expenditure of the local authority by way of interest, on the other, the point being that a local authority deducts tax from the interest it pays and that unless that deduction is made out of taxed revenue it becomes a liability of the local authority. There is, therefore, a set-off between the grants, on the one hand, and the tax deduction, on the other.

Then there is a further statement in sub paragraph (e) of the Rules—this is still a question of practice, of course which appears to be general—that there then may be a separate liability to assessment which is, as I understand it, still in respect of the grant under Sections 170 and 171 of the 1952 Act. Therefore, I respectfully suggest to the hon. Gentleman—respectfully, because this is a matter of extreme complication on which I should not like to venture any opinion without hearing what the experts have to say about it—that this is a matter by no means as simple as the hon. Gentleman stated, that the new Clause is of much wider scope, and, also, that it is not quite true to say that grants that were not previously taxed now become taxable.

I conclude on this because on the principle I appreciate the intention of the new Clause and that it appears to be commendable, but I should like to know what the money effect of it will be. I do not know whether the Treasury has worked that out. I hope that it has, because the Treasury has a habit of coming here and waiting to be asked before telling us, and the hon. Gentleman did not tell us, when he was moving the new Clause, what will be its effect on local authorities, coupled with the abolition of Schedule A. I have indicated, I hope, that on a matter of this kind we are strongly disposed on this side of the House to welcome relief for local authorities.

I now turn to the new Clause No. 18, which we are also discussing, which proposes to give local authorities considerable and substantial relief. It is called "Local Authorities: Income Tax relief on credit balance of Housing Revenue Account". As hon. Members will be well aware, the housing revenue account is the main housing account of local authorities and feeds the housing repairs account. There also may be a housing equalisation account, but that is an optional account and both the other two are obligatory under the Housing (Financial Provisions) Act, 1958.

The housing revenue account consists, very broadly—that is not a suffi- cient description of it, perhaps—of the income of the local authority from grants and rents, and so on, on the one hand, and its expenses not only in looking after the houses but also in paying interest on loans, on the other. That account may, at the end, like all other accounts, show a balance one way or the other, and the balance between the credits and the debits was taken in a recent Housing Act as the basis for deciding, on certain assumptions, whether a higher or lower rate of grant should be given to local authorities.

7.0 p.m.

It therefore has its precedent in legislation as an indication of the housing financial position of a local authority. But there are, of course, many cases in which there is no credit balance at all, and there may well, indeed, be a debit balance. We recognise that. There are cases where a local authority shows a credit balance, where the revenue received from rents and the like exceeds the expenditure on the houses. As I understand the position, that has hitherto been taxable.

This is exceedingly complicated, because it goes in with the other balances, one way or the other, of the local authorities. The intention of this Clause, therefore, is, in effect, to provide for relief to local authorities in respect of such balances, but to do it not by saying that such a balance is not taxable, but by providing a countervailing relief to the amount of the balance. That does simplify matters when one is dealing with such complicated arrangements as necessarily exist between the local authorities and the Revenue.

Subsection (1) of the Clause provides for relief in that form if there is an excess of the kind I have indicated. It says: …the local authority shall be entitled to a deduction from the amount of any income tax with which they are chargeable equal to tax at the standard rate on that excess. That clearly follows the usual formula for relief in these cases. The two remaining subsections provide for cases which really arise under the Housing Act, 1961—we are, after all, dealing with taxation matters and revenue has to be treated reasonably—and it would be possible to increase the amount under the foregoing provisions by making excessive transfers to the housing repairs account.

The same point arose under the Housing Act, 1961, where power as given to the Minister of Housing and Local Government to disallow such excessive transfers. We think that that could reasonably apply here, and then, obviously, if there were a housing equalisation account—which is simply an account for the purpose of keeping a level run of grant, as it were, in the housing revenue account—that could be disregarded.

I notice, by the way, that by what I hope is a printer's error—it may be my own, of course—the word "revenue" has been omitted from the first line of subsection (3). However, I have explained the intention of the Clause, and in this very complicated field it seems the simplest way of doing something. Now I proceed to consider what it is what we want to do and why we want to do it.

What we intend by this Clause is to provide relief from taxation in respect of council housing which, on this side of the House at any rate we regard as a public service. We think it wrong in principle that a public service of this kind should attract taxation, as it appears to do at present, and that it is all the more wrong when housing subsidies—about which I need not go into detail—are given to local authorities. After all, if the Government tax the result, they are giving with one hand and taking away with the other, and that is a procedure always to be avoided, although it is dear to the Treasury, on occasions when it is giving something, to be able to withdraw a little from the gift.

However that may be, I think that when one goes to the principle of this it is a sound argument that the Government should not give a subsidy in this case with one hand and take away profits by taxation with the other. It may be said that the effect of this would simply be to induce local authorities to pile up an even higher balance in the housing revenue accounts, and that they would do so by charging higher rents, and that rents are quite high enough already.

There is, however, another possibility. That is that local authorities which found themselves in difficulties over their housing revenue accounts might find that, as they were no longer taxed, they were a trifle more prosperous and able to reduce rather than increase the rents.

Be that as it may, I pass to the broad considerations. It is quite clear that the local authorities at present stand sorely in need of every support that can be given to them, in relation to their housing activities, by a tax relief. We say that for two reasons. The first is that they have to borrow the money in order to build houses. Though I do not wish to go into the matter at great length, I think that it must be common knowledge in the House that the housing and other activities of local authorities have been sorely restricted in recent years by high rates of interest. The days when they could borrow at 2½ or 3 per cent. under a Labour Government now seem to them like some remote past, but also, I hope, like some immediate future. Certainly, they stand in sore need of financial relief in relation to their housing.

The proof of the pudding in these matters is rather in the eating, and whether the reason is financial or not—probably it is not wholly that, but certainly it is in part—the local authorities in recent years have found their housing activities sorely restricted; and when we are told that a given number of houses is produced every year it becomes interesting to look at the proportion of the total at present and see how little is actually provided by the local authorities.

In 1951, for instance, about one-eighth of the housing was built for private owners—that is to say, the proportion was one private owner's house to seven for local housing authorities. If one goes on through the years and takes the General Election years one by one, one finds that the proportion built by local authorities diminishes year by year until, in 1962, five houses were built for private owners as against only three council houses.

Clearly, the difficulties of house building by local authorities—the difficulties of providing a sufficient amount of council houses—call for consideration in connection with taxation of this activity. I suggest strongly to the Government that there is an overwhelming case for giving local authorities in this respect such assistance as one can. Quite apart from the logical reason that it is absurd to give with one hand and to take away with the other, the practical point is that the more assistance and relief that can be given, the more we are likely to get the council houses which even the Government are now beginning to recognise to be more and more required.

To put it from another angle, these council houses are houses which are to be built and let, and, without going into any detail, it is houses to let which are sorely needed in the country at present. Those built for private owners are almost all of them houses for sale. If there is this sore need for houses to let, and, judging by their latest pronouncements about housing, I do not imagine that the Government would deny it, surely this is quite the wrong moment to continue taxation on local authorities in this respect.

Therefore, it is with that kind of background and that kind of consideration in view that I suggest to the Government that they ought to give additional relief to local authorities who are sufficiently fortunate to be able to get some credit balance in their housing revenue account.

I hope that I have made the point quite clear. I am encouraged in putting it forward by the fact that on the very day that the Opposition Clause was put down, there appeared, by some combination of happy thinking, the Government new Clause indicating some sort of intention, however qualified and however much necessitated by their own acts, to give financial relief to local authorities. I felt that in the collective Treasury brain or heart there had been a faint stirring, a feeling that something ought to be done about taxing local authorities, that their needs required a little better consideration.

So it is not only because this is a reasonable proposal, but because of the background of the matter and things I can hardly go into at great length now, that I trust that the Government will accept with open arms the new Clause which we are now offering them, the effect being, as I have indicated, to exempt from taxation the credit balance in the housing revenue account.

Mr. Barber

By leave of the House; I should like to clear up one or two misunderstandings, for which I apologise, about the new Clause in the name of my right hon. Friend. The hon. and learned Member for Kettering (Mr. Mitchison) suggested that in my opening remarks I had referred only to grants made to local authorities. Certainly, I intended to refer to grants payable by the Exchequer or by local authorities.

The wording of the new Clause refers to a payment…made to a person by way of grant or other contribution towards expenses incurred… It is perfectly true that I said in general terms that the grants in question, by which I meant grants and subsidies and other contributions, had not hitherto been taxed and would not be taxed in future. In saying that, what I had in mind was that the whole object of the Government new Clause was to restore the position as it was under the old Schedule A legislation.

It is perfectly true, as the hon. and learned Member pointed out, that in certain circumstances there was a liability to taxation. Grants or subsidies, or whatever they were, were taken into account, for example, if they constituted a trading receipt, for example, if they were in the hands of someone carrying on business as a builder or property developer. Until the other day I had not appreciated that some grants were paid to such people.

Again, if grants are paid to help to meet expenditure on property and that expenditure itself would qualify for tax relief, for example, expenditure on repairs to or maintenance of the property and in respect of which a maintenance claim could be made, the grants were set off against such expenditure and the tax relief allowable was based on the net expenditure borne by the claimant after setting off the grants. A similar principle will apply in future in the case of taxation under Case VIII as did apply in the case of taxation under Schedule A.

7.15 p.m.

Perhaps I should also have mentioned when I moved the new Clause that Amendment No. 121, which I suggested might conveniently be taken with it, merely contains corresponding provisions for Profits Tax. In a sense, it is almost consequential.

I should now like to turn to new Clause No. 18, in the name of the hon. Member for Cardiff, South-East (Mr. Callaghan), to which the hon. and learned Member has spoken. In subsection (1) it provides that if in any Income Tax year a local authority has a credit balance in its housing revenue account, the authority shall be entitled to a deduction from the amount of any Income Tax with which it is chargeable equal to tax at the standard rate on that balance. As I understand it, the intention is that the local authority should escape any liability to tax which arises in respect of rents brought into the account where the account shows a credit balance. Subsections (2) and (3) relate to points of detail on the computation of the credit balance of the housing revenue account and I do not think that the House would wish me to spend any time on those.

The new Clause was put down after the Government new Clause which gives special tax treatment to statutory housing grants. At first, I wondered whether the hon. and learned Gentleman had taken into account the effect of the new Clause which I moved on behalf of my right hon. Friend. As the Opposition new Clause is drafted, it could give relief from tax in respect of a credit balance although that balance resulted from the receipt of housing grant which, under the Government new Clause, was not taken into account as an income receipt for tax purposes. The hon. and learned Gentleman will agree that that would clearly be nonsense. However, I want to direct myself to the substance of the Opposition new Clause.

I should remind the House of the present position. Localauthorities are under a statutory obligation to keep a housing revenue account of their income through expenditure in respect of various housing schemes. The sums which are credited to the account include rents, housing grants and income from investment of money borrowed for housing schemes. The debits to the account include interest on or instalments in repayment of loans raised for housing schemes, management expenses and statutory contributions, if there are any, to the housing repairs account, or the housing equalisation account made for the purpose of equalising the income of the housing revenue accounts derived from housing grants and so on over any period during which loan charges required to be debited to that account will be payable.

The important point which is relevant to the new Clause is that the balance of the housing revenue account as such has no significance for tax purposes. It is especially significant for other purposes, and the hon. and learned Gentleman reminded us of them, but for the purposes of taxation the balance of the housing revenue account seems to have no significance.

The various elements in the account to which I referred a few moments ago have to be treated individually for tax purposes. For example, the rents from house property are taxable in the same way as rents generally, and the interest which is credited to the account is taxable either by deduction at source or by direct assessment. Moreover, certain debits to the account, such as instalments in repayment of loans, would not be deductible for tax purposes, although if one looked merely at the balance of the housing revenue account and gave relief from taxation on the basis of that balance, one would be doing so on the basis that those instalments of repayments of loans, which are not deductible for tax purposes, were being treated as though they were so deductible.

Mr. William Warbey (Ashfield)

I am trying to follow the hon. Gentleman's argument. He said earlier that the items are treated separately for tax purposes, and that this applies to rent. How does one assess the tax on rent, treating the rent as a separate item regardless of expenses?

Mr. Barber

I have in mind the fact that under the old system rent was liable to tax under Schedule A, and also the provisions for excess rents where the income from property exceeded the Schedule A value. In future, there will be a new system whereby rents are assessed under Case VIII. On the other hand, investment income which accrues either to a local authority or to anybody else is dealt with in a different way in the Income Tax Acts.

All that I was pointing out was that it is basic to the whole way in which we levy taxation in this country that we should not lump together the whole of the income, whether it is of a revenue nature or of a capital nature, deduct from that expenditure, whether it is of a revenue or of a capital character, take the balance and give relief from taxation, or levy taxation. What one ought to do is. to follow the system, which has hitherto been followed in the case of local authorities, and that is to look at these various sources of income in isolation and deal with them accordingly from a taxation point of view.

Mr. Mitchison

I appreciate that there are distinctions between capital and income and that taxation proceeds by various items. The hon. Gentleman talked about not lumping things together, but is not that what is done? Has the hon. Gentleman looked at these agreed rules? Rule 55(f) says: The amount, if any, by which the total interest paid in respect of all grant-aided schemes…exceeds the sum of (i) the aggregate taxed income of all such schemes"— and that includes all these matters— …(ii) the grants less expenses is to be merged in the main set-off computation". The main set-off computation relates to a set-off against the tax deducted from interest paid by local authorities. I suggest to the hon. Gentleman that the practice—and there is authority for it in the courts—is to lump these matters together, the exception being Section 171, of the 1952 Act.

Mr. Barber

What one does not do is to look at the housing revenue account and merely levy tax on the basis of the balance outstanding on that account. I think that the hon. and learned Gentleman will find that the taxation of rents in the hands of a local authority is treated differently from the taxation of any interest which may be credited to the same housing revenue account. At any rate, be that as it may, I submit that there is no reason why local authorities, like any other landlord, should not pay Income Tax on income which is derived from the ownership of property.

The principles which we are discussing now raise issues which remind me very much of the debates that we have had on previous occasions concerning building societies and other worthy institutions which fulfil a most useful social purpose. As the hon. and learned Gentleman said, one of the most valuable social services provided today is that of local authority housing, particularly for the old, the infirm, and people living on small incomes who may not be able to afford an economic rent; but I would not have thought it right in the case of local authorities, any more than in the case of building societies, to provide them with a special tax exemption of the kind proposed by the hon. and learned Gentleman.

As I am sure the hon. and learned Gentleman will admit, we have already done a great deal for local authorities by way of subsidies and in other ways, and in the recent White Paper on housing in which we outline the Government's proposals for expanding the provision of housing these words appear: …given the assumption"— and, to my mind, this is an important assumption— that proper rents are charged subject to rebates for those who need them, the Government will be prepared to see that local authorities receive whatever subsidy they need to carry through their housing responsibilities and to plan ahead with confidence. The provision of local authority housing is both necessary and desirable, but I do not think that it is in itself a sufficient reason for giving it specially favoured treatment for Income Tax purposes as suggested by the hon. and learned Gentleman.

I should remind the House that the Opposition's new Clause is open to further objections because, as drafted, it could have the effect of reducing a local authority's Income Tax liability to less than what it should be under the ordinary arrangements for collection of tax by deduction at source. Where local authorities pay interest under deduction of tax on loans or other annual payments, they are required, like anyone else making such payments, to account to the Inland Revenue for the tax so deducted.

This tax is, of course, the tax of the recipient of the income, not the tax of the payer. If the payer has sufficient income taxed at the standard rate for the year of assessment to cover the annual payments, his debt to the Inland Revenue is franked by the tax which he bears in the ordinary way, butin other cases a separate Income Tax assessment is made on him to collect the tax which he has deducted, or so much of it as is not franked by tax which he otherwise bears.

The great majority of local authorities are in this position, that is to say, their liability is limited to handing over to the Inland Revenue the tax which they have deducted from annual payments in so far as it is not franked. As the Clause is drafted, it would improperly—and I am sure the hon. and learned Gentleman will agree—allow a deduction against this tax of an amount equal to tax at the standard rate on the credit balance of the housing revenue account, and I am sure that was never the hon. and learned Gentleman's intention.

Mr. Mitchison

Why not?

Mr. Barber

The hon. and learned Gentleman asks "Why not?" The reason is that the tax which is deducted is really the tax of the recipient of the income, although it is, in fact, deducted by the payer. Consequently, if it is not franked, it ought to be handed over to the Inland Revenue.

Apart from the defects in the Clause—which prevent it from achieving what I would have thought was a not unreasonable objective, although I disagree with it—the basic principle behind it is wrong. There is no reason why local authority housing should receive the special treatment for which the hon. and learned Gentleman is pressing. In asking the House to reject the hon. and learned Gentleman's Clause, I do so not only on the somewhat narrow technical grounds to which I thought it proper to refer, but also on the broader principle with which I dealt.

In conclusion, I remind the hon. and learned Gentleman of the passage in the recent White Paper on Housing which makes it clear that, assuming proper rents are charged, with rebates for those people who really need them, we shall see that local authorities receive whatever subsidy they need to carry through their housing responsibilities and to plan ahead with confidence. That, I should have thought, is a critical pledge and a far better way of dealing with local authority housing than the way proposed by the hon. and learned Member.

7.30 p.m.

Mr. Michael Stewart (Fulham)

I propose to say only a few words on this new Clause. I am not going into the financial complications with which the Financial Secretary was concerned. There seemed to be a difference of opinion between him and my hon. and learned Friend the Member for Kettering (Mr. Mitchison) as to the exact method of levying this tax, but I think the hon. Gentleman went to the heart of the matter when he said that he did not see that any local authority should not pay tax on its rents just like any other landlord.

I am sure that that approach is wrong. The hon. Gentleman was talking as if we ought to take care to see that no one agency does too much in providing housing. He seemed to fear that if we gave this concession it would put local authorities in a better position than other potential landlords to provide housing. A good many of us would not at all mind if that were so.

The hon. Gentleman did not tell us what difference it would make in any actual sum of money coming to the Exchequer if this Clause were added to the Bill. How much less comes to the Exchequer by reason of the fact that there is no provision like this? I should be surprised if it would make a substantial difference. We put down our new Clause looking to the future. I hope that there would be an increased use of methods of building and that local authorities would be able to provide good homes at less real cost and ultimately the burden of what they have to pay in interest, quite apart from what happens to interest rates, would go down. Without some provision of this kind the effect of any progress which any particular local authority is able to make in this field would be that it would be more liable to pay tax if it were more successful in making such reductions in its expenditure than at present.

Great stress was laid by the Financial Secretary on the passage from the recent White Paper on Housing, which said that if only local authorities would charge what the Government are pleased to call "proper rents" the Government would see that they got whatever subsidies they needed. It has always been a theme of the Government that local authorities ought to charge what they call realistic rents for houses. Suppose some local authorities were increasingly to listen to the Government's argument on this matter and start raising their rents. All the thanks they would get from the Government for that would be that they would have to pay a larger amount in tax.

I should have thought that if the Government were interested in seeing that local authorities charged what the Government think are realistic rents the Government might do something to see that if local authorities did so they would have rather more of the advantage accruing to local authorities. The only valid argument which can be advanced to local authorities in favour of charging higher rents would be that they would then have more income with which to build more houses and not have to pay more to the Treasury.

The passage which was quoted went on to say that if local authorities paid what the Government call proper rents the Government would be prepared to pay whatever subsidies they need. That statement comes near the end of the Government's period of office. A statement like that would be more appropriate for a Government just entering into office. To tell local authorities now that, provided they do this, that or the other, the Government are prepared to see that they get whatever subsidy they need, will fall rather coldly on the ears of local authorities—as, indeed, it has.

If the hon. Gentleman is acquainted with some of the consultations going on between the Ministry of Housing and Local Government and the local authority associations about the possible future of subsidies he will know that the housing authorities certainly do not think that they are getting adequate subsidy at present, particularly in view of the high interest rates they have to pay. If the Government want to give any credence to their profession now that they are willing in future to do what they have not done in the past and to provide local authorities with the subsidies they need, they might do something by way of earnest of intention.

Our new Clause, as my hon. and learned Friend explained, would give the Government the opportunity to show local authorities that it is not just a promise in a White Paper, but that they have taken the opportunity of the Finance Bill to show their good will to local authorities. I hope that the Government will reconsider this matter before a final decision is taken.

Question put and agreed to.

Clause read a Second time and added to the Bill.


  1. (1) Subject to the following subsections, the Income Tax Act 1952 shall have effect as if in section 271(1) (which defines "industrial building or structure" to mean a building or structure in use for the purposes listed in paragraphs (a) to (g) of the subsection) there were added after paragraph (g) the following paragraph—
    • "(h) for the purposes of a trade carried on in retail shop"
    and as if in subsection (3) of that section the words "retail shop" were deleted wherever they appear.
  2. (2) For the purposes of this section, section 265 of the Income Tax Act 1962 shall not apply.
  3. (3) No allowance or charge shall be made by virtue of this section for any year of assessment earlier than the year 1963–64 and in any case in which, one the day preceding any such year of assessment, a building or structure is to be treated as an industrial building or structure only by virtue of this section 268(5) (which provides for treating part of the expenditure on a building or structure as written off in years in which no annual allowance is made in respect of it) shall apply with the omission of proviso (a).
  4. (4) Where by virtue of this section a balancing charge is made on a person in respect of any expenditure, the amount on which it is made shall not exceed the amount of the allowances made to him in respect of that expenditure by virtue of this section.—[Mr. Graham Page.]

Brought up, and read the First time.

Mr. Graham Page

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

This new Clause arises out of approaches made to the Chancellor of the Exchequer by the Co-operative Union, the National Chamber of Trade, the Retail Distribution Association and the Multiple Shops Federation. All those important bodies hold the view that it is wrong that no allowance should be given for tax purposes for the gradual writing off of the capital cost of structure of shop premises. This, of course, is not the first occasion on which such an approach has been made to the Chancellor. Repre- sentations on these lines have been made for several years.

The Clause would apply—and I stress this—only to the annual allowance. It would apply the annual allowance provisions to retail shops. The annual allowance up to the present has been 2 per cent. on the cost of structure of premises and now under Clause 34 of this Bill it will be 4 per cent. The new Clause, therefore, does not apply to initial allowance or investment allowance. Those are what I might call the real capital allowances, the special stimuli to development, whereas the annual allowance is merely a depreciation allowance and not a real capital allowance primarily intended to stimulate development.

I refer to the actual wording of the Clause as it appears on the Notice Paper and in particular to the Sections of the Income Tax Act, 1952, which the Clause mentions. In subsection (1) there is reference to Section 271(1) of that Act. That Section contains the definition of industrial building or structure to which the allowance at present applies. It is intended by the Clause to include a retail shop within the definition of industrial building or structure. This may perhaps sound anomalous, but in fact in Section 271(1) one finds a long list of various properties not all of which come within the common understanding of the phrase, "industrial building or structure".

Subsection (2) of the Clause excludes Section 265 of the Income Tax Act, 1952, which refers to initial allowances; those were amended later to alternative form, the investment allowances. The Clause refers only to annual allowances under Section 266 of the 1952 Act. Under that Section the allowance was originally one-fiftieth per annum of the capital expenditure incurred in the construction of the building, but under Clause 34 of the Bill it would be one twenty-fifth of that expenditure. It would be possible, therefore, if the Clause were accepted, to write off the expenditure on construction over 25 years.

Let me for the purpose of argument class this as a capital allowance, although in a moment I shall have to show that I do not agree that it should be classed as such. It should, we are told, be classed as an initial allowance and an investment allowance, which is one which is granted as a matter of policy rather than revenue. We have been told that that was the reason for granting these capital allowances for industrial buildings; it was to stimulate the development of industrial buildings.

If that is the argument for the annual allowance included within other capital allowances, I suggest that it is a matter of urgent policy at present to recognise that the construction of retail shops should receive such a stimulus. It is urgent policy that our city centres should be rebuilt. Literally hundreds of towns are drawing up their plans for reconstructing the centres of their cities. One of the great difficulties of such reconstruction is the displacement of the existing trader and finding accommodation for him when he returns at a figure which he can afford. Many small traders are being displaced in this way, and it is extremely difficult to find accommodation for them at the sort of rent which they can afford when they return to the area in which they have been trading perhaps, for generations. Any taxation relief which can be given in this respect will ease that difficulty and will assist in keeping the rents down for those traders who wish to continue to trade in the reconstructed area.

I say this not simply from the point of view of the tenants of private landlords, because much of the reconstruction is being undertaken by local authorities and they, too, find that they have to charge high rents for the new premises. Some local authorities are undertaking the development themselves. Any taxation relief of this sort would be welcome. Some are joining with private developers in the development of their city centres, but the private developers may hesitate to join in that way and may, perhaps, be encouraged to develop elsewhere where there is a form of tax relief for them.

Another urgent policy reason for such a concession is that we are faced with the recent Offices, Shops and Railway Premises Act, which will force the owners and occupiers of shop premises as well as of offices to make substantial improvements to their properties. If they endeavour to make those improvements to some of the older properties it will be a matter of putting new wine into old bottles, and in many cases reconstruction is necessary rather than patching up. For that purpose one should give the stimulus to die reconstruction of shop premises, particularly in the old areas, by a concession such as I am suggesting in the new Clause.

7.45 p.m.

The main point which I wish to make is that annual allowances are not merely a stimulus to development. The policy considerations, the stimulus, may apply in the case of initial allowances and investment allowances but not in the case of annual allowances. It is simple accountancy that these are a recognition of depreciation and that without them profits are not correctly stated. There is a tax allowance for repairs, as opposed to construction, and this very fact encourages traders to do repairs to their shop premises when reconstruction is required. It is difficult to give any statistics of the effect of tax allowance on repairs in encouraging traders to do repairs rather than reconstruction, and it is not easy to say exactly how much desirable reconstruction is being rejected in favour of extensive and unsatisfactory repairs. But from what I am told, I believe that that is in fact happening.

I am told that on the basis of 50 years' obsolescence, profits of shops are being over-stated by as much as 5 per cent. in the absence of annual allowances, which means that the Chancellor is collecting tax on 5 per cent. of the profits of retail businesses which are not really profits at all. They ought to have been set against proper depreciation of the premises. If that figure is true, then my right hon. Friend is taking a very large sum in tax upon money which is not truly profit because we are disregarding depreciation of the premises.

In April, 1951, the Committee on the Taxation of Trading Profits and in June, 1955, the Royal Commission on the Taxation of Profits and Income both recognised the fairness of charging depreciation on commercial structures against profits. That must surely be the right thing to do. To ignore it is to ignore an expense which, to use the words of the Act, is "wholly, necessarily and exclusively" incurred in earning the profits. It is not ignored in this way elsewhere in Europe. At one time we were called a nation of shopkeepers, but in this respect at present we are at a disadvantage compared with the shopkeepers of the rest of Europe. I find that 12 out of 14 countries which allow depreciation to be charged for tax purposes at all, allow it to be charged in respect of shops.

Retail shops become obsolescent quite as quickly as factories on which there is this allowance. I say that not because of any destructive user of shops, as one can say there is in factories, but because of the new methods which come into use and the new operations in shops. We witness this more and more at present as modern forms of retail shops appear and the older shop becomes obsolete. My right hon. Friend the Chancellor of the Exchequer should recognise this.

I do not put the Clause forward as an exclusive right of retail shops. There may be other properties entitled to the charging of depreciation against their profits. However, I contend that, in the case of retail shops, the argument is unanswerable.

Dr. Horace King (Southampton, Itchen)

I have been asked, as I was before the Budget was prepared, by various groups of retailers in my town and by the chamber of commerce to support the new Clause which the hon. Member for Crosby (Mr. Graham Page) has very clearly moved. I shall do so very briefly, because, in the letters which I have received from grocers and other retailers of my town, they have always argued the point of fairness and equity. They have contended that they have been treated unfairly in this matter. Whenever finance is associated with unfairness, it is the sense of justice that must appeal to a Member of Parliament.

I would only say to the hon. Member for Crosby, who spoke so clearly about this, that he pitches the benefits of the Clause really high. If he wants to tackle the high cost of shopping in new cities, he ought to get down to tackling the land racket, which has a much more serious effect on costs. However, it would not be in order to discuss that problem on this Clause.

I remind the House that Section 271(1) of the Income Tax Act, 1952, is a subsection of definition. It lists all the various groups of British industry that can benefit from certain tax concessions—mills and factories; transport; water and electricity; any trade which manufactures; any trade which stores goods to be manufactured; any trade dealing with mineral deposits; then the whole of agriculture, because it mentions any trade dealing with the cultivating of land. The subsection having listed those that it includes under the benefits which I shall mention in a moment, it carefully excludes in its excluding list retail shops. Retail shops are deprived of the benefit of relief for capital expenditure, relief for initial allowance, relief for depreciation allowance, and relief for balance charges.

I shall be very interested tonight to hear the case of the Financial Secretary or the Economic Secretary for separating retail shops in this way. As the hon. Member for Crosby said, shops have a capital which depreciates just like anything else. Shops have to be replaced. The replacement of retail shops in this modern age will proceed at a faster pace than ever before, certainly in towns and cities. I can understand that there is no case for special incentives of the kind that we give to industries for high policy, such as the initial allowance that we give for new capital which is directed to support an export drive.

There must be a case in equity for equal relief for this industry—it is an industry; people work in it; it renders a valuable service to the community—as compared with other industries, on the basis that they have to invest capital and that capital—their shops—wears away just as surely as a factory or anything else wears away.

At this time retail shops are paying savage rates, because the rate burden which some of us have spoken about affecting domestic consumers weighs heavily on retail shops in cities and will continue to increase dramatically. This burden and the fact that the Government give them no relief of the kind we seek means that extra burdens must be borne by those who buy in retail shops. Every expense of this kind that the Government can relieve retail shops from is a relief which will ultimately come back to the consumer. Therefore, there is a case in equity for the Clause. The Minister may not accept its exact terms or the exact ratio of relief proposed, but I believe that tonight he should look very carefully at the principle for which we are fighting.

Sir Edwin Leather (Somerset, North)

I want very briefly to support my hon. Friend the Member for Crosby (Mr. Graham Page), very much on the lines outlined by the hon. Member for Southampton, Itchen (Dr. King). My hon. Friend the Financial Secretary will recall that in introducing his Budget on 3rd April my right hon. Friend the Chancellor of the Exchequer referred very strongly to the equity of taxation. He used these words: The integrity of our tax system depends very much upon its being fair to all concerned, and upon the avoidance of discrimination."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 674, c. 482.] This has been a principle which successive right hon. and hon. Gentlemen on the Treasury Bench over many years have never hesitated to plead with considerable urgency and passion when it was an excuse to avoid making an allowance to any worthy cause which people thought should be dealt with. I put it to my hon. Friend the Financial Secretary very sincerely that in this case the present system is discriminatory against those in retail shops.

I must immediately declare that I have a personal interest in this, to the extent that I am a director and a very modest shareholder in a group of companies which owns retail shops. I hope, therefore, that this might also give me some qualification to understand the problem.

In the present situation the pretence is that there is something quite different about running a retail business from running any other kind of business. I do not know exactly how my hon. Friend the Member for Crosby arrived at his figure of 5 per cent. The figure which I want to give to the Financial Secretary is considerably higher than that, perhaps because it has been arrived at in a different way. I want to state my case for the inequity, the quite unreasonable discrimination against the retail trade in the present situation, in this way.

It is generally accepted that industry's earnings—what we euphemistically choose to call profits, largely for polemical reasons—should pay to the State about 50 per cent. in taxation. This has been about the balance, when Income Tax and Profits Tax are added together, of most industrial countries for a very long time. It has not varied by more than 1 per cent. or 2 per cent. from this figure.

If my hon. Friend the Financial Secretary studies the balance sheets of any of the main branches of the retail trade and relates the taxation figure to the profits figure, he will find that it is never anything like 50 per cent. The taxation figure in the companies of which I have some experience regularly runs between no less than 60 per cent. and 65 per cent. The reason is purely because there is no depreciation allowed on the buildings. Therefore, any sensible management, any management following sound accountancy principles, just has to take that figure out of its profits to provide for the replacement of its assets.

A directly discriminatory factor to the extent of between 10 and 15 per cent. of earnings is imposed under our present system on the retail trade and, as far as I know, against no other trade. It is an inequity which even the ingenuity of my hon. Friend the Financial Secretary would have the greatest possible difficulty explaining away. I do not think that either he or the Economic Secretary, or even both of them together, could explain it satisfactorily.

8.0 p.m.

The point made by my hon. Friend the Member for Crosby about the rebuilding of city centres is of great importance. This aggravates the position. In many big cities today there is a considerable awareness, and rightly so, of fire risks and a new emphasis on fire regulations. Many shops that have previously been regarded as having adequate fire arrangements are being inspected by fire prevention authorities, which are enforcing major alterations.

I do not object to this, because I realise that it is all in the interest of the public. However, it is unfair that this kind of thing should be applied by any authority to one industry while, if it is applied to another, that industry can charge the costs to depreciation in the normal way. If changes happen to be necessary to a retail shop no depreciation allowances are made.

We are going through a period when tremendous changes are taking place in the whole system of retailing. Hon. Members may have read in this morning's newspapers about a supermarket deal involving about £9 million, and 1,000 new stores being planned. Everywhere we look we see the changing face of retailing, whether it be a small chemist's shop or a vast department store. There are new ideas and developments and a vast number of new buildings. If these services are to be efficient and give the British public what they want, and what competition demands, a great deal of capital expenditure by retail store owners is necessary and which, if it took place in any other industry, would be granted depreciation allowances without question.

For some peculiar historical reason the retailer is discriminated against. I hope that the Financial Secretary will tell us that the Treasury will apply the doctrine of equity to the retail trade and maintain the integrity of the Budget, on which my right hon. Friend the Chancellor seems so keen.

Mr. Percy Holman (Bethnal Green)

I wish to give my fullest support to the new Clause, although it is asking for only half a loaf. In years past such a Clause has been sponsored by myself, sometimes in the company of the Liberal Party. There has, I think, been a feeling in the past that when the names of hon. Members of more than one party are put to a new Clause there is some prejudice against it being called. For this reason, it pleases me tonight to find that on this occasion the Clause has been called; although, as I say, it seeks only half a loaf and not all of it.

No one has been able logically to show what difference there is between industrial and commercial property. The two are integrally connected. I would not produce one pennyworth of goods unless I could sell them. The sales organisations must, therefore, deserve the same treatment as the factory. Sales organisations are probably a more vital element in the economy than a great deal of industrial development, especially for our export drive.

The Clause puts a wedge into the present discrimination between commerce and industry. The conditions in commerce have altered drastically in the last few years. The old type of village or small community shop could continue for generations with very little change; perhaps a more modem counter occasionally and one or two new features in the window display. Largely due to the influence of the Co-operative movement, which created the majority of the first 1,000 self-service stores, there has been a remarkable development in retailing—a development that has led to more economic retailing, bigger units and self-service stores. It is often the case that a 50 to 60 per cent. increase in turnover can take place with hardly any increase in staff.

The new trends in retailing involve considerable capital outlay and if I were to compare factory with retail establishment today I would say that the competitive needs of the retail trade involve in the aggregate a bigger percentage of capital outlay than the factory because of the steady and planned modifications and improvements that must be made. For this reason I support the half loaf, if I cannot have the whole one. I welcome the hope that has been expressed that for a change the Government will at least express a logical argument why a doubling of the allowances for factories and the total ignoring of the commercial side is equitable. As I have explained, in many ways the retail industry can affect the output and sales ability of the factory. There are other aspects than pure economy in retailing today and those, in their turn, affect our whole standard of living.

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

I support in a general way what has been said by my hon. Friend the Member for Crosby (Mr. Graham Page), my hon. Friend the Member for Somerset, North (Sir E. Leather) and the hon. Member for Bethnal Green (Mr. Holman), but with a slightly different sense of emphasis and with a different approach to the timing.

It is unreal to expect hon. Members in favour of the new Clause to succeed in their venture tonight and to obtain the support of the Government for their proposal. I apprehend that the new Clause will be turned down.

Mr. Cyril Bence (Dunbartonshire, East)

The hon. Member has no reason to say that.

Mr. Rees-Davies

I do not think that there is an enormous amount of fire in the belly of hon. Members opposite on this issue.

My hon. Friend the Member for Crosby is adept in proposing matters which, in time, succeed in obtaining their place on the Statute Book. I have in mind the Cheques Bill and many other Measures which have become Acts of Parliament. However, let us get the position clear. If it is said that the present position is to be pursued for industry only, because industry reflects a higher benefit to the national economy and therefore needs to be given preference, then I can understand that argument. I should like to know exactly what are the principles underlying the policy of the Government in this matter. For this reason, I reserve my views on the subject because I am not entirely sure that one can say that the retail trade is on the same basis as industry.

That brings me to another important matter. Is there not today a changing face in the world as between the importance of the retail trade and industry? Are they not closer partners now than they have ever been before? For example, I am anxious to see that we do not gradually remove the small trader entirely from the face of Britain. One of the great advantages which the large retail shops have is the immense capital laying behind them. Whilst taxation may do some damage to them relatively, in that nearly 65 per cent. of all their profit earnings is taken from them—in industry, it is about 50 per cent.—none the less they have fairly high profit margins, and as they are able to buy in very great bulk they are succeeding gradually in eliminating the small trader, who is frequently unable to build up the savings he needs if he is to modernise. He is not able to keep up with the Joneses. This is the problem. I find that many of the small traders in Thanet are not able to put aside the amount necessary to enable them to compete with the big supermarket when the big supermarket moves into the High Street of the local town.

There is thus the second problem that, though we want a true efficiency in modern retail methods, many of our shops have a layout and composition too completely out of date to enable them to trade in modern conditions. For example, it is expensive for them to turn over even from what I might call service by the individual to self-service—or they may want to provide self-service in part of the shop but not in the whole of it. It is undoubtedly true that they are unable to attract the capital necessary to enable them to provide a really attractive shop front and layout that is commensurate with those provided by the large retail distribution chains.

Furthermore, they are now competing with new types of salesmanship. We have this high-pressure American salesmanship coming in, with what might be called the give-away method, and direct sales to the public. We have the great Wolfson chain, and other firms selling by mail order. These are all great competitors of the small trader. That means that he not only has to compete with "big brother" in his own realm but with many other new brothers in other directions.

The situation has somewhat changed from what it was a few years ago when, if Irecollect correctly, one never really had it suggested that these allowances should be given to the retailer as they are to the industrialist. Rateable value has now become one whole at last. However we may complain about it or whatever we may say on its behalf, the fact remains that we are now paying fair rates, and I should have thought that it was time for the Treasury carefully to examine its principles and see whether it should not extend these allowances. The Treasury would at the same time have to look at the hotel industry, for instance, because it is obvious that if the retailer is to come in on this, consideration will also have been given to whether the hotelier, who is also providing a service, ought not to be put on the same basis.

I do not think that one can expect to deal with this matter tonight, but the whole question needs careful review. I am coming round to the view, to put it no higher—unless someone can persuade me to the contrary—that these allowances should go right across trade and industry as a whole; and that it would be better to enable these people to equip and improve themselves out of their profits. They could then even pay a high rate of flat taxation overall—the money must come from somewhere, and if the Treasury does not get it in one direction it will get it in another.

I am not sure that it would not be better to review this whole realm of taxation and then, having enabled retail traders, hoteliers, and all those in commerce and industry to re-equip and put the proper capital into their businesses, later take away money from them on what would be an equitable basis. As I say, I do not expect a full answer tonight, but we will all be interested to hear what the Minister has to say on the general principles of the whole issue.

8.15 p.m.

Mr. A. E. Oram (East Ham, South)

I could follow the argument advanced by the hon. Member for the Isle of Thanet (Mr. Rees-Davies) that the small retailers are faced by the competition of mail order business, and so on, but I did not follow quite so clearly his argument about the big shops, because they would gain as much as, if not more than, the small trader if this new Clause were accepted.

The hon. Member for Crosby (Mr. Graham Page), and other hon. Members, made out an interesting and sound case in favour of the central proposition in the Clause. There may be objections to the actual form of the Clause—we shall all listen with interest to the contributions from the two Front Benches in that respect—but I certainly support the grant of capital allowances to retail shops on an equal basis with industrial undertakings.

I have never been able to understand why this artificial distinction has been made. On both sides of the House there has been the rather irrational supposition that factories—the productive processes—are in some sense virtuous, whereas commercial premises—distribution—are in some sense less virtuous, and rather wasteful. I have never been able to accept that proposition. What is the use of making a pair of shoes and leaving them in the factory? They are of no use at that stage. They are useful only when on a wearer's feet. To get them on to a wearer's feet, retail shops and other means of distribution are essential, and should be equally treated for taxation purposes.

My hon. Friend the Member for Southampton, Itchen (Dr. King) quoted from the 1952 Income Tax Act the list of premises, operations, and so on, that benefit from the present capital allowances. Agriculture, transport, and factories of all kinds are listed. While he was speaking, I thought of the homely pot of jam. All the apparatus and buildings connected with the growing of the fruit on the farm, its transport and its processing in the jam factory get the benefit of the capital allowances but, from then on, for some totally mysterious reason, there is a disadvantage to those who undertake the delivery of the jam to the table.

I hope that we shall get a favourable response; not necessarily acceptance of the Clause, but an indication that the main proposition is at long last accepted, and that this completely artificial division between the productive and distributive industries will be brought to an end.

Mr. Bence

A new situation has arisen in the distribution of manufactured products, because many retailers now have to undertake, mainly under the resale price maintenance system, some servicing of the product they market. This in the main applies to motor cars, but retail establishments dealing with such other products as refrigerators and radio and television sets have to provide for the repair, maintenance and servicing of machines of the manufacturers for which they have the agency.

; Would such an element in redistribution qualify for capital allowances for the installation of equipment and machinery to perform such a service to a specific product? The motor car agent has to install special equipment. The Ford Motor Company, for example, lays down that its agents must have certain standard equipment to examine and test it products. Does the garage owner, who would be the retailer, receive a capital allowance in respect of this equipment installed to market a fixed price product, with fixed prices for servicing?

Mr. Barber

The object of the new Clause, as my hon. Friend the Member for Crosby (Mr. Graham Page) has said, is to extend the system of annual allowances, but not investment or initial allowances, to the retail shops. The hon. Member for East Ham, South (Mr. Oram) said he would assume that I would refer to the form of the Clause, but I should like to confine what I have to say to the principle behind it, and the points which have been raised in this interesting but short discussion on an important matter.

Under the Clause, the relief proposed would run for all capital expenditure on retail shops incurred during the last fifty years and for all future expenditure. Relief would start for 1963–64 and would be at 2 per cent. per annum, except that, in view of an increase in anual allowances proposed elsewhere, it would be at 4 per cent. per annum in respect of expenditure incurred after 5th November last year. The allowance of 2 per cent. for expenditure incurred before 5th November, 1962, would run for what was left of the fifty years, and for expenditure after 5th November it would run at 4 per cent. for twenty-five years.

Retail shops include any premises of a similar character where retail trade or business, including repair work, is carried on. As the House knows, they are excluded from benefits of the capital allowance system, together with such premises as dwelling-houses, showrooms, hotels and offices. This exclusion is by specific provision in the legislation which provides for capital allowances. They were excluded from the scheme of the Income Tax Act, 1945, because, as explained at that time, the policy was to encourage modernisation, expansion and re-equipment of our productive and manufacturing industries.

I can see the great attraction of this proposal considered in isolation. The appearance and efficiency of retail shops are matters of importance in any advanced society. Reference has been made to the great need to rebuild the centres of many of our cities, which means rebuilding much commercial property, including retail shops. I well remember not being very impressed by the retail shops I saw in Moscow, but even there valiant efforts are being made.

The hon. Member for Bethnal Green (Mr. Holman) was quite right in saying that we cannot concentrate exclusively on production and manufacture. There are all manner of commercial buildings, of which shops are only one example, which contribute in one way or another to the efficiency of the community and are taken for granted today in what is sometimes referred to as the affluent society, if I dare use that terrible expression. It is true to say that, in general, commercial premises tend not to suffer wear and tear to the extent suffered by industrial premises. Furthermore, it is true that over a period retail shops tend to appreciate rather than depreciate in value. These are relevant factors, but I would be the first to admit that they are by no means conclusive.

There are two important factors which the House must take into account. The first is that in any consideration of tax relief we have to consider priorities. This inevitably raises the matter of cost. I am told that the cost of this proposal would rise eventually to about £40 million a year. It is plain for all to see that capital expenditure on retail shops is considerable. I have heard the extent of expenditure on retail shops made the cause of complaints in the House and outside, but I do not take the same view. It is said by some that too much of our scarce building resources is devoted to shops and shop fronts when there is still a housing shortage, but, quite apart from the. effect on the building industry, which, we know, is pretty well stretched, there is also the question whether tax relief of the order here involved should not be devoted, if it were available, to some other purpose.

I would say to my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) that this year my right hon. Friend has provided considerable tax relief for industrial building and plant and machinery. Having determined, as obviously he did, the overall relief which in his judgment was available, I hope that my hon. Friend will take the view that, at any rate this year, my right hon. Friend was right to concentrate on productive industry. However, if that argument is not accepted, and this is very much a matter of judgment and opinion, and even if it is thought that an exception should be made—perhaps on the ground of equity put forward by the hon. Member for Southampton, Itchen (Dr. King)—I cannot see that it would be right to single out for special relief this one category of commercial buildings.

In fairness, it should be said that my hon. Friend the Member for Crosby, in moving the Clause, had some doubts. Certainly, my hon. Friend the Member for Somerset, North (Sir E. Leather) pointed out that there was not something special about retail shops. He thought that they were being discriminated against. But, of course, there are equally strong arguments which have been advanced over the years, and which, no doubt, will continue to be advanced, on behalf of offices and on behalf of hotels.

Some of my hon. Friends put down a new Clause which was selected for discussion in Committee, although they just missed the boat and were not here in time to move it, and that new Clause was concerned with the provision of annual allowances for hotels. Hotels were referred to, also, by my hon. Friend the Member for the Isle of Thanet. It would be folly, I think, to close one's eyes to the cost of relief for commercial premises generally. The cost of extending allowances to commercial buildings generally would rise to no less than £172 million a year.

I should mention that there are a number of practical problems involved in this Clause, although I do not suppose that the House will wish me to go into those at this stage since most hon. Members have concentrated on the question of principle.

8.30 p.m.

The main reasons why I cannot advise the House to accept the new Clause are these. First, for the reasons I have given, I do not think that the proposal really merits the priority at this time which it is sought to give it, bearing in mind the cost involved. Secondly, I say frankly that I cannot see how one could in practice, adopting a realistic approach to these things, limit the relief to retail shops and not extend it to most, if not all, commercial premises. I hope, therefore, that my hon. Friends will not press their proposal on this occasion in the knowledge that if they do adopt that attitude, my hon. Friend the Member for the Isle of Thanet will not be unduly surprised.

Mr. Douglas Jay (Battersea, North)

I admit that I approach this proposal with some caution. We have gone a fairly long way in recent years in introducing and extending capital allowances. We have had the initial allowance, the investment allowance, a bigger investment allowance, and now free depreciation. Although all these are often justifiably recommended, of course, as stimuli to investment, they are a form of reduction of taxation of profits. I should not be quite so sure as my hon. Friend the Member for Southampton, Itchen (Dr. King) seemed to be that, in the case of the retail trade, for instance, such a reduction of taxation of profits would necessarily be wholly passed on to the consumer. I am, therefore, a little cautious at the outset.

If hon. Members were to argue that there is no difference in principle between commercial property and industrial property, they would be on very strong ground. It is true that a shop, office or hotel building, although it may not depreciate so rapidly as a factory building, does depreciate in the end. A shop or an office does not last for ever. On those grounds, a very strong argument can be advanced, and I think that the Royal Commission did, in effect, take that view.

However, although it is perfectly natural that retail trading organisations should put forward the argument embodied in the Clause, we must, if we examine it as a House of Commons, come to the conclusion that it is a quite different proposition that this concession should be given to retail shops and not to offices, hotels, and other forms of commercial property.

I agree there with the Financial Secretary. Indeed, the very argument about equity advanced by some hon. Members in saying that, if the concession is given to industrial property, it should be given to retail property, could be, as it were, turned against them in this way, that, if it is to be given to retail shops, it should be given to offices and hotels also.

There is one form of discrimination which we should be prepared to support. I refer to the proposal put forward at an earlier stage of the Bill that capital allowances should be given to all forms of commercial property in development districts but in development districts only. A very strong argument—I shall not elaborate it now—can be advanced that it would be very desirable to give a stimulus to the building of offices and other commercial property in those parts of the country. This proposal, however, gives no preference to development districts but, on the other hand, picks on retail shops as opposed to other forms of commercial property.

For the reasons I have briefly given, it is not a proposal which, in this precise form, I can recommend the House to accept.

Question put and negatived.


The Betting Duties Act, 1963 (which consolidates certain enactments relating to the pool betting duty) shall cease to apply to bets on dog races made by means of a totalisator on a licensed track.—[Mr. A. Lewis.]

Brought up, and read the First time.

Mr. Arthur Lewis (West Ham, North)

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

Mr. Deputy-Speaker

We can take with this new Clause the following new Clause, entitled "Reduction of pool betting duty".

Mr. Lewis

The new Clauses are similar, but, while I support and appreciate the point contained in the second one, I do not think it is exactly analogous with that in mine.

I have no vested interest in this subject apart from the fact that I have adjoining my constituency one of the finest greyhound racing tracks in Britain, namely, the West Ham greyhound racing track. However, there are many other fine tracks throughout the country, probably the best known of which is Wembley, where many great sporting events take place. I mention that because in years gone by it has only been through the build-up of the greyhound racing side that money has been drawn in to pay for many of the great sporting events which take place at such places as White City, Wembley, and the rest.

For the sake of hon. Members who are not quite au fait with the position, perhaps it would be as well if I explained the background to this matter and then explained how it is a classic example of discrimination, which was mentioned during the debate on the previous Clause. It was in 1947, I think, that the late Sir Stafford Cripps introduced a new form of taxation, namely, a 10 per cent. Pool Betting Duty on all bets placed on totalisators at greyhound race tracks. It was said that his objective was twofold. First, there was such a lot of money being placed in bets at greyhound race tracks and the tracks themselves were making such vast fortunes and paying such enormous dividends that he as Chancellor of the Exchequer felt that it was time that he syphoned some of it into the Treasury. Secondly, he was rather worried about the scarcity of consumer goods and about the fact that people were not spending money on goods because the goods were not available.

That situation has changed drastically. There is now an abundance of consumer goods. The tracks are not making fabulous profits. Indeed, many tracks have had to "pack up" and go into liquidation. In almost every instance the tracks are not paying the big dividends to the shareholders, as was formerly the case.

I am not personally against the taxation of betting, gambling and gaming. The Chancellor of the Exchequer has to get money to pay for the various social welfare services, such as the National Health Service and National Insurance benefits. If he decided that the taxation of gambling, gaming, betting and the rest was a fair and proper way of getting the money, I would not grumble. Here, however, we have complete and absolute discrimination.

Unfortunately, through no fault of yours, Mr. Deputy-Speaker, but certainly of mine, the new Clause was not called in Committee. I wish that it had been, because then would have been the most appropriate time for me to explain the situation. As it is, I shall have to speak to some extent in retrospect, because the day in question was the day after Derby Day.

I noticed in the Press that almost every member of the Government was in attendance at the Derby. I do not in any way attack them for that; I am not trying to scandalise or personalise their private lives. My only regret is that I was not there, although some of my hon. Friends, including my right hon. Friend the Member for South Shields (Mr. Ede) and my hon. Friend the Member for Dudley (Mr. Wigg), were fortunate enough to get there. It was also reported as being the best and biggest Derby of all time for the money that the bookmakers received in bets. Two big bookmakers were reported as drawing in over £50,000 in bets.

I thought to myself that that was quite good. I read also that the Chancellor was there and put on his little 2s. bet on the tote. The strange thing is that of all those who took part in that happy event, not one of them paid a halfpenny in taxation.

On that same evening, however, in various parts of London and the rest of the country, including my own constituency at West Ham, greyhound races and meetings were taking place. The people who attended those greyhound race-tracks in the evening, certainly in my constituency, were mainly working-class people who had finished their day's work at the docks, their factory or elsewhere. They staked their 2s. or 4s. on a totalisator, made by the same people and operated in exactly the same way as the totalisator at Epsom racecourse, but they immediately lost 10 per cent. in tax. Before the race was run, before they had any pleasure, they lost 10 per cent. I regard that as unfair.

Sometimes, the same people go away from the Derby at Epsom in the afternoon, where they are not taxed, and go to the greyhound races in the evening, when they are taxed. That is not only completely unfair, but is unjust. It is rather as if a man buys a packet of Wills's Woodbines cigarettes, on which he pays 10 per cent. tax, but if he buys Gold Flake cigarettes, made by the same company, he pays no tax. A better example is the man who smokes cigarettes and pays 10 per cent. tax as against the man who smokes cigars and pays no tax.

I did not have the opportunity on Budget day of congratulating the Chancellor on his Budget, but we all know what a wonderful performance it was. He refreshed himself, I believe, with a glass of water in which there was some whisky. Good luck to him. It would have been unfair had there been a stiff 10 per cent. tax on one brand of whisky but no tax on another brand. That is what is now happening. Not a halfpenny in taxation is imposed on any bets placed at horse racing courses, but there is a 10 per cent. tax on every bet placed at the same totalisator at greyhound racing tracks.

8.45 p.m.

Since the Government came into office, they have, rightly or wrongly, introduced various forms of legislation which have made betting easier. We now have bingo, gaming parties and betting shops. If a man is going to place 2s., 4s., 10s., £1 or even £100 as a wager on a certain greyhound, and he knows that across the road at the betting shop he can put the money on without losing anything in tax, he certainly will not go to the greyhound race track where before he puts the money on he will have lost his 10 per cent., his admission money and his programme money. What happens? The man stays away from the track and puts the money on at the betting shop. We have seen a consistent fall in the attendances at greyhound race tracks, and a number of them have now closed down.

I have made a hardy annual of this subject for very many years. Originally I had no support. I am glad to say that now, fortunately, a number of hon. Members on both sides of the House support me, and on one occasion I had the support of 100 signatures and a vote of about 84 in favour of an Amendment on a previous Finance Bill. I have plugged away at this subject not because I have any financial interest in it but because the present provision is discriminatory. Even hon. Members who are against the principle of betting say, "We do not support betting and do not like gambling and gaming, but if there is to be this principle, all should be treated alike."

Whoever was the Minister who replied last year said that the matter should be left to the Government and they would have a complete review of the whole question of betting and gaming. Chancellors of the Exchequer and other Treasury Ministers of both parties have admitted that the tax is discriminatory and unfair and should be dealt with. Last year we did not vote on the matter because we were told that an investigation was going on and there would be a review. When the Budget was introduced, we expected something in it to deal with this matter, but there was not. It has again been put off to next year. As the Treasury has admitted that the tax is unfair and discriminatory, the Chancellor ought to drop the tax pending the review, whatever may be decided, or, if he cannot do that, he ought to see that all are treated alike.

The next new Clause, in the name of the hon. Member for Southend, East (Sir S. McAdden), on which I will not trespass, seeks to reduce from 33 per cent. to 25 per cent. the football Pool Betting Duty. There is a difference in that case, for that is not betting or gambling on the course such as I have been speaking about. The point I want to make to the Treasury is that it ought to be within its possibility, if not completely to abolish the duty, to put the two sports I have dealt with on the same basis in regard to deductions.

In greyhound racing the track promoters are allowed 6 per cent.—and this goes back to about 1930—for administrative costs and charges. In horse racing the allowance is 10 per cent. With the 10 per cent. tax deduction and the 6 per cent. allowed for administrative costs, there is a 16 per cent. reduction for greyhound racing as against the 10 per cent. as an administrative charge for horse racing. I suggest that if the Treasury cannot agree to the abolition of the deduction, there should be a 10 per cent. all-in administration cost or a 4 per cent. tax deduction plus 6 per cent. administrative charge for both until such time as the Chancellor brings forward his proposals for review. Briefly, that is the position and I think that there is a case with which the Treasury could deal.

Sir Stephen McAdden (Southend, East)

I intervene briefly, as is my custom, because I feel that if a Member cannot make his point fairly briefly it is not much good trying to make it at all in this House.

The hon. Member for West Ham, North (Mr. A. Lewis) has a case for his Clause. The case for a reduction of the football Pool Betting Duty is a great deal stronger. The hon. Gentleman has been talking of an industry subjected to a 10 per cent. Pool Betting Duty which was 11 per cent. as a result of the 10 per cent. surcharge, and in the last Budget it was reduced to 10 per cent. In the case of the Clause that I am mentioning, the football pool betting tax was increased from 30 per cent. to 33 per cent. and stands at that figure today.

I want to make this point on behalf of the Chancellor, among others. I am anxious to protect the Chancellor. He is losing a lot of revenue. As a result of this increased tax to 33 per cent., he knows quite well that the revenue he is receiving is declining, because people know that a great deal of the money they invest in betting on football is taken from them in the form of tax. As a result people are drifting away to other forms of gambling, of which there are many in this country.

We have heard a lot in recent times about gaming clubs, "chemmy" parties and the like. Crockfords is a child in the art of gaming compared with the Chancellor. But the Chancellor has a much bigger stake in gambling than anyone else. His 33 per cent. income from football pool tax represents a far larger income to him than that of those who are concerned in the organisation of gambling, whether Crockfords or anyone else. If he is concerned in saving this particular form of gambling from which be derives such an important revenue, he must not tax it out of existence, as he seems to be doing.

The other person who ought to be protected besides the Chancellor is the punter. As one who does a little bit of punting myself, not with considerable success, I am getting a little "fed-up" swith the situation in which so much of the Is. I invest in a football pool is taken away in taxation. The football pools are admitted on both sides of the House to be one of the most innocent forms of gambling. We do not hear of homes being disrupted and men leaving their wives as a result of a flutter on a football pool. Yet, in this comparatively innocent form of gambling, out of every Is. a punter invests the Chancellor immediately takes 4d.

In addition, I hope that my right hon. Friend will seriously consider the trouble that he is causing the Postmaster-General, who is losing a tremendous amount of revenue as a result of the decline in football pool betting. Not only does the punter invest his money; he must also buy a postal order, so that the Post Office reaps the benefit both of poundage and postage. Football pool betting has thus proved a great source of revenue to the Post Office as well as to the Chancellor.

In these circumstances, I would have been happier if my right hon. Friend had seen fit at this stage not to raise the level of taxation to this grossly high figure of 33 per cent. I would have thought that some reduction was justified. If it is justified in the case quoted by the hon. Member for West Ham, North, it is even more justified in this case.

I know that it has been argued that the Chancellor is engaged upon a review of all forms of gambling, and that in due time he will pay some attention to this matter. But we were told that twelve months ago. We were assured that the Chancellor had his eye on this and would see that some fairer system would be introduced. There is an old saying: Live the horse and you will get grass; While the grass grows the horse dies. That is true of football pool betting.

We are told that if we go on a little longer perhaps a more equitable system will be introduced. But, meanwhile, the decline in football pool betting will result in a considerable loss of revenue. I urge my right hon. Friend to recognise that he is subjecting the football pools to a most savage and penal rate of taxation, quite unjustifiable in equity.

It is quite unfair that this form of gambling should be subjected to this extremely heavy taxation while other forms, with the exception of greyhound racing, go scot free. It is unfair to the Chancellor, to the Postmaster-General and, worst of all, to the poor punter.

Mr. Rees-Davies

A sterling effort is always made on their behalf, but whether it be whisky, cigarettes, or football pool duty that is concerned, our hearts are fairly hardened—at least, mine is. My attitude is that it is the job of any Chancellor to get what he can from all three. These are the standard things in which a Chancellor has a very great interest.

If it were not for our vices, we could not run this country at the standard we expect. What a terrible day it would be for the country if people gave up smoking, drinking whisky and betting on the pools. All the people who live a good life would have to pay the taxes which are at present paid by those who enjoy these practices.

But I want to turn to the practical element here. I do not support my hon. Friend the Member for Southend, East Sir S. McAdden) in asking for a reduction in the football pool betting tax. But I do support the case of the greyhound industry for a reduction, and I had the opportunity of a long discussion with my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) on this subject when he was Chancellor of the Exchequer. I sought to establish to the Treasury, and I think with a certain modicum of success, that to reduce the dog tax from 10 per cent. to 5 per cent. would result in recovering the whole of the lost tax within two to three years. I think that that argument appealed to the Treasury and it is the argument to which I now propose to apply my mind.

9.0 p.m.

Any betting man knows what is the maximum which can be regularly taken from him while still enabling him to go on betting. Dog race attendances are not as regular and as steady as they ought to be because the punter soon realises that they are not worth his while. He cannot have taken from him 16 per cent. of his total investment on every race and then expect to win, unless his information is remarkable, or unless he is well in with the trainers, and even then he would probably lose.

The maximum he can take out of the till in betting is 10 to 11 per cent. all in. This is as applicable to horse racing as it is to dog racing. With greyhound racing 6 per cent, is taken away for operating costs and in respect of the totalisator and the reasonable profit upon that—and this operates at every track as a matter of the Act of Parliament which so provides—and then there is the 10 per cent. Stafford Cripps tax, making 15 per cent. Last year and the year before that produced a revenue of about £6 million, which is not very much.

If the tax were reduced from 10 per cent. to 5 per cent. and there were the same turnover, at first sight that would appear to constitute a loss to the Revenue of £3 million. However, if my hon. Friend looks at the figures for dog racing attendances between 1945 and 1950 he will see that they were nearly twice what they now are and that the revenue then being achieved was potentially higher. As, today, there is a higher expenditure on the amount invested per bet than there was in those days, I am personally satisfied that certainly within two years at least part if not the whole of that £3 million would be recovered. I do not ask for this provision today. I want to see it carried into effect next year, when the rest of this matter is cleared up. I agree that hon. Members have raised this matter year after year. I have always stuck to my view that there should be some taxation of betting, and I still maintain it. There should be some on the Tote.

Now let me turn to another matter which has a direct bearing on this issue and which should be considered at the same time. I am not dealing with the legal side, but the dog tote has as yet another disadvantage which has not been mentioned. The dog tote, by tradition if not by law, applies only on the track, whereas with horse racing there are tote investors off the track. Today, the tote investor can open the betting shops and can draw money off the track as well as on. It is important that that should also apply to the dogs, because this is one of the pleasant vices which we enjoy and from which the Government derive revenue.

It is, therefore, right that my hon. Friend the Economic Secretary should now turn his great mind to these matters from having dealt with mere unit trusts and things of that kind and should apply his commercial judgment to them, it is only on the test of commercial judgment that I put forward a case about betting and gaming right through the field.

There are twin problems here—how to widen the scope to enable people to bet easily upon the totalisator, and how to ensure that the Government take the right proportion—neither too much to discourage people from going dog racing, nor too little to get their proper return. I think that 5 per cent. is about right. That does not mean that it is about right for horse racing, because they have a disadvantage which does not apply to greyhounds. Out of their tote, which is a 10 per cent. take, they have to make provision for veterinary services, for research to assist breeding, and other matters like that, and, therefore, the money does not go as direct profit.

If we were to add 5 per cent. tax on to that 10 per cent. it would mean taking 15 per cent. on horses, which would be far too much. Some other method has, therefore, to be found to get the equivalent of about 10 to 11 per cent.—which is the maximum the punter will continue to pay without realising that he is inevitably losing far too much—if we want to get what can reasonably be taken from those people who supply the money. This is not the same as with whisky, where people buy one bottle and no more. Betting is a recurring thing. It is dealt with on a daily basis. As I once tried to point out to my hon. Friend the Member for Kidderminster (Sir G. Nabarro), one cannot just go sailing on in this difficult field.

I fully endorse what my hon. Friend the Member for Southend, East so wisely said. He has great knowledge of this matter. The man who ought really to be having a go at the Chancellor of the Exchequer is the Postmaster-General. It is bad luck on the Postmaster-General that, having laid on the necessary postal services to deal with the pools, he receives a decreasing revenue from the post which comes in every week and a fall in the turnover figures which he would expect to get from those who engage in betting on the pools. This is the real cream, and he should feel satisfied at being able to provide these extra facilities which we expect from the Post Office.

People are beginning to wake up to the idea that they ought not to continue betting on the pools. I like gambling, but I have never had a bet on the pools, because when I heard that 25 per cent. was being taken I told myself that I could not win and, therefore, there was no point in betting on them. This has got into the public and it has to come down to about the 25 per cent. mark. I agree with the difficulty of dealing with this, and I appreciate that it is too late to deal with it this year, although I hope that the regulatory effect will come off it. I hope that this will be borne in mind, just as I hope that the whole question of the regulator may come up for consideration before this year is out.

Bearing that in mind, I would counsel the Government in all these matters to be hard and practical businessmen and to be what hon. Gentlemen opposite often criticise us for being, that is, businesslike, and make solely commercial judgments of what they can reasonably extort from the public for these pleasures which, let us be honest, we all know provide the basis of the social services in this country.

Mr. du Cann

My hon. Friend the Member for Southend, East (Sir S. McAdden) enunciated what seemed an admirable principle when he said that speeches in the House should be both clear and short. I shall endeavour to follow his excellent example.

First, I wish to quarrel with the hon. Member for West Ham, North (Mr. A. Lewis), who said—I am not sure if he meant it—that all the great events, without exception, take place at Wembley. I think that many who are familiar with events at Murrayfield, Hurst Park and Lords, if I may mention that place today, would most strongly disagree.

Mr. Lewis

I said the best events.

Mr. du Cann

The hon. Member now corrects his statement and says that the best events take place at Wembley. But I think that there are many places where excellent events take place. He also said that most of the Government were at the Derby. I am sorry to disappoint him, but I was not there.

We are discussing two new Clauses. One—Abolition of pool betting duty on bets on dog racecourses—is in the name of the hon. Member for West Ham, North, who has taken a consistent interest in this matter. He is quite right to make the point for he has been a great champion of the dog tracks over a long period. The other new Clause—Reduction of pool betting duty—is in the name of my hon. Friend the Member for Southend, East, who also has been consistent in his attitude to these matters over a long period. I should also say how grateful we are to both hon. Members and to my hon. Friend the Member for Isle of Thanet (Mr. Rees-Davies) for having brought these subjects again to the notice of the House.

There certainly is, without any doubt, as the hon. Member for West Ham, North acknowledged, a growing feeling that betting should be taxed. I remind the House that my right hon. Friend the Chancellor said in his Budget statement: gambling is a form of expenditure which should contribute towards the rising cost of social and other Government expenditure."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 587, c. 465.] The hon. Member used those words himself and my hon. Friend the Member for Isle of Thanet made the point in even more graphic terms.

The hon. Member for West Ham, North was entirely right to remind the House of the debates which took place last year. They were answered, as he reminded us, by my hon. Friend the Financial Secretary, who undertook, on behalf of the Government, that a review of the whole subject of betting would take place. In those circumstances, the hon. Member said, some of the arguments put in Committee were not then pressed to a Division. The comprehensive review has been proceeding and a very great deal of work has taken place. I think that the hon. Member will remember, in particular, the debates that we have had on this Finance Bill with particular reference to Clause 2, in which I was very much involved and in which my hon. Friend the Member for Isle of Thanet also took part.

In Clause 2 of the Bill now before the House, we are seeking additional powers to obtain information. To date the House has been good enough to agree in general that we should have those powers. The point, put very shortly, is this. We have had earlier experience of taxing betting, in 1926 to be precise. That experience was unhappy. We are, therefore, entirely determined on two things.

The first is that, although there may be legacies of the past as the hon. Member explained and to which my hon. Friend the Member for Southend, East referred, we are not prepared this year to take any kind of piecemeal action whatever. Nor are we prepared to take any sort of action which is in any sense precipitate.

I am perfectly certain that the House would complain—and complain justly and rightly and with very good reason—if we had introduced a tax in order to satisfy this growing feeling to which hon. Members have given expression and yet had to do it without having full information before us, to such an extent that the tax might not be as effective as it may well be if we decide to introduce new, varied and different taxes in due time. I am in no doubt about this whatsoever.

I agree with my hon. Friend the Member for Isle of Thanet, who said that the time for action in these fields is next year rather than this year. Perhaps I should mention the figures involved. If we were to accept these two new Clauses the cost in respect of that dealing with abolition of tax on dog racing betting would be £5¾ million and the cost in respect of that dealing with a reduction of pool betting duty would be £7 million. If, while I am on the subject, I may be permitted to deal with certain other points, I should say that we are not entirely clear that reductions in taxation are necessarily the most pressing need. The hon. Member for West Ham, North spoke of discrimination. I shall not comment in detail on that, other than to say that the point he made and the point made by my hon. Friend the Member for Southend, East has certainly been noted.

On the other hand, there is a body of opinion which feels that perhaps the need is to level up rather than to level down. Be that as it may, the hon. Member for Southend, East introduced a most ingenious argument when he suggested that the law of diminishing returns was applying because of—I quote him—the high rate of tax on pool betting and that the Chancellor might do better in the long run—a point which was emphasised by my hon. Friend the Member for Isle of Thanet—if the tax were reduced, as he would make up the revenue eventually.

9.15 p.m.

That point is certainly noted. I do not dissent from the view expressed by my hon. Friend the Member for Thanet when he said that it may be impossible to rule out all discrimination and that it may be appropriate to have discrimination in taxation on one form of betting by comparison with another. It is too early to be definite about that.

I suggest that it would be wrong to adopt a selective approach to what is acknowledged to be an extremely difficult and complicated matter. The points so clearly made by the three hon. Members who have spoken will be recorded and noted by us. We shall bear them in mind. I cannot comment, in particular or in general, on what form taxation may take in the future until my right hon. Friend has completed his comprehensive review. I am sure that it is right to have that review and to pursue it actively, as I assure we the Committee are doing.

In these circumstances, I must advise the House to reject the new Clauses. I hope that in the light of what I have said, the hon. Members concerned will not press them.

Question put and negatived.


  1. (1) The following provisions of this section shall have effect to provide information for determining whether, and in what manner and to what extent, it is expedient to amend the law so as to disregard for purposes of taxation expenditure incurred for political purposes or to disallow such expenditure in the computation of profits or gains.
  2. (2) Any person not exempted from the operation of this subsection who in the year ending with July 1963 incurred expenditure for political purposes shall before the end of August 1963 notify that fact to the Commissioners of Inland Revenue in this section called "the Commissioners".
  3. (3) Any person not exempted from the operation of this subsection who in the year ending with July 1964 incurs expenditure for political purposes shall unless he has previously given a notification under this or the foregoing subsection notify the Commissioners, within one month after the date on which he incurs the expenditure, of the fact that he has incurred it.
  4. (4) Any person required to give a notification under the foregoing provisions of this section shall within such time and in such form as the Commissioners may require furnish the Commissioners with such information as to the amount and date of the expenditure concerned, the description and character of the political purposes, the person or persons receiving any money or other benefit from the expenditure, and other matters as the Commissioners may by notice require.
  5. (5) There shall be exempted from the operation of subsection (2) or, as the case may be, of subsection (3) of this section any person who, being an individual, incurs expenditure for political purposes not exceeding the sum of one hundred pounds during the year mentioned in the relevant subsection and who, if required by the Commissioners to furnish them with a declaration to that effect, does so furnish them.
  6. (6) The Commissioners, if satisfied in any case that there is good reason why anything required to be done by or under the foregoing provisions of this section cannot be, or was not, done within the time limited by or under 1254 these provisions, shall extend the time by such period as appears to them to be required.
  7. (7) Any person who fails to give the notification required by subsection (2) or (3) of this section, or to comply with any other requirement of the foregoing provisions of this section, shall be liable to a penalty of one hundred pounds, and if after conviction of a failure to furnish any particulars or information, the failure continues he shall be liable to a further penalty of ten pounds for each day on which it so continues.
  8. (8) In this section "expenditure incurred for political purposes" means expenditure incurred, whether for a consideration or otherwise, for the purpose of promoting or opposing changes of the law, including expenditure incurred in support of or in opposition to a political party or candidates for a parliamentary election, but not including any expenditure required to be returned under section 69 (return as to election expenses) of the Representation of the People Act 1949—[Mr. Callaghan.]

Brought up, and read the First time.

Mr. Callaghan

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

The Clause has the intention of securing information about the expenditure for political purposes by corporate bodies and by individuals so that a little daylight may be let into the murky background of Conservative Party finances. The Conservative Party alone among the political parties has consistently refused to publish any accounts. No one knows the sources of its finances No one knows where it gets its money. Now and again we get a small indication when there is a row and somebody resigns from some so-called industrial council protesting at the way in which money is being spent on Conservative propaganda, but, broadly, no one has ever been able to persuade the Conservative Party to tell us what are the sources of its finances. When in power the Conservative Party has always insisted that trade unions and other such bodies should indicate very clearly how they raise their money and how they spend it.

I am not surprised that there is a great deal of wariness on the part of the Conservatives to reveal the source of their own finances, but we thought that if we could not persuade the Conservative Party to tell us the source of their finances, there might be something to be said for starting at the other end and seeing what the sources of the finances are, so that if we cannot get combined accounts, the nation may at least be able to see what is going into the coffers, even thought we do not see what comes out.

We have been assisted in our proposal by the Chancellor because, rather unusually in a Finance Bill, he introduced a Clause, Clause 2, in order to provide himself with information about gaming, and he is laying a requirement upon those concerned with gaming to supply information to the Commissioners showing the extent of gaming, where it is done and in what way it is done, so that at the end of the day, when he has acquired all the information which is appropriate, he can decide whether there is a case for taxation. We thought that this would be a very appropriate thing to do in connection with political expenditure, especially by public companies, and we are grateful to the Chancellor for giving us an opportunity to put down a Clause which, I should like to advise the House, is based almost wholly upon his new Clause.

We think that, if it is a good thing to get information about the extent of gaming, there is much to be said for getting similar information about the amount of expenditure on political purposes by bodies outside the House. We should like to prise out of the Conservative Party, if we can, or at any rate out of its backers, what it is they are trying to do. There is something unhealthy and furtive about secret contributions to political parties in exchange for favours which may or may not be given.

Let us have a look at some of the sources of Tory cash. The best known is Aims of Industry. Quite apart from that body, there is another which has been unearthed by the Observer called "British Industrialists Association Limited". This is a very remarkable body. It numbers among its most powerful backers television—the chairman of Associated Television Ltd., Sir Robert Renwick, is a leading shareholder in British Industrialists Association Limited—cement manufacture, the steel industry, the domestic appliance business, machine tools and private banking.

What contributions do these people make to the Conservative Party, and in exchange for what favours? It is something which the public would be well advised to ask and to know the answers to. We have had a very interesting development over the last few years in television. Every one of us in the House has seen the pressure that has been exerted upon the Tory Party by the television interests. Every one of us has seen the lobbies which have been devised by the television interests for the express purpose either of getting favours for themselves or of changing the Government's mind in order that they should pay less tax and less revenue to the Government. Are these people the paymasters of the Government? They have been successful to the extent that they have got set up a second channel. Millions of pounds have gone into the coffers of the television interests, and everybody knows it. Whatever investment they have made in the Tory Party has been well repaid, even though some of them are now getting so greedy that they are not ready to accept what they get.

The chairman of British Industrialists Association Limited is Sir Robert Renwick, who is the chairman of Associated Television Ltd. British Industrialists Association collected a lot of money before the last General Election. Ninety per cent. of that money, or 90 per cent. of the money which was collected by its predecessor, with the same address but a slightly different name, went to the Tory Party. I had better be strictly accurate about this. It was not then called British Industrialists Association Limited. It was called "United Industrialists Association", but it was the same body; it had the same address and the same telephone number; only the notepaper changed. Ninety per cent. of all the money it collected was handed over to the Tory Party. I think it ought to be acknowledged, however, that it gave 5 per cent. of it to the National Liberal Party and the other 5 per cent. went to Aims of Industry, that well-known non-political body which is concerned only with preaching economic truth.

It would be in the interests of public life in this country if it were known what money is going into the coffers of British Industrialists Association Limited and whether it is indeed passing it on to the Conservative Party. We know that great efforts are being made now to col- lect money from industrialists. Some of my hon. Friends have seen some evidence of it in their constituencies, and they may tell us about it later. We know what efforts are being made to repair the ravages caused by Government policy. We do not know how far they will succeed. We know that the Government are willing to make use of any secret source of finance in order to achieve their objectives and it is about time they came clean on this score.

We are not saying in the Clause that these contributions should be forbidden but merely that they should be known. We say that people are entitled to know what British industry is doing in this sphere, just as the trade unions are required to make their information known. Let us consider what the trade unions are required to do. Section 3 of the Trade Union Act, 1913, states: The funds of a trade union shall not be applied, either directly or in conjunction with any other trade union…in the furtherance of the political objects to which this section applies…". This shows that trade unions must not use their funds in this way. But the profits of a company may be used in this way. If one is a trade union officer and wishes to indulge in the support of a political party or political candidate one must first of all ballot one's members. No one ever takes a ballot of the shareholders of a public company to inquire whether or not they wish to do this. Having taken a ballot of one's members in a trade union and having secured a majority, one must then set up a separate fund. I have not yet heard of one of the large companies setting up a separate political fund, having ballotted and secured the assent of their shareholders.

The trade union fund for this purpose must be kept separate. I have never heard of that happening in a public company. Further—and the Conservative Party has made a great deal of this—if any member of a trade union wishes to contract out of payment to such a fund he may fill in a form entitling him to do so. Is any shareholder entitled to fill in a form to contract out of his share of the responsibility for the contributions that are made by his company? Having done that, the trade union must then account in detail to the Registrar General of Friendly Societies for every halfpenny it pays out. There is no requirement on a public company to do anything remotely like this.

Public companies, on the other hand, specifically deny their shareholders this sort of information when they are asked for it. They all use a formula, which is, "We do not disclose the details of individual transactions. We do not think that it would be right to give to one shareholder what we do not give to others". There may be something in that. We wish to remove that disability by making this information available to us all.

I have with me, supplied by my trade union, the form which one must fill in and which contains the information which must be given to the Registrar General of Friendly Societies when a trade union decides to set up a political fund. All the information is then public and any hon. Member opposite can obtain a copy of the information by merely going to the office of the Registrar General of Friendly Societies. He will then be supplied with the details of every halfpenny expended by the union for political purposes.

The form seeks information about organisational grants to Parliamentary candidates, local affiliations, by-election insurance funds, fees to delegates at conferences, Festival of Labour expenditure, summer school fees and expenses, British-Asian Socialist Fellowship, conference expenses, grants, bonuses, printing, stationery, Income Tax, meetings, speakers, the National Council of Labour College summer school, and bank charges. Every item is there and every item is open to scrutiny by the Registrar General of Friendly Societies. When will we get the same degree of honesty from some companies?

If hon. Members opposite want to fight a political battle fairly, what are they prepared to do to see that the requirements made of public companies which indulge in political activities are at least as stringent as those imposed on trade unions? What is the difference? If a trade union is required to disclose all this information, why should the same criteria not apply to public companies which subscribe either directly or through the funds of another activity to the funds of the Conservative Party?

They do not do it directly; they are too discreet for that. They set up middlemen—and Sir Robert Renwick, chairman of Associated Television, is the principal of the middlemen—who then tout around these companies securing contributions that are eventually to be passed on to the Conservative Party. A great many industrialists would prefer not to contribute, but feel that they must do so. There is a sort of protection racket going on at the present time—the Tory protection racket. Industrialists feel that they must contribute even though they dislike the policies of the Tory Party almost more than we do. Everyone knows what happens.

9.30 p.m.

The foolish, or incredible, argument sometimes used on the opposite side is that if this information were known these companies might be intimidated. They are intimidated now. They are intimidated into supporting Tory Party funds whether they want to or not, because it is known to their fellow industrialists whether or not they do contribute. Let no one tell me that if this information were made public, and we all knew where public companies stood on this issue, a Labour Government might intimidate them; that we might frighten them, and abuse our position.

Can the House imagine the scene when the Labour Government decided to take some action against Associated Television, and Sir Robert Renwick, trembling in his board room, saying, "I live in daily fear of what the Labour Government will do to me"? I know what would happen. The news bulletins of Associated Television and all the rest, and all their programmes, would be full of disguised propaganda about what was going on.

These people control the source of communications. They are not intimidated. The real trouble is that so many people do not realise how the source of communications is controlled. It is foolish to assume, or to say, that these bodies would live in fear of what a Labour Government might do to them.

What is their purpose? The purpose of British Industrialists is …to originate and promote improvements in the law and to support or oppose alterations therein, and for the purpose aforesaid to petition Parliament. Cannot hon. Members imagine them coming to the Bar of the House? But why should they come to the Bar of the House when they have the ear of Ministers in the Cabinet room?

The purpose is also to …take any other legal steps and proceedings which may be deemed expedient. If that is its object and what it is set up to do—to alter the law and to promote improvements in the law—for whom is it to be done?

If that is the purpose, let us have it above board, let us know what is going on, and let us see what are the sources of finance. We can then detect where the pressures are coming from, because if one thing is clear about the Government it is that they continually succumb to pressure, and to pressure from sources that are hidden. Time after time we have seen the way in which the Government have curbed public policy to suit their own supporters. I suppose that all Governments are the victims of pressure groups, but at least let those pressure groups be in the open.

The lobbyists in the United States have to register as such. Very stringent precautions are laid down to ensure that, even though lobbying goes on, the public may know who the lobbyists are. In this country they act in a subterranean manner. They knock on the back doors of Ministers' rooms—perhaps they do not even have to go there. They may summon the Ministers to come to them, for all I know—that would not be unheard of. We are living in an unhealthy situation, in which a great deal of private pressure is being applied to the policies of the Government and the people do not know the source of that pressure. We should let in a little fresh air.

The purpose of the Clause is to provide, first, that the Commissioners shall have the power to require those who make such contributions to declare them. It will then be possible for the Chancellor of the Exchequer—and, if he publishes the results, for the House and the country—to see just how much money is involved, and to decide what action, if any, should be taken. We know, and it has never been challenged, what action was taken before the last General Election. We know that in the 12 months leading to September, 1959, £1½ million was spent by these companies. More money was spent by these groups of companies before the last election than was spent by every candidate of all parties during the election. During the course of the election itself all candidates, successful and unsuccessful, spent only £1 million. These are the hidden persuaders and it is right that they should be dragged out in the open.

I do not know what the Chief Secretary to the Treasury will answer to this, but let him be quite clear about the case which I am making. I am not making the case that these companies and individuals should be denied the right of making contributions. I am making the case that if they do subscribe in this way they should be known.

The General and Municipal Workers' Union, the Transport and General Workers' Union, the Amalgamated Engineering Union and the National Union of Mineworkers and any other body affiliated to the Labour Party makes a contribution to the party, but the amount is known. Hon. Members may argue that there are local contributions which cannot be known. A great deal of contributions are made at local level and this would be equally true of the Conservative Party, but at least we know the national position. We do not know the national position of the Conservative Party and I do not believe that the party wants us to know.

Mr. Martin Maddan (Hitchin)


Mr. Charles Loughlin (Gloucestershire, West)

Will my hon. Friend give way?

Mr. Callaghan

I will give way to my hon. Friend and then, in fairness, I must give way to the hon. Member for Hitchin (Mr. Maddan).

Mr. Loughlin

I only wanted to try to correct what may be a wrong impression in connection with local trade union donations. Each branch of a national trade union has to provide a yearly balance sheet stating quite clearly what has happened to its money. This is required by law.

Mr. Callaghan

I am grateful to my hon. Friend. I did not mean that it was not known at local level. We all know about the balance sheets. I meant that they are not aggregated at the centre, but I am glad that my hon. Friend has put it on record that they are known locally.

Mr. Maddan

The hon. Member has based all his case on the fact that the people whom he alleges subscribe to the Conservative Party influence the party improperly. He particularly quoted Sir Robert Renwick, chairman of Associated Television, and he gave the example of the failure of the Government to agree to a second I.T.A. channel. Does the hon. Gentleman not know that among the "big four" Associated Television alone had been wanting that channel, and is not all his argument just a load of nonsense?

Mr. Callaghan

Not at all. All it shows is that they are getting a little too greedy and even the stomachs of Cabinet Ministers in the Conservative Party can become queasy after a time. They have had a great dollop of cream out of this country in the last few years.

When this matter was last discussed in the House we had a reply from the then Home Secretary who is now First Secretary. We were then making the point, which I am afraid is hopeless and we can never expect to get the Government to agree to it, that the Conservative Party should publish its accounts. We have given that up. We know perfectly well that it would never dream of doing anything of the sort and therefore we are moving to the next point.

My right hon. Friend the Member for Smethwick (Mr. Gordon Walker) specifically raised then the contrast which I have raised with the trade unions, though perhaps he did not go into it with a great wealth of detail. The Home Secretary replied, and I think that hon. Members will detect the typical individual note of the form of that reply. He said: I have been asked why there cannot be a similar regard for what companies do in relation to their shareholders. I refer the House with all sincerity to the investigation into company law being undertaken at present by Lord Justice Jenkins. We must await the conclusion of his Report, because this is part of the general remit to the Committee… It is covered. That is, in part, the answer to some of the apprehensions expressed today."—[Official Report, 21st July, 1960; Vol. 627, c. 797.] In a typical way, he rode off it.

I have here the Report of the Jenkins Committee. I wonder whether the Chief Secretary can refer me to any paragraph in it which deals with this problem. I cannot find one. I have looked very carefully through it, but I can find nothing. I fear that the apprehensions which the then Home Secretary observed still remain with us, so the Chief Secretary will have to find a better answer than a non-existent paragraph in the Jenkins Report if he is to satisfy us.

The only passage in the Report which touches slightly on this matter, though not directly, is on page 43, where the Jenkins Committee, having examined a number of complaints from shareholders, makes recommendations to increase the flow of information passing from directors of companies to their shareholders, suggesting a number of means to enable shareholders to know a little more about what is being done in their name.

I am very happy to help the Jenkins Committee and to help shareholders. Here is a way by which shareholders could find out or could be told what was being done in their name, without their consent, perhaps against their will, in furtherance and aid of a party to which they may themselves be opposed.

How does the Chief Secretary propose to deal with this situation which bears so unfairly upon the trade unions as compared with public companies in this country? If he would like to remove, as the Conservative Party has endeavoured to do over so many years, the impression that it rests on big business, and is supported by bigbusiness, he can make a start by providing for the revealing of the sources of its finance. If big business chooses to tell us what its funds are used for when it is financing political objectives, we shall begin to know for certain to just what extent the Conservative Government rest upon big business, draw their support from big business and are, in fact, beholden to big business for so much of what they do.

Mr. J. Grimond (Orkney and Shetland)

I approach this matter with a certain amount of impartial partiality. I see about me millionaires on every side, and I feel wonder, tinged a little with envy. I was impressed by the exposition of the hon. Member for Cardiff, South-East (Mr. Callaghan) on the dis- closure made by the trade unions, and I accept it. I say, in passing, that, if it wanted to come with absolutely clean hands in this matter, the Labour Party might, perhaps, consider contracting in instead of contracting out. But I do not wish to press that now.

I shall pursue the matter from a slightly different standpoint, a standpoint touched on by the hon. Gentleman but not forming part of his main theme. I say this in ail seriousness. I cannot see how one can maintain that shareholders in a company should not be informed of the contribution which the company makes for political purposes. In every company there are many shareholders who are not members of the Conservative Party. They may not want their money to be used for politics at all. They may be Liberals, Socialists, or Scottish Nationalists. How one can possibly justify the contention that these people should not be informed of the contributions made by the companies of which they are shareholders, I cannot understand.

The Clause deals exclusively with expenditure for political purposes, and I think that there is a striking difference between the obligations laid upon trade unions and those laid upon limited companies. Personally, I would carry it further. There are many purposes, of which I wholly approve, for which companies give money, such as research and the arts, but I still say that they should make it perfectly clear in their balance sheets that they are making these donations. I should have thought that this was the elementary right of the shareholders. I am sometimes slightly surprised that they can reconcile the purposes laid down in their memorandum and articles with the donations which they undertake.

9.45 p.m.

I believe that this is a serious matter and that it has become much more serious because, forty or fifty years ago, political parties and many other activities in this country could be supported by voluntary contributions made out of people's personal funds and their income. That is becoming more and more difficult. Limited companies are taking on a lot of the work which used to be done by individuals. They support the Conservative Party directly or through the Aims of Industry and other bodies which have been mentioned, and they support many other things as well. In these circumstances, it is only right that they should show to their shareholders how they are using the funds and profits of the company.

Whether we approve of the purpose or not, if public companies are to play an active and, in some ways, dominant part in the life of this country we should know what they are doing, and I am very sympathetic to the point made by the hon. Member.that in politics, in particular, it is very important to know where the real source of power and finance lie. As I have said, although I have some envy of the Labour Party, we know from where its finances come and can draw our own conclusions as to whether or not it is influenced by the trade unions. Sometimes I think it is.

I beg the House not to treat this entirely as merely a party point. The part which public companies—and I admit to being a shareholder myself—play in the life of the country and the question of where power, influence and finance lie are important. I do not want to get out of order, but it is becoming more and more important as the electoral law becomes largely a dead letter in this respect, because funds can be used long before an election campaign starts and immense pressure can be brought to bear on the opinion of the country long before we are aware of being in an election campaign at all.

I therefore ask the Government to consider this, matter seriously from the political level as it is put in this new Clause and also on the broader level of the responsibility of public companies in this country and of how we want our politics to be conducted.

Mr. Dick Taverne (Lincoln)

Since the Tate and Lyle case, the floodgates in this matter have been opened wide. In 1951, the expenditure by companies for political propaganda purposes was considerable, but by 1959 it had risen to a very large sum indeed, as my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) pointed out. It rose to £1½ million, which was revealed by Butler and Rose, in their book on the last General Election, to be four times the amount spent on advertising by the Conservative Party.

A number of points arise here. Some of them have been made already. I would very much endorse the point made by the right hon. Member for Orkney and Shetland (Mr. Grimond) that this constitutes a danger to democracy. The rôle of propaganda can, of course, be overemphasised. It is not all important, but it is very important, and we recognise this fact in our electoral law, which limits the expenditure of candidates. It is absolute nonsense to say that the expenditure of candidates must be limited, but that the expenditure which has a much more direct influence by propaganda throughout the nation should be unlimited and completely lopsided.

It is true that this proposal does not aim to restrict the amount of expenditure, but undoubtedly if, as a result, legislation emerges which prevents the deduction of this kind of propaganda expenditure for tax purposes it will lessen it. There is a danger to our democracy if this expenditure continues to expand.

Secondly, who finances this propaganda? This propaganda is financed by two sets of people: first, shareholders, but, secondly, as a result of the Tate and Lyle case in 1955, it is clear that it is financed not only by shareholders, but also partly by taxpayers. This is inexcusable and monstrous. It means that Labour and Liberal taxpayers indirectly contribute to a propaganda campaign which, in effect, is directed in favour of the Conservative Party.

Mr. R. Gresham Cooke (Twickenham)

Would not the hon. Member agree that if the whole purpose and ownership of the company is being taken away by political action the shareholders are perfectly entitled to spend money in protecting their interests?

Mr. Taverne

It is clear that the hon. Member did not see the basis on which the 1955 decision was reached. The argument was rejected that the purpose was merely to protect shareholders, and if it had been something merely to protect the owners it would not have been allowed as a deduction for tax purposes. The hon. Member's intervention is, therefore, entirely faulty in law quite apart from anything else.

If one looks at the matter, not from a technical or legal viewpoint, but factually, it is clear that the purpose of this expenditure as a whole, through the companies which have been mentioned, is to persuade people to vote against a certain party. I wrote a letter to The Times on this subject and I had a reply from Aims of Industry, to which, unfortunately, I could not reply publicly because my further letter coincided with the period when the correspondence columns of The Times were taken up with a certain moral question, and I had a polite letter from the editor explaining why my letter could not be published.

In the course of its letter, however, Aims of Industry stated that its action was defensible for two reasons, following a number of earlier points that were given. The first was that it was no more than was happening in the case of people contributing to trade union funds or bingo drives, or people who buy party-line newspapers. That is absurd, for two obvious reasons. Anybody who contributes in these ways knows where his expenditure goes and can contract out, whereas shareholders in a company have no option of doing so. They do not know where their money goes and they cannot contract out.

Secondly, the point was made that the expenditure was non-political, as the hon. Member for Twickenham (Mr. Gresham Cooke) has suggested. This is true only in the sense in which Conservatives often claim that they are non-political. This expenditure is part of the Conservative campaign at the time of General Elections and it can be called non-political only in a Primrose League sense.

The new Clause makes clear what, in common sense, we understand by political and non-political If the Clause is passed, the matter would become clearer to the public. It would become open and above board. In local politics, we insist with the strictest rules that people should declare any interest which they have. In national politics, it is not by any means possible to have quite the same degree of openness. Let us, however, have at least some openness. Let us know what influence is being exercised on particular parties and on a particular Government, because it is a fundamental principle of healthy democracy that this sort of thing should be known and should be above board.

Apart from anything else, there is a clear case for amending the law as was established by the Tate & Lyle case. That decision was reached only with the greatest difficulty, with two eminent law lords dissenting. In this case, to clear up the matter would not only be an advantage from the viewpoint of the Chancellor of the Exchequer, but is fundamental to the requirements of a healthy democracy.

Mr. Donald Chapman (Birmingham, Northfield)

My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) has tonight put a brilliant case. He expressed the feelings of many decent people. There is something unhealthy, unpleasant and murky in this part of our political activity.

Mr. Richard Marsh (Greenwich)


Mr. Chapman

My hon. Friend is quite correct. I am very proud of British democracy, but if there is one aspect which in other countries can be criticised as being less than the standard which we ought to be setting, it is this one—if there is one at all.

To the brilliant case which my hon. Friend made I want to add only two footnotes. He was slightly mistaken in saying that the Jenkins Committee did not report on this matter. What happened was that that Commitee examined the matter, but, unfortunately, ran away from it. The Committee's Report says, in paragraph 53, that the matter had been reported to the Committee and that the Committee had thought about it. Finally, it says that these donations have never reached the sort of magnitude which needs an express instruction to companies to publish them.

But the Committee was running away from the problem—for two reasons. In some companies it has reached noticeable proportions. One iron and steel company spent £250,000 supporting the Tory Party campaign before the last General Election. Another spent a similar sum. We know from private information that many companies spend £60,000 to £100,000 on these matters. [Laughter.] An hon. Member opposite laughs. But these are not insignificant figures. They are about a fifth of what all the Conservative Party spent as individuals in the campaign at the last General Election. If that is not significant in its impact on democracy, I should like to know what is.

The Jenkins Committee is to blame because it ran away from the problem and gave us no guidance whatever although the Home Secretary had said, in 1960, that it would do so. The blame rests squarely on the Jenkins Committee. In the absence of any guidance from it, we are now entitled to go back to what was said by the then Home Secretary, now the First Secretary, as quoted by my hon. Friend—that we should await the outcome of the Jenkins Committee. As the Jenkins Committee has given us no guidance, we are entitled to say that the Government must now take up at the point where the right hon. Gentleman left off in I960. The Government must make their own judgment and not prevaricate on the issue any longer.

As a second point on the Jenkins Committee, it also said that if the donations ever got so large, it expected—it did not put it at all forcibly—that some duty would be put on the companies to publish something about them under Section 149(1) of the Companies Act, 1948. I should like to ask the right hon. Gentleman about that Section, which states that the profit and loss accounts must give a true and fair picture of the expenditure of the company in the past year. The Jenkins Committee said that, in its view, included in this was the need under that Section to give the figures for political expenditure if they reached any magnitude. I should like to know what is happening about that Section.

I know of many companies which are wilfully disguising their expenditure on political purposes under other headings under that Section. It is about time that this aspect was dealt with. If the right hon. Gentleman will not tell us anything on our main proposition, he ought at least to be able to tel1 us that the operation of the Section will be looked at to ascertain whether the law is being applied. My view is that companies are wilfully avoiding that Section and distributing their expenditure on political activities under such headings as "advertising", "miscellaneous", "printing" and "contributions to charitable organisations". They use every term but the true one under that Section.

It is about time that the Section was properly enforced by the Government and companies were forced to give, in the words of the Section, a true and fair picture in their annual profit and loss account of where the money is going on matters like this.

10.0 p.m.

The second footnote I would add is this. I refer to the debate that took place in 1960, when this whole issue was discussed. I want to remind the House of what the hon. Member for Devon, North (Mr. Thorpe) said on that occasion. He quoted to us two examples of companies to which someone of his acquaintance had written to ask, as a shareholder, where the money was going. He read part of the replies from the two companies, which are a scandal if ever there was one, of the way in which the shareholders and the public are treated.

The British Ropes Co.—this ought to be of interest to the Financial Secretary, because it is within his constituency of Doncaster—and the South Africa Co. both replied in letters to a shareholder who wrote saying, "I am a shareholder in your company. I want to know what you spend on political purposes", that it would not be in the interests of the public or the shareholders to give this information to him as a shareholder.

How ridiculous can this situation be? This situation has been repeated on other occasions, as my hon. Friend said. In fact, it amounts to this: there is a wilful conspiracy to hide this not only from the public as a whole, but from the immediate people most entitled to the knowledge, the shareholders of the individual companies concerned.

In the circumstances, we are absolutely entitled tonight not to have a party reply. We can have some party knockabout on this, but the decencies of our public life are involved in this issue and the reputation of British democracy. It is important that after we have had the knockabout stuff which we always expect from the Chief Secretary—we will allow him that and laugh with him as he makes it—we should have a serious reply, first, about the crucial issues involved in the operation of the Companies Act and, secondly, about the proper rights of individual shareholders in a democracy. I congratulate my hon. Friend on introducing a first-class new Clause. I am sure that hon. Members on this side will support him.

Mr. Maddan

We have just heard it said that there should be a serious reply from the Treasury Bench. I have been waiting to hear a serious case made by the Opposition. I do not intend to detain the House very long. The hon. Gentleman the Member for Birmingham, Northfield (Mr. Chapman) gave some quick figures relating to companies giving a certain amount of money for certain purposes and as I did my mental arithmetic and added them up they came to approximately half the total amount of which the hon. Member for Cardiff, South-East (Mr. Callaghan) complained. I do not see what can be so secret or subversive or disgraceful about the present situation.

I want to make a point about the speech of the hon. Member for Lincoln (Mr. Taverne), who said that companies were spending money to persuade electors to vote against a certain party. I wonder which party. Just supposing that it is the Labour Party, in whose interest is that? Is it in the interest of the party opposite, or of the Conservative Party, or of a party not represented in this House at all?

If a case is to be made out, then it must be made with a great deal more evidence and logic than the case made by the Opposition this evening. The only reason for disturbing the status quo is the claim that it is being abused. I want to emphasise what I said in my intervention in the speech of the hon. Member for Cardiff, South East. It was very late in his speech and, therefore, perhaps not quite as relevant as it would have been if I had been able to say it when I first rose to interrupt him.

The hon. Gentleman said that these contributions were used as leverage on the Government. When asked to give an example, the best he could say was that the chairman of Associated Television had improperly persuaded the Government to grant a second channel for commercial television. But Associated Television is the company which has pre-eminently wished to have such a channel. The hon. Gentleman s case was, however, that television companies did not wish to have such a channel.

The more I listened, the more I enjoyed the gusto with which hon. Members opposite attacked this subject—at least, they seem to have found something which they can treat with gusto—the less impressed I was with the case.

Mr. Loughlin

I do not intend to keep the House for more than two or three minutes. I am delighted that the speeches of my hon. Friends have excited at least one hon. Member opposite enough to get him to his feet. As my hon. Friends spoke from this side of the House, hon. Members opposite seemed to get very excited, but I was beginning to feel that, whilst they were getting excited, they were still not prepared to try to defend the existing position.

I want the Chief Secretary to deal with the position simply. References have constantly been made over the years to the expenditure of trade union funds for political purposes. I am an official of a trade union and it has never tried to hide the fact that it pays substantial sums of money into Labour Party funds so that its members can get some advantage.

The trade union movement recognises that the Labour Party continues the industrial struggle on the political field. It is as simple as that. The unions, both nationally and through their branches, have consistently paid into Labour Party funds for that purpose. There is nothing secret about it, but we have had to face tremendous criticism from hon. Members opposite over the years. There has always been this constant barrage of criticism of the trade union movement for paying into Labour Party funds. We have had the contracting in and contracting out argument which the right hon. Member for Orkney and Shetland (Mr. Grimond), the Leader of the Liberal Party, trotted out again tonight.

The trade union movement operates on a democratic basis, and if the majority of the members of a trade union determine that they shall contract in, in the sense that they will affiliate to the Labour Party, that should be sufficient for the members of a corporate body. I would go further and say that we have been pushed into this—that at least our members can contract out.

What has been happening on the other side of the medal over the years was brilliantly exposed by my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan). Over the years, companies have been paying substantial sums of money into Tory Party funds for the sole purpose of securing political advantage, and for no other reason. One of my hon. Friends said that it was corrupt. I do not think that it is. The only corruption is the attempt to hide what is going on.

The companies cannot apply two standards of conduct. They and hon. Members opposite, who collectively represent many companies, have argued that trade unions should be exposed for contributing to the Labour Party, but if it is right for trade unions to be exposed to the fullest possible investigation about the spending of the money of their members, it is equally right that when companies enter this field they, too, should be subject to the same exposure.

I defy any hon. Member opposite—and I will sit down at once if the intervention is desired—to give a single reason why there should be anything secretive about a company spending money for political purposes by making a contribution to the Tory Party. It is done in devious ways. It is often not a direct contribution but is made to the Aims of Industry organisation, and companies have been contributing to the Economic League for years.

I warn right hon. Gentlemen opposite, because this is tied up with so many things, that there is now a public awareness of what is going on. There is now public concern about the suggestion that faceless men are controlling the Tory Party for nefarious ends. [Interruption.] I wish that hon. Members opposite would be a little more patient. I am not saying that it is so. But if I accept that the trade union movement has a right to pay into a political party so that its aims can be considered, the companies who believe in the Tory philosophy have the same right. I am not arguing that they should not. What I am arguing is that once newspapers like the Observer and other allegedly quality newspapers start investigating, as they are doing, one can bet one's bottom dollar that there is public awareness of it.

10.15 p.m.

I do not want to enter into the question of morality, but before hon. Gentlemen opposite resist this proposal I ask them to ask themselves whether, if I am a shareholder in a company—and I assure hon. Gentlemen opposite that the only shares I have are in the local Co-operative society; and I think I have a couple of £s in it—I would have the right to know whether the money in that company is being distributed by donations to the Tory Party? If hon. Gentlemen opposite argue that a trade unionist has a right to determine whether his 10d. a quarter—because that is what it amounts to in my union, the Union of Shop, Distributive and Allied Workers; every member pays 10d. a quarter into a political levy—shall be paid or not, the same measuring rod must be applied to every shareholder in a company. If the trade unionist is circumscribed in this way, and if the trade unionist has a right to determine what should happen to his money, a shareholder in a company should have the same right.

We talk about democracy, but if there are hidden persuaders, if there are allegations that people are contributing money so that they can get a bigger slice of the lolly that is going, we ought to know about them. Heaven knows that since 1959 there has been some lolly paid out by the Government to industries controlled by companies; it is, therefore, very easy to argue that they are doing it for the purpose of getting public money in return.

The Chief Secretary has left the Chamber for a moment or two. If the right hon. Gentleman and the Financial Secretary want to face this issue at all, I ask them to face it in a simple way. There cannot be two standards. The standard which applies to the trade unions should apply equally to private companies.

Mr. Raymond Gower (Barry)

The party opposite has made a vigorous plea in favour of this new Clause.

Mr. Bence

And a confident one.

Mr. Gower

The hon. Member says that it is a confident plea, but I have greater doubt about its confidence than I have about its vigour.

The point that is made is that if this information were published, and revealed in this way, this would ensure a greater sense of democracy in our political institutions. The basis of the argument is that if these details were furnished in this way, less money would be spent by this means. I respectfully suggest that the hon. Member for Cardiff, South-East (Mr. Callaghan) and his colleagues are attacking the symptoms and not the real, underlying causes. They could get rid of this problem in most cases merely by refraining from bringing forward policies which threaten the very existence of these industries.

I have no particular objection to the publication of many of these details. I am quite convinced that most of these companies, after a full and open consideration of the issues involved, would openly come down in favour of such expenditure if they thought it was for the protection of their very existence. The whole point about this very badly drafted new Clause is that it defines in a most vague, and, I think, a dangerously extensive way, the sort of political activity which hon. Members opposite have in mind.

I certainly should have very little objection to the publication of direct contributions to political parties, but that is a very different thing from saying that when a company deems that its future existence is threatened in this way and decides to take certain steps, either alone or with other companies in an industry, or in a group of industries, it is doing something wrong or basically unsound. In my submission, it is very wrong to suggest that this necessarily is political activity.

Mr. Marsh

If it is neither wrong nor is it political activity, what harm would be done in allowing the shareholders to know what is happening?

Mr. Gower

I have already said that I had very little objection to publication of details of contributions to political parties. My objection is to the classification under one general Clause, not only of that kind of contribution but of all other kinds of contributions which the hon. Member has in mind and to calling all these things, under one general heading, political activity. It is a measure of the desire of hon. Members of the Opposition to make a very large mountain out of a molehill—[Hon. Members: "Oh."] An hon. Member opposite has mentioned a figure. He now says that he referred to the amount of expenditure over a very wide field. Hon. Members opposite could accomplish this far more effectively—

Mr. Loughlin

We shall do.

Mr. Gower

—by simply not bringing forward policies which threaten the very existence of certain companies.

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

The hon. Member for Barry (Mr. Gower) is obviously very hurt and very angry. He, I thought, was seeming to criticise the vigour with which the case had been put from this side of the House, but, whatever else his own speech lacked, it certainly was not vigour.

I refer to the last sentence spoken by my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin), who asked rhetorically, why should there be two standards—one for the Conservative Party and one for the trade union movement? Surely the answer is that there are in fact two standards, there are two sets of priorities and always have been, and it is not a question of all the right being on one side and all the wrong on the other. Debates of this kind have taken place before. They have been noisy and undignified and never seemed to be like a discussion because the two sides have not been speaking the same language.

One of the great strengths, and at the same time great weaknesses, of the Labour movement is its obsession with correct procedure. It is part of our history that when self-educated men were building up the trade movement or the Co-operative movement, or local government when they began to take a part in that, they had to work out the rules for themselves. Everyone on this side of the House knows that we have our "Outlawries Bill" and our "Consolidated Fund".

There is one way in which one can speak in the Labour movement—that is, to move the reference back of the report of the Standing Orders Committee. Anyone dealing with procedure is all right in the Labour movement. This is sometimes a weakness but it has also been a great strength. My hon. Friend the Member for Gloucestershire, West referred to the rules of his union on accounting for expenditure on political purposes. They were laid down in a Parliament of a different political colour, but I do not think that his union would object to them, because this kind of procedure has always been accepted in the Labour movement, as anyone will appreciate who has heard the secretary of the social committee present the balance sheet of the money collected at the last rummage sale.

As I have said, there are two standards. Among Conservatives there is a hurt indignation and a feeling that such questions as these are faintly indecent, implying suggestions of dishonour which are contrary to the Conservative Party's tradition. The party bases its traditions on the belief that its members are born to rule and that nobody should question their methods. There are certain duties incumbent on their supporters, contributions of money ought to be made confidentially, and nobody should inquire how the money is raised or spent. A good old crusty Tory is deeply offended by the very suggestion from this side of the House that the source of the money should be revealed. He does not understand what it is all about. The party has been following its procedure for centuries.

I am surprised that, as a matter of form, we have not present the Minister of the Crown who is still affectionately known on the other side of the House as the Patronage Secretary. He is the centuries-old expert of this department of Government, and that is why his office exists. I am not certain whether the Chief Secretary now is his superior, but in any event the Chief Secretary will speak on behalf of the Chancellor, and I am more likely to get a reply from a Treasury Minister to the questions which I want to ask, particularly about the law as it affects persons. The Clause refers to persons as well as to companies, although most of the heat in the debate has been engendered on the subject of companies.

The Clause would have some extremely complicated results in respect of persons, and I should like the Chief Secretary to sort them out straight away. If not the Chief Secretary, then the Patronage Secretary is aware that in Admiralty House on 5th July a lunch will be held, in the terms of the invitation "to meet the Prime Minister."[Hon. Members: "Which one?"] That is how it is phrased. It is not stated how long the lunch will last, or how intimate and personal the social side of it will be, but the person who issued the invitation is Mr. Ronald Simms, who will speak to those present on "The Conservative Party and the next General Election."

These gatherings have been held before, so that the Patronage Secretary or the Chief Secretary will be able to answer my questions with no difficulty. This is a regular process of raising money for the Conservative Party. Those who are invited to lunch are wealthy people who are assumed to owe a debt of gratitude to the Conservative Party. They are to meet the Prime Minister. Mr. Ronald Simms will tell them what is wanted out of them, and the only question which they have to answer is, "How much?" This has been going on for many years.

This implies a complicated job for the Inland Revenue. There is the question of the Prime Minister's personal allowance for entertainment expenses. This comes out of his salary. It is difficult to see at a glance exactly how the cost of this lunch will be met, but in any case it seems that a good deal of it will be paid by the taxpayer; not this time by a shareholder but out of, I suppose, the Consolidated Fund. I do not know. Or this might be a new form of virement.

10.30 p.m.

At any rate, it is obvious that no one can reply from the Treasury Bench on a proposition of this kind and to a new Clause of this kind unless he makes quite clear what would be the effect of the Clause on the existing method of assessing how far personal expenses of this kind are allowable for this purpose, how far various emoluments are given to the public service, and how much of them could be allowed for purely party money raising activities of this kind.

I hope and believe that the Chief Secretary will be able to explain this, in the calm terms which I would expect from him, as part, as I say, of a centuries-old tradition. My hon. Friend said there are two standards. There are two standards, and the two different sides of the House uphold them. There is something not altogether respectable about Tory standards. That is the impression which does tend to gain ground, but I am sure that old-fashioned Tories believe that it is their perfect right to have a Patronage Secretary, living, in normal circumstances, next door to the Prime Minister—as he has done over the centuries—to carry out the same kind of duty with dignity on a confidential basis, and that that is the right way in which such a party should be kept in power.

Mr. Ron Ledger (Romford)

I intervene only because a number of hon. Members on this side of the House have referred to large organisations or to large companies which donate large sums for political purposes and because the obvious answer from the other side was that they do this only because they are scared of being taken over. I intervene because there are many thousands of pounds being donated by small firms, and I would relate to the House how I happened to find out how this was going on in my constituency.

A notice appeared in the local paper inviting industrial organisations to join the Romford Industrial Council. I was most surprised to hear that this council was being formed because I thought that industry in Romford was being pretty well served by its M.P., so I bothered to investigate a little. To my surprise, as a result of those investigations one industrialist came to me with a complaint. He had applied to join this industrial association only to find that, indirectly, he was expected to donate to the Conservative Party. I did not investigate any more fully because there were enough things to do and I gathered, anyway, that they were not going to continue with the build up of that organisation but would continue with it in the next constituency.

I heard nothing more until I received from the agent of the Conservative M.P. in the next constituency a letter dealing with a perfectly normal matter, but I noticed that by strange coincidence I got a very similar sort of envelope, and when I opened the letter I found it was, again, from the Conservative Party agent. I read it quickly, and to my astonishment it was inviting me to donate £50—[Hon. Members: "Hear, hear."]—to the Hornchurch and District Industrial Association, and informed me that this would give me the right to four lunches or dinners at the House of Commons—[Hon. Members: "Oh."]—at which at least a junior Minister would be present to speak, the balance from this sum of £50 to go to Conservative Party funds.

I mention this because it might well be that, if only by mistake, the Minister will accept this Clause, and then he will want to know how to look into the accounts to find the sort of expenditure we are talking about. It will not obviously be a donation to the Conservative Party. In this case in the accounts it will be a donation to an industrial association, but in fact at least four-fifths of the total amount will be a donation directly to the Conservative Party, and I defy any hon. Member opposite to say that this would not be for political purposes. I have made this short intervention only because these matters have not been mentioned.

Mr. Callaghan

Would my hon. Friend allow ms to quote what the chairman of the Industrial Council of Romford says? The chairman of the Industrial Council of Romford is a Mr. John Lockwood, who will be remembered as a former Conservative Member of Parliament. Speaking about this Industrial Council he says this: The Council does not aim to give any industrial help. Its main aim is to provide money for the Conservative Party.

Mr. Ledger

My hon. Friend was quite right to intervene. The point here is that, first, there is the bribery on the part of the Conservative Party, which is bad enough—

Mr. Denis Howell (Birmingham, Small Heath)

On a point of order. Is not my hon. Friend raising a matter which, if the facts are true, is a breach of privilege? Must it not be a breach of privilege if in fact—

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

Order. If the hon. Member is concerned with a breach of privilege, this is not the right time to raise it.

Mr. Ledger

At this moment I am not all that concerned with a breach of privilege, but I will consult my hon. Friend about it later. The main point I want to make is that the expenditure for political purposes on the part of industrial organisations will not be obvious from the balance sheet, and I have reported this instance to show that there is a deliberate deceit on the part of companies in trying to hide from the public the fact that they are spending money supporting the Tory Party.

Sir Peter Roberts (Sheffield, Heeley)

I think that the hon. Member for Romford (Mr. Ledger) strayed somewhat from the beaten track in his remarks, as he seemed to object to one party or the other trying to get private subscriptions into its coffers. I also think that the hon. Member for Paddington, North (Mr. Parkin), who has to be much more careful about straying from the beaten track, did somewhat stray.

I rise to my feet because of the inconsistency between the speeches of the hon. Members for Gloucestershire, West (Mr. Loughlin) and Birmingham, Northfield (Mr. Chapman). As I understood it, the hon. Member for Gloucestershire, West said that it was perfectly proper for the majority of those in the trade union movement to vote for a political levy. Personally, I would agree with him. However, the hon. Member for Northfield quoted the case of some shareholder in some company the name of which I have forgotten who appeared to be a minority shareholder. What the hon. Member is saying is that, in his view, a minority shareholder should have the powers under some legislation here today to over-weigh the majority. If the hon. Member for Northfield had any logic whatsoever in his case, he should be able to say that the majority of the shareholders of a company could go to their annual meeting, vote out the board, and put in another board which would tell them all the facts they wanted. It is absolute nonsense for hon. Members opposite to claim the democratic principle on the one hand and not to claim the democratic principle on the other.

Mr. Loughlin


Sir P. Roberts

No. If I may say so, the hon. Member was a little more democratic than was his hon. Friend the Member for Northfield, so he will do well to keep his place.

A great deal of information might be given in this debate. If the hon. Member for Cardiff, South-East (Mr. Callaghan) is to reply to the debate, as I hope, his answers to certain questions might assist the Conservative Party. Is it the intention of a Labour Government, if they ever get into power at some far-distant date, to nationalise the steel industry? [Hon. Members: "Yes."] We are entitled to know. Is it the intention of the Labour Party, if it gets into power, to nationalise the road haulage industry? Come on—we want to know. Is it the intention of the Labour Party to nationalise the insurance industry? [Hon. Members: "No."] We should like to know.

Mr. Callaghan


Sir P. Roberts

Just a moment. I believe that if the hon. Gentleman will answer those questions, this debate will have been very worth while.

Mr. Callaghan

As the hon. Member has asked me those questions, and as I have the opportunity to reply later, may I put this to him? If I undertake to reply to his questions, will he undertake to tell me how much his company and the other steel companies have contributed to various organisations for political purposes?

Sir P. Roberts

I will undertake to let the hon. Gentleman know the amount my company spends.

Mr. Bence

This use of company funds one way or the other is one of the most serious issues facing the country today. It may be that, 40 or 50 years ago, many of the people running British industries were the largest owners of those industries, but industry today is run by professional managers on behalf of boards of directors representing an increasingly smaller number of concentrated institutions. For instance, many right hon. Gentlemen leave the benches opposite and become directors, not of one company but of a dozen companies, or 20, and then spend about 48 weeks in the year going round getting funds for the Tory Party. This is happening, and we know it.

In British industry, we have profit sharing. A trade unionist who works in a factory where that system operates gets a shareholding in the concern. He is a member of a trade union that is affiliated to the Labour Party, and he contracts in to pay a political levy—in my own union, the levy amounts to 2s. per year, and one can contract out. But the directors of the company, who may be members of the Tory Party and members of many other companies, too, can use their position on the directorate to contribute the trade unionist's money, as a shareholder, to the Tory Party.

There is no ballot. Nobody suggests that the shareholders should be balloted whether the money should be used for the benefit of that party. A director of a company may be someone who has lost his seat as a Tory Member, and has been given that directorship. Let us have ballot papers issued to the workers, the shareholders, in the company, to decide whether or not they shall make a political contribution of £20,000 a year to the Tory Party, the Liberal Party or the Labour Party. Let us have the three nominations on the ballot paper. These people are not spending their own money in aid of any political party or organisation; they are spending other people's money—the workers' money, the shareholders' money. They have no right to do it.

10.45 p.m.

I hope that when, before long, we on this side of the House are the Government, company law will be so amended that information about all moneys spent by public companies is published in a clear form so that everyone can see where the money goes. I sat in a man's office in my constituency and he showed me a letter. I have never read anything like it in my life. I wish that I could have pinched it and read it out to the House. It was almost a demand from the Tory Party for funds. [An Hon. Member: "What is wrong with that?"] It was wrong because of the terms of the letter. It was almost as if the man had been obliged by tradition to pay a tithe. It was the tradition of the Middle Ages in the form of a feu duty and a tithe on his revenue. It was a sort of protection racket. This is the kind of thing that is going on. It is about time that the whole system was ended. It is absolutely discreditable in the twentieth century.

Mr. Denis Howell

May I draw my hon. Friend's attention to the little racket which he will recall is operated by the Tories in Birmingham? They send round a black book to the small shopkeeper bearing at the top the name of an industrialist who had contributed a few hundred pounds and the note, "Please enter your name and we will send the book to the next small shopkeeper," so that everyone in the area knows who has and who has not contributed.

Mr. George Brown (Belper)

In America people are put in prison for doing that.

Mr. Bence

No doubt my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell) could reiterate many stories of what happens in Birmingham with the Tory Party. I was in Birmingham for many years and I know very well that there was a great deal of intrigue to obtain recruits and money for the Tory Party. It is more difficult to do that there now than it was many years ago. The best thing the Tories can do in Birmingham is to concentrate on collecting the necessary funds against losing their deposits when there is a three-way contest.

If the Clause cannot be accepted, I hope that when we have the report on company law that law will be reformed so that those who have a stake in an industry, workers and shareholders, shall be informed about the money the company is spending, whether on political parties or any other purpose. In most industries this is public money in the true sense, and where public money is handled all sections of the public are entitled to know how, where and for what purposes it is being spent. I have to tell how I spend my money to satisfy the Inland Revenue. It is unjust that directors of companies can use company funds and direct them to any political party, no matter which, or to extraneous purposes outside their articles of association and their business. This is a disgrace to a democratic society.

The Chief Secretary to the Treasury and Paymaster-General (Mr. John Boyd-Carpenter)

I was a little surprised at what the hon. Member for Dunbartonshire, East (Mr. Bence) has just said in his peroration. He said that he had to tell the Inland Revenue how he spent his money. Unless the hon. Gentleman is claiming that the way he spends his money is a way which enables him to deduct that money in the computation of his income for Income Tax purposes, in which case it is right that he should be required to tell the Inland Revenue, it is a surprise to me that he should have to tell the Inland Revenue or anyone else how he spends it.

In view of the course which the debate has taken, the House may, perhaps, be interested to come back to the words of the new Clause.

The opening words of it are: The following provisions of this section shall have effect to provide information for determining whether, and in what manner and to what extent, it is expedient to amend the law so as to disregard for purposes of taxation expenditure incurred for political purposes or to disallow such expenditure in the computation of profits or gains. When I first saw this on the Notice Paper, I was subject to two conflicting reflections. By one I was reminded of the way we are adjured at the beginning of every Parliament to put the best possible construction on each other's motives. By the other I was reminded of the agreeable and somewhat volatile character of the hon. Member for Cardiff, South-East (Mr. Callaghan). Although I came to the conclusion that, on the face of it, this was intended to be a new Clause designed to prevent any loss to the Revenue through claims for deductions for tax purposes which should not be made, I suspected that we should have, in fact, precisely the sort of debate which we have had.

The hon. Member for Lincoln (Mr. Taverne) was, I think, the only hon. Member actually to refer to taxation at all in this context. It would be an appropriate gesture on my part if I were to single him out for priority in reply. I thought that he was completely wrong—I cannot carry the civilities much further—when he referred to the contributions made to political parties as being financed by taxpayers and to the flood-gates being open. This is simply not so.

On the question whether a contribution to a political party is an allowable deduction or expense for tax purposes, the law, as I understand it, is perfectly clear since the Tate and Lyle case, namely, that in general such contributions to political paries are not allowable as a deduction for tax purposes. The basic rule is that expenditure is not deductible in computing profits unless it is wholly and exclusively—words which will not be unfamiliar to hon. Members—incurred for the purposes of a trade or profession.

It follows that no allowance is due, in computing profits, for payments for political purposes such as contributions to political or party funds or electoral expenses. All that is allowable under the Tate and Lyle decision is—I am deliberately using imprecise language from the lawyer's point of view—expenditure when the existence of a company is thought by its board to be menaced.

Here, because I think that he had not got them in mind, I remind the hon. Member for Lincoln of the words of the noble Lord, Lord Morton of Henryton in delivering the leading opinion in the House of Lords: My Lords, apart from authority I should have no hesitation in answering the question just posed in the affirmative. Looking simply at the words of the Rule, I would ask: if money so spent is not spent for the purposes of the Company's trade, for what purpose is it spent? If the assets are seized, the Company can no longer carry on the trade which has been carried on by the use of those assets, Thus the money is spent to preserve the very existence of the Company's trade".

Mr. Taverne

Does not the right hon Gentleman's case rest entirely on his misinterpretation of my argument? Is it not a fact that, in the Tate and Lyle case, the expenditure which was allowed to be deducted for tax purposes was expenditure in the course of the campaign organised by Aims of Industry?

Mr. Boyd-Carpenter

This is the reason for the decision. I have read the extract from the leading opinion in the case, which goes on to point out that there is no authority to the contrary, because the noble Lord in that passage says "apart from authority".

The money was spent to preserve the very existence of the company's trade. All the way up in the case, the courts—and in the processes of our law, it went through four different tribunals—upheld the view that whereas general contributions to political parties are not admissible for this purpose, where it is a question of the defence of the very existence of the company and of its trade, they are, for the reason given by the noble Lord, plainly spent in the interests of the company. We start, therefore, on the basis—

Mr. Taverne

Will the right hon. Gentleman give way?

Mr. Boyd-Carpenter

Not again at this stage.

Mr. Taverne

The right hon. Gentleman is wrong.

Mr. Boyd-Carpenter

It is no use the hon. Member saying that I am wrong, because I quoted the actual passage from Lord Morton.

Therefore, we start on the basis that the great bulk of the contributions which we have been discussing tonight—and whether rightly or wrongly made, I am not at the moment and on this point concerned—are not allowable as a deduction for tax purposes and are, therefore, not at the cost of the taxpayer.

Now, we come to the real purpose of the Amendment as it was disclosed by the hon. Member for Cardiff, South-East. He said several times that it was the intention that the shareholders should know whether their money was being given to political parties. That was repeated by the right hon. Member for Orkney and Shetland (Mr. Grimond), although, I thought—I do not speculate as to the reasons—rather more hesitantly. The Liberal Party, I am told, does not do too badly in the City.

Mr. Grimond

If I may rely on the right hon. Gentleman's assistance, I shall be glad to take him up on this afterwards.

Mr. Boyd-Carpenter

I would always assist the right hon. Gentleman in a good cause, but I somehow doubt whether it would come within that definition. As he says, we can discuss it agreeably afterwards.

The practical point is that the new Clause would not serve that purpose. It proposes that the return should be made to the Commissioners of Inland Revenue. The hon. Member for Cardiff, South-East will know, because he once served the Inland Revenue, and the hon. Member for Sowerby (Mr. Houghton), if he is present, will know well, that information given to the Inland Revenue about individual taxpayers is not published or released. Indeed, it is a basic principle, supported by the oath taken by officers of the Inland Revenue, that it is not disclosed.

Therefore, while, no doubt, the Clause would serve the purpose which it purports to serve—of permitting consideration to be given to a deduction for tax purposes, which, on the whole, does not exist anyhow—the purpose for which, we are told, it is really intended would not be served by it, because, on the basis not only of Inland Revenue practice, but of the Inland Revenue oath, the facts about an individual taxpayer's tax position—the taxation he pays, what he is allowed for tax purposes and the information furnished to the Revenue under Revenue powers—is not disclosed.

Therefore, whatever value the Clause may have for its purported purpose—which, as I have explained, is very small—the value which it would have for the real purpose behind it is absolutely nil. Consequently, we have spent a considerable time tonight suggesting that the House of Commons should enact something which would not have the effect that those who wish to enact it want.

That has the agreeable consequence that it does not necessitate a speech of any great length from me. [Hon. Members: "Hear, hear!"] I am glad that I carry the House with me on that point. It is always agreeable, particularly at this late hour of the night, so to do. However, I will pick up one or two of the points which were raised because as others have had a bit of fun I suppose it would be churlish to deny it also to me.

There was a very interesting point in the speech of the hon. Member for Cardiff, South-East when he talked about television interests and suggested that there was a sinister connection between the alleged contributions of television magnates to the Conservative Party and the existence of independent television. Perhaps he would tell us whether the Labour Party, if it came to power, intends to abolish independent television or not.

An Hon. Member

What has this to do with the subject?

11.0 p.m.

Mr. Boyd-Carpenter

It has this to do with it. It has been suggested that the contributions of these magnates have in some way caused independent television to be provided. Therefore, if it is really thought that an improper thing of that sort has brought independent television into being, no doubt the hon. Gentleman, in his highly scrupulous mood tonight, would wish to clear the whole thing out of the way and abolish independent television. I shall have even more fun watching the hon. Gentleman fail to answer that question.

We had a great many speeches about how unfairly trade unions were treated compared with companies.

Mr. Callaghan

It was the other way round.

Mr. Boyd-Carpenter

No. On the contrary, it was how unfairly trade unions were treated compared with companies.

Mr. Callaghan

The right hon. Gentleman has the argument quite the wrong way. I think that trade unions are treated fairly. That is to say, they have to make a full disclosure of what they do. It is companies' shareholders who are treated unfairly, because they cannot know.

Mr. Boyd-Carpenter

I am obliged to the hon. Gentleman, because he is now making it clear that he thinks that trade unions are in a privileged position. [Hon. Members: "Oh."] That is what he said. As a matter of law, he is quite right, since the Trade Disputes Act, 1906, put them specially in a privileged position in law. Therefore, the hon. Gentleman is simply not comparing like with like, because he was dealing in this context with bodies which, as he agrees with me, are given a position of special privilege in law and have had that for over fifty years.

Therefore, simply to say that one should equate the position of companies with the position of trade unions is to fall into the ordinary logical fallacy of not comparing like with like. There is not a single trade union which would wish to forfeit the very great advantages it has under the law by changing its status to that of a company under the Companies Act. If any trade union were to come to that decision, its leaders would, I think, require their minds examined.

Mr. G. Brown

Give the shareholders the same privilege.

Mr. Boyd-Carpenter

The right hon. Member for Belper (Mr. G. Brown) has not been present during most of the debate.

Mr. Brown

I have been here a long time now.

Mr. Boyd-Carpenter

Not through most of the debate. I have no doubt that it seemed a long time to the right hon. Gentleman, but if he had been present throughout the debate he might have thought that it was even longer. What the right hon. Gentleman is now doing is to ask for privileges for shareholders. So far as I know, I have not been asked for them by shareholders. This is rather a curious attitude for the Labour Party to adopt. It is not normally so tender to shareholders.

Of course, the debate itself has had a singular element of unreality. It has been conducted as if all great parties do not require and obtain substantial contributions to maintain their party organisations. Hon. Members opposite know perfectly well that their own organisation, with the very expensive advertising campaign it has recently undertaken, and with its considerable corps of professional officers, is a highly expensive thing to maintain. Even the Liberal Party has quite a set-up whose secretariat, as the hon. Member for Huddersfield, West (Mr. Wade) told us earlier, spends its time looking up methods of tax evasion.

Thus, the central fact of the debate has been its unreality, because the whole suggestion of hon. Members opposite has been that their organisation does not depend, as we all depend, on a very large measure of contributions. The idea of the Labour Party now coming forward at this stage as the champion, as we have been old, of the shareholders is one of the things that will cause the biggest laugh of the year outside.

Mr. Callaghan

I do not know whether I would have leave of the House to speak again. [Hon. Members: "No."] Very well. But I think that some hon. Members said "Yes" and some "No."[Interruption.]

Mr. Deputy-Speaker

Order. I hope that there will be no dubiety about it. If objection is taken the hon. Gentleman cannot speak for a second time. May I assume that leave is granted by the House? [Hon. Members: "Yes."] Then I call Mr. Callaghan.

Mr. Callaghan

I am much obliged. I will not take long. It seemed to me that the Chief Secretary gave away the whole case in his final remarks. He is a very skilful debater, but his reply was rather laboured.

The right hon. Gentleman referred, very properly, to the highly expensive publicity campaign the Labour Party is carrying on. That is true. We are spending more on propaganda than we have ever spent in the past. But everybody knows about it, and everyone will know exactly how much we spend, because it will be published in the accounts. Can the right hon. Gentleman say the same of the Conservative Party?

What is well known about this is that before the last General Election at least four times as much was spent on advertising by bodies supporting the Conservative Party but not affiliated to it in supporting its campaign as was spent by the party itself. This has been demonstrated and never denied. If the right hon. Gentleman cares to deny it now, he can do so.

It is also well known, and I challenge him to deny it, that before the last election there were conferences between important industrial organisations on the one side and Conservative Party headquarters on the other to decide which should undertake certain parts of the propaganda and how the division of expenses and labour should be made. I challenge him to deny that.

Mr. Boyd-Carpenter

They are entitled to do it.

Mr. Callaghan

Perhaps they are. I am not saying that it is wrong. I am saying that we are entitled to know—and that is a phrase which will be familiar to him. We are entitled to know exactly how these funds are raised, and shareholders are entitled to know how their money is being spent.

The Chief Secretary has refused utterly to concede that there is any merit in this Clause. I agree that it goes only part of the way. The Chancellor of the Exchequer would know and would be able to form a judgment on the basis of the Clause—

Mr. Boyd-Carpenter


Mr. Callaghan

I will give way when I have finished the sentence. The Chancellor would be able to form some judgment on the basis of the information collected as to the extent of the expenditure by companies and others for political purposes which is not known now. That would at least be a distinct advantage.

Mr. Boyd-Carpenter

It is all very well for the hon. Member to say that, but when I sought to interrupt he was saying that it was the shareholders of each individual company who were entitled to know. The new Clause would give them no more information than they have at present.

Mr. Callaghan

I was coming on to that. As those hon. Members who were in the Chamber when we started the debate will know, the Clause is based exactly on Clause 2 of this Finance Bill, which is related to gaming and which provides for the Chancellor to know what the position about gaming is before he takes certain decisions. We are suggesting exactly the same thing in connection with political expenditure. We are suggesting that the Chancellor should first assemble the information. After that it would be possible to decide whether legislation was necessary on the basis of all the facts assembled instead of all the deductions which may have been made.

If the right hon. Gentleman's only objection to the Clause is that it does not do what we want it to do, namely, give the shareholders the right to know, he can easily draft a better. Would he like to assist us to do that? Have we con-

vinced him of the merits of the case? Does he think that there is a case for the shareholder knowing? He did not answer that question in the debate. Does he think that there is a case for the company telling its shareholders?

Mr. Boyd-Carpenter

It has nothing to do with the Clause.

Mr. Callaghan

It is to do with the Clause. The Chief Secretary has roamed as widely as anybody else, but I am sure that he will be forgiven if he gives the answer to that question.

Mr. Boyd-Carpenter

It has absolutely nothing to do with the Clause or the Bill.

Mr. Callaghan

That sort of evasion is the last refuge of a Minister who cannot answer a question because he does not wish to do so.

The hon. Member for Sheffield, Heeley (Sir P. Roberts), the Master Cutler, asked me certain questions about our policy. I will be glad to send him free of charge, gratis and for nothing a copy of Signposts for the Sixties in which he will find clearly set out what we intend to do when we have won the next election.

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

The House divided: Ayes 129, Noes 169.

Division No. 145.] AYES [11.13 p.m.
Abse, Leo Fletcher, Eric Lee, Miss Jennie (Cannock)
Ainsley, William Forman, J. C. Lewis, Arthur (West Ham, N.)
Allaun, Frank (Salford, E.) Fraser, Thomas (Hamilton) Loughlin, Charles
Allen, Scholefield (Crewe) Galpern, Sir Myer Lubbock, Eric
Awbery, Stan (Bristol, Central) George,LadyMeganLloyd(Crmrthn) McBride, N.
Bellenger, Rt. Hon. F. J. Ginsburg, David McCann, John
Bennett, J. (Glasgow, Bridgeton) Gordon Walker, Rt. Hon. P. C. MacColl, James
Blackburn, F. Gourlay, Harry MacDermot, Niall
Bottomley, Rt. Hon. A. G. Grimond, Rt. Hon. J. McInnes, James
Bowden, Rt. Hn. H. W. (Leics,S.W.) Hamilton, William (West Fife) McKay, John (Wallsend)
Bradley, Tom Hannan, William Mackie, John (Enfield, East)
Bray, Dr. Jeremy Harper, Joseph MacMillan, Malcolm (Western Isles)
Brown, Rt. Hon. George (Belper) Hayman, F. H. Mahon, Simon
Callaghan, James Henderson,Rt.Hn.Arthur (Rwly Regis) Mallalieu, E. L. (Brigg)
Carmichael, Neil Herbison, Miss Margaret Manuel, Archie
Chapman, Donald Hill, J. (Midlothian) Mapp, Charles
Craddock, George (Bradford, S.) Holman, Percy Mendelson, J. J.
Crossman, R. H. S. Hooson, H. E. Millan, Bruce
Dalyell, Tam Houghton, Douglas Milne, Edward
Davies, G. Elfed (Rhondda, E.) Howell, Denis (Small Heath) Mitchison, G. R.
Davies, Harold (Leek) Hoy, James H. Morris, John
Davies, Ifor (Gower) Hughes, Cledwyn (Anglesey) Noel-Baker, Francis (Swindon)
Dempsey, James Hughes, Emrys (S. Ayrshire) Noel-Baker,Rt.Hn.Philip(Derby,S.)
Diamond, John Hunter, A. E. Oliver, G. H.
Dodds, Norman Hynd, John (Attercliffe) O'Malley, B. K.
Driberg, Tom Irvine, A. J. (Edge Hill) Oram, A. E.
Duffy, A. E. P. Irving, Sydney (Dartford) Parkin, B. T.
Edwards,Rt.Hon.Ness(Caerphilly) Janner, Sir Barnett Pavitt, Laurence
Edwards, Robert (Bilston) Jay, Rt. Hon. Douglas Pearson, Arthur (Pontypridd)
Fernyhough, E. Jones, Dan (Burnley) Probert, Arthur
Finch, Harold Jones, T. w. (Merioneth) Redhead, E. C.
Fitch, Alan King, Dr. Horace Rees, Merlyn (Leeds, S.)
Reynolds, G. W. Soskice, Rt. Hon. Sir Frank Weitzman, David
Rhodes, H. Spriggs, Leslie Whitlock, William
Robertson, John (Paisley) Stewart, Michael (Fulham) Wigg, George
Rogers, G. H. R. (Kensington, N.) Swingler, Stephen Wilkins, W. A,
Ross, William Taverne, D. Willey, Frederick
Silverman Julius (Aston) Taylor, Bernard (Mansfield) Williams, W. R. (Openshaw)
Silverman, Sydney (Nelson) Thomas, lorwerth (Rhondda, W.) Willis, E. G. (Edinburgh, E.)
Skeffington, Arthur Thompson, Dr. Alan (Dunfermline) Winterbottom, R. E.
Slater, Joseph (Sedgefield) Tomney, Frank Yates, Victor (Ladywood)
Small, William Wade, Donald
Smith, Ellis (Stoke, S.) Warbey, William TELLERS FOR THE AYES:
Sorensen, R. W. Watkins, Tudor Mr. Lawson and
Mr. Charles A. Howell.
Allan, Robert (Paddington, S.) Harrison, Col. Sir Harwood (Eye) Pott, Percivall
Ashton, Sir Hubert Harvey, Sir Arthur Vere (Macclesf'd) Prior, J. M. L.
Atkins, Humphrey Harvie Anderson, Miss Prior-Palmer, Brig. Sir Otho
Awdry, Daniel (Chippenham) Hendry, Forbes Proudfoot, Wilfred
Barber, Anthony Hill, J. E. B. (S. Norfolk) Pym, Francis
Barter, John Holland, Philip Ramsden, James
Biffen, John Hope, Rt. Hon. Lord John Rawlinson, Sir Peter
Biggs-Davison, John Hornsby-Smith, Rt. Hon. Dame P. Redmayne, Rt. Hon. Martin
Bingham, R. M. Howard, John (Southampton, Test) Roes, Hugh (Swansea, W.)
Bishop, F. P. Hughes-Young, Michael Rees-Davies, W. R. (Isle of Thanet)
Black, Sir Cyril Iremonger, T. L. Renton, Rt. Hon. David
Bourne-Arton, A. James, David Ridsdale, Julian
Box, Donald Johnson, Dr. Donald (Carlisle) Roberts, Sir Peter (Heeley)
Boyd-Carpenter, Rt. Hon. John Johnson, Eric (Blackley) Rodgere, John (Sevenoaks)
Boyle, Rt. Hon. Sir Edward Johnson Smith, Geoffrey Roots, William
Braine, Bernard Jones, Arthur (Northants, S.) St. Clair, M.
Brewis, John Kerans, Cdr. J. S. Scott-Hopkins, James
Bromley-Davenport,Lt.-Col.SirWalter Kerr, Sir Hamilton Sharples, Richard
Brown, Alan (Tottenham) Kershaw, Anthony Shaw, M.
Bryan, Paul Kitson, Timothy Sheet, T. H. H.
Buck, Antony Lancaster, Col. C. G. Smith, Dudley (Br'ntf'd & Chiswick)
Bullard, Denys Leavey, J. A. Smithers, Peter
Carr, Rt. Hon. Robert (Mitcham) Legge-Bourke, Sir Harry Stanley, Hon. Richard
Clark, Henry (Antrim, N.) Lewis, Kenneth (Rutland) Steward, Harold (Stockport, S.)
Cleaver, Leonard Litchfield, Capt. John Stodart, J. A.
Cooke, Robert Longbottom, Charles Stoddart-Scott, Col. Sir Malcolm
Cooper-Key, Sir Neill Longden, Gilbert Storey, Sir Samuel
Craddock, Sir Beresford (Spelthorne) Loveys, Walter H. Studholme, Sir Henry
Crawley, Aidan Lucas-Tooth, Sir Hugh Summers, Sir Spencer
Curran, Charles McAdden, Sir Stephen Taylor, Sir Charles (Eastbourne)
Currle, G. B. H. MacArthur, Ian Taylor, Edwin (Bolton, E.)
Dalkeith, Earl of McLaren, Martin Taylor, Frank (M'ch'st'r, Moss Side)
d'Avigdor-Goldsmid, Sir Henry McLaughlin, Mrs. Patricia Temple, John M.
Deedes, Rt. Hon. W. F. McMaster, Stanley R. Thomas, Sir Leslie (Canterbury)
Digby, Simon Wingfield Macpherson,Rt.Hn.Niall(Dumfries) Thomas, Peter (Conway)
Donaldson, Cmdr. C. E. M. Maddan, Martin Thompson, Sir Richard(Croydon, S.)
du Cann, Edward Markham, Major Sir Frank Tiley, Arthur (Bradford, W.)
Eden, Sir John Mathew, Robert (Honiton) Turner, Colin
Elliot, Capt. Walter (Carshalton) Matthews, Gordon (Meriden) Turton, Rt. Hon. R. H.
Emery, Peter Mawby, Ray van Straubenzee, W. R.
Errington, Sir Eric Maxwell-Hyslop, R. J. Vickers, Miss Joan
Fletcher-Cooke, Charles Maydon, Lt.-Cmdr. S. L. C. Wakefield, Sir Wavell
Fraser, Ian (Plymouth, Sutton) Miscampbell, Norman Walker, Peter
Freeth, Denzil Montgomery, Fergus Walker-Smith, Rt. Hon. Sir Derek
Galbraith, Hon. T. G. D. More, Jasper (Ludlow) Wall, Patrick
Gibson-Watt, David Morgan, William Ward, Dame Irene
Gilmour, Sir John (East Fife) Nabarro, Sir Gerald Wells, John (Maidstone)
Glover, Sir Douglas Nicholls, Sir Harmar Whitelaw, William
Goodhew, Victor Nugent, Rt. Hon. Sir Richard Wills, Sir Gerald (Bridgwater)
Gower, Raymond Osborn, John (Hallam) Wise, A. R.
Green, Alan Page, Graham (Crosby) Wolrige-Gordon, Patrick
Gresham Cooke, R. Pannell, Norman (Kirkdale) Woodnutt, Mark
Grosvenor, Lord Robert Pearson, Frank (Ciltheroe) Woollam, John
Gurden, Harold Peel, John Worsley, Marcus
Hamilton, Michael (Wellingborough) Pickthorn, Sir Kenneth Yates, William (The Wrekin)
Harris, Frederic (Croydon, N.W.) Pilkington, Sir Richard
Harrison, Brian (Maldon) Pitman, Sir James TELLERS FOR THE NOES:
Mr. Chichester-Clark and
Mr. Finlay.

Further consideration of the Bill, as amended, adjourned.—[Mr. Boyd-Carpenter.]

Bill, as amended (in Committee and on recommittal), to be further considered Tomorrow.