Commons Sitting of 26 June 1963

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the chair]
PRIVATE BUSINESS

  CLYWEDOG RESERVOIR JOINT AUTHORITY BILL [Lords] (By Order)
  As amended, considered; an Amendment made to the Bill.
  And objection being taken to further proceeding, further consideration of the Bill, as amended, stood adjourned.
  Bill, as amended, to be further considered Tomorrow.

  GLASGOW CORPORATION ORDER CONFIRMATION BILL
  Read the Third time and passed.
ORAL ANSWERS TO QUESTIONS
  MINISTRY OF DEFENCE

    N.A.T.O. (Ottawa Conference)
    Mr. Dempseyasked the Minister of Defence what consultations took place at the Ottawa Conference, with a view to ensuring that the North Atlantic Treaty Organisation will be capable of resisting conventional attack by the use of conventional forces.
    The Minister of Defence (Mr. Peter Thorneycroft): The proceedings of the meeting are, of course, confidential, and I cannot add to the communiqué.
    Mr. Dempsey: Is the Minister aware that, although that may be the case, there is considerable criticism from our allies that our forces are not adequately equipped to resist a conventional attack? Obviously, there might have been a leak somewhere. Does not the right hon. Gentleman agree that the proper equipment of our conventional forces is extremely important—so important that it might even prohibit the possibility of a
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    nuclear catastrophe? Is it not about time that Members received some assurance that we are making an effort to resist a conventional attack by the use of conventional weapons?
    Mr. Thorneycroft: I was at Ottawa, and I certainly did not hear any such criticism from our allies. I would draw the hon. Member's attention to paragraph 9 of the communiqué.
    Captain Litchfield: Can my right hon. Friend say whether SACLANT is satisfied that he has adequate forces to deal with a conventional war in the Atlantic?
    Mr. Thorneycroft: That question has rather wider issues, concerning conventional forces in the naval field. Perhaps we can discuss that separately.

    Independent Nuclear Weapons
    Mr. Frank Allaunasked the Minister of Defence to what extent it is the policy of Her Majesty's Government to retain independent nuclear weapons for so long as other countries possess them or have opportunities to acquire them.
    Mr. Thorneycroft: It is the policy of Her Majesty's Government to retain an independent nuclear deterrent.
    Mr. Allaun: Is it not precisely this insistence by the Government that is being used by other countries as a main argument for becoming nuclear Powers themselves? In other words, are not the Government encouraging in this way the spread of A-bombs and H-bombs, which they are said not to be wishing to do?
    Mr. Thorneycroft: No, Sir. The Question asked only what our policy is, and I have told the hon. Member what it is.

    Sergeant Missile Sites, Europe (German Technicians)
    Mr. Frank Allaunasked the Minister of Defence to what extent German technicians are in control of North Atlantic Treaty Organisation Sergeant missile sites in Europe.
    Mr. Thorneycroft: I can, of course, accept no responsibility for the arrangements between two foreign Governments. I am, however, informed that German technicians are being trained to handle

    1309
    the Sergeant delivery system and that the warheads will remain in United States custody.
    Mr. Allaun: Is not the position now that the German forces have been quipped with these American missiles, have been trained in their use, and probably know where the nuclear warheads are stored, nearby, by the American forces? Is not this an exceedingly dangerous position?
    Mr. Thorneycroft: I do not want to pursue this point. I have no responsibility in this matter whatever.

    British Army of the Rhine (Reorganisation)
    Sir Richard Glynasked the Minister of Defence what plans he has for the reorganisation of the British Army of the Rhine; and if he will make a statement.
    Mr. Pagetasked the Minister of Defence if he will make a statement as to the redeployment of the British Army of the Rhine.
    Mr. Thorneycroft: I have decided to reorganise the British Army of the Rhine from seven brigade groups to three divisions each of two brigade groups. One infantry brigade group less its armoured regiment will be withdrawn. It will be replaced by additional artillery regiments and various ancillary units, such as engineer and transport units. The net effect will be to achieve a more balanced and effective fighting force. This reorganisation does not involve a reduction in manpower. This organisational plan, of which the N.A.T.O. military authorities have been informed, will, on the basis of current planning, be implemented by the end of 1964.
    Sir Richard Glyn: I thank my right hon. Friend for his reply. Would he agree that this change will be generally welcome as increasing the efficiency of B.A.O.R. and enabling military planning to proceed on a more realistic basis? Can he tell the House that this will be achieved without reducing the number of infantry battalions in the British Army either by amalgamation or otherwise?
    Mr. Thorneycroft: Yes, I think it will have those advantages. It does not involve the disappearance of battalions from the British Army.
    Mr. Wigg: Can the right hon. Gentleman tell us whether this means that he is reconstituting the divisional structure? Can he give the House an undertaking that, from now on, units of the Rhine Army will be kept up to their establishments and will be effectively equipped so that we may move away from the completely unrealistic policy of the last two years?
    Mr. Thorneycroft: The arrangements here are for a three-divisional structure. There will be three divisions each of two brigades, which is the total of six brigades instead of seven. As to equipment, I would say that it is a very well equipped Army now. New equipment is coming in all the time. I hope that the hon. Gentleman will take another opportunity to go and see for himself.
    Mr. Paget: Is the right hon. Gentleman aware that I am more concerned about where our Army is than whether there are three divisions or seven brigade groups? Is the present position that they are about 48 hours from their deployment position, whereas the Russians are about 12 hours from those deployment positions? Is this somewhat unsatisfactory deployment position to be maintained?
    Mr. Thorneycroft: Having been there recently, I am satisfied that the arrangements for deployment on the forward strategy are adequate and proper. I am not going into the hours—I do not see why any of us should—but they are adequate and proper for the tactical and strategic requirements of the Western defences in that area.
    Mr. Shinwell: Was not it decided several years ago, when the Army of the Rhine was being reorganised by the present Government, to depart from the divisional formation and accept the position of brigade groups? Is not this a departure from the existing position? Will the right hon. Gentleman explain why he speaks about the force being balanced now when all along the Government have claimed that it was?
    Mr. Thorneycroft: I do not understand the second part of the right hon. Gentleman's supplementary question. Of course it is a change from what was the case before. It is now six brigades instead

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    of seven. It is not a departure from our obligation in this matter, which is that we should work to 55,000, and that is what we intend to do.
    Mr. Morris: The Minister said that N.A.T.O. has been informed of this decision. Does that mean that N.A.T.O. and SACEUR approve? Secondly, we have been told that there will be no difference in the number of men in B.A.O.R. How many men are there? If there are fewer than 55,000 is it proposed to bring the figure up to 55,000? How long has the present brigade structure been in existence and why change it now?
    Mr. Thorneycroft: We changed it in order to improve the operational efficiency of the organisation. We are concerned that we should stick to our treaty obligation to bring these forces up to 55,000. It is not necessary to ask for SACEUR approval to this organisation but it is courteous and proper to inform SACEUR.
    Mr. Healey: Is not it the case that this reorganisation proves the point which has been made again and again from this side of the House that the pretence that Her Majesty's Government were maintaining seven brigades in Germany in a state of fighting readiness has been damaging to the alliance and damaging to the efficiency of our own forces? Why has it taken so long for the Government to recognise the importance of this matter?
    Mr. Thorneycroft: In the things which have been said to me in defence debates since I have been Minister I do not recall much stress being laid on that point by the hon. Gentleman. Nevertheless, if he agrees that six brigades is a better organisation than seven, I am happy to see this measure of agreement between the two sides of the House.
    Mr. Speaker: Mr. Cronin, Question No. 6.
    Mr. Wigg: On a point of order, Mr. Speaker. I have been invited by the right hon. Gentleman to visit the Rhine Army. Pending my departure, may I ask whether he will answer the question which I asked him about establishment?
    Mr. Speaker: I recognise that this is a wide topic and that the enjoyment of
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    the hon. Gentleman's trip will be largely dependent on whether he gets the answer or no. But in the interests of other hon. Members we must get on.

    V-Bomber Force
    Mr. Croninasked the Minister of Defence if he will make a statement on the operational rôle of the V-bomber force while assigned to Supreme Allied Commander, Europe, in support of the North Atlantic Treaty Organisation.
    Mr. Thorneycroft: The V-bomber force will, if war comes, and if required to do so, attack certain targets, assigned to it by SACEUR, which are appropriate to its capabilities.
    Mr. Cronin: Will the right hon. Gentleman see that in future the V-bomber force concentrates on the useful rôle of acting as a strike force for the direct defence of Europe against invasion and cease to emphasise so much the persistently illusionary rôle of a strategic nuclear deterrent?
    Mr. Thorneycroft: I have never held the view that it is a useful approach to defence to say that you must never defend yourself.

    Swaziland (Dispatch of Troops)
    Mr. Shinwellasked the Minister of Defence what units of Her Majesty's Forces were sent to Swaziland.
    Mr. Thorneycroft: The 1st Battalion, Gordon Highlanders.
    Mr. Shinwell: Have we so many troops available that we can afford to send the Gordon Highlanders to Swaziland for the purposes of strike breaking? Is not it completely a pretence to say that these troops were sent to preserve law and order when in fact the strikers were dispersed immediately after the troops arrived?
    Mr. Thorneycroft: I must refer the right hon. Gentleman to the statement made by my right hon. Friend the Colonial Secretary on 18th June in which he dealt fully with this matter.
    Mr. Brockway: Can the right hon. Gentleman be happy that British troops should be used to suppress a strike by workers whose maximum wage is 30s a

    1313
    week? Is it right to ask British soldiers to do that kind of job?
    Mr. Thorneycroft: A lot of questions were asked of my right hon. Friend on this point, and answered, and I do not think I can carry the matter further.
    Mr. Frank Allaun: On a point of order, Mr. Speaker. Has not the Minister of Defence a personal responsibility on this kind of issue?
    Mr. Speaker: I cannot make the right hon. Gentleman answer or not answer. Nor can I dictate his responsibility. We must get on.

    Officers' Widows (Pensions)
    Dame Irene Wardasked the Minister of Defence how many widows of Regular officers of each rank in the three Armed Services, including the Indian Armed Services, are receiving widows' ordinary pensions; in each case how many lost their husbands before 4th November, 1958; and how many of these Regular officers' widows are now over 70 and 75 years of age, respectively.
    Mr. Thorneycroft: The Answer to my hon. Friend's question consists of a table of figures which I will, with permission, circulate in the Official Report.
    Dame Irene Ward: May I ask my right hon. Friend whether he has given

    Rank of husband (Army rank used for convenience)

    Total number of widows drawing ordinary pensions

    Number of widows who lost their husbands before 4th November, 1958

    Number of widows who are now over 70 years of age

    Number of widows who are now over 75 years of age

    Field Marshal

    …

    …

    10

    7

    8

    6

    General

    …

    …

    …

    66

    45

    42

    30

    Lieutenant-General

    …

    96

    70

    63

    47

    Major-General

    …

    …

    369

    266

    242

    180

    Brigadier

    …

    …

    …

    675

    440

    332

    262

    Colonel

    …

    …

    …

    1,002

    732

    569

    427

    Lieutenant-Colonel

    …

    2,779

    2,002

    1,483

    1,128

    Major

    …

    …

    …

    2,759

    1,793

    1,119

    864

    Captain and Lieutenant

    …

    3,222

    2,201

    1,814

    1,412

    TOTALS

    …

    …

    10,978

    7,556

    5,672

    4,356

    Dame Irene Wardasked the Minister of Defence to what extent the pensions of pre-1958 officers' widows reflect the rise in the cost of living compared
    the same amount of study to the table of figures as he has given to the Questions—which he has answered—from right hon. and hon. Gentlemen on both sides of the House? If he has, can he tell me whether he has observed that elderly widows are rapidly dying? May I ask whether he thinks that they have been generously treated? Why has he not done something to see that they receive a great deal more favourable treatment?
    Mr. Thorneycroft: I have studied the figures and I am grateful to my hon. Friend for putting this Question on the Order Paper and enabling me to look at the matter again. This is a matter which deserves proper consideration, which I am giving to it at present.
    Mr. Lipton: Has not the Minister of Defence observed that some of these officers' widows are drawing pensions which are well below the National Assistance scales? Is not that a disgraceful state of affairs?
    Mr. Thorneycroft: I would not say it is a disgraceful thing; it is a situation which existed under all Governments for a very long time. It is important to remember that this is quite different from a State pension of that character, but I am considering these matters and I do not want to be drawn into all the argument about them.
    Following are the figures:
    with those of the post-1958 pensions.
    Mr. Thorneycroft: The answer to my hon. Friend's Question consists of a table

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    of figures which, with permission, I will circulate in the Official Report.
    Dame Irene Ward: Will my right hon. Friend bear in mind that I expect a Tory Government to do a great deal better than a Socialist Government? [Hon. Members: "Why?"] Would he bear in mind that I am very grateful to him for what he said in reply to my previous Question? I have been to see him and have been to see the Chief Secretary to the Treasury. I am received most charmingly by most Ministers; but I am not susceptible to charm—I am susceptible to action. [Hon. Members: "Oh."] When am I to get a satisfactory answer to the representations I have made?
    Mr. Thorneycroft: In the light of that, I can only invite my hon. Friend to come and see me. I do not know what she

    The percentages in the table below indicate the extent to which the purchasing power of pensions awarded to officers* widows bereaved before 4th November, 1958, or on or after that date, has kept pace with the rise in the cost of living since those pensions were introduced.

    Those bereaved before 4th November, 1958

    Those bereaved on or after 4th November, 1958, the husband having been entitled to Retired Pay under one of the following Codes: —

    Forces Family Pensions, 1952 New Scheme

    Retired Pay Code

    1919, 1945 and 1950

    1956

    1960

    1962

    Per cent.

    Per cent.

    Per cent.

    Per cent.

    Per cent.

    95·7

    112·8

    104·7

    93·7

    96·3

    NOTES:

    1 No account has been taken of the increase of up to £20 a year awarded
    to widows aged 70 or over.

    2 The Cost of Living has been calculated using the Interim Index of Retail Prices
    and the Index of Retail Prices.

    High Commission Territories (Access by Air)
    Mr. Brockwayasked the Minister of Defence what arrangements are being made to enable forces to reach the High Commission Territories without utilising airports of the Republic of South Africa available only with the permission of its Government.
    Mr. Thorneycroft: We have had arrangements for some years for air access to the Territories.
    Mr. Brockway: While deploring the use of troops in Kenya, without even
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    will be susceptible to, but I shall do my best.
    Dr. King: Is the Minister aware that the anomalous treatment of the pre-1958 Service pensioner is a hardship and an injustice both to older Service men and to the widows of former Service men? Will he take note of the very serious representations made again and again from both sides of the House calling attention to this matter?
    Mr. Thorneycroft: I think that the hon. Member is raising a rather wider question of parity. These Questions are related to a difference in treatment between pre- and post-1958 widows according to the date of their bereavement. It is to that question that I am directing my mind at the moment.
    Following is the Answer:
    the consent of the Kenya Government, and their use in Swaziland, does not the right hon. Gentleman realise the dangers that are implicit if British troops are to get to Southern African territories only with the consent of the Republican Government and the use of its airfields?
    Mr. Thorneycroft: The hon. Gentleman asks what arrangements were made. We did not use South Africa as a staging post in this dispute.
    Mr. Brockway: Is it not the case that before those troops were used in Swaziland the permission of the Republic of

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    South Africa had to be obtained so that their airfields at Johannesburg could be used?
    Mr. Thorneycroft: No, we did not use them.

    Kenya Base (Expenditure)
    Mr. Pagetasked the Minister of Defence how much money was spent on the Kenya Base subsequent to the Lancaster House Conference at which the African future of Kenya was settled.
    Mr. Thorneycroft: There were two conferences at Lancaster House. Between the first in 1960, which merely planned the next step in Kenya's constitutional evolution, and the second, about £4¼ million were spent. It would have been imprudent to stop construction at that stage, though new commitments were drastically reduced. After the 1962 conference, at which internal self-government was agreed, a little over £¼ million was spent on completing or paying for work started in earlier years.
    Mr. Paget: By 1960, was it not quite clear that every single African leader was on record as saying that a British base in Kenya would not be acceptable to an independent African Kenya? Is the right hon. Gentleman aware that this £4½ million thrown straight down the drain would be more than adequate to cover better pensions for all the widows who have been so shabbily treated and who were referred to in the Questions asked by the hon. Lady the Member for Tynemouth (Dame Irene Ward)?
    Mr. Thorneycroft: No, Sir.
    Mr. Healey: The Minister, answering a similar Question the other day, expressed his satisfaction at the failure of Her Majesty's Government to predict this type of event. Is this complacency to be regarded as normal in the Government? Does he propose to move in a state of cataleptic trance through every decision of this nature?
    Mr. Thorneycroft: I observed that if all of us, either in public or private affairs, could forecast the course of events four or five years ahead, many financial transactions would become much easier.
    Mr. Wigg: Before he completely dissolves into tears on this Question, will
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    the Minister persuade those who now hold Kenya's destiny that it would be in the best interests of those in Africa that this base in Kenya should be accepted as a permanent institution and that in the long run it would have the high regard of African opinion?
    Mr. Thorneycroft: I think discussions are going on and should go on about the relationships between us and the emerging independent Kenya, which we all wish well, but there are more difficult questions than the general strategic base in an independent Kenya. I shall, however, bear in mind what the hon. Member for Dudley (Mr. Wigg) has said.
    Mr. F. Harris: While fully supporting what the hon. Member for Dudley (Mr. Wigg) said in his question, is it not as well to remind ourselves that nothing has yet been decided, so far as we know, about the base in Kenya with all its implications? Should we not remind ourselves that, contrary to what has been said by hon. Members opposite, Mr. Ngala was very much in favour of the maintenance of a military base in Kenya, and Mr. Mboya himself at the time of the election said that K.A.N.U. itself would like to see the retention of the base?
    Mr. Thorneycroft: These are all very proper considerations to bear in mind, but, as these discussions are going on and being conducted by my right hon. Friend, I could not add very much further to them.

    S.E.A.T.O. Exercise, Thailand
    Mr. Healeyasked the Minister of Defence if he will make a statement on British participation in exercise "Thanarat" recently held in Thailand.
    Mr. Thorneycroft: British forces taking part in this S.E.A.T.O. exercise included a battalion headquarters and one company of the King's Own Yorkshire Light Infantry, some armoured cars and detachments of administrative support units. The R.A.F. provided air transport support, a squadron of Canberras and a squadron of Hunters.
    Mr. Healey: Is it not the case that the exercise has revealed serious weaknesses and deficiencies in the equipment of British Forces, particularly jungle boots,

    1319
    packs and rations? Can the right hon. Gentleman say what steps are being taken to remedy these deficiencies?
    Mr. Thorneycroft: No, Sir, but the object of an exercise is to reveal deficiencies. That is what we had it for. I hope that no one will discourage exercises of this kind, because they are an invaluable part of the training of the British Army.

  ROYAL NAVY

    Rosyth Dockyard (Covered Slipways)
    Mr. Burdenasked the Civil Lord of the Admiralty the estimated cost of building a covered submarine slipway at Rosyth Royal Naval Dockyard; and how many such slipways are to be constructed there.
    The Civil Lord of the Admiralty (Mr. John Hay): No covered slipways are to be built at Rosyth Royal Naval Dockyard. The question of estimated cost therefore does not arise.
    Mr. Burden: Does not my hon. Friend agree that this is a rather odd decision in view of the fact that it was decided that such a slipway should be built at Chatham, and has been built? Presumably it ensured proper working conditions and that men engaged on submarine construction could work under bad weather conditions. If no such slipway is to be built at Rosyth, where we understand construction is to take place in future, the men will be subjected to very great hardship in the yard in the worst winter weather if they have to work in the open.
    Mr. Hay: Such slipways are required only for building submarines and, since we have no intention of building submarines at Rosyth, there is not much point in providing a slipway of this kind there.

    Oberon Class Submarines (Construction Cost)
    Mr. Burdenasked the Civil Lord of the Admiralty why the estimated cost of building an Oberon class submarine is approximately the same as in a private dockyard when employees in the Royal dockyards are paid much less than workers in private yards.
    Mr. Hay: The figures of average earnings per hour for the shipbuilding and ship repairing industry and the marine industry compared with the corresponding figures in the four professional departments at Chatham Dockyard are almost the same.
    Mr. Burden: If that is the case, why is it that the actual artisans working in the Royal dockyard receive approximately two-thirds the amount paid to comparable artisans in private yards? Does it not imply that there is an overloading of costings of the Civil Service and other factors on to the Royal naval dockyards? Will my hon. Friend look at the possibility of getting these reduced in order that the artisans may have comparable payment to those working in private yards?
    Mr. Hay: There is a certain amount of difficulty here because the problem is concerned with the weekly basic rates for time workers in the Royal dockyards, which it is true are below those paid on average in the shipbuilding industry, but much of the payment is by results and in consequence a higher rate is paid than that for the time worker. Many of these things are under active consideration by ourselves with the trade unions.

    Royal Dockyards and Commercial Shipyards (Work)
    Dr. Kingasked the Civil Lord of the Admiralty the total value of work he is placing for the next two years with the Royal dockyards and commercial shipyards.
    Mr. Hay: Orders so far authorised for placing this year include two fleet replenishment ships, three Leander class frigates and a survey ship. One of the frigates is planned to be built in a Royal dockyard; orders for the other ships will be placed with commercial yards by competitive tender. I cannot anticipate what further orders will be placed this year or in 1964–65.
    Repair, refit and modernisation work in this country for the Royal Navy is at present running at about £47 million a year. Most of this work is done in the Royal dockyards.
    Dr. King: Is the Minister aware that this work is the lifeblood of cities such as Portsmouth and Chatham, which

    1321
    have Royal dockyards? Is he also aware of its tremendous importance to firms like Thorneycroft, which engage in naval construction work? Will he deny the rumour that he proposes to reduce the amount of work which is going out in the next two years? This is of tremendous importance to these cities.
    Mr. Hay: There have been quite a number of rumours floating around recently and it is a little difficult to know to which the hon. Member refers. I recently made a statement in answer to Questions in the House as to the prospective work load on the Royal dockyards, and I am afraid that I can add nothing today to what I said on that occasion.

    Dockyards (Manpower)
    Mr. W. Hamiltonasked the Civil Lord of the Admiralty what is the normal annual rate of wastage of man power in the three southern dockyards; and if he will provide the actual figures for each of the dockyards annually since 1958.
    Mr. Hay: As I said in the course of supplementaries on 19th June last there is a lot of room for misunderstanding of what wastage can mean and I could not vouch for the accuracy of figures for past years. So far as normal wastage for 1962–63 is concerned I would refer the hon. Member to the reply which I gave to the hon. Member for Edinburgh, East (Mr. Willis) on the same date.
    Mr. Hamilton: Can the hon. Member hazard a guess as to how many Questions my hon. Friend the Member for Edinburgh, East (Mr. Willis) and I have to put down before we drag out of the Minister the number of jobs which will be lost in these dockyards?
    Mr. Hay: I think that it would be very unwise of me to guess on anything, but these matters may possibly be raised in the course of the debate in the next week, and we might be able to examine them more easily than at Question Time.
    Mr. Willisasked the Civil Lord of the Admiralty what estimates he has made of the fall in the number of men employed over 65 years of age during the current year at Chatham, Portsmouth, and Devonport, respectively.
    Mr. Hay: No such estimate has been made.
    Mr. Willis: Is the hon. Member aware that in the course of a statement made on 29th May and his Answer last week it seemed that about 5,000 jobs are to be lost in the three southern dockyards? What is the Admiralty doing to try to find some alternative forms of employment, and what are the Government doing in order to avoid hardship in these ports?
    Mr. Hay: That is a very much wider Question. I am sorry if there has been any misunderstanding about the exchanges which took place at Question Time last week. As far as the over 65's are concerned—and this is what the Question is about—we cannot estimate with any accuracy which is worth while the fall which there would be in the course of the current year at the three southern dockyards. As for the future, when the work load declines and if redundancy occurs, we would seek naturally to let it fall, to begin with, on the over-65's, who have already reached retiring age but have continued to work because they wanted to do so and because we wanted them to do so.
    Mr. Burden: Does not the hon. Gentleman realise that this constant uncertainty is most damaging to the morale of everybody in the dockyards and in the dockyard towns? Will he exercise himself to the utmost in order to try to give some much more tangible answer in the debate which is to take place next week?
    Mr. Hay: I agree with the hon. Member that uncertainty, if it exists, is damaging. The Answer which I gave a fortnight ago was intended to clear up a lot of the uncertainty, and all the information coming to me suggests that to a very great extent that uncertainty has in fact been dissipated. If there is anything further which I can add in the debate next week, I shall be only too happy to do so.
    Mr. Willis: Surely the hon. Member appreciates that in the original statement it was said that to the number which would be lost as a result of wastage must be added those spelled out in my Question? If that is the case, the number must be getting on for 5,000.
    Mr. Hay: I am afraid that the hon. Member is again falling into the pitfall into which he fell a week ago. In my Answer of 29th May I said that we expected a number of factors to deal with any decline in the labour force, and those factors were, amongst others, normal wastage, restriction on overtime, restriction of adult entry and a fall in the number of men over 65.

    H.M. Ships (Use)
    Mr. Loughlinasked the Civil Lord of the Admiralty what is the policy of Her Majesty's Government regarding the use of Her Majesty's naval vessels as agents on behalf of foreign Governments for the purpose of arresting British subjects or ships owned by British nationals.
    Mr. Hay: Her Majesty's ships are not used in this way.
    Mr. Loughlin: Is not the right hon. Gentleman aware that on 22nd May he indicated to me that H.M.S "Palliser" had not only stopped a British ship but had boarded her and immobilised the engines of the trawler so that she could be arrested by the Icelandic Government vessel? Is not the British Government getting a little tired, as the fishing industry is getting a little tired, of piracy on the high seas which is taking place on this issue, when a 24-mile limit is being applied by the Icelandic Government? Is it to be the Government's policy to assist them?
    Mr. Hay: No, Sir. I think that the hon. Member should perhaps look again at the reply which I gave to him on 22nd May about the action of Her Majesty's ship "Palliser". It is important to remember that the "Odin" was claiming the right of hot pursuit and was believed to be prepared to use force to effect an arrest. The trawler's skipper had refused to submit to arrest and a violent clash with the "Odin" appeared imminent. The decision of the commanding officer of the "Palliser" to immobilise the "Milwood" was taken to prevent bloodshed, and Her Majesty's ship was in no sense the agent of the Icelandic Government. I am sure that the action of the commanding officer in these extremely difficult and confused circumstances was correct.

    Hunter-Killer Submarines (Construction)
    Dr. Dickson Mabonasked the Civil Lord of the Admiralty when and where construction of the third nuclear-propelled hunter-killer submarine for the Royal Navy will begin.
    Mr. Hay: Fabrication of components has already started for the third nuclear-propelled hunter-killer submarine ordered for construction at Barrow.
    Dr. Mabon: Is it not a very unsound policy to concentrate the building of the nuclear-powered hunter-killer submarines and to allocate both pairs of the Polaris vessels in the north-west of England? Is it not in the national interest to try to see the spread of these contracts in the different shipbuilding rivers of the country so that the technical ability and "know-how" of providing these vessels, both in war and in peace, will be spread more widely?
    Mr. Hay: The hon. Member has perhaps not appreciated—as frankly I had not until I learned about it—that building these submarines is wholly different from the technique used in the building of a conventional vessel. In fact, many parts are fabricated well away from the shipyards in question and are assembled on the site. For example, orders of about £1 million for component parts will be placed in Scotland, and other parts of the country will also benefit.
    Mr. Willis: Would it not be a good thing if these special techniques were also available to be used on the Clyde, a very great shipbuilding area?
    Mr. Hay: It is not for me to agree or to disagree with the hon. Member about that, but certainly I know that my right hon. Friend the Minister of Transport has been very interested indeed in trying to get shipyards generally to adopt some more modern techniques in respect of some parts of their work.
    Mr. Critchley: Is the Minister aware that three of these submarines are not enough to meet the future needs of the Royal Navy?
    Mr. Grimond: The Minister's answer underlines the anxiety which is felt. It is just because it is a new technique that

    1325
    considerable anxiety is felt that Messrs. Scotts have not been asked to take part in this new development. Will he give an assurance that this does not mean that all future building of atomic submarines will be confined to two yards? Will he give an assurance that Messrs, Scotts are in fact sharing in the sub-contracting of which he spoke?
    Mr. Hay: I cannot answer the second part of that supplementary question without notice. Answering the first part of the question, we look at each of the orders on their merits.
    Dr. Mabon: On a point of order. I give notice that I should like to raise the matter on the Adjournment.

    Widows' Pensions
    Mr. Wadeasked the Civil Lord of the Admiralty how much pension is now received for herself and one child by the widow of a commander who retired after maximum service on the 1956 Code and died on 3rd November, 1958; and how much would she receive for herself and her child if he had died the next day, assuming in both cases that she is 50 years of age.
    Mr. Hay: Including the child's pension, £274 6s. a year and £414 3s. a year respectively.
    Mr. Wade: This is a similar point to one raised earlier this afternoon with the Minister of Defence. Is it not quite unfair that the widow who by misfortune lost her husband one day before 4th November, 1958, should receive little more than half as much as she would receive if he had died the next day? Surely this is illogical. Is it not high time that the Government ended this discrimination against widows of members of the Armed Forces?
    Mr. Hay: I cannot accept the implication in the latter part of the hon. Gentleman's supplementary question. I do not think that there is any discrimination in the pejorative sense in which he used the word. Whenever there is a change of policy, there is bound to be a dividing line, and when that is a date some people find themselves on one side and others, perhaps more fortunate, are on the other side. I cannot say that this is a matter which is peculiar to the Royal Navy. I
    1326
    will take note of the point made and bring it to the attention of my right hon. Friend.
    Captain Litchfield: Does my hon. Friend think that this sort of anomaly is acceptable? Does he appreciate the feeling there is inside and outside the Services? Does it not make a nonsense of the so-called principle of immutability?
    Mr. Hay: As my right hon. Friend the Minister of Defence said earlier his afternoon, we are well aware of the views held on these matters. They are being constantly looked at. I cannot go beyond that this afternoon.
    Mr. Paget: Surely it is inevitable that the principle of one pension for one service has to be adopted? Is it not a question of the sooner the better?
    Mr. Hay: I am afraid that I can only answer for one Service.

    Coastguard Cottages, Weymouth
    Mr. Barnettasked the Civil Lord of the Admiralty when his Department will apply for improvement grants to modernise the coastguard cottages which it lets to Admiralty personnel at the No the, Weymouth.
    Mr. Hay: The hon. Member presumably refers to the standard and discretionary grants made by local authorities to private landlords financed by the Treasury under the House Purchase and Housing Act, 1959, and the Housing Financial Provisions Act, 1958. Such grants however are not applicable to Government-owned property. My Department cannot therefore apply for these grants in respect of the cottages at the No the, Weymouth, which are, incidentally, held by the Admiralty on a lease due to expire in March, 1966.

    Bahrain
    Miss Vickersasked the Civil Lord of the Admiralty what arrangements are made for the accommodation and education of the families of Her Majesty's Royal Navy at the naval base at Bahrain.
    Mr. Hay: Apart from the commanding officer's official residence and 12 married quarters for ratings, all the accommodation for Naval families in Bahrain is hired, either under Service

    1327
    arrangements administered by the Royal Air Force, or privately.
    Education is provided for children of all ages in the Royal Air Force school at Muharraq.
    Miss Vickers: Why have men been encouraged to go from Aden to Bahrain on the condition that, if they go there, they can take their families? When they have found accommodation at fantastic prices they then find, despite the fact that their wives have got rid of their houses in England, have had the children inoculated, and so on, that they are unable to get their families to join them.
    Mr. Hay: I was not aware of the point made by my hon. Friend in the first part of her supplementary question. If that is so, it would certainly need looking at, and perhaps she would allow me to do so.

    Aircraft Carrier Replacement Programme
    Mr. Wallasked the Civil Lord of the Admiralty if he will make a statement about the aircraft carrier replacement programme.
    Mr. Hay: I would refer my hon. Friend to the reply given to my hon. Friend the Member for Plymouth, Devonport (Miss Vickers) on 19th March. I have nothing further to add at present.
    Mr. Wall: Is my hon. Friend aware that there is considerable anxiety about the continued delay in reaching a decision on this important matter? Can he assure the House that, if for political reasons the Government decide to go ahead with the construction of a mixed-manned Polaris surface force, even then the aircraft carrier replacement programme will have a clear priority?
    Mr. Hay: I am aware that there is some feeling on this matter which is certainly not only in the House. We will certainly come to a conclusion about it as soon as we properly can, taking account of the point my hon. Friend makes.

    Portland (Civil Lord's Visit)
    Mr. Barnettasked the Civil Lord of the Admiralty whether he will make a statement as a result of his recent visit to Portland, in particular on the
    1328
    future policy of Her Majesty's Government in relation to Admiralty establishments there.
    Mr. Hay: The purpose of my visit to Portland was to visit H.M. ships "Hampshire" and "Verulam", to inspect the sea training facilities operated from this base, and to inspect certain buildings in the base itself.
    I do not contemplate any changes in our policy in relation to the Admiralty establishments at Portland following my visit.

    H.M. Ships (Skilled Men)
    Mr. Willisasked the Civil Lord of the Admiralty what is the estimated extent of the shortages of technically skilled manpower in Her Majesty's ships at present in commission; and when it is expected these will be made good.
    Mr. Hay: Current shortages of skilled men in Her Majesty's ships in commission is confined to the weapons, electrical and radio departments. Complements in these departments have been temporarily reduced. As to the second part of the Question, my predecessor wrote to the hon. Gentleman after the Navy Estimates debate listing measures taken to deal with the shortages and said that the full effects would not be achieved in the fleet for some time. Meanwhile, our recruiting of new entries is going well.
    Mr. Willis: May I express my thanks for the letter? Could the hon. Gentleman say whether the position has improved over what it was a year ago when about nine ships were without their full complement and in another 46 ships junior ratings were doing the jobs of senior ratings?
    Mr. Hay: As I have been in this office for so short a time, I should like notice before I could answer that supplementary question, but I do not think that the situation can be anything like as bad as the hon. Gentleman says it was a year ago, because I should have been told about it if it were so.

    Troop Landing Exercises, West Cornwall
    Mr. Haymanasked the Civil Lord of the Admiralty what proposals he has for troop landing exercises in the Zennor area of west Cornwall.
    Mr. Hay: The Admiralty is seeking to use, with the consent of the owners, about 355 acres of moorland in the Zennor district of west Cornwall for training pilots and Royal Marines in deploying from and re-embarking in helicopters in difficult and realistic operational conditions.
    This rugged area is particularly suitable for the purpose, and its proximity to the parent airfield at Culdrose offers great advantage in saving valuable training time and avoiding the necessity for special support arrangements.
    We have referred the proposal to the local planning authorities whose replies are awaited. I should emphasise that nothing would be done which might disfigure the countryside.
    Mr. Hayman: Will the Minister bear in mind that this area has been designated as an area of outstanding natural beauty and that the moorland over which these troops will exercise probably has concentrated in a few square miles more prehistoric monuments than there are in any other part of Great Britain? Will he also bear in mind that there is strong opposition but that I am hopeful that other areas which would not seem to be controversial will be suggested? If he will allow me, I will tell him of one or two.
    Mr. Hay: In answer to the first part of the supplementary question, I am indeed well aware of the factors to which the hon. Gentleman draws attention. I should be most happy to accept his offer of mediation or help, however one likes to put it, because I fear that there has been a good deal of misunderstanding as to what it is we would like to be able to do. All that is in question is simply putting men down from helicopters and then picking them up at another place when they have gone over the intervening distance on foot.

    Royal Observatory Grounds, Herstmonceux Castle
    Mr. G. M, Thomsonasked the Civil Lord of the Admiralty if he will arrangedaily opening to the public of the grounds of the Royal Observatory at Herstnionceux Castle, Sussex.
    Mr. Hay: The Observatory grounds are open to the public on Monday, Wed-
    1330
    nesday and Thursday afternoons from April to October. I regret that opening the grounds to the public at the weekends is not practicable, as additional staff would have to be engaged to safeguard the building and equipment contained therein.
    Mr. Thomson: Is the Civil Lord aware that these are very beautiful grounds and that immense credit is due to those who lay them out and maintain them? Since they cost large sums of public money, ought not the public to be allowed the same sort of regular access to them as they enjoy to other Ministry of Works buildings?
    Mr. Hay: I am aware that these grounds are of very great beauty indeed. It is a question of balance. We think that on the present evidence there is plenty of opportunity for the public to visit them, but to open them at weekends, as is suggested, would undoubtedly increase the expense substantially, because of the additional staff which we should have to employ.
    Mr. G. M. Thomsonasked the Civil Lord of the Admiralty if he will state for the most recent convenient 12-month period the number of visitors to the Royal Observatory at Herstmonceux Castle, Sussex, the revenue received from visitors, and the cost of the upkeep of the castle grounds.
    Mr. Hay: In 1962 there were 5,276 visitors and the revenue received from them was £542. The gross cost of upkeep of the estate and grounds was £6,400, and the net cost, after taking account of revenue from other sources, £4,323.
    Mr. Thomson: Do not these figures underline my case? Would it not help the Exchequer a little if there were regular daily openings?
    Mr. Hay: On the contrary, the expense might rise considerably if we had to employ a substantial number of staff at weekends.

    Director, W.R.N.S. (Oslo Flight)
    Commander Purseyasked the Civil Lord of the Admiralty why the Director Commandant of the Women's

    1331
    Royal Naval Service was provided with a special Service aircraft to fly from Lee-on-Solent to Oslo on 27th May; if he will state the type of aircraft, the number and ranks of the crew, the number of days the aircraft was away from its base, and the cost of petrol, oil and other expenses; what steps were taken, and with what result, to compare the total cost with that of a return fare by British European Airways scheduled aircraft; and why this lady did not travel by this method.
    Mr. Hay: The Director of the Women's Royal Naval Service, accompanied by her secretary, a 2nd officer, W.R.N.S., was flown from Lee-on-Solent to Oslo on 27th May for the purpose of paying an official visit of inspection to the W.R.N.S. unit stationed in this foreign capital and of advising the Royal Norwegian naval authorities on certain matters connected with their own women's naval service. The aircraft used was a Sea Devon of the communications flight of the Royal Naval Home Air Command. Its crew consisted of one lieutenant R.N. and one petty officer. It was away from its base for just over four days; but during part of that time it was engaged on other duty flights. The cost of the petrol and oil consumed in connection with the visit of D.W.R.N.S. and of subsistence for the crew in Oslo was about £100.
    The tourist class return fare by B.E.A. would have been £52 11s. per passenger.
    Commander Pursey: At how many naval air stations is there a policy of giving joy rides to all civilians, irrespective of the cost? What control is exercised by the Admiralty over the unnecessary use of Service aircraft to prevent the waste of large sums of money, particularly when civilian scheduled air services are available? Who approved this expensive flight and why did this lady not travel by B.E.A.?
    Mr. Hay: With respect, I should have thought that, in the light of the facts I have been able to give, the hon. Gentleman would have chosen the opportunity of his supplementary question to withdraw some of the statements he made to the Press about this matter before he knew what the facts were.

    V.I.P. Helicopter, Lee-on-Solent
    Commander Purseyasked the Civil Lord of the Admiralty why the V.I.P. helicopter at Lee-on-Solent was flown to the Isle of Wight on the afternoon of 15th June; for how long it was employed; what was the total cost to Government funds of fuel, oil and other expenses; if he will state the names and offices of the civilian passengers; and whether they were insured against all risks by their own or special insurance policies, or signed a statement that, in the event of an accident, they would make no claim on public funds.
    Mr. Hay: The Commanding Officer, Lee-on-Solent, was asked by the Mayor of Gosport on the afternoon of Saturday, 15th June, whether he could be conveyed urgently to the Isle of Wight where his mother-in-law had just been taken seriously ill.
    The mayor had tried to get a quick commercial sea passage but without success. The air station, which is normally closed on Saturdays, was, in fact, open on this particular day and the commanding officer agreed to fly the mayor.
    The Whirlwind helicopter was employed on this mission for not more than 15 minutes. The cost was about £20. The mayor made it clear that he was prepared to pay. The flight was arranged so urgently that there was no time to issue the ticket which is normally given to civilian passengers, and which makes it clear to them that in the event of any accident they would have no claim on public funds.
    Commander Pursey: How far is this service available to all civilians and how far, for example, would it be available to ratings who wished to fly by helicopter from Lee-on-Solent to the Isle of Wight under similar conditions? How far is this old school tie business between commanding officers—[Hon. Members: "Oh."]—yes indeed, these services are only available under the old school tie arrangement. How far is this old school tie business between commanding officers, mayors and other authorities carried? Why was this helicopter loaned to Southern Television and why is it used to provide a taxi service between Lee

    1333
    and H.M.S. "Vernon" when the journey by road transport takes only about half an hour? What control does the Admiralty exercise over helicopters in the naval air service to stop this gross abuse of them?
    Mr. Hay: The hon. Member has sought to put in a supplementary form a number of questions which he has down for Written Answer today. I think that he had better await those Answers. On the main point, our regulations provide that commanding officers of Her Majesty's ships and naval air stations may authorise nights in naval aircraft under their control for Members of Parliament, senior civic dignitaries, representatives of local Press, radio and television services, tutors and schoolmasters of universities, schools and colleges, provided—and I emphasise this—that there is no extra cost to Navy Votes. In respect of this particular journey by the Mayor of Gosport no extra cost will fall on Navy Votes because the mayor agreed—indeed, he agreed before the flight—to pay.

  BRITISH ARMY

    War Office Building (Weeks Report)
    Mr. Boydenasked the Secretary of State for War if he will publish the Weeks Report on War Office Building, together with a report on the results achieved since the adoption of its recommendations.
    The Under-Secretary of State for War (Mr. James Ramsden): No, Sir.
    Mr. Boyden: Does not the Undersecretary realise that with the changeover of the works services organisation from his Department to the new Ministry, the implications of the Weeks Report and the way the change-over was carried out, the matter is of the greatest importance to this House so that hon. Members and the public can judge how effective is the new organisation? Has the War Office anything to hide, because before the Estimates Committee on 14th May several complimentary remarks were made about the works services organisation? What, therefore, is to be hidden, and why?
    Mr. Ramsden: The answer contains a simple point. It is that it would be con-
    1334
    trary to the normal practice to publish a Departmental report of this character. That is the widespread practice of Government Departments. There is nothing whatever to hide.
    Mr. C. Pannell: As one who has read the Weeks Report, may I ask the Minister whether he has read it and why, from his own reading of it rather than on the say-so of somebody in a Government Department, the Report should not be placed in the Library? Is he aware that I had some difficulty when I wanted to read it in connection with certain responsibilities concerning this side of the House? His predecessor made no difficulty about giving it to me to read and since there is nothing in the Report which makes it confidential from the point of view of hon. Members, should it not be placed in the Library?
    Mr. Ramsden: It is a question of Departmental practice. If we are to have reports of this character written freely and frankly for Departmental use it is a wise practice to abstain from publication.

    War Office Works Services Staff
    Mr. Boydenasked the Secretary of State for War on what date the transfer of the War Office works services staff to the Ministry of Public Building and Works took place.
    Mr. Ramsden: On 1st April, 1963.
    Mr. Boyden: How does it come about that on 14th May complimentary things were being said about the works services organisation of the War Office in Estimates Committee B, while 10 months later the whole organisation was transferred to a new Department, the implications being that that organisation of the War Office was defective and needed great reorganisation? Surely the Weeks Report should be published or there are grave implications that there were defects in this works services organisation before that date?
    Mr. Ramsden: I cannot accept what the hon. Member says. From the strictly Departmental point of view the previous arrangements worked extremely well and there is no sign that the present arrangements will not work equally well from the point of view of the War Office and, for all I know, the other Service Departments.

    1335
    The new arrangements have wider advantages in the context of national building policy, which I think are accepted.
    Mr. Paget: Short of publication of the Report, may we not have a copy of it placed in the Library?
    Mr. Ramsden: I will undertake to consider that, but without commitment.

    Guardsman Richardson (Resettlement Grant)
    Dr. D. Johnsonasked the Secretary of State for War whether he will reconsider his decision in regard to the refusal of a resettlement grant for 23517380 Guardsman E. J. Richardson, Scots Guards, discharged from the service consequent on the loss of his right eye owing to an accident sustained while on training.
    Mr. Ramsden: No, Sir. Resettlement grants were paid to soldiers who were discharged during the period of major redundancy with at least 15 years' service or who were invalided from engagements for at least 15 years. Guardsman Richardson was given a free discharge, and as he had less than 15 years' service he did not qualify for a resettlement grant.
    Dr. Johnson: I thank my hon. Friend for the interest he has shown in this case. Can he not do anything for this badly wounded man who was injured accidentally in the course of honourable service? Does my hon. Friend realise that, while my constituent appreciates the interest he has shown, what he really wants is a resettlement grant that will enable him to enlist or make a useful life for himself in an alternative service, for which his attainments so well fit him?
    Mr. Ramsden: I appreciate the point my hon. Friend makes and, of course, we have had a lengthy correspondence about it. I think that the answer to his constituent's concern is that Guardsman Richardson is receiving a disability pension, for which he is eligible, and this is open to reassessment in the normal way if his condition were to deteriorate.

    Swaziland (Dispatch of Troops)
    Mr. Shinwellasked the Secretary of State for War the cost of sending troops to Swaziland.
    Mr. Hector Hughesasked the Secretary of State for War what regiments of British troops and how many men have been sent for service in Swaziland; when they were sent there; and if he will make a statement.
    Mr. Ramsden: The troops arrived in Swaziland between 13th and 18th June. The force is composed of the First Battalion of the Gordon Highlanders and certain supporting sub-units. The movement costs are about £110,000.
    Mr. Shinwell: Does the hon. Gentleman seek to justify this expenditure on the dispatch of the Gordon Highlanders to Swaziland for the purpose of assisting to break a strike? Is he aware that there has been for many years a definite understanding in the War Office, and in the Service Departments generally, that troops are not to be deployed for the purpose of strike breaking? Why this expenditure at this time?
    Mr. Ramsden: I canont go beyond what my right hon. Friend the Minister of Defence said a few minutes ago in reply to a similar question from the right hon. Gentleman.
    Mr. Hector Hughes: Is not strike breaking by troops sent to Swaziland for that purpose a disgraceful abuse of the purpose for which men join the Army? Will the Under-Secretary take steps to see that this disgraceful practice and abuse is abolished and not used any more?
    Mr. Ramsden: I cannot accept what the hon. and learned Member says about strike breaking. British troops are properly used for the preservation of law and order.
    Mr. Shinwell: Will the Under-Secretary seek to justify what he has just said by informing the House whether it is not the fact that there was only some disorder as a result of a strike having taken place, and that the troops were sent in order to force the men back to work, which, in fact, happened after the troops had been there for some little time? Was it not a clear case of sending troops for the purpose of breaking a strike?
    Mr. Ramsden: I have nothing to add to my original Answer to the right hon. Gentleman.
    Mr. Hector Hughes: In view of the very unsatisfactory Answer given by the Under-Secretary, I shall raise this matter on the Adjournment.

THE YEMEN (BRITISH SERVICE PERSONNEL)
Mr. W. Yates(by Private Notice) asked the Lord Privy Seal if he has any statement to make concerning the progress of the diplomatic negotiations requested by him between the United States Government and the Yemeni Republican authorities to secure the release of 18 British subjects detained in Yemen since Sunday.
The Joint Under-Secretary of State for Foreign Affairs (Mr. Peter Thomas): The latest information I have is that the United States Embassy in Ta'iz has not yet received a reply from the Yemeni Republican authorities in Sanaa to their request for the release of the men, but the United States Chargeé ďAffaires has been assured that they are being well-treated.
The United States Vice-Consul in Aden has also been assisting a British political officer in negotiations on the frontier.
Mr. Yates: I thank the Minister for that reply. Is he aware, first, that the House is grateful for the help given by the United States to us in our difficulties? Secondly, does he not agree that this is a time when the House must wish to have good relations between the Yemeni people and our own country? Thirdly, would he not also agree that this House is concerned about the worry of the parents of the people who are now in imprisonment? Fourthly, if it is intended to move these people from the border area to Ta'iz, it might be possible for a British official to go with them.
Further, is the Under-Secretary aware that I have sent a message to the effect that if I could do anything to assist in the movement of these people—[Interruption] I know that some hon. Members think it very funny; something like the Daily Express this morning. This is a serious matter, and not a matter for joking. I have spoken to the American Embassy and, in view of this, may I say that if the United States Government and the Republican Government of the Yemen would like my help in any capacity, I am prepared to go there?
Mr. Thomas: I should certainly like to reiterate what my hon. Friend has said about our gratitude to the United States. We are grateful to them for their offer of help.
In regard to my hon. Friend's question about good relations between the British people and the Yemeni people, I can assure him that we have nothing but good will towards the Yemeni people. As has frequently been said in this House, we are anxious to establish good relations with whatever régime is in effective control in the Yemen.
My hon. Friend referred to the anxiety of the parents. I have been told by my right hon. Friend the Minister of Defence that a British Service doctor has been allowed to visit these Service men today, and found them fit and in good spirits. They are receiving food supplies from our troops.
We are grateful to my hon. Friend for his offer to mediate in this matter, but I think that the United States is doing everything possible, and that possibly it is wise not to cross wires at this moment.
Mr. Healey: Can the Under-Secretary of State say whether money passed to secure the release of the four women of Her Majesty's Forces who have already been released to Aden? Further, can he say whether Her Majesty's representative in Lahej has negotiated with the tribal leaders of the tribe that has captured the personnel, or whether he is negotiating with representatives of the Yemeni Government?
Mr. Thomas: As far as I know, no money passed. The negotiations have so far been conducted with police and tribal authorities, but also directly, through them, with the Yemeni Republican authorities.
Mr. F. M. Bennett: Is my hon. Friend aware of the story current in some organs of the Press today to the effect that passage may be allowed to Yemeni forces through British territory in order to escort these prisoners, not to freedom but into imprisonment within the interior of the Yemen? Can my hon. Friend comment on that, and say whether there is anything in this quite astonishing suggestion?
Mr. Thomas: I know nothing about this. The report, as I saw it, was that

1339
Egyptians were seeking to go over parts of Aden territory, but I did not know that any Yemeni forces were seeking to do so.
Mr. Bennett: On a point of order, Mr. Speaker. I was referring not to the definition between U.A.R. forces and Yemeni forces, but to the forces in the country at the moment.
Mr. Snow: In view of the quite exceptional knowledge and experience of the hon. Member for The Wrekin (Mr. W. Yates), will the Minister not take too lightly his hon. Friend's offer, because all possible aid should be brought to bear on this delicate problem, in which these men may be in peril of their lives?
Mr. Thomas: I do not think that I did take the matter too lightly. I expressed gratitude to my hon. Friend for his offer to mediate, but said that the United States authorities are doing everything possible at the moment and that I thought it wiser not to cross wires.

GIFTS TO POLITICAL PARTIES
3.37 p.m.
Mr. James Boyden: I beg to move,
That leave be given to bring in a Bill to compel companies to publish details of all gifts to political parties.
I am sure that my proposed Bill will command the support of the whole House. Hon. Members opposite very frequently advise members of the public to invest in companies; it might, indeed, be said that they advocate a shareholding democracy. That being so, it is quite intolerable that directors of companies, who stand in much the same position as do trustees in respect of the money given into their charge, should spend their shareholders' money in gifts to political parties, something of which many of their shareholders would not approve if the matter were made public.
In these days of complicated relationships between business firms and Government, and between businesses and the employees that the firms employ, it is quite right and proper that the wishes of employees should be taken into consideration.
Some hon. Gentlemen on this side of the Chamber advocate profit sharing, so that interest in what the directors of a company do with their shareholders' money is very wide indeed, and it is quite intolerable that directors of companies should please themselves how they use their shareholders' money in relation to political parties.
My Bill would ask only that information should be published so that the shareholders and employees should know what is going on. This is a small matter, but it is a very proper subject for a private Member to introduce. Indeed, on Fridays we hear the hon. Member for Exeter (Mr. Dudley Williams) and his "Friday men" advocate that Private Members' Bills should be subject to great scrutiny in the House. If it is right and proper that such Bills should be subject to this scrutiny, surely it is right and proper that when companies are using money for political purposes their shareholders and employees should know what is happening.
This is a narrow point of justice for the people who invest money, but behind

1341
it there is a very much more important general political point. This House is very proud of how, over the years, in a practical way, it has grafted democracy on to existing institutions. Many of us from time to time take visitors round the House. We draw their attention to some of the glorious events in the history of the House when people stood for principles and great principles were established, such as the 1832 Reform Act, from which a long succession of reforms were brought about, bringing the vote to the ordinary people.
It is not much use the ordinary citizen merely having a vote unless he has access to the fullest amount of information about what the parties stand for. My Bill would do something to show the connection between certain companies and certain parties and the actions which follow from certain payments. Last night, in the House, several of my hon. Friends developed this point at length in relation to certain companies. I only make the point of principle that the ordinary citizen, in these days of mass information media, has great difficulty in ascertaining the true facts about what political parties stand for and what political actions they propose to take. My Bill would do something to uncover a subject which was described last night as murky and dark.
During the last few years, especially, there has been great apprehension among the public about the powers which certain individuals have over the forming of public opinion. The Pilkington Report deplores that newspaper magnates should have too much power over public opinion-forming in newspapers and on television and advised that steps be taken to diffuse the power of public opinion-forming so that no man should have too much power. Yet in the ordinary commercial field nobody knows how much of the shareholder's money is used to create a climate of opinion which will produce certain political actions. It is no use a man having a vote if another man has newspapers and television and shouts so loud that the little man's voice is drowned.
Not only is there a voice behind the scenes, but nobody, not even the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), is in a position to know
1342
exactly what goes on. I should have thought that the right hon. and learned Gentleman would be the keenest supporter of the Measure so that he might know exactly where the money comes from and so that justice might be done.
Mr. James Callaghan: The right hon. and learned Member does not want to know.
Mr. Boyden: There is a widespread opinion that those working behind the scenes, the faceless men, should not have too much influence. My Bill would merely ask that the public should know, in this House, if a man has an interest he must declare it. This practice runs right through public life. In local government, when a council's housing policy is being discussed, a councillor who is a tenant of the council declares his interest.
I have always thought it peculiar that such a fuss should be made about a council house, and about such a man having a vote, when the rent is raised by Is., when, at the same time, there can be on the council a building contractor who may not be immediately concerned with that issue, but is concerned with the broader issue of building perhaps 300 houses and may subsequently have a contract. If he is concerned with a particular contract he declares an interest, of course.
The Bill would attempt to bring order into this chaos. Henry VII had an effective way of dealing with over-mighty subjects. He either put them in the Tower or chopped their heads off. In these days an over-mighty subject uses his shareholders' money to influence decisions in favour of his company and then finds himself in the House of Lords. There may be no connection at all between these things. It may be an accident that money given to a particular political objective is rewarded in this way, but at least the public are entitled to know how the money goes. I should have thought that every reputable company would be anxious to support my Bill so that it could clear its own name.
3.39 p.m.
Lieut.-Colonel Sir Walter Bromley-Davenport: I should like to suggest to the House, with great respect, that the speech to which we have just

1343
listened is a lot of nonsense. We debated this question twice last night.
Mr. Arthur Lewis: The hon. and gallant Member did not.
Sir W. Bromley-Davenport: The hon. Member may be right. I did not debate it, but I was here and I interrupted. We debated this question twice last night and, therefore, we have not only been listen-
ing to a lot of balderdash, but also wasting our time. I oppose the Motion.
Question put, pursuant to Standing Order No. 12 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of Public Business): —
The House divided: Ayes 147, Noes 186.

Division No. 146.]

AYES

[3.46 p.m.

Ainsley, William

Hannan, William

Oram, A. E.

Allaun, Frank (Salford, E.)

Harper, Joseph

Padley, W. E.

Awbery, Stan (Bristol, Central)

Hart, Mrs. Judith

Pannell, Charles (Leeds, W.)

Bacon, Miss Alice

Hayman, F. H.

Parkin, B. T.

Barnett, Guy

Healey, Denis

Pavitt, Laurence

Bellenger, Rt. Hon. F. J.

Henderson,Rt.Hn.Arthur(Rwly Regis)

Pearson, Arthur (Pontypridd)

Bence, Cyril

Hill, J, (Midlothian)

Peart, Frederick

Bennett, J. (Glasgow, Bridgeton)

Holman, Percy

Prentice, R. E.

Benson, Sir George

Houghton, Douglas

Pursey, Cmdr. Harry

Blackburn, F.

Howell, Denis (Small Heath)

Rankin, John

Bottomley, Rt. Hon. A. G.

Hughes, Emrys (S. Ayrshire)

Redhead, E. C.

Bowden, Rt. Hn. H. W. (Leics.S.W.)

Hughes, Hector (Aberdeen, N.)

Rees, Meriyn (Leeds, S.)

Braddock, Mrs. E. M.

Hunter, A. E.

Reynolds, G. W.

Bray, Dr. Jeremy

Hynd, H. (Accrington)

Rogers, G. H. R. (Kensington, N.)

Brockway, A. Fenner

Hynd, John (Attercliffe)

Ross, William

Brown, Rt. Hon. George (Belper)

Janner, Sir Barnett

Shinwell, Rt. Hon. E.

Browne, Percy (Torrington)

Jay, Rt. Hon. Douglas

Silverman, Julius (Aston)

Butler, Herbert (Hackney, C.)

Jones, Rt.Hn.A.Creech(Wakefield)

Silverman, Sydney (Nelson)

Butler, Mrs. Joyce (Wood Green)

Kelley, Richard

Slater, Joseph (Sedgefield)

Callaghan, James

Kenyon, Clifford

Smith, Ellis (Stoke, S.)

Carmichael, Neil

Key, Rt. Hon. C. W.

Snow, Jullan

Chapman, Donald

King, Dr. Horace

Soskice, Rt. Hon. Sir Frank

Collick, Percy

Lawson, George

Spriggs, Leslie

Craddock, George (Bradford, S.)

Lee, Frederick (Newton)

Steele, Thomas

Dalyell, Tam

Lever, L. M. (Ardwick)

Stewart, Michael (Fulham)

Davies, G. Elfed (Rhondda, E.)

Lewis, Arthur (West Ham, N.)

Stones, William

Davies, Harold (Leek)

Lipton, Marcus

Stress, Dr. Barnett(Stoke-on-Trent,C.)

Deer, George

Loughlin, Charles

Taverne, D.

Dempsey, James

Lubbock, Eric

Thomas, Iorwerth (Rhondda, W.)

Diamond, John

McBride, N.

Thompson, Dr. Alan (Dunfermline)

Dodds, Norman

McCann, John

Thomson, G. M. (Dundee, E.)

Duffy, A. E. P.

MacColl, James

Thornton, Ernest

Ede, Rt. Hon. C.

McInnes, James

Thorpe, Jeremy

Edwards, Robert (Bilston)

McKay, John (Wallsend)

Wade, Donald

Edwards, Walter (Stepney)

Mahon, Simon

Warbey, William

Fernyhough, E.

Mallalieu, E. L. (Brigg)

Wells, Percy (Faversham)

Finch, Harold

Mallalieu, J.P.W.(Huddersfield,E.)

Wells, William (Walsall, N.)

Fitch, Alan

Manuel, Archie

Whitlock, William

Fletcher, Eric

Mapp, Charles

Wigg, George

Foot, Michael (Ebbw Vale)

Mason, Roy

Wilkins, W. A.

Forman, J. C.

Mayhew, Christopher

Williams, D. J. (Neath)

Fraser, Thomas (Hamilton)

Mendelson, J. J.

Williams, W. R. (Openshaw)

Galpern, Sir Myer

Millan, Bruce

Willis, E. G. (Edinburgh, E.)

Ginsburg, David

Milne, Edward

Wilson, Rt. Hon. Harold (Huyton)

Gourlay, Harry

Mitchison, G. R.

Winterbottom, R. E.

Greenwood, Anthony

Monstow, Walter

Woof, Robert

Grey, Charles

Moody, A. S.

Wyatt, Woodrow

Grimond, Rt. Hon. J.

Morris, John

Gunter, Ray

Noel-Baker,Rt.Hn.Phillp(Darby,S.)

TELLERS FOR THE AYES:

Hale, Leslie (Oldham, W.)

O'Malley, B. K.

Mr. Boyden and

Mr. William Hamilton.

NOES

Allason, James

Black, Sir Cyril

Cary, Sir Robert

Arbuthnot, John

Bourne-Arton, A.

Channon, H. P, G.

Ashton, Sir Hubert

Box, Donald

Chichester-Clark, R.

Balniel, Lord

Boyd-Carpenter, Rt. Hon. John

Clark, Henry (Antrim, N.)

Barber, Anthony

Braine, Bernard

Clark, William (Nottingham, S.)

Barlow, Sir John

Brooman-White, R.…

Cleaver, Leonard

Barter, John

Brown, Alan (Tottenham)

Cooke, Robert

Batsford, Brian

Bryan, Paul

Cooper, A. E.

Bennett, F. M. (Torquay)

Bullus, Wing Commander Erie

Cordeaux, Lt.-Col. J. K.

Bennett, Dr. Reginald (Gos & Fhm)

Burden, P. A.

Costain, A. P.

Bitten, John

Butcher, Sir Herbert

Coulson, Michael

Birch. Rt. Hon. Nigel

Carr, Compton (Barons Court)

Craddock, Sir Beresford (Spelthorne)

Curran, Charles

Kerr, Sir Hamilton

Pym, Francis

Dalkeith, Earl of

Kershaw, Anthony

Ramsden, James

d'Avigdor-Goldsmid, Sir Henry

Kitson, Timothy

Rawlinson, Sir Peter

Drayson, G. B.

Leavey, J. A.

Redmayne, Rt. Hon. Martin

du Cann, Edward

Legge-Bourke, Sir Harry

Rees, Hugh (Swansea, W.)

Duncan, Sir James

Lewis, Kenneth (Rutland)

Ridsdale, Julian

Eden, Sir John

Linstead, Sir Hugh

Robson Brown, Sir William

Elliot, Capt. Walter (Carshalton)

Litchfield, Capt. John

Russell, Ronald

Emery, Peter

Lloyd, Rt. Hon. Selwyn (Wirral)

Scott-Hopkins, James

Emmet, Hon. Mrs. Evelyn

Longbottom, Charles

Sharples, Richard

Errington, Sir Eric

Longden, Gilbert

Shaw, M.

Farey-Jones, F. W.

Loveys, Walter H.

Skeet, T. H. H.

Finlay, Graeme

Lucas, Sir Jocelyn

Smith, Dudley (Br'ntf'd & Chiswick)

Fletcher-Cooke, Charles

Lucas-Tooth, Sir Hugh

Smithers, Peter

Forrest, George

McAdden, Sir Stephen

Spearman, Sir Alexander

Fraser,Rt.Hn.Hugh(Stafford&Stone)

MacArthur, Ian

Stodart, J. A.

Fraser, Ian (Plymouth, Sutton)

McLaren, Martin

Storey, Sir Samuel

Freeth, Denzil

McLaughlin, Mrs. Patricia

Studholme, Sir Henry

Galbraith, Hon. T. G. D.

Maclean,SirFitzroy(Bute&N.Ayrs)

Summers, Sir Spencer

Gammans, Lady

Macleod, Rt. Hn. Iain (Enfield, W.)

Taylor, Edwin (Bolton, E.)

Gilmour, Sir John (East Fife)

McMaster, Stanley R.

Taylor, Frank (M'ch'st'r, Moss Side)

Glover, sir Douglas

Macmillan, Maurice (Halifax)

Teeling, Sir William

Glyn, Dr. Alan (Clapham)

Maddan, Martin

Temple, John M.

Glyn, Sir Richard (Dorset, N.)

Maginnis, John E.

Thomas, Sir Leslie (Canterbury)

Goodhew, Victor

Maitland, Sir John

Thomas, Peter (Conway)

Gresham Cooke, R.

Marshall, Sir Douglas

Thompson, Sir Kenneth (Walton)

Grosvenor, Lord Robert

Mathew, Robert (Honiton)

Thompson, Sir Richard (Croydon, S.)

Hamilton, Michael (Wellingborough)

Matthews, Gordon (Meriden)

Thorneycroft, Rt. Hon. Peter

Harris, Frederic (Croydon, N.W.)

Maudling, Rt. Hon. Reginald

Thornton-Kemsley, Sir Colin

Harris, Reader (Heston)

Mawby, Ray

Tiley, Arthur (Bradford, W.)

Harvey, Sir Arthur Vere (Macclesf'd)

Mills, Stratton

Tilney, John (Wavertree)

Hastings, Stephen

Montgomery, Fergus

Turner, Colin

Hay, John

More, Jasper (Ludlow)

Tweedsmuir, Lady

Heald, nt. Hon. Sir Lionel

Nicholson, Sir Godfrey

Vane, W. M. F.

Hendry, Forbes

Nugent, Rt. Hon. Sir Richard

Vickers, Miss Joan

Hirst, Geoffrey

Oakshott, Sir Hendrie

Vosper, Rt. Hon. Dennis

Holland, Philip

Orr, Capt, L. P. S.

Wakefield, Sir Wavell

Hornsby-Smith, Rt. Hon. Dame P.

Osborne, Sir Cyril (Louth)

Walker, Peter

Howard, John (Southampton, Test)

Page, John (Harrow, West)

Wall, Patrick

Hughes-Young, Michael

Page, Graham (Crosby)

Ward, Dame Irene

Hulbert, Sir Norman

Pannell, Norman (Kirkdale)

Wells, John (Maidstone)

Hurd, Sir Anthony

Pearson, Frank (Clitheroe)

Whitelaw, William

Irvine, Bryant Godman (Rye)

Peel, John

Williams, Dudley (Exeter)

Jenkins, Robert (Dulwich)

Percival, Ian

Wolrige-Gordon, Patrick

Johnson, Dr. Donald (Carlisle)

Peyton, John

Woodnutt, Mark

Johnson, Eric (Blackley)

Pickthorn, Sir Kenneth

Yates, William (The Wrekin)

Johnson Smith, Geoffrey

Pike, Miss Mervyn

Joseph, Rt. Hon. Sir Keith

Pilkington, Sir Richard

TELLERS FOR THE NOES:

Kerans, Cdr. J. S.

Prior-Palmer, Brig Sir Otho

Lt.-Col. Sir Walter Bromley-

Davenport and Sir Gerald Wills.

ORDERS OF THE DAY
  FINANCE BILL
  As amended (in Committee and on re-committal) further considered.
  FINANCE BILL

    New Clause.—(PURCHASE TAX: 10 per CENT. RATE REDUCED TO 5 PER CENT.)
    Subject to any order of the Treasury made after the passing of this Act under section 39 of the Purchase Tax Act, 1963, all goods hitherto chargeable to purchase tax at the rate of 10 per cent. shall be chargeable at the rate of 5 per cent. and no more; and accordingly Part I of Schedule 1 to that Act shall be amended by substituting for any reference to a rate of 10 per cent, a reference to a rate of 5 per cent.—[Mr. Houghton.]
    Brought up, and read the First time.
    3.56 p.m.
    Mr. Douglas Houghton: I beg to move. That the Clause be read a Second time.
    Mr. Speaker: We could discuss this proposed new Clause with the new Clause No. 21—(Purchase tax: 15 per cent. RATE REDUCED TO 5 PER CENT.)—in the name of the hon. Member for East Ham, South (Mr. Oram) and other hon. Members.
    If that were considered appropriate, I would call the second of these new Clauses, when we get there, for a Division if required. I do not see any of the hon. Members concerned with it here at the moment.
    Mr. Houghton: Thank you very much, Mr. Speaker. I am sure that it will be for the convenience of the House that we should discuss both these Clauses together. We could decide later about a Division on the second of them.
    The Clause which I am moving proposes to reduce the existing Purchase Tax of 10 per cent. to 5 per cent. The associated new Clause proposes to reduce the Purchase Tax of 15 per cent. to 5 per cent. This is not intended to be merely a repetition of the last debate that we had in Committee on 28th May. We then had a spritely speech from the right hon. Gentleman the Chief Secretary to the Treasury, in better form that day than he was last night, if I may say so, and a boastful and rude speech from the hon.
    1348
    Member for Kidderminster (Sir. G. Nabarro), whom I do not see in his place at the moment.
    I want, if possible, a little later to go rather more deeply into this question of Purchase Tax, but the House will recall that on the occasion of our last debate we heard quite a lot about what I would describe as the "crackpot" side of the Purchase Tax. We heard how blackcurrant juice has been swept into the same group as orange squash and how, if hon. Members opposite dry their tears of anguish with a linen handkerchief, the Chancellor has his cut of 10 per cent., whereas if they dry their tears with a paper handkerchief their tears, if not unchecked, are at least untaxed.
    Then we heard of the failure of the authorities to distinguish between a music stand and a bandstand and of the difference, Purchase Tax-wise, between a trombone and a piano which, although they make quite different noises, are both musical instruments, more or less. Nor must we overlook the challenging and as yet unsolved problem of how much chocolate makes a chocolate biscuit. We hear that chocolate on one side only makes it a biscuit which is untaxed. Chocolate in the middle as a sandwich makes it still a biscuit which is untaxed. But if there is chocolate on both sides it becomes a sweetmeat and is caught by the 15 per cent. tax.
    4.0 p.m.
    So while scandals rock the Government and the Prime Minister is deeply, if not mortally wounded, the absurdities of the Purchase Tax, in a manner of speaking, take the biscuit. [Hon. Members: "Oh!"] Well, that is good enough to be getting on with. What a wonderful world this is! I can quite understand why people sit down in Trafalgar Square to protest against the end of it. It is much too entertaining to be blown up, especially when one comes to the entertaining side of Purchase Tax.
    On 28th May our proposed reductions in Purchase Tax were more drastic than we now propose. We then asked that the 10 per cent. group should be exempted altogether. We also asked that the 25 per cent. group should be relieved of 5 per cent., making it 20 per cent. Thirdly, we asked for the 15 per cent.

    1349
    group to be reduced to 5 per cent. Those three proposals would cost, we were told by the Chief Secretary, £266 million a year in revenue.
    We have taken note of that and have reduced our demands. Now we propose that the 10 per cent. group shall be reduced to 5 per cent., to leave the 25 per cent. as it is, and to renew our earlier proposal to reduce the 15 per cent. group to 5 per cent. I estimate the cost of the new Clause which I am moving to be £85 million and the cost of the other new Clause which we are considering at the same time to be £36 million, a total of £121 million, and that is much less than half of the total cost of our proposals on 28th May.
    The Chancellor may say, as, indeed, the Chief Secretary said in so many words last time, that this is such a substantial reduction in revenue that the Opposition must show either that the economy is in need of this extra stimulus or that these proposals should take the place of some already taken either in this Bill or otherwise. My answer is that a Labour Chancellor, in the circumstances in which the Chancellor found himself on 9th April, would, I feel sure, have done more and would have done it differently. But I shall not particularise on this, because it is always difficult when concessions have been announced and when they either have been implemented or are in the course of being put into operation for anyone to suggest that this or that should not have been done and that something else and something different should have been put in its place.
    In putting forward these new Clauses, what the Opposition say is that had a Labour Government been introducing the Budget we should certainly have made room for greater reductions in the Purchase Tax. The Chancellor himself, as an advance measure before the Budget, slashed the 45 per cent. rate of Purchase Tax and reduced it to 25 per cent, in two bites, in November on one group of goods and on 31st December on another, at a cost in revenue of almost £100 million altogether.
    In fact, the Chancellor has been busy ever since he was appointed to his present office almost a year ago. I think that it will be a year a fortnight Saturday since the right hon. Gentleman be-
    1350
    came Chancellor of the Exchequer—on 13th July last year. On 27th September, 1962—I am just giving a few extracts from the Chancellor's diary of reflation—he released special deposits, £80 million. On 3rd October he increased public investment for 1962–63 and 1963–64, £70 million. Then he released additional post-war credits, £40 million. On 11th October a strident voice at the Conservative Party conference said, "Stop dawdling, Maudling."
    On 5th November, an appropriate anniversary—the Chancellor of the Exchequer cut tax on motor cars—£50 million to £60 million—and announced the increase in capital allowances. On 8th November the building programme was expanded; on 27th November the road works programme was extended in the North-East; and on 29th November there was a further release of special deposits—another £80 million—and so on. There were on 31st December Purchase Tax cuts of £30 million a year. Then we come to the Budget on 9th April when there was a £269 million release in taxation. So in all that catalogue of what the Chancellor has done over the months to reflate the economy there was certainly room for further reduction in Purchase Tax had the Chancellor wanted to make it, and we think he should have done so.
    I think that the way in which the Government have dealt with Purchase Tax and Customs and Excise duties since 1961 is nothing but a fiddle. It is a conjuror's trick. In 1961, the then Chancellor asked for the regulator. In July, 1961, he used it, and up went all indirect taxes by 10 per cent.—not for revenue purposes, but for the better regulation of the economy, as a damper on spending. "Pay more as you spend or buy less" was the Chancellor's message. "Make room for exports" he said. Very well, we damped down, and some folk were soon out of work.
    Then came 1962, and the then Chancellor, the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), was still in an austere mood. He reduced direct taxation by only £8½ million, most of that in aid exemption and age relief. He abolished the surcharge which was made under the powers given to him by the 1961 Finance Act, thereby letting go £196 million a year revenue. But he

    1351
    tidied up the Purchase Tax groups and scales, and he did that on an all-round basis at the higher level. He moved the 5¼ per cent. rate, as it then was, up to 10 per cent. He introduced a new tax on sweets and ice cream at 15 per cent., thereby increasing the indirect taxation by over £210 million. So by this sleight of hand £196 million of revenue from the surcharge vanished, and out of the magic money box came £210 million, £14 million more than before, as the result of the reconstruction of the scale of indirect taxation and the introduction of the new tax at the 15 per cent. rate on sweets and chocolate biscuits.
    The new Chancellor comes along, as a result, as my right hon. Friend the Member for Huyton (Mr. H. Wilson) has suggested, of the sacking of the wrong half of the Cabinet, and he came and opened up the floodgates, it was said, and he reduced—most properly, I think—the highest rate of Purchase Tax below 45 per cent. He brought it down to 25 per cent. But he has left untouched the austerity taxes imposed by his predecessor last year. We have not really had an answer to the question why he has left those alone.
    It is the natural thing when taxation is imposed expressly as an economic measure to reduce those taxes when a period of relaxation or of expansion follows, but the Chancellor has left the Purchase Tax at the 10 per cent. rate alone and he has left untouched the 15 per cent. new tax introduced last year, though, as I said, he has reduced the top rate of Purchase Tax from 45 per cent. to 25 per cent. But it is the Chancellor's failure to reduce the emergency taxation of 1961–62 that we are now attacking.
    We want to put the 10 per cent. group back where it was before—to 5 per cent. That covers clothing, boots and shoes, mattresses and many other essential articles from which the Chancellor exacts a tribute of £170 million a year. Then there was the new tax group of 15 per cent., the "sweet meat" tax. We ask for this to be reduced to 5 per cent. Thus, instead of a three-tiered Purchase Tax of 10 per cent., 15 per cent. and 25 per cent., the right hon. Gentleman would have a two-tiered Purchase Tax of 5 per cent. and 25 per cent.
    1352
    I admit freely that a two-tier Purchase Tax with a difference of 20 per cent. is open to objection, but we have to do the best we can with the structure of the Purchase Tax as it is. The right hon. Gentleman will probably ask whether we are seriously suggesting that the Chancellor can bring the cost of these proposals—£121 million a year—within the framework of the Bill. But I wonder whether it is generally realised that after much heralded and welcome tax reliefs in the Bill, the Chancellor is getting an extra £45 million from the taxpayer in the current finacial year than he got last year and that £40 million of this extra taxation is in indirect taxation.
    The figures are all to be seen on page 29 of the Financial Statement. Despite reductions in Income Tax, mostly from the increases in personal allowances and adjustments of the reduced rate bands—there is £131 million less in Income Tax shown in the Schedule this year, £169 million in a full year—the gross receipts from Income Tax and Surtax in 1963–64 will be only £22 million less than last year. In the Customs and Excise details, there will be an increase, despite reductions, in the top rate of Purchase Tax of £64 million in indirect taxation. The net increase in revenue from taxation is, as I have said, £45 million, of which £40 million is in indirect taxation.
    I suppose that the right hon. Gentleman will ask why we should give up perfectly good Purchase Tax when—and I quote from his speech on 28th May—
    "As a pure matter of fact, the Purchase Tax does not have any very substantial effect on the cost of living."
    The right hon. Gentleman went on to show that the Purchase Tax as put on in 1961–62 put prices up, but would not bring them down if it were taken off. He said that if the 10 per cent. were abolished altogether it would reduce the retail price index by only three-quarters of I point. Therefore, presumably, under our proposals to reduce the 10 per cent. to 5 per cent. the Retail Price Index would be reduced by three-eighths of a point. He will probably ask, "Why surrender £85 million of revenue a year merely to reduce the index by so small a fraction that no one will feel it?".
    4.15 p.m.
    Just to show how unimportant Purchase Tax was from the point of view of the level of prices, the right hon.

    1353
    Gentleman continued, in that speech on 28th May,
    "To abolish the Purchase Tax as a whole…would make only a reduction of 1·8 in the index."—[Official Report, 28th May, 1963; Vol. 678, c. 1210.]
    He added that this put the matter in proportion
    I suppose that it puts a good deal in proportion because there is a flood of evidence that the increase of 1961–62 did, as a matter of pure fact—to quote his own phrase—increase prices. Incidentally, I would like to ask what is so "pure" about facts which are only conjecture? In forming any judgment of the effect on the Retail Price Index of reductions in the Purchase Tax, there can be no certainty either that a reduction in prices will follow or that it will not.
    The pure fact is—I stick to purity—[Laughter.] Purity is not a dirty word in this House. [Laughter.] Well, let us stick to the Chief Secretary. The pure fact is that, during 1962, there was an increase of 2·3 per cent. in the Retail Price Index and in 1961 an increase of 3·8 per cent. I think that there is no doubt that some of this increase was the consequence of the higher levels of Purchase Tax introduced by the regulator in 1961, and confirmed or increased in the Finance Act, 1962.
    Hon. Members have only to read the informative statement produced by Cadbury's, on Purchase Tax on chocolate biscuits—there were no samples by the way—and the memorandum produced by the Co-operative Union to see that Purchase Tax did have a marked effect on the price level in the last two years.
    The prices of clothing and footwear were pushed up by the additional tax imposed last year. The increase was four points in the case of furniture, five in the case of men's clothing, four or five in the case of women's clothing and six in the case of footwear—and boots and shoes are very close to the heart of my hon. and learned Friend the Member for Kettering (Mr. Mitchison), which enables me to say that men's clothing happens to be close to my heart because I have a constituency interest in it.
    Now we are told that increases in Purchase Tax invariably result in higher
    1354
    prices, which is the idea behind them, but that marginal reductions in Purchase Tax make no noticeable difference. That is a very interesting proposition. If the Government keep the taxes on because no benefit will befelt by the consumer if they are taken off, then I think that some further inquiry is necessary into price fixing and profit margins. It will be astonishing if increases in Purchase Tax are a good reason for increasing prices, but that a reduction in Purchase Taxis no reason at all for reducing them. There is something there which the consumer wants to know. To use a phrase in common currency just now, we are entitled to know. This great Purchase Tax mystery should be cleared up.
    Finally, we ought to hear from the Government where they are making for with Purchase Tax. Is this just a holding operation until the added value and other turnover taxes have been explored? We ought to have a statement of policy. The Chancellor should reveal his mind. We have a pretty good idea of his views on other branches of our tax structure. Our present difficulty is whether it is worth while asking any Minister to reveal his mind now.
    Mr. Cyril Bence: We have had enough revelations.
    Mr. Houghton: We have to proceed with our business as though the status quo was to continue for a little longer. The moment has not come for those of us on this side of the House to discuss these things merely among ourselves. We must still address ourselves to the Government in case they have a further opportunity of doing something about our proposals.
    I stress that in his reply on 28th May the Chief Secretary skirted round the main issue of Purchase Tax. He had great fun with much that had been raised in the course of the debate. He challenged the Opposition on cost and to declare what these reductions in Purchase Tax would replace in the Budget proposals. I tried to deal with those two points intelligently and reasonably.
    I think that we should now ask the Government to say more about their present attitude towards Purchase Tax, especially in the lower ranges, where

    1355
    price increases are felt by a large number of poor people. Otherwise, we shall have to say that there can be little confidence in the Government to continue to rule the country when they cannot give a sensible definition of a chocolate biscuit.
    Mr. A. E. Oram: I understand that we are discussing two new Clauses, a common feature of both being that the level of tax proposed is 5 per cent. If the Government accept both, they will be continuing the process in which last year's Chancellor of the Exchequer took some pride—that of the simplification of the rates of Purchase Tax.
    Last year, the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) told us that he was taking the opportunity to make some simplification and reduction in the number of rates of Purchase Tax. It was a little illogical that it was in that Budget that he introduced the new rate of 15 per cent. on sweets and soft drinks. The Opposition are now giving the Government the opportunity to simplify the rates by reducing both the 10 per cent, and 15 per cent. rates to that of 5 per cent.
    I was very glad that my hon. Friend the Member for Sowerby (Mr. Houghton) took up the subject of the effect of Purchase Tax on the cost of living. He reminded us that we were told last year that to reduce Purchase Tax would not have a great effect on the cost-of-living index. He gave some figures of where it had had a direct effect. One figure which he did not give was that of the substantial reduction from 100 points last year to 96 points this year for radio and television sets. That shows, what should be self-evident, that reductions in Purchase Tax directly affect the cost of living. It is largely on those grounds that we are putting forward these two new Clauses.
    May I give the House a few figures of the way in which the general cost of living has been behaving since hon. Members opposite have been in power? Almost every year there has been an increase in the cost-of-living index of between three and four points. Last year, the increase was nearly five points. Consumers want to know when this relentless upward turn of the cost of living is
    1356
    to be stopped. We admit that some factors in this process may be beyond the Government's control, but there are others which are directly within their control, and the use of Purchase Tax is one obvious way in which the Government can affect the cost of living.
    I particularly urge on the Chief Secretary the second new Clause, which proposes that the tax on soft drinks and ice cream and sweets and confectionery, which ought not to have been introduced in any case last year, ought to be, if not removed, at least reduced by the amount we suggest. The impact of cost-of-living increases is particularly harsh on old folk and large families. The old-age pensioners and families with many children are those who would gain most direct benefit from a reduction in expenditure on soft drinks and sweets, and so on. I hope that the Chief Secretary will give a favourable answer on those grounds.
    One of the effects of Purchase Tax on these items has been a distinct decline in the production of soft drinks. According to the Financial Times of 21st May, soft drink production has declined from 442 million gallons last year to 411 million gallons this year. According to the Financial Times of 21st April, ice cream consumption has been reduced by 20 per cent. There are similar, if not quite so steep, declines in the consumption of chocolate biscuits.
    Was this the Government's intention? Did they have it in mind to bring about a decrease in the production of these items when they introduced this form of Purchase Tax? Will the Chief Secretary give us some idea of the effect of that reduction on estimates of revenue? Last year we were told that the tax was expected to yield £30 million during that year and £50 million in a full year. What effect has the decline in production had on those estimates?
    Almost all the concessions which the Chancellor felt able to make this year—and we welcome them—were in direct taxation. There were no concessions in indirect taxation, whereas, as my hon. Friend the Member for Sowerby pointed out, last year, particularly in the lower ranges of Purchase Tax, there were considerable increases in indirect taxation.
    Taking the two budgets together, I consider that this represents a considerable injustice. Taxes have been imposed on

    1357
    consumers and the switch of taxation in this way is distinctly harmful. I hope that by the acceptance of one or perhaps both of these new Clauses something will be done to rectify the ill-effects of last year's Budget and this one.
    4.30 p.m.
    Mr. A. E. Cooper: The easiest task of an Opposition at any time is to propose reductions in taxation, knowing that they will never have to implement their proposals. It stems from a sense of irresponsibility which we have noticed in a big way with the Labour Party at the present time.
    The hon. Member for Sowerby (Mr. Houghton), with a facility which we all admire, makes quite a case for this reduction, but he does not attempt to tell us how, if the Clause is accepted, the loss of revenue which the Exchequer will sustain will be made up. Is it to be made up by direct taxation? Is it to be made up by increases in other forms of indirect taxation? How is this money to be recouped?
    Mr. Houghton: At the moment, it would add to the borrowing requirement, which is big already, but which could be bigger.
    Mr. Cooper: So we are no longer to live within our income? We are to borrow more and more and sustain greater interest charges as we go on building ourselves up into a worse inflationary position than this country has sustained since the end of the war.
    The hon. Member for East Ham, South (Mr. Oram) referred to the increase in the cost of living over the past few years, and gave a figure of 3 to 4 per cent., but what he did not tell the House was that wages and old-age pensions had increased each year by a percentage greater than that, so in point of fact the working man, the salary earner, the wage earner and the old-age pensioner are much better off today than they have ever been in the history of the nation, and no amount of double talk by hon. Gentlemen opposite can gainsay that.
    The hon. Member for Sowerby and his hon. Friends, through their Leader the right hon. Member for Huyton (Mr. H. Wilson), have put forward the proposition that if they are returned to power we shall no longer have fee-paying for universities.
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    They have not told the country what this will cost, or where the money will come from. I will tell hon. Gentlemen opposite that this will cost £8 million. It may be said that £8 million is not very much in relation to £6,000 million, but it must be remembered that hon. Gentlemen opposite have also said that they propose to raise the school-leaving age to 16. They have not told the country how much this will cost for more teachers and more buildings, or even where they will get the extra teachers and the new buildings from. In fact the right hon. Member for Huyton and his hon. Friends have put forward a prospectus which, if it were put forward by a private individual, would land him in gaol.
    Let us come back to the basis of these two new Clauses under discussion. I can understand the economic argument put forward by the hon. Member for Sowerby. Indeed, I have put it forward myself in this House on many occasions. The point is that we must have a balance between direct and indirect taxation. This is a matter for honest argument between both sides of the House, and between economists within the same area of political thinking. Many economists who support the Conservative Party hold differing views, just as economists who support the Labour Party put forward differing cases when arguing the matter among themselves.
    I have long held the view that if it were possible the best way to run the economy would be to make all earnings free of tax and tax only spendings. I recognise that this is impossible, for the simple reason that under the proposals put forward not only by the Conservative Government but by the Labour Party when it was in office a number of people have been eliminated from the tax paying range. I do not know the figures, but I believe that about 6 million people pay no direct taxes at all.
    Obviously, therefore, if we were to impose a system such as I think would be right, all these people at the lower end of the scale who pay no direct taxes would immediately be affected if indirect taxes were increased. This may not be an insuperable problem. It might be possible by an increase in wages or by various adjustments in pension rates, and so on, to get it, but it certainly would be an extremely difficult problem

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    to overcome and, therefore, what we in Parliament have to address our minds to is the balance between direct and indirect taxation.
    Purchase Tax obviously comes into the category of indirect taxation. The question is whether this forms too large a share of the demands which the Chancellor makes on each and every one of us. This is the nub of the problem. If we think that it is too big a proportion, then I say to the hon. Member for Sowerby that we must be honest and tell the people from where we are going to get the balance of the money. It is no use hon. Gentlemen opposite or my hon. Friends making demands on the Government for more schools, more roads, more hospitals, more housing, and all these things without honestly telling the country where the money will come from to pay for them. The problem really is as simple as that if we are prepared to face facts.
    I still think that Purchase Tax rates at some levels are too high.
    Mr. E. Shinwell: The hon. Gentleman said that if his hon. Friends wanted hospitals, schools, and so on, the money would have to be found to pay for them. But that is precisely what hon. Gentlemen opposite have been demanding. They have been demanding more hospitals, more schools, and so on. Where will the money come from?
    Mr. Cooper: The right hon. Gentleman is being a little disingenuous. We are demanding these things, and we are prepared to face the bill. What the hon. Member for Sowerby is doing is proposing reductions in taxation which will make it impossible for the Government to provide the services which we feel are necessary for the country.
    We have to be honest about this. It is no use running around the country saying that we are to have these things if we are not prepared to foot the bill for them. The argument which we have to face is whether we want more direct taxation and less indirect taxation, or vice versa. We cannot have it both ways. It must be one or the other.
    I think that direct taxation is still too high, and that it is to indirect taxation that we should look for more
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    revenue which the Government need to provide the services which hon. Members on both sides of the House consider are necessary. I have no objection to the hon. Member for Sowerby putting forward his new Clause—it is obviously necessary for him to do so at this time—but I do not believe that in doing so he is facing the real problems of our time.
    Mr. Neil McBride: I support these two new Clauses to reduce the Purchase Tax to the maximum of 5 per cent. proposed. At the outset, I refer back to the Budget of 1962, when the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) said that his proposals,
    "by their general balance, are designed to maintain the improvement in our affairs clearly to be seen since July last."—[Official Report, 9th April, 1962; Vol. 657, c. 994.]
    As the House knows, the success of his deflationary measures resulted in a series of "little Budgets" being proposed by the Chancellor to arrest the decline in our national economy. They were very strange words indeed, in the light of the present unemployment figures, which are many thousands mere than they were at a similar period last year.
    In 1962, the then Chancellor of the Exchequer—this is to be found in column 991 of Hansard of 9th April—announced that the 13¾ per cent, and 5½ per cent. rates were to be consolidated at 10 per cent. The result was an increase of tax on furniture and on clothing, except for children's clothing, which is tax-free The hon. Member for Kidderminster (Sir G. Nabarro)—who, unfortunately, is not in his place at the moment—has said that he regards as contemptible persons who, outside the House, declare that the imposition of a 15 per cent. tax on sweets and soft drinks amounts to taxing children's sweets and small pleasures. But there are many millions of people who take that view and who consider that this tax is an unjust one, which should be abolished.
    It is necessary in this context to put the case for two defenceless age groups and for another group of people who are by no means defenceless, I listened with interest and a sense of wonder to the hon. Member for Ilford, South (Mr. Cooper) when he spoke about the old-age pensioners. The old-age pensioner

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    has a pride and dignity, as I know very well at first hand. In Tory Britain. my father, in his eightieth year, is still working. He should have had a decent pension to reward him for a lifetime spent in industry. He is no different from millions of others. It was cold, callous, calculated indifference to old-age pensioners to announce in January last, during a winter of the utmost severity, that there would be an increase for them and then not to bring it into operation until May.
    The second defenceless age group is the very young, whom the 15 per cent. tax hits most severely. There is, however, another group of people, the housewives, who are concerned all the time with the cost of living. I am certain that, after studying the Government's policy, they have passed sentence on the Tories and will sign their warrant of execution as a Government at the next General Election.
    It is the family man earning low wages who is most affected by the Purchase Tax, and it would be a great help to him if the level were reduced. There is a vast difference of outlook between the party opposite and my right hon. and hon. Friends. We should do something to reduce the cost of living if we accepted these new Clauses and put them into effect. Food prices alone have risen 6 to 7 per cent. since January, 1962. Taking the level at January 1962, as 100, the increase by December, 1962, was 2·3 per cent., and in this year, until April, the increase was 1·9 per cent., when the index stood at 104.
    There is great cause for alarm in the increases in prices of essential commodities. Everyone knows about it. Women, particularly, know what happens. The rise goes on almost imperceptibly, now a penny, now a halfpenny, and so on. The process has been accelerated ever since the Tory Partytook office. Yet the Government seem powerless to do anything while, in the words of their own spokesmen, the value of the £ is steadily eroded. There is an abiding need for a reduction of taxes, yet Tory affluence seems always to mean increases all round. Government supporters may declare that Income Tax cuts are on the way, but many married men with families will not accept that they will necessarily receive any benefit since what little may come
    1362
    to them by way of relief is eaten away in increased fares.
    In 1959, the Tory boom year, when the right hon. Member for Bromley (Mr. H. Macmillan), during that famous General Election, told us how well we were doing, the cost of a season ticket from the constituency of the Chancellor of the Exchequer to London, that is, from High Barnet, to Charing Cross, was £9 3s., whereas two days ago it became £12 17s., an increase of 40 per cent.
    Mr. Cooper: If all the hon. Gentleman says is true, how does it come about that the nation today is better housed, better fed, better clothed and better shod than at any time in its history?
    4.45 p.m.
    Mr. McBride: It would be a poor thing if that could not be said of any country which makes any pretence to progress. There has been progress in this country, of course, and it has been hastened not least by the party of which I am a member.
    To return to my theme, the weekly cost of travel from the Chancellor's constituency to London has risen from 18s. 9d. to 26s. 3d.—
    Mr. Deputy-Speaker (Sir Robert Grimston): Order. I am sorry to interrupt the hon. Gentleman, but in specific references to fares on the railways we are getting very far from the new Clause.
    Mr. McBride: With respect, Mr. Deputy-Speaker, I made those references by way of illustration.
    Everywhere one turns—the cost of meals in cafés, the cost of telegrams, and so on—one meets rising prices. The adoption of these new Clauses would give considerable benefit. I draw particular attention to the price increases influenced by the proposals in the 1962 Budget which extended the Purchase Tax to 15 per cent. on the wholesale value of sugar confectionery, including chocolate biscuits, soft drinks and ice cream from 1st May, 1962. At that time, the Chancellor met criticism by saying that he was not prejudicing the position of soft drinks in relation to alcoholic drinks, but he was undoubtedly, by that increase in price, bringing many soft drinks very near to the price level of some alcoholic drinks. Moreover, in taxing confectionery andice cream, he was forgetting that, in

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    modern Britain, these things are not luxuries. Every family expects to have them, and they are much appreciated by many people. It is high time that the level of tax on commodities in Groups 34, 35 and 36 was reduced.
    The right hon. and learned Member for Wirral said that the yield from soft drinks would be £50 million, but I draw attention to the Answer given to my hon. Friend the Member for Dunbartonshire, East (Mr. Bence) on 14th March, when it was said that the repeal of this tax would cost £10 million a year. Someone's arithmetic must have gone wrong. Of course, production has fallen. The production of soft drinks and ice cream has fallen in every country when taxes of this kind have been imposed.
    Some hon. Members may say that we had poor summers in 1962 and 1961, and, therefore, that the soft drink profits are dependent on the last 10 per cent. to 15 per cent. of sales and on the marginal spending of the housewife, who has little margin left today. Over 70 per cent. of soft drink sales are consumed in the home. This shows that products like these are vulnerable to price increases because of the considerable effects of Purchase Tax on them. The Chancellor knows that the operation of this tax brings about a decline in purchasing power, and a decline in the housewife's spending power means less revenue from company tax and Profits Tax.
    I think that the new Clause proposing a reduction of 5 per cent. in Purchase Tax would help the ordinary people and would make a real contribution to bringing down the cost of living. Although the reduction may seem to hon. Members opposite infinitesimal, the ordinary people for whom I speak would view the acceptance of these new Clauses with great pleasure.
    Mr. Brian O'Malley: We have had an interesting and often diverting debate.
    I congratulate my hon. Friend the Member for Sowerby (Mr. Houghton) on his kind reference to musical instruments which, I realise, is not under discussion. I was pleased to note that, although in musical terms my hon. Friend perhaps did not know the difference between a crotchet and a hatchet, he did know the difference between a piano and a trom-
    1364
    bone, which is more than can be said for the Treasury, which did not know the difference between a music stand and a band stand.
    When we were discussing similar new Clauses in Committee, hon. Members opposite strongly supported a simplified Purchase Tax system by which instead of having, as we have had in the past, seven rates of Purchase Tax there would be only three. The hon. Member for Kidderminster (Sir G. Nabarro) said that he would like only one rate. The new Clauses propose to knock the number down to two rates of 5 per cent. and the present rate of 25 per cent. I therefore hope, perhaps innocently, that we shall have some support from horn. Members opposite who would like to see such simplification.
    I support the new Clauses on two grounds, economic and human. When one is making economic decisions, which the Chancellor of the Exchequer had to do when he was formulating his Budget, it is particularly important that one should consider not only the economic problems, but also the human problems involved. I have no doubt that every hon. Member agreed with the Chancellor of the Exchequer's belief that the economy of the country was in need of expansion and of an injection of purchasing power.
    It was as a result of that belief that we had the Purchase Tax changes in November last year and all the other changes which my hon. Friend the Member for Sowerby mentioned in giving that interesting biographical account of the career of the Chancellor of the Exchequer during the time that he has been in office. My hon. Friend showed that, considering the amount of money involved in these new Clauses, the Chancellor of the Exchequer could have done something about the present Purchase Tax situation within the range of the finance that he was considering.
    What the right hon. Gentleman has, perhaps, neglected to do is to consider the human problems involved in the present rates of Purchase Tax. In the very short time that I have been a Member of the House of Commons it has seemed to me that the Chancellor of the Exchequer is a very pleasant man and I therefore appeal to him, on human grounds, to give favourable consideration to these new Clauses.

    1365
    I am particularly concerned this afternoon with the people whom I mentioned during the Committee stage, when similar Clauses were being considered, namely, the old-age pensioners. We all know that old-age pensions have recently been increased, but if we are in close contact, as many of my hon. Friends are, with old-age pensioners who have no other source of income we know that even with the recent increases they still have considerable difficulty in arranging a budget so that they may have adequate food. They still have tremendous difficulty in obtaining for themselves things which people who have given a lifetime of service to the community should have no difficulty in obtaining.
    I think particularly of the time when old-age pensioners, either single people or married couples, want a new carpet, a hearth rug, or some new furniture. I believe that a reduction in Purchase Tax from 10 per cent. to 5 per cent. would help them a great deal generally, but it would also help them to get the household requisites which they so often badly need.
    I have no doubt that my hon. Friends who have been in the homes of old-age pensioners living off their old-age pensions, or getting a little help from National Assistance, realise how often there is this air of shabby gentility in the house, of people, trying very hard to keep up appearances, who just have not the money to buy a new carpet when a hole appears in the old one. We must, therefore, consider the 6 million old-age pensioners in discussing this matter.
    We must also look to the people who have gained nothing as a result of the Budget. Apart from the pensioners, a very large number of people are receiving National Assistance. A large number of people are paying no Income Tax at all. I have recently had in my area a number of cases of applicants for National Assistance who have been the subject of an £8 7s. labourers' wage stop. This is the wage which they might be expected to take home as labourers in the Rotherham district.
    We have a large number of people, people on National Assistance and people working in unskilled occupations, whose income is extremely low. If we take the judgment of the National
    1366
    Assistance Board, their take-home wage is as low as £8 7s. a week These people are not paying Income Tax. They are not paying direct taxation. I would argue, I think with some justification, that a reduction in the 10 per cent. rate of Purchase Tax on household goods and clothing and a reduction in the 15per cent, rate on soft drinks and ice creams, which, of course, every' family wants and has to buy for its children, help these people.
    5.0 p.m.
    The first plea that I would make to the Chancellor is that in coming to an economic decision he should take into consideration the human element involved and therefore consider these new Clauses favourably. When we look at the Budget and at the Finance Bill a number of questions arise which are relevant to our consideration of the two new Clauses which seek to reduce the present rate of Purchase Tax. I have mentioned, first, the human considerations. The second consideration is whether, on present signs, the amount of money which is being injected into the economy is sufficient to produce the degree of expansion without inflation which all hon. Members desire. The third is that we have to look at any factors militating against such expansion of demand, or other desirable aspects of policy, which the acceptance of these two new Clauses could help to prevent.
    I should like to refer briefly to some of the comments made by my hon. Friend the Member for Swansea, East (Mr. McBride) and my hon. Friend the Member for East Ham, South (Mr. Oram), who spoke about the rise in the cost-of-living index. Surely, when the Chancellor talks in terms of incomes policy, however desirable it may be to prevent inflation in an expanding economy, it is nonsense to expect the co-operation of the trade unions in this policy if wage standards are being undercut all the time by a consistent and steady increase in the cost of living, such as we have had in the last few years.
    When quoting instances of fares, my hon. Friend the Member for Swansea, East was ruled out of order, but I think that we should pay attention to the way in which products like eggs, butter, fish,

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    meat, sweets and soft drinks have risen in price in recent years. These are things that we should take into consideration. We have seen since last year's Budget consistent and steady increases in the price of foodstuffs, in the price of domestic furniture; in fact, in the prices of the goods upon which the Purchase Tax rate was either increased or imposed for the first time. We must look at the increase in fares, in the cost of meals bought out, in the increase in National Insurance contributions the increase in the cost of housing, rents and rates, and the way in which the rates will inevitably move upwards, and the continued indebtedness of local authorities.
    Another example is that it was announced this morning that gramophone records have gone up in price quite considerably. It is the responsibility of the Government to do what is within their power to contain and hold steady the cost of living. If the Government are to push for an incomes policy they must do that. I suggest that the acceptance of the Clauses put forward from this side of the House will be doing something to keep the cost of living steady in the interests of the Chancellor's own declared national incomes policy.
    The last point that I would raise is the state of the manufacturing industries which produce the goods which are at present taxed at the rate of 10 per cent. and 15 per cent. The Chancellor has stated in recent weeks that there are signs that the economy is beginning to expand, that we are getting the healthy degree of expansion which the Chancellor has stated that he desires. This is not surprising. It is obvious that as a result of the money injected into the economy by the Budget there will be some expansion of industry and of the economy. There has to be, because a General Election is coming, so something has to be done about it from the point of view of the Government.
    The question that we must ask is whether, on the signs available so far, the amount of expansion is so favourable as to indicate that we shall get the degree of expansion that we need, and a 4 per cent. increase in our gross national product during 1963. Is the expansion sufficient to remove by the end of the
    1368
    year the slack which we have in almost every industry in the country?
    Without going into details, I can only say that a number of signs point to the fact that the expansion that we are getting, and the confidence that is being engendered as a result of the Budget, indicates that the amount of money pumped into the economy is perhaps not sufficient. In the Federation of British Industries inquiry into industrial trends, at the end of May, the question was asked of firms, "What are the most important factors likely to limit your output for the next four months?" At the end of May, 1962, 67 per cent. of the firms replied "Lack of orders or sales".
    At the end of January, 77 per cent. gave this reply, and at the end of May this year, in spite of the Budget, 71 per cent. of the firms participating in the inquiry still said that it would be orders that would limit their expansion and keep the slack in their industry. In fact, it would appear that the necessary expansion, confidence and orders are not coming forward.
    I would suggest that in view of the slack in the economy, in view of those answers, and of the sluggish state of the retail trade, which has shown very little change from the earlier months of this year, and the fact that there is still no sign of a hire-purchase boom which is an indication of increasing demand, it could be argued in detail that there are very strong economic arguments for injecting further money into the economy.
    I would support these Clauses on the human grounds which I have raised, because it would help to peg down the cost of living, which we all want to do, and because I believe that these Clauses, while serving a useful social purpose, would, at the same time, serve a useful economic purpose and achieve the ends of expansion without inflation which the Chancellor has said that he desires.
    Mr. W. A. Wilkins: I apologise to the House for breaking into the rather placid tenor of our ways to make a few comments on the two new Clauses, but more especially upon the speech which we had to endure from the hon. Member for Ilford, South (Mr. Cooper). I have been in the House of

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    Commons a long time and I have a clear recollection of coming into this Chamber on the occasion of Committee and Report stages of the Finance Bill and hearing the hon. Member make the same speech almost every year without fail.
    The hon. Member always takes the same line. The usual Tory challenge is offered to us, as it is on the occasion of General Elections, about the things that we on this side promise the nation that we will do if we are given the power, and we are challenged about where we would find the money. If the hon. Member is willing to sit in his place and listen to me, and provided that I am not ruled out of order by the Chair, I shall be pleased to tell the hon. Member some of the ways in which we would find the money.
    We would not find it by the trickery and jiggery-pokery that we have witnessed for so many years from the Government when they have messed about with the nation's finances, taking money with one hand, paying it back with the other, taking it from National Insurance contributions or devious means of that kind, handing out £400 million, as was done by the Tory Chancellor in 1958, and then clawing it back by taxation or regressive legislation which is brought in six months later. I could go through a whole catalogue of the actions of succeeding Tory Chancellors and the way they have manipulated the country's finances to curry favour at General Elections.
    One of the reasons why I am intervening is because the same pattern is being followed again this year. We have had £250 million already proposed to be given away in tax reliefs by the Budget and today we are pleading with the Chancellor to make remissions in Purchase Tax. I do not think that we will get them. We are kicking against the wall. If these remissions are to come at all, they will come in a few months' time, assuming that the election takes place in the autumn. If the election is to come early next year, we should get the remissions towards the end of this year and the 10 per cent. surcharge would probably be taken off, as I said a month ago to a conference which I was addressing. The regulator is likely to be used but it will be held back until a little later. I could go through the whole gamut of the conduct of the
    1370
    party which controls the country's destinies and show it up for what it is worth.
    I remember when the former Chancellor of the Exchequer, the late Sir Stafford Cripps, imposed Purchase Tax. At the time, he had good reason for doing so. Although, because of the circumstances of the time, I was compelled to support him, nevertheless I have always objected to him and to every other Chancellor in that I am opposed to this type of taxation in principle. This exposes a fundamental difference between myself and, at least, the hon. Member for Ilford, South and probably between our two parties.
    I am opposed to indirect, hidden taxation, to taxes which people are called upon to pay, which they assimilate after they have been in operation for a short time—for example, the tax on tobacco, which stops people smoking for, perhaps, two or three months, after which they drift back to it again and, perhaps, ignore the tax.
    Mr. Cooper: The hon. Member said that he supported the late Sir Stafford Cripps, but he has not told the House that to the one and only Budget presented by the late Mr. Hugh Gaitskell, who also increased Purchase Tax, he gave his support.
    Mr. Wilkins: I do not happen to be in the fortunate position of being Chancellor of the Exchequer and I cannot impose my will upon Chancellors of the Exchequer. I am giving a personal opinion, which I have always held, that direct taxation—payment according to ability to pay—is the only fair form of taxation. After that kind of payment is made by direct process, the individual can spend his money as he wishes and without the hidden taxation on the various goods or articles which we use. There is, therefore, a fundamental difference of opinion on this point.
    I appeal to the First Secretary—[Hon. Members: "Chief Secretary."] I get so muddled with alt the different titles that the Prime Minister gives his subordinate Ministers these days. I appeal to the Chief Secretary to the Treasury to give the most serious, sympathetic consideration to the proposals which we are making in the two new Clauses for the reduction of Purchase Tax.
    5.15 p.m.
    I speak from a fundamental objection to this type of tax, but there are other considerations which should weigh with

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    the Government when considering it. They want, I understand, to reflate the economy, as my hon. Friend the Member for Sowerby (Mr. Houghton) would say. This is an obvious necessity and it is one of the answers to the hon. Member for Ilford, South. It is a prerequisite of everything we do. I constantly tell people when addressing public meetings that the Labour Party cannot hope to succeed in its programme unless it is able fully to implement its proposals in "Plan for Progress", which I commend to the hon. Member. Then, he might not come here chiding us about how we are to find the money.
    I appeal to the Chief Secretary to consider our request, for two reasons. The first is the incidence of Purchase Tax upon the goods which are comprised in the two groups in question and which bear most hardly upon masses of the general public. They are items which must be used every day in the week, things which people have to buy almost continuously, for they are the means whereby we live and clothe ourselves.
    I refer, first, to footwear. If the Chancellor wants to help and to boost the economy and give it a thrust forward, I suggest that he might turn his attention to footwear. I know that footwear of infants and young children is not affected by the tax, but that does not alter the fact that it is extremely expensive to buy. The cost of all forms of children's clothing is appalling. Having had to find the means of rearing four children, I have an abundance of sympathy for those who are trying to raise young families today, with the extremely high costs, not so much of feeding them, but of finding their clothing and shoes. It may be that if we can do something to increase the prosperity of the boot and shoe industry, that might reflect itself in lower charges at least for children's footwear.
    My reason for asking the Chief Secretary to consider our proposals is that the incidence of short-time working in this industry, which hitherto has flourished, in post-war years at least, is far and away higher than in any other industry. My figures, which I believe to be correct, show that something like 15 per cent. of workers in the footwear industry are working short time.
    In the bedding industry, which is allied to the furniture industry, my figures
    1372
    show that 14·6 per cent of workers are on short time. All Members of Parliament have received representations from these two industries asking us to do something to assist them. The only way we can do so is to make their product more easy to purchase, and one of the ways in which we can help—although we know the Treasury answer, because we have had it in Written Answers to Questions—is by reducing Purchase Tax on furniture.
    If the occupants of the Treasury Bench are serious, as I imagine they are, because it is only natural that they should want to present the best possible case to the country when they appeal to the electorate at the General Election. If they want to inspire and reflate the economy, I urge them to consider the two ways which I have suggested by which they could stimulate consumer demand. In stimulating consumer demand they perhaps could help to remove some of this burden of short-time working which so many workers in these industries are experiencing at the moment.
    Mr. Laurence Pavitt: I wish to join in the pleas which have been put forward by my hon. Friends on this side of the House in support of these two new Clauses, and in particular the very sincere contributions made by my hon. Friend the Member for Swansea, East (Mr. McBride) and my hon. Friend the Member for Rotherham (Mr. O'Malley) on very humanitarian grounds. I share in the plea which my hon. Friend the Member for Rotherham made to the Chancellor of the Exchequer's humanity, but perhaps with a little less faith and a little less hope. I would inform my hon. Friend that an affable exterior does not of necessity mean that there is a heart of gold beating beneath it and that I am afraid that he will find that at the end of the debate the Chancellor of the Exchequer and the Chief Secretary will be their usual flint like, rocklike selves and that we shall have their resistance to the nthe degree.
    I sympathise a good deal with my hon. Friend the Member for Bristol, South (Mr. Wilkins). I happen to have the misfortune to be misrepresented in this House by the hon. Gentleman the Member for Ilford, South (Mr. Cooper).

    1373
    He knows he does not get my vote. I have the misfortune not only, like my hon. Friend, of having heard the hon. Gentleman the Member for Ilford, South make that speech in this House before; I have also heard it many times outside.
    Mr. Wilkins: But perhaps he will not be heard here very much longer.
    Mr. pavitt: We on this side are arguing on quite a narrow front. I think we should be grateful to the hon. Gentleman the Member for Ilford, South, for he stated the fundamental difference between, the two parties.
    Mr. Wilkins: Oh, he is a good Tory.
    Mr. Pavitt: We on this side are seeking as far as we can to reduce the impact of indirect taxation on people least able to pay it. The hon. Gentleman the Member for Ilford, Southis anxious not to do that because in his mind he feels that the priority is reducing the amount of direct taxation, which, in his view, is too high. I know his argument and the reasons for it. I do not agree. This is the vital difference between the two sides of the House in this debate.
    Our plea has been advanced on three main fronts during this debate, firstly, consideration of that section of the community who happen to be old—the pensioners and the old people; secondly, the tax on soft drinks and ice cream, sweets and chocolates, a tax which affects the children, and for that reason ours is a plea for the family; and thirdly, the housewives. I would add to this last point made by my hon. Friend the Member for Swansea, East a special plea for the young marrieds. This range of tax hits the young couple trying to start out in present circumstances and conditions, and carrying the tremendous responsibilities of trying to get a house. The only way they can do it invariably is to find a huge mortgage deposit, and then on top of that they have to buy commodities on which they have to pay Purchase Tax, the incidence of which has a crippling effect upon them.
    To consider first the old-age pensioners. The hon. Gentleman the Member for Ilford, South—asthe Chief Secretary probably will, for I have on many previous occasions heard him deploy the case in this Chamber—pointed out that the
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    old-age pensioners have never had it so good. He could show his figures and statistics to show that by so many points they were better off last year or by so many points their pension was not so good another year—and there is that usual reference to the three years after the war as well. We shall probably get that one again. Against those sorts of statistics I should like the House to realise how the last winter showed how those getting on in years and not very affluent came up against the extreme problem of acute poverty, due to the cost of living and also to the failure to raise the rates in time to meet the need for fuel during that very cold spell. I blame the Prime Minister and his right hon. and hon. Friends for most of the misfortunes of this country, but I cannot blame them for the cold winter.
    Mr. Wilkins: They blamed us for the cold spell in 1947.
    Mr. Pavitt: If my right hon. Friend the Member for Easington (Mr. Shinwell) were in his place I am sure he would underline that point.
    Mr. O'Malley: I am sure the House would be interested to know that in fact the pension of a single person in 1946 was about one-quarter of average earnings whereas the pension of a single person in 1962 was rather less than one-fifth of average earnings.
    Mr. Pavitt: I am very grateful to my hon. Friend, but I do not want to deploy figures. That is the kind of thing which hon. and right hon. Gentlemen opposite are adept at, and if I had to award the price for making debating points of statistical comparison I should award it to the Chief Secretary, who makes debating points about statistics far more efficiently than I can.
    I want to tell the House how I see it, and how I saw it last winter, from the human angle. I happen to serve on the board of the Central Middlesex Hospital. During that cold spell an old-age pensioner, a woman, was brought in dead. Her body temperature when she came to the Central Middlesex Hospital was 70 degrees. This happened in 1963—a woman died because she could not afford adequate coals and heating in her home. That is the situation I am presenting to the Chief Secretary, the sort of situation

    1375
    which comes from the taxing of commodities which these people need to buy, not as luxuries but in order to live. Of course, one could follow this example with many others.
    I know that many of us in this House try to follow up cases of our old people, by accompanying services such as meals on wheels. We go into their homes, and we find these tragic cases. I know that many hon. Gentlemen on the other side of the House do so as well. We meet these old people and we know that they have still got their pride, and it is a job to persuade them to take National Assistance, to which they are entitled. We try to persuade them to take it, but we find they are living in dire poverty, not having the necessities, and living alone at the age of 75 or 76 or 77, surrounded by their bits and pieces accrued through a lifetime. We have seen this sort of thing time and time again. They cannot afford the price of fuel, which is a high priority in their necessities. In my constituency last winter many went to bed with hot water bottles because they could not afford the price of fuel. So the plea I make is that we get away from statistics and have a look at the realities.
    Now I come to the question of the large families and the lollipop tax for kiddies. I was interrupted in a debate yesterday when one of my constituents came with a housing problem of statutory overcrowding—five children and mother and father living in one room. I had to tell him I was sorry, but we have 390 people in my constituency who are statutorily overcrowded out of 4,000 on the waiting list. Time after time, Friday after Friday, I have to meet families of five or six or seven or eight living in inadequate accommodation. It is on these families, the larger families, that this Purchase Tax falls most heavily. The more children one has the more difficult the expenditure and the greater the impact of the incidence of Purchase Tax. The priorities have to be altered, and we ask the Government, in making their rearrangements, to accept these two new Clauses.
    When the lollipop tax was imposed there was a specious argument, that because of the high incidence of dental caries it was right to tax sweets so that the children would not eat so many. This
    1376
    is one of the very few instances in which that sort of argument is used. I should probably be out of order if I were to explore this, but one could instance other things which are either socially or from the health point of view harmful but about which no such action is taken. But it would be far better to do something about the woefully inadequate dental care than to tax children out of eating too many sweets and out of incurring dental caries by this high rate of Purchase Tax.
    Like most people who get called at the tail end of a debate. I find that many of the points I had thought to make have already been made more effectively by one's colleagues. I do not want to reiterate the arguments about the various effects on industry. In my constituency we are heavily affected by all these things. Wall's ice cream factory is in my constituency. On the tape this afternoon there is a news item about a biscuit factory in my constituency being the subject of a take-over bid. The makers of Coco-Cola or Pepsi-Cola are in my constituency, and this tax affects not only these firms, but my constituents who work for them.
    I ask the Chief Secretary not to give us one of his brilliant debating speeches, scoring debating points off my hon. Friends, but to deal with these two items of Purchase Tax as put forward in the proposed new Clauses with less brilliance but a little more heart.
    5.30 p.m.
    Mr. Bence: I was rather interested in the proposition of my hon. Friend the Member for Bristol, South (Mr. Wilkins) and of my hon. Friend the Member for Willesden, West (Mr. Pavitt), that we should be indebted to the hon. Member for Ilford, South (Mr. Cooper) for being so explicit in his remarks about these two new Clauses. The hon. Gentleman made his position perfectly clear, and I have no doubt that he expressed the opinion of many in the ToryParty outside the House—that in order to relieve direct taxation, more and more taxes should be gathered by the spread of indirect taxation. I have heard the view expressed many times before, that since modern industry is a mass-producing system for mass consumption, one way of getting money is to tax the consumers when they consume the mass products.

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    I disagree with my hon. Friend. As an engineer, I am a supporter of mass production, and, therefore, of mass consumption. All my life I have bent my energies to improving the techniques of design and the mass production of consumer products in the hope that my fellow human beings will find it easier to consume those products.
    When we introduced Purchase Tax we applied a brake and reduced consumption. The object of Purchase Tax was to curb the mass production of products. It has been said from time to time—and there may be occasions when this is justified—that Purchase Tax curbs consumption at home, stops too much money chasing too few goods and enables more of the manufactured products to be exported. I am afraid that in 1963 it is not quite as simple as that. Export markets will only be gained through the superiority of our design and if we produce products at a competitive price in the world markets. This process is helped by stimulating mass consumption of mass produced products.
    The hon. Member for Ilford, South said something which I thought had died a long time ago. When we talk about improving the physical and material standards of our people, where is the money coming from? I remember hearing this argument as a boy in 1914 when the Prime Minister was Mr. Asquith and when the Bank of England said that the First World War would have to be stopped because there was no money in the bank. Mr. Lloyd George said, "You will find the money or there will be a new governor of the Bank of England", and the money was found. The money is always found when society thinks it worth while.
    The question which we should have been asking in the last ten years was not where the Tory Party found the money, but where that money was going. This is the question, I hope, which my constituents will ask, and not only that they will ask where the Government are getting the money but what, having got it, they are doing with it.
    I remember in the years 1945–51 the posters saying "Stop the Hole in the Purse". In the last 10 years—
    Mr. Deputy-Speaker (Sir Robert Grimston): This is getting too wide. I
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    allowed the hon. Member for Ilford, South (Mr. Cooper) to deploy an argument which was in connection with the lowering of Purchase Tax and to go into certain things by way of illustration. It is quite obvious that the hon. Member for Dunbartonshire, East (Mr. Bence) has the right to reply, but he is going far beyond it now.
    Mr. Bence: It is always difficult when an hon. Member opposite widens the debate, as the hon. Member for Ilford, South did. I appreciate that it is then very difficult to keep within the bounds of order, which he broke.
    Mr. Deputy-Speaker: I allowed the hon. Member for Ilford, South to deploy an argument. That is the responsibility of the Chair. The hon. Gentleman did not break the rules of order. I allowed him, within the rules of order, to deploy a certain argument, and I allowed the hon. Member for Dunbartonshire, East to reply. What I am saying is that the hon. Gentleman is going far too wide now.
    Mr. Bence: I accept your Ruling, Mr. Deputy-Speaker, and I will desist from pursuing the extravaganza in which the hon. Gentleman indulged and will bring the debate back to the point of indirect taxation as against direct taxation with which the hon. Gentleman was dealing.
    The burden of indirect taxation to the lower income group is very considerable compared with what it is to that section of society which is paying direct taxation. For instance, to many of us who pay direct taxation the burden of Purchase Tax is very small indeed.
    I had a case this week of a man who is receiving National Assistance and who is subject to the wage stop. The wage stop in Scotland is lower than it is in the South because the average earnings of labourers in Scotland is lower than in the South. But this man pays the same rate of Purchase Tax in Scotland as we do in the South even though he is on a much lower wage. Therefore, the burden of indirect taxation is very high indeed on the lower income group. The burden of indirect taxation to this man on National Assistance in Glasgow is much greater than the burden on his counterpart in the South. This is the problem, but the hon. Member for Ilford, South is in favour of increasing it.
    Mr. Cooper: It was entirely the basis of my argument. I said that so long as we have a large number of people paying no Income Tax at all, then, obviously, if we are going to increase indirect taxation these people are going to suffer. I argued that this was the basis of the problem of any change in taxation from direct to indirect. I recognised that.
    Mr. Bence: But we cannot alter the system of taxation from direct to indirect because there is such a tremendous gap in incomes. What would be a desirable social objective would be to narrow the gap in the income structure. We should have a more egalitarian society. That seems to me a logical argument. The hon. Gentleman should cross the Floor of the House.
    Mr. O'Malley: I think it would be in order for the purpose of this debate to ask my hon. Friend a question. He mentioned the argument of the wage stop, as I did earlier. I mentioned the figure of £8 7s. as the wage stop which exists in my employment exchange in Rotherham which illustrates the wage that an unskilled labourer might be expected to take home. I tried to say that this was inadequate and to appeal on these grounds for a reduction of the Purchase Tax rates. Does my hon. Friend know what the wage stop is in his constituency? Is it £8 7s., or above or below that figure?
    Mr. Bence: In my constituency it was, in fact, £9.
    Mr. Charles Loughlin: Will my hon. Friend explain to the House, and to me in particular, what he means by a "wage stop"? I must confess that I am fascinated but bewildered.
    Mr. Bence: I am delighted to explain. As was explained by my hon. Friend the Member for Rotherham, when a man receiving unemployment benefit buys hardware commodities he has to pay this 10 per cent. Purchase Tax. When such a man has exhausted his unemployment benefit, especially in those large areas of the country which in the last 10 years have come lower and lower in the employment scale, he has to go on National Assistance. He has exhausted his stamps. As a labourer, his maximum earnings may be only £9, although his
    1380
    average earnings are supposed to be £13. He may be entitled to £12, but the wage stop is applied and he does not receive more than £9, on the theory that if he gets more he will not work. That is the wage stop. But he still has to pay 15 per cent. and 10 per cent. in Purchase Tax on commodities which he has to buy for use in his home.
    I am interested in two products which are made in my constituency. The first is sewing machines. I can never understand why a sewing machine should bear a tax of 15 per cent. The Cabinet that it goes into bears no Purchase Tax, and if the electric motor that drives it is used to drive the starter of a motorcar it bears no Purchase Tax. But if it is put into a sewing machine it bears Purchase Tax. I cannot understand that, because a sewing machine is an essential piece of capital equipment for the young woman who is married and is raising a family, in a society where the cost of railway travel is rising, rents are rising, the rate burden is almost impossible, and the housewife must buy her cloth by the piece and make up clothes herself. I cannot understand why she must pay a Purchase Tax of 15 per cent. on a sewing machine.
    In our modern productive society, in some respects it is unfortunate that things are discarded by people not when they are worn out but when they are out of date. Goods are now being scrapped because they have been replaced by new models out of the productive machine. Technology grows so fast in our modern industrial economy that we have to change our models from time to time. Competition demands it. There is this rat race, to keep up with the Joneses. One manufacturer has to improve his model to keep up with another. Therefore, one markets on the proposition that people will be changing from one product to another from time to time.
    In those circumstances, Purchase Tax becomes a very heavy burden. None of us can escape it. We are all aware of it in connection with the purchase of motor cars, or whatever it may be. There is always a change-over to the latest model. When this phenomenon is present in a modern industrial community—and I am not criticising, or arguing the merits of it—Purchase Tax becomes a very serious matter.

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    In my constituency I have the Singer Sewing Machine Co., on Clydebank. It is the only one of any consequence in this country. In fact, it is the biggest sewing machine manufacturing unit in Europe.
    Mr. Ellis Smith: It is in this country.
    Mr. Bence: It is not in this country, because this country is England. Scotland is in the United Kingdom, but it is not in England. Scotland is a nation. We have this huge plant, which is undergoing tremendous modification, with an investment of £4¼ million. A sewing machine can last for twenty years. In fact, there are machines still in use which were manufactured sixty years ago. But we know that the whole advertising campaign of this country is directed towards the idea that products should be scrapped not because they are worn out but because they are out of date. The Singer Sewing Machine Company has been marketing its product against severe competition from Japan, America and Germany.
    The Japanese, who are our biggest competitors at present, have a much lower labour content cost, which means that the Singer Company has to face that added competition. Although a duty is imposed on imparted sewing machines, Purchase Tax inhibits a proper rate of sale of our sewing machines.
    5.45 p.m.
    Two other factories in my constituency manufacture products which are liable to Purchase Tax. Why the product of one should be subject to Purchase Tax is beyond my comprehension, but it does not come into this group; it is in the 25 per cent. group. But the other product does come into this group—soft drinks. There is a soft drinks factory in my constituency which moved there not very long ago. Shortly after it came this tax was imposed, and it immediately affected sales. I can see no object in encouraging industriaists—by giving them capital allowances and free depreciation—to increase their productivity and to produce more and more, while, at the same time, the Government impose Purchase Tax on their products.
    This is the craziest system I have heard of. I can imagine visitors from Mars looking down on earth and saying, "Here
    1382
    is a Government, in 1963, handing out £400 million in tax concessions in order to encourage industrialists to produce more and more goods and, at the same time, imposing a 33 per cent. Purchase Tax in order to ensure that as little as possible of their products are sold." That seems to me to be completely contradictory. This factory is frustrated, just as is the biscuit factory which was built in Liverpool.
    There is another factory in my constituency which produces general gymnasium equipment. The situation in this case is the last word in craziness. In Committee I said that 95 per cent. of its products were sold to a Government agency. I was wrong. The figure is 97·3 per cent. Only 2·7 per cent. of its products are sold to individuals on non-Government institutions, including local authorities. Almost all its products are paid for by the Treasury, which collects the Purchase Tax and then pays it.
    What sort of nonsense is this? What crazy financing and economic system are we going in for when the Government impose Purchase Tax on products of which, for all practical purposes, it is the only purchaser? If this firm manufactured a steel bracket for use in a glider there would be no Purchase Tax, but if that steel bracket were used in a vaulting horse in a gymnasium it would have to bear Purchase Tax—so we had better give up using vaulting horses and use gliders instead.
    We can all remember when the Chief Secretary to the Treasury was in Opposition. Then he was not interested in public enterprise. Now he is in the Treasury, and his main interest should be the stimulation of private enterprise. He ought not to be a saboteur of private enterprise. When he was in Opposition he said that any big businessman who agreed to run a public enterprise was a Quisling. Many of my hon. Friends will remember when, with all his debating skill and agility, he used to argue that point. Now he is supposed to be supporting private enterprise, but he is a Quisling, because the imposition of Purchase Tax on gymnasium equipment and on sewing machines is causing grave injury to important industries in Scotland. I ask him to accept the Amendments, confident that if they are accepted Great

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    Britain will soon find alternative ways of producing the necessary revenue, by the increased industrial activity of its people.
    Dr. Alan Thompson: So much ground has been covered in the debate that I do not intend to detain the House for long, but I want to underline one or two points which seem to me to be important. The first concerns the fact that indirect taxation weighs heavily on one section of the community.
    I saw it suggested the other day that Purchase Tax was not necessarily regressive because the tax on luxury goods was higher than the tax on necessities. This is a complete misunderstanding of what regressive taxation means. "Regressive" does not apply to the percentage of the cost of the goods. It applies to the proportion of a person's income which he spends on this form of taxation. Even though a wealthy man pays a high tax on luxury goods for his wife, it forms a much smaller proportion of his total income than the tax paid on the range of necessities bought by a working class man.
    In this sense indirect taxation is regressive, and we regard it as socially unjust. It hits at vulnerable groups of people, particularly old people and children, and it also hits young married couples who are not just consuming but are engaged in a form of what I would describe as domestic investment. They are building and furnishing their house, and they are buying many consumer durables which will last for many years. This spending occurs in a period of three or five years, and it is not consumption spread over a long period at an average rate; it is an intensive period of spending on what I call domestic investment for the good of their families and their living standards and for their long-term welfare. Young married couples are particularly badly hit by this tax.
    Equally serious is the whole effect of the high rate of Purchase Tax on the expectations of business men, producers and retail traders. There is no doubt that high rates of Purchase Tax reduce consumption. Any business man in the House, any manufacturer or retailer of furniture, shoes or anything else, can give detailed evidence of how changes in Purchase Tax affect his sales. If they
    1384
    affect his sales, they also affect his long-term expectations and his investment.
    A crying need of British industry, not only on the manufacturing side but on the retail side, is for the adoption of new technological inventions and new methods which will keep us in step with the rest of the world. Unless the manufacturer has some expectations of the market ahead, he will be affected. If his expectations are continually being disrupted by the extraneous element of Purchase Tax, clearly this will affect him. In the nineteenth century we could always extend our markets geographically because we could push back the frontiers of the world. Now we face a much tougher proposition in extending our markets, and there can be very little doubt that Purchase Tax in this respect distorts the markets.
    My hon. Friends do not agree with me in my next argument, but it has never been a condition that hon. Members on this side of the House should all say the same thing on every topic; but I am against too wide variations in Purchase Tax. I would favour a lower tax spread over a much wider range of articles. I think that discriminatory taxation of this kind sometimes injures an manufacturer who may be quite efficient—more efficient than people paying a lower rate of tax. He is working hard and becoming more efficient, and he is using new techniques, but a tax is put on for reasons quite extraneous to his efficiency. I therefore believe that too wide variations can distort the pattern of our industry.
    I should like to see a low Purchase Tax. I should like this on grounds of social equality and because I do not think that it would injure producers' expectations so much. I should also like to see it because it is a kind of tax which can be more easily used as a regulator. We on this side of the House will need to use regulators with effect from next October, May, August or whenever it is. Of course we shall not use regulators as they have been used by the Conservative Party—to rescue the Government from the consequence of a disastrous economic policy or for purely electoral reasons. Regulators should be used very sparingly indeed, because they injure expectations of spending and the policies of manufacturers and distributors and they

    1385
    injure employment. They should be used only for the most compelling international needs, the most pressing balance of payments needs, and not for the kind of reason for which the Government have used them.
    We urge the Government to accept these Clauses on behalf of the vast majority of the people of the country—the economically vulnerable people, the consumers; and also on behalf of the producers whom, as my hon. Friend the Member for Dunbartonshire, East (Mr. Bence) said, the Conservatives claim to represent. We know that they no longer represent the majority of young married couples or old-age pensioners or children, but we had assumed that they claim to represent manufacturers and business men. I suggest that this category of people is as badly injured in their long-term policies and planning by high rates of Purchase Tax as are the other categories which I have mentioned.
    Mr. Tam Dalyell: The Economic Secretary may recollect a long correspondence which we have had about a constituent of mine in Roxburgh—a manufacturer of soft drinks. I wish to say straight away that neither the Economic Secretary nor his officials could have been more helpful. They have been extremely helpful in this instance to my constituent, perhaps more helpful than they need have been under the strict regulations.
    At the same time, I think we can make the general point that the problems of soft drink manufacture are not confined to any one constituency. Is it not a fact that the soft drink trade is peculiarly sensitive to changes in prices, that there is a highly elastic demand and that the trade has had a hard time during the rough weather? Will not the Minister make some arrangement whereby, as winter comes in, some reconsideration can be given to the tax position of manufacturers of soft drinks? Perhaps when he replies the Chief Secretary will give us some idea of the fraction of the total of £36 million which the tax brings in which is derived from soft drinks.
    Mr. Loughlin: I will not keep the House for more than two minutes, but I wish to add a plea on the question of
    1386
    soft drinks, I have in my constituency perhaps one of the largest producers of soft drinks, Beecham and Carter, who produce Ribena, Tango and various other soft drinks. There is some fear for the employment prospects in the industry. It seems to me, on balance, that there has been a deterioration in the trade in soft drinks since the Purchase Tax was imposed.
    Will the Chief Secretary address himself to this problem, because he would not accept that a tax should be continued if, as a result of its continuance, there was a danger of unemployment arising in the industry. Will he indicate that he will examine the possibilities of relieving the industry of this tax?
    6.0 p.m.
    The Chief Secretary to the Treasury and Paymaster-General (Mr. Boyd-Carpenter): When the hon. Member for Sowerby (Mr. Houghton) moved the first of the new Clauses which we are discussing, he said that he did not intend that the debate this afternoon should be a repetition of that which took place in Committee. I must admit that in one respect he fully carried out that intention. The House may remember that when the hon. Member for Cardiff, South-East (Mr. Callaghan) moved a similar Clause in Committee, it was widely noted that he made no reference at all, in the course of a very agreeable speech, to the cost of the concessions which he was advocating.
    Mr. Callaghan: I did not know the cost.
    Mr. Boyd-Carpenter: The hon. Member says that he did not know that—which, perhaps, is a rather startling admission for a shadow Chancellor of the Exchequer advocating wide reductions in taxation. I only say to the hon. Member, may his shadow never grow less.
    The hon. Member for Sowerby characteristically faced this and, if he will allow me to make a small correction, gave substantially the cost with which I would agree. The first of these two new Clauses would cost, we estimate on the latest figures, £83 million and the second new Clause would cost £36 million. Therefore, we are discussing together proposals for an abandonment of revenue to the extent of no less than £119 million. The question

    1387
    immediately arises—and arose during the hon. Member's speech—as to how the change in the shape of the Budget which a remission of taxation to that extent would entail would be dealt with. The hon. Member for Sowerby was somewhat elliptical about this. He said that a Labour Chancellor would have made room for further reductions in Purchase Tax, but my hon. Friend the Member for Ilford, South (Mr. Cooper) said, with his usual skill—
    Mr. Wilkins: And tedious repetition.
    Mr. Boyd-Carpenter: Those of us who have served in this House for a number of years know what an extremely good debater and Parliamentarian my hon. Friend is. This was an example. He drew the hon. Member for Sowerby into interjecting that this would be met by an increase in Government borrowing, I understand that the hon. Member for Sowerby meant that he would simply forgo this amount of revenue without imposing compensating increases in taxation. Therefore, we have to deal with this matter on the basis that what is advocated, apart from the limited merits of Purchase Tax changes, is a very substantial change, to the tune of £119 million in the shape of the Budget. It is proposed, in other words, that the net release of purchasing power through the Budget should be increased by £119 million.
    The hon. Member proceeded to advocate that by the rather surprising tactics of retailing, with his usual accuracy, the release of purchasing power which my right hon. Friend had achieved before the Budget. As I listened to him it seemed that as he pointed out the very big releases which have been made, he was at every stage weakening the case for a further increase. We had a discussion on this in Committee and I ventured to say something on it, although the hon. Member for Swansea, East (Mr. McBride) and a newspaper columnist between them, apparently in advance of my speech, did not agree. We had some discussion in Committee and I ventured to say that I thought my right hon. Friend's judgment of the shape of the Budget and the stimulus needed for the economy was being shown to be sound and justified by developments since then.
    Since we had that debate and I made that assertion, we have had very striking
    1388
    confirmation in the extremely satisfactory reduction in the June unemployment figures and a much more optimistic approach shown by the F.B.I.'s committee in respect of business confidence. What is proposed now, faced by a Budget which seems to be showing every sign of achieving its object of expansion without inflation, is a change, without any further compensating measure, entailing the abandonment of £119 million of revenue. On those grounds alone the House should be very unwilling to contemplate changes of that kind.
    Mr. Loughlin: Cut Government expenditure.
    Mr. Boyd-Carpenter: The hon. Member says, cut Government expenditure. There is an almost universal consensus of opinion on that and almost universal disagreement about what should be cut. I should be tempted out of order—even with your wide generosity, Mr. Deputy-Speaker—if I were to discuss that question.
    Mr. Callaghan: Do I conclude from what the right hon. Gentleman has said that if present trends continue he does not expect to see any further changes in Purchase Tax in a downward direction this year, and no more release of purchasing power?
    Mr. Boyd-Carpenter: One of the most foolish things a Treasury Minister can do is to indulge in gratuitous prophecies or forecasts. All I say is that the pattern of the Budget seems to be meeting the needs of the situation and the economy is developing satisfactorily under its influence. The hon. Member for Cardiff, South-East will be aware that the very substantial injection of purchasing power developing from the Income Tax changes does not take physical effect in the great majority of cases until next month.
    Mr. Callaghan: The right hon. Gentleman will remember that they will be offset to a great extent by increases in National Insurance contributions, so the net effect will be very little. Why is he so confident that it would be wrong to release this £119 million if he cannot forecast what the trend is likely to be?
    Mr. Boyd-Carpenter: Every Chancellor has to exercise his judgment and this is an essay in judgment in the shape of the Budget. All I am saying is that

    1389
    every sign since the Budget is that my right hon. Friend's assessment of the economy appears to be justified. On the other point made by the hon. Member, of course the employee's element in the National Insurance contributions is a very much smaller item; the release in Income Tax is several times larger.
    The hon. Member for Sowerby referred to the present shape of Purchase Tax. I was very glad to hear the views of the hon. Member for Dunfermline Burghs (Dr. A. Thompson), who seemed to share my view rather than that of the hon. Member for Sowerby as to what, broadly speaking, is the proper shape for this tax. My view, which I think is borne out by experience of the tax when it was in other forms, is that if we have a number of very high rates and therefore very considerable discrimination between the rates applicable to different articles—sometimes on the edge of a category and obviously turning on quite narrow considerations—it has an adverse effect on employment and trade and distorts the pattern of production. This tax, whatever its merits and demerits, is far more efficient and contributes better to the economy, if it consists of fairly broad bands of fairly low rates. In its present state I think it achieves this.
    Sir Harmar Nicholls: Is my right hon. Friend aware that his argument and the argument of the hon. Member for Dunfermline Burghs (Dr. A. Thompson), so far as I understood it, are strongly in favour of a widely spread sales tax? We cannot go into that in discussion of these new Clauses, but would that not be better?
    Mr. Boyd-Carpenter: It would be difficult to relate that question to the debate on these Clauses calling for reductions in Purchase Tax, so I am afraid that I must leave it there.
    The hon. Member for Sowerby, my hon. Friend the Member for Ilford, South, and one or two other hon. Members, referred to the balance between direct and indirect taxation. Part of the argument of the hon. Member for Sowerby for his Clause was that this year he felt that too large a proportion of increases in revenue would come from indirect taxation rather than direct taxation. One or two other hon. Members made similar observations. It is interesting in that
    1390
    connection to see what the overall position is. On the estimates of expenditure for the current year, 1963–64, 46·8 per cent. of total revenue will come from indirect taxation, compared with 49·1 per cent. in 1950–51.
    That is interesting as showing that over these 12 years the proportion of revenue derived from indirect taxation has actually fallen. In so far as the hon. Member's argument was based on thispoint—the balance of direct and indirect taxation, the merits of which are rather doubtful—I think it is considerably weakened by that fact.
    The hon. Member for Sowerby, as did several of his hon. Friends, made a great deal of play about the effect on the Interim Index of Retail Prices. There was a good deal of comment about the hardship caused by increases in prices. Again and again the argument was adduced that because the index had shown certain advances that was an argument for a reduction in Purchase Tax. We had this out at some length during the Committee stage discussion. The fact is that the Clause referring to the 10 per cent. rate would, as was said by the hon. Member for Sowerby, affect the index only, so far as one can calculate, by ·375 per cent., or—as the hon. Member said—three-eighths of a point on the figures.
    I would stress that, so far as I know, it has never been the view of any Government that Purchase Tax should be used as a direct instrument on the cost of living index. Plainly its effects are too small. I must again call in aid the experience of hon. Gentlemen opposite. They may remember that, between June, 1950, and June, 1951, the index rose by no less than 11 points. Notwithstanding this, the 1951Budget produced a net increase of £28 million from Purchase Tax. Therefore there is no consistency between that and the argument adduced today in. favour of reducing Purchase Tax in order to give some relief which would result from a change in the index. I have no doubt that on that point the hon. Member for Bristol, South (Mr. Wilkins) supported the Government of the day, despite his proclaimed dislike of Purchase Tax on principle today.
    Mr. Wilkins: And always.
    Mr. Boyd-Carpenter: I believe that at about that time the hon. Gentleman

    1391
    was a Government Whip and used his influence to induce other hon. Members opposite to take the view adopted by the then Chancellor of the Exchequer. The hon. Gentleman's objection to the principle of Purchase Tax seems to be confined to the life of a Conservative Government.
    The hon. Member for East Ham, South (Mr. Oram) asked for the yield of the 15 per cent. from the tax to be divided into the commodities and compared with the estimate when it was introduced last year. The 1962 Budget estimate on tax yield from the three groups in a full year was, as I think the hon. Gentleman said, £50 million. That is divided into confectionery, £32½ million; soft drinks, £10½ million; ice-cream, £7 million. The current estimates of yield are, confectionery, £34 million; soft drinks, £15 million; ice-cream, £6 million. The overall figure is £55 million as against £50 million.
    The hon. Members for Swansea, East, Rotherham (Mr. O'Malley) and Willesden, West (Mr. Pavitt) all spoke about the problems of what they called the "old-age pensioners". I hope that the House will not think I am going back to my concern with a previous Department if I express the hope that, after 15 years, we might refer to "retirement pensioners", as they are the people of whom we are talking in this context. I can only remind the House that the real value of the benefits which these people draw is higher than it has ever been on any previous occasion. I am quite sure that, as matter of social policy, the right way to deal with the very real problems of the old—I beg the House to agree that I have given as much thought to this subject as at least some hon. Members—is by this steady, successive increase in their benefits, rather than by trying to adjust, at any rate the system of indirect taxation.
    I am strengthened in that view by the fact that Purchase Tax has less bearing on the problems on this class of people than almost any other. Anyone who has studied this matter closely knows that the main expenditure of these people is on food, fuel and rent, none of which is affected by Purchase Tax. The family survey shows clearly that the proportion of disposable income going in Purchase tax rises as incomes rise and is lowest at the bottom level of income. There-
    1392
    fore I do not think that the pleas made for the retirement pensioner are material on this question of Purchase Tax.
    6.15 p.m.
    I wish to remind the House that the burden, particularly of the 10 per cent. rate which we are discussing, can easily be exaggerated. It falls on the wholesale price, which means in general that its effect on the retail price is 6 per cent. or 7 per cent. In general, I do not think that an unduly serious impact. Nor do I think—this is in reply to one or two other speeches—that tax at this level can be said to have a serious effect on employment. I accept at once that the higher rates of Purchase Tax, the old 100 per cent. rate which we had when the party opposite was in office, or the 66⅔ per cent. rate, could, and almost certainly did, have an adverse effect on employment in the trades concerned. But it is one of the advantages of the changes which have taken place, getting the tax down to much lower levels, that one can claim that the effect on employment is unlikely to be more than marginal.
    My right hon. Friend who is responsible to the House and to the country—it is a great responsibility—for judging the shape of his Budget, formed a view, which he expressed in the Budget statement, about the amount of extra purchasing power that it would be wise to release. I have said, I do not wish to repeat myself, that it would seem that his judgment is being endorsed by events. One cannot, therefore, approach this Purchase Tax issue without having very seriously in mind that the yield of this tax—in all, I think, about £545 million—plays a major part in our national finances and the management of our national economy. It is a tax about which amusement may be caused. We had some this afternoon. All taxes have their marginal points which seem anomalous and which are suitable subjects for derision. But the fact that such difficulties exist has been weighed against the fact that this tax is producing a very substantial part of the national
    revenue.
    The proposals before us represent a very substantial reduction in the tax, a reduction which, it seems to me, from the angle of employment and of the cost of living, has very unsubstantial support. These new Clauses, if accepted, would result in a serious hole being made in

    1393
    the structure of my right hon. Friend's Budget, and I hope, therefore, that the House will not agree to their inclusion in the Bill.
    Question put, That the Clause be read a Second time: —
    The House divided: Ayes 161, Noes 221.

    Division No. 147.]

    AYES

    [6.18 p.m.

    Abse, Leo

    Hamilton, William (West Fife)

    Padley, W. E.

    Ainsley, William

    Hannan, William

    Paget, R. T.

    Allaun, Frank (Salford, E.)

    Harper, Joseph

    Pannell, Charles (Leeds, W.)

    Awbery, Stan (Bristol, Central)

    Hart, Mrs. Judith

    Parker, John

    Bacon, Miss Alice

    Hayman, F. H,

    Parkin, B. T.

    Barnett, Guy

    Healey, Denis

    Pavitt, Laurence

    Bellenger, Rt. Hon. F. J.

    Henderson,Rt.Hn.Arthur(RwlyRegis)

    Pearson, Arthur (Pontypridd)

    Bence, Cyril

    Herbison, Miss Margaret

    Peart, Frederick

    Bennett, J. (Glasgow, Bridgeton)

    Hill, J. (Midlothian)

    Prentice. R. E.

    Benson, Sir George

    Holman, Percy

    Probert, Arthur

    Blackburn, F.

    Houghton, Douglas

    Pursey, Cmdr. Harry

    Bottomley, Rt. Hon. A. G.

    Howell, Denis (Small Heath]

    Rankin, John

    Bowden, Rt. Hn. H.W, (Leica, S.W.)

    Hughes, Cledwyn (Anglesey)

    Reynolds, G. W.

    Bowles, Frank

    Hughes, Emrys (S. Ayrshire)

    Rhodes, H.

    Boyden, James

    Hunter, A. E.

    Robertson, John (Paisley)

    Braddock, Mrs. E. M.

    Hynd, H. (Accrington)

    Robinson, Kenneth (St. Pancras, N.)

    Bradley, Tom

    Jay, Rt. Hon. Douglas

    Rogers, G. H. R. (Kensington, M.)

    Bray, Dr. Jeremy

    Jenkins, Roy (Stechford)

    Ross, William

    Brockway, A, Fenner

    Jones, Dan (Burnley)

    Royle, Charles (Salford, West)

    Brown, Rt. Hon. George (Belper)

    Jones, Elwyn (West Ham, S.)

    Silverman, Julius (Aston)

    Butler, Herbert (Hackney, C.)

    Jones, T. W. (Merioneth)

    Skeffington, Arthur

    Butler, Mrs. Joyce (Wood Green)

    Kelley, Richard

    Slater, Joseph (Sedgefield)

    Callaghan, James

    Kenyon, Clifford

    Smith, Ellis (stoke, S.)

    Carmichael, Neil

    Key, Rt. Hon. C. W.

    Sorensen, R. W.

    Chapman, Donald

    King, Dr. Horace

    Soskice, Rt. Hon. Sir Frank

    Collick, Percy

    Lawson, George

    Spriggs, Leslie

    Corbet, Mrs. Freda

    Lee, Frederick (Newton)

    Steels, Thomas

    Craddock, George (Bradford, S.)

    Lever, L. M (Ardwick)

    Stewart, Michael (Fulham)

    Cronin, John

    Lewis, Arthur (West Ham, N.)

    Stones, William

    Crossman, R H. S.

    Lipton, Marcus

    Stress, Dr.Barnett(Stoke-on-Trent,C.)

    Dalyell, Tam

    Loughlin, Charles

    Taverne, D.

    Davies, G. Elfed (Rhondda, E.)

    McBride N.

    Thomas, George (Cardiff, W.)

    Davies, Ifor (Gower)

    McCann, John

    Thomas, Iorwerth (Rhondda, W.)

    Dempsey, James

    MacColl, James

    Thompson, Dr. Alan (Dunfermline)

    Diamond, John

    McInnes, James

    Thomson, G. M. (Dundee, E.)

    Dodds, Norman

    McKay, John (Wallsend)

    Thornton, Ernest

    Duffy, A. E. P.

    Mackie, John (Enfield, East)

    Tomney, Frank

    Ede, Rt. Hon. C.

    Mahon Simon

    Watkins, Tudor

    Edwards, Rt. Han. Ness (Caerphilly)

    Mallalieu E, L. (Brigg)

    Weitzman, David

    Edwards, Robert (Bilston)

    Mallalieu, J.P.W. (Huddersfield, E.)

    Wells, William (Walsall, N.)

    Edwards, Walter (Stepnay)

    Manuel, Archie

    Wilkins, W. A.

    Fernyhough, E.

    Mapp, Charles

    Williams, D. J. (Neath)

    Fitch, Alan

    Marsh, Richard

    Williams, LI. (Abertillery)

    Foot, Michael (Ebbw Vale)

    Mason, Roy

    Williams, W. R. (Openshaw)

    Forman, J. C.

    Mayhew, Christopher

    Williams, W. T. (Warrington)

    Fraser, Thomas (Hamilton)

    Mendelson, J. J.

    Willis, E. G. (Edinburgh, E.)

    Galpern, Sir Myer

    Millan, Bruce

    Wilson, Rt, Hon. Harold (Huyton)

    George,LadyMeganLloyd(Crmrthn)

    Milne, Edward

    Winterbottom, R. E.

    Ginsburg, David

    Mitchison, G. R.

    Woof, Robert

    Gordon Walker, Rt. Hon. P. C.

    Monslow, Walter

    Wyatt, Woodrow

    Gourlay, Harry

    Moody, A. S.

    Zilliacus, K.

    Greenwood, Anthony

    Morris, John

    Grey, Charles

    Moyle, Arthur

    TELLERS FOR THE AYES:

    Gunter, Ray

    O'Malley, B. K.

    Mr. Redhead and Mr. Whitlock.

    Hale, Leslie (Oldham, W.)

    Oram, A. E.

    NOES

    Allason, James

    Birch, Rt. Hon. Nigel

    Channon, H. P. G.

    Arbuthnot, John

    Bishop, F. P.

    Chataway, Christopher

    Ashton, Sir Hubert

    Black, Sir Cyril

    Chichester-Clark, R.

    Atkins, Humphrey

    Bourne-Arton, A.

    Clark, Henry (Antrim, N.)

    Awdry, Daniel (Chippenham)

    Boyd-Carpenter, Rt. Hon. John

    Cleaver, Leonard

    Barber, Anthony

    Boyle, Rt. Hon. Sir Edward

    Cooke, Robert

    Barlow, Sir John

    Brewis, John

    Cooper, A. E.

    Barter, John

    Bromley-Davenport,Lt.-Col.SirWalter

    Cooper-Key, Sir Neill

    Batsford, Brian

    Brooman-White, R.

    Cordeaux, Lt.-Col. J. K.

    Bell, Ronald

    Brown, Alan (Tottenham)

    Costain, A. P.

    Bennett, F. M. (Torquay)

    Browne, Percy (Torrington)

    Coulson, Michael

    Bennett, Dr. Reginald (Gos & Fhm)

    Bryan, Paul

    Craddock, Sir Beresford (Spelthorne)

    Bevins, Rt. Hon. Reginald

    Bullus, Wing Commander Eric

    Crawley, Aidan

    Biffen, John

    Burden, F. A.

    Critchley, Julian

    Biggs-Davison, John

    Butcher, Sir Herbert

    Curran, Charles

    Bingham, R. M.

    Cary, Sir Robert

    Currle, G. B. H.

    Dalkeith, Earl of

    Johnson Smith, Geoffrey

    Redmayne, Rt. Hon. Martin

    d'Avigdor-Goldsmid, Sir Henry

    Jones, Arthur (Northants, S.)

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

    Doughty, Charles

    Jones, Rt. Hn. Aubrey (Hall Green)

    Ridsdale, Julian

    Drayson, G. B.

    Joseph, Rt. Hon. Sir Keith

    Robertson, Sir D.(C'thn'S & S'th'ld)

    du Cann, Edward

    Kerans, Cdr. J. S.

    Robinson, Rt. Hn. Sir R. (B'pool,S.)

    Duncan, Sir James

    Kerby, Capt. Henry

    Robson Brown, Sir William

    Eden, Sir John

    Kerr, Sir Hamilton

    Rodgers, John (Sevenoaks)

    Elliot, Capt. Walter (Carshalton)

    Kershaw, Anthony

    Roots, William

    Emery, Peter

    Kitson, Timothy

    St. Clair, M.

    Emmet, Hon. Mrs. Evelyn

    Lambton, Viscount

    Scott-Hopkins, James

    Errington, Sir Eric

    Leather, Sir Edwin

    Seymour, Leslie

    Erroll, Rt. Hon. F. J.

    Leavey, J. A.

    Sharples, Richard

    Farey-Jones, F. W.

    Leburn, Gilmour

    Shepherd, William

    Fell, Anthony

    Legge-Bourke, Sir Harry

    Skeet, T. H. H.

    Finlay, Graeme

    Lewis, Kenneth (Rutland)

    Smith, Dudley (Br'ntf'd & Chiswick)

    Fisher, Nigel

    Linstead, Sir Hugh

    Smithers, Peter

    Fletcher-Cooke, Charles

    Litchfield, Capt. John

    Speir, Rupert

    Forrest, George

    Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)

    Stevens, Geoffrey

    Fraser, Ian (Plymouth, Sutton)

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Steward, Harold (Stockport, S.)

    Freeth, Denzil

    Longbottom, Charles

    Stodart, J. A.

    Galbraith, Hon. T. G. D.

    Longden, Gilbert

    Storey, Sir Samuel

    Gammans, Lady

    Loveys, Walter H.

    Studholme, Sir Henry

    Gardner, Edward

    Lucas, Sir Jocelyn

    Summers, Sir Spencer

    Gibson-Watt, David

    Lucas-Tooth, Sir Hugh

    Taylor, Sir Charles (Eastbourne)

    Gilmour, Ian (Norfolk, Central)

    McAdden, Sir Stephen

    Taylor, Edwin (Bolton, E.)

    Gilmour, Sir John (East Fife)

    MacArthur, Ian

    Teeling, sir William

    Glover, Sir Douglas

    McLaughlin, Mrs. Patricia

    Tempts, John M.

    Glyn, Dr. Alan (Clapham)

    Maclay, Rt. Hon. John

    Thatcher, Mrs. Margaret

    Glyn, Sir Richard (Dorset, N.)

    Maclean, Sir Fitzroy(Bute&N. Ayrs.)

    Thomas, Sir Leslie (Canterbury)

    Goodhew, Victor

    Macleod, Rt. Hn. Iain (Enfield, W.)

    Thomas, Peter (Conway)

    Gower, Raymond

    McMaster, Stanley R.

    Thompson, Sir Kenneth (Walton)

    Green, Alan

    Macmillan, Maurice (Halifax)

    Thompson, Sir Richard (Croydon, S.)

    Gresham Cooke, R.

    Maginnis, John E.

    Thorneycroft, Rt. Hon. Peter

    Grosvenor, Lord Robert

    Maitland, Sir John

    Thornton-Kemsley, Sir Colin

    Gurden, Harold

    Marshall, Sir Douglas

    Tiley, Arthur (Bradford, W.)

    Hamilton, Michael (Wellingborough)

    Matthews, Cordon (Meriden)

    Turner, Colin

    Harris, Frederic (Croydon, N.W.)

    Maudling, Rt. Hon. Reginald

    Turton, Rt. Hon. R. H.

    Harris, Reader (Heston)

    Mawby, Ray

    van Straubenzee, W. R.

    Harrison, Brian (Maldon)

    Mills, Stratton

    Vane, W. M. F.

    Harvey, Sir Arthur Vere (Macclesf'd)

    More, Jasper (Ludlow)

    Vickers, Miss Joan

    Hastings, Stephen

    Morgan, William

    Vosper, Rt. Hon. Dennis

    Hay, John

    Nicholls, Sir Harmar

    Wakefield, Sir Wavell

    Heald, Rt. Hon. Sir Lionel

    Nugent, Rt. Hon. Sir Richard

    Walker, Peter

    Heath, Rt. Hon. Edward

    Oakshott, Sir Hendrie

    Walker-Smith, Rt. Hon. Sir Derek

    Hendry, Forbes

    Orr, Capt. L. P. S.

    Wall, Patrick

    Hirst, Geoffrey

    Page, John (Harrow, West)

    Ward, Dame Irene

    Hobson, Rt. Hon. Sir John

    Page, Graham (Crosby)

    Wells, John (Maidstone)

    Holland, Philip

    Pannell, Norman (Kirkdale)

    Whitelaw, William

    Hope, Rt. Hon. Lord John

    Pearson, Frank (Clitheroe)

    Williams, Dudley (Exeter)

    Hornby, R. P.

    Peel, John

    Wills, Sir Gerald (Bridgwater)

    Howard, John (Southampton, Test)

    Percival, Ian

    Wolrige-Gordon, Patrick

    Hughes-Young, Michael

    Pickthorn, Sir Kenneth

    Woodnutt, Mark

    Hulbert, Sir Norman

    Pike, Miss Mervyn

    Woollam, John

    Hurd, Sir Anthony

    Pilkington, Sir Richard

    Worsley, Marcus

    Iremonger, T. L.

    Pitman, Sir James

    Yates, William (The Wrekin)

    Irvine, Bryant Godman (Rye)

    Prior, J. M. L.

    Jenkins, Robert (Dulwich)

    Prior-Palmer, Brig. Sir Otho

    TELLERS FOR THE NOES:

    Johnson, Dr. Donald (Carlisle)

    Pym, Francis

    Mr. McLaren and Mr. Hugh Rees.

    Johnson, Eric (Blackley)

    Rawlinson, Sir Peter

    New Clause.—(EXEMPTION FROM DUTY OF CERTAIN CARS FOR INVALIDS.)
    Paragraph (g) of subsection (1) of section 6 of the Vehicles (Excise) Act 1962 (which exempts from duty vehicles which do not exceed six hundredweight in weight unladen and are adapted, and used or kept on a road, for invalids) shall be extended to include such vehicles as are therein mentioned up to fifteen hundredweight in weight unladen; and accordingly the said paragraph shall have effect with the substitution for the word "six" of the word "fifteen".—[Mr. Callaghan.]
    Brought up, and read the First time.
    Mr. Callaghan: I beg to move, That the Clause be read a Second time.
    I am grateful to my hon. and learned Friend the Member for Kettering (Mr.
    Mitchison) for drafting this Clause, which arises out of a memorandum which a number of hon. Members have received supplied by the Joint Committee on Mobility for the Disabled, headed, "The case for supplying suitably adapted small cars to the disabled".
    I confess that I knew nothing about this subject until I received this memorandum. Hon. Members will agree that sometimes we read these things and sometimes we do not. I am very glad to say that I read this one, which is prepared by a very distinguished group—the British Legion, the British Council for Rehabilitation, the British Limbless Ex-Servicemen's Association, the

    1397
    Coal Industry Social Welfare Organisation, the Invalid Tricycle Association, and many others. I think it makes a very good case on a subject that deserves the attention of the House.
    I am relying on this Joint Committee for all my facts, I freely confess. I also confess that I do not know the cost of the concession for which I am now asking, and I do not regard that as any sin. Briefly, according to the Joint Committee, there are at the moment 15,000 tricycles supplied to National Health patients. No charge is made by the Ministry of Health when tricycles are supplied to invalids. The Ministry pays the cost of insuring and taxing them and arranges to pay for repairs and maintenance. It also supplies sheds in which to house the vehicles. In addition, the Ministry supplies 14 gallons of petrol free of charge each year.
    If a National Health Service patient has a car the procedure is somewhat different, I understand from the memorandum hon. Members have received. Such a person can, if he unfortunately becomes eligible as a result of a disability or disease, have the controls of his car adapted at a maximum cost of £70. A motor tricycle cannot be issued in addition to meeting the cost of conversion to hand controls and any tricycle or shed he may have had is withdrawn. Nor does the Ministry make any payment towards the insurance, taxing or maintenance and repairs of the car or its conversion.
    The case being put by this group of organisations is that the Ministry in these cases supplies cars suitably converted. I will not discuss that matter because I would be out of order on the new Clause. I will, instead, deal with the taxation of these motor vehicles. As I say, the insurance and taxation of the tricycles is paid for by the Ministry. If one has a car which is converted, on the other hand, one must pay the cost oneself. A motor invalid tricycle of under 6 cwt. is exempted from the Road Tax.
    Apart from the merits of whether or not cars should be supplied, the group of organisations I have mentioned raises a number of questions. The memorandum states that tricycles are not as reliable as cars. I must be careful about what I say in this context lest I get into trouble with the manufacturers. On
    1398
    second thoughts, perhaps I had better stick my neck out, for I do not suppose that their blows will fall too heavily. The organisations advise me that it is easier to get cars serviced than these rather specialised tricycles. Logically that sounds right, but I do not know for certain. They also argue that the depreciation on tricycles is at a much higher rate than on cars. I suppose that that could be so since one can sell a car more easily than an invalid, tricycle.
    It appears that one of these tricycles costs about £325. A B.M.C. 850 c.c. car with adapted hand controls costs £410. There is not a great deal of difference in cost between the two. The Road Tax on a small car is £15 a year. I understand that other countries exempt small cars used by invalids—that is, incapacity caused by industrial disease, war service or simply illness which has resulted in incapacity to use normal vehicle controls—from the payment of Road Tax. My new Clause is designed to test the Government view in whether or not we can do something like that in this country.
    I hope that hon. Members opposite as well as my hon. Friends will press the Government on this matter. The new Clause is in no sense a fatuous one. It raises a case which is well worth examining. It might be objected to on the ground that the owner of an invalid tricycle is not as well off as the owner of a car—the question being, why help the car owner? In these cases of need I do not believe that there need be much distinction. Where a man has so lost the use of his faculties that he is required to have a specially adapted hand or foot controlled motor car, it does not appeal to me to think that he may be a little better off than a tricycle owner. I hope that the Government realise that the new Clause is tabled in a serious way and that they will give sympathetic consideration to the possibility of exempting these small cars used by invalids from the Road Tax.
    Mr. R. T. Paget: I have been for many years vice-president of the Association of Invalid Tricycle Users. I have interviewed probably every Minister of Health on this subject since I have been an hon. Member. Nothing has brought so much happiness to handicapped people than the provision of transport under the National Health

    1399
    Service. It is nothing short of extraordinary the way in which this has been able to bring them out of their loneliness and into a communal life.
    In Northampton our football grounds contain special places where invalid tricycles can be parked. The railways are amazingly helpful in the way of accommodation and fares, and all this has done much to break down the terrible loneliness of incapacity. There is, however, only one seat in these vehicles, A second seat would make an enormous difference, merely because a friend or relative could accompany the disabled driver.
    I have come across the argument that we must be careful to provide only for the incapacitated. "We do not want to provide free lifts for people who are not incapacitated. Other people might use the car," I have been told; but it is not a very worthy argument. Another argument I have met from a number of Ministers of Health has been to the effect that the sort of change proposed by the new Clause would be more expensive from the tax point of view. We have heard that there is less than £100 involved between the cost of the two types of vehicle. The depreciation on a tricycle is much higher than on a car and the maintenance costs more.
    From the purely financial point of view I am confident—and I have investigated this—that it would cost the Treasury less to provide cars, which are standard and made by B.M.C., than to provide these special tricycles, which are always breaking down, involve heavy maintenance, special agents to do that maintenance, heavy depreciation and the provision of garage space. I have pointed out to successive Ministers of Health that one cannot consider this matter in terms of transferring money from one pocket to another. The tax aspect should not eater into the argument.
    The success of this struggle, which has been going on for the last 15 years, to get this sensible and additionally humane change in what has been a great addition to human happiness would be a useful step. There cannot be more than a trivial cost involved to the Exchequer, and I hope that the Government will on this occasion consider the new Clause sympathetically.
    The Economic Secretary to the Treasury (Mr. Edward du Cann): We entirely understand the motives of the hon. Member for Cardiff, South-East (Mr. Callaghan) in tabling this new Clause. It is his wish and anxiety to elicit a reply in general from the Government on the whole subject of invalid vehicles. I will do my best to satisfy him in one particular, and at once, by saying that we have every sympathy with his motives. It is entirely clear that this matter merits serious examination from every point of view. The hon. Gentleman was somewhat modest as to the degree of his own knowledge in the matter, but he has the advantage of having a copy of a memorandum that I have not myself seen. He says that he will give it to me. I shall be very grateful for it, because I shall be interested and pleased, as will be my right hon. Friend, to study it.
    There is not an hon. Member who is assiduous in his constituency who is not very well aware of the kind of problem to which the hon. Gentleman and his hon. and learned Friend the Member for Northampton (Mr. Paget) have very properly referred. It is entirely and completely true that the introduction of these three-wheeled vehicles—and, in certain cases, as I shall mention later, four-wheeled vehicles—has made a very great deal of difference to the complicated and handicapped lives that these people are otherwise obliged to lead.
    I do not wish to speak in general on the subject of concessions for handicapped people. We debated that during the Committee stage, and I think that the House is only too well aware of the intrinsic difficulty there always is in such a situation as this. Inevitably, if we give tax concessions to those who are handicapped in one way or another we have to give the greatest benefit to those who are in receipt of the largest income. Though that may not be a bad thing to do, we have consistently taken the view that it should be the aim of policy to endeavour to help to the greatest possible extent those who are at the bottom end of the scale.
    Whatever method is chosen—and, for obvious reasons, to which the hon. Gentleman has referred, we cannot now go very closely into method—there is the common ground between us that it

    1401
    must be the aim of this House, Government and Opposition together, to do whatever we can for handicapped persons. That aim I share. But there are, regrettably, strong practical objections to the method suggested, which is admitted to be a testing suggestion, by the hon. Member for Cardiff, South-East, and I will try to explain them with care.
    The effect of the Clause would be to raise the weight limit of invalid vehicles that are exempt from vehicle excise duties from 6 cwts. unladen to 15 cwts. unladen. The present concession is given under Section 6(1g) of the Vehicles (Excise) Act, 1962. That is a rather interesting Section. Among the other vehicles that are given an exemption are fire engines, ambulances and road rollers. Looking at my own driving licence, I observe that I am qualified, as many other hon. Members may be, to drive a road roller. I have always wanted to drive one, but have not yet had the opportunity to do so.
    The present weight limit does not extend beyond small single-seat invalid carriages. The hon. and learned Member for Northampton referred to these particularly, and all of us who visit football grounds, orrugby or cricket clubs, have seen the particular trouble to which so many of those organisations go to provide parking space for these vehicles so that the occupants can see something of the game. What a welcome and desirable development that is. Those of us who have seen them there know at once the type of vehicle we are talking about and, in the main, that is the type of vehicle that is covered by this concession. They are, as has been said, purpose-made vehicles. They have brought great benefits, but they also have disadvantages.
    The proposed Clause would bring in light cars such as the Morris Mini-Minor, the Hillman Imp, the two-door Morris 1000, perhaps the Austin Cooper, and the Ford Anglia, if they were adapted for invalids. There is a long catalogue of what are ordinarily regarded as popular cars that would be included if this new Clause were approved.
    6.45 p.m.
    From the description I have given, I hope that the House will appreciate that
    1402
    the present weight limit of 6 cwts. is so low that it is unlikely to lead to abuse of the concession. The vehicles for which the concession is at present given are readily identifiable, and can be used by only one person. I cannot imagine any hon. Member or member of the public buying one to use for ordinary journeys. The vehicles covered are small and low powered, and not attractive to the ordinary road user. The taxation authorities have very little difficulty in administering the present exemption, because the applicants are almost certainly invalids who intend to use the vehicles themselves.
    On the other hand, while we appreciate what the hon. and learned Gentleman said on a point that I wish to develop—and I beg the House to take this with great seriousness—we feel that if Mini-Minors and other popular family saloons were brought in there would be a far greater incentive to abuse, which neither the taxation authorities nor the police would be able to check without making inquiries about the degree of incapacity and the circumstances of the proposed use of the vehicle.
    I must justify what I say, so it might help the House if I explain in detail the way in which abuse might arise if this Clause were incorporated in the Bill, The Clause does not define what constitutes a vehicle adapted for an invalid. Those words do not necessarily mean that the vehicle must have special controls so that the invalid can drive it himself. The hon. Member for Cardiff, South-East made that point, but the fact is that a vehicle would not, by this new Clause, need to be adapted in the way he had in mind.
    That is the serious demerit of the new Clause. It could cover a car that had had the front seat beside the driver removed and some form of leg rest put in so that an invalid with a stiff leg could sit in the back and be driven around. The Clause also does not make any provision for the amount of time the vehicle must be used for conveying the invalid. It would therefore be possible to adapt a vehicle in a fairly simple way and, in fact, use it very rarely for conveying the invalid but use it for most of the time for the normal purposes of private motoring. That would be a severe abuse, and unacceptable.

    1403
    Perhaps I might give a further if extreme example, but it is a valid example. Very many private cars these days have reclining front seats which, as the Clause is at present drafted, could count as an adaptation. I am sure that the House will appreciate at once the difficulties and dangers which that would involve.
    In theory, the way to prevent such abuse would be to make a further Amendment to the Vehicles (Excise) Act so as to lay down a definition of the way in which a vehicle had to be adapted in order to qualify for an exempt licence. But even if we introduced a rigid definition which limited the granting of exempt licences to vehicles which had substantially modified controls so that an invalid who, for example, had limited use of his legs could drive, we should not thereby be preventing able-bodied members of his family, or his friends, from using the vehicle in place of an ordinary car which would be subject to tax. I am sure that it would not matter if the additional use were limited; the difficulty and danger is that one could not cater for it, or be certain of it. We should not be preventing people who did not need special controls from buying invalid cars and driving them around tax free.
    We must therefore draw the conclusion—
    Mr. G. R. Mitchison: Before the Economic Secretary passes from that part of the document in his reading, I would point out that the Section provides that the vehicles must be used for invalids. All these difficulties seem to be purely questions of enforcement, and no more.
    Mr. du Cann: Indeed, they are questions of enforcement, but they are very important questions of enforcement, and I am coming to that matter in a moment. I am sorry that the hon. and learned Member for Kettering (Mr. Mitchison) twits me with reading from a document. The reason for that is very simple. This is a most important and somewhat complex matter and I am most anxious to give the fullest and most careful reply I can. As the hon. and learned Gentleman knows, I am perfectly ready at any time, either in this House or elsewhere, to speak without notes, but I thought
    1404
    that this was an important subject. I am saying that I think that we must draw the conclusion that we should have to go on and introduce further Amendments to the Vehicles (Excise) Act.
    In the first place, we should have to provide that only invalids incapacitated in certain sorts of ways, namely ways which would create the need for adaptation of the vehicle in the manner laid down in the Act, would be eligible for an exempt licence. The problem of drawing up a definition sufficiently precise to provide the basis for administering the concession would be formidable. We should also have to place on the licensing authorities a new administrative burden of checking that the conditions of the concession in this respect were fulfilled. But this is not all. To be fair to the ordinary taxpayer, we should have to amend the Act so as to restrict the use of a vehicle for which exemption had been granted to occasions when the invalid was driving himself.
    Mr. Paget: It is no more difficult to provide that a car should be used only when there is an invalid in it, but who is not necessarily driving himself, without any other provision with regard to the driving licence. As to the question of who should be allowed to do it, under the National Health Act only certain invalids are qualified to obtain the invalid carriage provided for them. Could it not be arranged that the right to tax exemption was based on precisely the same qualifications as the right to obtain an invalid carriage? I do not see the difficulties.
    Mr. du Cann: I am just coming on to deal with the hon. and learned Member's first point. In reply to the second point, I thought that I had explained that the vehicles which are currently in the main being issued to handicapped people are three-wheeled vehicles of a rather special, purpose-made type. I think that we would all agree that it is thoroughly unlikely that any ordinary purchaser would wish to buy one of these vehicles and use it for ordinary motoring purposes. In the case of the four-wheeled vehicles of which I read a list, and suggested that there were others, it would be true to say that different considerations apply.
    To deal with the first point that the hon. and learned Member raised, to

    1405
    enable the police to check up on such a provision we should need a special pattern of licence which could be recognised, and we should have to place on the police the obligation of occasionally checking up that the driver was the person to whom the exempt licence had been issued. I agree that it would be possible to devise such a system, but we have a feeling that it would not be easy for the police, and I suggest that the House should take that consideration very seriously.
    Mr. Mitchison: I am sorry to interrupt again, but I noticed that this Act contains a specifically general power to make regulations. Section 23(1) of it reads:
    "Regulations under this Act may be made generally for the purpose of carrying this Act into effect…"
    and it contains a "without prejudice" reservation at the end. Therefore, it seems that if any of these administrative points constitute the serious objection to doing the right thing they could be met by appropriate regulations.
    Mr. du Cann: Yes, I was not going to suggest that that was not the position. I say that there are objections to the new Clause, which I am endeavouring to retail to the House.
    We also feel that there are perhaps objections in general to dealing with the matter in this way. Indeed, whether it is dealt with under the terms of the new Clause, or regulations are introduced, that general point is still valid. We have considered whether it would be appropriate for the Government to introduce Amendments to the Vehicles (Excise) Act, possibly in the manner suggested, in order to permit this concession to be made. We have come to the conclusion, however, that the extra work placed on the licensing authorities and on the police would not be justifiable. We are not convinced that abuse could be prevented and that a definition of disablement could be worked out which would be thought to be fair and also sufficiently precise to provide a firm basis for administration. That is the position at present.
    The hon. Member for Cardiff, South-East, on the other hand, referred to cases where vehicles are currently provided by the Ministry of Health. He has his figures just about right. The Ministry of Health supplies about 16,000 tricycles, which are mostly lighter than 6 cwt., to National Health Service patients, and
    1406
    about 4,000 mini-cars to certain severely disabled war pensioners under Royal Warrant—avery satisfactory form of proceeding as I think the House has agreed. The hon. Member said that the Ministry pays the tax, if any, and the insurance, so that a tax concession is not necessary in those cases.
    I said that I would not speak of method and I will not do so at length, but it certainly seems to us that the existing method is being followed with success. I noticed that hon. Members opposite were nodding agreement when I described it as very successful. I question whether the best method by which to proceed to help these people is not perhaps by an extension of the existing method over a period of time rather than by tax exemption methods of this sort. Certainly it would be true to say that the most seriously disabled people of all very often have cars which are not adapted in any way but which are driven by fit persons. This is one of the snags.
    There are about 60,000 heart and lung cases who cannot drive themselves and this new Clause will not help them. This is why I say that we are not satisfied, for a variety of reasons, that the Clause would be necessarily the right way to set about it. Perhaps the hon. Member for Cardiff, South-East will allow me to say that it is probably true that the Clause does not cover cases which he would particularly wish to cover, especially the 60,000 whom I have mentioned.
    I referred earlier to the discussion which we had in Committee on allowances in general. I think that the Committee, as it then was, understood the point that we have by no means closed minds on allowances in general. We shall certainly pay serious attention to what has been said by the hon. Member for Cardiff, South-East and the hon. and learned Member for Northampton and, through interventions, by the hon. and learned Member for Kettering. We should like to have a fuller and better look at this whole subject but, although our sympathies with those who are disabled are as strong as the sympathies of those who have spoken in the debate, we feel with regret that the new Clause would not be the way to deal with the subject. However, we certainly wish to help in any practical way that we can find.
    Miss Margaret Herbison: I hope that after that speech the Economic Secretary, and indeed the Chancellor of the Exchequer, will extend their sympathy and bring some practical result from it. As I listened to my hon. Friend the Member far Cardiff, South-East (Mr. Callaghan), I felt that the Clause might go a little way towards alleviating great hardship, though it did not go nearly far enough to benefit people who greatly need to be benefited.
    The Economic Secretary has said that 4,000 mini-cars are given to the seriously war disabled. My hon. Friend the Member for Cardiff, South-East said that the difference in cost between a mini-car and an invalid carriage was about £100 since the Treasury already bears the burden, if it can be called a burden, of the licensing and the tax. We would have been more ready to accept the case made by the Economic Secretary if he had given us a definite assurance that the Chancellor of the Exchequer was willing to have discussions with the Minister of Health on this matter. We would then have felt that we were not only getting protestations of sympathy but that something would follow those protestations.
    7.0 p.m.
    I want to add a little to what has been said about the great difference which is made to the life of a disabled person if he has a mini-car instead of a tricycle. I represent the kind of constituency where every day I see in the streets people in those three-wheeled carriages. They are the seriously industrially disabled, and continually they make approaches to me in an effort to have a mini-car instead of a tricycle. A short time ago in an interview that I had with one of the most seriously disabled and his wife, I asked whether he had come to me in his three-wheeled car and whether his wife had come by bus. He said "No, I am afraid we broke the rule. It was very uncomfortable, but we both came in my tricycle." They could not go very far in that manner, and yet so often these men who want to go out visiting and who need the assistance of their wives or friends are prevented from enjoying those social amenities to which we all have a right, because they have to choose between going out on their own or staying at home with their wives.
    1408
    If the Economic Secretary were to tell us that as a result of this debate and of the representations that have been made from various organisations, he is going to have serious talks with the Minister of Health in order to devise some arrangement whereby the seriously industrially disabled may be given mini-cars—something for which many of us have asked for a long tune—I would be prepared not to press this proposed Clause; but if not, then in order to register my feeling I should want to vote upon it.
    Mr. Frederic Harris: I should not like to let this occasion pass without a few words being uttered from the back benches on this side of the House. I have listened to the whole discussion of this Clause with considerable sympathy. I think that any hon. Member who has much to do with his constituents must have come across problems affecting incapacitated people in this unfortunate position.
    When I first saw this new Clause I tried to find out how many people might be so involved in the greater Croydon area, which I am privileged to represent with two other hon. Members. I was given to understand that in an area which, after all, has a population of about 250,000, only 20 to 25 people would be involved. Bringing that down to practical facts, and having listened carefully to what my hon. Friend the Economic Secretary told us—and here I should like to say that I respect his views very much because I know how sincere they are—I cannot see that this difficulty cannot be tackled in some way or other.
    Obviously easier systems could be provided if necessary by the local authority, but I am assured by the police in the Croydon area that they know pretty well all the people concerned in their district. Therefore, it appears that even the local police would not expect much trouble in ensuring that abuses were avoided.
    I therefore ask the Economic Secretary, while fully respecting his views about the complications and possibilities of difficulty, if he will appreciate that there is a real feeling on the part of almost every hon. Member that something should be done to remedy this situation. The concession may not be much, but if we can give some little assistance in this direction we shall bring happiness and contentment to

    1409
    people who are very unfavourably placed, and we should therefore like the Government to try to give a concession of this kind.
    I strongly support the view that has been expressed by the hon. Lady the Member for Lanarkshire, North (Miss Herbison). Would my hon. Friend the Economic Secretary give an assurance that he will look into this matter further with my right hon. Friend the Chancellor of the Exchequer and, in particular, with my right hon. Friend the Minister of Health to see whether the present excellent scheme could be extended so as to give satisfaction not only to hon. Members but to a comparatively few people in almost every town and village? If this could be done, those people would feel that this Finance Bill had produced a worth while concession.
    Mr. E. G. Willis: I wish to speak in this debate for a few minutes because, in addition, to having the normal quota of disabled men in my constituency, I also have the Thistle Foundation, which successive Ministers of Pensions and their Parliamentary Secretaries always visit within a short time of taking office.
    In the Thistle Foundation there are about 100 families, the male members of which are more or less seriously disabled. About half those men have cars, and quite a number have tricycles. I can assure the Economic Secretary that this is a serious source of concern. The general feeling amongst the disabled men is that the tricycle, while it is most valuable, is in fact a very selfish thing because it means that only the man is able to go out. It means, too, that he does not get a full family life for he cannot take his wife and children with him. The man resents this fact very much, and in fact it tends to kill his desire to go out. Very often a man would go out but he stays at home simply because he is unable to take his wife and children with him. This is a burning question with these disabled men.
    I agree that it is very necessary to extend the provision of four-wheeled cars through the Ministry of Health. But it would also help if the concession which is proposed in this Clause could be given, and I am not sure that it would be so difficult to administer. If the Ministry of Health can administer a scheme covering cars which are provided free to certain
    1410
    people whose numbers are vigorously controlled, I cannot see how we could not extend the scheme to a category which, while not receiving the cars free, would enjoy great benefit. Surely the same machinery will operate.
    My hon. Friend the Member for Lanarkshire, North (Miss Herbison) made the right suggestion when she said that this proposal ought to be tackled in co-operation with the Ministry of Health and the Secretary of State for Scotland, who should inquire into the possibility of extending this concession to cover a wider range of people than are at present covered, even though those people might have to buy the vehicles. I have spent many hours in the Thistle Foundation in Edinburgh and I know what a burning question this is and what a difference a concession of this kind would make to the lives of these people. The provision of a car makes quite different men of them. I have known these people for years. I have known them to grumble even when they have had a tricycle, but as soon as they have acquired a car it is surprising how happy this has made the whole family. The degree of happiness is enormous, as the difference it makes to the man.
    I was disappointed by the Economic Secretary's reply. Although I fully understand the arguments which he advanced and I appreciate that there are administrative difficulties, I feel that, if this matter were approached through the Ministry of Health and the Scottish Department of Health, an answer could be found to make it possible for people paying for their cars to enjoy the benefits proposed in the Clause.
    Mr. Callaghan: May I ask a question of the Economic Secretary?
    Mr. Speaker: It is a little difficult, in the middle of no speech by the Economic Secretary, and with others seeking to speak. Perhaps some other opportunity would be more convenient.
    Mr. Ede: While the Economic Secretary was speaking, I could not help feeling that it is a pity that he has such an unprepossessing title for the office which he holds. It seemed to me that he felt, with the rest of the House, that here was something which, in the name of humanity, ought to be

    1411
    done, yet he had to raise the kind of objections which we know have to be met.
    I know one man in my constituency who has benefited, after a struggle to get himself included, under the Ministry of Health scheme. The difference this has made to that man and to his family is almost beyond belief. We are here concerned with a group of very unfortunate people. It should be possible to alleviate their misfortunes a little if we can only find a way of dealing with the quite legitimate objections which the Economic Secretary raised to the new Clause. I can only hope that I have not said anything to hinder his sympathy in the matter. I hope that those whom he has to consult will realise that the House has today been most impressed by the case which has been put and that we think that this is one of those cases in which economics ought not to have the last word and in which even police regulations ought occasionally to err on the side of humanity.
    Mr. Dalyell: The hon. Member for Croydon, North-West (Mr. F. Harris) spoke of his own constituency and said that the number of people involved there was about 20 or 25. In the mining areas such as those represented by my hon. Friend the Member for Lanarkshire, North (Miss Herbison) and myself, there is no doubt that the number would be six or seven times that, probably 150 or even 200. It is equally true that, just as the number of cases is multiplied, so the possibilities of abuse are multiplied, but I am certain that the whole argument about abuse is really chimerical and illusory. In fact, if people in the mining villages did abuse the concession in regard to mini-cars, they would certainly be reported to the police, if the police did not know already. The "grape vine" works very quickly. In this case, the "grape vine" would be concerned with justice, and it would work very efficiently. I am certain that the argument about abuse in the heavy industrial areas would fall very quickly, for understandable human reasons.
    Mr. Speaker: Mr. du Cann. I can now be less unhelpful. Perhaps there will be an opportunity for the hon. Member for Cardiff, South-East (Mr. Callaghan) to ask his question.
    Mr. du Cann: If I may have the leave of the House, I am ready, so to speak, to expose myself to radiation from the hon. Member for Cardiff, South-East (Mr. Callaghan). I shall be very brief. I do not wish to weary the House again with the arguments I attempted to put a few minutes ago. I believe that they are valid arguments, but I see no reason to rehearse them now.
    I say at once to the right hon. Member for South Shields (Mr. Ede) that he did not offend me. I do not think that there is anything he could say which would offend me; I have great admiration for him, as he knows. The right hon. Gentleman is perfectly right. I feel these matters as keenly as anyone in the House, but it is my anxiety and my duty as Economic Secretary to the Treasury—I agree with what the right hon. Gentleman said about the title—to try to ensure that we adopt the best and wisest method in the interests of the people themselves, in the interests of good administration and in the interests of the taxpayer. That is my sole concern.
    7.15 p.m.
    The hon. Lady the Member for Lanarkshire, North (Miss Herbison), my hon. Friend the Member for Croydon, North-West (Mr. F. Harris), the hon. Member for Edinburgh, East (Mr. Willis) and the hon. Member for West Lothian (Mr. Dalyell) all made additional points and stressed the problems which these people have. Of course, every constituency Member is very well aware of these things, and I fully share the anxiety expressed.
    I willingly undertake to the House to discuss the whole question with the Minister of Health. That was, in any case, my intention as a result of the debate; indeed, I intended to do so when I saw the new Clause on the Notice Paper. There are problems for the Minister of Health. He has to get his priorities right, and so forth—I will not go on about it—but I am very ready to discuss the matter with him, and at once.
    I reiterate what I endeavoured to put earlier. The House will have noted that my right hon. Friend the Chancellor heard the greater part of the discussion. We shall pay strict attention to what

    1413
    has been said by all who have spoken in the debate. We are grateful to those who have spoken for the points which they have made and we are very ready to study carefully what has been said. The House will understand that there are difficulties in going beyond that, but, in giving both those undertakings, I fully mean what I say.
    Mr. Callaghan: I think that the Economic Secretary has, with the leave of the House, almost answered the question which I wanted to put to him, but I wonder whether I can take him a little further. He said in his original comments—I think that I have his words—"I question whether the best method of helping is not by additional allowances". When he used the words "I question whether", I wondered whether he would go on to answer his own question. Is he saying that it is better to do it in this way? Having given us an assurance that he will discuss the matter, will he discuss it with a view to getting some easement of the situation to which the new Clause is directed? Otherwise, we should take the view, I think, that it is not impossible for him, under the new Clause as drafted, to take the steps necessary for the enforcement upon which he laid so much emphasis.
    My hon. and learned Friend the Member for Kettering (Mr. Mitchison), who is for me the source of all wisdom in these matters, tells me that it is quite possible for the Economic Secretary to make regulations under the new Clause, if it were written into the Bill, which would enable him to draw up a register and provide for marks of identification on the cars, or whatever it might be.
    I think that not many people would care to be convicted of driving an invalid's car. There is a certain amount of decency in this country, thank God, and I do not think that people would particularly want to be hauled before the courts on an offence of that sort for an abuse of tax regulations. I believe that there is merit in what my hon. and learned Friend says. It would be possible to devise regulations to deal with this problem, even though it would be dealt with only partially by regulations.
    I want the Economic Secretary to go a little further. The Chancellor is back
    1414
    with us. Will they undertake, in their discussions with the Ministry of Health, to try to find a solution to this problem by way of allowances if we do not now press the Clause in regard to taxation?
    Mr. du Cann: I think that the hon. Member for Cardiff, South-East (Mr. Callaghan) was, in fact, interrupting me before I had quite completed my second reply. Presumably, therefore, it is in order for me to answer the question which he has asked. We shall be very willing—I am sorry if I did not make it entirely clear—to consider all the suggestions which have been made during the debate, including the particular point put by the hon. and learned Member for Kettering (Mr. Mitchison). I shall certainly raise this in our discussions with the Minister of Health, and we in the Treasury also shall pay attention to it. I hope that I have given the hon. Gentleman an exact answer, because it is my sincere wish to do so.
    Mr. Callaghan: In the light of what the Economic Secretary has said, and as I understand that it is intended to try to solve this problem one way or another, I beg to ask leave to withdraw the Motion.
    Motion and Clause, by leave, withdrawn.
    New Clause.—(LOCAL AUTHORITIES: INCOME TAX RELIEF ON CREDIT BALANCE OF HOUSING REVENUE ACCOUNT.)

    (1) subject to the provisions of this section, if in any year of assessment the amount carried to the credit of a local authority Housing Revenue Account exceed the amount debited to that Account, 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.

    (2) Subsection (3) of section 4 of the Housing Act 1961 (which provides for the disallowance for accounting purposes of excessive transfers from a Housing Revenue Account to a Housing Repairs Account) shall apply for the purposes of this section as it applies for the purposes of that section.

    (3) For the purposes of this section sums carried from a Housing Account to the credit of a Housing Equalisation Account or from a Housing Equalisation Account to a Housing Revenue Account shall be disregarded.—[Mr. Callaghan.]

    Brought up, and read the First time.
    Question put, That the Clause be read a Second time: —
    The House divided: Ayes 157, Noes 188.

    Division No. 148.]

    AYES

    [7.20 p.m.

    Abse, Leo

    Harper, Joseph

    Padley, W. E.

    Ainsley, William

    Hart, Mrs. Judith

    Parker, John

    Allaun, Frank (Salford, E.)

    Hayman, F. H.

    Parkin, B. T.

    Awbery, Stan (Bristol, Central)

    Healey, Denis

    Pavitt, Laurence

    Bacon, Miss Alice

    Henderson,Rt.Hn.Arthur(RwlyRegis)

    Pearson, Arthur (Pontypridd)

    Barnett, Guy

    Herbison, Miss Margaret

    Peart, Frederick

    Bence, Cyril

    Hill, J. (Midlothian)

    Prentice, R. E.

    Bennett, J. (Glasgow, Bridgeton)

    Holman, Percy

    Probert, Arthur

    Benson, Sir George

    Hooson, H. E.

    Pursey, Cmdr. Harry

    Blackburn, F.

    Houghton, Douglas

    Rankin, John

    Bottomley, Rt. Hon. A. G.

    Hoy, James H.

    Redhead, E. C.

    Bowden, Rt. Hn. H. W. (Leics, S.W.)

    Hughes, Cledwyn (Anglesey)

    Rees, Merlyn (Leeds, S.)

    Bowen, Roderic (Cardigan)

    Hughes, Emrys (S. Ayrshire)

    Reynolds, G. W.

    Boyden, James

    Hunter, A. E.

    Rhodes, H.

    Braddock, Mrs. E. M.

    Hynd, H. (Accrington)

    Robertson, John (Paisley)

    Bradley, Tom

    Janner, Sir Barnett

    Robinson, Kenneth (St. Pancras, N.)

    Bray, Dr. Jeremy

    Jay, Rt. Hon. Douglas

    Rogers, G. H. R. (Kensington, N.)

    Brown, Rt. Hon. George (Belper)

    Jenkins, Roy (Stechford)

    Ross, William

    Butler, Herbert (Hackney, C.)

    Jones, Dan (Burnley)

    Royle, Charles (Salford, West)

    Callaghan, James

    Jones, T. W. (Merioneth)

    Silverman, Julius (Aston)

    Carmichael, Neil

    Kelley, Richard

    Smith, Ellis (Stoke, S.)

    Chapman, Donald

    Kenyon, Clifford

    Sorensen, R. W.

    Collick, Percy

    Key, Rt. Hon. C. W.

    Soskice, Rt. Hon. Sir Frank

    Corbet, Mrs. Freda

    King, Dr. Horace

    Spriggs, Leslie

    Craddock, George (Bradford, S.)

    Lawson, George

    Steele, Thomas

    Cronin, John

    Lee, Frederick (Newton)

    Stewart, Michael (Fulham)

    Crossman, R. H. S.

    Lever, L. M. (Ardwick)

    Stones, William

    Dalyell, Tam

    Lewis, Arthur (West Ham, N.)

    Stross,Dr.Barnett(Stoke-on-Trent,C.)

    Davies, G. Elfed (Rhondda, E.)

    Loughlin, Charles

    Swingler, Stephen

    Davies, Ifor (Cower)

    Lubbock, Eric

    Taverne, D.

    Deer, George

    McBride, N.

    Thomas, George (Cardiff, W.)

    Dempsay, James

    MacColl, James

    Thomas, Iorwerth (Rhondda, W.)

    Diamond, John

    MacDermot, Niall

    Thompson, Dr. Alan (Dunfermilne)

    Dodds, Norman

    McInnes, James

    Thomson, G. M. (Dundee, E.)

    Ede, Rt. Hon. C.

    McKay, John (Wallsend)

    Thornton, Ernest

    Edwards, Robert (Bilston)

    Mahon, Simon

    Thorpe, Jeremy

    Edwards, Walter, (Stepney)

    Mallalieu. J.P.W. (Huddersfield, E.)

    Tomney, Frank

    Fernyhough, E.

    Manuel, Archie

    Wade, Donald

    Fitch, Alan

    Mapp, Charles

    Watkins, Tudor

    Foot, Dingle (Ipswich)

    Marsh, Richard

    Wells, William (Walsall, N.)

    Forman, J. C.

    Mason, Roy

    Whitlock, William

    Fraser, Thomas (Hamilton)

    Mayhew, Christopher

    Wilkins, W. A.

    Galpern. Sir Myer

    Mendelson, J. J.

    Williams, D. J. (Neath)

    George, Lady MeganLloyd(Crmrthn)

    Millan, Bruce

    Williams, LI. (Abertillery)

    Gordon Walker, Rt. Hon. P. C.

    Milne, Edward

    Williams, W. R. (Openshaw)

    Gourlay, Harry

    Mitchison, G. R.

    Williams, W. T. (Warrington)

    Greenwood, Anthony

    Monslow, walter

    Willis, E. G. (Edinburgh, E.)

    Griffiths, w. (Exchange)

    Moody, A, S.

    Winterbottom, R. E.

    Grimond, Rt. Hon. J.

    Morris, John

    Woof, Robert

    Gunter, Ray

    Moyle, Arthur

    Wyatt, Woodrow

    Hale, Leslie (Oldham, W.)

    O'Malley, B. K.

    Zilliacus, K.

    Hamilton, William (West Fife)

    Oram, A. E.

    Hannan, William

    Oswald, Thomas

    TELLERS FOR THE AYES:

    Mr. Grey and Mr. McCann.

    NOES

    Allan, Robert (Paddington, S.)

    Bullus, Wing Commander Eric

    Elliot, Capt. Walter (Carshalton)

    Allason, James

    Burden, F. A.

    Emery, Peter

    Arbuthnot, John

    Butcher, Sir Herbert

    Emmet, Hon. Mrs. Evelyn

    Ashton, Sir Hubert

    Cary, Sir Robert

    Errington, Sir Eric

    Atkins, Humphrey

    Chataway, Christopher

    Farey-Jones, F. W.

    Awdry, Daniel (Chippenham)

    Chichester-Clark, R.

    Fell, Anthony

    Barber, Anthony

    Clark, Henry (Antrim, N.)

    Finlay, Graeme

    Barlow, Sir John

    Clark, William (Nottingham, S.)

    Fisher, Nigel

    Barter, John

    Clarke, Brig. Terence(Portsmth, W.)

    Fletcher-Cooke, Charles

    Batsford, Brian

    Cleaver, Leonard

    Fraser, Ian (Plymouth, Sutton)

    Bell, Ronald

    Cooper-Key, Sir Neill

    Freeth, Denzil

    Bennett, F. M. (Torquay)

    Cordeaux, Lt.-Col. J. K.

    Gammans, Lady

    Bevins, Rt. Hon. Reginald

    Corfield, F. V.

    Gardner, Edward

    Biffen, John

    Coulson, Michael

    Gibson-Watt, David

    Biggs-Davison, John

    Crawley, Aidan

    Gilmour, Ian (Norfolk. Central)

    Bingham, R. M.

    Currie, G. B. H.

    Gilmour, Sir John (East Fife)

    Bishop, F. P.

    Dalkeith, Earl of

    Glover, Sir Douglas

    Bourne-Arton, A.

    d'Avigdor-Goldsmid, Sir Henry

    Glyn, Dr. Alan (Clapham)

    Boyd-Carpenter, Rt. Hon. John

    Deedes, Rt. Hon. W. F.

    Goodhew, Victor

    Brewis, John

    Donaldson, Cmdr. C. E. M.

    Gower, Raymond

    Brown, Alan (Tottenham)

    Drayson, G. B.

    Green, Alan

    Browne, Percy (Torrington)

    du Cann, Edward

    Gresham Cooke, R.

    Bryan, Paul

    Eden, Sir John

    Grosvenor, Lord Robert

    Gurden, Harold

    MacArthur, Ian

    Sharples, Richard

    Hamilton, Michael (Wellingborough)

    McLaren, Martin

    Shepherd, William

    Harris, Frederic (Croydon, N.W.)

    McLaughlin, Mrs. Patricia

    Skeet, T. H. H.

    Harris, Reader (Heston)

    Maclay, Rt. Hon. John

    Smith, Dudley (Br'ntf'd & Chiswick)

    Harrison, Brian (Maldon)

    Maclean,SirFitzroy(Bute&N.Ayrs)

    Smithers, Peter

    Hastings, Stephen

    Macleod, Rt. Hon. Iain (Enfield, W.)

    Speir, Rupert

    Hay, John

    McMaster, Stanley R.

    Stevens, Geoffrey

    Heald, Rt. Hon. Sir Lionel

    Macmillan, Maurice (Halifax)

    Steward, Harold (Stockport, S.)

    Hobson, Rt. Hon. Sir John

    Maitland, Sir John

    Stodart, J. A.

    Hollingworth, John

    Marshall, Sir Douglas

    Storey, Sir Samuel

    Hornby, R. P.

    Matthews, Cordon (Meriden)

    Summers, Sir Spencer

    Howard, John (Southampton, Test)

    Maudling, Rt. Hon. Reginald

    Taylor, Sir Charles (Eastbourne)

    Hughes-Young, Michael

    Mawby, Ray

    Taylor, Edwin (Bolton, E.)

    Hurd, Sir Anthony

    Mills, Stratton

    Taylor, Frank (M'ch'st'r, Moss Side)

    Iremonger, T. L.

    Miscampbell, Norman

    Teeling, Sir William

    Irvine, Bryant Godman (Rye)

    More, Jasper (Ludlow)

    Temple, John M.

    Jenkins, Robert (Dulwich)

    Morgan, William

    Thomas, sir Leslie (Canterbury)

    Johnson, Dr. Donald (Carlisle)

    Neave, Airey

    Thomas, Peter (Conway)

    Johnson, Eric (Blackley)

    Oakshott, Sir Hendrie

    Thompson, Sir Kenneth (Walton)

    Johnson Smith, Geoffrey

    Page, John (Harrow, West)

    Thompson, Sir Richard (Croydon, S.)

    Jones, Arthur (Northants, S.)

    Page, Graham (Crosby)

    Thornton-Kemsley, Sir Colin

    Joseph, Rt. Hon. Sir Keith

    Pannell, Norman (Kirkdale)

    Turner, Colin

    Kaberry, Sir Donald

    Pearson, Frank (Clitheroe)

    Turton, Rt. Hon. R. H.

    Kerans, Cdr. J. S.

    Peel, John

    van Straubenzee, W. R.

    Kerby, Capt. Henry

    Percival, Ian

    Vane, W. M. F.

    Kershaw, Anthony

    Pickthorn, Sir Kenneth

    Vickers, Miss Joan

    Kitson, Timothy

    Pilkington, Sir Richard

    Vosper, Rt. Hon. Dennis

    Lambton, Viscount

    Pitman, Sir James

    Wakefield, Sir Wavell

    Leavey, J. A.

    Powell, Rt. Hon. J. Enoch

    Walker, Peter

    Legge-Bourke, Sir Harry

    Prior, J. M. L.

    Walker-Smith, Rt. Hon. Sir Derek

    Lewis, Kenneth (Rutland)

    Prior-Palmer, Brig. Sir Otho

    Wall, Patrick

    Linstead, Sir Hugh

    Rawlinson, Sir Peter

    Whitelaw, William

    Litchfield, Capt. John

    Redmayne, Rt. Hon. Martin

    Wills, Sir Gerald (Bridgwater)

    Lloyd,Rt.Hn. Geoffrey (Sut'nC'dfield)

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

    Wolrige-Gordon, Patrick

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Ridsdale, Julian

    Woodnutt, Mark

    Longbottom, Charles

    Robinson, Rt. Hn. Sir R. (B'pool,S.)

    Woollam, John

    Longden, Gilbert

    Robson Brown, Sir William

    Worsley, Marcus

    Loveys, Walter H.

    Rodgers, John (Sevenoaks)

    Lucas, Sir Jocelyn

    Roots. William

    TELLERS FOR THE NOES:

    Lucas-Tooth, Sir Hugh

    Scott-Hopkins James

    Mr. Hugh Rees and Mr. Pym.

    McAdden, Sir Stephen

    Seymour, Leslie

    New Clause.—(PURCHASE TAX: 15 PER CENT. RATE REDUCED TO 5 PER CENT.)
    Subject to any order of the Treasury made after the passing of this Act under section 39 of the Purchase Tax Act, 1963, all goods hitherto chargeable to purchase tax at the rate of 15 per cent. shall be chargeable at the rate of 5 per cent. and no more; and accordingly Part I of Schedule 1 to that Act shall be amended by substituting for any reference
    to a rate of 15 per cent. a reference to a rate of 5 per cent.—[Mr. Oram.]
    Brought up, and read the First time.
    Question put. That the Clause be read a Second time: —
    The House divided: Ayes 152, Noes 194.

    Division No. 149.]

    AYES

    [7.30 p.m.

    Abse, Leo

    Crossman, R. H. S.

    Hannan, William

    Ainsley, William

    Dalyell, Tam

    Harper, Joseph

    Allaun, Frank (Salford, E.)

    Davies, G. Elfed (Rhondda, E.)

    Hart, Mrs. Judith

    Awbery, Stan (Bristol, Central)

    Deer, George

    Hayman, F. H.

    Bacon, Miss Alice

    Dempsey, James

    Henderson, Rt.Hn.Arthur(Rwly Regis)

    Barnett, Guy

    Diamond, John

    Herbison, Miss Margaret

    Bence, Gyril

    Dodds, Norman

    Hill, J. (Midlothian)

    Bennett, J. (Glasgow, Bridgeton)

    Duffy, A. E. P.

    Holman, Percy

    Benson, Sir George

    Eds, Rt. Hon. C.

    Houghton, Douglas

    Blackburn, F.

    Edwards, Robert (Bilston)

    Hoy, James H.

    Bottomley, Rt. Hon. A. G.

    Edwards, Walter (Stepney)

    Hughes, Cledwyn (Anglesey)

    Bowden, Rt. Hn. H. W.(Leics, S.W.)

    Fernyhough, E.

    Hughes, Emrys (S. Ayrshire)

    Bowles, Frank

    Fitch, Alan

    Hunter, A. E.

    Boyden, James

    Fletcher, Eric

    Hynd, H. (Accrington)

    Braddock, Mrs. E. M.

    Foot, Dingle (Ipswich)

    Janner, Sir Barnett

    Bradley, Tom

    Forman, J. C.

    Jay, Rt. Hon. Douglas

    Bray, Dr. Jeremy

    Fraser, Thomas (Hamilton)

    Jenkins, Roy (Stechford)

    Brown, Rt. Hon. George (Belper)

    Galpern, Sir Myer

    Jones, Dan (Burnley)

    Butler, Herbert (Hackney, C.)

    George,LadyMeganLloyd(Crmrthn)

    Jones, T. W. (Merioneth)

    Callaghan, James

    Gordon Walker, Rt. Hon. P. C.

    Kelley, Richard

    Carmichael, Neil

    Gourlay, Harry

    Kenyon, Clifford

    Chapman, Donald

    Greenwood, Anthony

    Key, Rt. Hon. C. W.

    Collick, Percy

    Griffiths, W. (Exchange)

    King, Dr. Horace

    Corbet, Mrs. Freda

    Gunter, Ray

    Lawson, George

    Craddock, (George (Bradford, S.)

    Hale, Leslie (Oldham, W.)

    Lee, Frederick (Newton)

    Cronin, John

    Hamilton, William (West Fife)

    Lever, L. M. (Ardwick)

    Lewis, Arthur (West Ham, N.)

    Padley, W. E.

    Stones, William

    Loughlin, Charles

    Parker, John

    Stross,Dr.Barnett(Stoke-on-Trent,C.)

    McBride, N.

    Parkin, B. T.

    Swingler, Stephen

    McCann, John

    Pavitt, Laurence

    Taverne, D.

    MacColl, James

    Pearson, Arthur (Pontypridd)

    Thomas, George (Cardiff, W.)

    MacDermot, Niall

    Prentice, R. E.

    Thomas, Iorwerth (Rhondda, W.)

    McInnes, James

    Probert, Arthur

    Thompson, Dr. Alan (Dunfermline)

    McKay, John (Wallsend)

    Pursey, Cmdr. Harry

    Thomson, G. M, (Dundee, E.)

    Mahon, Simon

    Rankin, John

    Thornton, Ernest

    Mallalieu, E. L. (Brigg)

    Redhead, E. C.

    Tomney, Frank

    Mallalieu,J.P.W.(Huddersfield, E.)

    Rees, Merlyn (Leeds, S.)

    Watkins, Tudor

    Manuel, Archie

    Reynolds, G. W

    Whitlock, William

    Mapp, Charles

    Rhodes, H.

    Wilkins, W. A.

    Marsh, Richard

    Robertson, John (Paisley)

    Williams, D. J. (Neath)

    Mason, Roy

    Robinson, Kenneth (St. Pancras, N.)

    Williams, LI. (Abertillery)

    Mayhew, Christopher

    Rogers, G. H. R. (Kensington, N.)

    Williams, W. R. (Openshaw)

    Mendelson, J. J.

    Ross, William

    Williams, W. T. (Warringion)

    Millan, Bruce

    Royle, Charles (Salford, West)

    Willis, E. G. (Edinburgh, E.)

    Milne, Edward

    Silverman, Julius (Aston)

    Winterbottom, R. E.

    Mitchison, G. R.

    Small, William

    Woof, Robert

    Monslow, Walter

    Smith, Ellis (Stoke, S.)

    Wyatt, Woodrow

    Morris, John

    Sorensen, R. W.

    Zilliacus, K.

    Moyle, Arthur

    Soskice, Rt, Hon. Sir Frank

    O'Malley, B. K.

    Spriggs, Leslie

    TELLERS FOR THE AYES:

    Oram, A. E.

    Steele, Thomas

    Mr. Grey and Mr. Ifor Davies.

    Oswald, Thomas

    Stewart, Michael (Fulham)

    NOES

    Allan, Robert (Paddington, S.)

    Freeth, Denzil

    Lucas-Tooth, Sir Hugh

    Allason, James

    Gammans, Lady

    McAdden, Sir Stephen

    Arbuthnot, John

    Gardner, Edward

    McLaren, Martin

    Ashton, Sir Hubert

    Gibson-Watt, David

    McLaugthlin, Mrs. Patricia

    Atkins, Humphrey

    Gilmour, Ian (Norfolk, Central)

    Maclay, Rt. Hon. John

    Awdry, Daniel (Chippenham)

    Gilmour, Sir John (East Fife)

    Maclean,SirFitzroy(Bute&N.Ayrs)

    Barber, Anthony

    Glover, Sir Douglas

    Macleod, Rt. Hn. Iain (Enfield, W.)

    Barlow, Sir John

    Glyn, Dr. Alan (Clapham)

    McMaster, Stanley R.

    Barter, John

    Goodhew, Victor

    Macmillan, Maurice (Halifax)

    Batsford, Brian

    Gower, Raymond

    Maitland, Sir John

    Bell, Ronald

    Green, Alan

    Marshall, Sir Douglas

    Bennett, F. M. (Torquay)

    Gresham Cooke, R.

    Matthews, Gordon (Meriden)

    Bevins, Rt. Hon. Reginald

    Grosvenor, Lord Robert

    Maudling, Rt. Hon. Reginald

    Biffen, John

    Gurden, Harold

    Mawby, Ray

    Biggs-Davison, John

    Hamilton, Michael (Wellingborough)

    Mills, Stratton

    Bingham, R. M.

    Harris, Frederic (Croydon, N.W.)

    Miscampbell, Norman

    Bishop, F. P.

    Harris, Reader (Heston)

    Moore, Jasper (Ludlow)

    Bourne-Arton, A.

    Harrison, Brian (Maldon)

    Morgan, William

    Boyd-Carpenter, Rt. Hon. John

    Harvie Anderson, Miss

    Neave, Airey

    Brewis, John

    Hastings, Stephen

    Oakshott, Sir Hendrie

    Brown, Alan (Tottenham)

    Hay, John

    Page, Graham (Crosby)

    Browne, Percy (Torrington)

    Heald, Rt. Hon. Sir Lionel

    Page, John (Harrow, West)

    Bryan, Paul

    Hobson, Rt. Hon. Sir John

    Pannell, Norman (Kirkdale)

    Bullus, Wing Commander Eric

    Hollingworth, John

    Pearson, Frank (Clitheroe)

    Burden, F. A.

    Hornby, R. P.

    Peel, John

    Butcher, Sir Herbert

    Howard, John (Southampton, Test)

    Percival, Ian

    Cary, Sir Robert

    Hughes-Young, Michael

    Pickthorn, Sir Kenneth

    Chataway, Christopher

    Hurd, Sir Anthony

    Pilkington, Sir Richard

    Chichester-Clark, R.

    Iremonger, T. L.

    Pitman, Sir James

    Clark, Henry (Antrim, N.)

    Irvine, Bryant Godman (Rye)

    Powell, Rt. Hon. J. Enoch

    Clark, William (Nottingham, S.)

    Jenkins, Robert (Dulwich)

    Prior, J. M. L.

    Clarke, Brig. Terence (Portsmth, W.)

    Johnson, Dr. Donald (Carlisle)

    Prior-Palmer, Brig. Sir Otho

    Cleaver, Leonard

    Johnson, Eric (Blackley)

    Pym, Francis

    Cooke, Robert

    Johnson Smith, Geoffrey

    Rawlinson, Sir Peter

    Cooper-Key, Sir Neill

    Jones, Arthur (Northants, S.)

    Redmayne, Rt. Hon Martin

    Cordeaux, Lt.-Col. J. K.

    Joseph, Rt. Hon. Sir Keith

    Rees, Hugh (Swansea, W.)

    Corfield, F. V.

    Kaberry, Sir Donald

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

    Coulson, Michael

    Kerans, Cdr. J. S.

    Ridley, Hon. Nicholas

    Currie, G. B. H.

    Kerby, Capt. Henry

    Ridsdale, Julian

    Dalkeith, Earl of

    Kerr, Sir Hamilton

    Robinson, Rt. Hon. Sir R.(B'pool,S.)

    d'Avigdor-Goldsmid, Sir Henry

    Kershaw, Anthony

    Robson Brown, Sir William

    Deedes, Rt. Hon. W. F.

    Kitson, Timothy

    Rodgers, John (Sevenoaks)

    Donaldson, Cmdr. C. E. M.

    Lambton, Viscount

    Roots, William

    Drayson, G. B.

    Leather, Sir Edwin

    Scott-Hopkins, James

    du Cann, Edward

    Leavey, J. A.

    Seymour, Leslie

    Eden, Sir John

    Legge Bourke, Sir Harry

    Sharples, Richard

    Elliot, Capt. Walter (Carshalton)

    Lewis, Kenneth (Rutland)

    Shepherd, William

    Emery, Peter

    Linstead, Sir Hugh

    Skeet, T. H. H.

    Emmet, Hon. Mrs. Evelyn

    Litchfield, Capt. John

    Smith, Dudley (Br'ntf'd & Chiswick)

    Errington, Sir Eric

    Lloyd,Rt.Hn.Geoff rey(Sut'nC'dfield)

    Smithers, Peter

    Farey-Jones, F.W.

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Speir, Rupert

    Fell, Anthony

    Longbottom, Charles

    Steward, Harold (Stockport, S.)

    Finlay, Graeme

    Longden, Gilbert

    Stodart, J. A.

    Fisher, Nigel

    Loveys, Walter H.

    Storey, Sir Samuel

    Fletcher-Cooke, Charles

    Lucas, Sir Jocelyn

    Summers, Sir Spencer

    1420

    1421

    Taylor, Bernard (Mansfield)

    Turner, Colin

    Whitelaw, William

    Taylor, Sir Charles (Eastbourne)

    Turton, Rt, Hon. R. H.

    Williams, Paul (Sunderland, S.)

    Taylor, Frank (M'ch'st'r, Most Side)

    van Straubenzee, W. R.

    Wills, Sir Gerald (Bridgwater)

    Teeling, Sir William

    Vane, W. M. F.

    Wolrige-Gordon, Patrick

    Temple, John M.

    Vickers, Miss Joan

    Woodnutt, Mark

    Thomas, Sir Leslie (Canterbury)

    Vosper, Rt, Hon. Dennis

    Woollam, John

    Thomas, Peter (Conway)

    Wakefield, Sir Wavell

    Worsley, Marcus

    Thompson, Sir Kenneth (Walton)

    Walker, Peter

    Thompson, Sir Richard (Croydon, S.)

    Walker-Smith, Rt. Hon. Sir Derek

    TELLERS FOR THE NOES:

    Thornton-Kemsley, Sir Colin

    Wall, Patrick

    Mr. Ian Fraser and

    Tiley, Arthur (Bradford, W.)

    Wells, John (Maidstone)

    Mr. MacArthur.

    Clause 2.—(INFORMATION AS TO GAMING.)
    Mr. Roy Mason: I beg to move, in page 4, line 15, at the end, to insert:
    Provided also that the expression "facilities for gaming" shall not include facilities provided by a society to which section 54(1) of the Betting, Gaming and Lotteries Act, 1963 (constructionof certain references to private gain) extends in a case where by virtue of the said section 54(1) the proceeds of gaming are not to be held to be applied for purposes of private gain.
    The effect of the Clause without the Amendment would be disastrous to all non-profit-making clubs. I speak particularly on behalf of the working men's clubs. There are 3,575 of them, and they have a membership of 2½ million. As we all know, they are patronised during the year by millions more, including the wives of members and visitors who are allowed to visit the clubs at week-ends.
    Each club is democratically run. The clubs elect annually their president, secretary, treasurer and committee. They are in themselves a little community and many areas, particularly in the north of England, revolve around the activities within a working men's club. They raise money to maintain their organisation and their little community. In this sense, therefore, each club is a microcosm of our general way of life—indeed a kernel of our democracy.
    The clubs are well run. Their elected representative are responsible people. There are few instances that call for police interference. Because of this, bearing in mind that the clubs cater for a vast number of people, they should be preserved and should not be subject to the interference that the Clause will cause without the insertion of the Amendment. Indeed, it could be the ruination of club life as we understand it.
    Mr. du Cann indicated dissent.
    Mr. Mason: The Economic Secretary disagrees. I hope that when he intervenes
    he will be able to answer fully the points I am about to make.
    In his Budget speech, the Chancellor of the Exchequer said:
    "Meanwhile, because we have as yet no adequate information about the extent and nature of gaming, I propose that the Customs and Excise should compile a register of all gaming institutions, including in this those often vary profitable machines known as one-arm bandits,"—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675. c. 466.]
    Does the Chancellor really suggest that a working men's club is a gaming institution? Before the Clause passes, we should have enlightenment from the Chancellor about what exactly he means by a gaming institution. It would be a grave reflection on working men's clublife if he described them as gaming institutions.
    Having in mind that non-profit-making clubs might be affected by the Clause, I ask for the insertion of the Amendment. It refers to a recent enactment, the Betting, Gaming and Lotteries Act, 1963, in which these clubs are at present exempted because there is no profit or benefit for an individual. It is ploughed back into the organisation as a whole.
    Section 54(1) of the 1963 Act states:
    "In construing section 33, 37, 43 or 48 of this Act, proceeds of any entertainment, lottery, gaming or amusement promoted on behalf of a society to which this subsection extends which are applied for any purpose calculated to benefit the society as a whole shall not be held to be applied for purposes of private gain by reason only that their application for that purpose results in benefit to any person as an individual."
    That subsection refers to four previous Sections in the Act which deal with gaming machines, saving for entertainments not held for private gain, exemption of small lotteries incidental to certain entertainments and non-commercial entertainments and the giving of prizes. They are exempted under that recent Act.
    The House must be aware that in that regard, all moneys which are made in

    1423
    working men's clubs go back into the organisation for such purposes as club extensions, better amenities and facilities for members, outings for the aged people, old folks' treats, children's trips, the promotion of socials and sports and the maintenance of convalescent homes. All this, I suggest, is in jeopardy if this frightening Clause is not amended.
    7.45 p.m.
    The Clause suggests that a demand is to be made by the Inland Revenue in July to every club and that a return of all the activities of clubs must now be submitted—for example, bingo, tombola, fruit machines and the rest. This will be quite a task for the secretaries and treasurers of the clubs. If the tax inspector is not satisfied with the work which has been done or the returns which have been sent in, is there not a possibility that the clubs will have descending on them a horde of snoopers so that they can be satisfied?
    This is a matter concerning not only working men's clubs. The Association of Conservative Clubs, too, is affected to the full in this respect. Like the working men's clubs—although the Association is political, and working men's clubs are not—the Association will be affected if the Clause is not amended.
    If after completion of the snooping operation the Chancellor decides to tax the operations of these clubs, he will kill many of the socially desirable benefits which for many years have resulted from the clubs' activities. I cannot think that even a Tory Chancellor could be as mean as that. He would be cutting off his nose to spite his face, because members of the clubs would then fall back upon the State, especially for a lot of work that the clubs do to look after their old people and to make provision for those who go to the convalescent homes of the clubs. These homes would be in danger of being run down because of lack of money if the Chancellor intends to cream away the profit from these organisations. Consider, too, the work involved in the many thousands of non-profit-making clubs. I cannot imagine that all this would be worth the Chancellor's while.
    On 15th June, the Association of Conservative Clubs held its annual meeting. It represents, I understand, 1,500 Con-
    1424
    servative clubs throughout the country. The annual meeting unanimously passed the following resolution:
    "This meeting notes with concern that the Chancellor of the Exchequer is looking into the possibility of introducing a tax on profits obtained from fruit machines and calls upon the Association of Conservative Clubs to make representations to the Chancellor with a view to ensuring that the revenue from fruit machines from non-profit-making clubs which is used for the general benefit of all the members of such clubs as in the case of Conservative and other political clubs should not be taxed".
    No doubt the Chancellor is aware of that resolution. Probably he has had it sent to him and has considered it. If so, the House is entitled to be enlightened by either the Chancellor or by the Economic Secretary during this discussion.
    One does not have to remind the House that working men's clubs are non-political. The Clause, however, has far-reaching consequences. It affects not only Members of both sides of the House of Commons, but their type of club as well. I hope that the House will consider what I have said and that hon. Members opposite, too, will press for the insertion of the Amendment.
    Mr. du Cann: This is the third or even the fourth occasion when we have discussed gaming. In a way, I welcome this fresh debate, for it gives one an opportunity again to state clearly the Government's intentions in this matter. I welcome that because I say at once to the hon. Member for Barnsley (Mr. Mason), whose speech we have enjoyed, that he has somewhat misunderstood the position. I hope to be able to reassure him.
    First let me start on common ground. He paid a warm tribute to the many non-profit-making clubs which there are up and down the country, and I should like to associate myself strongly with his remarks. There is no doubt whatsoever that the facilities provided by these clubs are enjoyed by a multitude of our people, and for myself I say more power to their elbow.
    I rather fancy, if I may get on to slightly different ground, that he thought that Treasury Ministers, at any rate, live rather monastic lives and never visit clubs, but we are working men, too, and we certainly go into these clubs as

    1425
    much as anyone else, and I think we are familiar with the kind of entertainments and the kind of benefits which they undoubtedly provide for the community as a whole.
    I say that particularly for this reason, for he was very strong and very forceful and very vigorous, as all of us who know him are quite accustomed to, and he said he thought that our proposals were disastrous—that was one of his phrases I picked up—and that the very existence of these clubs—this was another of his phrases—would be put in jeopardy by the wicked things we were doing. I really must refute this with equal emphasis. We are not thinking of those clubs. It is certainly not our wish to do anything of the sort.
    Let me deal with a technical point. The Amendment seeks to make exclusions from the fact-finding inquiry—I will say more on that subject in a moment—for the purposes of gaming by reference to Section 54 of the Betting, Gaming and Lotteries. Act, 1963. It seems very doubtful, in law, whether this can be done, because this Section is purely interpretative. However, I will leave that point. I mention it only because I am obliged to discuss the Amendment with care and I want to cover all the points in the argument.
    I began by saying that we had had three or possibly even four discussions of the Government's intentions in relation to this matter. I think hon. Members will remember particularly the discussions we had in Committee when we were talking about Clause 2. I recall especially a somewhat entertaining and somewhat inaccurate intervention by my hon. Friend the Member for Kidderminster (Sir G. Nabarro). That fact alone was sufficient to make that debate a landmark. We talked about what would be the exclusions and it was agreed, without a Division, that these exclusions are to be made by Statutory Instrument made by the Treasury after the Bill receives the Royal Assent, and that that seemed to us to be the right way to proceed, and it has seemed to be also to the House that this should be so and the right way to proceed. This is the first time on which the method has been questioned in any way.
    I should like to remind hon. Members, and the hon. Member for Barnsley, in
    1426
    particular, of our aims. They are these. The first is to collect information and to do nothing else. The House will remember very well, for this is ground we have been over before and, heaven knows, we have discussed it enough times before, so that I should have thought it was well known, that there was to be a review. The review has taken place and much work has been done, but we found that we needed more information, and have asked Parliament to give us the powers to collect that additional information—the memory of 1926 will be clearly within a recollection of the House. It is the desire, and I am certain it was the intention of the House, to try to see if gaming in its various forms could not be taxed in the way in which one section, at any rate, of it is taxed at the present minute and that it must be right to have a comprehensive approach and that it must be right for the Treasury Ministers to be in possession of the fullest possible information. That was the first aim, to enable my right hon. Friend, before making up his mind upon what action, if any, to take, to have the fullest information, and in order to be in a position to make up his mind before imposing a greater form of taxation on the growing volume of gaming, and to make up his mind on the basis of the facts.
    Mr. Dan Jones: Is it the intention of the Minister to secure this information from the clubs referred to by my hon. Friend the Member for Barnsley (Mr. Mason)?
    Mr. du Cann: Yes. I am very ready to come to that in just a moment. First I was describing that the first aim is to obtain information.
    I come on to the second aim. We seek to distinguish—the House has been good enough to date to give us powers so to do—between what I called in Committee high-powered gaming on the one hand and the very different type of gaming with which we are very familiar indeed on the other hand. The second form of gaming, the low-powered gaming, if I may so call it, covers a very wide range of mild gaming for which our social legislation lays down conditions under which it can be conducted. I will give examples if I may.
    Under Section 35 of the Act to which the hon. Gentleman the Member for

    1427
    Barnsley referred, cribbage and dominoes will certainly be excluded. I remember that when we reached this stage of our debate on Clause 2 and we discussed this it was observed that no Member of the Liberal Party was present. They seem to be curiously uninterested in the subject. I remember that my hon. Friend the Member for Kidderminster answered the question he posed himself, and where were they? He said they were probably playing cribbage. [Interruption.] What his activities are tonight I do not know. Possibly he is concerned with Section 37 which deals with the whist drive, as it were, held in a village hall on behalf of a church or on behalf of a local political party or, indeed, a local bingo game, gaming of that sort.
    Section 48 is concerned with prizes for the kind of rolling down a penny game that we see at church fetes, Scout fetes, political fetes and the rest of it. Section 49—in answer to the point made by my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens)—adds to the exclusions the smaller amusements where there is a game interest. We were thinking particularly of the kind of competition, again enjoyed by so many of our people, especially at the seaside, in arcades and in shows run by travelling showmen and the rest.
    Then in Section 50 is the kind of amusement which seemed to displease my hon. Friend the Financial Secretary who made a splendid speech on the Second Reading of the Bill, namely, those in which one shoots at "cats". Perhaps he is a cat lover. I do not know. At any rate, it was our intention to exclude them also.
    Section 43 is concerned with lotteries, the conditions for lotteries, as the House knows very well, and will have within its recollection. Section 43 is concerned with lotteries and is therefore not relevant.
    The exclusions are reasonably self-contained and are very well known to most Members of the House and in the constituencies in all parts of the country and we discussed these matters and it was agreed that they should be excluded from the inquiry. They are little things. They are innocent things, and one may perhaps say that in many cases—except, perhaps, to the self-supporting Liberal
    1428
    Party—they are socially desirable as well.
    Examples of the other type of activities, the high-powered gaming about which we wanted particularly information were—I give two examples—first, organised bingo in converted cinemas and dance halls where admission has to be paid for and where large cash prizes are given. That is one thing we were interested to find out about. Then, of course, there is the casino type of gaming which is so often mentioned both in the newspapers and the House of Commons. There are other examples. I give those two in particular.
    I am sure that the distinction between the two is entirely clear. Having said that, that leaves Section 33, which is concerned with gaming machines, that is to say fruit machines or, as my right hon. Friend calls them, one-armed bandits, which are legal when used, and only when used, in clubs for other than private gain. That is the only occasion on which they are legal. The hon. Gentleman the Member for Barnsley has quoted what my right hon. Friend said during his Budget speech, and I will not repeat that, but I must come back again to what the hon. Gentleman the Member for Barnsley was saying because he was suggesting that if our inquiry were to be concerned with one-armed bandits we should be in some way striking a mortal blow at the clubs. I must tell him very frankly indeed that I see no reason whatever why the managers of those clubs should refuse or even wish to refuse to answer questions on this subject. I cannot see why they should refuse to give the Customs and Excise authorities—not the Inland Revenue—the information which my right hon. Friend must have if he is to be in a position to makeup his mind how, if he thinks it appropriate, he can best introduce a fair system of taxation.
    8.0 p.m.
    This is not a determination to tax; it never has been. What my right hon. Friend will decide to do in due course—if anything—he can decideonly in the light of information. This is only an information-seeking activity and, as such, I am sure that it is entirely legitimate and entirely right. I tell the hon. Member for Barnsley frankly that we are determined to have this full information, and that we think it appropriate

    1429
    that we should have it. I am certain that the clubs have nothing to fear from this inquiry. We shall not send a posse of snoopers into the clubs. The hon. Member did not suggest that, but I have heard it suggested by others.
    If there is any anxiety at all on this score it is entirely due to a misconception of our purpose. As I said in the beginning, we are well aware of the advantages which have been brought to some of these clubs by the introduction of these machines. I am the president of a club in my constituency, and I recall with pleasure looking at its accounts only a few months ago. But, I repeat, if we are to have fair taxation, and taxation which does not have undesirable social consequences, my right hon. Friend must be in a position to have the fullest information.
    These clubs make no complaint—apart from those occasions when a Treasury Minister goes into them—about their need to pay Excise Duty on liquor, cigarettes and the rest. Their members, as citizens of this country, must fit into the pattern of legislation. We are not asking them—and we will not be asking them—to do anything which reflects dishonourably upon them. We shall not be asking them to give us any information which we are not asking from other people. This is a serious inquiry, and I hope that the hon. Member for Barnsley, who spoke with such vigour on the subject, will use his influence with these clubs in order to see that they respond to our intentions in the sympathetic manner in which we shall conduct this inquiry.
    Mr. Mitchison: I associate myself—and I am sure that many hon. Members on this side and on the other side of the House associate themselves—with the appreciative remarks that the Economic Secretary made about the functions of our clubs. This Amendment does not raise any deep moral principle in connection with clubs or gaming but it nevertheless raises a question of principle of some importance.
    I want to begin by referring to Section 54 of the Betting, Gaming and Lotteries Act. I must acknowledge my indebtedness to the working men's clubs, or to their legal advisers, for the form of the Amendment, because they have hit the right form. This is merely a case of
    1430
    trying to define a body, in the nature of a club, which does not provide facilities for gain but does provide facilities for what I should like to call internal consumption.
    Obviously, the Chancellor does not intend to tax the almost historic case that occurred many years ago, in Mr. Gilbert Beyfus's evidence before some body or another, relating to four bishops playing whist in the Athenaeum, even if they played for money. The question is: what kind of gaming can the Chancellor possibly intend to tax? He gave us one or two instances, including dominoes and cribbage. It may be that these games have a peculiar and specific innocence of their own which carries them anywhere, and that whether people play the game of dominoes or cribbage inside the doors of a Conservative club or anywhere else it will not be taxed.
    But we proceed from that to other forms of gaming, which, if they were conducted for profit, would be proper matters for investigation. Section 54 of the 1963 Act is a pure construction Section, but it is perhaps the more convenient for that, and in subsection (3) it provides that the provisions of the Section shall extend
    "to any society which is established and conducted…wholly for purposes other than purposes of any commercial undertaking…"
    That is the relevant part. Subsection (1). which is referred to in the Amendment, provides, in effect, that for the purpose of the 1963 Act a club is not to be deemed to be applying the money for purposes of private gain in the case of gaming in these clubs by reason only that a certain member of that club receives an advantage out of it.
    Those are the kinds of consideration which apply in the Act, and it seems to me that they draw a quite definite line between bingo or similar gambling that the Economic Secretary referred to, which is conducted in a converted cinema or somewhere else as a matter of business by somebody—just as a bookmaker may be conducting his business on a racecourse or a dog track—and something which is obviously on the other side of the line and which is a form of domestic gaming, as I like to call it, such as the sort of gaming indulged in by the four bishops playing whist together.

    1431
    I suggest that we cannot for a moment intend that the powers of investigation—and I agree that they are powers of investigation only—provided in Clause 2 should be applied to domestic gaming. What these clubs have good reason to worry about is the possibility that the investigations with which they are already threatened—they have been asked questions by the Inland Revenue, or have received forms from it, or have been told what information they must provide—are being carried out for the purpose of treating them as a commercial proposition of some sort, and as organisations making money out of gaming and therefore being subject to taxation, instead of treating them as what they are, namely, places where this kind of domestic gaming goes on.
    I say at once that they are not an absolutely obvious case. We must consider what they are. If we have to draw a line between gaming as a form of business, or anything of that sort, and gaming not for profit or for gain, and carried on not at all as a commercial undertaking, I suggest that we should choose the line that was drawn in the Betting, Gaming and Lotteries Act—which, after all, is the Act which defines gaming.
    Subsection (7) contains a provision allowing the Treasury to exempt people from these inquiries. If we knew that the Treasury was going to exempt the clubs the matter would be put on an entirely different footing, but on the one hand we have had preliminary inquiries, as I mentioned, and on the other the categorical statement of the Economic Secretary that the Government intend to pursue these clubs and to get this information. I agree that it is only an investigation, and that it does not follow that the clubs will be taxed, but it indicates that the Treasury regards them as a possible taxable object. I do not imagine that similar inquiries are made about what is obviously domestic gaming and therefore I think they are right to take the point at this early stage that they are clubs in the proper sense of the word; that there is no commercial element about it whatever, and even though someone may make an advantage out of it—that is the case contemplated in the
    1432
    subsection—they are to be distinguished from the kind of gaming which goes on as a business.
    The Economic Secretary rightly referred to the importance of these clubs in the life of the community. They are subject to considerable investigation in one way and another, in connection with the recent changes in the licensing law and with their rules, and so on. I am not saying for a moment that they should not be. But we are now proposing to ask them for a great deal more, for information which it might be extremely difficult to obtain—even were it right to get it—in a form which would be of any practical use. I do not know much about that—the Treasury and Customs and Excise would know more than Ido—but I am doubtful about the purpose of the inquiry or survey even if it were right to conduct it and I return to the question whether the clubs ought to be pursued. That is the question raised by the Amendment. I hope that I have made clear my point about the difference between domestic gaming and trading for gain. I have dealt with the exemption Clause. It does not come into this, as I see it, unless the Government change their minds after the speech of the Economic Secretary. Now the question is, what is it right to do in the circumstances?
    I suggest that here we are dealing with a body of people who have made their points reasonably. None of us is reasonable on every point. But by and large they have a real point to make in this respect, which, so far as I can see, is one on which they differ from the Government. Even if working men's clubs generally are considered by the Government to be an unreasonable body—the Economic Secretary came very near to suggesting that in his speech—I hope the hon. Gentleman will not make a similar criticism of his particular friends, the Conservative clubs, who the other day unanimously passed a resolution—relating it is true only to fruit machines—raising the general question in a rather simpler form. I think it ought to be clear that these clubs are, for the purposes of the Betting, Gaming and Lotteries Act, 1963, "clubs" in the proper sense of the word; and whatever goes on inside them regarding gaming—subject to the provisions of that Act, of

    1433
    course—is not gaming in private but is the other kind of gaming which I have called, and still call, domestic gaming.
    The clubs ought not to be taxed. And if they are not to be taxed I see no reason for inquiring into them. Surely not even the Government will say that they are to make all these inquiries if they do not propose to tax the clubs. If they can say so it makes the inquiry a little less valuable, though it would certainly reassure the clubs. But when they say that they need this information and propose to get it, I can see that they do not rule out the taxing of clubs in respect of these matters on questions of principle.
    Unless they are prepared to give some assurance to that effect, it would appear to be quite inconsistent with what was said by the Economic Secretary and we shall have to take the question of principle to a Division. I repeat, it is a question of principle. It is not a question whether gaming is good or bad. It is not even a question whether gaming should be taxed or not. It is a question whether, if we are to have taxation of gaming, it should be extended to domestic gaming—that is the clearest phrase I can use. If we are to do so, on which side of the line is this form of gaming to fall, bearing in mind that in the 1963 Act we have a provision, which seems to me to amount to a definite decision, that it is on the domestic side just as much as dominoes, and cribbage, which I understand are played between the hon. Member for Kidderminster (Sir G. Nabarro) and Members of the Liberal Party.
    8.15 p.m.
    Mr. D. Jones: I have doubts about any form of gambling but I will not pursue that point, because I do not seek a halo. The speech of the Economic Secretary bewildered me. He said that the Government were not evilly or unkindly disposed towards clubs. But he was even more definite in his determination to obtain this information by a survey or inquiry. I cannot understand why such a survey should take place. I support what was said by my hon. Friend the Member for Barnsley (Mr. Mason). If the Economic Secretary is the president of a club, he will know that these clubs perform a useful social service. My hon. Friend the Member for
    1434
    Barnsley referred to the work they do for old-age pensioners. They also doa great deal of work for children. Libraries are provided on club premises and money, which represents the proceeds of gaming, is used to organise concerts of high cultural value. I support the Amendment for these reasons. I have misgivings about gambling generally. But if all forms of gambling resulted in money being raised for such good purposes, by jingo, gambling would be on a much higher level than it is today.
    The speech of the Economic Secretary has bewildered hon. Members. The Government should be definite about what inquiry is to take place and for what purpose it is intended, if they are kindly disposed to the clubs. Such an inquiry would cost money and take time. I hope that the Economic Secretary does not mean that money will be spent for no good purpose. We are certain that the clubs are not profit-making. But that is only part of the matter. They perform a definite social service, and they should be encouraged. If the Chancellor has any punitive intentions, we should be told. The House should not be asked to believe that a costly inquiry is to be held for no purpose. We are entitled to more information.
    Mr. Ede: I have been a member of clubs affiliated to the Working Men's Club and Institute Union for 62 years. On the day I was demobilised after the First World War I was elected president of the local branch of the then organisation known as the National Association of Discharged and Demobilised Sailors and Soldiers. One of the first things they did was to enter into an arrangement to purchase a freehold property and establish a club. On that occasion I was elected president, and I have been elected ever since, so I can claim to know something about the working of these clubs.
    One of the anxieties of the committees of clubs is not to offend against the laws relating to gambling. When one has been a member of a committee and president of a club in action the fear that there may be some surreptitious gambling going on is never distant from one's mind. I have no doubt that the objects of the Government are to obtain information so that they can ascertain how far there is legitimate gaming of the kind described by

    1435
    my hon. and learned Friend the Member for Kettering (Mr. Mitchison) as "domestic gambling" going on and whether it is possible for that to make a contribution towards the Revenue. That is quite genuine, but, once inquiries begin, it is very difficult to maintain that kind of attitude by the persons conducting the inquiry.
    There has been a general appeal issued this week asking that if anyone knows a nice, juicy scandal connected with politics, will he please send it along to a judge of the High Court, who will thank him for it and then investigate it. That is asking for information. I do not think many of us could put our hands on our hearts and say that during the past six months we have not heard of any such thing. I do not intend to repeat any of the things I have heard in the Dining Room, in the Smoking Room, or even in the Tea Room. I can understand the committee of a club being very nervous about somebody investigating and asking for information in these matters, although I am prepared to accept the statement of the Government that they are only seeking information at this stage.
    Secretaries and treasurers, after all, are ordinary working people who have to earn their living. It is part of their contribution to the social life of the community in which they live that they take on these onerous jobs, which even now are quite difficult and might easily land then in trouble, not for anything they do themselves but through some inadvertence on the part of a member or paid servant of the club who does not quite carry out his duties. This may involve those honorary officers in very considerable difficulty. When they have to contemplate falling in the kind of forms they may expect to receive, I can well understand that they have some misgivings about whether they can adequately carry out the responsibilities placed upon them. The Economic Secretary, I am sure, means that the Government will stand no nonsense from anyone when he says that they will get the information. That is the kind of phrase which when read in cold print, may still further increase the anxieties of the people to whom I have alluded.
    In my constituency, as well as in the place where I live, I am well acquainted with the work of those clubs affiliated to
    1436
    the Working Men's Club and Institute Union. I have never been a member of a Conservative Club. In my own regenerate days I was a member of the committee of a Liberal club, but there was a strong Conservative club in the district, too, and occasionally on a change of brewer, it was astonishing how rapidly people's political opinions changed in respect of their membership of the club.
    Do golf clubs come under this provision? Any kind of club of that sort? When I had some responsibility to the House for clubs I always had to recognise that in dealing with them I dealt with a very wide range of social classes in this country. I am not talking about the big London and West End clubs, but most of the clubs to which I have alluded rely very much on the bodies to which they are affiliated for guidance in these matters. The chief advantage of being affiliated to the Working Men's Club and Institute Union is that the officers of the club have access to the finest possible advice which is available in dealing with all the problems of administration and the legal difficulties which they come up against.
    When they get these forms all these people will be involved in seeking guidance in this way. I should have been happier in my relationship to the Amendment if the Economic Secretary had said that certain clubs, to be defined, could be exempt under one of the Orders which he mentioned in his speech, so that one might have some idea of the way in which these honorary officers of the clubs will be able to feel that they will get appropriate advice from the organisations with which they are affiliated. I hope that it will be possible for something to be done on those lines, because I am sure that the last thing that anyone wants to see is one of the honorary officers of one of these clubs getting into trouble, as is so easy, through the inadvertence of one of his members or one of the wage-earning officials, for example a steward, who may be questioned in these matters.
    Mr. du Cann: It may assist the right hon. Gentleman and the House if I say something to him shortly on this point. I am certain that the Customs and Excise in general will give any help they possibly can both to such organisations as the right hon. Gentleman mentioned, the central organisations to which clubs are affiliated,

    1437
    and to individual clubs in different localities. There is every wish and every intention on the part of the Customs and Excise to be as helpful as they possibly can and to assist those who have to bear these burdens in a way of which I am sure the right hon. Gentleman would approve.
    Mr. Ede: I thank the hon. Member very much for that intervention. I am sure that many anxieties will be relieved by such an assurance from him, and I hope that it will enable the information which is required for the Government's purpose to be obtained. There is always a fear that when one offers information to authorities it may be used for purposes other than those for which one tendered it. I want to see some effort made to have this question settled on lines which will enable information to be available and which will assure those who genuinely give the information willingly that they are running no undue risks by being truthful.
    8.30 p.m.
    Mr. John McKay: I entered the Chamber without any knowledge of what was likely to be discussed. I have been very interested in the debate. All those who have spoken have made fairly intellectual speeches on a topic on which that was not to be expected. I was impressed to some extent by the Minister, but what interested me more than anything else and influenced me to rise was the brilliant speech of my hon. and learned Friend the Member for Kettering (Mr. Mitchison). I say with due impartiality that his exposition of what appeared to be a simple issue indicated to me that the subject is perhaps of great importance.
    The question is: is it of great importance? To my mind, it is of importance because of the number of people affected. It affects everyone in clubland. They exist in every county. They are drawn from all walks of life. They go on quietly and sensibly doing a good job. These
    clubs are not out to make great profits. They are just as interested in using much of their surplus money to help children and old people particularly. The brilliant speech of my hon. and learned Friend shows that the arguments need to be closely examined.
    The Minister apparently based his argument on the question of an inquiry. The Government have no idea of doing anything harmful to clubs; they do not seek to cripple them; they do not seek to interfere with them in any way. One would think that the Minister was a benevolent man out to do clubs some special good. When his argument was thoroughly and intellectually examined by my hon. and learned Friend, who I repeat made a brilliant speech, the subject was opened up in such a way that an entirely new view was given which inclined the unbiased man who was at all interested to change his attitude. My hon. and learned Friend the Member for Kettering showed in his brilliant speech that there was something behind the Minister's remarks on this subject.
    My hon. and learned Friend discussed the whole question of obtaining information. To me his remarks indicated that it is necessary for us to inquire why the Exchequer should be so interested in these clubs and should need to make a close investigation of their finances. When the Treasury desires to make this sort of investigation one is bound to think that something is amiss, that something smells about the activity being investigated. It is because of this that I can assure my hon. and learned Friend he has the support of all his Friends. He made an extremely strong case to show that, whatever information the Government may want about gaming, they have no need to press their investigations on these clubs.
    Question put, That those words be there inserted in the Bill: —
    The House divided: Ayes 147, Noes 193.

    Division No. 150.]

    AYES

    [8.38 p.m.

    Abse, Leo

    Blackburn, F.

    Carmichael, Neil

    Ainsley, William

    Bottomley, Rt. Hon. A. G.

    Castle, Mrs. Barbara

    Allaun, Frank (Salford, E.)

    Boweden, Rt. Hn. H.W. (Leics, S.W.)

    Chapman, Donald

    Awbery, Stan (Bristol, Central)

    Bowles, Frank

    Collick, Percy

    Bacon, Miss Alice

    Braddock, Mrs. E. M.

    Corbet, Mrs. Freda

    Barnett, Guy

    Bradley, Tom

    Craddock, George (Bradford, S.)

    Bence, Cyril

    Bray, Dr. Jeremy

    Cronin, John

    Bennett, J. (Glasgow, Bridgeton)

    Butler, Herbert (Hackney, C.)

    Dalyell, Tam

    Benson, Sir George

    Callaghan, James

    Davies, G. Elfed (Rhondda, E.)

    Deer, George

    Jones, Dan (Burnley)

    Pursey, Cmdr. Harry

    Dempsey, James

    Jones, T. W. (Merioneth)

    Rankin, John

    Diamond, John

    Kelley, Richard

    Redhead, E. C.

    Dodds, Norman

    Kenyon, Clifford

    Rees, Merlyn (Leeds, S.)

    Duffy, A. E. P.

    Key, Rt. Hon. C. W.

    Reynolds, G. W.

    Ede, Rt. Hon. C.

    King, Dr. Horace

    Rhodes, H.

    Edelman, Maurice

    Lawson, George

    Robertson, John (Paisley)

    Edwards, Robert (Bilston)

    Ledger, Ron

    Rogers, G. H. R. (Kensington, N.)

    Edwards, Walter, (Stepney)

    Lever, L. M. (Ardwick)

    Ross, William

    Fernyhough, E.

    Lewis, Arthur (West Ham, N.)

    Royle, Charles (Salford, West)

    Fitch, Alan

    Loughlin, Charles

    Silverman, Julius (Aston)

    Fletcher, Eric

    McBride, N.

    Small, William

    Foot, Dingle (Ipswich)

    MacColl, James

    Smith, Ellis (Stoke, S.)

    Forman, J. C.

    McInnes, James

    Sorensen, R. W.

    Fraser, Thomas (Hamilton)

    McKay, John (Wallsend)

    Soskice, Rt. Hon. Sir Frank

    Galpern, Sir Myer

    Mahon, Simon

    Spriggs, Leslie

    George,Lady MeganLloyd(Crmrthn)

    Mallalieu, E. L. (Brigg)

    Steele, Thomas

    Gourlay, Harry

    Mallalieu, J.P.w. (Huddersfield, E.)

    Stewart, Michael (Fulham)

    Greenwood, Anthony

    Manuel, Archie

    Stones, William

    Grey, Charles

    Mapp, Charles

    Stross,Dr.Barnett(Stoke-on-Trent,C.)

    Griffiths, W. (Exchange)

    Mason, Roy

    Swingler, Stephen

    Gunter, Ray

    Mayhew, Christopher

    Taverne, D.

    Hale, Leslie (Oldham, W.)

    Mendelson, J. J.

    Thomas, George (Cardiff, W.)

    Hamilton, William (West Fife)

    Millan, Bruce

    Thomas, Iorwerth (Rhondda, W.)

    Hannan, William

    Milne, Edward

    Thompson, Dr. Alan (Dunfermline)

    Harper, Joseph

    Mitchison, G. R.

    Thomson, G. M. (Dundee, E.)

    Hart, Mrs. Judith

    Monslow, Walter

    Thornton, Ernest

    Hayman, F. H.

    Moody, A. S,

    Watkins, Tudor

    Henderson, Rt.Hn.Arthur(RwlyRegis)

    Morris, John

    Wilkins, W. A.

    Herbison, Miss Margaret

    Moyle, Arthur

    Williams, D. J. (Neath)

    Hill, J. (Midlothian)

    Noel-Baker,Rt.Hn.Phllip(Derby,S.)

    Williams, LI. (Abertillery)

    Holman, Percy

    O'Malley, B. K,

    Williams, W. R. (Openshaw)

    Houghton, Douglas

    Oram, A. E,

    Williams, W. T. (Warrington)

    Hoy, James H.

    Oswald, Thomas

    Willis, E. G. (Edinburgh, E.)

    Hughes, Cledwyn (Anglesey)

    Padley, W. E.

    Winterbottom, R. E.

    Hughes, Emrys (S. Ayrshire)

    Parker, John

    Woof, Robert

    Hunter, A. E.

    Parkin, B. T.

    Wyatt, Woodrow

    Hynd, H. (Accrington)

    Pavitt, Laurence

    Zilliacus, K.

    Hynd, John (Attercliffe)

    Pearson, Arthur (Pontypridd)

    Jay, Rt. Hon. Douglas

    Prentice, R. E.

    TELLERS FOR THE AYES:

    Jenkins, Roy (Stechford)

    Probert, Arthur

    Mr. McCann and Mr. Ifor Davies.

    NOES

    Allan, Robert (Paddington, S.)

    d'Avigdor-Goldsmid, Sir Henry

    Hooson, H. E.

    Allason, James

    Deedes, Rt. Hon. W. F.

    Hornby, R. P.

    Arbuthnot, John

    Donaldson, Cmdr, C. E. M.

    Howard, John (Southampton, Test)

    Ashton, Sir Hubert

    Drayson, G. B.

    Hughes-Young, Michael

    Awdry, Daniel (Chippenham)

    du Cann, Edward

    Hurd, Sir Anthony

    Balniel, Lord

    Eden, Sir John

    Iremonger, T. L.

    Barber, Anthony

    Elliot, Capt. Walter (Carshalton)

    Irvine, Bryant Godman (Rye)

    Barlow, Sir John

    Emery, Peter

    Jenkins, Robert (Dulwich)

    Barter, John

    Emmet, Hon. Mrs. Evelyn

    Johnson, Dr. Donald (Carlisle)

    Batsford, Brian

    Errington, Sir Eric

    Johnson, Eric (Blackley)

    Bell, Ronald

    Farey-Jones, F. W.

    Johnson Smith, Geoffrey

    Bennett, F. M. (Torquay)

    Fell, Anthony

    Jones, Arthur (Northants, S.)

    Bevins, Rt. Hon. Reginald

    Finlay, Graeme

    Joseph, Rt. Hon. Sir Keith

    Biffen, John

    Fisher, Nigel

    Kerans, Cdr. J. S.

    Bishop, F. P.

    Fletcher-Cooke, Charles

    Kerby, Capt. Henry

    Bourne-Arton, A.

    Foster, John

    Kerr, Sir Hamilton

    Boyd-Carpenter, Rt. Hon. John

    Fraser, Ian (Plymouth, Sutton)

    Kershaw, Anthony

    Brewis, John

    Gammans, Lady

    Kitson, Timothy

    Bromley-Davenport, Lt.-Col. Sir Walter

    Gardner, Edward

    Lambton, Viscount

    Brown, Alan (Tottenham)

    Gibson-Watt, David

    Leather, Sir Edwin

    Bryan, Paul

    Gilmour, Ian (Norfolk, Central)

    Leavey, J. A.

    Bullus, Wing Commander Eric

    Gilmour, Sir John (East Fife)

    Lewis, Kenneth (Rutland)

    Burden, F. A.

    Glover, Sir Douglas

    Linstead, Sir Hugh

    Butcher, Sir Herbert

    Gower, Raymond

    Litchfield, Capt. John

    Cary, Sir Robert

    Grant-Ferris, R.

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Chataway, Christopher

    Green, Alan

    Longbottom, Charles

    Chichester-Clark, R.

    Gresham Cooke, R.

    Loveys, Walter H.

    Clark, Henry (Antrim, N.)

    Grosvenor, Lord Robert

    Lubbock, Eric

    Clark, William (Nottingham, S.)

    Gurden, Harold

    Lucas, Sir Jocelyn

    Clarke, Brig. Terence (Portsmth, W.)

    Hamilton, Michael (Wellingborough)

    Lucas-Tooth, Sir Hugh

    Cleaver, Leonard

    Harris, Frederic (Croydon, N.W.)

    McAdden, Sir Stephen

    Cooper-Key, Sir Neill

    Harris, Reader (Heston)

    McLaughlin, Mrs. Patricia

    Corfield, F. V.

    Harrison, Brian (Maldon)

    Maclay, Rt, Hon. John

    Costain, A. P.

    Harvie Anderson, Miss

    Maclean,SirFitzroy(Bute&N.Ayrs)

    Coulson, Michael

    Hastings, Stephen

    McMaster, Stanley R.

    Craddock, Sir Beresford (Spelthorne)

    Hay, John

    Macmillan, Maurice (Halifax)

    Crawley, Aidan

    Heald, Rt. Hon. Sir Lionel

    Marshall, Sir Douglas

    Curran, Charles

    Hendry, Forbes

    Matthews, Gordon (Meriden)

    Currie, G. B. H.

    Hobson, Rt. Hon. Sir John

    Mawby, Ray

    Dalkeith, Earl of

    Hollingworth, John

    Maydon, Lt.-Cmdr. S. L. C.

    1440

    1441

    Mills, Stratton

    Ridsdale, Julian

    Thompson, Sir Kenneth (Walton)

    Miscampbell, Norman

    Robson Brown, Sir William

    Thompson, Sir Richard (Croydon, S.)

    More, Jasper (Ludlow)

    Rodgers, John (Sevenoaks)

    Thornton-Kemsley, Sir Colin

    Morgan, William

    Roots, William

    Tiley, Arthur (Bradford, W.)

    Nabarro, Sir Gerald

    Ropner, Col. Sir Leonard

    Turner, Colin

    Oakshott, Sir Hendrie

    St. Clair, M.

    Turton, Rt. Hon. R. H.

    Page, Graham (Crosby)

    Scott-Hopkins, James

    van Straubenzee, W. R.

    Page, John (Harrow, West)

    Seymour, Leslie

    Vane, W. M. F.

    Pannell, Norman (Kirkdale)

    Sharples, Richard

    Victors, Miss Joan

    Pearson, Frank (Ciltheroe)

    Shepherd, William

    Vosper, Rt. Hon. Dennis

    Peel, John

    Skeet, T. H. H.

    Wakefield, Sir Wavell

    Percival, Ian

    Smith, Dudley (Br'ntf'd & Chiswick)

    Walker, Peter

    Peyton, John

    Smithers, Peter

    Walker-Smith, Rt. Hon. Sir Derek

    Pickthorm, Sir Kenneth

    Smyth, Rt. Hon. Brig, Sir John

    Wall, Patrick

    Pilkington, Sir Richard

    Speir, Rupert

    Wells, John (Maidstone)

    Pitman, Sir James

    Steward, Harold (Stockport, S.)

    Whitelaw, William

    Powell, Rt. Hon. J. Enoch

    Stodart, J. A.

    Williams, Paul (Sunderland, S.)

    Prior, J. M L.

    Storey, Sir Samuel

    Wills, Sir Gerald (Bridgwater)

    Prior-Palmer, Brig. Sir Otho

    Summers, Sir Spencer

    Wolrige-Gordon, Patrick

    Pym, Francis

    Taylor, Sir Charles (Eastbourne)

    Woodnutt, Mark

    Rawlinson, Sir Peter

    Taylor, Edwin (Bolton, E.)

    Woollam, John

    Redmayne, Rt. Hon. Martin

    Taylor, Frank (M'ch'st'r, Moss Side)

    Worsley, Marcus

    Rees, Hugh (Swansea, W.)

    Teeling, Sir William

    Yates, William (The Wrekin)

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

    Temple, John M.

    Ridley, Hon. Nicholas

    Thomas, Sir Leslie (Canterbury)

    TELLERS FOR THE NOES:

    Mr. McLaren and Mr. MacArthur.

    Clause 9.—(PIPE-LINES.)
    8.45 p.m.
    Mr. du Cann: I beg to move, in page 10, line 20, at the end to insert:
    (8) In the application of this section to Northern Ireland references to the Pipe-lines Act 1962 shall have effect as if that Act extended to Northern Ireland.
    The Clause deals with pipelines and in effect provides that Customs may treat them as bonded warehouses. We had some discussion of the Clause in Committee and it was generally agreed. This is a purely technical Amendment to ensure that the Clause applies in Northern Ireland as it does in Great Britain in general.
    Amendment agreed to.

    Clause 11.—(SURTAX RATES FOR 1962–63.)
    Mr. Geoffrey Stevens: I beg to move, in page 10, line 33, at the end to insert:
    Provided that in the case of an individual (or in the case of a married couple either spouse) who was aged 65 or over at the commencement of the year of assessment such higher rates shall be charged where the total income exceeded £2,500.
    A month ago I was very fortunate in that the Chair selected an Amendment which I moved, the effect of which was to raise the starting point of Surtax from £2,000 to £3,000. In the week or ten days that followed the debate, I had letters from all over the country supporting my action. My hon. Friend the Economic Secretary, however, despite the tribute which he paid to
    the manner in which I posed this suggestion, made some very crushing remarks in reply. I do not intend to deal with those remarks this evening.
    The hon and learned Member for Kettering (Mr. Mitchison) was even more crushing in his remarks and I should like to reply to those, but I will not be tempted. I will refer to only one of my hon. Friend's points and that was that the cost of the proposal I made would be in excess of £75 million in a full year, which seemed a shade on the high side for an Amendment moved by a back bencher, and for that reason I readily asked leave to withdraw the Amendment.
    I come back now with an Amendment more modest in two respects. Instead of proposing an increase in the starting point of Surtax from £2,000 to £3,000, the Amendment cuts that advance in half, from £2,000 to £2,500, and it limits that higher starting figure of £2,500 to a taxpayer who is 65 years of age or over at the beginning of the year of assessment, or in the case of a married couple where either spouse is 65 years of age at the beginning of the year of assessment.
    Having taken some little time on the previous occasion to advance the reasons which I thought were good and sufficient for raising the starting point of Surtax, I shall not weary the House by repeating those arguments. I intend to make only two points in support of my Amendment. Six weeks ago I suggested that the figure of £2,000 is the only starting point figure in the Income Tax Code

    1443
    which has remained unchanged since it was introduced over 40 years ago. I was not and have not since been challenged on that suggestion, and I therefore believe that I am right.
    It is true that when that special tax, Surtax, was introduced in 1922 it was intended as a tax on wealth. Surely that must mean "wealth" in real terms and not necessarily wealth in money terms, because there is a variation in the amount of wealth which money can buy. If £2,000 was the yardstick for a wealthy person in 1922, it certainly is not a proper yardstick over 40 years later. For that reason, if for no other, I suggest that the time has come to consider investment income as well as earned income.
    I have included the age qualification of 65 in my Amendment. That seems a reasonable age. It is the normal retiring age of a man. It is the age at which the retirement pension is normally paid, so long as the person does retire. It is the age at which many men hope to retire and at which many private pension schemes begin to operate.
    My hon. Friend the Economic Secretary rejected my previous suggestion on the ground of the tremendous cost involved. I should have thought that with these two qualifications—the reduction to £2,500 and the age qualification—the cost would obviously be very much less and perhaps even within the proper sphere of a back-bench Member to move.
    I recall that so many of these incomes which are deemed to be unearned in fact have come from interest, dividends, and rents on sums put aside year by year from earned income during a working life by people who are not covered by pension schemes, and I see no reason why those forms of income should be deemed to be unearned and should not attract the earned income allowance which pensions do. They should have similar treatment. All such incomes should be deemed to be earned incomes for Surtax purposes. I therefore commend the Amendment to the House.
    Mr. A. P. Costain: I wish to add my supplications to those of my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens). This is a matter which I have
    1444
    had very much in mind in my constituency which contains a lot of people who are in this income group. They are all people who have retired on their own savings.
    Before my hon. Friend the Economic Secretary works out the mathematics, I want to put one point to him. A number of people in this age group, because of the tax position in this country, are leaving to live in the Isle of Man and the Channel Islands. It is a great shame that these people, who have made their living in this country, should have to go abroad or to adjacent islands in order to avoid paying Surtax. I hope that my hon. Friend the Economic Secretary will, in his calculations, bear this other factor in mind and give to these people some hope that they can remain in this country as they would wish to do.
    Mr. du Cann: As usual, my hon. Friends the Members for Portsmouth, Langstone (Mr. Stevens) and for Folkestone and Hythe (Mr. Costain) have made powerful, persuasive and cogent speeches, but I am sorry to have to say that I cannot accept the Amendment. Clause 11 lays down the rate of Surtax for the year 1962–63, and the Amendment proposes that, if a taxpayer, or, as my hon. Friend explained, in the case of a married couple, his wife, was 65 or over at the commencement of the year of assessment, the higher rate should be charged when the total income exceeds £2,500.
    First, I must tell my hon. Friends that there is some doubt about the interpretation of the Amendment. It might be interpreted in one of two ways. First, it might be said to let all elderly Surtax payers off Surtax on the slice of Surtax-able income between £2,000 and £2,500 however big their income might be, leaving slices above £2,500liable to Surtax at the rates proposed in the Bill. Second, it might be said to exempt from Surtax elderly taxpayers whose total income for Surtax purposes is less than £2,500, leaving those with incomes above £2,500 to pay Surtax at the rates proposed in the Bill. In other words, someone with an income of £2,499 would pay no Surtax, but, if he had, by accident, an income of £2,501 or anything above that, he would pay Surtax at the full rate. There are those difficulties of interpretation.

    1445
    My hon. Friend the Member for Langstone referred to the Amendment which he proposed in Committee. Perhaps I misjudged him, but he seemed to cast doubt on my estimate of the cost of that Amendment.
    Mr. Stevens: No, I did not.
    Mr. du Cann: My hon. Friend corrects me. He did not doubt at all my estimate of the cost of that Amendment. However, he said that he hoped that this Amendment would cost a good deal less. So it would. He will recall that there was with that Amendment, too, some difficulty regarding the drafting. It would have made the Surtax rates start at £6,000 because of the way the allowances would work. Hence the high cost. This Amendment, if accepted, would cost a great deal less, only £1 million.
    I absolutely understand—I say this as seriously as I can—the anxiety which my hon. Friend feels on this subject. He has great experience in Income Tax matters, occupying a very responsible position in a society concerned with the problems of Income Tax payers, and I can well believe that he has had a volume of correspondence on this question.
    Mr. Ellis Smith: Could we be told the name of the society?
    Mr. du Cann: I think that it would be appropriate for my hon. Friend to give the name himself if he wishes to do so. In any case, I think that it is very well known.
    Mr. Stevens: The name of the society, which escapes the hon. Member for Stokeon-Trent, South for the moment, is the Income Tax Payers' Society. Subscription 1 guinea. Members opposite welcome.
    Mr. du Cann: I am glad to remind the House of the splendid work which my hon. Friend does in that connection. It is part of the devoted work he does in many spheres and for which he does not always obtain the proper credit.
    I was about to say that cost is not the principal ground of objection. It does not provide the principal reason why we are unable to accept the Amendment. My hon. Friend said something on the subject 40 years on. He is quite right to draw attention to the fact that this particular matter
    1446
    has not been dealt with for about 40 years. On the other hand, it would be quite wrong to leave the House with the impression that the Government are so unsympathetic to the plight of the elderly and the retired that nothing whatever is done.
    In this very Bill, we propose by Clause 12 to raise the income limit for age relief for Income Tax purposes from £800 to £900, and by subsection (7) the age exemption provisions are again improved from £300 to £325 for a single person and from £480 to £520 for a married couple.
    9.0 p.m.
    If my hon. Friend is suggesting that it would be appropriate to introduce an equation into the Surtax field, I am obliged to say this to him. First, perhaps he feels that there is a new anomaly in the Surtax field because of the measures taken by this House which were introduced by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) in 1961. But I should make it clear that any blurring of the distinction between earned and investment income would certainly be contrary to the basis deliberately adopted by my right hon. and learned Friend when framing his Budget at that time.
    Secondly—and this is perhaps a more important objection, for, like many hon. Members, I am impatient of precedent—although my hon. Friend's proposal provides relief for income from savings, the Amendment is not in any way limited to the income from investments which represent the accumulation from savings of past earnings, and any such limitation would certainly seem to be a practical impossibility. My hon. Friend will know my feelings about savings and the feeling and attitude of the Government about savings. It must be right to encourage people to make provision for their old age, if possible, during their lifetime. Whether they do this to a large or small extent, good luck to them. It is a splendid thing to do. But there is a difficulty in distinguishing between income of that sort, which is genuine income, and investments provided from savings and income of other kinds. That is one of the complications.
    The third and probably the most important point of all is that it seems to

    1447
    create new anomalies to retain the kind of Income Tax age relief which I have described, raised to £900 by the Bill, and at the same time to recognise a new hardship category consisting of elderly people with incomes of £2,000 and upwards. Such a state of affairs would certainly be regarded as unfair by all those elderly taxpayers with incomes below £2,000 which would, nevertheless, be too large to qualify for the Income Tax age relief.
    These are very real difficulties. I hope that my hon. Friend will not feel that there is any reason of prejudice which obliges us to take an attitude of this sort. On the contrary, we leave prejudice to other people. We are most anxious to find ways of helping these people if possible. But, with regret, we are convinced that the method proposed by my hon. Friend is not one which we are in a position to accept in the interests of taxpayers as a whole and, more particularly, in the interests of other elderly people who do not precisely fit into the pattern set in the Amendment. For those reasons, I hope that my hon. Friend will not press the Amendment.
    Mr. Houghton: The Economic Secretary is a kind of Parliamentary tranquilliser. He turns down the proposals of his hon. Friends and of my hon. Friends in the gentlest possible manner. I think that he must have a tin of soft soap there.
    The hon. Member for Portsmouth, Langstone (Mr. Stevens) will not be surprised to hear that we shall not be able to follow him into the Division Lobby if he presses this Amendment. What he is asking for is Surtax age exemption. That raises many questions of equity in taxation and of comparison with the burdens of taxation resting on people in groups lower down. Moreover, as far as I can see, the relief which would be given would be on investment income only, because to the extent that these older people are on pension, for example, they will get the benefit of earned income relief and the special earned income relief under the Surtax concessions given in the Finance Act, 1961. Therefore, they would have to be getting fairly large incomes—up to £5,000 a year—if their incomes were wholly earned or pensions before they
    1448
    would pay Surtax at all. The special earned income relief and the earned income relief combined would bring them down to £2,000, at which level no Surtax is payable except to the extent that they have investment income.
    Mr. Stevens indicated assent.
    Mr. Houghton: I see the hon. Gentleman nodding his head. It is therefore true that this Amendment really means that it would give exemption from Surtax on that amount of the income over £2,000 which is investment income. He may intend that, and, indeed, he referred to the savings of people of this level of income. But the hon. Gentleman, although he has not been in our debates just recently, must know that we have, unfortunately, been rejected in our request for some relief of Purchase Tax on clothing, boots and shoes and mattresses.
    Mr. Stevens: I think that the hon. Gentleman should change his oculist because clearly his eyesight is failing. I have heard every word of the debate on Purchase Tax this afternoon.
    Mr. Houghton: The hon. Gentleman will not expect us in the same day that we have our own proposals to relieve people in the lowest income groups of Purchase Tax to agree to his proposal to give age exemption on this point. I shall not delay the House any longer. I think that I heard sufficient of the sentiments of my hon. Friends behind me, while the Economic Secretary was speaking, to chance my arm in declaring that we cannot support the hon. Gentleman's Amendment.
    Mr. Stevens: Crushed again, I beg to ask leave, with reluctance, to withdraw the Amendment.
    Amendment, by leave, withdrawn.

    Clause 15.—(CHARGE TO INCOME TAX OF PROFITS AND GAINS ARISING FROM LAND.)
    The Financial Secretary to the Treasury (Mr. Anthony Barber): I beg to move, in page 13, line 44, to leave out from "furniture" to the end of line 5 on page 14 and to insert:
    "and tax in respect of the payment for its use is chargeable under Case VI of Schedule D, tax in respect of the rent shall be charged

    1449
    under Case VI of Schedule D unless the landlord, by notice in writing to the surveyor given within two years after the end of the year of assessment, requires that this provision shall not apply".
    This Amendment to Clause 15(4) fulfils an undertaking which I gave to hon. Members when we considered the Clause in Committee. It deals with a point raised by one of my hon. Friends. Clause 15(4), as the House will remember, is intended to ensure that where property is let furnished it is not necessary to make two assessments, one under Case VIII on the rent attributable to the bare accommodation and another under case VI on the balance attributable to the use of the furniture and any services, unless, of course, the landlord wants the rent to be assessed under Case VIII in order to take advantage of the provisions in Schedule 4.
    This subsection was intended never to apply where the provision of services amounts to a trade assessable under Case I. In that event, an apportionment is necessary between the rent proper and the trading profit, since in the hands of an individual the trading profit is treated as earned income whereas the rent assessable under Case VIII is not treated as earned income. The Amendment makes it perfectly clear, that the only circumstances in which rents may be assessed under Case VI of Schedule D instead of Case VIII are where the property is let furnished and the payment for the use of

    Provided that if before the 1st January in any year a person delivers a statement in writing to the surveyor—

    (i) showing that since the beginning of the last preceding year of assessment he has ceased to possess one or more sources of income chargeable under Case VIII; and

    (ii) giving the aggregate of the rents and receipts relevant for purposes of Case VIII to which he has become or is likely to become entitled in the current year; and

    (iii) showing that that aggregate is less than the aggregate of such rents and receipts to which he became entitled in the last preceding year, and that it would not have been less if he had not ceased to possess the said source or sources,

    then, if the surveyor is satisfied as to the correctness of the declaration, an assessment made on that person in the current year shall be made on an amount which bears to the amount arrived at under paragraph (a) of this subsection the same proportion as the said aggregate for the current year bears to the said aggregate for the last preceding year, and paragraph (b) of this subsection shall apply accordingly.

    Mr. Deputy-Speaker (Sir William Anstruther-Gray): In considering this Amendment, it will be possible to discuss also the three Amendments to it in the name of the hon. Member for Crosby (Mr. Graham Page), in line 3, leave out from "showing" to first "the" in line 6.
    the furniture is assessable under Case VI as the law now stands.
    The Amendment removes from subsection (4) all references to payment for services, and the law relating to such payments is consequently left unchanged.
    I also promised in the course of the same debate that we would do our best to meet the situation about basing a Case VIII assessment on accounting periods rather than on tax years. The Revenue will certainly do this—it is an important point—in appropriate cases, as it has done in the past, in making excess rent assessments, but we thought it better not to introduce an Amendment on this point because the legislation would be quite complicated if we were to deal with all the possible sets of circumstances. I well remember that the hon. and learned Member for Kettering (Mr. Mitchison), who is not in the Chamber at the moment, pointed out in Committee, when this was considered, that there would be difficulties in, as it were, partial legislation, and we came to the conclusion that it was a matter that could better be dealt with in future, as in the past, as one of administration.
    Amendment agreed to.

    Clause 16.—(ASSESSMENT AND COLLECTION OF TAX UNDER CASE VIII.)
    Mr. Barber: I beg to move, in page 14, line 33, at the end, to insert:
    In line 7, leave out "or" and insert 'and".
    In line 10, leave out from "year" to end of line 12.
    Mr. Barber: This Amendment to subsection (2) of the Clause again fulfils an

    1451
    undertaking which I gave in Committee, when the point was raised by my hon. Friend the Member for Nottingham, South (Mr. W. Clark). Other hon. Members, on both sides, have since written to me about it. As the House knows, assessments under Case VIII are to be on a current year basis, but to prevent a break in collection it is necessary to provide a legally enforceable liability to pay tax on 1st January in the current year notwithstanding the fact that the true liability cannot be ascertained until the following year.
    Subsection (2) of the Clause deals with the problem by providing that a provisional enforceable assessment under Case VIII can be made in the year of assessment on the assumption that all relevant facts are the same as in the previous year. The Amendment provides that if before 1st January in the year of assessment a taxpayer shows to the satisfaction of the inspector of taxes that since the beginning of the preceding year of assessment he ceased to possess any property the income from which is assessed under Case VIII, and the aggregate of his gross rents and other receipts from property which he has received or is likely to receive in the current year of assessment is less than the aggregate of the preceding year and would not have been less if he had not ceased to possess the property, the provisional assessment may be reduced in proportion to the reduction in his gross receipts.
    This is a little difficult to follow merely by listening to what I am saying. I can, if necessary, if any hon. Member desires, elaborate the sum which has been done, but I think that anybody who reads tomorrow what I have just said will come to the conclusion that this provides a simple rule dependent only on gross rents and other receipts which are capable of fairly accurate estimation and avoids going into details of expenses.
    Mr. Graham Page: As my hon. Friend the Financial Secretary to the Treasury has said, under subsection (2,a) the tax will be leviable on the assumption that one's income from this source is the same as in the previous year. Thus, to take an example, on 1st January, 1966, a demand will arrive for tax payable on the income to which one was entitled during the year 1964–65. That will
    1452
    not be merely an assessment. It will indeed be a demand, because tax will be leviable not only on the income of the previous year, but on the income to which one was entitled in the previous year. Again, the tax is charged not on the rents actually received, but on the rents which one is entitled to receive.
    9.15 p.m.
    This will be something of a shock to taxpayers who happen to have dropped their rent income in one year. Suppose, for example, following the dates I have just given, that during the year 1965–66 properties have been empty which were fully let the previous year. The taxpayer is to be charged on a figure of rent which he received in the previous year, but in this particular year he is called upon to pay he may have to do complete exterior repairs or even substantial structural repairs—heavy expenses. It may even have been a case of a reducing rent. Frequently property is let at a high rent for the first few years, and, at a certain break in the term, the rent drops to a lower figure. Even if that has happened, he will still have to pay on the previous year and only be able to claim it some months later.
    Mr. J. J. Mendelson: Can the hon. Gentleman quote examples of where this drop in rent occurs at present?
    Mr. Page: It is not an uncommon provision in leases. I dare say the hon. Gentleman is thinking of cases the other way round, where there is a small rent to start with and it is increased, but it is a common form to have a high rent to start with and for it then to drop. It does occur. That is not the only instance where a taxpayer will be in some difficulty in paying tax out of money he has not received in cash. I have already mentioned heavy expenses during one year.
    It would be reasonable, if he foresees this coming in a year, to put in a statement to his inspector of taxes saying, "This is what I estimate my income will be this year. Let me pay on account on 1st January on the basis of this figure." According to this Amendment he can do that if he shows that he has disposed of the property, but only if he shows that he has disposed of the property, during the year. That comes in sub-paragraph

    1453
    (i) in this Amendment. So the first thing he has to do to get any relief from this is to show that he has disposed of the property. This is the only occasion on which he will be granted relief from paying tax on the basis of rent which he was entitled to receive the year before.
    My Amendments to the Amendment would, in effect, delete sub-paragraph (i) and leave the Amendment so that if the taxpayer can show that
    "the aggregate of the rents and receipts relevant for purposes of Case VIII to which he has become and is likely to become entitled in the current year and…that that aggregate is less than the aggregate of such rents and receipts to which he became entitled in the last preceding year"
    he would pay on account a figure, to put it briefly, which would be settled by the authorities, a reasonable figure in accordance with his estimate of what his income would be.
    I should have thought that that would have been a fair and reasonable way of dealing with the matter, and certainly no loss to the Revenue. The matter is adjusted at the end of the year, but it does avoid the hardship which may occur by the taxpayer having to pay out large sums in tax in respect of money which he may not have received in cash.
    Mr. Houghton: I think that the hon. Gentleman the Member for Crosby (Mr. Graham Page) is carrying this a little too far. The basis of assessment in Case VIII, as the hon. Gentleman has explained, is the rent receivable in the preceding year, but that is merely for the purpose of making an assessment in advance of the conclusion of the year of assessment. It is not a final assessment; it is a provisional assessment because, under Clause 16(2,b) it is clearly stated that tax shall be leviable on the basis of rents receivable in the preceding year but that
    "any necessary adjustments shall be made after the end of the year, whether by way of additional assessment, repayment of tax or otherwise, to secure that tax is charged by reference to the rents or receipts to which the person assessed becomes entitled in the year of assessment."
    Mr. Graham Page: The word "leviable" is used. Surely that means that if it is leviable on 1st January it is payable on 1st January, and is not a mere assessment of what a person has to pay.
    Mr. Houghton: I agree. There would not be much purpose in making a provisional assessment unless one were going to make a payment on it, otherwise it would be a purely theoretical exercise. If we accept that that is the proper basis of assessment of the rents receivable in the year of assessment—which I believe to be the proper basis—we have to find some basis upon which tax can be levied during the year of assessment, subject to subsequent adjustment after the profits for the year can be ascertained. The hon. Member for Crosby is quite right in saying that on the provisional assessment, which is based on the rents receivable in the preceding year, tax will be paid on 1st January in the year of assessment, and that the adjustment will be made after the end of the year of assessment. I hope that I am right about that.
    In his Amendment the Financial Secretary has met the point that if, in the year of assessment, profits are lower because some property has been disposed of, it seems unfair to continue a provisional assessment on the basis of the rents receivable in the preceding year, when it is known absolutely and clearly that the rents receivable in the year of assessment are bound to be lower because of that disposal of property.
    This is bringing forward into Case VIII a form of cessation provisions providing that a person shall not be assessed in the year of assessment on the basis of the preceding year in respect of some source of income that has gone. But, for practical reasons, that is restricted to the disposal of property, and not merely to the reduction of the rent receivable on property from another hazard which may lead to a reduction in the profits in the year of assessment. The question is how far we ought to make adjustments in the year of assessment by reference to changes in the level of income subsequent to the preceding year.
    The hon. Member for Crosby is seeking to extend this concession to anything that may have led, or may lead, to a reduction of income in the year of assessment, by reference to the amount receivable for the preceding year. That seems to run the risk of an enormous number of adjustments midway between the making of the assessment on the basis of the preceding year and the

    1455
    adjustment to be made anyhow after the year of assessment is ended. On administrative grounds alone that is a most formidable proposal.
    The next question is whether it is justified, having regard to the basis on which the tax is to be levied. To have disposed of property and, therefore, to have disposed of a source of income is one thing, but merely to have had a reduction in income by reference to other factors on the same property is a different thing. It is all very complicated, and none of us wants to do any harm to those who will be affected by provisions of this kind.
    I think, also, that many discoveries will be made in the operation of this new Case VIII, We cannot pretend—I keep saying "we", I speak as a Member of the House—that we shall have got everything right and no difficulties will arise. I think they are bound to arise. I fear that I cannot advise my hon. Friends to support the Amendment of the hon. Member for Crosby, on the ground that the hon. Gentleman is carrying this process of midway adjustment rather further than the circumstances justify, and that this would open up operations which would be gone over once, twice, possibly even more times, in the course of a year in order to get the amount of the assessment absolutely right for the year of assessment. That, I think, is asking too much, though I fully understand the point made by the hon. Gentleman.
    If we are to take the properties of the current year as the basis of assessment and the profits of the preceding year as the provisional basis on which to operate, it is necessary to reduce the occasions on which that provisional assessment is altered during the currency of the year of assessment, when it is all to be reviewed and adjusted as soon as may be after the year is ended.
    Mr. Barber: With the leave of the House, I should like to say a word about the Amendments introduced by my hon. Friend the Member for Crosby (Mr. Graham Page). Put briefly, the effect of them would be that if the taxpayer showed that for any reason at all his gross receipts from property in the current year were likely to be less than in the preceding year, the amount of assessment would be reduced in proportion to
    1456
    the reduction of his gross receipts. As was pointed out by the hon. Member for Sowerby (Mr. Houghton), this would remove the condition that it is only where a taxpayer ceases to possess some of his property and an income fall is due to that fact, that relief, provided by the Amendment I moved a short time ago, is to apply.
    Although I recognise that there may be some cases which would benefit by the Amendment of my hon. Friend, I think that they would be few in number. After all, there would not usually be a fall in the gross receipts from property except where the taxpayer had disposed of some property, or there was the sort of special arrangements to which my hon. Friend referred. I am in a difficulty, because I sympathise with what was said by my hon. Friend and what was said by the hon. Member for Sowerby. I have a good deal of sympathy with the objects of my hon. Friend and the approach which he set out so logically to the Committee. But I think it goes a little too far. It would leave considerable scope for argument as to the anticipated fall in income.
    The hon. Member for Sowerby was on a good point when he indicated—I hope I understood him right—that to do as my hon. Friend suggests might well undermine the firm basis of liability which is necessary in order to prevent a break in the collection of tax on rents and other income from property. I should like to give my hon. Friend an assurance in order to go some way to quell his concern.
    9.30 p.m.
    A statutory rule to cover all variations in receipts from property as compared with the preceding year would be too hampering to the collection of tax, but applications can always be made to the Inland Revenue to hold over tax in cases where hardship is alleged. Any such applications, I can assure my hon. Friend, would be sympathetically considered under the Inland Revenue's general power of care and management.
    I think my hon. Friend will agree that we have gone some way in the Amendment in the name of my right hon. Friend to meet the most important cases my hon. Friend had in mind. I have had

    1457
    the advantage of discussing this matter with him. With that assurance, I hope he will not press his Amendments but that the House will accept the Amendment in my right hon. Friend's name.
    Amendment agreed to.

    Clause 17.—(RELIEF FOR RENT, ETC., NOT PAID.)
    Mr. Graham Page: I beg to move, in page 16, to leave out line 33 and to insert "where a person claims".
    Mr. Speaker: It will probably be convenient to discuss with this Amendment the next one in page 16, line 37, leave out "and" and insert "then unless it appears".
    Mr. Page: These Amendments are quite closely related to our discussion on the previous Amendment. Under Clause 15(2), as has been said, this tax is on the amount of rents receivable and not necessarily on the amount received. It is possible, therefore, under Clause 17 to obtain relief from taxation upon rents which have not been paid. Otherwise the taxpayer might have to pay tax on money which he has not received and was not strictly entitled to receive because there was default on the part of the payer, or he properly surrendered his right to claim it. In order to get that relief under Clause 17, the taxpayer has to prove three items.
    I hope my hon. Friend the Financial Secretary can help us on this. I am not sure what is meant by "proves". Every claim for relief has validity as if it were on oath because of the penalties for wrong or false claims. When the taxpayer is being given the right to claim a relief under the Income Tax Acts and in other respects it is usually on the basis that he must show cause to the satisfaction of the surveyor, or the Commissioners—not that he must prove certain things. If he makes a statement claiming relief, he must satisfy his inspector that he is entitled to that relief.
    That phrase, or something like it, was used by my hon. Friend in discussion of the last Amendment—for example, "if the surveyor is satisfied as to the correctness of the declaration"—not, "if the taxpayer proves". In Clause 17 he is called upon to prove that he has taken reasonable steps to enforce his rights against the tenant, or that if he has
    1458
    waived his right he has done so in order to avoid hardship to the tenant. I do not think that under any other Schedule or case the taxpayer is called upon to prove that he has not received a sum. If he can show to the satisfaction of the Commissioners that he has not received it, he does not have to go into elaborate proof.
    I stress that Case VIII is not like an ordinary assessment against which one can appeal. In this case the sum is leviable on a fictitious amount. It is leviable on the rents the person was entitled to receive in the previous year to assessment.
    Mr. Houghton: That is not a fictitious amount, is it?
    Mr. Page: It is a fictitious amount so far as concerns the year of assessment. It is a notional amount, if the hon. Member prefers that word. It is an amount on which his tax is based although he may not have received it in fact. In order to show that he has not received it, and is not entitled to recover it, he has to prove certain imprecise conceptions in the Clause—reasonableness or hardship—which are extremely difficult negative conceptions to prove. It is wrong to place on the taxpayer the burden of proof. Surely the assumption should be that the creditor does not remit a debt without some good cause. If that case can be taken to the Commissioner he should be entitled to his relief.
    The way in which the Clause would read if the Amendment were inserted is as follows:
    "Where a person claims that he has not received an amount which he was entitled to receive in respect of any rents or receipts on the profits or gains arising from which he would be chargeable under Case VIII then unless it appears…".
    I need not read the next two paragraphs. This is a fairer and more reasonable way to grant this right to relief—to allow the taxpayer to put forward his claim and the facts and to show to the satisfaction of the authorities that he is entitled to this relief.
    Mr. Barber: I first assure my hon. Friend the Member for Crosby (Mr. Graham Page) that there is no particular significance in the use of the word "proves" in this Clause. It is true that in other parts of the Income Tax Act

    1459
    reference is made to facts being established to the satisfaction of the Commissioners or of the surveyor. But if my hon. Friend will look at the Sections in the 1962 Act from Section 208 onwards—I have refreshed by own memory—he will find that they deal with personal and other relief and that in Section after Section—209, 210, 211, 212—dealing with all manner of personal reliefs, there is reference to "proved" by the taxpayer.
    Mr. Houghton: I understand that in law a man must prove that he has a wife.
    Mr. Barber: I should have thought that that was a pretty reasonable thing to say. These Amendments to Clause 17, which provide a landlord with relief in respect of rent which he is unable to collect, are presumably intended to transfer the burden of proof from the taxpayer to the Revenue. I am sorry to have to disappoint my hon. Friend, but I have taken a certain amount of advice on the drafting of his Amendments and I am afraid that I have come to the conclusion that these Amendments in fact amount to saying that if the claimant has good reason for not collecting his rent he is not to be given any relief, but if he has no good reason for not collecting his rent, he is to be given relief—which is precisely the reverse of what my hon. Friend wants to do.
    But I will devote a moment to the merits of the proposal. The basis of the charge under Case VIII is the rent which the landlord becomes entitled to receive in the tax year concerned. Clause 17, however, gives him relief where for good reason he is unable to recover the rents to which he is entitled. A similar relief is given by a concession in Great Britain and, strange though it may seem, by Statute in Northern Ireland in relation to tax under Schedule A and the excess rent provisions of Case VI of Schedule D.
    In order to establish his claim for relief for lost rent under Clause 17 the claimant is required to prove three things—and I think I need not trouble the House by going over the various matters on which the inspector would have to be satisfied, because they are clearly set out in the Clause and have been referred to by my hon. Friend.
    My hon. Friend's Amendments are intended to transfer the onus of proof that these conditions are satisfied from the tax-
    1460
    payer to the Revenue. I will leave aside a moment the fact that I do not think that his Amendment would achieve that object. I think that my hon. Friend's proposal is wrong. After all, it is the taxpayer who knows the facts. It is the taxpayer who has the information necessary to prove it. The Revenue will not normally have the information necessary to disprove a claim which is false. It is, therefore, always the rule that the onus is on the taxpayer to establish a claim to relief from tax. There is no good reason in this case for departing from the general rule. The taxpayer, after all, is surely in the best position to know whether he received the amount in question, what steps he took to enforce payment, and, if the payment is waived, what were the circumstances of the waiver. It is reasonable that the onus should be on him to satisfy the Inland Revenue or, if he cannot reach agreement with the inspector, to satisfy the Appeal Commissioners on these points.
    Therefore, in the view of my right hon. Friend the approach of this Clause is right in principle, for the reasons which I have given. However, even if that view were not acceptable to my hon. Friend, he will, I hope, bear in mind that the Amendments, according to the advice I have received, do precisely the opposite of what he intends them to do. I hope that for that reason, if for no other, he will not press them.
    Amendment negatived.
    Mr. du Cann: I beg to move, in page 17, line 2, to leave out from "received" to the end of line 6 and to insert:
    "the claimant or, if he is dead, his executors or administrators shall not later than six months thereafter give notice in writing of its receipt to the surveyor, and such re-adjustment of liability to tax (for all relevant years of assessment) shall be made as may be necessary and may be made at any time at which it could be made if it related only to tax for the year of assessment in which the amount, or the part of the amount, is received.
    (2) The foregoing subsection shall be deemed to be included in the third column of Schedule 6 to the Finance Act 1960 (relating to penalties on persons failing to furnish particulars or furnishing false particulars)."
    Clause 17 provides for the taxpayer to be granted relief from tax where he cannot obtain payment of rent or other income to which he is entitled in respect of land. Where the relief is given, the taxpayer will be put in the same position

    1461
    as if he had never received the rent, or whatever it may be. If he subsequently recovers the rent, the relief is to be withdrawn, and the result will be that the recovered rent will be treated as income of the year when it was due and not of the year when it was actually paid.
    Under the Clause as it stands, the Revenue's power to adjust the taxpayer's liability in such circumstances is subject to no time limit. Representations have been made to us by various learned bodies—I make the point particularly in answer to a suggestion which was very properly made by the hon. Member for Sowerby (Mr. Houghton) yesterday—that the Revenue's power to raise the assessment in these cases should be subject to the normal time limits. The Amendment accordingly imposes a time limit, which ordinarily would be six years after the end of the year of assessment in which the payment is received, on the Revenue's power to raise assessments for past years.
    I want to make two other points. First, in order to ensure that the Revenue is duly informed where taxpayers recover arrears of rent a claimant is obliged to notify the Inspector of Taxes within six months. If a poor claimant is dead, the same obligation falls upon his executors or administrators. Secondly, in cases of fraud there will be no time limit available.
    I hope that the Amendment will commend itself to the House.
    Amendment agreed to.

    Clause 20.—(TRANSITIONAL PROVISIONS FOR SCHEDULE A TAX FOR 1963–64.)
    The Solicitor-General (Sir Peter Rawlinson): I beg to move, in page 19, line 21, to leave out subsection (5) and to insert:
    (5) Paragraph 7 of Schedule 4 to this Act shall apply in relation to the year 1963–64 as it applies in relation to subsequent years, but with the substitution for sub-paragraph (1) of the following sub-paragraph: —
    "(1) Where this paragraph applies to an estate for the year 1963–64 the owner shall be treated for the purposes of tax under Schedule A or under Chapter II of Part VII of the Act of 1952 (excess rents) as if he were not the occupier of any part of the estate occupied by him, and as if—

    (a) in relation to a part of the estate which for any period in the year is not comprised in a lease under which he is the
    1462
    landlord, he were entitled under a lease of that part to rent for the said period, becoming due from day to day, at a rate per annum equal to the annual value of that part ascertained in accordance with Schedule 7 to this Act; and

    (b) in relation to a part of the estate which for any period in the year is comprised in a lease under which he is the landlord, the rent, so far as it relates to that part, were at a rate per annum not less than the annual value of that part ascertained in accordance with the said Schedule 7.",

    but as respects any period during which the sub-paragraph (1) hereinbefore contained does not exclude the operation of subsection (2)(a) of this section, the cost of the maintenance, repairs, insurance and management of any part of the land referred to in that sub-paragraph as the estate, being a part in the occupation of the owner, shall be disregarded in the application of section 101(4) of the Act of 1962 to the land.
    This was the Amendment referred to by the hon. Member for Cardiff, South-East (Mr. Callaghan) yesterday, in relation to the fact that between Friday of last week and Monday there was a change in the first two lines. I might be helpful to the House if I explain just how that came about. It was with the intention of helping the House, because otherwise there would subsequently have had to be an Amendment. If it had been left in its other form it would have related to paragraph 6 of Schedule 4, when it has been changed to paragraph 7 of the new Schedule. It was, therefore, not in any way to alter the sense, but to avoid a printing Amendment later, and to make it clear that the Amendment was put down.
    9.45 p.m.
    The Amendment is consequential on the proposed new provision in Schedule 4, paragraph (7), to which I have referred, and it relates to mansion houses on land managed as one estate. Under the present law—under the Income Tax Act, 1952—properties on land managed as one estate are treated as a unit for maintenance claim purposes. Thus an excess of expenditure of one property over the annual value of that property as assessed under Schedule A can be set off against the rents of other properties on the same estate.
    The Bill provided originally that where an owner-occupied house was managed as one estate with rented property in 1962–63, the owner occupier could still claim the expenses on the house against the rents of the rest of

    1463
    the estate if he elected to bring in the current annual value of the house on the other side of the account. This, however, did not go far enough because houses which benefit from this relief do not command a rent which covers the cost of repairs.
    The new paragraph (4) of Schedule 4, which we will come to later, provides that expenses can be set off against the rents of other properties on the estate only if the rent is a "full rent"; and with a large mansion no one will pay or take a rent sufficiently high to cover the expenses of upkeep.
    The new paragraph provides that where such a house is let the owner shall still have the option to set off his expenses against the rents of other properties on the estate, on the condition that the owner is treated as receiving a rent of not less than the current annual value. Thus the Amendment is consequential to the new paragraph (7) and it was obviously right that this should apply in the way that it is applied—both where the house is owner occupied and where the house is let.
    Amendment agreed to.
    The Solicitor-General: I beg to move, in line 43, at the end to insert:
    (6) Paragraph 9 of Schedule 4 to this Act, and the provisions of paragraph 10 of that Schedule modifying the application of the said paragraph 9 in certain cases, shall apply for the purpose of computing rent payable by a person in determining his liability to tax for the year 1963–64 under section 175 or 176 (excess rents) of the Act of 1952 as they apply for the purpose of computing amounts deductible for purposes of Case VIII in subsequent years.
    The Amendment gives an intermediate landlord who in 1963–64 pays a chargeable premium, or amount in the nature of a premium, the appropriate annual write-off against his rental income for 1963–64 It is a consequential matter and arises out of the new paragraph (9) of Schedule 4.
    Amendment agreed to.

    Clause 22.—(TREATMENT OF PREMIUMS, ETC., AS RENT.)
    The Solicitor-General: I beg to move, in page 21, line 2, to leave out "term" and to insert "duration".
    This is a drafting Amendment. Under Clause 22, a premium charged is arrived
    1464
    at by deducting from the amount of the premium 2 per cent. in each year of the lease except the first. If a lease is granted for 99 years with an option to break after 7 years, Clause 25 lays down that the period to be taken into account is 7 years. In Clause 25 the nomenclature adopted is to call ninety-nine years the term of the lease and the Amendment makes that consistent with Clause 22.
    Amendment agreed to.
    The Solicitor-General: I beg to move, in page 21, line 47, to leave out "him" and to insert:
    "a person other than the landlord, or payable to a person".
    This Amendment corrects a flaw in the drafting of subsection (5). It was clearly the intention that this subsection should also provide for payments made to third persons, and not only the landlord himself as, otherwise, the landlord could require the tenant to pay the sum to the landlord's wife, or a connected company, or whatever it might be. This Amendment corrects that mistake.
    Amendment agreed to.

    Clause 23.—(CHARGE ON ASSIGNMENT OF LEASE GRANTED AT UNDERVALUE.)
    Mr. Graham Page: I beg to move, in page 22, line 20, after "where" to insert:
    "after the beginning of the year 1963–64".
    Clause 23 creates quite a new liability to tax. It is a tax upon a fictional, notional, or suspended premium, whatever one wishes to call it, if the property is let at less than a rack rent and without demanding a premium at the time of the let, or demanding what the tax authorities may think is an insufficient premium. There is a sort of floating about in the air of an unborn taxable premium, referred to in the Clause as "the amount foregone", which hangs in the air, as it were, from the back of an Inland Revenue stork.
    Incidentally, "amount foregone" must surely mean the amount gone before. Should not the word be spelt "forgone", meaning what one has gone without? Perhaps is it a foregone premium in that it has gone before. If it is, I should not call it unborn, as much as a ghost floating in the air waiting to be seized upon by the tax authorities.
    Let me, however, stick to my simile of an unborn taxable premium, because

    1465
    it is born when the lease is assigned if, on that assignment, a premium is paid. Not only that, it becomes born again with new taxable premium on another assignment. The mother and father, or the forebears of all this, are the lease which was granted—and I underline "was"—for fifty years, but the transaction on which the Clause really takes effect is the assignment.
    Does the Clause apply to the assignment of the lease, the lease having been granted before 4th April, 1963? I have sought by this Amendment to make quite certain that it refers only to leases granted after that date. I am quite aware that Clause 25(6) states
    "…nothing in the three foregoing sections"—
    which I would therefore understand to mean the Sections we are doing without, as the word is spelt in the same way as in the expression, "the amount foregone":
    "shall apply in relation to a lease granted…before"—
    4th April, 1963. But the substance of Cause 23 is the assignment, and not the grant of the lease.
    Further, the Clause speaks about a lease that was granted some time in the past. Does that provision apply to a forgone lease as it applies to a forgone amount? I confess that I think that the draftsman's sense of timing is no better than his sense of spelling in this case, and my Amendment is an endeavour to make it a foregone conclusion that the Clause applies only to leases granted after April, 1963.
    The Solicitor-General: I hope that my hon. Friend the Member for Crosby (Mr. Graham Page) will not think me discourteous if I say that I got a little confused in the similes, the "gone" and the "ghosts", but I do not share his doubts, which are more ghostly than real, concerning the effect of Clause 25(6). He is perfectly right that Clause 23 imposes a charge on the amount paid on the assignment of a lease, of 50 years or less, originally granted at an under-value. The illustration which I have used before is that of the freeholder who grants a lease to his wife for £10 and the wife assigns the lease for £10,000. By Clause 23 she pays on £9,990.
    The Amendment seeks to interpose words which carry the implication that the
    1466
    terms subject to which the given lease is granted may be different after the start of 1963–64 from what they were before, but such a lease surely must have been granted once and for all. If the intention of the insertion of the words is to prevent the Clause from applying to assignments made on or after 1963–64 of leases that are granted before 1963–64 I suggest to the House that Clause 25(6) sets out in unequivocal terms the object which is required to be achieved. I appreciate what my hon. Friend has said both about spelling and drafting but I suggest that the position is covered by Clause 25(6) and that some of his doubts are more ghostly than real.
    Mr. Graham Page: On that assurance, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn
    Mr. Graham Page: I beg to move, in page 22, line 41, to leave out subsection (2) and to insert:
    (2) Any grantor, assignor, or assignee of a lease to which subsection (1) of this section applies may forward to the surveyor for his consideration a statement of the facts and circumstances relating to such a lease and such further information, if any, as he may think fit, and may request the surveyor to give a certificate as to whether or not a charge to tax arises or may arise under this section, and if so, the amount on which the charge arises, or may arise, whereupon the surveyor may—

    (a) call upon the grantor assignor or assignee as the case may be to furnish him within twenty-eight days or such extended period as he may subsequently allow such further particulars as he may reasonably require:

    Provided that if the particulars so required are not furnished to the surveyor within the period or extended period allowed for the purpose he may proceed under this section upon the information before him, or

    (b) within a reasonable time after examination by him of such statements object to any statement or any part thereof and in that case shall state in writing the cause of his objection according to the best of his knowledge and information;

    (c) grant such a certificate subject to such terms or conditions as he may think fit.

    (3) Any person who is aggrieved by the decision of the surveyor on any question arising under subsection (2) of this section may by notice in writing to that effect given to the surveyor within three months from the date on which notice of the decision is given to him make an application to have his claim for relief heard and determined by the Special Commissioners.
    This is an Amendment of more substance perhaps than the previous one. By

    1467
    subsection (2) the Clause provides a clearance procedure. Indeed that must be very necessary, because this tax is to arise out of conditions in the past—conditions when a lease was granted. If a premium is obtained on the assignment of that lease it may be due to the fact that the lessor has foregone a premium at the time when he granted the lease. On the other hand, it may be due to the enhanced value of the property, by reason of general inflation or of local betterment or of a definite improvement to the property itself. It may be that the premium on assignment has had nothing to do with the fact that the premium had been foregone at the time the lease was granted. Clearance procedure, therefore, is very necessary, and if it is necessary it should be fair and reasonable but as it stands in the Bill it is very strangely expressed.
    The applicant, according to Clause 23(2), has to say whether or not a charge arises and on what amount it arises. He has to set out to the inspector how he, the taxpayer, thinks the tax arises and how much may be payable. One must remember that this is based on the amount forgone, which must have been an estimate of an amount at the time the lease was granted.
    Mr. Houghton: The taxpayer surely will be in possession of the information. To the extent that it can be ascertained he is the most likely person to know what it is.
    10.0 p.m.
    Mr. Page: Indeed. If the hon. Gentleman will look at my Amendment he will see that that is exactly what the taxpayer would do; he would put before the inspector
    "a statement of the facts and circumstances".
    That appears in the second line of my substituted subsection (2). Having put those facts before the inspector—who is called the "surveyor" in proper language—he will request the surveyor to give the certificate. The surveyor will then be entitled to call upon the applicant to provide further facts if he thinks necessary. But that is very different from requiring the taxpayer to assess the tax himself, to put the amount before the surveyor and then for the surveyor to do nothing about it.
    As subsection (2) stands at the moment, the surveyor need do nothing about it.
    1468
    He can receive this information, If he rejects it, and is courteous, he will, of course, say that he does reject it, but he is under no obligation in subsection (2) to give any reasons for the rejection. I imagine that he will be very careful not to give those reasons because the Act will not require him to give them. I submit that the subsection (2) which I desire to substitute for that in the Bill is a far more usual form of obtaining a clearance certificate.
    In my Amendment the applicant provides
    "a statement of the facts and circumstances".
    He requests
    "the surveyor to give a certificate as to whether or not a charge to tax arises…and if so, the amount…"
    The surveyor may well call for more facts, and, having got all the facts that he thinks necessary, will state his reasons and grant or refuse a certificate.
    Furthermore, I have added in my Amendment something which is not in the Bill—the right of appeal to the Special Commissioners against that certificate in order to reach finality in the matter. That gives a straightforward reasonable procedure for the taxpayer to obtain a clearance certificate. I do not think that can be said of subsection (2) of Clause 23 which leaves the whole matter in the air after the taxpayer has gone to the trouble of getting valuations, estimates and so on of this amount forgone, worked out what he thinks is the tax, applied for a certificate, and then nothing more may happen. I am sure that my rather more spelt-out procedure is more fair on the taxpayer.
    The Solicitor-General: My hon. Friend the Member for Crosby (Mr. Graham Page) says that to spell out what the surveyor or inspector should do would be of greater assistance, but I must advise the House that I do not think that is so.
    As my hon. Friend has pointed out, Clause 23 provides that if there is submitted to the inspector or surveyor by the grantor or assignor, or even the assignee, a statement showing whether or not a charge to tax arises or may arise, and if the inspector is satisfied as to the accuracy of the statement, he shall so certify.

    1469
    My hon. Friend has stated that the Amendment provides for a statement in much greater detail and provides also for an appeal. I suggest that what he has put forward is not appropriate. The grounds of the inspector's objection may derive from the tax liabilities of a person who has not authorised disclosure—for instance, a former assignee of the lease. It would be contrary to the principle of confidentiality to oblige the inspector to make a statement of his grounds, when he may have obtained those grounds for acting as he has done from knowledge or information of the tax liabilities of some person who has not permitted the disclosure.
    Secondly, the appeal procedure suggested is not altogether appropriate. Clause 23 is designed to determine the tax liability, not the accuracy of the person's statement as to his tax liability. Here again, the problem of confidentiality would arise, making matters very difficult for the Special Commissioners. I suggest, therefore, that the words my hon. Friend proposes are not appropriate.
    There are no objections when liabilities under Clause 23 are under ordinary appeal because, as my hon. Friend said, the onus is on the taxpayer to show that the Clause 23 assessment is wrong or that he is entitled to reliefs, and the information would come from him. The proposals now in the Bill leave it to the inspectors to do their best, as of course they will; and they should not, I suggest, be bound inflexibly as my hon. Friends spelt-out provisions would require. I hope that he will not press his Amendment.
    Amendment negatived.

    Clause 24.—(CHARGE ON SALE OF LAND WITH RIGHT TO RECONVEYANCE.)
    Mr. Jasper More: I beg to move, in line 28, at the end to insert:
    (4) This section shall not apply to the sale of or to the grant of a lease of any mineral asset as defined in section 37(12) of this Act.
    This Amendment, which is related to an Amendment to Clause 37 appearing later on the Notice Paper in the name of my hon. Friend the Member for Newbury (Sir A. Hurd) and myself, has its origin in Clause 37 which, as the House will remember, has made a breach in a position long held by the
    1470
    Inland Revenue on the subject of mineral depletion allowances.
    The object of this Amendment and of the later Amendment is directed to the position of the owner of minerals or similar substances, because the inclusion of the new allowance under Clause 37 creates a very peculiar situation for him when regard is had to Clause 24. If Clause 37 goes through as it stands, the owner will face three choices: to work the minerals himself, to lease them to be worked at a royalty, or to sell them. The obvious choice, as matters now stand, would be to sell them, but, by Clause 24, he puts himself under a tax liability on a sale if in the instrument of sale is included any option or agreement for repurchase.
    I must ask the House to descend from the rarer heights of tax law with which we have been dealing for most of this evening and consider the humble facts of land and estate management. As matters now stand, an owner of an area of sand, gravel or mineral which it is desired to work must, if he is to obtain the tax concession which has now been granted under Clause 37, sell that area outright without regard to the effect that this may have on his property, his farm or the rest of his land. To use a phrase familiar to those concerned with land management, he must make a hole in his estate, and the area forming that hole he may never be able to recover into his own position. Anyone who has been concerned with the management of land or of an estate must be only too well aware of the very practical difficulties and disadvantages that that can cause.
    I ask the Treasury to consider this from the practical point of view and to agree that in this Clause, which is designed to coyer the case of sales with repurchase option, this exception should be made in the case of owners of mineral assets.
    Mr. Barber: First I express my gratitude to my hon. Friend the Member for Ludlow (Mr. More) for putting such a complicated point so succinctly.
    As my hon. Friend will know, and as other hon. Members who followed our proceedings in Committee will remember, Clause 24 is aimed at countering an avoidance device. It provides that, if property is sold under terms by which it can later be reconveyed to the vendor

    1471
    at a lower price, the difference between the sale prices shall be taxable. Such an arrangement is tantamount to the grant of a lease, the consideration for which is expressed in capital form, and as such it is of the same nature as a premium on a lease, provisions for taxing which are set out in one of the earlier Clauses. Clause 24 simply provides the same measure of tax liability to the consideration passing under the arrangement which it covers as the previous Clause applies to premiums proper.
    It is perfectly true, as my hon. Friend indicated, that as a normal commercial transaction it is not unusual for mineral-bearing land to be conveyed in the manner which is described in Clause 24. I appreciate the point which my hon. Friend makes. I assure him that we considered it very carefully even before his Amendment appeared on the Notice Paper. It was raised with us by an organisation which got in touch with my right hon. Friend the Chancellor of the Exchequer and we did our best to cover it. If the landowner had granted a lease for the appropriate period between the conveyances, any royalties received would be taxable in the normal way, but my hon. Friend explained why in the new circumstances it might not be desirable to proceed in that way.
    As I say, my right hon. Friend has considered this matter, but I am afraid that we have come to the conclusion that it would be impossible to frame legislation which would release a genuine case of this kind from the charge set up by Clause 24 without invalidating the Clause altogether as an anti-avoidance measure. Since all land may be said to contain minerals of some kind, it would be possible to present any sale which involved a reconveyance in terms of a mineral lease without imposing any obligation on the purchaser to extract any minerals at all. I need not go into detail and I hope that the House will take it from me that it would be extremely difficult to take the line that the genuine case could be distinguished by evidence that a purchaser had used the property in a trade of mineral extraction and had made a claim to relief under Clause 37.
    In the case where there is a genuine commercial reason for a restricted sale of the type caught by Clause 24, there appears to be an alternative way of
    1472
    achieving much the same result. A landowner could enter into an arrangement under which he granted a lease of the surface for a small rent together with a licence in consideration of a lump sum to remove the minerals. The landowners would be chargeable on the rent but not, except in the unlikely event of the case falling within the charge under Case VII on short-term gains, on the lump sum.
    I appreciate full well that my hon. Friend is not trying to get round the anti-avoidance provisions of the Clause in any reprehensible way, but I fear that to do as he suggests would have the inevitable consequence of leaving the door wide open to avoidance, and with the best will in the world we can see no way of dealing with this matter. I am sorry that I cannot advise the House to accept the Amendment, but I hope that my hon. Friend will take comfort from the alternative arrangements which I have suggested and which can be operated in certain genuine cases.
    Amendment negatived.

    Clause 25.—(PROVISIONS SUPPLEMENTAL TO SS. 22 TO 24.)
    10.15 p.m.
    Mr. du Cann: I beg to move, in page 23, line 29, at beginning to insert:
    "Paragraph 8 of Schedule 4 to this Act, and the provisions of paragraph 10 of that Schedule modifying the application of the said paragraph 8 in certain cases, shall have effect for reducing or removing a charge to tax imposed otherwise than under Case VIII by virtue of any of the three foregoing sections (excluding section 22 (5)) as they have effect in relation to a charge to tax imposed under Case VIII, and".
    It may be for the convenience of the House to consider this Amendment with Amendment No. 125. This Amendment is a purely drafting Amendment and Amendment No. 125 is consequential upon it.
    Mr. Callaghan: We want to make progress but this really is not the way to make progress. Can we be told where Amendment No. 125 is and what it is about?
    Mr. du Cann: I apologise if I have not made the matter as clear as I could have done to the House. I thought that it was understood that these two Amendments went together. Amendment No. 125 relates to Schedule 5. The two go

    1473
    together and the second is consequential upon the first.
    Amendment agreed to.
    The Solicitor-General: I beg to move in page 24, line 42, to leave out "section 22 of this Act or".
    This Amendment is consequential on the Amendment to Clause 22, which the House has already considered, and as the word "term" no longer appears in Clause 22, because that has been removed by the House, the reference to that Clause in Clause 25 should be taken out.
    Amendment agreed to.

    Clause 29.—(CASES I AND II OF SCHEDULE D: AMENDMENTS IN RELATION TO LAND.)
    Mr. du Cann: I beg to move, in page 26, line 18, at the end to insert:
    Provided that the provisions of Schedule (Transitional allowances for annual value of trade premises) to this Act shall have effect for allowing deductions, in the cases there provided, by reference to deductions which would have fallen to be made if the said section 136 had applied for the years 1963–64 and 1964–65.
    This Amendment introduces an entirely new Schedule called Transitional Allowances for Annual Value of Trade Premises. It is Amendment No. 57, which deals with a transitional problem arising out of the abolition of Schedule A. The House will remember that my hon. Friend the Member for Nottingham, South (Mr. W. Clark), who is not in the Chamber at present, moved an Amendment dealing with the point in Committee. In reply, the Solicitor-General admitted that there was a problem and promised that it would be carefully considered before Report. His remarks are recorded in Hansard, 16th May, 1963, column 1668. Accordingly, the hon. Member for Nottingham, South withdrew his Amendment.
    The problem concerns the treatment of a trader who owns his trade premises. There could be cases of difficulty, as my hon. Friend the Member for Nottingham, South illustrated. This is the difficulty. It could perhaps arise when the trader ceases to occupy the premises for the purpose of his trade, as, for example, when he sells them. The reason the problem arises is this. Normally, as the House will be well aware, because we
    1474
    have discussed this matter on several occasions, a trader is assessed on the profits, not of the year of assessment, but of a basis period which is normally his accounting year ending in the preceding year of assessment. The annual value of business premises which is deductible in computing the profits for any period is the annual value for that period. Thus, the annual value of premises owned and occupied for trade purposes in year one is deductible in computing the profits which form the basis of assessment for year two. It follows that when a trader sells his trade premises, but continues to carry on his business, he gets an allowance for the annual value of a year or more after he has sold them. This balances the fact, that, if he acquires the premises when he was on the preceding year basis, he would normally not get a deduction until a year or more after the date of acquisition. This system is well known to the House. That is the existing law—that is to say, before the introduction of the Bill. If, therefore, the trader is deprived of a deduction for annual value without further relief, he will be unfairly treated by reason of the Schedule A abolition. As long as he owns the premises, there is no inequity because the loss of the Schedule D deduction is balanced by the fact that he pays no Schedule A. But immediately he sells the premises he would cease to pay Schedule A in any event and would still, under the old system, get a Schedule D deduction for twelve months, and perhaps longer.
    Therefore, to meet this inequity, the Schedule which is introduced by the Amendment provides briefly that when premises cease to be occupied by the trader for trade purposes he gets a deduction broadly equal to the deductions of which he is being deprived on the change of system. No relief, of course, will be due if he ceases to occupy the premises at the same time as he ceases to carry on the trade. The point is to ensure that such a person in circumstances which I have attempted to describe would be no worse off under the new system than he would have been under the old.
    I have spoken in the main of traders, but the relief will apply equally to a person carrying on a profession or vocation assessable under Case II of Schedule

    1475
    D. It would cover, for example, farmers, doctors and other professions of the same sort. In view, therefore, of the fact that the Amendment is proposed to meet a point that was raised in Committee, I hope that it will have the approbation of the House in general.
    Mr. John Diamond: The matter is a little technical and one cannot necessarily digest everything that is said at the moment one hears it. One appreciates the purpose of the Amendment and it is, perhaps, a pity that the hon. Member for Nottingham, South (Mr. W. Clark) could not be in his place this evening to acknowledge the consideration that has been given by the Economic Secretary to the request made by the hon. Member in Committee.
    The Amendment is clear. I hope, nevertheless, that when we deal with the Schedule, the Economic Secretary will not feel that he has exhausted everything that could be said on the matter. The Schedule is long and detailed and there are various points in it which, perhaps, need full explanation. In the hope that we will reach the Schedule the earlier the shorter I speak. I will leave it at that for the moment.
    Mr. du Cann: If it would be for the convenience of the House, I am certainly ready to undertake to do my best to explain any points in the Schedule which the hon. Member would wish me to do.
    Amendment agreed to.
    Mr. Barber: I beg to move, in page 26, line 26, after "that", to insert:
    (a) this subsection shall not apply to any payment to which section 180 (mineral rents and royalties, etc.) of the Act of 1952 applies;
    (b)
    This Amendment simply corrects a drafting flaw which inadvertently altered the law. Without the Amendment, certain taxpayers would, in affect, get relief twice over.
    Amendment agreed to.
    The Solicitor-General: I beg to move, in page 26, line 31, to leave out from the beginning to the end of line 22 on page 27 and to insert:

    (3) Where, in relation to any land used in connection with a trade, profession or vocation,—
    1476

    (a) tax has become chargeable under section 22 (except subsection (5)), 23 or 24 of this Act on any amount (disregarding any reduction in that amount under paragraph 8 of Schedule 4 to this Act), or

    (b) tax would have become so chargeable on that amount but for the operation of section 22(5) of this Act or the said paragraph 8, or but for any exemption from tax,

    the previsions of Schedule (Allowance of trading deduction where premium &c. paid) to this Act shall have effect, in the cases there provided, for allowing deductions calculated by reference to that amount in computing the profits or gains of the trade, profession or vocation.

    (4) Where during a period in the five years ending with the year 1962–63 any premises were occupied by a person for the purposes of a trade, profession or vocation carried on by him, and payments relating to the premises made by him during that period in respect of maintenance, repairs or insurance were not deducted in computing the profits or gains of the trade, profession or vocation chargeable under Case I or II of Schedule D, he shall be entitled to a deduction in computing those profits or gains for the year 1963–64 of any amount by which the aggregate of the payments exceeds the aggregate of so much of the relief which was or, on a claim in that behalf, could have been allowed to him under sections 99 to 101 of the Act of 1952 as related to the premises and it attributable to any part of the said period.

    The Clause deals with amendments to the computation of business profits under Cases I and II of Schedule D. They are required in consequence of the abolition of Schedule A and the introduction of the new system of taxing income from real property. The point arises not only where the relief is given for premises which are occupied for the purpose of trade, which has been done, but also for premises let by a trader for less than the commercial rent in consideration of being tied premises. Examples are filling stations and public houses. This has been accepted by my right hon. Friend and this Amendment putts that into effect.
    The Amendment, therefore, gives, firstly, relief to traders in respect of certain payments which under the Bill become chargeable on the recipient; and secondly, it gives relief to the trader in regard to certain expenses on repairs to business premises. The Amendment refers to the second of the new Schedules, and the effect of the Amendment with the new Schedule is to extend that relief to the tenant in respect of amounts chargeable in respect of business premises under Clauses 23 and 24 which we have just been discussing. It may be easier for the

    1477
    House and more convenient if we wait till we deal with the terms of the Schedule itself.
    The object of Clauses 23 and 24 is to prevent the lessor from avoiding tax on premiums by dressing up a contract into some form not involving premium. That is really tax avoidance, and the Clause imposes, therefore, a liability under Case VI, but since the liability of one party to a contract should be matched by relief to the other party, who is the tenant, therefore the trader who is a tenant of business premises in respect of which charges are imposed under Clauses 23 and 24 gets that relief. Therefore, accordingly subsection (3) provides that that deduction be made in the calculation of profits under Cases I and II of Schedule D of the tenant of business premises in respect of the premium charged under Clause 22 or the amount charged under Clause 23 or Clause24. That is the effect of the Amendment.
    Mr. Callaghan: Could the Solicitor-General tell us what is the difference between the original subsection (3) and the new subsection (3) he has proposed?
    The Solicitor-General: With the leave of the House, the point was that relief was given under the original subsection for premises occupied for the purpose of trade. That is what is in the Bill at present. The Amendment takes it a stage further and also gives relief where premises are let by a trader for less than the commercial rent in respect of the consideration of their being tied premises. That is what it adds to what is already in the Bill.
    Amendment agreed to.
    The Solicitor-General: I beg to move, in page 27, to leave out lines 27 to 32.
    This deals with persons who are treated as carrying on the business of dealers in land. Under the present law, a dealer must bring all premiums and similar receipts into computation of the profits chargeable under Case I. Clause 29(4), as at present in the Bill, provides that only the excess of any such receipts over the amount chargeable under Case VIII is to be treated as receipts of trade under Case I. The Amendment does not touch this, but subsection (4) also deals with the calculation of the amount to be taken for the purposes of trading profit as the
    1478
    value of the reversion to a lease, and the effect of the Amendment is to omit that part of subsection (4) which deals with the calculation of the reversion.
    10.30 p.m.
    The present principle as decided by the courts—I do apologise to the House, for this is a complicated matter—is that when regarding the dealer in land and his tax position we have to divide the property into two interests, first the lease, and secondly the reversion. Where he grants a lease at a premium he has disposed of the lease and has kept the reversion, and is therefore liable only on the profits on the sale of the lease. This involves the more complicated matter of dividing the cost to the dealer into two parts—first, the cost of the interest represented by the lease and, secondly, the cost of the reversion. Each must be taken as a proportion of the total cost.
    That was the principle. It was thought that subsection (4) should deal with that, but on reflection it has been thought that that is not so, and that it is better to keep the old principle. By Clause 22 part of the premium is taxed as though it were rent, and only the balance will come into Case I. The amendment to the latter part of Clause 29(4) provides that the value of the reversion will not be increased by the notional rent, because there is no ground for increasing the liability of the dealer. He is of course required to bring the whole premium into account.
    This is a matter of tax law. On reflection it has been thought better to stick to the old principle rather than continue with the amendment suggested which, on reflection, was found to be fallible.
    Amendment agreed to.
    The Solicitor-General: I beg to move, in page 27, line 35, to leave out:
    "so far as it relates to trading receipts".
    This again, follows on the lines of the last Amendment, in some ways. It deletes paragraph (c) of Clause 29(5). This is consequential on the previous Amendment.
    Amendment agreed to.
    The Solicitor-General: I beg to move, in page 27, line 46, to leave out from

    1479
    "receipt" to the end of line 10 on page 28 and to insert:
    (6) In computing the profits or gains of a trade of dealing in land, any trading receipts falling within section 23 or 24 of this Act shall be treated as reduced by the amount on which tax is chargeable by virtue of that section, but where on a claim being made under subsection (2)(b) the said section 24 the amount on which tax was chargeable by virtue of that section is treated as reduced this subsection shall be deemed to have applied to the amount as reduced, and such adjustment of liability to tax shall be made (for all relevant years of assessment), whether by means of an additional assessment or otherwise, as may be necessary and may be so made at any time at which it could be made
    1480
    if it related only to tax for the year of assessment in which the said claim is made.
    The main effect of the Amendment is to add a new subsection to Clause 29, extending to payments chargeable under Clauses 23 and 24 the rule laid down in Clause 29(4) in relation (to premiums chargeable under Clause 22. The main object of subsection (4), as I have explained, is to allocate liability between Case I and Case VIII where the recipient is a dealer in land. Subsection (4) provides that if any part of the premium is chargeable under Case VIII by Clause 22 it is to be excluded from the Case I computation.
    Amendment agreed to.

    Clause 31.—(DEDUCTIONS IN RESPECT OF TITHE REDEMPTION ANNUITIES.)
    Mr. du Cann: I beg to move, in page 28, line 31, to leave out from "made" to "as" in line 32.
    It might be for the convenience of the House, Mr. Deputy-Speaker, if we considered with this Amendment the Amendment in line 37.
    Mr. Deputy-Speaker: So be it.
    Mr. du Cann: These Amendments correct a draftingslip in the Clause which deals with Income Tax deductions allowed in respect of tithe redemption annuities.
    Under the Clause, as drafted, relief is to be given against the taxpayer's income for the year in which the instalment is paid, so that if it is paid late the relief is given in the wrong year. The Amendments put this right by giving the relief for payments which are made as instalments of tithe redemption annuities against the payer's income for the tax year in which the instalment becomes; payable. The basis of relief is thus the same as the basis under Section 97 of the Income Tax Act, 1952.
    This is a very simple point. The hon. Member for Sowerby (Mr. Houghton) has asked us to tell him when matters have been brought to our attention by learned bodies and professional associations. This mistake in drafting was discovered in the Inland Revenue. I know that he would wish the Inland Revenue to have the credit for that.
    Amendment agreed to.
    Further Amendment made: In line 37, leave out "in which it is made" and insert:
    "of assessment in which (he instalment becomes payable".—[Mr. du Cann.]
    10.35 p.m.
    Mr. Callaghan: I beg to move, That further consideration of the Bill, as amended, be now adjourned.
    We have now reached the normal adjourning time for the House. We have had a hard day at it. We are now scampering through a lot of Amendments. The Solicitor-General's explanations are pellucidly clear and the
    1482
    explanations of the Economic Secretary are, as always, couched in the most courteous language. We have not had a great deal from the Chancellor of the Exchequer, who is no doubt keeping himself in reserve for later. I think we are entitled to ask the Government what their intentions are. We have left it until now because we have now reached the end of this very formidable Part on Schedule A. There is a great deal more still to be done. We warned the Chancellor that this position would be reached. I think that everyone will acquit the House of obstruction. During the last two or three hours Government back benchers have had their fill of the debating time. I do not wish to deny them their fill of debating time. I only say that they cannot have their cake and eat it. If the Government are to encourage their own back benchers to move Amendments, they will have to allow extra time to the House for the consideration of the Bill. I am not opposed to that, but it is a fact which has to be taken into account.
    The next Amendment but one—that in page 34, line 39—is another Conservative Amendment. That is absolutely proper. No one would seek to deny the moving of the Amendment, After that, we shall have a very important discussion, for which perhaps the former Chancellor has arrived, on the question of what we call the grey areas, namely, development districts, which will take a very considerable time, because a number of hon. Members on both sides—I wonder whether I am right in thinking that the former Chancellor will join in the debate—will want to make points. There is a great deal more to be done. No one is more conscious of this than I am.
    Is it the Chancellor's intention to drive us through the night, or does he have some other proposal to make which will enable us to adjourn at a reasonable early hour tonight and resume consideration of the Bill either tomorrow or on Friday, or whenever else the Government seek to put it back? No one will deny that we have got through a lot of work today. We have dealt with many Amendments. The speeches have been cogent and to the point. They have been forthcoming from both sides, and at the end of the normal Parliamentary day we are entitled

    1483
    to ask the Chancellor what his intentions are.
    The Chancellor of the Exchequer (Mr. Reginald Maudling): I would not quarrel with much of what the hon. Member for Cardiff, South-East (Mr. Callaghan) has said. My impression is that we are now making very good progress. I thought we would have a very good chance of finishing the Bill. [Hon. Members: "Oh."] Yes. It is only fair to say that I have not asked the Committee in the Committee stage to sit late on the Bill. It has passed through very smoothly and there has been reasonable discussion on both sides without any late sittings. There are two substantive matters which will arise in the course of the subsequent discussion.
    On the time taken by the two sides, up till about a quarter to nine we were engaged entirely on points put forward by
    the Opposition—important points. I agree, new Clauses and Amendments. That is a fair point to make in reply to the hon. Gentleman. My impression is that we have got through a very great volume of work. I have not asked the House to sit late on the Bill on any previous occasion. It would be reasonable to proceed, and I think that we could by concentration and brevity conclude the business.
    Mr. Callaghan: I must say—
    Mr. Deputy-Speaker: The hon. Gentleman can speak again only by leave of the House.
    Mr. Callaghan: By leave of the House? I will not bother.
    Question put, That further consideration of the Bill, as amended, be now adjourned: —
    The House divided: Ayes, 112, Noes 163.

    Division No. 151.]

    AYES

    [10.40 p.m.

    Abse, Leo

    Hamilton, William (West Fife)

    Oswald, Thomas

    Ainsley, William

    Hannan, William

    Parker, John

    Allaun, Frank (Salford, E.)

    Harper, Joseph

    Parkin, B. T.

    Awbery, Stan (Bristol, Central)

    Hayman, F. H,

    Pearson, Arthur (Pontypridd)

    Barnett, Guy

    Herbison, Miss Margaret

    Probert, Arthur

    Bennett, J. (Glasgow, Bridgeton)

    Hill, J. (Midlothian)

    Redhead, E. C.

    Blackburn, F.

    Holman, Percy

    Rees, Merlyn (Leeds, S.)

    Bottomley, Rt. Hon. A. G.

    Houghton, Douglas

    Reynolds, G. W.

    Bowden, Rt. Hn. H. W. (Leics,S.W.)

    Hoy, James H.

    Rhodes, H.

    Braddock, Mrs. E. M.

    Hughes, Cledwyn (Anglesey)

    Robertson, John (Paisley)

    Bradley, Tom

    Hunter, A. E.

    Robinson, Kenneth (St. Pancras, N.)

    Bray, Dr. Jeremy

    Hynd, John (Attercliffe)

    Rogers, G. H. R. (Kensington, N.)

    Brown, Rt. Hon. George (Belper)

    Janner, Sir Barnett

    Ross, William

    Callaghan, James

    Jay, Rt. Hon, Douglas

    Silverman, Julius (Aston)

    Carmichael, Neil

    Jenkins, Roy (Stechford)

    Skeffington, Arthur

    Castle, Mrs. Barbara

    Jones, Dan (Burnley)

    Small, William

    Corbet, Mrs. Freda

    Jones, T. W. (Merioneth)

    Sorensen, R. W.

    Craddock, George (Bradford, S.)

    Kelley, Richard

    Soskice, Rt. Hon. Sir Frank

    Cronin, John

    King, Dr. Horace

    Spriggs, Leslie

    Dalyell, Tam

    Lawson, George

    Stewart, Michael (Fulham)

    Davies, G. Elfed (Rhondda, E.)

    Ledger, Ron

    Stones, William

    Dempsey, James

    Lever, L. M. (Ardwick)

    Swingler, Stephen

    Diamond, John

    Lewis, Arthur (West Ham, N.)

    Taverne, D.

    Duffy, A. E. P.

    Loughlin, Charles

    Thomas, George (Cardiff, W.)

    Edelman, Maurice

    McBride, M.

    Thomas, Iorwerth (Rhondda, W.)

    Edwards, Robert (Bilston)

    MacColl, James

    Thompson, Dr. Alan (Dunfermline)

    Fernyhough, E.

    McInnes, James

    Tomney, Frank

    Fitch, Alan

    Mallalieu, E. L. (Brigg)

    Watkins, Tudor

    Fletcher, Eric

    Manuel, Archie

    Wigg, George

    Foot, Dingle (Ipswich)

    Mapp, Charles

    Wilkins, W. A.

    Forman, J. C.

    Mason, Roy

    Williams, LI. (Abertillery)

    Galpern, Sir Myer

    Mendelson, J. J.

    Willis, E. G. (Edinburgh, E.)

    George, Lady M eganLloyd(Crmrthn)

    Millan, Bruce

    Winterbottom, R. E.

    Ginsburg, David

    Milne, Edward

    Woof, Robert

    Gourlay, Harry

    Mitchison, G. R.

    Greenwood, Anthony

    Morris, John

    TELLERS FOR THE AYES:

    Grey, Charles

    Noel-Baker, Rt.Hn.Philip(Derby,S.)

    Mr. McCann and Mr. Ifor Davies

    Griffiths, W. (Exchange)

    O'Malley, B. K.

    Hale, Leslie (Oldham, W.)

    Oram, A. E.

    NOES

    Allan, Robert (Paddington, S.)

    Barber, Anthony

    Biggs-Davison, John

    Allason, James

    Barter, John

    Bishop, F. P.

    Ashton, Sir Hubert

    Batsford, Brian

    Black, Sir Cyril

    Awdry, Daniel (Chippenham)

    Bennett, F. M. (Torquay)

    Bourne-Arton, A.

    Balniel, Lord

    Biffen, John

    Boyd-Carpenter, At. Hon. John

    Brewis, John

    Heald, Rt. Hon. Sir Lionel

    Pitman, Sir James

    Bromley-Davenport,Lt.-Col. Sir Walter

    Hendry, Forbes

    Powell, Rt. Hon. J. Enoch

    Brown, Alan (Tottenham)

    Hirst, Geoffrey

    Prior, J. M. L.

    Cary, Sir Robert

    Hobson, Rt. Hon. Sir John

    Prior-Palmer, Brig. Sir Otho

    Chataway, Christopher

    Holland, Philip

    Pym, Francis

    Chichester, Clark, R.

    Hollingworth, John

    Rawlinson, Sir Peter

    Clark, Henry (Antrim, N.)

    Hooson, H. E.

    Rees, Hugh (Swansea, W.)

    Clark, William (Nottingham, S.)

    Hope, Rt. Hon. Lord John

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

    Cleaver, Leonard

    Hornby, R. P.

    Ridley, Hon. Nicvholas

    Cooper-Key, Sir Neill

    Howard, John (Southampton, Test)

    Ridsdale, Julian

    Corfield, F. V.

    Hughes-Young, Michael

    Rodgers, John (Sevenoaks)

    Costain, A. P.

    Hurd, Sir Anthony

    Roots, William

    Coulson, Michael

    Iremonger, T. L.

    St. Clair, M.

    Craddock, Sir Beresford (Spelthorne)

    Irvine, Bryant Godman (Rye)

    Scott-Hopkins, James

    Crawley, Aidan

    Johnson, Eric (Blackley)

    Seymour, Leslie

    Critchley, Julian

    Johnson Smith, Geoffrey

    Sharples, Richard

    Currie, G. B. H.

    Jones, Arthur (Northants, S.)

    Skeet, T. H. H.

    Dalkeith, Earl of

    Joseph, Rt. Hon. Sir Keith

    Smith, Dudley (Br'ntf'd & Chiswick)

    d'Avigdor-Goldsmid, Sir Henry

    Kerans, Cdr. J. S.

    Smithers, Peter

    Deedes, Rt. Hon. W. F.

    Kerr, Sir Hamilton

    Speir, Rupert

    Donaldson, Cmdr. C. E. M.

    Kershaw, Anthony

    Steward, Harold (Stockport, S.)

    Drayson, G. B.

    Kitson, Timothy

    Stodart, J. A.

    du Cann, Edward

    Leavey, J. A.

    Storey, Sir Samuel

    Eden, Sir John

    Lewis, Kenneth (Rutland)

    Studholme, Sir Henry

    Elliot, Capt. Walter (Carshalton)

    Litchfield, Capt. John

    Summers, Sir Spencer

    Emery, Peter

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Teeling, Sir William

    Emmet, Hon. Mrs. Evelyn

    Loveys, Walter H.

    Temple, John M.

    Errington, Sir Eric

    Lucas-Tooth, Sir Hugh

    Thomas, Sir Leslie (Canterbury)

    Finlay, Graeme

    McLaren, Martin

    Thompson, Sir Richard (Croydon, S.)

    Fisher, Nigel

    McLaughlin, Mrs. Patricia

    Thornton-Kemsley, Sir Colin

    Fletcher-Cooke, Charles

    Maclay, Rt. Hon. John

    Turner, Colin

    Foster, John

    Maclean, Sir Fitzroy(Bute & N.Ayrs)

    Turton, Rt. Hon. R. H.

    Gammans, Lady

    Macleod, Rt. Hn. Iain (Enfield, W.)

    van Straubenzee, W. R.

    Gibson-Watt, David

    McMaster, Stanley R.

    Vickers, Miss Joan

    Gilmour, Ian (Norfolk, Central)

    Macmillan, Maurice (Halifax)

    Wade, Donald

    Gilmour, Sir John (East Fife)

    Matthews, Cordon (Meriden)

    Wakefield, Sir Wavell

    Glover, Sir Douglas

    Maudling, Rt. Hon. Reginald

    Walker, Peter

    Glyn, Dr. Alan (Clapham)

    Mawby, Ray

    Walt, Patrick

    Cower, Raymond

    Maydon, Lt.-Cmdr. S. L. C.

    Wells, John (Maidstone)

    Grant-Ferris, R.

    Mills, Stratton

    Williams, Paul (Sunderland, S.)

    Green, Alan

    Miscampbell, Norman

    Wills, Sir Gerald (Bridgwater)

    Gresham Cooke, R.

    More, Jasper (Ludlow)

    Wolrige-Gordon, Patrick

    Grosvenor, Lord

    Morgan, William

    Woodnutt, Mark

    Gurden, Harold

    Nabarro, Sir Gerald

    Woollam, John

    Hall, John (Wycombe)

    Page, Graham (Crosby)

    Worsley, Marcus

    Hamilton, Michael (Wellingborough)

    Pannell, Norman (Kirkdale)

    Yates, William (The Wrekin)

    Harris, Frederic (Croydon, N.W.)

    Pearson, Frank (Clitheroe)

    Harrison, Brian (Maldon)

    Peel, John

    TELLERS FOR THE NOES:

    Harrison, Col. Sir Harwood (Eye)

    Percival, Ian

    Mr. Ian Fraser and Mr. MacArthur

    Harvie Anderson, Miss

    Pickthorn, Sir Kenneth

    Hastings, Stephen

    Pilkington, Sir Richard

    Clause 35.—(RATES OF ANNUAL ALLOWANCES FOR MACHINERY AND PLANT.)
    Mr. du Cann: I beg to move, in page 31, line 23, to leave out "last."
    A proviso in this Clause refers to
    "…the percentage last mentioned in paragraph (c) of the said subsection (3).…"
    But there is, in fact, only one pascentage, so mention of the word "last" is unnecessary.
    Amendment agreed to.

    Clause 37.—(ANNUAL ALLOWANCES FOR MINERAL DEPLETION IN THE UNITED KINGDOM.)
    Mr. More: I beg to move, in page 34, line 39, at the end to insert:
    (1A) Where a person entitled to a mineral asset grants a lease or licence of a mineral asset to another in return for a rent or royalty, he shall be entitled for any year of assessment in which any such rent or royalty is received by him to an annual allowance in charging
    his profits or gains from such lease or licence, and save for subsections (1B), (12), (13) and (14) the provisions of this section shall not apply to allowances under this subsection.
    (1B) The annual allowance under subsection (1A) of this section for a year of assessment shall be equal to the fraction mentioned below of the rent or royalty received in the year of assessment, that is to say—

    (a) where the first rent or royalty was received less than ten years before the year of assessment, one-half;

    (b) where the first rent or royalty was received less than twenty but not less than ten years before the year of assessment, one quarter;

    (c) in any other case, one-tenth.

    I would begin by destroying one illusion that appeared to be in the mind of the hon. Member for Cardiff, South-East (Mr. Callaghan)—that back benchers on this side had been encouraged by the Government to move Amendments. I am not conscious of having had any such encouragement, notwithstanding the

    1487
    transcendent importance of this Amendment.
    When this Clause was discussed in Committee, it rightly received a paean of praise from the hon. Member for Southampton, Itchen (Dr. King), who recalled the efforts made by back benchers to secure this amendment of the law for the benefit of mineral operators. He quoted the recommendation of the Royal Commission on the Taxation of Income and Profits in 1955, which stated:
    "In future a depletion allowance should be given in respect of the cost of acquisition of mineral rights or areas…"
    The hon. Member's words were echoed by my hon. Friend the Economic Secretary in a graceful speech which ended agreeably, if slightly inconsequently, with his memories of "Old Gurney" and the Somerset County Cricket Club. This Amendment relates to the position in which the Bill in its present form leaves the owner of mineral assets. I have referred to this in connection with a previous Amendment to Clause 24.
    Having quoted the words of the Royal Commission of 1955, which have given rise to the Amendment, I want very briefly to lead the House slightly further back in Income Tax history, and trace the process by which the law now appears in what I contend is a highly anomalous form. I want to take the House back to 1920, when we had a Report of the Royal Commission on the Income Tax, reading which one is reminded of what afterwards became famous as the "Lime house" speech, the coal strike of 1919, and other matters then very much before the public eye.
    When this Royal Commission came to the question of allowances for depletion of minerals, and addressed itself to the position of those who owned minerals and those who operated minerals, one gets the impression that it thought it prudent to decide in advance what its principles would be as a basis for its conclusions. Paragraph 191 of the Report reads:
    " The second or main principle we have followed is that no allowance should be granted to any asset other than an inherently wasting material asset which has been created by an expenditure of capital. The allowance must not be granted in respect of a right to the income derived from any asset…"
    Having started with that assertion of principle, the Commission apparently thought it desirable to produce some reasons to support it. Those reasons, I think, are sufficiently remarkable to justify an airing after being in cold storage for 43 years.
    The first reason was that if a reform was made on these lines the Revenue would lose a lot of money. That is clearly an important reason, but it is not unique to reforms of this kind. Secondly, the Commission produced the momentous reason that the administrative difficulties would be great. That may be true, but it is certainly not original in regard to any speeches on Income Tax reform. Thirdly, it said that people buying properties of this kind knew the tax liability and therefore paid less for them. That is a solemn truth and a solemn thought, but it does not necessarily follow that people buying such property on a particular date know what the rates of tax will be in five, ten or twenty years' time.
    Nevertheless, having enunciated those principles, the Commission had put itself in the satisfactory position that from then on it could proceed on what might be called an a priori basis, and five paragraphs later it arrived at its grand conclusion that
    "In accordance with the principle stated in paragraph 191, we are of the opinion that no allowance should be granted to incomes arising from wasting assets which consist of the proprietorship of natural resources in this country."
    But there again the Commission seemed to have had afterthoughts and to have thought that perhaps reasons should be given.
    Three more reasons were produced, which again I think deserve an airing. The first was that assets of this kind had not been created by the expenditure of capital. That, I suppose, is true. If mineral assets were created by anybody they were created by Almighty God. Secondly, and this was a pressing reason, income derived from them had always been subject to Income Tax. Thirdly, and this was almost adding insult to injury, it was said that the imposition of a further tax, called Mineral Rights Duty, which at that time had recently been introduced, showed that assets of this kind had been regarded

    1489
    as particularly suitable subjects for special taxation rather than special exemption.
    Therefore, we reach the position that, having first decided on its principle, the Commission arrived at its conclusion and this is fortified with a number of reasons based largely on loss and invenience to the Revenue and largely on the fact that it had always been taxed and that, anyhow, it had been found so suitable a subject for tax that the Government had even added another tax to the ordinary tax.
    The Amendment attempts to put the mineral owner on precisely the same basis as the mineral operator in relation to the Clause. In moving an Amendment to Clause 24, I have already pointed out the alternatives which face a mineral owner, and my hon. Friend the Financial Secretary was good enough to suggest an alternative method which might be available in a case of this kind. But it ought to be pointed out in this connection that where mineral assets are leased to an operating company on what for many years in this country has been the normal basis, that is, a lease in consideration of rent or royalty, it is really a false argument to say that this is income in the ordinary sense of that word.
    In aid of that, one might quote an extract from the same Royal Commission of 1955, on which Clause 37 is based, which says:
    "It requires a strong weight of argument to maintain a position under which the tax authority is entitled to exact tax upon the basis of a profit which is absolutely unreal."
    This profit, in every context except the present context, has been long regarded as absolutely unreal in the sense of being truly income. One has only to look at the position under the Settled Land Acts, the whole object of which is to distinguish income from capital, to see that it is the inherent basis of that legislation that a proportion, which may be 25 per cent. or 75 per cent., shall be allocated to capital and not treated as income. It is, therefore, on that point of principle that this Amendment is put forward, bearing in mind, and for the reasons I have given, that in spite of the important concession which this new Clause 37 has given, it leaves the work incomplete, and in order to put
    1490
    the law on a complete and logical basis it is really necessary that this Amendment should be included.
    11.0 p.m.
    Mr. du Cann: My hon. Friend the Member for Ludlow (Mr. More) was generous and kind enough to say that on the main Question on Clause 37 I made an agreeable speech. I am afraid that he may not say the same after he has heard what I have to say this evening.
    Mr. Paul Williams: My hon. Friend made an agreeable speech.
    Mr. du Cann: I will certainly say that my hon. Friend made an agreeable one. He always does. It was very lucid, but I totally disagree with the logic of what he said. I should like my hon. Friend to know that we looked into this matter with great care. I appreciate that perhaps not a very large number of people are affected, but one can well understand the importance of the matter to them, and certainly the question has been given every attention.
    I should like to enveadour to explain to my hon. Friend shortly, for the convenience of the House, why it is that we find his proposal unacceptable. The first point is this. Relief under Clause 37 is at present limited to a person carrying on the trade of working a source of United Kingdom minerals who incurs capital expenditure on its acquisition. My hon. Friend's Amendment proposes a large extension. It seeks to extend relief to landowners who lease mineral-bearing land to an operator in return for an annual rent or royalty, which is normally based upon the output which he wins.
    The relief sought by the Amendment differs from that in the Clause in an important particular. As the House will well remember, under the Clause a series of annual allowances is given while the mine is being worked, but the total relief allowable to an operator is limited to the net cost of acquiring the source. On the other hand, the relief sought by the Amendment is not related to cost at all—a point upon which my hon. Friend commented—but only to the royalty received, and no balancing adjustment is provided for. The two things are entirely different.

    1491
    I turn to a fresh point. It is plain that there is a substantial difference between the principle behind the Clause and the Amendment proposed by my hon. Friend. I have already made the point that the Clause puts right, so to speak, the position of traders. The Clause is, in fact, based upon the assumption that the minerals won by an operator represent his trading stock. Until 1963–64 he has not been able to charge the cost of this stock against his taxable profits, and in this he differed from other traders.
    My hon. Friend was right to remind the House that this has been a matter of concern while I have been a Member and various of us on both sides of the House have made common cause in urging it upon the Administration. It has now been accepted. Certainly the idea has been warmly recommended, first by the first Millard Tucker Committee in 1951 and, secondly, by the Royal Commission in 1955. But my hon. Friend's point is not so recommended in anything like the same sense, and I suggest to him entirely frankly that a landowner leasing mineral land for a royalty is certainly not in the same position as a trader. He is not himself concerned with turning over stock, but allows another person temporary use of an asset which he owns in return for income which no doubt contains an element to represent the diminution of the value of the asset as minerals are extracted.
    The principle behind the Amendment is that relief should be given for a wasting asset simply because it wastes, but this is not the principle which has been implemented by the Clause. As all hon. Members who have taken an interest in the matter know very well indeed, it has proved very difficult to find a method to give the sort of fiscal allowance that should be given to mineral operators, and this method has been chosen certainly as a temporary method.
    If it were suggested—although it is not suggested by my hon. Friend—that there was some analogy between capital allowances provided under this Clause or capital allowances provided in any other way to traders, I should have been bound to reject that proposition strongly. But the two things are not the same by any means.
    1492
    I had the impression from what my hon. Friend said that he had not taken sufficient cognizance of the fact that most agreements would certainly provide an element in the rent to take account of the fact that the landlord is owning a wasting asset, and I had the impression, too, that he had overlooked the fact that most leases today contain restoration provisions. It is not as if, therefore, at the end of the useful life of the pit or whatever it may be the landlord would be left simply with a hole in the ground. If that were not so, if most leases did not contain restoration provisions, certainly planning permission is rarely given these days for the extraction of a mineral unless there is a firm and clear undertaking to restore this land after the working has been complete.
    Therefore, although we are ready to sympathise with the position of those who are involved, if I felt that it was appropriate to propose special action on their behalf, certainly I am entirely clear that the action which my hon. Friend proposes is not, as he suggested, a logical follow-through on Clause 37, for the argument in favour of Clause 37 is entirely different from the argument which he has put forward in favour of this Amendment. The two things are entirely separate, and for those reasons, although I am interested to hear his remarks, to which certainly we will pay attention, I must reluctantly advise the House, none the less definitely, to reject the Amendment, and I hope my hon. Friend will not seek to press it.
    Mr. Houghton: We on these benches concur in the remarks of the Economic Secretary. There is a saying which is perhaps opposite to this case—"Much wants more."
    Amendment negatived.
    Mr. du Cann: I beg to move, in page 35, line 28 after "charge", to insert "on an amount".
    This is merely a drafting Amendment in order to incorporate certain standard wording. The point about it is that if different phraseology, or phraseology to which the lawyers are not ordinarily accustomed, were used in this place or in any other, there might well be doubts as to interpretation. We hope, therefore, that the House agrees that we should make this small insertion.

    1493
    Again I say to the hon. Member for Sowerby that this was a point suggested by the Inland Revenue. My own opinion of it—and I hope the House will concur—is that it is an admirable suggestion.
    Amendment agreed to.
    The Solicitor-General: I beg to move, in page 38, line 2, to leave out "a lease" and to insert "an asset".
    I think it might be convenient to deal at the same time with the Amendments in page 38, line 7, and in page 38, line 10.
    Mr. Deputy-Speaker: That will be convenient.
    The Solicitor-General: These Amendments are purely consequential on what the House has already approved in the Amendment in Clause 29, page 26, line 31. The Amendments in Clause 37, page 38, line 7, and page 38, line 10, which we are taking together with this Amendment, speak for themselves. They merely substitute references to the proposed new Schedule—"Allowance of Trading Deduction where Premium Etc. Paid"—for the reference to Clause 29.
    Since there has been this relief given in the amended Clause 29, it will be no longer appropriate to refer to "a lease", and the wider term "asset" is substituted by the Amendment to page 38, line 2, which I am now moving.
    Amendment agreed to.
    Further Amendments made: In page 38, line 7, leave out "section 29 (3) of" and insert:
    "Schedule (Allowance of trading deductions where premium &c. paid) to".
    In line 10, leave out "the proviso to the said section 29 (3)" and insert:
    "paragraph 5 of that Schedule".—[The Solicitor-General.]
    Clause 38.—(ANNUAL ALLOWANCES FOR NEW MACHINERY AND PLANT IN DEVELOPMENT DISTRICTS.)
    Amendment made: In page 39, line 12, after "allowances", insert:
    "under Chapter II of Part X of the Act of 1952".—[Mr. Barber.]
    Mr. Barber: I beg to move, in page 39, line 19, to leave out
    "the percentage of that amount"
    and to insert:
    "so much of that amount as is".
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    This Amendment and the Government Amendment in Clause 39, page 41, line 32, to which we shall shortly come, are drafting Amendments which were brought to our attention by the Scottish chartered accountants, to whom we are very grateful.
    Mr. Callaghan: I do not understand this. The whole of subsection (1) of the Clause is a very difficult provision indeed. It contains more than 20 lines, and as far as I could see when I looked at it quickly an hour or so ago, it contains no full-stop anywhere. I just do not follow what leaving out "the percentage of that amount" and inserting "so much of that amount as is" really means. I should be grateful for an explanation.
    Mr. Barber: Certainly. As I said, the need for these Amendments had not occurred to me or to those who advise me until the matter was brought to our attention by the Scottish chartered accountants. I can tell the hon. Member for Cardiff, South-East (Mr. Callaghan) that I still have some doubt myself as to whether they are really necessary. But I will explain why we thought it wise to make them.
    Clause 38, as the hon. Gentleman knows, provides for free depreciation for certain new plant and machinery in development districts. Clause 39, with which the other Amendment deals, provides for free depreciation for new mining works and exploration plant and machinery for use in those districts. This is done by substituting for the annual allowance provided for in the Acts the percentage of expenditure specified by the taxpayer.
    It was suggested to us by the chartered accountants of Scotland that the word "percentage" might enable a taxpayer to claim more than the full expenditure in a case governed by Clause 39 because, so it is said, the taxpayer might specify a percentage of more than 100. I should have thought it rather unlikely that this argument would commend itself to any court if the matter were taken to appeal. I imagine that the court would be unlikely to accept that a percentage could be more than 100, but I think—I hope that the House will agree—that it is desirable not to leave the point open.

    1495
    The point was put tome. There is room for a difference of opinion. Who am I to put forward my own particular point of view in these circumstances? As there may conceivably be some doubt about it, and the Scottish chartered accountants who made the point to us are, as the hon. Member for Glasgow, Craigton (Mr. Millan) knows full well—I am sorry he is not here—a most respectable body of people well versed in these matters, we thought it right and proper to make the Amendments.
    Mr. Mitchison: We on this side of the House would have much liked a little pen picture of the scene. What happened is quite obvious. It was the collocation of a fraction in line 18 and a percentage in line 19 which upset the intelligence and inflamed the imagination of the Scottish chartered accountants who called upon the hon. Gentleman. I am sorry that the Government are so wild nowadays that they found this somewhat improbable assumption one which they were prepared to consider and to meet.
    Mr. Barber: With the leave of the House, perhaps I ought to say that it is not necessary to make this change in Clause 38, but we thought we had better do so to keep the two in conformity.
    Amendment agreed to.
    11.15 p.m.
    Mr. Douglas Jay: I beg to move, in page 40, line 20, at the end, to insert:
    (b) if it is adjacent to a development district so defined and for that reason and because of conditions of local employment, transport or housing ought in the opinion of the Board of Trade to be treated for the purposes of this and the next following section (but for no other purposes) as included with the development district or.
    Mr. Deputy-Speaker: I think that it would be convenient with this Amendment to take also the following Amendments: In page 40, line 26, at end insert:
    (6) In relation to any new town outside a development district which draws or will draw its population mainly from the district, this section shall apply as if the new town were included in the district, and a certificate given by a person authorised in that behalf by the Minister of Housing and Local Government, or (where the new town is in Scotland) the Secretary of
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    State, and stating whether or not a new town draws or will draw its population mainly from a specified district shall be conclusive for the purposes of this subsection.
    In page 41, line 23, at end insert:
    "new town" means an area designated under the New Towns Act 1946 as the site of a new town.
    and the Amendments in the name of the hon. Member for Ormskirk (Sir D. Glover) to leave out "and (6)" and insert "(6) and (7)" in line 1, and leave out "(6)" and insert "(7)"in line 3, and the Amendment by the Chancellor of the Exchequer in Clause 39, page 42, line 6, leave out subsection (3) and insert:
    (3) Subsections (5) and (6) of the foregoing section shall apply for the purposes of this section as they apply for the purposes of that section, but so that the said subsection (6) shall apply as if references to machinery or plant included references to works expenditure on the construction of which is expenditure to which the said Chapter III applies, and as if, in the application of paragraph (c) of that subsection to such works, references to a building or structure were omitted.
    Mr. Jay: This Amendment not merely raises a point of substance, but is also easier to understand than some Amendments which we have recently discussed. By the Amendment, we seek to extend to areas neighbouring on development districts the concession on free depreciation and mining allowances contained in Clauses 38 and 39. It seems to us unreasonable, when one is dealing with large areas of population, where people may travel considerable distances to work in one way or another, to refuse the benefit of this free depreciation arrangement to one part of such a large, populated area just because it falls outside the boundary of the development district.
    The Financial Secretary to the Treasury will, I am sure, realise that in putting forward this proposal, we are merely following the principles of the Local Employment Act, 1960, of which the Chancellor of the Exchequer was the principal author. That Act lays down that the considerable powers of assisting development districts contained in that Act—which may not be considerable enough, but are much more considerable than the free depreciation with which we are tonight concerned—may be exercised not merely in development districts alone, but in certain other districts.

    1497
    Section 1(4) of the Act states:
    "Any reference in the following provisions of this Act to a development district shall have effect as if—(a)…(b)…(c)…formed part of the development district."
    That is to say, all the powers are exercisable in the three types of additional areas, (a), (b) and (c). Area (a) is
    "any county district which in relation to the development district, or to that locality and any other area, is a receiving district within the meaning of the Town Development Act, 1952."
    That corresponds roughly with the Amendment in page 40, line 26. Area (b) in Clause 1(4) of the Local Employment Act, 1960, is
    "any burgh or county the council of which are, in relation to the development district, or to that locality and any other area, a receiving authority within the meaning of Part II of the Housing and Town Development (Scotland) Act, 1957".
    Area (c), which is most relevant to our Amendment, is
    "any place so situated that workers living in the development district, or in any such county district, burgh or county as aforesaid, can conveniently work at that place."
    This means that under the Local Employment Act it is possible to use powers for giving assistance to industry in a particular spot which, although it is outside the development district, nevertheless may draw workers from within the development district. This is an arrangement which was agreed to by the House at the time of passing the Local Employment Act.
    If, therefore, the Bill is enacted in its present form without our Amendment, one would get the curiously anomalous situation that the other powers under the Local Employment Act are exercisable at the discretion of the Board of Trade outside a development district on these defined conditions, whereas the free depreciation would be exclusively confined to the development district. I see no reason for legislating in that anomalous fashion. If our Amendment is adopted, and the following one in page 40, line 26, the substantial effect would be that the free depreciation powers could also be applied in the areas neighbouring the development districts as well as the main substantial powers under the Local Employment Act. I should have thought that it would have been both more logical, as well as giving more scope to the
    1498
    Government to assist the expansion of employment in these areas.
    Of course, this point would not matter so much if the present Government had followed the previous policy of scheduling the main areas of industry and population such as the North-East Coast or Merseyside as overall development districts, without any bits and pieces excluded within them, but the Government are not operating that policy. Under the Local Employment Act we have small development districts here, and then an area there which is not a development district. For instance, in the course of the late winter, under the curious administration of the party opposite, we had periods when the south bank of the Tyne was a development district and the north bank of the Tyne was not. If that had been the arrangement in force when these powers were being exercised, we should have had free depreciation operating on one side of the Tyne and not operating on the other. I see the right hon. and learned Gentleman the Member for Wirral (Mr. Selwyn Lloyd) here. It would also be possible, under this scheme of things, to have Liverpool a development district with free depreciation applying, and Birkenhead excluded. I think at the moment the whole of Merseyside is a development district.
    I should much prefer to see a reversion to that situation, where whole of large industrial areas like the North-East Coast and South Wales were scheduled as development areas, and then all these awkward difficulties would not arise, but, unfortunately, the Government have not adopted that system. They insist on adhering to separate little areas. If we are going to do that, I do submit to the House that it would be much more logical to treat the free depreciation powers in exactly the same way, or, at any rate, in nearly the same way, as the main powers under the Local Employment Act.
    I do not think we ought to be complacent about the present employment, or rather unemployment, situation in these areas. Of course, there has been a reduction in unemployment between February and June, but the significant thing about the figures is, I think, this, that over the United Kingdom as a whole there were 80,000 more unemployed in

    1499
    June, the present month, this year than there were in June a year ago, and at this moment there are 200,000 more unemployed than in June two years ago. Therefore, I do not think we should be complacent. At this moment, in June, 1963, the unemployment percentage is 4·3 on the North-East Coast and 4·3 in Scotland; unemployment on the North-East Coast is one-third higher than it was in June two years ago. Therefore, I do not think there is any ground for complacency.
    I hope that the Government, for this reason, and for the sake of legislative logic and tidiness, will be ready to accept the Amendment.
    Mr. Ian Percival: I beg to move the Amendment in page 40, line 26—
    Mr. Speaker: No. The hon. Member cannot move it now, but he can discuss it now.
    Mr. Percival: I beg your pardon, Mr. Speaker.
    I understand that it is for the convenience of the House to consider also with the Amendment under discussion the Amendment in page 41, line 23, standing in the name of my hon. Friend the Member for Ormskirk (Sir D. Glover) and that that can be discussed now. I further understand that it will be for the convenience of the House if the further Amendment in the name of the Chancellor of the Exchequer, in page 42, line 6, is discussed at the same time, and also the Amendments, in the name of my hon. Friend the Member for Ormskirk, to that Amendment.
    It might be convenient for the House if they were discussed in the reverse order. All that need be said about the last one is that it is a necessary consequence of the first one. Let me take the one in the middle, because all that need be said about that is that it is a necessary advance to give effect to the intention of the first one, if the first one be accepted.
    That brings me to the first Amendment. This overlaps the Amendment proposed by the right hon. Member for Battersea, North (Mr. Jay). It is very tempting at this early hour to pick up the
    1500
    points which the right hon. Gentleman made and to discuss them, but it would also be to the convenience of the House if I confined myself to stating very briefly the reasons why my hon. Friends and I hope that our Amendments will be accepted.
    My hon. Friends and I fully appreciate the importance of limiting the free depreciation to areas within boundaries clearly established and firmly accepted, and we also fully appreciate that help must be concentrated if the areas in the greatest need are to benefit to the full. But we suggest that, without infringing these principles, there is one small extension to free depreciation which should be allowed, and that is in the case of a new town which is not in itself a development district—because if it is in a development district the provision already applies—but which is virtually starting from scratch; that is, one which is not building up on an already existing town but which draws of will draw virtually all its population from a development district. Ex hypothesi, such a new town has no fund of existing industry to start with. The people who come there from a development district will need jobs when they arrive. When such a new town is wholly designed to help that development district, I respectfully suggest that there is much to be said for giving industry in it the same special benefits as are applied to the development district from which virtually all its inhabitants will come.
    The Amendment, I do not hesitate to say, was framed with the new town of Skelmersdale especially in mind, and it is hoped that if it is accepted by the Government, Skelmersdale will be certified as an area under the relevant provisions. Skelmersdale is perhaps a very good illustration of the common sense of this Amendment, for while there are varying views about where a new town should be established, I think everyone will agree that once it has been decided to have a new town in order to help a development district, it is plain common sense to do as much as one can to get that new town off to a good start.
    In this instance, by way of an example, it would be very undesirable that people should be moved from a development district to this new town and then find that there were no jobs for them in

    1501
    the new town, and for them perhaps to have to go to Southport looking for employment when there are possibly not enough jobs there already. This Amendment seeks to avoid that sort of difficulty and to assist new towns which are starting from scratch to get off to a good start, I very much hope that my hon. and right hon. Friends will accept it.
    Mr. Selwyn Lloyd: I want not to make a point of general interest or general principle but to put forward a constituency interest—the effect of the Clause as it stands on Ellesmere Port. Ellesmere Port is a thriving, prosperous town in my constituency with little or no unemployment, but under the 1952 Act it has made an arrangement to take overspill from Liverpool. Under Section 1 (4,a) of the Local Employment Act, 1960, to which reference was made by the right hon. Member for Battersea, North (Mr. Jay), it qualifies for assistance. Therefore, industrialists extending or locating new plant can qualify for assistance under that Act, because the overspill receiving areas are treated in the same way as the exporting areas.
    11.30 p.m.
    But there is quite a different position under the Chancellor's present proposals. For Ellesmere Port to qualify for assistance under the Bill, it would have to be designated as part of a development district. The right hon. Gentleman is wrong in saying that the whole of Merseyside is so designated. Ellesmere Port is excluded from the Merseyside development district. It is very difficult to ask that Ellesmere Port should be put into the Merseyside development district, because there is no unemployment in the borough.
    My hon. Friend the Member for Southport (Mr. Percival) has put forward the case with regard to the new towns. I cannot see any reason why that should not be broadened to include Ellesmere Port and such places, because it is de facto, if not de jure, anew town. Since the war it has grown from a village into a progressive and forward-looking borough, and I cannot see why the same principle should not be applied to a case such as that as to a new town.
    1502
    I must tell my right hon. Friend that the consequences if no provision can be made to deal with a case like this is that a brake may well be imposed on the rate at which Liverpool overspill can be accepted in Ellesmere Port. Owing to the distances involved if those people come to live in Ellesmere Port, they cannot be expected to work in Liverpool. It is not a practicable proposition. It would take them too long to get there. Therefore, it is necessary to provide in the new borough employment as well as housing. I do not think one can expect any borough to import into itself unemployment. It must want to provide the facilities within the borough which employ the people who are being asked to come and live there.
    Under the Bill the trouble is that every inducement is given to industry not to come to Ellesmere Port. If one takes the next-door borough of Bebington which is within the area, there is every inducement to industry to come there or to other parts of Merseyside, but not to Ellesmere Port. It is difficult to expect such a borough to go on accepting overspill. It has willingly accepted a rôle in relation to the problem of getting people out from Liverpool into the overspill areas, but I do not think one can expect a borough, however well-intentioned it is, to go on doing this if it means importing into its own area the problem of unemployment.
    The consequence of this, if it stands as it does at the moment, is that it will slow down the rate at which the overspill from Liverpool can be accepted into the borough. I do not think that that is really the intention of my right hon. Friend. If it is, I do not think that my right hon. Friend the Minister of Housing and Local Government will approve it very much. It is a serious problem. I hope that my right hon. Friend will find it possible in some way to meet what is a very practical difficulty. It is a difficulty not only of new towns as such but of places like Ellesmere Port, which are de facto new towns although they may not be de jure so.
    Mr. Mitchison: There are two Amendments under consideration. Is not the position that Ellesmere Port would be, or might be, covered by our Amendment but could not be covered, because it is not a new town, by the

    1503
    Amendment submitted from the Government back benches?
    Mr. Lloyd: With the clarity of perception which I expect of the hon. and learned Gentleman, he is quite right. That is the position. I hope that I may have an assurance of some sort from my right hon. Friend.
    Mr. Barber: The provisions for free depreciation for development districts and Northern Ireland introduced by my right hon. Friend have not only been widely welcomed but are recognised, I think, as an important departure from the general principles which apply in taxation matters of this kind. The fact that my right hon. Friend was prepared to embark on this new venture at all will, I am sure, have convinced hon. Members on both sides of the House that he would be prepared to go further if it were desirable.
    The Amendment in the name of the hon. Member for Cardiff, South-East (Mr. Callaghan), moved by his right hon. Friend the Member for Battersea, North (Mr. Jay), and the series of Amendments in the name of my hon. Friend the Member for Ormskirk (Sir D. Glover) and referred to by my hon. Friend the Member for Southport (Mr. Percival), both provide in differing degrees for some extension of the areas which are to qualify for free depreciation.
    It seems to me that there are really two basic principles which have to be accepted, or which would be accepted by most hon. Members. The first is that if the provision for free depreciation is to be effective—if it is going to make a real impact on those parts of the country where the problem of high and persistent unemployment is most pressing—it must be rigorously selective. The success of the proposal will depend to a considerable extent on the very fact that the areas which qualify for free depreciation will have a significant tax advantage over the rest of the country. It follows that in the interests of development districts and of Northern Ireland the relief must not be spread too widely.
    The second principle which most people would accept is that in matters of taxation, certainty is very important. I realise that this is not a conclusive argument,
    1504
    but it is an important factor which hon. Members would wish to take into account. There are circumstances where the granting of discretion to Ministers in matters of taxation might be necessary and might override the fiscal principle that there should be lines clearly drawn and approved by this House which establish where liability to taxation begins and ends. All I say is that one should not lightly bestow upon the Executive discretion in important matters of taxation, particularly where the exercise of that discretion would be open to argument, and where different people might well quite sincerely exercise their judgment in different ways.
    Mr. Callaghan: Surely the whole test under subsection (5) relies upon the district being within the provisions of the Local Employment Act. The definition of what is covered by that Act is an administrative definition, taken by a Minister, so that one stage removed this will be an administrative decision, and there can be no certainty even in the Clause as drafted.
    Mr. Barber: I entirely agree with the hon. Member. I hoped that I had made it clear. I said that there were occasions when the granting of discretion to Ministers might override the basic fiscal principle to which we normally adhere. This is certainly the case. But there are questions of degree. How far are we to go?
    All I say is that with these principles in mind, which are certainly not conclusive, we should consider the various Amendments. The Amendment moved by the right hon. Member for Battersea, North, would extend free depreciation beyond development districts to adjacent districts if the Board of Trade thought fit, having regard to local conditions of employment, transport and housing.
    On the face of it this is a very attractive idea. It would in practice make areas in which free depreciation was available comparable to some extent with areas to which the Board of Trade can have regard for the purposes of capital grants. The Local Employment Act, 1960, includes, as part of a development district, for these purposes, what are called travel-to-work areas, areas so situated that persons living in development districts and receiving districts can conveniently travel to work in them.

    1505
    In committee various suggestions were made for extending this relief. Some hon. Members suggested that we should look to growth points for areas of high unemployment and extend these taxation facilities to those areas. Others suggested county boroughs, with a substantial amount of unemployment, and others suggested areas where the average wages were low. The right hon. Gentlement referred to larger areas. He wanted to see larger areas rather than development districts as at present defined.
    When my right hon. Friend first informed the Committee of this measure he pointed out that the relief, to be effective, must not be spread too widely, and that for administrative reasons it was highly desirable to have lines which are clearly drawn. He therefore advised the Committee to accept the Clause as it stood, although he undertook to keep the matter under review and that if, in the light of experience, changes were required, changes would be made. After all, free depreciation is a new and very powerful fiscal incentive aimed at the elimination of areas where high unemployment tends to persist. It is clear that it must at least be aimed at those areas themselves. If it goes lightly, obviously in general it will have less force and lose the sharpness of its incentive effect.
    The right hon. Gentleman said that he was merely proposing that we should follow the Local Employment Act. There is a very important difference between the proposals in the Opposition Amendment and the way in which the Local Employment Act works out. The Board of Trade is not merely concerned about these problems of delimiting areas, nor is the Board of Trade unduly exercised about the fact that particular overspill areas may not be deserving of assistance under its system of grants and loans. The reason is that the Board of Trade's system under the Local Employment Act is entirely discretionary. It can decline to assist any venture that it does not think will be a useful one in relieving unemployment in the development districts. It can, as it were, tailor its grants to enterprises in overspill or travel-to-work areas by reference to the proportion of the workers likely to be drawn from development districts.
    1506
    I should not have thought that anybody would suggest that the Inland Revenue could exercise the same discretion or ought to do so. Under the Amendment, the relief would go indiscriminately to persons in these adjacent areas qualifying for it, however undeserving—I use the word in inverted commas, as it were—they might appear. I appreciate the objective behind the Opposition Amendment, but for the reasons I have mentioned I cannot advise the House to accept it.
    The other Amendments which you, Mr. Speaker, said that we might discuss with this Amendment raise a somewhat narrower paint. They would extend the free depreciation provisions of Clause 38 to capital expenditure on new industrial plant and machinery in a new town which is to draw its population mainly from a development district. The Minister of Housing and Local Government or the Secretary of State for Scotland would certify that a new town is to draw its population from a specified development district and the new town would thereupon be treated as if it were included in that district. If the district concerned ceased to be a development district, the free depreciation provisions would cease to apply to the related new towns as well, subject to the safeguards of general application in subsection (6).
    This proposal is more specific than that which the right hon. Gentleman moved. The proposed extension would affect Skelmersdale only, as matters stand at the moment. There are no other new towns already designated to which it could apply. In particular, it is of interest to note that all the four existing new towns in Scotland are already in development districts.
    We have considered very carefully the proposal contained in the Amendments in the names of my hon. Friend the Member for Ormskirk and my hon. and learned Friend the Member for South-port and have come to the conclusion that the proposal is justified.
    I turn for a few moment to the question of Ellesmere Port, which was raised by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd). The Chancellor of the Exchequer appreciates the concern of my right hon. and learned Friend about this matter. Indeed, they have discussed it

    1507
    together. Perhaps I can mention some of the difficulties of acceding to my right hon. and learned Friend's request. One starts from the basis that Ellesmere Port is not a development district. Ex hypothesi, it is not an area of high and persistent unemployment. Indeed, as my right hon. and learned Friend said, it is a thriving, prosperous town with little or no unemployment. This is not conclusive, and I quite recognise the argument that he made on the basis that Ellesmere Port was a thriving town.
    11.45 p.m.
    If free depreciation were to be extended to Ellesmere Port it would of necessity apply not only to new industry, which it is sought to attract there, but to all the existing industry in the town. In this respect Ellesmere Port is different, at any rate for all practical purposes, from Skelmersdale. The reason is that Skelmersdale has at present virtually no industry. It follows, therefore, that as a practical matter free depreciation for Skelmersdale can be regarded as applying to new projects.
    There is a third problem to be faced. If provision were made to apply free depreciation to Ellesmere Port, one could not rest there. It would mean opening up the possibility of free depreciation being given to all towns which are overspill areas. In all those towns free depreciation would be extended to all existing businesses and, as we know, many of these overspill areas, like the one to which my right hon. friend referred, are flourishing communities with little or no unemployment.
    Mr. Jay: It would affect only overspill areas from development districts; not all of them.
    Mr. Barber: It would be difficult to distinguish between the two.
    Mr. Jay: I meant to say that it would not, for example, affect the new towns around London.
    Mr. Barber: No. I was referring to overspill from development districts. I misunderstood the right hon. Member. As I mentioned in answering the right hon. Member for Battersea, North, the same problem does not arise with Board of Trade grants because the Board of Trade can exercise considerable discre-
    1508
    tion and it does, in fact, frequently decline to give financial assistance to a project in an overspill area.
    As a result of the approach made to my right hon. Friend the Chancellor, he has asked me to say, having given the matter considerable thought, that the claim of free depreciation is a new one, so far it is untried and it may be that in a number of respects, which at present we cannot foresee, experience will point to the need for changes. If this turns out to be so, changes will be made. But at the moment my right hon. Friend does not feel able to go further than to accept the proposal in the name of my hon. Friend the Member for Ormskirk mentioned by my hon. Friend the Member for Southport. I must, therefore, advise the House to accept that proposal and to reject the Amendment in the name of the hon. Member for Cardiff, South-East.
    Mr. Mitchison: The Financial Secretary said that the Amendment he proposes to accept applied only to Skelmersdale. But what about Corby, which is a new town and which draws its population mainly from the development districts in Scotland? It contains very substantial existing machinery which is now being added to in Messrs. Stewarts and Lloyds works and which would, therefore, appear to be affected by the Amendment. While the Financial Secretary said that it would apply only to Skelmersdale, has this point been considered?
    Mr. Barber: I mentioned that, so far as I know, it would apply only to Skelmersdale. I can assure the hon. and learned Member that if Corby satisfies the criteria laid down in the new subsection, then Corby will qualify. I cannot, off the cuff, deal with the position of every new town, but I thought that it would apply only to Skelmersdale at present.
    Mr. Emlyn Hooson: I support the Amendment in the name of the hon. Member for Cardiff, South-East (Mr. Callaghan). The Financial Secretary was right when he said that certainty is important in tax relief matters. But certainty can be bought at too high a price. Whereas, generally, discretion should not lightly be bestowed on the Executive, if the free depreciation

    1509
    allowances are to be really effective, there must be discretion in the Board of Trade. The incentive provided by Clause 38 is much more likely to be effective if the Amendment is accepted.
    I might illustrate the point by the reference of the right hon. and learned Member for the Wirral (Mr. Selwyn Lloyd) to Ellesmere Port. I happen to know a little about the Merseyside, and it seems to me that Ellesmere Port is a natural growth point in the Merseyside, and that any incentive for the increase of industry in Ellesmere Port area very naturally relieves unemployment in Merseyside generally. It seems foolish that Ellesmere Port should be excluded from the benefits to be derived from the free depreciation allowances when, by bringing in the "grey" areas at the discretion of the Board of Trade, the Clause would be very much more effective. For that reason, I support the Amendment.
    Mr. William Ross: I found the Minister's speech very disappointing, and rather alarming in many respects. He referred to overspill. We have the noble Lord, Lord Craigton, the Minister of State, going round all the Scottish local authorities trying to sell overspill—"If you have overspill from Glasgow it will bring industry"—but one of the reasons for the comparative failure of the overspill programme in Scotland is that those authorities that have signed an overspill agreement have not got the industry.
    Those overspill areas not scheduled under the Local Employment Act will now be under a greater disadvantage, because there is less likelihood of industries leaving Glasgow, where they will have the free depreciation allowance, and going to Haddington, Kilmarnock, Newmilns or Galston, none of which is in a scheduled area, and all of whose councils have signed overspill agreements, or are thinking of doing so.
    The implication is that things have not been properly thought out, and it cannot be argued that it is not just new developments that will get the benefit of the concession but that industries already established will also benefit. That stems from the original conception, which does not apply only to new developments brought into the area but to industries
    1510
    in the area. It is therefore unfair to claim as a strength in respect of the original scheme a weakness when we seek to apply a logical extension. I am very sorry that the Financial Secretary does not see fit to accept the Amendment of my hon. Friend the Member for Cardiff, South East (Mr. Callaghan).
    The Chancellor will remember that, as President of the Board of Trade, one of the first things he had to do in the administration of the Local Employment Act that he piloted through the House, was to see me and the chairman of a firm that had been brought to Kilmarnock who was proposing to make a fourth extension to his factory. It was discovered that in the period from the conception of the extension to getting it off the drawing-board, Kilmarnock had been descheduled with the introduction of the new legislation.
    The right hon. Gentleman will remember that I produced for him figures of where the people in that factory and in other factories lived. The point is that those men and women who are unemployed in scheduled areas or districts are registered there because of residence, but their unemployment stems from somewhere outside those areas.
    The right hon. Gentleman will remember that he used the powers given to him under the Local Employment Act to ensure that benefits were given for this development to Kilmarnock which had been descheduled. That was a proper use of the flexibility granted under that Act. It is a great pity that the right hon. Gentleman has not continued in office as President of the Board of Trade for a long time, because we have had much the same kind of development since. Someone was prepared to come from London and settle in Kilmarnock on the very same estate, but we received a letter from the Board of Trade to say that it could not be done because there were too many unemployed in Kilmarnock.
    This is a wonderful way of working. The former President of the Board of Trade was prepared to do this when there were fewer unemployed in Kilmarnock, but the present President is not prepared to do it because there are more, and too many, unemployed there. The argument is that the new firm would

    1511
    be taking labour from outside Kilmarnock. Five miles away from this industrial estate, which is not now in a development area, a new firm has cropped up, making much the same product as the firm in Kilmarnock. I doubt whether there are a hundred people living in the intervening area and the firm draws its labour from Kilwinning, Irvine and Ardrossan in the same way as Kilmarnock does. Why should one get the benefit, and not the other, when the unemployment in Kilmamock is worse than it is in the development district?
    If we are prepared to have the travel-to-work arrangement under the Local Employment Act, we should do it in respect of this provision. There was no logic and considerable danger in the reply we received to this debate. I foresee great difficulties in areas adjacent to these districts. This applies equally to Grangemouth, Newmilns, the areas which are growth centres and which may suffer as a result of the administration of this provision. What is supposed to be of advantage to great areas of Scotland may prove in the end to be entirely disadvantageous.
    I hope that the Chancellor of the Exchequer will think again about this. He has shown himself a man of practical ability with a determination to grasp this problem. He will remember the words which he used when we debated the Schedule to the Local Employment Act. He said that he was sure that the Bill would meet with success. There is more unemployment in the development districts today than there was when we passed that Act. There is 50 per cent, more in Scotland. If the right hon. Gentleman wants the full advantage of this provision he should spread its application a little farther to those areas which presently employ people, within the travel-to-work area, who reside within areas which themselves are scheduled. He will then have considerable advantage from the policies which he hoped would succeed.
    Mr. Dalyell: Is the Financial Secretary in a position to give us an assurance that the advantages which he is extending to Skelmersdale will also be extended to those towns which are at present in scheduled areas but areas which might
    1512
    be descheduled? I admit that I have an axe to grind. What happens, for instance, to Livingstone if the areas round about it are descheduled?
    Mr. Callaghan: I confess to surprise that the Government have accepted the Amendment in the name of the hon. and learned Member for Southport (Mr. Percival). I congratulate him on it, but I think that we want to examine a little more what it means. It is quite clear that the Financial Secretary was under the impression that it referred only to Skelmersdale to start with. Then the possibility was raised by my hon. and learned Friend the Member for Kettering (Mr. Mitchison) that it might conceivably apply to Corby. I have consulted my hon. Friend the Member for Pontypool (Mr. Abse) as to whether Cwmbran would come under this.
    12 m.
    If I may take Cwmbran, which I know better than Corby, it is not in a development district itself, but it can well be argued—and I am sure my hon. Friend with his eloquence would very easily argue a case—that most of the new employment has been, or will be, drawn from declining industries in the development districts. That being so, it seems to me that we are getting into a very novel position in tax matters, because on the fiat of the Minister of Housing and Local Government the Minister will be able to determine whether, say, the firm of Girlings in Cwmbran is going to have the advantage of free depreciation or not.
    Do we know what we are doing here? When the Financial Secretary was resisting Amendments just now on the basis of the need for certainty, on the one hand, and, secondly, on the fact that it is important that everyone should know what is going to happen, it seemed to me very extraordinary that a Minister should be put in the administrative position where he can determine the amount of an individual firm's liability. If I have misunderstood, then I will give way so that we need not waste time on it, but I shall not have a further opportunity of speaking, though others will.
    It seems a point of very great importance which should not be slid over this evening. I cannot believe that there has ever been a case before in taxation

    1513
    history where on the certificate of a Minister it will be decided whether a particular firm or group of firms will be entitled to free depreciation or not. I think that we ought to recognise fully what we are doing and we ought to have the considered view of the Government. I am not suggesting that the matter has not been considered fully, but I was surprised when it was accepted as it was. Look at the room for speculation and argument at the way in which the Minister will lay himself open to charges of political judgment in a matter like this. I am not suggesting that the Chancellor of the Exchequer would do so, but I say that he lays himself open to the charge.
    Let us look at the words. I think it is worth while taking up the time of the House in the matter. The Amendment reads:
    "In relation to any new town outside a development district"—
    I take Cwmbran—
    "which draws or will draw its population mainly from the district"—
    that is the development district. What does that mean? I assume it means the development district. There is a development district very close to Cwmbran which has declining industries, and there is no doubt that a number of workers from that development district have moved into Cwmbran and are working there. So I think it can be argued that Cwmbran—I am not saying it would—would fall within the section. The Amendment goes on to say:
    "…this section shall apply as if the new town were included in the district"—
    that is to say, it will get the free depreciation—
    "and a certificate given by a person authorised in that behalf by the Minister of Housing and Local Government.…"
    So a person, presumably the regional controller of the Ministry of Housing and Local Government in South Wales, is going to decide whether firms in Cwmbran are going to be given for this purpose free depreciation.
    Then the Amendment goes on to say, so far as I understand it, that this certificate shall be conclusive. I am no lawyer, but that means that it cannot be challenged, presumably, in the courts. I do not know. I think that this needs
    1514
    a degree of consideration before the Government put themselves in this position, and we should like to have some further answer from the Government on this point.
    It is quite clear that the Financial Secretary was under the impression that he was talking about Skelmersdale only, but there are other places which will feel that they have claims to come in. Corby may well be one. I am told that when one goes to Corby it is only Scotsmen whom one meets and that they celebrate Hogmanay in Corby more than they celebrate Christmas. If that is so, we may well find Stewarts and Lloyds in Corby being provided with the most substantial financial inducements, with free depreciation, which will make their position vastly different from that of a great many other companies. I am not sure about this—I am raising questions about it—but I think it opens up a very wide field of speculation.
    I turn to one or two other matters. I am disappointed that the Financial Secretary turned down our new Clause, but not so disappointed as I would be if I did not remember the history of last year. Last year we moved—but, of course, not in such splendid prose, nor at such great length, nor with so few punctuation marks—the substance of Clause 38, and it was rejected. The Government told us that they could not do it. Now it appears on the Order Paper and we are happy to assent to it. Now we move a new Clause dealing with areas outside development districts, and we are given the same answer as we were given last year. I should not be at all surprised if next year we saw our Clause pop up and the Government claiming all the credit for it once again, and we shall feel that we have been able to do something useful in a matter of this sort. Of course, I do not know if hon. Members opposite will be there next year, and I do not think they know either.
    On the question of unemployment, I thought that the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) put his finger on the spot, although he did not draw the same conclusions as I am going to draw about this question of unemployment in relation to his own constituency. He said that we could not

    1515
    expect Ellesmere Port to be included in this under the Local Employment Act because there was no real unemployment there—at any rate, not to a substantial degree—and therefore, he said, this must be different. This shows a fundamental difference of approach between the Government and ourselves to this question of development areas and development districts.
    Mr. Selwyn Lloyd: The hop. Gentleman has got it wrong. It is already covered by the Local Employment Act. It cannot be designated as a development district.
    Mr. Callaghan: I am sorry if I did not make it clear. Therefore, it does not get free depreciation. The right hon. and learned Gentleman was arguing that it was not entitled, under the definition of the Local Employment Act, to be included as a development district—at any rate, according to the administrative decisions of Ministers on this matter. This shows a fundamental difference, and I make the plea once more that the Government should accept something along the lines of our Clause because we believe they are fundamentally wrong in considering these development districts as tiny, isolated spots whose only purpose is to overcome any unemployment that may exist. We believe it is important that we should look at these areas on a much wider basis. In fact, the development districts should be much more equivalent to the old development areas, and we say that because we look beyond the problem of unemployment in these areas to the need for the development of a spirited life and a healthy community that will be spread fairly and equitably throughout the British Isles.
    I was talking to a great expert on this subject only last week, and he told me—I suppose this is the sort of generalisation that people make—that in 30 years' time if we go on as we are, we shall need another London in the South-East. This is a fantastic thought. I must say that the thought of having to bear another London in the South-East makes me feel glad that I am now in the second half of my century. I do not think that there can be anyone in the House who wants to see another London in the South-East. If it is a choice between
    1516
    that and developing the regions on a healthy basis, there will be unanimity about which we should try to do.
    The Government's policy is shown to be not adequate at all to deal with this great problem. They are still thinking in terms of how to get rid of spots of unemployment. We want them to think more widely than that, and we have, therefore, put this Amendment down. Admittedly, it does not go nearly as far as I should like, but we have to keep within the terms of the Clause as drafted.
    The Financial Secretary did not put the picture accurately when he said that the effect of our Amendment would be indiscriminate. Not at all. These districts must be defined by the Board of Trade in exactly the same way as they are now defined for the purposes of the development district procedure under the Local Employment Act. There would be nothing indiscriminate about it. It would be an extension of the development district procedure.
    We believe that there is much to be said for areas like Ellesmere Port being treated as we propose. They are outside the development districts, and they will, therefore, find themselves being overlooked by new industries. There will be no attraction to go there. This is one of the difficulties which we always foresaw in this type of legislation, and it will be overcome only if we take large enough areas, much larger than the present proposed areas. No one should disguise the difficulties which exist at the boundary points.
    The Amendment has one very attractive consequence. We are all looking forward to seeing how the right hon. and learned Member for Wirral will vote tonight. If he thinks of the interests of his constituency, he will vote for our Amendment. Perhaps I was wrong in the thought which passed through my mind when I saw the Patronage Secretary talking to him just now. I hope, for his sake, that the Patronage Secretary has not got another revolt on his hands. It would really be too much to add to his worries to have the right hon. and learned Gentleman against him. From his beaming and cherubic countenance, it looks as though he has persuaded his right hon. and learned Friend not to go into the Lobby. This will be a disappointment to me because I should like nothing more than the

    1517
    pleasure of walking through the Lobby with the right hon. and learned Gentleman in defence of a constituency interest. Now, we shall have to put him to the test. Which will he place first—his loyalty to the Government or his loyalty to his constituency?
    Mr. Barber: With the leave of the House, may I reply briefly to what has been said? I went over the ground fairly well earlier, and I do not wish to repeat myself.
    The hon. and learned Member for Montgomery(Mr. Hooson) thought that my argument was not sound in suggesting that it was not, perhaps, advisable to give too much discretion to the Executive in matters of taxation. I reiterate what I said before. There may well be circumstances in which, on balance, one has to give the Executive a certain amount of discretion, as, indeed, we are doing by the provisions of Clause 38 as it stands. It is all a question of degree, and I am sure that the hon. and learned Gentleman himself would not wish to go too far in that regard.
    The hon. Member for Kilmarnock (Mr. Ross) complained that those outside development districts who would not qualify for free depreciation would be worse off. It is inevitable that the greater the incentive one provides for areas of high and persistent unemployment—known as development districts—the less is the incentive to manufacturers to develop outside. This, I fear, is inevitable. On the other hand, my right hon. Friend and the Government generally have been pressed in previous years to do something on the lines which my right hon. Friend has introduced this year. The hon. Member for Cardiff, South-East (Mr. Callaghan) has taken some credit for the fact that, in his view, what we are doing was something on the lines proposed by the Opposition last year, although, of course, he would like us to go further.
    12.15 a.m.
    The hon. Member for West Lothian (Mr. Dalyell) asked what happens if there is a new town in a development district, which would, therefore, qualify for free depreciation, and the development district is de-listed, if that is the right word to use. Then, the new town would not be in a development district, but if it
    1518
    satisfied the new subsection (6) of Clause 38, it would, in turn, qualify for free depreciation. If it did not satisfy the provisions of the new subsection (6), it would not so qualify.
    The hon. Member for Cardiff, South-East asked three questions. The first was about other places; he mentioned Corby and two other places in particular and he asked whether they would or would not benefit under this provision. As, I think, the hon. Member will fairly understand, I cannot give him a definite answer in relation to other new towns. It all depends on whether they satisfy the criteria which are laid down in the new subsection (6).
    I referred, because I thought it right—this has been raised by my hon. Friend the Member for Ormskirk (Sir D. Glover)—to the particular case of Skelmersdale, because on the information which I have before me it seemed tome that clearly it satisfied the criteria which are laid down. As stated in the subsection, however, it will be for my right hon. Friend the Minister of Housing and Local Government or my right hon. Friend the Secretary of State for Scotland to provide the necessary certificate.
    Mr. Mitchison: Will it be? The subsection lays down certain conditions which have to be fulfilled. If the conditions are fulfilled, no doubt it is very convenient to have a certificate, for that would be conclusive. If, however, the conditions are fulfilled and no certificate is forthcoming, why would not the taxpayer get the relief to which he is entitled under the two of them?
    Mr. Barber: Obviously, that situation will not arise, because if the criteria are satisfied, the appropriate Minister will issue the certificate. Somebody has to exercise a certain discretion. It has been suggested by several hon. Members opposite that this is a proper thing to do.
    The second point raised by the hon. Member for Cardiff, South-East, was that he did not think it a good thing the Minister of Housing—one person—should have the discretion which he has under the new subsection. The discretion is very limited. What the Minister has to decide in the main is whether the population in question comes mainly from the development district. Certainly,

    1519
    if we were to adopt an approach on the lines of that laid down in the Opposition's Amendment, far more discretion would be given to Ministers or, in this case, the Board of Trade, because only in the vaguest terms are there references to local employment, transport, housing, and so on. I recognise that this may be an approach which some people would favour, but certainly more discretion would be involved in those cases.
    Mr. Loughlin: Will the hon. Gentleman explain a point which arises from his remarks? It seems to me that the principle of the Amendment has been accepted by the Government. If one looks at the Clause, the advantages are to be derived provided that the place is within Northern Ireland. Surely, in some part of Northern Ireland there must be at least one place that does not qualify in the normal sense as a development district. Why is the hon. Gentleman applying it in that sense and not accepting the Amendment?
    Mr. Barber: So far as I know, they do not have development districts in Northern Ireland. I thought, from the discussion we had previously on Clause 38, that it was the general desire of hon. Gentlemen opposite, as well as of my hon. Friends, that Northern Ireland should qualify for this great benefit. I thought that that was universally acceptable. Certainly I have heard no word to the contrary until the hon. Gentleman raised the point.
    Mr. Loughlin: I accept it for Northern Ireland—the same principle.
    Mr. Barber: The same principle does not apply, as I understand it, because in fact there are no such things as designated development districts in Northern Ireland. Therefore, if we did not refer to it it would be wholly excluded.
    Clause 38 is a most important departure which I think hon. Gentlemen opposite as well as my hon. Friends consider to be in the right direction. Whatever differences we may have as to the extent to which my right hon. Friend has gone, the Clause itself is widely to be welcomed, and indeed, I should have thought that the whole House would have welcomed the extension, small though it may be, which I advise the House to
    1520
    accept, the extension proposed in the Amendments in the name of my right hon. Friend.
    Mr. Jay: By leave of the House, I would ask a brief question of the Financial Secretary. Is he really quite sure that the Amendment in page 40, line 26, does not mean a good deal more than he appears to think it means? The words are
    "In relation to any new town outside a development district which draws or will draw its population mainly from the district".
    The words are not a new town "adjacent to a development district" which is the form used in our Amendment. Stevenage is outside a development district; Basildon is outside a development district. It is not quite obvious what the "district" would be in relation to such a town as those. It seems to us that the words are somewhat loose. I agree it is a new town which
    "draws or will draw its population mainly from the district"
    but the use of the words "will draw" means that this tax concession surely would be dependent on something which has not happened but which may happen in future. Would not my hon. and learned Friend be right, and if Corby were mainly drawing its population from Mother well or Coatbridge it could qualify for this concession? Is the Financial Secretary quite sure that, even if the objectives of his hon. Friend's Amendment are laudable, he is not accepting it in a form in which the wording is rather loose and might go much further than any of us intends?
    Mr. Barber: I can assure the right hon. Gentleman that we have looked at the wording very carefully and are satisfied that it fulfils the purpose intended.
    Mr. Houghton: On a point of order Mr. Deputy-Speaker. My right hon. Friend the Member for Battersea, North (Mr. Jay) has moved the Amendment in page 40, line 20. When the hon. and learned Gentleman the Member for Southport (Mr. Percival) said he wished to move his Amendment, in page 40, line 26, Mr. Speaker said that he could not move it; it could be discussed along with the Amendment in page 40, line 20; and it was on that basis that the hon. and learned Gentleman made his contribution to the debate. We have

    1521
    since been urged by the Financial Secretary to accept something which has not been moved and which, in strict form, is not before the House. Only the arguments and considerations in connection with it came before the House in the course of the debate; but that Amendment in terms has not come before the House. So presumably, Mr. Deputy-Speaker, we are still debating the Amendment moved to page 40, line 20, and it is on that that the decision of the House has now to be taken. Perhaps you will guide the House by telling us what happens after that.
    Mr. Deputy-Speaker: The hon. Member will recollect that it is quite often the practice of the House to discuss more than one Amendment at the same time. The only Question before the House, of course, is on the first Amendment of the series, but there is nothing after that, when that has been disposed of, to prevent the subsequent Amendments which have been discussed, from being moved. The hon. Member knows that that is often done, and when this Amendment has been disposed of I would propose to call for the formal moving of the other Amendments, and then let the House decide upon them.
    Mr. Callaghan: No one wants to put you in a difficulty, Mr. Deputy-Speaker, but we thought that the selection of new Clauses and Amendments was made by Mr. Speaker before the debate started and, on the basis of such information as we were given, we understood that you would allow the hon. and learned Member's Amendment to be discussed but not to be moved. That is frequently done. There are three cases which we normally have: where a new Clause or Amendment is moved; where a new Clause or Amendment is discussed with another new Clause or Amendment but cannot be moved, which is the category into which the hon. and learned Member's Amendment falls; and where a new Clause of Amendment is discussed with another new Clause or Amendment and you allow a Division on both.
    Your predecessor in the Chair indicated to the hon. and learned Member for Southport that he could discuss his Amendment but it would not be called. [Hon. Members: "No"] Most hon. Members who shout "No" were
    1522
    not here at the time. That is the position as we have understood it since 3.30 p.m. Are you saying that although our understanding on the whole has been accurate up to this point in the whole of the 10 days' debate on the Finance Bill, it is now inaccurate and that you always intended to call the hon. and learned Member's Amendment? In that case, the guidance which we have received must have gone astray.
    Mr. Deputy-Speaker: I can deal only with the position as it is now. It will be in order for the Amendments which have been discussed to be moved. I remind the hon. Member for Cardiff, South-East (Mr. Callaghan) that the selection of Amendments which is announced is provisional; it is always carefully stated that it is provisional. I also remind him—and this has happened on both sides of the House—that there have been occasions on which it has been understood that an Amendment had not been selected for a Division, but hon. Members who were interested have asked for a Division and this has been permitted.
    Mr. Callaghan: I must press you a little about this, Mr. Deputy-Speaker, because we want to get it clear. I think that no one would raise an objection if you were to say that you had decided to alter the original intention and to allow the Amendment to be moved because you understand it to be acceptable to the Government. That is a point of view which I think the House would accept. But we ought to know whether that is the way in which your mind has moved and whether you have decided to permit the Amendment to be moved because you understand it to be acceptable to the Government.
    Mr. Deputy-Speaker: The original selection by Mr. Speaker was provisional, but I understand that he had decided to allow other Amendments to be moved formally after a discussion had taken place.
    Mr. Callaghan: You, Sir, cannot know what was said by your predecessor in the Chair, but those who were present heard your predecessor tell the hon. and learned Member for Southport that he could discuss his Amendment but not move it. No indication was given then, or earlier.

    1523
    that he would be allowed to move it later. [Hon. Members: "Oh."] I know what I am talking about, and I am only trying to get the position clear. If the Chair, quite properly—and it is entirely at the discretion of the Chair—decides to allow an Amendment to be called, I raise no objection, but we are entitled to know as a House—and the whole House is concerned—whether this is a new decision of the Chair which reverses a previous decision. That is all I am asking, and it seems to me a perfectly fair question.
    Mr. Deputy-Speaker: I cannot help wondering whether there has been some misunderstanding, and that what was meant to be conveyed to the hon. and learned Member when the discussion was taking place on this Amendment was that he could talk about his Amendment but could not move it at that stage.
    Question put, That those words be there inserted in the Bill: —
    The House divided: Ayes 62, Noes 123.

    Division No. 152.]

    AYES

    [12.29 a.m.

    Abse, Lea

    Hill, J. (Midlothian)

    Oram, A. E.

    Bennett, J. (Glasgow, Bridgeton)

    Holman, Percy

    Probert, Arthur

    Blackburn, F.

    Hooson, H. E.

    Redhead, E. C.

    Bottomley, Rt. Hon. A. G.

    Houghton, Douglas

    Rees, Merlyn (Leeds, S.)

    Bowden, Rt. Hn. H.W. (Leics, S.W.)

    Hoy, James H.

    Reynolds, G. W.

    Bradley, Tom

    Hughes, Cledwyn (Anglesey)

    Robertson, John (Paisley)

    Callaghan, James

    Hynd, John (Attercliffe)

    Robinson, Kenneth (St. Pancras, N.)

    Carmichael, Neil

    Janner, Sir Barnett

    Rodgers, G. H. R. (Kensington, N.)

    Castle, Mrs. Barbara

    Jay, Rt. Hon. Douglas

    Ross, William

    Dalyell, Tam

    Jenkins, Roy (Stechford)

    Skeffington, Arthur

    Dempsey, James

    Jones, T. W. (Merioneth)

    Small, William

    Diamond, John

    King, Dr. Horace

    Soskice, Rt. Hon. Sir Frank

    Duffy, A. E. P.

    Lawson, George

    Spriggs, Leslie

    Edelman, Maurice

    Lever, L. M. (Ardwick)

    Taverne, D.

    Fitch, Alan

    Loughlin, Charles

    Watkins, Tudor

    Fletcher, Eric

    MacColl, James

    Wilkins, W. A.

    Foot, Dingle (Ipswich)

    Manuel, Archie

    Willis, E. G. (Edinburgh, E.)

    Galpern, Sir Myer

    Mendelson, J. J.

    Winterbottom, R. E.

    Griffiths, W. (Exchange)

    Millan, Bruce

    Hale, Leslie (Oldham, W.)

    Mitchison, G. R.

    TELLERS FOR THE AYES:

    Hannan, William

    Noel-Baker,Rt.Hn.Philip(Derby,S.)

    Mr. Ifor Davies and Mr. Grey.

    Herbison, Miss Margaret

    O'Malley, B. K.

    NOES

    Allan, Robert (Paddington, S.)

    Gammans, Lady

    McLaren, Martin

    Allason, James

    Gibson-Watt, David

    Maclay, Rt. Hon. John

    Awdry, Daniel (Chippenham)

    Gilmour, Sir John (East Fife)

    Maclean, Sir Fitzroy(Bute&N.Ayrs)

    Barber, Anthony

    Gower, Raymond

    Macmillan, Maurice (Halifax)

    Barter, John

    Grant-Ferris, R.

    Matthews, Gordon (Meriden)

    Batsford, Brian

    Green, Alan

    Maudlins, Rt. Hon. Reginald

    Bennett, F. M. (Torquay)

    Grosvenor, Lord Robert

    Maydon, Lt.-Cmdr. S. L. C.

    Biffen, John

    Gurden, Harold

    Mills, stratton

    Biggs-Davison, John

    Hall, John (Wycombe)

    Miscampbell, Norman

    Bishop, F. P.

    Hamilton, Michael (Wellingborough)

    More, Jasper (Ludlow)

    Black, Sir Cyril

    Harris, Frederic (Croydon, N.W.)

    Nabarro, Sir Gerald

    Bourne-Arton, A.

    Harrison, Col. Sir Harwood (Eye)

    Page, Graham (Crosby)

    Boyd-Carpenter, Rt. Hon. John

    Hastings, Stephen

    Pannell, Norman (Kirkdale)

    Bromley-Davenport, Lt.-Col. Sir Walter

    Hendry, Forbes

    Pearson, Frank (Clitheroe)

    Brown, Alan (Tottenham)

    Hirst, Geoffrey

    Peel, John

    Chataway, Christopher

    Hobson, Rt. Hon. Sir John

    Percival, Ian

    Chichestar-Clark, R.

    Holland, Philip

    Pickthorn, Sir Kenneth

    Clark, Henry (Antrim, N.)

    Hollingworth, John

    Pilkington, Sir Richard

    Clark, William (Nottingham, S.)

    Hope, Rt. Hon. Lord John

    Prior, J. M. L.

    Cleaver, Leonard

    Hornby, R. P.

    Rawlinson, Sir Peter

    Cooper-Key, Sir Neill

    Hornsby-Smith, Rt. Hon. Dame P.

    Redmayne, Rt. Hon. Martin

    Corfield, F. V.

    Howard, John (Southampton, Test)

    Rees, Hugh (Swansea, W.)

    Crawley, Aidan

    Hughes-Young, Michael

    Ridley, Hon. Nicholas

    Dalkeith, Earl of

    Hurd, Sir Anthony

    Ridsdale, Julian

    d'Avigdor-Goldsmid, Sir Henry

    Irvine, Bryant Godman (Rye)

    Roots, William

    Deedes, Rt. Hon. W. F.

    Johnson, Eric (Blackley)

    St. Clair, M.

    Donaldson, Cmdr. C. E. M.

    Johnson Smith, Geoffrey

    Scott-Hopkins, James

    du Cann, Edward

    Jones, Arthur (Northants, S.)

    Seymour, Leslie

    Elliot, Capt. Walter (Carshalton)

    Kerans, Cdr. J. S.

    Sharples, Richard

    Emery, Peter

    Kershaw, Anthony

    Shepherd, William

    Errington, Sir Eric

    Kitson, Timothy

    Skeet, T. H. H.

    Finlay, Graeme

    Legge-Bourke, Sir Harry

    Smith, Dudley (Br'ntf'd & Chiswick)

    Fisher, Nigel

    Lewis, Kenneth (Rutland)

    Smithers, Peter

    Fletcher-Cooke, Charles

    Longden, Gilbert

    Steward, Harold (Stockport, S.)

    Foster, John

    Loveys, Walter H.

    Stodart, J. A.

    Fraser, Ian (Plymouth, Sutton)

    Lucas-Tooth, Sir Hugh

    Storey, Sir Samuel

    Studholme, Sir Henry

    van Straubenzee, W. R.

    Wells, John (Maidstone)

    Summers, Sir Spencer

    Vickers, Miss Joan

    Wolrige-Gordon, Patrick

    Teeling, Sir William

    Vosper, Rt. Hon. Dennis

    Worsley, Marcus

    Thompson, Sir Richard (Croydon, S.)

    Walker, Peter

    Turner Colin

    Wall, Patrick

    TELLERS FOR THE NOES:

    Turton, Rt. Hon. R. H.

    Ward, Dame Irene

    Mr. MacArthur and Mr. Pym

    Mr. Deputy-Speaker: Does the hon. and learned Member for Southport (Mr. Percival) formally move the Amendment in page 40, line 26?
    Mr. Ian Percival: Yes. Mr. Deputy-Speaker. I beg formally to move, in page 40, line 26, at the end to insert:
    (6) In relation to any new town outside a development district which draws or will draw its population mainly from the district, this section shall apply as if the new town were included in the district, and a certificate given by a person authorised in that behalf by the Minister of Housing and Local Government, or (where the new town is in Scotland) the Secretary of State, and stating whether or not a new town draws or will draw its population mainly from a specified district shall be conclusive for the purposes of this subsection.
    Mr. G. W. Reynolds: On a point of order. May I draw your attention, Mr. Deputy-Speaker, to the fact that at 10.40 this evening we had a vote on the question whether the debate should be adjourned, and that 40 Members who voted in favour of staying on have since left?
    Mr. Houghton: On a point of order. Mr. Deputy-Speaker, you have just called the hon. Member for South-port (Mr. Percival) formally to move—and the hon. Member has formally moved—his Amendment in page 40, line 26. If the House approves the Amendment it will be written into the Bill. May I therefore ask whether the House is now free to ask further questions about the Amendment, and to probe a little further what exactly it means, and the extent to which it may influence, in an important respect, the economic development of the areas involved?
    I submit that we have not debated this matter, as a substantive Amendment. [Interruption.] Despite the discouragement that I am receiving, I submit that there is a big difference between formally moving an Amendment on which a Division takes place for demonstration purposes and writing a new provision into the Bill, in substantive form. I wish with your permission, if you rule that I can do so, to ask the Government a few more questions about this Amendment.
    Mr. Deputy-Speaker: These arrangements rest on an understanding. At the commencement of this discussion I happened to be in the Chair and I suggested that it would be for the convenience of the House to take all these Amendments together. That was accepted by the House. Therefore, that is the future understanding. It would not be out of order to allow the hon. Gentleman to ask some more questions upon the Amendment, although, according to the previous understanding of the House, it would only be moved formally.
    The only thing I would say to the House is that, if we have these understandings and then they are broken, it makes things very difficult. There will be nothing out of order, and if the hon. Gentleman is very anxious to put more questions I will permit it, but I must add that it makes things very difficult if understandings which have been come to and agreed to by the House are then not adhered to.
    Mr. Callaghan: With great respect, Mr. Deputy-Speaker, I should not like the House to think that there was to be any broken understanding about this, especially as I notice that some Ministers, including the Chief Secretary, are apparently cheering that observation. The right hon. Gentleman still seems to think so.
    Mr. Boyd-Carpenter indicated assent.
    Mr. Callaghan: The right hon. Gentleman was not here during the previous discussion, but we will leave him alone. I want to put it on record—we must get these things right—that there is no broken understanding on this side of the House. [Interruption.] I think some hon. Members opposite want to stay all night. They can have their wish, if they want it. I want to make it quite clear, as you have raised this point, Mr. Deputy-Speaker, that we did not understand that you would allow the Amendment to be moved. If there was a mistake on our part, I accept responsibility for it, but I am bound to say to you that I do not think there

    1527
    was a mistake on our part in that connection. We were quite clear in our understanding that the hon. and learned Member for Southport (Mr. Percival) was not to move it. We do not wish to resist that. I made that clear before the Division took place. If you had not now referred to the danger of breaking understandings, I would not be on my feet now. If my hon. Friend the Member for Sowerby (Mr. Houghton) has some new points and wishes to put them, he is entitled to do so, as you have said. I would not want them to be put in an atmosphere that he is breaking an understanding, because it was the original understanding that was broken and my hon. Friend is not breaking it now.
    Mr. Deputy-Speaker: I think that there has been some misunderstanding about the understanding. I am only the servant of the House. In the circumstances I suggest that the hon. Member for Sowerby (Mr. Houghton) should put his points, but in view of what has happened I would merely make the suggestion, with all respect, that they might perhaps be put as concisely as possible.
    Mr. Houghton: Mr. Deputy-Speaker, I am very much obliged to you. The last thing I would wish is that either you or the House should think that I was imposing on your good will and indulgence. It is customary on occasions such as these for new Clauses or Amendments to be discussed in association with the one which is called, but it is generally understood in such circumstances that there is no real business to be done on those which are discussed in association with the main Amendment or new Clause before the House or the Committee.
    Mr. Ross rose—
    Mr. Houghton: I must complete my point. The understanding I had in this matter was that the usual understanding prevailed. We now find that it does not. I am not complaining about that; and since you have given me the opportunity to pursue my points a little further, Mr. Deputy-Speaker, I promise not to detain the House more than a few minutes.
    12.45 a.m.
    Mr. Leo Abse: So that there will be no further understandings or misunderstandings, I hope that my hon. Friend is not expressing a view on behalf of all hon. Members, for the Clause we are discussing closely concerns my constituency and I hope that he will not consider binding other hon. Members who may wish to raise points of considerable importance.
    Mr. Houghton: I am speaking only for myself. I have no desire to exclude any of my hon. Friends from making their contributions.
    The Amendment states:
    "In relation to any new town outside a development district which draws or will draw its population mainly from the district…"
    I urge hon. Members to note the words
    "…development district which draws or will draw…".
    That means that, for some indefinite period in the future, it is expected that this new town will draw its population from the—I emphasise the word "the"—district. Thus there is not only an expectation that the new town will draw its population, which would be a normal expectation, but that it will draw it mainly from "the" district.
    Consider a new town like Stevenage. It is probably not drawing its population from any one district. It may be drawing some of its population from the London or near-London area, which is not a development district. It may be attractive to many people who prefer to live in Stevenage to continuing their life in London. I sympathise with their point of view if they hold it as a basis for moving to Stevenage. Others may be going there from Scotland.
    My hon. and learned Friend the Member for Kettering (Mr. Mitchison) referred to Corby, which is a kind of Scottish enclave in England. It may be that Corby is or will be drawing its population mainly from one or more development districts in Scotland. We want to clear this matter up because the Amendment refers to drawing
    "…its population mainly from the district…".
    "The" seems an extraordinary word to use in connection with any district. I can only hope that the hon. Member for Southport (Mr. Percival) had the customary help from the Parliamentary drafts-

    1529
    men in getting the Amendment in the sort of shape the Government could accept without having to change a word or a comma. It is a strange word and I want to be clear about its use.
    As I understand it, it does not mean that a new town, to qualify, must be or will be drawing its population from an adjacent district. It can draw, as long as it is mainly drawing it from one or more districts. If Stevenage or a new town like it is drawing or will draw its population from district A, B, C, or E it then qualifies for the benefits of free depreciation because it is drawing from all and sundry development districts.
    We want this matter cleared up because some of my hon. Friends, as my hon. Friend the Member for Pontypool (Mr. Abse) indicated, have new towns in their constituencies and they want to know whether their new towns are drawing or will draw their populations mainly from the district; which will give them status under the Amendment.
    I am sure that this is not being tiresome; we just want to be clear about what we: are doing, and as we have until breakfast time—or longer, if necessary—to find out, I do not apologise for delaying the House for a few minutes, because this is probably the only practical piece of business we will do, apart from murmuring approval to a number of long additions to the Bill moved by the right hon. Gentleman.
    Mr. Willis: On a point of order, Mr. Deputy-Speaker. An hon. Member opposite appears to be in a state of coma, and I am not quite sure whether he is ill, and requiring attention. Perhaps that could be seen to. The hon. Member is still in a state of coma, and I think it only right that we should see whether he is well because, if he is ill, we should assist him.
    Mr. Abse: Representing, as I do, the constituency which has in it the new town of Cwmbran, I am particularly concerned that there should be no ambiguity in a Clause which quite clearly affects the whole economic district which I represent. I confess that I am utterly perplexed by the meaning of the Clause as it stands. Cwmbran is a new town which is drawing, and is likely in the future to draw, a considerable portion of its population from declining areas in
    1530
    the north of the county. I would naturally be eager and anxious to have benefits endowed upon Cwmbran wherever they might come from, but I am equally anxious that the endowments it receives should be made in an equitable manner.
    Is it seriously suggested that industries that may be thriving and prosperous and doing very well—and I am pleased to say that many of them are—will suddenly be able to take advantage of this provision, whilst other industries that may be just outside the confines of the new town and not doing well, or doing equally well, will get no benefit at all, although the population upon which they draw may equally be coming from development districts?
    We are talking here of a comparatively small area of the county, and anomalies must arise in such a situation precisely because the Government are not accepting our view that one should not deal with this problem in this absurdly fragmented way but should consider a larger area. What troubles me very much about the Clause is that, apart from the fact that there may be these quite unjust differences in the treatment of an industry that may be just within the borders of a new town and those that may be just outside them, I observe that by the terms of the Clause the person who will determine these factors will be the Minister of Housing and Local Government who, perforce, has a very great interest in a new town.
    The Minister of Housing and Local Government will not necessarily have the same interest, nor can he be expected to have, in industries that may lie in a gap between the periphery of the new town and the development districts which are in existence, or may likely come into existence, as in my own case in the north of Monmouthshire. He is the Minister responsible for the new town, unlike the President of the Board of Trade, who will quite clearly have a limited interest in a particular area.
    Is it seriously being suggested that we are to give powers to the Minister of Housing to give special preparation benefits to industries within a new town while, within a few miles of that new town, there may be industries that will be debarred from these benefits just because they are outside the limits of a

    1531
    development district and, equally, just outside the new town?
    This is the sort of situation which can easily arise in South Wales in this new town where there are bound to be development districts within striking distance of it. I hope that this matter will be cleared up. As far as the Clause is grammatical and intelligible at all, it lacks clarity and is likely to cause confusion. We do not want to be importuned by firms in the area about its meaning. There may be glimmerings of new benefits to the newtown in the Clause, but it will cause more confusion because the Government are not prepared to accept the obvious answer that the whole area should be considered and not a place here and a place there, which only makes confusion worse confounded.
    Mr. Ross: If we do not put this matter right tonight we never will put it right, because there is no reconsideration of a Clause once it has been amended on Report. The Bill cannot be amended in another place, because it is a financial Measure.
    I do not think that I am breaking any understanding in what I am about to say, because when there is an understanding about discussing an Amendment that is made clear. The hon. and learned Member for Southport (Mr. Percival) proceeded to move his Amendment and was told he could not move it, the reason being that one Amendment having been moved we cannot discuss two things at once. Obviously it would have been out of order for an hon. Member to have referred to the hon. and learned Member's Amendment when he was moving his own and therefore the usual understanding did not apply in this case.
    I am concerned about the wording. It reads:
    "In relation to any new town outside a development district…"
    I do not see the President of the Board of Trade or any representative of that Department here, but I understand that there are about 160 development districts. Any new town which is not inside a development district must therefore be outside 160 districts. If that is
    1532
    so, how can we identify and specify the new town which draws or will draw its population mainly from the district?
    This is further extended if we jump a few lines to the authorisation that must be given from somebody in the Department. That person must state whether or not a new town
    "draws or will draw its population mainly from a specified district…"
    The whole thing is hopelessly confused. It might pass the House of Commons sitting as a Committee but I assure the House that it would not pass the Scottish Standing Committee. We would not tolerate the language used here.
    What do the Government intend to do about this? Clearly and emphatically the first two lines are absolute nonsense. It is not just a case of ambiguity. The expression "the district" means one district. But that district is not specified at all. The only thing specified is the new town. But the new town is not outside a development district; it is outside as many development districts as there are. The first two lines are wrong, and the implication of the last two lines is that the new town is outside a specified, a particular, development district.
    1.0 a.m.
    In actual fact, however, we have the new town of Livingston which has been designated. As far as I know, the new town of Livingston is not going to take its population from one area which is a development district. It is going to draw from very much wider areas. Indeed, it would be ruled out from being embraced in this Amendment if it took its population from two development districts, because the last line says "a specified district."
    Suppose that its population came mainly from part of the Lothians that was not a development district, which it could be, or from Glasgow which is another development district. Despite the fact that it is helping development districts, it would not get the advantage, although if it takes it from only one it will. The thing is utter nonsense, and this arises from the rather thoughtless way in which the Government have regarded this whole group of Amendments.
    If the Government really make up their mind that they want an Amendment that

    1533
    is something that is a considerable improvement to a Bill, they do not leave it to the chance selection of either the Chairman of Ways and Means in Committee or to Mr. Speaker on Report. They add their names to the Amendment, and, having added their names, they make sure that the Amendment is rightly worded. How often have we heard an Amendment accepted in principle and the Government undertake to introduce their own Amendment in order to meet the point. But they cannot make a change now unless by way of a manuscript Amendment. I suggest that they do it quickly and make the change by manuscript Amendment.
    I suggest it is essential that we should discuss the matter in order to find out what the Government have in mind. Do they really mean this and think that it will stand up in law, because I am convinced that it will not? I sincerely hope that we are going to hear from the Government. We cannot send for the Lord Advocate.
    Mr. Loughlin: Heaven forbid.
    Mr. Ross: It is most unfair for my hon. Friend to say that. After all, he is like me, he has never seen the Lord Advocate.
    Mr. Loughlin: Will my hon. Friend give way? The reason why I said "Heaven forbid" is that I have had experience in Standing Committee of his hon. Friends from Scotland demanding the attendance of the Lord Advocate, and then, when he appeared, of his making the position worse by some of the most wonderful stretches of the imagination that I have ever heard from a lawyer.
    Mr. Ross: We can shout as loudly as we like, but the Lord Advocate cannot confuse us because he is not a Member of the House. We could ask for the Solicitor-General for Scotland to give us his interpretation, but with no more success. It is essential that these Law Officers should be able to do this because, after all, the Secretary of State for Scotland and his Department are concerned in relation to this matter. They have to interpret this, and the Scottish courts will certainly be concerned. But the Solicitor-General for Scotland, alas, cannot find any con-
    1534
    stituency in Scotland to adopt him. It shows what little faith the Scottish Tories have in the Solicitor-General for Scotland in the matter of law in relation to Parliamentary that they do not allow him to come and tell us just exactly what this Amendment means.
    I do not know if the English Law Officer will try to sort this out and tell us what he thinks. I should be very grateful if he would give us the benefit of his knowledge and tell us how he would interpret these words. Will he tell us whether, in his opinion, they make sense and whether there is any tie-up between the first two lines and the last two? I cannot see how any enlightened lay Member of Parliament who is awake at this time of night, who is able to read this with one eye, can make sense of it. I am satisfied that it does not. The Government should admit it and tell us what they are going to do about it.
    The Government have already agreed to accept the Amendment, and but for the intervention of my hon. Friend—to whole intervention many hon. Members opposite objected—it would have been passed into law with the rest of the preceding parts of the Bill. The Government are going to be in a bit of a pickle if they now want to make a change in something which 10 minutes ago they were willing to accept.
    Mr. Mitchison: I make no apology for asking some questions about this Amendment, for it is bound to have a considerable indirect effect on the lives and employment of a considerable number of people.
    I cannot resist the conclusion that the present acceptance results from a muddle at some stage or other, and I propose to indicate why. I want an explanation, and I hope I shall have it, not from any of the Treasury Ministers, with great respect, but from the Law Officer of the Crown who is sitting on the Front Bench and who ought to be able to tell us what the subsection in this Amendment means.
    The Amendment begins by saying:
    "In relation to any new town outside a development district which draws or will draw its population mainly from the district…"
    A new town can be inside only one development district but it will be outside a large number of development

    1535
    districts, and in those circumstances I read this Amendment as meaning:
    "In relation to any new town which draws or will draw its population mainly from a development district within which that new town is not…"
    If that is the wrong construction, I shall be most grateful if the Solicitor-General will indicate what the right construction is, but that is the construction as I understand it.
    The first point that arises is this. These development districts are numerous. They vary from time to time. The test for them is an administrative test. There is no reason whatever why a couple of development districts should not be contiguous. Whether they are or not at the moment I do not know; at any time they might be. In that case, it is purely a matter of administrative decision or convenience; it is the opinion of the Board of Trade—nothing more—as to whether we have one or two development districts there. Yet if I am right in this construction, the fortunes of a considerable number of people, their jobs and lives depend upon a ridiculous administrative decision as to whether there are one or two development districts within a given area.
    I want the Solicitor-General to consider that point. May I repeat it to him. It is perfectly possible that a given area may be one, two or three development districts if they are contiguous with one another. That is purely a question of the opinion of the President of the Board of Trade and the decision he gives under the Local Employment Act. Yet, as I read the Amendment, the area which falls to be considered for the purposes of producing population for the new town will be large or small according to whether it is divided or not divided into a number of development districts. If I have not made my point perfectly clear to the hon. and learned Gentleman, I hope that he will tell me. That is the first point. So far, I have dealt only with "draws".
    Now, the next point—"or will draw its population". I pause here to say something else. I do not myself accept the conclusion—I want the hon. and learned Gentleman to give us his opinion and advice about it—that, if a certificate
    1536
    is refused, that is conclusive. No doubt, if a certificate is given, that is conclusive, but supposing that the taxpayer seeking relief establishes in the proper way, either, in the first instance, to the inspector or, ultimately, perhaps, in a court, that there is, in fact, a new town outside a development district which draws its population mainly from that district, is he to be refused the promised tax relief because the Minister will not give him a certificate?
    There is a dilemma here. If, in fact, he establishes this, or could establish it, but he is then deprived of his rights by the refusal of an executive Minister to give him the certificate although the conditions for that certificate are fulfilled, that is, as I see it, giving to Ministers a power over taxation for which I know no parallel whatever, and it seems to me to be fundamentally unjust. The conditions will then be fulfilled. The intention of Parliament will have been fulfilled. Simply the ipse dixit of a Minister or Secretary of State will deprive the taxpayer of the relief to which he appears to be entitled on that state of facts.
    I suggest to the hon. and learned Gentleman, therefore—I want him to be good enough to give his views on the question—that that cannot be so and that the position must be as follows. If, in fact, the taxpayer establishes the facts in the first leg of the Amendment, it does not really matter whether he gets a certificate or not, except, of course, for the convenience of it. If he gets the certificate, that is conclusive, but, even in that case, I suggest, the effect of the certificate is to make the Minister the judge of the facts. I do not know why that is done.
    I am the more puzzled about it from this point of view. Apparently, the Minister who has to give the certificate is not the Minister who deals with the development district but the Minister who deals with the new town. Consequently, to take the case of Corby, for example, the Minister there concerned is the English Minister although, in fact, the main part of the population may come from a Scottish development district. This is no academic point. I assure the hon. and learned Gentleman that it will be a close question of fact

    1537
    whether or not the population of that particular new town does or does not come from a particular Scottish development district.
    Mr. Jay: Or will come.
    Mr. Mitchison: I have not forgotten that. It is "does or does not come" at present. And the certificate, the conclusive certificate, is to be given by an English Minister. How is the Minister to know where those people come from? Men are sent to Corby—many of them skilled men—under arrangements made by Scottish employment exchanges. Others are recruited by private firms up in Scotland. What does the English Minister of Housing and Local Government know about all this? How will be find out? Will he send an inquiry round the town and ask them all where they came from?
    1.15 a.m.
    I turn from that—I am still addressing myself to the Solicitor-General—to this remarkable matter of prophecy. It is not only where the place now draws its population mainly from, but there is also a question of where it will draw its population mainly from. I have often heard of certificates about facts, but I have never heard of a certificate about the future. I should have thought that it verged on the blasphemous, even in the hands of a Minister.
    On what grounds does a Minister of the Crown certify that the population of a given place, remarkably few of whom may have arrived yet, ever will arrive from anywhere and, if so, where they will come from? What kind of certificate is it? Has the hon. and learned Gentleman ever before met a certificate like this about the future? This is poaching on prophets with a vengeance. This is a demarcation dispute of the most serious character.
    Ministers are to tell us about the future and, more than that, to certify conclusively about the future. The prophets will all be out of work. This is fantastic. If the future goes wrong afterwards, it will not have gone wrong in the eves of the Minister or the eyes of the law. It must have happened like that; the Minister had certified so.
    What is the sense of this? Surely, the only conclusion that one can draw
    1538
    is that the Minister's certificate will be a convenient aid in some cases, and no more. If that is the position, the taxpayer—and this is relief to a taxpayer—has to go to the court and establish the future. How will he do that? It would be convenient if the Minister can do it, but how will the taxpayer do it? It means that if it can be shown that a certain new town will draw its population from a certain development district, there will be payment of a given figure of £ s. d. which would not otherwise have been made. I do not know how it is done. I hope that the Solicitor-General will explain the facilities for proving in law courts the future of new town populations. That presents a number of considerable difficulties.
    I hope that I have made my points clear. The Clause contains every possible element of certainty that a Clause in a Finance Bill could contain. It gives to the Executive powers which are so ridiculous that no self-respecting Minister ought ever to have them inflicted upon him. It places on the taxpayer the burden of proving the impossible as a condition of getting the relief which, apparently, the Government intend him to have. To put the matter quite shortly, it is sheer nonsense.
    Mr. Barber: Before the hon. and learned Member for Kettering (Mr. Mitchison) spoke, other hon. Members who raised much the same points as he has done addressed their observations to me. Therefore, I will try in the first instance to answer the hon. and learned Member, especially as in his remarks he was concerned with certain aspects of policy as well as with the interpretation of the words.
    The hon. and learned Member seemed to think that there was something odd in the two words "will draw" appearing in the new subsection. The reason for those words is to cover situations such as at Skelmersdale, where, I understand, very little development has so far taken place, although it is hoped by all concerned that a great deal will take place. Therefore, it is necessary to look at that new town and at any other new town which may come within the ambit of the subsection and where it is likely to draw its population from in the future. I hope that we shall all remember, when we are considering the

    1539
    detail of this subsection, that all that my right hon. Friend is trying to do in accepting this series of Amendments is to help new towns like Skelmersdale. I am sure that is something we are all in favour of.
    As to the difficulty of reaching a conclusion as to where a new town will draw its population from, that, as the hon. and learned Gentleman hinted, is a matter of judgment. I think he called it prophecy, but it will be a judgment, made by the Minister of Housing and Local Government or the Secretary of State for Scotland, based on the facts which are available. Of course, as the hon. and learned Gentleman knows, when one is talking of new towns and development districts, there is a great deal of long-term planning which goes on in connection with new towns, and I should have thought that there would be ample facts available to enable the Minister concerned to reach a conclusion.
    The hon. and learned Gentleman asked what is to happen if the Minister went berserk or something like that, and refused to give a certificate, although a private individual with sufficient interest were able to establish that the new town in question drew or would draw its population mainly from a development district which he specified. As I understand it, and I have consulted my hon. and learned Friend on this point, if a certificate were not given and the criteria laid down in the subsection were established, then indeed the new town would qualify for free depreciation, but it was thought to be of convenience to have provision for a certificate to be issued by one of these two Ministers, and I should have thought that an advantage.
    The other point raised by the hon. and learned Gentleman was the meaning of the words "the district". I think I can best explain what is meant by the subsection in this way. One takes a new town and is considering whether or not it falls within the ambit of this subsection. Then one considers any single development district and whether the new town draws or will draw its population mainly from that particular district. As the hon. and learned Gentle-
    1540
    man pointed out to us, there is towards the end of the subsection a reference to "a specified district". Therefore, one has to consider, in accordance with this subsection, the position of the new town in relation to any particular district. Having done that, one comes to the conclusion that it draws or will draw its population mainly from that particular district, or that it does not. If one finds that it does not come from that particular district one looks to see if it comes from another.
    Mr. Mitchison: "Will draw." I wish the hon. Gentleman would deal with this more seriously. What the Minister is going to certify is that the new town "will draw" its population from a particular development district. He is also, presumably, going to consider whether or not that development district will be there in a year or two's time, and it is not only a year or two but longer. He is going to consider whether the conditions which will attract the population from that district will exist. At the end of it all there will be peculiar injustice if the same number of people come from the same area. It depends on whether that area is one or two development districts whether the relief is given to the taxpayer.
    Mr. Barber: I will elaborate that point if I may. I think it is perfectly clear from the wording that the district referred to must be a development district. Therefore, all one has to do is to look at any particular existing development district to see whether the population of the new town is either coming from or will come mainly from that particular development district. If the Minister comes to the conclusion that the new town will draw its population mainly from the existing development district the fact that it may be descheduled, or whatever the phrase is, in a year or two's time certainly would not preclude the Minister from designating the new town as being eligible for free depreciation.
    Mr. Jay: We are not objecting to the purpose which the hon. and learned Member for Southport (Mr. Percival) and the Government have in mind. We are arguing that the Clause as drafted may produce effects quite different from those intended. The difficulty arises from the

    1541
    ambiguity of the word "outside". The crucial phrase is
    "a new town outside a development district."
    The hon. and learned Member, or whoever drafted the Clause, had in mind Skelmersdale outside Merseyside or East Kilbride outside Glasgow in the sense of a new town which was near to a development district. But the word "outside" has not only that sense. One could say that Berlin is outside the United States or that Melbourne is outside Russia, so that the Clause would apply not only to new towns such as Cwmbran, Skelmersdale and East Kilbride but to Corby, Stevenage or Basildon, because they are outside a development district. If a new town is not in a development district, obviously it is outside a development district.
    Applying the Minister's argument, Corby and Stevenage are new towns outside a development district. If it were established that a new town in the South of England was likely to draw its population mainly from Scotland or the North-East Coast, then, according to the Minister's interpretation, Corby, Stevenage and similar new towns would qualify for free depreciation. That is not what the hon. and learned Member intends, and I am sure that it is not what the Chancellor intended, for the concession would be used to achieve exactly the reverse of the object of the Local Employment Act, and the Budget. It would mean that free depreciation was being used as a magnet to draw population from Scotland to some new town in the South.
    Mr. Ross: This is giving the Government too much credit. They must be drawn from only one development district in Scotland. Scotland is not a development district.
    Mr. Jay: I was dealing with the Financial Secretary's interpretation. If a new town in the south of England drew population from one, or according to the Minister's interpretation more than one, development district, it would qualify for the concession.
    Is the Chancellor satisfied that if we adopt the Clause in this form it would not apply to new towns in the Midlands or around London which were drawing population from one or more of the development districts? If it could have
    1542
    this effect—as appears to be the case from the Financial Secretary's interpretation—would it not be better to find some way to reconsider the wording?
    Mr. Maudling: The discussion has gone rather wide. There is a specific problem which is difficult. I said in my Budget statement that we were introducing a new principle of differentiation in taxation which was quite a new principle to our law, and I said that it would be important to draw pretty exact lines. We therefore drew the exact line around the development districts as such and we did not go into the "grey" area which is covered by the specific grants of the Board of Trade.
    1.30 a.m.
    There is one point which the Amendment brings forward, that there are certain new towns—not so much expanded towns—which are really extensions of existing towns. Skelmersdale is probably the best example. People from Liverpool are being housed in Skelmersdale. The population of the new town will be transferred from a development district in these circumstances, and, therefore, it is sensible that the same privileges or advantages should apply to them in their new city as would have done in their old city.
    I understand the feeling behind the proposal, which is that where there are new towns whose purpose is in practice to receive population from anexisting development district, that new town should have the advantages. I think I am right in saying that in the North-East all the new towns are in development districts. In Scotland, by and large, all are in development districts. Thus, as far as I can see, in practice Skelmersdale is the only example where we shall have a new town linked with a development district and drawing its population from a development district, Liverpool—which is the purpose of building the new town.
    The Amendment desires to deal with a simple practical problem which is worth dealing with. I see no reason why the proposal should be extended beyond this. The Amendment refers to "the district" and "a specified district," and does not extend beyond that.
    Mr. Jay: While we agree with the aims, can the right hon. Gentleman explain how the words in the Amendment

    1543
    would not apply to, for instance, Corby if it were drawing its population mainly from a development district in Scotland?
    Mr. Maudling: If that were so, it would apply, but I do not think it does.
    Mr. Willis: To take a specific example, if the new towns of East Kilbride or Livingston were descheduled, they might take workers from Glasgow or North Lanark. As I understand the right hon. Gentleman, if either of these new towns was linked with a specified development district, such as Glasgow, and the majority of the population came from the neighbouring development district, the new town would not be entitled to the payments under the Clause. As I understand it, the Secretary of State will tie a new town to a specific area—North Lanark or Glasgow, contiguous areas—but if the majority of the population came from a development district which had not been tied to the new town—which is possible because of the high unemployment in either area—it would not be eligible for the grants under the Clause.
    Mr. Dalyell: Will my hon. Friend accept that this is not a hypothetical problem but an actual problem? The area which contains Livingston has been scheduled, de-listed and scheduled again, and that might happen again in the future.
    Mr. Willis: I was dealing with it not as a hypothetical problem but as a very real problem. I fail to understand why a new town should be disqualified from receiving grants simply by virtue of the fact that it happens to be taking unemployed from Glasgow rather than from North Lanark or from North Lanark rather than from Glasgow. What is the purpose of this provision? Surely it is quite wrong. I should have thought that in order to have been effective it should have had rather a different interpretation from that which it was given by the hon. Member.
    It appears to me to be desirable for the Government to frame a Clause which would embrace this kind of circumstance. I do not see how the Secretary of State for Scotland can decide from where a new town is to draw its population if it is situated in central
    1544
    Scotland. Everyone knows the situation in the west of Scotland, and appreciates that population is likely to come from a number of develpoment districts. It might even come from Fife, which is a development district.
    Under this provision a new town will receive the grant only if the Secretary of State happens to be a good guesser and guesses the right district to which to tie the new town. That is hardly a suitable foundation upon which to base fiscal policy. I should have thought that the Chancellor of the Exchequer would hardly like to base his fiscal policy on the guesses of the Secretary of State for Scotland. One could hardly think of a more unsatisfactory method of distributing assistance. The provision appears to be quite unsuitable from that point of view.
    We all agree that the Government are trying to extend this assistance. That is a very good thing. But we question whether the provision provides the best method of proceeding. I should have thought that in the circumstances I have outlined, which are very practical circumstances, and quite likely to arise in Scotland, the provision does not do that.
    I agree with the other criticisms that have been made, but in order not to waste the time of the House I have not said anything about them. But this difficulty, which is made all the clearer by the explanation which has been given by the Chancellor, seems to present a real difficulty and to give rise to serious problems and also to the question why the town should be dependent upon this choice in an area where several choices can be made by the Minister concerned.
    Mr. Callaghan: I do not know whether my hon. Friends feel like torturing the Government any longer on this matter. What we have done is to expose the slipshod way in which this provision has been drafted, and to bring up a number of obvious anomalies which will become clearer as time goes on. I am not sure whether I am being fair to the hon. and learned Member for Southport (Mr. Percival). When hon. Members on this side of the House draft Amendments we are always told by the Government that our drafting is wrong, and even when they accept the

    1545
    principle they make us withdraw them in order that better-worded Amendments can be moved.
    The drafting in this case is slipshod, and I appreciate the difficulties under which the hon. and learned Member labours. I am surprised that the Chancellor should have accepted a provision worded in this way, and which has no doubt been worded in this way because the hon. and learned Member has not had at his disposal the tools that the Government have. I am surprised that the Chancellor should not have said to his hon. and learned Friend, "Withdraw the Amendment, and we will see what we can do about it". That would have been the best thing to do—unless assistance was given to the hon. and learned Member in the drafting of the provision. The responsibility now rests on the Government. It is they who are putting the Clause through. It is they who are recommending its acceptance. It looks as though they may well be inviting a number of court actions to be decided if the facts are not conclusive. It is clear that they have opened the door much wider than they intended. I do not know that we need resist it and I do not know that we need go on reminding the Government, at any rate this year, of what they have done.
    I draw attention to one further difficulty which the Chancellor has led himself into by the wording he proposes that we should accept. It is the intention of the Labour Party, if we win the next General Election, to build a new town in Mid-Wales. We hope that the population of that town will come from other parts of Wales. I put it to the right hon. Gentleman that it will be extremely difficult for the new town to get this free depreciation allowance, unless it can prove that it will draw all or the majority of its workers from the relatively small number of development districts. This is absurd, since the necessity of Mid-Wales, as everybody who knows it will agree, is to encourage industry to go there and establish itself there. We shall have to go to great pains with the aid of slate and crayons, census enumerators combined with birth certificates, and goodness knows what, to prove to the Minister of Housing and Local Government that all the workers will
    1546
    come from a particular district. This is madness. I do not believe the Clause will stand up beyond 12 months. I am willing to venture, outside the Chamber, considerable odds that the Government will come forward with Amendments to the Clause to make it more workable next year.
    Mr. Ross: They will not be there then.
    Mr. Callaghan: I yield to that. My hon. Friend is obviously right. Let us let them have their provision, wallow in the mire, and discover their own mistakes, which through lack of foresight they have been unable to see until we pointed them out to them, and let us move to the next Amendment.
    Amendment agreed to.
    Mr. Barber: I beg to move, in page 40, to leave out lines 29 to 32 and to insert:
    "the following machinery or plant as if the district had continued to be a development district, that is to say—

    (a) machinery or plant which at that time is within, and has before that time been used in, the district;

    (b) machinery or plant provided for use in the district under a contract entered into before that time;

    (c) machinery or plant provided for use in the district under a contract entered into within two years after that time and in the case of which the following conditions are satisfied—

    (i) that it is for use in or about a building or structure provided for use for industrial purposes under a contract entered into after the 3rd April 1963, or is for use in conjunction with other machinery or plant so provided, and

    (ii) that its provision was required for the fulfilment of the purpose for which the building or structure or, as the case may be, the other machinery or plant was provided, and

    (iii) that contracts for the provision of a substantial proportion of the assets required for the fulfilment of that purpose had been entered into before the district ceased to be a development district."

    I think it will be convenient to discuss with this Amendment the Amendment in Clause 39, page 42, line 6, which is consequential upon this Amendment.
    This is an important Amendment which, as things have turned out, was rightly requested by several of my hon.

    1547
    Friends when we first considered Clause 38. The Amendment extends the provisions for free depreciation on new plaint and machinery so as to provide some safeguard for a trader who, when a district ceases to be a development district, is in a practical commercial sense committed to expenditure on plant and machinery but is not actually committed to it by a binding contract at that time. In its present form the Clause provides in subsection (6) that, when a place ceases to be a development district, the free depreciation provision will still run in two cases. The first is for plant and machinery then in the district which has alreday been put into use in the district. This covers the case where the trader had not claimed the full amount available by the time the district ceased to be a development district. The second case is for plant and machinery provided for use in the district under a contract entered into before the district ceased to be a development district.
    1.45 a.m.
    The new proposal embodied in the Amendment covers the case where a trader has embarked on a project which would take some time to complete and has already contracted for substantial capital expenditure, while the district was still a development district, but has left over the ordering of some plant and machinery which is necessary to complete the project. He may, for example, have entered a contract for the construction of a new factory, or the factory may be under construction when the district ceases to be a development district. He may have left over ordering the necessary plant and machinery for good commercial reasons; perhaps to see how prices would go or how a particular machine would prove itself.
    In such a case he must go on with the purchase of plant and machinery and the Amendment would give him a further two years in which to enter the necessary contracts to secure the title to free depreciation. It was a proposal somewhat on these lines which was suggested by hon. Members when we considered this matter in Committee. We have, in the light of that discussion, looked at the matter further and I am sure that the Amendment will commend itself to the House.
    Mr. Mitchison: One does not want to find too many difficulties in a Clause of this sort, which is designed to deal with a position which may vary considerably between one case and another. However, considering the part which represents the new portion of the Clause, I find the timing rather curious. A period of two years is allowed and the Financial Secretary seemed to assume that that was reasonable. It seems a rather long period and there is no question of having a shorter period and discretion to extend it or anything like that. It is an absolute right.
    Considering the conditions to be satisfied, one sees that the first condition is that it must be
    "(c) machinery or plant provided for use in the district under a contract entered into within two years after that time and in the case of which the following conditions are satisfied—

    (i) that it is for use in or about a building or structure provided for use for industrial purposes under a contract entered into after the 3rd April 1963…"

    Can we be told why the date 3rd April, 1963, has been selected and whether an alternative was considered, providing a somewhat stricter frame than the one in the Amendment; a frame giving a discretionary power to extend it in appropriate cases?
    Mr. Barber: It is a question of judgment as to whether two years is the right period. I think it is generally agreed that some period is desirable to cover the case where a manufacturer has not entered into a binding, legal contract to purchase plant or machinery but where he is, for all practical purposes, committed to do so because he has started to build.
    Considering the time it takes to erect a factory and order the necessary plant—and,as I said, there may be sound reasons why the ordering has been deferred—I should have thought that two years was a reasonable period. It is a matter of judgment and other people may have taken a different view about the timing.
    Mr. Deputy-Speaker: The Financial Secretary, if he is making a full second speech, can do so only with the leave of the House.
    Mr. Barber: I apologise, Mr. Deputy-Speaker, and I ask for the leave of the House to speak again.

    1549
    The hon. and learned Member for Kettering (Mr. Mitchison) asked why reference was being made to a contract entered into after 3rd April, 1963. The reason is simply to keep this in line and consistent with the whole basis of free depreciation. As announced by my right hon. Friend, it would, in general, apply to the purchase of plant and machinery and to contracts entered into after 3rd April. This is part of the whole basis of the Clause and this is just a reflection of it.
    Amendment agreed to.
    Further Amendment made: In page 41, line 23, at end insert:
    "new town" means an area designated under the New Towns Act 1946 as the site of a new town.—[Mr. Percival.]
    Clause 39.—(ANNUAL ALLOWANCES FOR NEW MINING EXPENDITURE IN DEVELOPMENT DISTRICTS.)
    Amendments made: In page 41, line 32, leave out "the percentage of that residue" and insert:
    "so much of that residue as it."
    In page 42, line 6, leave out subsection (3) and insert:
    (3) Subsections (5) and (6) of the foregoing section shall apply for the purposes of this section as they apply for the purposes of that section, but so that the said subsection (6) shall apply as if references to machinery or plant included references to works expenditure on the construction of which is expenditure to which the said Chapter III applies, and as if, in the application of paragraph (c) of that subsection to such works, references to a building or structure were omitted.—[Mr. Barber.]

    Clause 42.—(SUPPLEMENTAL PROVISIONS AS TO CHAPTER III.)
    Mr. Barber: I beg to move, in page 45, line 36, to leave out from "1963" to the first "for" in line 38 and to insert:
    "a provision of the foregoing sections of this Chapter which applies to that expenditure but is not expressed to apply for the year 1963–64 and subsequent years shall apply".
    This is a drafting Amendment made necessary by the acceptance in Committee stage of what is now Clause 40—"Contributions to expenditure on treatment of effluents."
    Amendment agreed to.

    Clause 43.—(CO-OPERATIVE HOUSING ASSOCIATIONS.)
    The Solicitor-General: I beg to move, in page 46, line 40, to leave out "paragraph 1 or 5" and to insert "paragraphs 2 to 4."
    This Amendment speaks for itself. It is the new numbering of paragraphs 2 to 4 of the Fourth Schedule, on which I shall shortly have an opportunity of addressing the House. The Amendment is consequential.
    Amendment agreed to.
    Clause 46.—(ACCOMMODATION OCCUPIED BY HOLDER OF OFFICE OR EMPLOYMENT.)
    Mr. Barber: I beg to move, in page 49, line 29, at the end to insert:
    Provided that this section shall not apply if the rent is not less than might reasonably be expected to have been obtained at the time when the tenancy was granted, having regard to the terms of the tenancy, and, if at any subsequent time the landlord had the power (whether by terminating the tenancy or otherwise) to obtain a higher rent, the rent is not less than might reasonably be expected to have been obtained as aforesaid at that subsequent time.
    This Amendment might be conveniently taken with the Amendment in page 50, line 13, at end insert:
    (7) In this section "terms of the tenancy" docs not include any obligation imposed on the occupier or his wife in connection with his or her office or employment.
    These were put down to meet points raised in discussion between the Inland Revenue and the Institute of Chartered Accountants of Scotland. We are grateful to the Institute for pointing out that there was a matter here to be put right.
    The Clause imposes a Schedule E charge on a person holding an office or employment if he occupies premises in the United Kingdom under tenancy from his employer and if they are rent free or at a rent which is below the annual value of the premises. The Schedule E liability is based on the annual value of the premises less any rent which he pays for it. The point which the Scottish accountants made is that the Clause may be unfair if the premises are let originally on commercial arm's length lease, but the value of the premises has gone up since the lease was originally granted so that the rent is now below the current value.
    This point seems particularly strong where the lease was entered into when

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    the tenant was not in or even contemplating entering the employment of the employer but subsequently enters into such employment. I imagine that this sort of case is not likely to be common, but obviously if it arises it would not be right to impose Schedule E liability on an ordinary employee who is merely occupying by virtue of a bona fide commercial lease at a rent which cannot be increased, even though the value of the premises has gone up. This principle holds good also if the lease was entered into when the tenant was in the employment of the employer. In such a case the benefit the tenant is getting is exactly what he would have got as an ordinary tenant. It has no element of remuneration from the employment in it. These Amendments meet the points, and again I express gratitude to the Scottish accountants.
    Mr. Callaghan: I am deeply grateful to the Financial Secretary for that explanation. Even at the risk of keeping the House from Schedule 4 and the pleasure of listening to the Solicitor-General, I should like to draw attention to the wording. I read it six times and did not understand it. We heard what the Financial Secretary said and a glimmering of light broke through. I think that I understood what he said. If I did not, it is the fault of the imperfection of my understanding and not of the clarity of his explanation. I ask the House to read this and see what it makes of it:
    "Provided that this section shall not apply"—
    I am all right as far as that—
    "if the rent is not less than might reasonably be expected to have been obtained at the time when the tenancy was granted, having regard to the terms of the tenancy, and, if at any subsequent time the landlord had the power (whether by terminating the tenancy or otherwise) to obtain a higher rent, the rent is not less than might reasonably be expected to have been obtained as aforesaid at that subsequent time."
    What on earth does it mean?
    I hope it means what the hon. Gentleman said. I doubt whether the combined resources of the Attorney-General and the Solicitor-General would pledge themselves on a Clause drafted as obscurely as this. Let us read the words again and allow them to drop on our senses:
    1552
    "…the rent is not less than might reasonably be expected to have been obtained as aforesaid at that subsequent time."
    This is gibberish. I protest at drafting of this sort. The difficulty is that draftsmen today do not like full stops and it is astonishing how the quality of drafting varies a great deal. I read 20 lines of an earlier Clause which were without a full stop. It is important that even people like me should understand these things and it would be a good idea if now and again we dropped a full stop into some of these subsections. Let us use a few more verbs. Let us relate what we are saying to a single thought and then go on to a new sentence. It may take a few more words but it is worth it. I repeat that I do not understand what the last two lines of the Amendment mean. I trust the Financial Secretary, who has an honest face. I am willing to believe that they mean what he says they mean, but I cannot with the best will in the world say that I know they mean that.
    2.0 a.m.
    Mr. Dalyell: In my first 12 months in the House I was too hesitant to complain about this sort of thing. In some ways it would have been slightly impertinent to do so. But at the beginning of my thirteenth month I should like to echo the protest made by my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan). This is abracadabra legislation, and the sooner we get rid of it the better.
    Mr. Mitchison: I want to ask one question. I see that it was the Scottish accountants who called the Treasury's attention to this matter, and I have been looking through the Finance Bill to find out what happens to feus. I wonder if we could be told. These are leases. Are feus leases? They should not be, and, if not, what is the explanation, and did the Scottish accountants says anything about feus?
    Mr. Anthony Kershaw: It seems to me that it is crystal clear. What are the Opposition worrying about?
    Mr. Barber: Until the hon. and learned Member for Kettering (Mr. Mitchison) spoke I thought that he had not spoken because it was clear to him. But if he wants to know about feu duty

    1553
    he will find it in Clause 15 (1, b) which makes provision for the taxation of feu duties.
    Mr. Mitchison: We are not talking about the taxation of feu duties. We are talking about something quite different. How do feu duties come into this context?
    Mr. Barber: As far as I know, we are talking now about Clause 46, and unless the reference to feu duties in Clause 15 is somehow imported into Clause 46 I should not have thought that it would be relevant. I am afraid that without notice I should not like at this stage to give an answer off the cuff.
    Mr. Mitchison: Before the hon. Gentleman sits down may I ask him whether that is quite clear? What we are talking about are conditions under which this Clause shall apply, and they are related to the rent that might have been obtained, and so on. I should like to know how we translate this into ordinary Scottish practice. I am sure that there is an answer somewhere. What is it?
    Mr. Barber: If one looks at Clause 46, paragraph (a) and (b) of subsection (1), one sees that they refer to the case where an employee
    "pays no rent for the premises, or the rent he pays for them is less than the annual value of the premises…"
    If one refers to Clause 15, there it refers to
    "rents under leases of land in the United Kingdom"
    and there is a separate reference to
    "rentcharges, ground annuals and feu duties."
    Here we are concerned with rent.
    Amendment agreed to.
    Further Amendment made: In page 50, line 13, at end insert:
    (7) In this section "terms of the tenancy" does not include any obligation imposed on the occupier or his wife in connection with his or her office of employment.—[Mr. Barber.]

    Clause 52.—(GIFTS IN CONSIDERATION OF MARRIAGE.)
    Amendments made: In page 52, line 15, after "would" insert:
    "(subject only to any power of appointment to a person falling within sub-paragraph (i) or (iii) of this paragraph)".
    1554
    Line 17 at end insert:
    "or persons becoming entitled (subject as aforesaid) on the failure of any limitation in tail'.—[Mr. Barber.]
    Mr. Barber: I beg to move, in page 52, line 19, after "issue", insert
    "or the wife or husband of any issue".
    Subsection (l,b) of Clause 52 lists the persons who may be included in a marriage settlement without loss of the Estate Duty exemption. This list includes in paragraph (b,i) the parties to the marriage, their issue and the spouses of the issue. Paragraph (b,iii), which provides for a second marriage of one of the parties to the marriage, includes spouses and issue of any such second marriage. As it stands, the paragraph does not include any spouses of the issue of the second marriage, because it was not thought that such persons would be included in marriage settlements. It has been suggested, however, that it is reasonable for a marriage settlement to allow provision to be made for the family of the second marriage in precisely the same way as for the family of the first marriage. This Amendment accordingly adds the spouses of the issue of this second marriage to the list of possible beneficiaries.
    Amendment agreed to.
    Mr. Barber: I beg to move, in page 52, line 21, to leave out "the trusts" and to insert:
    "such trusts, subsisting under the law of England or of Northern Ireland, as are".
    The Trustee Act, 1925, which is referred to in the sub-paragraph which is sought to be amended by this Amendment, does not apply to Northern Ireland and the Northern Irish authorities have questioned whether British assets in Northern Irish marriage settlements containing protective trusts would be exempt under the Clause. This Amendment puts their position beyond doubt.
    Its effect is that the inclusion of a protective trust in a marriage settlement will not disqualify it from exemption provided the protective trust is within the specified conditions and is governed by the law of some part of the United Kingdom.
    Amendment agreed to.
    Mr. Barber: I beg to move, in page 52, line 36, to leave out subsection (2) and to insert:
    (2) A disposition made by either of the parties to a marriage shall not be prevented from being treated as a gift for the purposes of section 2(1,c) of the Finance Act 1894 (description of property deemed to pass on death) by reason only that it is in any way made in consideration of marriage, and references to a gift in the other enactments relating to estate duty (including the foregoing subsection) shall be construed accordingly.
    This Amendment is a redraft of subsection (2) of Clause 52 which in its original form caused some perplexity to hon. Members when we discussed it in Committee. My hon. Friend the Member for Crosby (Mr. Graham Page) in particular raised the matter. I am grateful to him and other hon. Members who suggested that we might improve it, and I hope that the redraft is easier to follow.
    Amendment agreed to.
    Mr. Barber: I beg to move, in page 52, line 40, after "marriage", to insert:
    "or adopted by the husband and wife jointly".
    This Amendment adds children adopted by the husband and wife jointly to the list of those who may be included as beneficiaries of a marriage settlement without loss of the Estate Duty exemption. My right hon. Friend the Chancellor of the Exchequer put down this Amendment as a direct result of the initiative taken by my hon. Friends the Members for Manchester, Blackley (Mr. E. Johnson) and Portsmouth, Langstone (Mr. Stevens).
    Mr. Graham Page: I see in my hon. Friend's Amendment that he restricts this provision to children adopted by the husband and wife jointly. There are cases in which children are adopted by one or other of the spouses, and I wonder why it has been restricted to the joint spouses.
    Mr. Barber: The House will remember that when we originally discussed this Clause I explained that what we were trying to do was to place the law in the same position as we had thought it was before the Courtauld decision in the House of Lords. What we are doing now, as a result of decisions made in Committee, is to make a slight extension in favour of adopted children. But the present legal provisions as we thought
    1556
    they were before the Courtauld decision provide in the case of marriage settlements for legitimate children of the two spouses with extensions at some time to the natural children, the illegitimate children, of the two spouses, and therefore we thought it was right to make the same extension in this Clause when dealing with adopted children.
    I made inquiries and I understand that it is quite common form and normal for children to be adopted by the two parties jointly. Certainly in any normal case I should have thought that this was the reasonable way to deal with the matter. We were simply trying to extend the provisions to adopted children on the same lines as they exist for legitimate children and natural children.
    Mr. Eric Johnson: It is not often the good fortune of anyone sitting on the back benches to find that a suggestion he advances at one stage is later taken up by the Government. This occasion is all the more remarkable, perhaps, because the suggestion came from someone like myself whose knowledge of taxation matters is, to put it politely, not exactly profound. I am very grateful to my right hon. Friend for putting down the Amendment. It goes a very long way to meet the point I had in mind.
    The Amendment which I put down at an earlier stage was not selected, but, Mr. Deputy-Speaker, you allowed me to refer to it, and my hon. Friend the Financial Secretary said that he would look into the matter to see whether he could meet my point. This he has done, and I am very glad that I stayed until this early hour in the morning to say "Thank you" to him for it.
    I notice that my right hon. and learned Friend the Member for Huntingdonshire (Mr. Renton) had a somewhat similar Amendment down which was not selected. He asked me to say that he had hoped to be here but he had an engagement which prevented him from staying on. [Interruption.] In defence of my right hon. and learned Friend, I should say that he told me that at about 4 o'clock this afternoon. I wonder whether what he had in mind is covered by my right hon. Friend's Amendment.
    Mr. Barber: With the leave of the House, may I explain that matter? I

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    think that there were two points in the Amendment put down by my right hon. and learned Friend the Member for Huntingdonshire (Mr. Renton). One related to the question whether the adoption should be limited to an adoption by both parties to the marriage or by one spouse only. I think that I have already covered that point.
    The other I can best answer, I think, by saying that the Amendment which I have moved will cover not only children adopted by the immediate marriage but also children adopted at a later stage, for example, by the issue of the marriage or by a subsequent marriage. As I understand my right hon. and learned Friend's Amendment, which, of course, he has not had the opportunity to explain as he is so busy elsewhere, this would cover the point he might have put had he been here.
    Amendment agreed to.

    Clause 54.—(REDUCED DUTY ON CONVEYANCE OR TRANSFER ON SALE.)
    Mr. Mitchison: I beg to move, in page 54, line 9, to leave out from "relation" to "to" in line 11.
    Mr. Deputy-Speaker: It will be possible to discuss with this Amendment the next following two Amendments, that is to say, in page 54, line 12, to leave out "that" and to insert "the said'; and in page 54, line 18, after "affect" to insert:
    (a) any duty chargeable under or by reference to the said heading as it applies to a conveyance or transfer of stock or marketable securities; or (b).
    Mr. Mitchison: I am much obliged, Mr. Deputy-Speaker.
    These Amendments raise a point which is important both as a matter of principle and as a matter of the amount of revenue involved. I regret that the Government's reluctance to accept a Motion earlier in the evening has forced us to consider them at this hour.
    As I understand it, Clause 54(1) prescribes, in effect, the scales set out in Schedule 9, and these are scales relating to a conveyance or transfer on sale. The effect of the Clause is partly to reduce the duties in connection with convey-
    1558
    ances of land and so on, and with that point these Amendments are not concerned.
    2.15 a.m.
    Subsection (2) contains a reference to
    "duty chargeable under or by reference to"
    the heading "conveyance", and so on,
    "as it applies to a conveyance or transfer of stock or marketable securities",
    and to a conveyance of that character the second column in the Schedule is made to apply. The Schedule appears at page 84 of the Bill and the second column is called "Ordinary rate".
    The effect of the Amendments is to remove the reference at that point to a transfer of stock or marketable securities, leaving, therefore, that subsection to apply only to matters that come in under the heading "Lease or Tack", which I am not dealing with at the moment. The third Amendment saves, in effect, at the present rate the duty on stock or marketable securities. Thus, the effect of the three Amendments taken together is to deny the benefit of the proposed reduction, the halving of the duty in respect of one group only of conveyances—that is, conveyances or transfers of stock or marketable securities.
    To put the matter in the simplest language, the intention of these Amendments is to leave the duty on stock transfers as it is at present instead of reducing it by half. It does not affect the duty on conveyances of land or lease or tack, or the rest of it. It is simply the one heading of Stock Exchange securities, and, strictly, not all those. That is the broad point that it is intended to raise and I turn from that to indicate why I regard it as important financially.
    From Table 11 of the White Paper, one gets the figures separately for the effect of the reduction of duty on transfers of stocks and shares. The effect is to amount to a loss of revenue this year, 1963–64, of £16 million and of £25 million in a full year. I; is a considerably larger figure than that of the reduction of duty on other matters. It is, therefore, the main thing affected by the Clause and it compares with the larger items in other parts of the table. To take a rough standard of comparison,

    1559
    it is roughly—not accurately—about half the cost of the abolition of Schedule A. Therefore, this modest little Clause, as one might call it, has a considerable effect.
    Let us consider what the effect is. First, the loss of revenue means that if the Chancellor of the Exchequer requires the money, somebody else has to pay it and the people who become entitled to this reduction are those who are concerned in buying and selling shares on the Stock Exchange. I have no particular comment or criticism to make on that. One does it oneself at times—at least, I do—but I fail to see why, if concessions are to be made, this class of people at that moment should get this concession.
    We have been putting forward Amendments to the Bill asking for a number of personal reliefs, and I shall not go through them again, but we also have put Amendments forward—there were some of them today—on questions of indirect taxation. I simply put it to the House that what we are comparing here is, on the one hand, a benefit to be given to people who deal in stocks and shares in one way or another and, on the other hand, benefits to be given—say, the Purchase Tax on ordinary domestic articles, the present 10 per cent. Purchase Tax on pots and pans, boots and shoes and all the stuff that the Chief Secretary taxed for the first time after the 1955 election. Of course, it amounts to more, but very considerable concessions could be made. Industries which are in difficulty at present, and which are having to pay this Purchase Tax, could be relieved of it at the moment. There is quite a wide field for concessions when we are dealing with figures as large as this.
    Then we are told that this is all nicely balanced and that the object of the Finance Bill is to allow a further expansion nicely balanced so as not to amount, on the one hand, to inflation, nor, on the other, to a continuance of the hard régime introduced by the right hon. and learned Gentleman the previous Chancellor of the Exchequer. If that is the position, how does this particular item come into it? Does it really encourage people to spend more or less? Is this the best use of the concessions by the national Revenue, if the object is to secure that balance, and to prime the
    1560
    pump, as it were, to a nicely measured degree? Therefore, looking at the matter not merely as a social matter but as some question of economic balance in the community, what exactly is the contribution of this particular remission of tax?
    Nobody likes paying taxes. There are plenty of candidates for concessions of this kind. I am not going elaborately through them, but exactly what purpose really is served by halving Stamp Duty at the moment? It is true that at one period it was at the lower figure to which it is now intended to reduce it, but, after all, it is not the only thing in the world which has gone up, and it is not the only tax which has gone up either. Why select this particular one?
    This seems to me to be a similar measure—I quite agree, on a less significant and obvious scale perhaps—but the same sort of measure as that which the Government introduced when, right in the middle of a Budget which appeared to have a whole lot of other objects, they suddenly introduced considerable concessions to Surtax payers. A considerable concession to traders and dealers in Stock Exchange securities seem to me to be exactly a concession of that character. I repeat, not so significant: the amount involved is considerably smaller; but the reason for it seems to me to be even smaller yet. What is it?
    Are we to be told that if we have too much Stamp Duty in London people will transfer their stocks and shares somewhere else? No doubt, one can find an instance or two, but really, to suppose that the level of Stamp Duty in London seriously affects the places where these transactions are effected is too great a strain on my credulity, at any rate.
    Are we, than, to be told that this will encourage—what is it called?—a property-owning democracy? I do not know. I have never quite understood what a property-owning democracy was supposed to be. I think it was supposed to be a collection of property-owning democrats rather than a property-owning democracy, but be that as it may, is it really supposed that the amount of this Stamp Duty will make much difference to that sort of thing? Again, I cannot believe it.
    I would not pay much attention to the thing if it were not that the total of all

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    these small concessions to Stock Exchange transactions amount to the very substantial sums I have mentioned. Therefore, I would say, in support of these Amendments, let the Government do what they are doing about land; let this conveyance certainly stand; but as regards Stock Exchange securities, there is no good reason for this at the minute, and they cannot very well persist in this when they refuse at the same time to make concessions about personal reliefs. Purchase Tax and the like, for which we have been pressing during these debates.
    There are two kinds of reason for it. One is the social reason that if we are to benefit a class of people, this is not the class which stands most in need of relief; and the other is economic, that if we wish to use a nice balance of the Finance Bill to arrive at the state which we desire to reach in the economy, then I fail to see how this measure has any noticeable effect in that respect. In the light of that, I have come to the conclusion that the Conservative Party are doing what they have done so often before—making a concession to their friends in the City at the expense of the mass of the general taxpayers.
    Mr. F. M. Bennett: At this late hour I will resist the temptation, though with difficulty, to run through all the irrelevancies and inaccuracies of the speech of the hon. and learned Member for Kettering (Mr. Mitchison), and I will comment on only one aspect.
    He said that a certain matter would strain his credulity. I am not a judge of what ought and what ought not to strain his credulity, but before he comes to the House he should take the trouble to check whether this duty was a serious obstacle to the maintenance and improvement of the earning capacity of the City of London in invisible earnings. He is so blinded by prejudice about people who may or may not gain from this small concession that he has not troubled to investigate what has been happening in recent years since the Stamp Duty was doubled. Stock Exchanges have been growing and increasing in strength on the Continent of Europe, not only taking business directly away from Britain, which admittedly may be small, but often stopping a substantial number of foreigners from investing in British and other' shares in this country because they
    1562
    could do it a great deal cheaper overseas. The facts and the figures are there, and if the hon. and learned Member had taken the trouble to study them he would not have made the speech which he has just made. Milan and Berne—
    Mr. Jay: Does not the hon. Member realise that if by this means we tempt investors from abroad to invest in this country, that does not increase our invisible earnings but exactly the reverse? It leads to dividend and interest payments from this country to people overseas, which increases our invisible imports, not our invisible exports.
    Mr. Bennett: I had not expected to have to give a lecture on foreign exchange earnings at this time of night. The right hon. Gentleman is completely wrong. It is a matter of those who wish to invest not only in British securities but also in both American and Continental securities, which can easily be bought either on the Continental exchanges or in London. If the right hon. Gentleman knew that he could buy more cheaply on the Continental exchanges than in London because of the 2 per cent. Stamp Duty, where would he do his buying?
    Mr. Jay rose—
    Mr. Bennett: I am sure that the hon. Member has the chance of catching your eye, Mr. Speaker, and can make his own speech. There has been a distinct choice where people could buy certain shares, either in London or on the Continental exchanges where there was no 2 per cent. Stamp Duty. So clearly can it be seen that prices for exactly similar shares could be shown on the Continental exchanges to be barely under the price in London plus 2 per cent. Stamp Duty which was incurred.
    Mr. Jay rose—
    Mr. Bennett: Oh, really.
    Mr. Jay: I thought that the hon. Member wanted to argue this seriously. I do not know why he is so impatient. If he induces an investor from France or Germany to buy shares on the London Stock Exchange, this does not lead to an increase in our invisible earnings. It leads to a payment from us to a foreign country, which is a minus and not a plus on our balance of payments. If the

    1563
    hon. Member understands that point, how can he argue (hat this will increase our invisible earnings?
    2.30 a.m.
    Mr. Bennett: What has been said is true in a sense if one buys any shares in England, but this applies whether they are bought on the Continent or in England. The argument is the same. When people invest in securities, whether British or Continental, and buy them through this country, the invisible earnings accruing from the transactions come to this country by way of the purchase, and that does not hold if they are bought on the Continent. [Interruption.] I do not know what that remark means. I have nothing to do with brokerage, nor am I concerned directly or indirectly with what I have referred to. It is a matter of common knowledge that, where invisible earnings are concerned, with the 2 per cent. Stamp Duty this country was losing an accretion of overseas business which it had obtained over a long time.
    Mr. Callaghan: Rubbish.
    Mr. Bennett: It is no good saying "Rubbish". It is a matter of facts and figures. To come here with a lot of Socialist cant and humbug about our trying to benefit certain sections of the community is an abuse of the House in this purpose. I am delighted that the Government have made an overdue relief which will lead to an increase in the foreign exchange earnings of the country, to the benefit of us all.
    Mr. William Clark: I hope that my hon. Friend will resist the Amendment. I cannot understand the hon. Member for Cardiff, South-East (Mr. Callaghan). If he wants a wealth tax and if by misfortune his party comes to office, I cannot think that it does him any good to resist investment in this country. It is obvious that the high Stamp Duty of 2 per cent. has been a deterrent to investment. What we want is more and more investment.
    What we must do is to make the investor's life easier. I am not speaking about large investors. There may be some force in the argument that a large investor need not necessarily be helped. I am thinking about the small investor.
    1564
    who may or may not support the Opposition. I would think that he supported this side of the House. Should such a man have a 2 per cent. Stamp Duty to deter him from saving? The 2 per cent. duty that we have suffered for the last few years is quite wrong, and I am delighted that the Government have reduced it to 1 per cent.
    I would point out to the Opposition that more and more small people are becoming more and more aware of the advantages of capitalism in the owning of shares. That is an irrefutable fact. In the last 10 years the number of people investing on the Stock Exchange has risen from 1¼ million to 3½ million. That shows that more and more people are prepared to invest in this country.
    But I do not think that we invest enough. The N.E.D.C. has asked for personal savings of 12 per cent. At the moment the rate is 10½ per cent. There is still a margin of 1½ per cent. Anything should be done which can help the small investors. There are probably 3½ million investing on the Stock Exchange and probably 1 million in unit trusts. That is still a small percentage of the population.
    I hope that my hon. Friend will resist the Amendment, because it would be wrong to take a retrograde step and increase the Stamp Duty to 2 per cent, again after the Government have accepted 1 per cent. I wish that my right hon. Friend had abolished it altogether. My hon. Friend the Member for Torquay (Mr. F. M. Bennett) has shown—it is no good the right hon. Member for Battersea, North (Mr. Jay) saying that investment in this country does not help our balance of payments; that is a very short-sighted view—that we must have investment in this country, whether it is from abroad or from our own nationals.
    It is all very well for the right hon. Member for Battersea, North, to shake his head. I invite him to look at the investment of our overseas competitors—the Continental countries which compete with us. Their investment, expressed as a percentage of their gross national product, is far higher than ours. That is one reason why this country must do more and more to encourage investment.
    I hope that my right hon. Friend will resist the Amendment. If the Opposition

    1565
    wish to push the matter to a Division I hope that they will do so, so that we can see how much strength they have. The people of this country want to own capital. Hon. Members on this side of the House want more and more people to own capital, and to be able to save their money. The Government must help them to do so. The reduction to 1 per cent.—it should have been to nil per cent.—will be helpful.
    Mr. Mitchison: The hon. Member has not dealt with the alternatives that I mentioned. I did not expect him to. But does he really think that this tax is a tax on investment? I should have thought that it was a tax on transfers. That is what it purports to be. Surely, if one person buys, another sells. We are preventing someone selling as much as or as little as we are preventing someone buying. If this is merely investment it is not affected by the fact that somebody subscribes to buy shares, or to buy unit trust units, or invests in some other way.
    Secondly, since the hon. Member chose to accept some remarkable propositions put forward by the hon. Member for Torquay (Mr. F. M. Bennett), what part of the business of the Stock Exchange does he think consists of transactions on behalf of overseas clients?
    Mr. Clark: I am surprised at the naivety of the hon. and learned Member for Kettering (Mr. Mitchison) in suggesting that this country, with its money market in the City of London, can afford to ignore the foreign investor. This is begging the whole question. What we have to do, if we are an international money market—as everybody will agree we are—is to avoid putting anything in the way of the foreign investor. Not only are we putting something in his way by increasing the Stamp Duty to 2 per cent.; we are also putting a deterrent in the way of our own people investing. It is quite wrong and fallacious for the hon. and learned Member to suggest that a 2 per cent. Stamp Duty does not deter.
    If a small investor has £50 to invest and buys a share, he is quite astonished if he has to pay £51 or £52 for that share, to cover the Stamp Duty. I am satisfied that the future of this country
    1566
    lies in increased investment, and anything that will bring that about will be a good thing.
    Mr. Maurice Macmillan: This tax is primarily on transfers, as the hon. and learned Member for Kettering (Mr. Mitchison) has said, and not on investment, but he must not disguise the thinness of his argument by the use of what Sir Alan Herbert called "witch" words, and talk in a contemptuous way of people buying or selling shares on the Stock Exchange when it is just as relevant—and, I think, truer—to refer to investors wishing to change their investment.
    The objection that I have to Stamp Duty—and the reason why I would rather see it abolished than reduced—is the burden it places on investment clubs, unit trusts and other organisations which protect the small investor by changing his investment on his behalf in the most suitable way.
    I must also protest at some of the other words used by the hon. and learned Gentleman when talking about this class of people, referring to traders and dealers in Stock Exchange securities. If we are to encourage people as a whole to take a share in industry, this is no way to refer to them when they come to do their dealings on what after all is a market like any other. It is fair to say that on this side of the House, even if not on the other side, we would prefer the people to be encouraged to own a share in industry directly rather than to have it taken over nominally on their behalf by right hon. and hon. Members opposite.
    Mr. du Cann: I am most grateful for the observations of my hon. Friends the Members for Torquay (Mr. F. M. Bennett), Nottingham, South (Mr. W. Clark) and Halifax (Mr. Maurice Macmillan), even at this very late hour. I feel, as the hon. Member for Cardiff, South-East (Mr. Callaghan) indicated in an earlier debate in Committee, that I am in danger of making the same speech again, not only the speech that I made then but also the speech that I made from the back benches in the past, but I will try to avoid the temptation.
    I well understand that it is the intention of the hon. and learned Member

    1567
    for Kettering (Mr. Mitchison) to preserve the 2 per cent. rate of Stamp Duty on transfers of stocks and marketable securities. I think that this intention is mistaken; so, I am pleased to observe, do my hon. Friends. The third Amendment is the substantive one. That seeks to preserve the 2 per cent. rate, as the hon. and learned Gentleman said, by providing that nothing in Clause 54 is to affect the duty on a transfer of stocks or marketable securities.
    The other two Amendments are really consequential upon the third. The first Amendment cuts out from Clause 54(2) the words which exclude transfers of shares and marketable securities from the relief from small transactions under paragraphs (a) and (b) of subsection (1). Since the third and main Amendment provides that nothing in the subsection is to affect the duty on such transfers, it renders these words superfluous: The second Amendment it purely a drafting Amendment.
    I want to refer immediately to what my right hon. Friend the Chancellor of the Exchequer said during his Budget speech. He said this:
    "The Stamp Duty on stock transfers and on house conveyances was doubled in 1947. I am convinced this was a mistake."—[Official Report, 3rd April, 1963; Vol. 674, c 488.]
    Those are my sentiments, and I understand that they are the sentiments of my hon. Friends.
    If it is the intention of the Opposition to double again the rate of Stamp Duty should they become the Government of the country, I am sure that that will be noted by the millions of people who are now stock owners in the United Kingdom and by the hundreds of thousands more who, so we are told on authority, are on the threshold of investing. It was suggested, not perhaps in terms, but by inference, by the hon. and learned Gentleman that this was done simply as a sop to the City. These precise words were used in an earlier debate. The hon. Member for Cardiff, South-East said something during the course of that debate which I want to comment on tonight. He said that what is good for the City is not necessarily good for the economy. I have never believed that what is good for the City is necessarily good for the economy any
    1568
    more than the hon. Gentleman believes that what is good for the trade unions in general is necessarily similarly good for the economy.
    Let me make the point entirely clear. The reason why this step is being taken is that we believe it to be very much in the interests of the economy as a whole to cut the Stamp Duty on stock transfers.
    The hon. and learned Gentleman made a fair debating point when he said that there were many alternative things that might have been done. That is true, but it is reasonable for me to point out that one must look at this measure—I agree with his figures of cost—in the context of the very large number of tax reliefs and incentives which this year add up to a total bill of £269 million and in future years could add up to a very much larger bill. To suggest that we have dealt with the Stamp Duty and have not given any other reliefs is entirely wrong.
    2.45 a.m.
    The 2 per cent. rate of duty has been higher than the duty in any other important country. I draw the attention of the hon. and learned Member for Kettering to the Quarterly Bulletin of the Bank of England, published in June, 1963. Set out clearly on page 116 are the costs of purchasing securities. On a standard purchase, including the present rate of duty, the cost in the United Kingdom is 2·8 per cent. This compares with 1·2 per cent. in the United States, 0·4 per cent. in Switzerland, 0·7 per cent. in the Netherlands, 0·4 per cent. in Italy, 1 per cent. in Western Germany, 1·3 per cent. in France and 1·1 per cent. in Belgium. If the Opposition think it right that our costs should be so much higher than any other country, I flatly disagree with them.
    Mr. Bruce Millan: The difference is that in most of those countries there is a capital gains tax. There is not in this country.
    Mr. du Cann: I thought that at least one hon. Member opposite would say that. The absence of a capital gains or wealth tax here—although we do have a speculative gains tax—is not fully relevant, because it would not necessarily fall on the same people as the Stamp Duty—for example, the small investor or foreign investors. In any case, the figure I gave a moment ago of 2·8 per cent. will be reduced to 1·8 per cent.

    1569
    In a number of foreign countries there is a duty upon the sales of stock as well as on purchases. When one examines the figures taking that factor into account, it becomes clear that the United Kingdom market, for the first time since the late Lord Dalton put up the tax in 1947, is properly competitive with overseas markets in general. It is competitive with the United States, France and Belgium. That is an important advance.
    Mr. Callaghan: Why?
    Mr. du Cann: I will give a number of reasons why. It is essential, apart from anything else, that we should have an efficient active market. A high rate of duty undoubtedly acts as a break on the market. There is, for example, no question that, while the rate of duty has been high, investors have been tending to transact their business in a freer market. The hon. and learned Member for Kettering has only to examine the SICOVAM in Paris or the development of American deposit receipts in New York to realise that. As a result, foreign exchange is lost and the raising of new capital is hampered.
    I agree with my hon. Friends when they stress the need for savings, especially in productive industry. There is no question that if the development of the market is inhibited that must militate against investment of new savings and transfers through the United Kingdom market.
    The hon. Member for Cardiff, South-East made the point in an earlier debate that he personally was in favour of the development of capital markets overseas, no doubt in the countries one immediately thinks of on the Continent, but also in the developing countries of the Commonwealth. I agree with him. I welcome this development. Surely it should be the aim of any Government in this country to encourage as far as possible a freer situation in regard to the movement of capital. That is our intention but, none the less, we must be allowed to do our utmost to see that the London market, with all its expertise and potential, is fully developed, with deterrents and barriers to that development removed.
    A good deal has been said by my hon. Friends about the efforts that are being made to encourage the public to be shareholders in industry. There is no question,
    1570
    as a matter of fact, that new and potential investors are deterred, and have been deterred, by the 2 per cent. rate of duty—[Hon. Members: "Oh."] There is no doubt at all about that. What my hon. Friend the Member for Nottingham, South said was perfectly true. New investors resent, and resent very much, finding themselves penalised for investing their savings.
    The hon. and learned Member for Kettering has suggested that this is something that will benefit large investors. That is true, but the largest investors of all are the institutions investing on behalf of a multitude of probably small policy-holders, and the like; or the trade unions, who I am delighted to see have established their own unit trust. Those are the large investors today. The logic of the hon. and learned Gentleman's argument is apparently to penalise them by maintaining a high rate of Stamp Duty but, inevitably, we must penalise the small investors, too. If that is what the Opposition want I, personally, want none of it.
    It is also true to say that the 2 per cent. Stamp Duty tends to turn away potential overseas investors in United Kingdom industry. That is undoubtedly a fact. Many of us have seen examples of this occurring. But I agree with the right hon. Member for Battersea, North (Mr. Jay) and the hon. Member for Grimsby (Mr.Crosland) who, in an earlier debate, said that there are certain dangers in overseas investment in the United Kingdom, especially if it is volatile investment. The Government are perfectly well aware of that situation, but that is no reason to discourage long-term portfolio investment, any more than it is to encourage those wishing to invest in the United Kingdom to do their investment in New York or Paris rather than in London, which is the situation that obtains as a result of the high rate of Stamp Dutyin the United Kingdom—
    Mr. Jay: I did not say that I was opposed to foreign investment here, or that I wished to discourage it. I was merely pointing out to the hon. Member for Torquay (Mr. F. M. Bennett) that investment here from foreign countries sometimes led to dividend payments from here to overseas, and so to invisible imports, not exports. One cannot justify it on those grounds.
    Mr. F. M. Bennett: As I have been referred to by the right hon. Gentleman, is it not the case that the dangers of which he speaks would be precisely the same whether it was done through London or the Continental exchanges? The whole point is where it is done, and whether or not one thereby gets additional foreign earnings.
    Mr. du Cann: We are probably all agreed. There are dangers in an excessive investment in the United Kingdom by overseas investors. On the other hand, there are certain advantages to be gained. Lately, we have been losing those advantages. We are satisfied now that we may have the opportunity of recapturing them, and we believe that to be a good thing.
    My hon. Friend the Member for Halifax who, with other of my hon. Friends, has played such a remarkable part in encouraging and fostering the interests of the small investor, has argued in favour of abolishing Stamp Duty altogether, and I want to explain why I spent such a boringly long time at the beginning of my speech in referring to the drafting of the Amendment.
    Whoever drafted the Amendment probably overlooked the fact that the existing provisions of Section 34 of the Finance Act, 1958, imposing duty at the 2 per cent. rate, are repealed by Clause 71(8) and Part IV of Schedule 12 of the Bill. That repeal is not affected by the Amendment so that, far from preserving the 2 per cent. rate on transfers of stocks and marketable securities, the Amendment would actually abolish the duty al together. Ironically enough, therefore, I must say that I cannot recommend the House to accept—
    Mr. Mitchison: In dealing with the Finance Bill we do not try to put down all the subsequent repeals. The hon. Gentleman knows that perfectly well. It is quite exceptional to try to deal with the Schedule of repeals. The hon. Gentleman and everybody else in the House understood what the intention and effect of this proposal would be. [Hon. Members: "Oh."] Am I wrong? Perhaps hon. Members opposite did not understand. I am surprised. They spoke as if they did. At this hour of the night this sort of point is rather cheap and a waste of time.
    Mr. du Cann: I will not waste the time of the House except to say that I am delighted to find that even by accident my hon. Friend the Member for Halifax is on the same side, so to speak, as the hon. and learned Member for Kettering. They must decide between themselves what they are going to do about this series of Amendments. I am satisfied for my part that my right hon. Friend was right to reduce the Stamp Duty and I am perfectly clear, as I believe were my hon. Friends, that there were good, positive reasons for doing this, which will bring substantial credit over a period of years to the British economy.
    Mr. Callaghan: We have heard a great many unsupported statements and a great many prejudices expressed under the guise of fact, but what we are doing is discussing whether in the context of this Budget it is the right time and the right way to release about £25 million of taxation which has been collected for 16 years by successive Chancellors of the Exchequer without complaint. It is because of that concern that I think the House should consider the matter in that light.
    There is a small, diligent lobby on the other side of the House, made up of the hon. Member for Halifax (Mr. Maurice Macmillan), the Economic Secretary before he was promoted to his present office, the hon. Member for Nottingham, South (Mr. W. Clark)—and I do not think the hon. Member for Torquay (Mr. F. M. Bennett). He is not here often enough in debates on the Finance Bill ever to constitute a lobby. I know that he is always here at three o'clock in the morning when this subject is discussed but I have not seen him at all previously today. [Interruption.] He appears to be wishing to be included in this lobby. I will withdraw, and include him. Except for this lobby, and Lord Ritchie of the Stock Exchange, I do not think that any of us has had letters from constituents protesting about this Stamp Duty.
    I have a great many letters protesting about other things—Schedule A, Surtax, Purchase Tax, and the Rent Act. I do not remember ever receiving a letter from an investor in my constituency complaining of the 2 per cent. Stamp

    1573
    Duty. This complaint stems from a small group opposite who have a clear interest in getting the Stamp Duty abolished to the extent of £25 million this time and another £25 million if it is abolished altogether. They share this interest with the Stock Exchange.
    Mr. Maurice Macmillan: Is the hon. Member suggesting that the objectives of the Wider Share Ownership Council are for the financial benefit of its members?
    Mr. Callaghan: I do not know what that Council is. I know that the hon. Member for Halifax has constituted himself a powerful spokesman for the tiny and unrepresentative group who are trying to persuade the Chancellor of the Exchequer that the most important thing to be done year by year is to give £25 million back in this way. If the hon. Member would put this matter to the electorate he would find that they would disagree overwhelmingly, even though they would derive some benefit from the £25 million. There is absolutely no pressure at all for this reform.
    Mr. W. Clark: I have no connection at all with the Stock Exchange. The reduction of £25 million does not benefit me one scrap. I am certain that with his usual courtesy the hon. Member will withdraw his remark that we who have spoken in this debate will necessarily benefit from this £25 million.
    3.0 a.m.
    Mr. Callaghan: I repeat that the hon. Gentleman has repeatedly constituted himself a member of this lobby in order to getrid of this £25 million. He can tell me that he does not benefit personally from it, and if he says that I believe him. Is that what he is saying, that he does not benefit from the reduction of the Stamp Duty? I did not say that he did; I said that he constituted himself a spokesman for the lobby. Everyone knows that at 3 o'clock in the morning when we get to this stage in the Finance Bill we can rely on half a dozen hon. Gentlemen who have not been near the place during the past ten days turning up in order to get the Stamp Duty reduced. I have seen it happen time after time. If hon. Gentlemen are so assiduous in the matter they cannot complain if they appear to constitute themselves a
    1574
    lobby. The hon. Member for Torquay was complaining that I was not including him in the lobby.
    Mr. F. M. Bennett: I am perfectly happy now.
    Mr. Callaghan: The hon. Gentleman is perfectly happy. He is one honest man at any rate. I am glad that he acknowledges to be a member of the lobby to reform the present legislation concerning Stamp Duty and to reduce the duty by £25 million. We all have our own sense of values. I understand that the hon. Member for Halifax believes this to be the most important matter in the Finance Bill.
    Mr. Maurice Macmillan indicated dissent.
    Mr. Callaghan: The hon. Gentleman shakes his head, but it is the only matter on which he has bothered to speak. On what other matter has he spoken during the last 10 days? He has not been here, and he knows it.
    Mr. Maurice Macmillan: The lobby to which the hon. Gentleman is referring is pressing for further reforms. The Stamp Duty happens to be the only one to which this Budget refers, and the only one at this stage that we can discuss.
    Mr. Callaghan: The hon. Gentleman is confirming what I am saying. He thinks that this is the most important matter in this Budget which demands his attention, his voice and his appearance in the House. We are glad to see him here, even if it is only for this purpose. But I think everyone will determine the matter from his own sense of values. There are a great many other subjects of which we would have welcomed the hon. Gentleman's very powerful advice and argument had he thought them as important as the remitting of Stamp Duty on Stock Exchange transactions. But he does not. I wish that the hon. Gentleman would turn his powerful intellect to other problems on which he could be a great deal more use.
    I just cannot share the view that of all the remissions of taxation that might be introduced this one stands out as the most important. This is why I oppose it and why I tell hon. Gentlemen opposite that most of their constituents would

    1575
    oppose it too. I said earlier, and I am yielding to the temptation myself now, that there is a great deal of unsupported assertion in the debate, but I do not believe that any average audience of British citizens gathered together would believe that at 3 o'clock in the morning we should have to spend a lot of time discussing whether £25 million should be taken off Stock Exchange transfers. I do not believe it.
    Mr. F. M. Bennett: Divide against it.
    Mr. Callaghan: We could divide against it, except that I understand from what the Economic Secretary tells us that owing to the deficiency in drafting if we do we shall be abolishing it—[Hon. Members: "Speak up."]—I cannot speak louder than I am now, but I hope that the hon. Gentleman will take it down and will report it to his constituents in Torquay. He may even climb back into the House on the basis of it. But I do not believe that the remission of £25 million of Stamp Duty is the most important problem that confronts the Chancellor of the Exchequer when he is unable to find the money to provide invalid cars for those disabled in industry. I hope that the hon. Gentleman will report the whole of that statement in full to his electors and see what they make of it.
    I know what my sense of values is on this, and I am delighted that it differs from that of the hon. Gentleman.
    Mr. F. M. Bennett: Come to Torquay.
    Mr. Callaghan: I would not bother to come to Torquay, although it is a wonderful place, one of the most beautiful I have ever visited. But there is a great deal of missionary work to be done there. Halifax, of course, is a different proposition. If the hon. Member for Halifax were to invite me to come there and debate this issue with him, that would be worth doing.
    Mr. Houghton: If my hon. Friend is going to Halifax, he had better come to Sowerby, too.
    Mr. Callaghan: There are more sinners to be recovered in Halifax than there are in Sowerby. I am very willing to go to Halifax with the hon. Gentleman. Apparently he is not offering the
    1576
    invitations quite so freely as the hon. Member for Torquay. However, the offer is open and I shall be delighted to debate this issue with him in Halifax.
    There was this question of investment. There seemed to be an awful blurring in the mind of the hon. Member for Nottingham, South as to what investment was. There are two different types of investment. One is the investment in which we start new schools, factories, railway lines, roads, plant and machinery. This is one form of investment which we agree must be very high and must be increased. There is the other form of investment which comprises those with spare Euro-dollars or Euro-sterling in the Continent of Europe trying to invest that money in the Stock Exchange. I agree with the Economic Secretary. That type of investment, which is entirely different from the other form of investment, with which we all agree, could on occasion be of benefit. But it could also be a great disadvantage to us and could influence the position of sterling very substantially.
    The Swiss, as I think is becoming increasingly known, certainly on occasion, if not continuously, impose a penalty on those who wish to invest money in Switzerland. They make people pay interest for the pleasure of investing there because the Swiss do not want it. [Interruption.] The hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) is an expert and if he has some marginal emendation to make, I will give way.
    Sir Henry d'Avigdor-Goldsmid: I am delighted to take advantage of the hon. Gentleman's kindness, because he has got the facts wrong. The Swiss penalise people who do not invest. They penalise people who leave their money in the bank in the most dangerous form. If, on the other hand, they purchase investments in Switzerland there is no penalty of any sort. Therefore, whatever the argument may be, it is not correct.
    Mr. Callaghan: I withdraw my flattering remark that the hon. Gentleman knows what he is talking about, because he does not—[Hon. Members: "Oh."]—not on this aspect of the matter. There has been a penalty for a considerable period if one invests in Switzerland from

    1577
    overseas, and they charge interest for the pleasure of leaving one's money there. This is precisely the sort of investment which the hon. Member for Torquay wants to encourage here, and which, as my right hon. Friend the Member for Battersea (Mr. Jay) says, leads to a great deal of hot money coming into this country.
    Somebody talked about long-term portfolio investment. What on earth does that mean? There is no such thing. It is a meaningless jumble of words. There is portfolio investment, of course, but it is as longor as short as the man who purchases it wishes it to remain long or short. He can sell it straight away and embarrass us within weeks or months. I am not keen on encouraging a great deal of this type of investment through Europe into this country. As I said on an earlier occasion, I would sooner see them building up their own exchanges on the Continent of Europe.
    I believe that hon. Members opposite are so interested in this because of the brokerage commissions. That is where the money is to be made and that is where the stockbrokers are. There is no doubt that they hope they will get a little more business and make a little more money this way. This is a typical way for the Conservative Party to behave, and they are behaving in a typical manner. I do not complain about it. Now, thank goodness, the eyes of the people are opening to what hon. Members opposite are doing. I think that their capacity for mischief is becoming exhausted and the time in which they are able to wreak it is running out, so that we shall be able to get back to a form of government which will be in the interests of the people—not in the interests of the Stock Exchange or of stockbrokers opposite, or the City, but in the interests of Britain.
    Undoubtedly, the City of London can on occasion operate against the interests of British industry. It has done so in the past. It can do so again. Our concern on these benches is to ensure that, as far as possible, the interests of the City of London shall harmonise with those of British industry and the British economy as a whole. If they do not harmonise, then it will not be the interests of the City of London which will be placed first but the interests of the economy as a
    1578
    whole and the interests of British industry. That is what matters.
    The Economic Secretary has told us that he would not accept these Amendments even if they were in order, so there is no opportunity for us to take this matter further, but I tell the hon. Gentleman that we shall remember it against him and remember it against the party opposite that they believe that, after 16 years in which the Stock Ex change has boomed, in which there have been more transfers each year than in the preceding year—
    Mr. du Cann indicated dissent.
    Mr. Callaghan: Does the Economic Secretary deny that?
    Mr. dn Cann: I was not denying it at all. As I understand the position, during the last 11 years or so, many more people have become investors in British industry. Lord Ritchie, the chairman of the Stock Exchange, said the other day, I think, that there were a further 500,000 on the threshhold of investing. There are 1,200 investment clubs where there were almost none five years ago. There are now, I think one of my hon. Friends reminded us, about 1 million unit trust investors—probably four times the number that there were five years ago. I regard this as a thoroughly desirable trend, and I am certain that the ideal of a property-owning democracy is something which is really attractive to people in this country, contrary, apparently, to what the hon. Gentleman thinks.
    Mr. Callaghan: The Economic Secretary is bearing out my point. During the past 16 years, since the duty has stood at 2 per cent., the Stock Exchange has moved ahead every year. There have been more and more transfers each year. There is no evidence that people have been deterred. All the evidence points the other way.
    Of course, this is a matter of taxation, which no one likes. No one likes paying for telephone calls, for wireless licences, for postage stamps. No one likes paying the tax on cigarettes, on whisky, on beer or on Stock Exchange transfers. If any thing is to be singled out, it is in the interests of hon. Members opposite to see that Stock Exchange transfers come first in the order of reliefs. I shall remember this against the Economic Secretary and against the party opposite, as a

    1579
    very clear indication of their sense of values and their sense of priorities.
    Amendment negatived.

    Clause 59.—(PAYMENT OF DUTY.)
    Mr. du Cann: I beg to move, in page 59, line 36, at the end to insert:
    (8) Any instrument which is deemed to be duly stamped by virtue of subsection (2) or (7) of this section shall be deemed to be duly stamped in Northern Ireland, and any instrument which is deemed to be duly stamped by virtue of the corresponding provisions in force in Northern Ireland shall be deemed to be duly stamped in Great Britain.
    To adopt the words of the hon. Member for Sowerby (Mr. Houghton) on an earlier occasion, now comes the tranquilliser. Perhaps it is a very good thing. This Amendment is a very simple one which I can explain very shortly. It provides that an instrument which is deemed to be duly stamped in Great Britain under subsection (2) or subsection (7) of the Clause shall be deemed to be duly stamped in Northern Ireland, and an instrument which is deemed to be duly stamped in Northern Ireland under the corresponding provisions of the Northern Ireland Finance Bill shall be deemed to be duly stamped in Great Britain.
    The effect of this provision will be that, once duty has been paid in respect of a bearer instrument in Great Britain of Northern Ireland, no further duty will be payable in respect of it in the other country. This will have certain obvious practical advantages.
    Amendment agreed to.
    Clause 65.—(COMPOSITION FOR STAMP DUTY ON LOCAL AUTHORITIES' SECURITIES.)
    Mr. du Cann: I beg to move, in page 62, line 48, after "cent." to insert "per annum".
    If the last Amendment was simple, this is even simpler. Again, I should tell the hon. Member for Sowerby Mr. Houghton) that this was a drafting oversight brought to our attention by the Inland Revenue. It is self-explanatory. We propose to put the matter right by this Amendment.
    Amendment agreed to.
    Clause 67.—(PROFITS TAX PROVISIONS IN CONNECTION WITH PART II OF THIS ACT.)
    3.15 a.m.
    The Solicitor-General: I beg to move, in page 63, line 41, at the end, to insert:
    Provided that where the person chargeable is a body corporate the said amount shall be treated for the purposes of section 42 (5) (b) of the Finance Act 1938 (by virtue of which rent paid to one body corporate by another associated with it is excepted from the charge to profits tax) as rent paid to the body corporate by the person making the payment in respect of which the amount became chargeable or, where it became chargeable under section 22 (2) of this Act, by the tenant on whom the obligation there referred to was imposed; but in determining whether the said section 42 (5) (b) applies to an instalment as respects which a claim under section 22 (5) of this Act has effect the relationship between the person paying and the person receiving the instalment shall be taken to be that subsisting when the transaction in respect of which the instalment is payable was entered into.
    (2) Schedule (Allowance of trading deduction where premium etc. paid) to this Act, as applied (by virtue of section 20 (1) of the Finance Act 1937) in computing the profits arising from a trade or business for purposes of the profits tax, shall have effect as if proviso (b) to paragraph 4 were omitted, and no deduction shall be allowed under that Schedule in computing any such profits for those purposes if the amount by reference to which the deduction would be made, or instalments of the payment in respect of which that amount arose, is or are excluded, by virtue of the proviso to the foregoing subsection, in computing profits for those purposes.
    As a tranquilliser, this will be even drier than the last Amendment moved by my hon. Friend. It relates to further changes in tax law with certain complications. The Clause makes changes in the Profits Tax law consequential on the Income Tax changes in Part II. The Amendment is necessary to ensure that the Profits Tax provisions apply with regard to the premiums chargeable under Clauses 22 to 25. Those Clauses make amounts chargeable to Income Tax in respect of certain premiums.
    Subsection (1) of the Clause as drafted provides that the amount chargeable under Clauses 22 to 25 shall be treated for Profits Tax purposes as income from an investment. By Section 42(5) of the 1938 Finance Act, however, payments of rents between companies in the same group are ignored for Profits Tax purposes. No deduction is allowed in computing the profits of the paying company and no receipt is included in the

    1581
    taxable profits of the recipient company. Obviously, the same rule should apply to premiums under this change in the law.
    Therefore, the first part of the new proviso in the Amendment is that premiums received by such a company shall be treated as if they are payments of rent coming under Section 42(5) of the 1938 Act. The second part of the proviso is more complicated. If premiums are paid by instalments, the recipient company may elect under Clause 22(5) to be charged to Income Tax on each instalment as if it were rent. The question whether the recipient company should be charged to Profits Tax in regard to or in respect of the premium is to be governed by its relationship to the payer when the transaction was entered into irrespective of any change in relationship between the parties while the payment and the instalments are payable. This is necessary, because we would otherwise have no firm basis for deciding whether annual allowances are to be granted to the tenant.
    By Section 20 of the 1937 Finance Act, profits are computed as under Case I of Schedule D, so that a company which pays (a chargeable premium and then sublets gets Profits Tax relief for the premium under paragraph 4 of the new Schedule, to which reference has been made earlier, dealing with allowances of trading deductions for a trader.
    The new Schedule will provide that where the trader receives both trade profits and rental income, allowance is given first against the rental income under Case VIII instead of against trade profits under Case I. The effect of that is to deprive the company of Profits Tax relief in respect of part of the premium payment. The Amendment to insert the new subsection (2) avoids this result by excluding proviso (b) of paragraph 4 of the new Schedule. With that explanation, I commend the Amendment to the House.
    Mr. Mitchison: The hon. and learned Gentleman is so singularly lucid and convincing that I have understood most of what he has said. Indeed, my only regret is that those who comprise the share transfer lobby are disappearing so rapidly from the Chamber that they
    1582
    have deprived themselves of the opportunity of listening to the Solicitor-General.
    Amendment agreed to.
    Mr. Barber: I beg to move, in page 64, line 25, at the end to 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.
    This Amendment has already been discussed with the new Clause (Exemption from tax on housing grants), and is consequential upon it.
    Amendment agreed to.
    Clause 71.—(SHORT TITLE, COMMENCEMENT, CONSTRUCTION, EXTENT, AMENDMENTS AND REPEALS).
    Mr. du Cann: I beg to move, in page 67, line 10, after "Act" to insert:
    "(except section (Prohibition of circulation of blank transfers))".
    We discussed this yesterday on the first of my right hon. Friend's new Clauses—(Prohibition of circulation on blank transfers). This Amendment is entirely consequential.
    Amendment agreed to.
    New Schedule.—(TRANSITIONAL ALLOWANCES FOR ANNUAL VALUE OF TRADE PREMISES).

    1. Subject to the provisions of this Schedule, an allowance under this Schedule shall be made to the person carrying on a trade where land which was occupied by him at any time before the end of the year 1962–63 for the purposes of the trade permanently ceases to be occupied by him for those purposes.

    2. The amount of the allowance shall be the excess of—

    (a) the aggregate of any deductions in respect of the annual value of the land which, by virtue of section 136 of the Act of 1952, would have been made in computing the profits or gains of the trade for the years 1963–64 and 1964–65 but for section 29(1) of this Act and the repeal by this Act of the said section 136, over

    (b) the aggregate of any deductions relating to the land made in computing the profits or gains of the trade for those years, being—

    (i) deductions permitted by section 29(2) of this Act, so far as made in respect of the period in respect of which the deductions mentioned in paragraph (a) above would have been made, or

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    (ii) deductions in respect of rent from which an amount representing tax was deducted under section 173 of the Act of 1952, so far as made in respect of that period.

    3. The allowance shall be made by—

    (a) treating the amount of it as rent paid for the land by the said person (in addition to any actual rent) becoming due from day to day during the period defined in paragraph 4 of this Schedule, and

    (b) allowing deductions accordingly in computing the profits or gains of the trade chargeable under Case I of Schedule D for any year of assessment the profits or gains for which fall to be computed by reference to a period including that period or any part thereof.

    4. The said period is that ending when the land permanently ceases to be occupied by the said person for the purposes of the trade, and of a duration equal to the aggregate of—

    (a) the number of months and fractions of months during which the land was occupied by him for the purposes of the trade in so much of the period by reference to which the profits or gains of the trade for the year 1963–64 fall to be computed as fell before the beginning of that year, and

    (b) the number of months and fractions of months during which the land was so occupied in so much of the period by reference to which the profits or gains of the trade for the year 1964–65 fall to be computed as fell before the beginning of the year 1963–64.

    5. No allowance shall be made under this Schedule where the date on which the land permanently ceases to be occupied by the said person for the purposes of the trade—

    (a) falls within a year of assessment and also within a period by reference to which the profits or gains of the trade for that year of assessment fall to be computed, or

    (b) falls within a year of assessment in which he permanently ceases to carry on the trade.

    6. Where there is a change in the persons carrying on the trade, but by virtue of section 19 (3) of the Finance Act 1953 or section 17 (1) of the Finance Act 1954 the trade does not by reason of the change fall to be treated for any of the purposes of the Income Tax Acts as permanently discontinued, this Schedule (including this paragraph) shall apply as if any occupation of the land before the change occurred by the persons carrying on the trade immediately before it occurred were occupation by the persons carrying on the trade immediately after it occurred.

    7. Where, by reason of a change in the persons carrying on the trade, the trade falls to be treated for any of the purposes of the Income Tax Acts as permanently discontinued, a person engaged in carrying on the trade immediately before the change occurred who continues to be so engaged immediately after it occurred shall be treated for the purposes of this Schedule as not having been in occupation of the land at any time before it occurred.

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    8. The foregoing provisions of this Schedule shall apply in relation to a profession or vocation as they apply in relation to a trade, but as if the reference in paragraph 3 to Case I of Schedule D were a reference to Case II of that Schedule.—[Mr. du Conn.]

    Brought up, and read the First and Second time.
    Question proposed, That the Schedule be added to the Bill.
    Mr. Diamond: I am afraid I am completely lost at the moment, but I understood, when we dealt with an Amendment to the Bill which heralded this new Schedule, that explanation of the Schedule was put off till we reached it. Indeed, I made it clear that we would reserve our comments till we heard exactly what the Schedule meant. It is a very complicated Schedule. We should like to know whether it meets the arguments put forward earlier, whether it goes too far or far enough. These are important matters which we want to discuss fully when we have had the explanation.
    Mr. du Cann: With leave, I am perfectly ready to say a few words about the Schedule. Perhaps I misunderstood the hon. Gentleman. When we discussed the Amendment earlier I gave some explantion of it and the hon. Gentleman the Member for Gloucester (Mr. Diamond) said that this was a most complicated matter and he was indeed right. He said it might be that he would have some questions he might want to pose about the Schedule. I therefore thought it more convenient not to say anything about the Schedule initially, thinking perhaps he would wish to raise some questions when we reached it. When he did not do so just now I thought perhaps he had changed his mind. But certainly if it is for the convenience of the House and the hon. Gentleman's convenience I am perfectly ready to say just a few words about the Schedule.
    Paragraph 1 provides for allowance to be given to a trader when he permanently ceases to use for business purposes property he owned or occupied for the purposes of his trade at any time up to the end of the year 1962–3. That is the first point. Secondly we come to pargaraph 2. This defines the amount of the allowance. Paragraph 3 provides that the allowance is to be given as if

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    it were rent spent from day to day over the period defined in paragraph 4. It is to be a deduction in computing profits in Case I or II of Schedule D for any year of assessment for which the profits fall to be computed by reference to a period including that period or part of it.
    Paragraph 4 defines the period over which the allowance is to be given. It ends when the premises permanently cease to be occupied for trading purposes, and the period is equal to the aggregate of two things: firstly, the part of the base period for the year 1963–4 falling before 5th April, 1963, during which the premises were occupied for trade purposes; and secondly, part of the base period for the year 1964–5 falling before 5th April, 1963, during which the premises were occupied for trade purposes. The hon. Member, with his professional experience, is familiar with matters of the taxation of business and appreciates the significance of those dates.
    Paragraph 5 provides that no relief is to be given if the land permanently ceases to be used for trade purposes either at a time immediately preceding the cessation of trade when the trader is assessed on the current year basis or in the year of cessation. Paragraph 6 deals, first, with partnership changes and, secondly, with certain company reconstructions. The House, and certainly the hon. Member for Gloucester, will remember that during my explanation of the Amendment I explained the matter predominantly in the context of a trader but that I made the point that the same rule, so to speak, would apply to professions, and I gave the instance of a farmer and a doctor. The effect of the paragraph is that in these cases the right to the transitional allowance passes to the successor partnership or company. I am sure that that is right and fair.
    Paragraph 7 provides that where there is a change in partnership which is treated as a cessation of trade or profession for tax purposes, the transitional allowance cannot be carried forward and allowed for the partners after the cessation. Paragraph 8 provides that the provisions of the Schedule apply to the profession or vocation as they do in relation to a trade. In fact, what I
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    have said is exactly what the subsection says and it confirms what I said about paragraph 6 and on the Amendment. I hope that that explanation has helped the hon. Member.
    Mr. Diamond: Perhaps I may have the leave of the House to speak again or be treated as having merely asked a question on my first intervention. As anyone who knows him will recognise, the Economic Secretary could not be guilty of any discourtesy to the House, and if anything I said misled him, I offer my apologies for that. His explanation has been helpful, but there are two points about which I want to make certain.
    He will remember that when this matter was discussed in Committee, when it was handled by the Solicitor-General, one of the main points made was to see that any Amendment which was framed to meet some complaints which had been made would not go further than achieving a situation in which, when taking account of the total years during which business had been carried on, where land had been occupied for the purposes of the trade, the trader would not suffer or gain any advantage as a result of it. For example, if it had been going for six years, there would be six years assessment under Schedule D, six years assessment under Schedule A and for six years the total would be precisely the same; there would not be seven years allowances under Schedule D and six years assessment under Schedule D. If the new Schedule meets that point and goes no further, I should like the Economic Secretary to confirm it. It is not easy to follow all the implications of paragraph 1 and it would be helpful if we had confirmation that an essential point of principle has been followed here.
    In paragraph 7 the hon. Gentleman referred to a change in the person carrying on the trade. Is this reference only to a partnership? If it is, we have no further problems about it. We shall then be satisfied. I do not know whether the Schedule fully satisfies the hon. Member for Nottingham, South (Mr. W. Clark). If it does, my suspicions will be aroused, and if it does not satisfy him fully, we may be satisfied.
    Mr. W. Clark: I shall not vote against it.
    3.30 a.m.
    Mr. du Cann: Perhaps I may, by leave of the House, reply shortly to the hon. Member for Gloucester (Mr. Diamond).
    First, perhaps I might say that I notice that my hon. Friend the Member for Notingham, South (Mr. W. Clark) is in his place. I appreciate that he could not be here during our discussion of an earlier Amendment. He was good enough to give us notice of that. The Amendment was proposed and the new Schedule has been drafted to meet the point that he made during the Committee stage. I mention that in case the point should have escaped his attention during this debate. [Interruption.] I can tell the right hon. Member for Battersea, North (Mr. Jay) that I was not saying that to find out whether my hon. Friend was awake. I thought that we might get the record absolutely clear and again explain the reason for the introduction of the Schedule.
    Next, I come to the first question asked by the hon. Member for Gloucester. I am grateful for what he said in the early part of his questioning. I regret to tell him that I am not in a position to satisfy him. There is no doubt that his point is a very good theoretical one, and I think there would have been justification for excluding cases of the kind which have benefited by reason of the method of assessment. He referred to the benefit, and I take his point, but I am advised—this has been looked at with some care and consideration—that it would be impracticable to segregate these cases so as to curtail or refuse relief.
    The premises may have been acquired years ago—that will almost invariably be the case—and there may well be no records now existing to show what the basis of assessment was when they were acquired. This is, indeed, the difficulty. If it were not the case, perhaps we should take a different attitude. Moreover, the premises may be quite different from those which existed when the land on which they stand was first acquired. One can well see how those problems arose during the passage of time, particularly in the context of some of our discussions earlier about the need for improving trade premises. It is, therefore, impracticable to limit the relief, we believe, by cutting out cases of this sort.
    I repeat that we have given this matter a great deal of thought, but, unfortun-
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    ately, we do not think it possible to cope with the kind of situation which the hon. Gentleman has in mind. We believe, however, that no substantial damage will be done thereby, and, having considered all the circumstances with care, we thought it appropriate to endeavour to meet, the point in general instead of this particular and, we believe, somewhat minor demerit.
    The third point related to paragraph 7. Like the small child who eats the nasty stuff on the plate first and leaves the best till last, I have left the satisfactory—as I hope the hon. Gentleman will think—part of my answer till the last. I can tell him that it is certainly correct that paragraph 7applies only to partnerships. To that extent I am sure I satisfy the hon. Gentleman completely, and I hope that on reflection he will perhaps think that I have satisfied him on his first question also.
    Question put and agreed to.
    Schedule added to the Bill.
    New Schedule.—(ALLOWANCE OF TRADING DEDUCTION WHERE PREMIUM ETC. PAID.)

    1. In this Schedule—

    "the amount chargeable" means the amount referred to in section 29(3) of this Act, and

    " the relevant period"—

    (a) where the amount chargeable arose under section 22 of this Act, means the period treated in computing that amount as being the duration of the lease;

    (b) where that amount arose under section 23 of this Act, means the period treated in computing the amount as being the duration of the lease remaining at the date of the assignment;

    (c) where that amount arose under section 24 of this Act, means the period beginning with the sale and ending on the date fixed under the terms of the sale as the date of the reconveyance or grant, or, if that date is not fixed, ending with the earliest date at which the reconveyance or grant could take place in accordance with the terms of the sale.

    2. Subject to the provisions of this Schedule, where during any part of the relevant period the land in relation to which the amount chargeable arose is occupied by the person for the time being entitled to the lease, estate or interest as respects which it arose for the purposes of a trade, profession or vocation carried on by him, he shall be treated, in computing the profits or gains of the trade, profession or vocation chargeable to tax under Case I or II of Schedule D, as paying in respect of that land rent for the period (in

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    addition to any actual rent) becoming due from day to day of an amount which bears to the amount chargeable the same proportion as that part of the relevant period bears to the whole.

    3. As respects any period during which a part only of the land in relation to which the amount chargeable arose is occupied as mentioned in the foregoing paragraph, that paragraph shall apply as if the whole were so occupied, but the amount chargeable shall be treated as reduced by so much thereof as, on a just apportionment, is attributable to the reminder of the land.

    4. Where a person, although not in occupation of the said land or a part thereof, deals with his interest in the land or that part as property employed for the purposes of a trade, profession or vocation carried on by him, paragraphs 2 and 3 of this Schedule shall apply as if the land or part were occupied by him for those purposes:

    Provided that—

    (a) where paragraph 8 of Schedule 4 to this Act has effect in relation to a lease granted out of that interest, paragraph 9(2) of that Schedule shall apply for modifying the operation of the said paragraphs 2 and 3 as it applies for modifying the operation of paragraph 9(1) of that Schedule;

    (b) in computing profits or gains for any year of assessment, rent shall not by virtue of this paragraph be treated as paid by a person for any period in respect of land in so far as rent treated under paragraph 9 of Schedule 4 to this Act as paid by him for that period in respect of the land has in any previous year of assessment been deducted, or falls in that year to be deducted, under that Schedule.

    5. Where, in respect of expenditure on the acquisition of his interest in the land in relation to which the amount chargeable arose, a person has became entitled to an allowance under section 37 of this Act (mineral depletion) for any year of assessment,then—

    (a) if the allowance is in respect of the whole of the expenditure, no deduction shall be allowed him under this Schedule for that or any subsequent year, or

    (b) if the allowance is in respect of part only of the expenditure, a deduction allowed him under this Schedule for that or any subsequent year shall be of an amount bearing to the amount which apart from this paragraph would fall to be deducted the same proportion as the remainder of the expenditure bears to the whole.

    6. Where the amount chargeable arose under section 22(2) of this Act by reason of an obligation which included the carrying out of work in respect of which any allowance has fallen or will fall to be made under Part X or Part XI of the Act of 1952, this Schedule shall apply as if the obligation had not included the carrying out of that work and the amount chargeable had been calculated accordingly.

    7. Where the amount chargeable arose under section 24 of this Act and the recon-
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    veyance or grant in question takes place at a price different from that taken in calculating that amount or on a date different from that taken in determining the relevant period, the foregoing provisions of this Schedule shall be deemed to have had effect (for all relevant years of assessment) as they would have had effect if the actual price or date had been so taken, and such adjustment of liability to tax shall be made, by means of am additional assessment or otherwise, as may be necessary and may be so made at any time at which it could be made if it related only to tax for the year of assessment in which the reconveyance or grant takes place.—[The Solicitor-General.]

    Brought up, and read the First time.
    The Solicitor-General: I beg to move, That the Schedule be read a Second time.
    This is the new Schedule which I pointed out to the House in conjunction with one of the Amendments to Clause 29. Clause 29 deals with the amendments to the computation of business profits under Cases I and II, which are required in consequence of the abolition of Schedule A and the introduction of the new system.
    The Amendment in Clause 29, together with the Schedule, extends the relief to a tenant in respect of amounts chargeable in relation to business premises under Clauses 22, 23 and 24. Paragraph (1) setsout the definition of the amount chargeable and the relevant period. Paragraph (2) provides for an allowance to the tenant of business premises in respect of which there has been a charge under Clauses 22, 23 or 24—that is to say, he is treated asthough he paid a rent equal to the chargeable amount, spread over the relevant period as defined in paragraph 1. The result is that in computing the profits of his business he receives a deduction for the fraction of the chargeable amount appropriate to the period for which he occupies the premises for business purposes.
    Paragraph (3) provides for the apportionment of the relief for any period in which part only of the premises in re-relation to which a chargeable amount arose is occupied for business purposes—as in the case of a doctor who has a surgery in his house and also occupies another part of the house, or some professional man or business trader in those circumstances.
    Paragraph (4), to which reference was made earlier, provides for the tied

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    house by a petrol company or brewer—for a house let to a tied tenant where a premium has been paid. The tenant is the legal occupier and but for this paragraph the brewer or petrol company would get no deduction in computing profits in respect of the chargeable amount of the premium paid. It also ensures that there shall not be a double allowance.
    Paragraph (5) also ensures against a double allowance under the Schedule and Clause 37, which deals with mineral depletion, where a premium was paid for the lease of a mine. Paragraph (6) applies that where a landlord makes a tenant pay for the improvements he is treated as receiving a premium equal to the difference between the value of his interest in the property immediately after the start of the lease and what its value would have been but for the obligation imposed on the tenant. This again prevents a double allowance of relief under this Schedule and under the capital allowance provisions.
    Paragraph (7) deals with the case where land is sold with a right to reconveyance. If the reconveyance takes place at a price different from that taken in calculating the chargeable amount, or on a different date from that used in calculating the relevant period, this paragraph provides for adjusting the relief given so as to accord with the actual price and the actual date of the reconveyance.
    Mr. Diamond: What the Solicitor-General had to say was intelligible. In that respect it was in marked contrast to the Schedule itself. Anyone who wishes to test whether he is awake at this hour should read through the Schedule carefully and slowly and try to put it down in précis form in not more than 100 words. It is inevitable that at this hour of the morning there might just creep into the Bill something that is not absolutely clear. Hon. Members on this side of the House would not wish to be responsible, having been compelled to consider matters such as this at twenty minutes to four in the morning, for every possible defect in a Schedule of this kind.
    Subject to that, we see no reason why the Government should not have the Schedule.
    Question put and agreed to.
    Schedule read a Second Time, and added to the Bill.

  Schedule 4.—(CASE VIII OF SCHEDULE D: ALLOWABLE DEDUCTIONS.)
  The Solicitor-General: I beg to move, in page 71, line 14, to leave out from the beginning to the end of line 50 on page 75 and to insert:
  DEDUCTIONS FROM RENTS AND OTHER RECEIPTS FROM LAND
  Deductions from rents: general rules

  1. The deductions which may be made from rent to which a person (hereinafter referred to as "the person chargeable") becomes en titled under a lease shall be such deductions of the amounts of payments made by him—

  (a) in respect of maintenance, repairs, insurance, or management;

  (b) in respect of any services provided by him otherwise than by way of maintenance or repairs, being services which he was obliged to provide but in respect of which he received no separate consideration;

  (c) in respect of rates or other charges on the occupier which the person chargeable was obliged to defray;

  (d) in respect of any rent, rentcharge, ground annual, feu duty or other periodical payment reserved in respect of, or charged on or issuing out of, land,

  as are provided by the following provisions of this Schedule.

  2. Subject to the provisions of this Schedule, from rent to which the person chargeable becomes entitled in a year of assessment there may be deducted the amount of any such payment as aforesaid which became due in the year of assessment or at an earlier time falling within the currency of the lease, in so far as the payment—

  (a) was made in respect of the premises comprised in the lease, and

  (b) in the case of a payment for maintenance or repairs, was incurred by reason of dilapidation attributable to a period falling within the currency of the lease or, in the case of any other payment, was incurred in respect of such a period:

  Provided that where the person chargeable became the landlord after the lease began, references in the foregoing provisions of this paragraph to the currency of the lease shall not include any time before he became the landlord.

  3.—(1) In the case of a lease at a full rent, the foregoing paragraph shall apply as if references to the currency of the lease included any period (hereinafter referred to as "a previous qualifying period")—

  (a) during which the person chargeable was the landlord in relation to a previous lease of the premises, being a lease at a full rent, or

  (b) which was a void period beginning either with the termination of a previous such

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  lease as aforesaid or with the acquisition by the person chargeable of the interest in the premises giving him the right to possession thereof,

  so however that a period shall not be a previous qualifying period if it preceded a period ending before the beginning of the lease which was not itself a previous qualifying period.

  (2) Where during any period the conditions necessary for the period to be a previous qualifying period were fulfilled as respects part of the premises, but not the whole, the period shall be treated as a previous qualifying period as respects that part of the premises only, and the foregoing sub-paragraph shall apply accordingly, any necessary apportionment being made of rent, payments or other matters.

  (3) In this and the next following paragraph, "void period" means a period during which the person chargeable was not in occupation of the premises or any part thereof, but was entitled to possession thereof.

  4. Subject to the provisions of this Schedule, in the case of a lease at a full rent, not being a tenant's repairing lease, there may also be deducted the amount of any payment made in respect of other premises by the person chargeable—

  (a) in so far as that amount could be deducted under paragraph 2 and 3 of this Schedule from rent to which he became entitled in the year of assessment under a lease of those other premises, being a lease at a full rent, or could be so deducted if that rent were not insufficient; or

  (b) if any part of the year of assessment is, in respect of those other premises, a void period beginning with the termination of a lease at a full rent, in so far as the amount could be deducted as aforesaid if the lease had continued until the end of that period.

  5. Where by reason of any change of circumstances a lease ceases to be, or becomes, a tenant's repairing lease or ceases to be, or bcomes, a lease at a full rent, paragraphs 3 and 4 of this Schedule shall apply in relation to the lease as it subsists after the change of circumstances as if it were a new lease granted when the change occurred.

  6. Where the person chargeable retains possession of a part of any premises and that part is used in common by persons respectively occupying other parts of the premises, the fore-going provisions of this Schedule shall apply as if a payment made in respect of the part used in common had been made in respect of those other parts.

  Deductions from rents: land managed as one estate
  7.—(1) Where this paragraph applies to an estate for a year of assessment, the owner shall be treated—

  (a) in relation to a part of the estate which for any period in the year is not comprised in a lease under which he is the landlord, as if he were entitled under a lease of that part at a full rent (not being a tenant's repairing lease) to rent for the said period, becoming due from day to day, at a rate per annum equal to the annual value
  1594
  of that part ascertained in accordance with Schedule 7 to this Act; and

  (b) in relation to a part of the estate which for any period in the year is comprised in a lease under which he is the landlord, not being a lease at a full rent, as if the lease were at a full rent and the rent, so far as it relates to that part, were at a rate per annum not less than the annual value of that part ascertained in accordance with the said Schedule 7

  and the foregoing provisions of this Schedule shall apply accordingly:

  Provided that

  (i) a payment relating to premises comprised in the estate shall not be deductible from rent in respect of premises not so comprised;

  (ii) paragraph (a) above shall not apply to premises occupied by the owner wholly and exclusively for purposes connected with the management of the estate or for the purposes of a trade, profession of vocation

  (2) This paragraph shall apply to an estate if, at the end of the year 1962–63, the land then comprised therein was managed as one estate and the owner for the time being of the estate by notice in writing to the surveyor so elects, but such an election—

  (a) must be made within twelve months after the end of the first year of assessment for which the person making it became entitled to make it or such further time as the Commissioners of Inland Revenue may allow;

  (b) except in the case of the first election that can be made under this paragraph, shall not have effect unless the like election has had effect as respects the immediately preceding ownership;

  (c) shall apply in relation to the estate throughout the ownership of the person making it.

  (3) Where in any year of assessment the estate comprises premises not included in it at the end of the year 1962–63, sub-paragraph (1) of this paragraph (except the proviso) shall apply in relation to the year of assessment as if the premises were not included in the estate in the year:

  Provided that where at the end of the year 1962–63 the owner of the remainder of the estate, as then subsisting, was entitled under trusts arising under a settlement or on an intestacy, or was entitled (in Scotland) under a disposition by way of life rent and feu, to an interest such that, on the occurrence of some future event or events, he might become the owner of the said premises, this sub-paragraph shall not apply to the premises if at any time before the end of the year 1962–63 the premises and the remainder of the estate, as then subsisting, were together managed as one estate.

  (4) In this paragraph "estate" means land in one ownership managed as one estate.

  Deductions from rents: premiums etc.

  8.—(1) Where in relation to any premises—

  (a) tax has become chargeable under the provisions of section 22 (except subsection

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  (5)), 23 or 24 of this Act on any amount (disregarding any reduction in that amount under this paragraph), or

  (b) tax would have become so chargeable on that amount but for the operation of section 22 (5) of this Act or this paragraph, or but for any exemption from tax,

  and, in respect of a lease granted out of, or disposition of, the lease, estate or interest in respect of which tax so became or would have become chargeable on the said amount (in this and the two following paragraphs referred to as "the amount chargeable on the superior interest"), a person would apart from this paragraph be chargeable under the said provisions on any amount (in this and the following paragraph referred to as "the later chargeable amount"), the amount on which he is so chargeable shall, where no claim is or can be made by him under section 22 (5) of this Act, be the excess (if any) of the later chargeable amount over the appropriate fraction of the amount chargeable on the superior interest.

  (2) Where a person would apart from this paragraph be so chargeable in respect of a lease or disposition which extends to a part only of the said premises, the amount on which he is so chargeable shall, where no claim is or can be made by him under section 22 (5) of this Act, be the excess (if any) of the later chargeable amount over so much of the appropriate fraction of the amount chargeable on the superior interest as, on a just apportionment is attributable to that part of the premises.

  (3) For the purposes of this and the following paragraph the appropriate fraction of the amount chargeable on the superior interest is the sum which bears to that amount the same proportion as the period in respect of which the later chargeable amount arose bears to the period in respect of which the amount chargeable on the superior interest arose, and for those purposes the period in respect of which an amount arose—

  (a) where it arose under section 22 of this Act, shall be the period treated in computing the amount as being the duration of the lease; or

  (b) where it arose under section 23 of this Act, shall be the period treated in computing the amount as being the duration of the lease remaining at the date of the assignment, or

  (c) where it arose under section 24 of this Act, shall be the period beginning with the sale and ending on the date fixed under the terms of the sale as the date of the re conveyance orgrant, or, if that date is not fixed, ending with the earliest date at which the reconveyance or grant could take place in accordance with the terms of the sale.

  9.—(1) Where in relation to any premises tax has or would have become chargeable as mentioned in sub-paragraph (1) (a) or (b) of the foregoing paragraph in respect of a lease, estate or interest, then, subject to the provisions of the following sub-paragraph, the person for the time being entitled to the lease, estate or interest shall be treated for the purpose of deductions under the foregoing provisions of this Schedule from rent receiv-
  1596
  able by him in respect of those or other premises as paying rent for those premises (in addition to any actual rent), becoming due from day to day, during any part of the period in respect of which the amount chargeable on the superior interest arose for which he was entitled to the lease, estate or interst, and in all bearing to that amount the same proportion as that part of the period bears to the whole.

  (2) Where the foregoing paragraph has effect in relation to a lease granted out of, or disposition of, the lease, estate or interest in respect of which tax has or would have become so chargeable, sub-paragraph (1) above shall apply for the period in respect of which the later chargeable amount arose only if the appropriate fraction of the amount chargeable on the superior interest exceeds the later chargeable amount, and shall then apply as if the amount chargeable on the superior interest were reduced in the proportion which the said excess bears to the said appropriate fraction:

  Provided that where the lease so granted, or the said disposition, extends to a part only of the premises, sub-paragraph (1) above and this sub-paragraph shall be applied separately in relation to that part and to the remainder of the premises, but as if for any reference to the amount chargeable on the superior interest there were substituted a reference to that amount proportionately adjusted.

  10.—(1) Where the amount chargeable on the superior interest arose under section 22 (2) of this Act by reason of an obligation which included the carrying out of work in respect of which any allowance has fallen or will fall to be made under Part X or Part XI of the Act of 1952, paragraphs 8 and 9 of this Schedule shall apply as if the obligation had not included the carrying out of that work and the said amount had been calculated accordingly.

  (2) Where an amount relevant for the purposes of paragraph 8 or 9 of this Schedule arose under section 24 of this Act and the reconveyance or grant in question takes place at a price different from that taken in calculating the amount or on a dale different from that taken in determining the period in respect of which the amount rose, that paragraph shall be deemed to have had effect (for all relevant years of assessment) as it would have had effect if the actual price or date had been so taken, and such adjustment of liability to tax shall be made, by means of an additional assessment orotherwise, as may be necessary and may be so made at any time at which it could be made if it related only to tax for the years of assessment in which the reconveyance or grant takes place.

  Deductions from rents: payments made before 1964–65.

  11.—(1) Except as provided by this and the following paragraph, no payment shall be deductible under the foregoing provisions of this Schedule if made before the beginning of the year 1964–65.

  (2) If the cost to the owner of any premises of maintenance, repairs, insurance and management during the five years ending with the

  1597
  1597
  year 1963–64 exceeded the relief available to him in respect of those five years, the excess shall be treated for the purposes of the foregoing previsions of this Schedule as if it were a payment in relation to the premises made by him in the year 1964–65 in respect of dilapidation attributable to that year:

  Provided that there shall be disregarded for the purposes of this sub-paragraph—

  (a) any payment made during a period when the owner was in occupation of the premises, and any relief so far as it was available to him in respect of such a period;

  (b) any payment in respect of which a deduction may be made by virtue of paragraph 12 of this Schedule;

  (c)any payment for works falling within section 101 (2) of the Act of 1952 (by virtue of which "maintenance" includes the replacement of farm buildings etc.), being a payment made after the end of the five years which, under section 101 (7) of that Act, we retreated as the five years preceding the year 1963–64, or would have been so treated if a claim under section 101 of that Act could have, and had, been made for that year,

  and where during any period the owner was in occupation of a part only of the premises there shall be disregarded for those purposes so much of any payment made during the period, or relief available to him in respect of the period, as is attributable to that part.

  (3) Where relief available in respect of any land managed as one estate fell to be computed in accordance with section 101(4) of the Act of 1952, payments made in respect of the estate, and the relief so available, shall for the purposes of the foregoing sub-paragraph be treated as apportioned between the premises comprised in the estate in accordance with their annual values for purposes of Schedule A, but so that as respects any premises in relation to which the owner was chargeable under section 175 of the Act of 1952 (excess rents) the annual value shall be taken to be that determined as mentioned in subsection (1) of that section.

  (4) References in this paragraph to relief available to a person in respect of any premises are references to relief which was or, on a claim in that behalf, could have been allowed to him in respect of the premises under sections 99 to 101 or 176(1) of the Act of 1952.

  12.—(1) If, in respect of any payment such as is mentioned in paragraph 1 of this Schedule made by a person in relation to any premises before the beginning of the year 1964–65, a loss is by virtue of section 346 of the Act of 1952 (relief m respect of losses under Case VI of Schedule D) carried forward to that year, the amount of the loss shall be treated for the purposes of the foregoing provisions of this Schedule as if it were a like payment made by that person in respect of the premises in, and in respect of, that year.

  (2) Where by virtue of sub-paragraph (1) above a deduction falls to be made in any year it shall be made notwithstanding anything in subsection (3) of the said section 346 (which requires relief under that section to be given
  1598
  as far as possible from the first subsequent Case VI assessment), and relief shall not be given under that section in respect of a loss in so far as a deduction in respect of it is made under this paragraph.

  I suggest that it would be for the convenience of the House if with this Amendment we deal with the Amendments in page 76, line 37, page 78, line 19, page 78, line 45, page 79, line 4, page 79, line 13, and in page 79, line 17. All these Amendments arise from the main Amendment, which is a recasting of Schedule 4.
  Schedule 4 contains in its present form a system of allowing expenses as a deduction in arriving at the amount of taxable protfis. It specifies what expenses are allowable in arriving at assessments under the new Case VIII of Schedule D on rents and other income from real property. It comes into operation in 1964–65 when rents are assessable under Case VIII of Schedule D instead of under Schedule A. It is a complex, though very important, Schedule, on which there was certain discussion in Committee.
  It provided, as the whole of this reorganisation does, a new ground of tax law. Obviously in this new field we sought the comments and advice of all members of the Committee and also of professional bodies whose concern and interest are particularly in this field. The Schedule has now been recast in the light of the advice we have received. We invited suggestions, and were indeed very grateful for them. Moreover, important points of substance were raised by professional bodies and by hon. Members on both sides, especially by my hon. Friends the Members for Nottingham, South (Mr. W. Clark), Crosby (Mr. Graham Page) and Aldershot (Sir E. Errington). We have met, if not all the points they raised in Committee, certainly the most important of them. I am grateful to them and to other hon. Members for the assistance they gave.
  The Amendment in page 71, line 14, recasts the provisions in Schedule 4 which set out the deductions allowable against rents under leases of land. It also alters other parts of the Schedule consequential on the main Amendment. In its present form, if the Amendment is accepted, it produces far greater clarity and coherence.
  The alterations are as follow. First, it recasts the provisions with regard to

  1599
  relief for maintenance expenditure incurred before 1964–65. This is in response particularly to points made by my hon. Friends the Members for Nottingham, South, Crosby and Aldershot. Now the expanses for all relevant periods are taken into account and the landlord is not now faced with the choice of leaving out of account either past expenses or future expenses up to the year 1967–68.
  Secondly, the provisions with regard to the set-off of losses on one property against the rents of another are simplified, again as the result of the comments made in Committee. Now, all rents are pooled, unless, first, they are not full rents—that is to say, rents which, taking one year with another, cover the cost to the landlord of his obligations and his expenses of maintenance, repairs and management; if they are not full rents, the letting cannot be regarded as a business transaction—or, secondly, substantially the whole responsibility for the repairs rests not with the landlord but with the tenant. If it rests with the tenant, the rent is effectively investment income which does not qualify for the set-off of expenses on other property. The restriction of rights of set-off to "lessor's repairing leases" is abolished. The third main alteration is that the allowable expenses are set out more clearly. The provisions for relief for the landlord who lets a building in flats, for his expenses in maintaining the common parts or part of the building and providing the services for which a charge is included in the rent, are set out.
  3.45 a.m.
  The fourth point is that relief is not now lost, as it was under the original Schedule 4, where payment is due in a qualifying period because the work has been done during such a period and is not made until after the property has ceased to qualify; for example, where it was occupied by the owner before the bill was paid. Under the old Schedule the relief was lost. That has been changed by paragraph (2) of the new Schedule.
  Paragraph (7) of the new Schedule covers the owner of a mansion house who, perhaps, has high expenses of upkeep;
  1600
  a property which is part of an estate, of which the other parts are let. This matter was dealt with earner. In such a case the owner is able to opt to have his expenses incurred on the first property set against rents received from other properties, provided he brings the full current annual value of the property on to the other side of the account. This, too, meets representations made to us by professional bodies and some of my hon. Friends.
  Regarding deductions for rents, the general rules are set out, firstly for maintenance and repairs, secondly for services, thirdly for tenants' rates and, fourthly, for head rents. While that represents the contents of paragraph (1), paragraph (2) sets out the deductions due from rents during the lease for dilapidations whether or not there is a full rent.
  Paragraph (3) is designed to show that where there is a full rent, the expenses can be carried forward from previous leases of the same premises at a full rent under the same landlord and also to cover void periods; that is, there is continuity while the premises are either let or kept for letting at the full rent. Paragraph (4) points out that if it is a full rent and not a tenant's repairing lease, there may be set against it expenses on other properties also let at the full rent. Paragraph (5) sets out that if, during the lease, any material change in the repairing obligations or rent payable took place, that is treated as a new lease.
  The second half of the new Schedule, beginning with paragraph (7), provides the mansion house relief. This was dealt with earlier. Paragraph (8) deals with deductions from rent in respect of premiums. This matter was also dealt with earlier. Paragraph (9) concerns another premium case. If a premium for a sublease arises there is the appropriate fraction to which I referred when dealing with the second of the new Schedules. Paragraph (10) deals with Clause 22 and improvements.
  I have given a skeleton recital, considering the hour of the morning, of the new Schedule. As I said in Committee, it is a complex matter. It shows more clearly what are the deductions and how they can be made. This can never be a simple matter or something which is easily understood. Nevertheless, the pro-

  1601
  visions will be in a better form if the House accepts the new Schedule.
  If this Amendment is accepted, the Amendments that we are discussing with it become consequential in carrying out those principles. I shall, of course, be happy, with the leave of the House, to assist the House further if hon. Members have any questions to ask.
  Mr. Jay: I agree with my hon. Friend that the Solicitor-General's speeches are somewhat clearer than the Schedules as they appear here. Nevertheless, I am still a little puzzled by the transaction in which we are now engaged. Under the Bill as it stands, we have Schedule 4 which relates, of course, to the deductions that the taxpayer could make from rents and other receipts from land for the purpose of computing his liability under the new charge of Case VIII. That part of the Schedule took up most of page 71, and all of pages 72, 73, 74 and 75 of the Bill—that is to say, about five pages. We are now asked to leave out all those pages and to substitute for their contents an entirely new form of words extending over a rather greater space.
  If one attempts to compare—as, I am sure, all hon. Members opposite, including the hon. Members for Nottingham, South (Mr. W. Clark) and for Halifax (Mr. Maurice Macmillan) have done most carefully—the original Schedule and the form of words now before us, one is inclined at first sight to think that the Government are merely saying more or less the same thing in rather different though, one hopes, rather clearer words than before.
  It immediately leaps to one's view that that is not entirely so in the case of paragraph 11 of the Amendment, which relates to payments made before 1964–65. Here, evidently, a major change of substance has been made. Do I understand from the Solicitor-General that we are not merely clarifying and restating and tidying up, but also making a number of changes in the substance and, indeed, the policy of the new tax? If that is so, it is a little surprising, and one would like to know just how matters have reached this stage.
  It is, after all, now perhaps fifteen months since the previous Chancellor announced that he would abolish Schedule A. Therefore, he and his staff,
  1602
  and the Inland Revenue, had this unusually prolonged period to think the matter over. They then produced this Bill. I agree that it is a major undertaking, but the Government themselves embarked on it. They produced it in April with this Schedule which presumably, they had been framing for a year or more. Now, without a great deal of notice, we are presented with an entirely new—what the hon. and learned Gentleman called recast, but what I should have called entirely rewritten, Schedule of great complexity containing not only a number of clarifications but matters of substance.
  I realise that criticisms of the Schedule were made in Committee and that the Government have quite rightly taken them into account, but what we want to be clear about is that we are confronted here, not merely with the rewriting of the Schedule, but a number of changes in the method by which these deductions will be allowed. Perhaps we can have a little more light on how it came about that this part of the Bill has had to be entirely rewritten, although, presumably, when they introduced the Measure the Government had had at least a year in which to work out those proposals.
  Sir Hugh Lucas-Tooth: I am sure the whole House will wish to thank the Government for the improvements in this Schedule, both as to substance and clarity, and to thank the Solicitor-General for the clear way he explained it to us. I should like to raise a matter of some importance to my constituents. Hitherto, local authorities have been charged Income Tax in respect of excess rental income for their council house estates under Case VI of Schedule D. They have also been charged under the same case of Schedule D in respect of other activities, such as the provision of amenities—tennis courts, football and cricket pitches, bathing pools, bowling greens and things of that kind.
  In the ordinary way, it has been possible for local authorities to make a profit on their housing estates, and it has not been uncommon for them to make a loss in respect of these other activities. Under the present dispensation, when both these kinds of activity are charged under the same case, it has been possible for local authorities to set off their losses against their profits. That

  1603
  was decided before the special Commissioners in a case in which Orpington Urban District Council was concerned in October 1959. I understand that that decision was opposed by the Government, but for four years they have done nothing about it and that has been the law.
  Let it be admitted that this position seems to have been the result of something of an accident. I think that it was due to the wartime arrest of Schedule A assessments. That made it necessary to deal with these surplus rental profits, and I imagine that they were put into Case VI because it was a convenient place to put them rather than for any other reason.
  I certainly do not wish to argue that the present state of affairs can be justified on strict logic. I admit frankly that the amenities which are provided by councils are not in any way usually confined to the tenants of their housing properties. They are usually available to all the ratepayers and are a quite separate kind of undertaking. I certainly would not be prepared to argue, as the Opposition have argued and voted yesterday, against all taxation of local authorities in respect of their housing estates.
  The point that I want to make is that the change brought about by transferring the charge in respect of council estates from Case VI to the new Case VIII has been sudden, arbitrary and unfair. It is right that I should give the figures in respect of my own local authority. In Hendon the taxable surplus on the housing revenue account for the year 1960–61 was over £86,000, making an Income Tax assessment of £33,000. In 1961–62 it had risen to £88,000, and the estimated profit for the year 1962–63 is over £90,000, making a liability to tax of more than £34,000.
  4.0 a.m.
  These are very large figures indeed, and the result of this Schedule, even as amended, appears to me to be to take away from Hendon Borough Council something of the order of £40,000 a year, without any sort of compensation, and, indeed, without any sort of warning at all. The council has pursued a perfectly consistent policy. It has financed these amenities out of this surplus income. That was entirely proper and entirely beneficial.
  1604
  The Government may, of course, argue that in doing this the council was, in fact, receiving something in the nature of a concealed subsidy from the Exchequer in respect of this very considerable income, and that if we are to make grants in this connection they ought not to be done in this way. I think that that may very well be so, but it seems to be even more undesirable to allow local authorities to act over a considerable number of years on the basis that the law is as it is and then, suddenly, to change the law, to cut off this source of revenue and to give no compensation of any kind.
  In a sense, what is being done now has something in the nature of a retrospective effect. Hendon—and I have no doubt many other local authorities—has entered into commitments and spent capital on the basis that it is going to be able to finance the matter as it has hitherto been able to do out of its surplus housing revenue account. It will no longer be able to do that, and this will inflict a very heavy loss upon it.
  I am not objecting to this change of policy being made on principle. It may well be that it is right that this should be done at the present time, but what I do ask my hon. and learned Friend or some other member of the Government to say is that it cannot be right suddenly to turn off this tap and to throw this very heavy burden on particular local authorities, and that something should be done in order to temper the wind to the shorn lamb so as, so to speak, to tail off the position in view of these heavy commitments and large sums of money involved.
  Mr. Graham Page: Despite the hour, I do not feel that I can let the occasion pass without thanking my hon. and learned Friend the Solicitor-General and my hon. Friend the Financial Secretary for listening so patiently to our points originally made in Committee and later on the Schedules, as they were originally drawn, and for meeting the major points. Despite the point on which my hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth) put his finger, the major points which were worrying us in Committee, as the Schedule originally stood, have been met.
  One of the rather difficult provisions which were originally in and which did

  1605
  not seem to benefit anyone was that about carrying on under the old scheme for the next four or rive years. That has gone. Secondly, it is quite clear that one can set off the loss on one property against the gains on another in one year if those properties are both let at the full rent. Thirdly, I think it is clear that one can carry forward a loss from one year to the next provided it is on the same category of property, the properties being let at a full rent.
  The fourth point, and the one which will affect more people than the others I have mentioned under paragraph 11, is that what we have called the unexpended balance of relief, that is, the relief which had not been disposed of in the average of the past five years, will now be payable in the year 1964–65 together with the actual cost in that year. That will be a reasonable way in which to treat the taxpayer from whose money tax has already been taken. It is not a concession or a bonus. It is paying back money to which he is entitled. In the year 1964–65 there will be that relief paid to him as well as a claim for his actual expenses.
  I am grateful that the amended Schedule deals with those four points. In addition, may I thank my right hon. and learned Friend the Solicitor-General for so clearly explaining to us these five pages of type which, however well we may be able to read them in the light of day, would otherwise be difficult to understand at this hour of the morning. He has certainly made them clear to us.
  Mr. Houghton: There is a matter of procedure when we are confronted with a rewrite of a substantial portion of a Bill that has already passed through the Committee stage. It would have been more helpful if, in some different type or in some annotation, we could have been shown what are the new points in this very lengthy Amendment.
  When the House is asked to do work twice over—first to go through the Schedule, and a very lengthy Schedule, too, in its original form, and then is presented with an Amendment which says "leave out from the beginning" and seeks to delete the next four pages and to substitute something which is about twice as long, it is a bit thick. This is not the local glee club. This is the House of Commons—what my hon. Friend the
  1606
  Member for Leeds, West (Mr. C. Pannell) described as the highest forum in the land. Here we are dealing with business in a way which would be a disgrace to the smallest branch of the Inland Revenue Staff Federation. I think this is one of the matters which should be considered by the appropriate body on procedure.
  But although we have been very badly treated, can we have an assurance that the taxpayer will be better treated? Can we have an assurance that there will be a nice glossy attractive-looking paperback published, entitled "Case VIII for Tiny Tots"?—for that is what will be needed. How taxpayers are going to cope, I do not know. How the Inland Revenue is going to cope, I do not know either. But in one way or another, I suppose, it has got to be done.
  But then we heard a few moments ago from the hon. Member for Hendon, South (Sir H. Lucas-Tooth) that something had happened which was quite a shock to the Borough of Hendon. This noble and wealthy borough, in which the Parliamentary Labour Party benevolent fund has recently invested £1,000, was described by the hon. Gentleman as a shorn lamb. A shorn lamb is not a very good investment even for the Parliamentary Labour Party benevolent fund.
  The truth is that some hon. Members did not realise what they were asking for when they asked for the abolition of Schedule A. They thought that it would be a nice neat job, costing the Chancellor £50 million, to relieve the owner-occupier of this burdensome tax on his notional income which was an abomination, and it was astonishing that it has lasted so long. But it was obvious that, in the doing of it, something had to be done with the rest of the shambles of Schedule A, the excess rents provisions, all the problems connected with leaseholds, tenanted properties, considerations of various kinds, premiums, and the rest. In fact, of course, under the old system many people were getting away with paying tax on far less than they should because of the basis of assessment of tenanted properties under Schedule A. Now, all that has been converted into this new case under Schedule D, with a new and more realistic basis of assessment. That is one of the by-products of the change.

  1607
  I do not think that the Inland Revenue welcomed, when they heard of it for the first time, the idea of embarking on this enormous enterprise; but, at least, a much cleaner job has been made of it as a by-product of the abolition of Schedule A on owner-occupiers. There will be many difficulties. As I said earlier, a good deal of tidying-up will be necessary as time goes on.
  It is really disturbing that we have to do our business in this way, hoping and believing that it is all right. Unless one reads this through very carefully, one cannot be sure that the Chancellor has not abolished the Monarchy in one of the paragraphs, unbeknown to the House of Commons, and the Queen's realm. What is hidden in it, goodness knows, unless it is all shown to us clearly. The right hon. and learned Solicitor-General has gone through it with care, but he has not covered the lot. We have to take it on trust. It is a great pity that the House of Commons, a legislative body, has to take anything on trust. It is a great reflection on our methods of doing business that we can spend long hours dealing with a lengthy Schedule in the Bill and then have it ripped out and a fresh set of pages stuck in. That is what it amounts to.
  I sincerely hope that, before very long, there will be a radical overhaul of the conditions in which the House does its business. The present situation is nothing short of disgraceful. If people realised the conditions and circumstances in which we did our work, they would tremble for the wisdom and the accuracy of our legislation. They might even accuse us of being party to a grand conspiracy to keep the legal profession fully occupied.
  4.15 a.m.
  We put on the Statute Book new Clauses, Schedules and Acts of Parliament ill-digested. We had two hours' discussion earlier of what an Amendment meant and few of us are realty satisfied with it, even though it is now to be written into the Bill.
  I have no doubt that hon. Members are beginning to think about their breakfast and I will not detain the House any longer, but when we are kept up as late
  1608
  as this we might as well make a night of it and do it properly. There are some things that can be said at a quarter past four in the morning that would not be tolerable at a quarter past four in the afternoon. [Interruption.] The hon. Member for Nottingham, South (Mr. W. Clark) is getting a little excited. He has had tributes paid to him. He and his hon. Friend the Member for Crosby (Mr. Graham Page) have shaped the Bill and made it better. They have been the main source of inspiration for much that is on the Order Paper this evening. So the hon. Member should be content to have this new fame thrust upon him from the Front Bench opposite, although he will, I trust, bear with me for one moment longer.
  I am sure that this new Schedule will do its job. I hope that it does. When the Inland Revenue has to translate it into intelligible guidance for taxpayers under Case VIII, I sincerely hope that hon. Members on both sides may be supplied with a free copy so that we can then discover for the first time what we are doing now.
  The Solicitor-General: I should certainly like to reply to two of the points which have been raised. At one time during the speech of the hon. Member for Sowerby (Mr. Houghton), I saw the shadow of impeachment over my head by thinking that I had misled the House of Commons and that somewhere tucked into Schedule 4 was such an awful consequence of the abolition of the monarchy. I assure the hon. Member that that is not hidden away anywhere in any of the paragraphs.
  Mr. Boyd-Carpenter: It is outside the scope of the Bill.
  The Solicitor-General: With regard to the shorn lamb of Hendon, already the cold winds of Sowerby have been blasted in that direction and I can provide no comfort. My hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth) was right, however, in saying that excess rents were put into Case VI in 1940, at a time when Schedule A valuations could not be raised by being revalued. The effect was that excess rents were available to set against losses on other Case VI transactions. If there had been a revaluation, of course, that would have

  1609
  disappeared. I can only say to my hon. Friend that I appreciate the point he has made so fully and strongly this morning on behalf of Hendon, but there is nothing that I can hold out to him in any word of comfort.
  Mr. Jay: Will the sort of effect on Hendon which was described tonight be general over many other local authorities?
  The Solicitor-General: As far as I am aware, that is very improbable.
  Sir H. Lucas-Tooth: It is only because of the admirable administration of the borough I represent that this is impossible in Hendon.
  The Solicitor-General: I am sure that that is the true reason for such a successful period in financial operation, which, unfortunately, appears to be coming to an end.
  This is, as the right hon. Member for Battersea, North (Mr. Jay) and the hon. Member for Sowerby appreciate, a major change, one of the greatest changes that have been made in the Inland Revenue law for a great many years. I do not think that on reflection anyone would criticise the fact that this is something in which the opinion, the comment and the experience of all Members of the Committee were sought and that when they were provided they were taken into account. I well appreciate the points made by the hon. Gentleman about procedure and about printing, and they, I am sure, will be noted. I am sorry it produced in the end such an unmanageable and indigestible meal for the House, but I have no doubt that the work of the Committee was extremely valuable, and I should like to repeat my gratitude to all hon. Members in the Committee for what they did in getting what I am sure is a very much better Schedule 4.
  Amendment agreed to.
  Mr. Barber: I beg to move, in page 76, line 8, to leave out from "person" to "as" in line 9.
  It would be convenient to take the next two Amendments at the same time. The three Amendments merely apply to deductions from sums within the ambit of paragraph 11 of this Schedule the same principle as the House has already agreed should be applied to rental income.
  Amendment agreed to.
  Further Amendments made: In page 76, line 15, leave out "in or before the year."
  In line 19, leave out "in or before the year".—[Mr. Barber.]
  Mr. Barber: I beg to move, in page 76, to leave out lines 28 and 29 and to insert:
  12. No payment shall be deductible under the foregoing paragraph if made before the beginning of the year 1964–65:
  Provided that this paragraph shall not prevent the deduction of a payment in so far as a loss in respect of the payment is by virtue of section 346 of the Act of 1952 (relief in respect of losses under Case VI of Schedule D) carried forward to that year, and where the deduction falls to be made it shall be made notwithstanding anything in subsection (3) of that section (which requires relief to be given as far as possible from the first subsequent Case VI assessment), and to the extent that it is made relief shall not be given under that section.
  This Amendment corrects an anomaly in the transitional provisions, and again, in so far as they apply to sums in respect of rents payable under reliefs, the Amendment corresponds to that already accepted by the House in respect of rents in the new paragraph 12 of this Schedule and contained in the Amendment the House agreed to just now. I will happily explain this Amendment in detail if the House wishes, but as I have just said, the same principle has already been accepted.
  Amendment agreed to.
  Further Amendments made: In page 76, line 37, leave out from "paragraph" to "lease" in line 40 and insert:
  "4 of this Schedule as a deduction which by virtue of paragraph 2 thereof might have been made by him from rent to which he was entitled for that year under a lease of the land, being a".—[Mr. du Cann.]
  In page 77, line 14, leave out from "in" to the end of line 16 and insert:
  "relation to the premises preserved or protected by the embankment of an amount equal to a twenty-first part of the expenditure and incurred in respect of dilapidation attributable to the year".—[The Solicitor-General.]
  Mr. du Cann: I beg to move, in page 77, line 42, to leave out from the beginning to "shall" in line 1 on page 78 and to insert:
  (3) In relation to expenditure in respect of which an allowance under section 94(l)(c) of the Act of 1952 would, but for the provisions of this Act, have fallen to be made in respect of the premises for the year 1964–65, the foregoing provisions of this paragraph shall apply as if the expenditure had been incurred in the year of assessment following that in

  1611
  which it was actually incurred and, so far as the expenditure was incurred in repairing the embankment in question, shall apply as if it had been incurred in making it, but those provisions.
  This Amendment corrects a flaw in the drafting of paragraph 13 of the Schedule which deals with the question of sea walls. It is a very simple matter. We are grateful to the professional body which brought it to our attention, but I am sure that the hon. Member for Sowerby (Mr. Houghton) will be delighted to hear that I am informed that the Inland Revenue had seen it even before that early date.
  Amendment agreed to.
  Mr. Barber: I beg to move, in page 78, line 15, to leave out from the beginning to the end of line 17 and to insect:
  "in respect of which an allowance has been made under Part X or Part XI of the Act of 1952".
  This merely corrects a mistake in drafting.
  Amendment agreed to.
  Further Amendment made: In page 78, line 19, leave out from "paragraph" to "deducted" in line 23 and insert:
  "where a sum or part of a sum deductible under the foregoing provisions of this Schedule can be deducted for the year of assessment in which the sum is paid it shall be so deducted, and where it cannot it shall be deducted for the earliest year of assessment for which it can be".—[Mr. Barber.]
  Mr. du Cann: I beg to move, in page 78, line 37, to leave out from "amount" to second "or" in line 39 and to insert:
  "on the profits or gains arising from which the first-mentioned person would be chargeable under Case VIII".
  This corrects an error in drafting.
  Mr. Mitchison: I merely rise to inquire whether the Inland Revenue is divided into two parts—those who commit and those who detect the errors in Bills.
  Mr. du Cann: With the leave of the House, I should inform the hon. and learned Member for Kettering (Mr. Mitchison) and the House that to some extent they are one and the same person.
  Amendment agreed to.
  Further Amendments made: In page 78, line 45, at end insert:
  (5) Where, on account of a payment made in any year of assessment, a deduction falls
  1612
  to be made under this Schedule from any rents or receipts to which the person making the payment became entitled in a previous year, all such adjustments of liability to tax shall be made, by repayment or otherwise, as may be necessary to give effect to the deduction.
  In page 79, line 4, leave out from beginning to end of line 12.
  In line 13, leave out "and". In line 17, at end insert:
  "and 'tenant's repairing lease' means a lease where the lessee is under an obligation to maintain and repair the whole, or substantially the whole, of the premises comprised in the lease".—[The Solicitor-General.]

  Schedule 5.—(RELIEF WHERE PREMIUM, ETC., TREATED AS RENT.)
  The Solicitor-General: I beg to move, in page 79, line 30, to leave out "or (3)" and to insert "(3) or (4)".
  The Amendment is consequential on the insertion in Clause 22 yesterday on recommittal of a new subsection dealing with premiums at the option of the tenant on consideration of a reduction in rent.
  Amendment agreed to.
  The Solicitor-General: I beg to move, in page 80, line 35, at the end to insert:
  "and whether or not any such balance remains the tax shall be arrived at by applying the said rate or rates to so much of the chargeable sum as remains after deducting such amounts as, following the principle se; out in the said paragraph 2(a,iii), are deductible from that sum".
  This and the next five Amendments are consequential. They are drafting Amendments to the Schedule, which provides for what is called top slicing relief in respect of charges on premiums where the person charged has a rate of Income Tax and Surtax which would otherwise mean that the payment would be increased to more than one year's Income Taxin one year. The premium may have to be paid out for a period of years. If the person is an individual, the top slicing relief comes into effect. These drafting Amendments make the top slicing relief in respect of the premium charges which were not previously included in the Schedule.
  Amendment agreed to.
  Further Amendments made: In page 80, line 40, after "(a)", insert "the rate of".
  In page 80, line 41, after "before", insert "the rate of".
  In page 80, line 43, after "calculating", insert "the rate of".
  In page 80, line 44, after "period", insert
  "and the deductions from that sum".
  In page 80, line 46, after "and", insert "in calculating a rate of tax".—[The Solicitor-General.]
  4.30 a.m.
  Mr. Barber: I beg to move, in page 81, line 36, to leave out from "year" to the end of line 40 and to insert:
  "of assessment for the purposes of surtax or at any subsequent time not later than six years after the end of the year of assessment,
  (2) Except in relation to a claim in respect of surtax, section 19 of this Act shall not apply as respects relief under this Schedule, and in relation to a claim in respect' of surtax shall apply as if references to the surveyor and the Commissioners concerned were references to the Special Commissioners, and as if proviso (c) were omitted."
  This Amendment to paragraph 6 of Schedule 5 allows a taxpayer to claim top slicing relief on a chargeable premium within six years after the end of the year of assessment for which the premium is chargeable. Under the Bill as drafted, a claim had to be made when the taxpayer made his Surtax return or appealed against an assesment—within 30 days of the notice of assesment. The time limit for claiming the corresponding Income Tax relief is six years. It is clearly desirable that the Surtax limit should be the same.
  Amendment agreed to.
  Amendment proposed: In page 81, line 45, leave out "section 25(1) of this Act" and insert "this Schedule".—[Mr. Barber.]
  Mr. Mitchison: On a point of order, Mr. Deputy-Speaker. Both the Financial Secretary and the Economic Secretary rose to propose the Amendment. Which of them actually proposed it?
  Mr. Deputy-Speaker (Sir William Anstruther-Gray): The Financial Secretary did.
  Mr. Diamond: As the Financial Secretary moved the Amendment, perhaps he can tell us why it appeared as a starred Amendment on the Order Paper yesterday.
  Mr. Barber: My hon. Friend the Economic Secretary will deal with that when he replies to the debate.
  Mr. Diamond: In those circumstances, I think we ought to allot the hon. Gentleman full marks for being so quick on the draw—
  Mr. Boyd-Carpenter: Quick on the withdraw.
  Mr. Diamond: —in getting out of having to explain to us why the Amendment appeared as a starred one as recently as yesterday on the Order Paper.
  Mr. du Cann: As my hon. Friend would have explained had he been called upon to answer the question, the Amendment is purely drafting. A number of learned bodies have been good enough to make representations to us about these matters, and they have all had to be gone into with a very great deal of care. That was the explanation in this case. It was a reflection of the care with which the suggestions made to us were examined rather than the dilatoriness of those concerned with the examination. The parent Amendments are concerned with a very minor matter and are purely drafting.
  Amendment agreed to.
  Schedule 10.—(AMENDMENTS ARISING FROM CHAPTER II OF PART II OF THIS ACT, SECTION 71.)
  Mr. du Cann: I beg to move, in page 86, line 17, at the end to insert:
  "or would be so chargeable if he were not exempt from tax".
  Perhaps we may consider the following Amendment at the same time. Both Amendments are designed to correct a flaw in the original drafting. The point was brought to our attention by one of the learned professional bodies. These Amendments deal with rent charges payable to a charity, as, for example, the Church Commissioners. Clearly these ought not to continue to be subject to deduction of tax as they are in the original drafting, and the Amendments ensure that they shall not be.
  Amendment agreed to.
  Further Amendment made: In page 86, line 28, at end insert:
  "or would be so chargeable if he were not exempt from tax".—[Mr. du Cann.]
  Mr. du Cann: I beg to move, in page 86, line 37, after "(8)", to insert:
  "after the words 'Schedule B, income' there shall be inserted the words '(other than yearly or other interest)' and".
  Again, this is a purely drafting Amendment, but again, for the information of the hon. Member for Sowerby, it was discovered—and we hope that it will be put right—by the Inland Revenue.
  Amendment agreed to.

  Schedule 11.—(REPEALS ARISING FROM CHAPTER II OF PART II OF THIS ACT.)
  Mr. Barber: I beg to move, in page 92, line 42, to leave out lines 42 to 44 and to insert:
  "Sections 153(2) and 162(3)".
  This Amendment corrects a minor oversight.
  Amendment agreed to.
  Mr. Barber: I beg to move, in page 96, line 21, at the end to insert:

  The Salmon and Freshwater Fisheries Act 1923 (c. 16).

  In Schedule 1, in Part II, in paragraph (4), the words "income tax or".

  From the passing of this Act. water Fish

  This Amendment repeals words which become meaningless on the abolition of Schedule A.
  Amendment agreed to.
  Mr. Barber: I beg to move, in page 96, line 40, at the end to insert:

  The Local Government Act 1933 (c. 51).

  Section 297; in, the section 305, in the definition of "Net annual" "value", the words from "either" to "the said Schedule A".

  From the passing of this Act.

  This Amendment repeals the provisions of the Local Government Act, 1933, which will become ineffective on the abolition of Schedule A.
  Amendment agreed to.
  Bill to be read the Third time this day.

  HOUSE OF COMMONS DISQUALIFICATION ACT 1957
  Resolved,
  That Schedule 1 to the House of Commons Disqualification Act 1957, in its application to this House, be amended as follows: —

  1. In Part I (Judicial Offices)—

  (a) for the offices of Chairman and paid Deputy Chairman of London Quarter Sessions and Chairman and paid Deputy Chairman of a court of quarter sessions for the county in Lancashire there shall be substituted the offices of whole-time salaried Chairman and whole-time salaried Deputy Chairman of London Quarter Sessions and whole-time salaried Chairman and whole-time salaried Deputy Chairman of a court of quarter sessions for the county in Lancashire;

  (b) the offices of whole-time salaried Chairman of the court of quarter sessions for the county of Kent and whole-time salaried Chairman and whole-time salaried Deputy Chairman of the court of quarter sessions for the county of Durham shall be added.

  2. In Part II (Commissions, Tribunals and other bodies of which all members are disqualified)—

  (a) the Horticultural Marketing Council and the Tithe Redemption Commission shall be omitted;

  (b) the Consumer Council, the Location of Offices Bureau, the National Incomes Commission and a standing committee appointed under section 4 of the Merchandise Marks Act 1926 shall be added.—[Mr. Barber]

  HOSPITALS, STROUD
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Finlay.]
  4.38 a.m.
  Mr. Anthony Kershaw: I regret that it should have been necessary to delay until a quarter to five in the morning the consideration of the most important business that we have before the House. I also particularly regret that it should have been necessary to keep my hon. Friend the Parliamentary Secretary here all night when the labours of his office are so great.
  I wish to refer to the hospitals in the Stroud area. The hospitals I have in mind are the Stroud General and Maternity Hospital, the hospital at Tetbury, Standish Hospital, and the hospital at Berkeley, which is in the constituency of my hon. Friend the Parliamentary Secretary to the Ministry of

  1617
  Housing and Local Government but is widely used by those who live in my constituency.
  All these hospitals are threatened with closure, drastic alteration, or reduction in status, at some time or other, and I can say without fear of contradiction that there is not to be found in my constituency or the area near it anyone—man, woman or child—who wants these hospitals to go.
  The suggestion is made in the papers we have had about this matter that in ten or fifteen years' time when the question comes for decision the new large and modern hospitals which are to be constructed at Gloucester and Bristol will provide an alternative to the hospitals to which I have referred and will be preferred by those who have to use them because of their efficiency and because of the general convenience of using them. I suggest that there is only one way in which this preference by the inhabitants of the area will be brought about. It will be, I am sorry to say, by so running down our local hospitals that even large impersonal hospitals, such as large hospitals must be which are situated far from our homes, will nevertheless appear preferable to what we will be left with.
  Unfortunately, there is some evidence that our hospitals are already, by the anticipation of these events, suffering in some sort from a war of nerves which is sapping their self-confidence, reducing their reputation, and reducing their efficiency, or is likely to do so.
  I do not find that the relations between the consultants who come to these hospitals and the hospitals themselves are very satisfactory. I know that the consultants are under contract to attend. I do not know the exact terms of these contracts. I know that the consultants are extremely busy men. It is obvious that, as is the case with other very busy men, the journey between their base and the hospitals scattered about the Stroud constituency and area takes some time. There is no lack of work at these hospitals. At Stroud, for instance, the waiting period for an average case for a consultant is one month and for urgent cases two weeks approximately, although this may vary in the case of some individuals. The waiting list at Gloucester, for orthopaedic cases, at any rate, is
  1618
  about four months. Obviously, it would be futile to transfer the work from the hospitals to which I refer to Gloucester or elsewhere, because the congestion would become even worse.
  Some consultants have recently prophesied in relation to Stroud Hospital a clinical disaster, and they made proposals that Stroud should become aG.P. hospital. The consultants say that it is not possible to get good staff at the Stroud Hospital. I do not think that they are correct in this. The last two housemen at Stroud were both extremely good, so good that they left their posts after quite a short time to go to work with the consultants. I think that it is unfortunate that there has not been a meeting, such as the general practitioners in my area wish to have with the consultants to discuss this matter. I understand that the consultants as a body are not willing to meet the general practitioners to talk the matter over.
  I accept that a certain number of changes should be made, or ought to be made from time to time, in the hospitals. Stroud General Hospital no doubt lies at the moment partially between two stools. It is neither small enough to provide the sort of cottage hospital treatment nor large enough to provide more elaborate treatment.
  In considering what changes should be made, we should consider, among other things, the clinical needs of the area. These are rising, and they are not small now. Stroud General Hospital deals with 50,000 cases a year. Stroud Maternity and Berkeley Hospitals and the Tetbury Hospital are always fully occupied. If any changes are necessary in any of these hospitals in the consultancy service, it is more necessary that the consultants should increase their number of attendances and not seek to reduce them. It might be said that the consultants do not have the time to do this. However, I propose the appointment to the Stroud Hospital, which is big enough for this, of a consultant surgeon and consultant physician. I appreciate that that would cost a considerable amount of money, but it would reinforce the status of the hospital, make it efficient in this regard and, for these reasons, the regional hospital board should consider this proposition.

  1619
  The suggestion that there should be very large hospitals at Gloucester and Bristol is reinforced by powerful medical arguments. I think it is true to say that the atmosphere in a large hospital is not as pleasant as that in a small one from the patient's point of view. However, the equipment is necessarily better, more elaborate and certainly more expensive. Despite this, the vast majority of patients who enter hospital do not need elaborate equipment. I understand that about 70 per cent. of them are either very young or old. What they need is not elaborate equipment but nursing, visiting by their relations and friends, and that personal attention which the very young and old need.
  We should face the fact that many people go to hospital not to be cured, alas, but to die. They do not wish, and we would not wish them, to pass their last days far from home, deprived of the comfort of their families; merely numbers on a chart in a large hospital to which they have never been before.
  The smaller hospitals scattered about the area have many part-time nurses who play a significant role in their efficient running. These nurses, perhaps former full-time nurses who are now married, could not and probably would not wish to transfer to the very large hospitals some distance from their homes.
  From the point of view of visitors to hospitals, Stroud is a rural area and part of it has poor bus services. The distances to the new hospitals will in some cases be twenty-five to thirty miles. The reduction in rail services which is taking place in the area, particularly over the short distance routes, will be a significant factor in making visiting to hospitals even more difficult than it is now.
  Most important of all, it must be remembered that the National Health service relies largely on the G.P. It is no secret that the relationship between the G.P. and the Service is one of the most difficult problems facing the Service today, a complete answer to which has not yet been found. One thing is quite certain, and that is that the general practitioner can keep in touch with his patients and maintain that family doctor relationship with those in his care, far
  1620
  more easly in a smaller hospital close to his practice than he can in a very large hospital twenty or ten miles away.
  I am quite certain that we have to consider not only the relationship between patient and doctor, but also the standard of skill and medical knowledge of the general practitioner who, if he is deprived of constant attendance, in company with consultants, on his patients in hospital, will necessarily suffer in his professional knowledge and interest. This problem of the general practitioner in the National Health Service cannot easily be met if the hospitals are to be removed from the area so that many of these doctors will only seldom be able because of the distance and time involved to attend their patients in these large hospitals.
  The National Health Service is not for the convenience of the administrators. It is not for the convenience of the consultants. It is not even for the convenience of the doctors. We are not trying to create a Health Service fit for a doctor to work in. As we all know, and should constantly remind ourselves, the National Health Service is a service for the patient. It is paid for by the individual taxpayer, and the democratic right of the taxpayer ought also, to some extent, to be regarded. None of these, the patient, the taxpayer, whoever he may be, wants our hospitals in the Stroud area, or in any other part, to be run down, and I find it hard to believe that they will ever reconcile themselves to the alteration and reduction in status they fear. They have a right to be heard.
  I believe that our hospitals in the Stroud area are at present medically efficient. They are sustained by the affection and activities of very many private citizens. The Stroud, Berkeley and Tetbury Hospitals all have very strong friends-of-the-hospital organisations, and I am sure that this energy could not be transferred to the big hospitals far away and comparatively impersonal to those who live in our area.
  If our hospitals are first run down and then closed down in the name of some pretended efficiency, some of the humanity will be lost to the National Health Service, much worthy and expert opinion will be saddened and disappointed, and I do not believe that the result can be to the advantage either of those who live in

  1621
  this part of Gloucestershire or of the National Health Service as a whole.
  Finally, may I ask one question? The new ward now ready at Cashes Green geriatric hospital is not being used, and I should like to know when it is to be brought into operation.
  4.53 a.m.
  The Joint Parliamentary Secretary to the Ministry of Health (Mr. Bernard Braine): I am very glad that my hon. Friend the Member for Stroud (Mr. Kershaw) has raised the question of the hospitals in the Stroud area. I entirely agree with him that the welfare of the patient must be our first consideration; in any discussion on hospital care, the patient must come first. We are on common ground, I hope, when I say that if the patient is to be provided with the best service that modern medical science can give, change in the hospital service is bound to come, and should be welcomed.
  With a great deal of what my hon. Friend says about hospital care I find myself in complete agreement but, with respect, I do not think that he has taken sufficient account of the fact that in recent years there have been far-reaching changes in medical practice.
  Among the more important of these has been the revolutionary change-over to more scientific methods of diagnosis and treatment and the development of a wide range of new and powerful drugs. These changes have been accompanied by increasing specialisation in the different branches of medicine and the recognition of their growing interdependence. Perhaps I can give an example. A patient needing acute hospital treatment usually requires the attention not only of a physicianor surgeon but of other specialists such as radiologists, pathologists and anaesthetists who require the use of complicated and expensive apparatus.
  However useful they have been in the past and however useful they are now, the fact must be faced that small hospitals cannot provide a full range of services in this sense. The most effective way of providing modern hospital care is in large hospitals where a wide range of services and skills can be brought to bear at all times, and where the limited resources of highly skilled staff and costly
  1622
  equipment can be used to the best advantage. I refute the suggestion that because a hospital is large and has all the necessary facilities and highly skilled staff it somehow or other becomes inhuman and a place to which people will be afraid to go. These hospitals are the places where, increasingly, all the equipment and all the treatments known to modern science can be made available to restore the patient to full health.
  It is for these reasons that the central feature of the pattern of hospital services—on which the hospital plan, published as a Command Paper in January last year is based—is the development of district general hospitals. These hospitals, in addition to the medical and surgical specialties, will generally also include a maternity unit, a short-stay psychiatric unit, a geriatric unit and facilities for the isolation of infectious disease. A hospital of this complexity must necessarily be of a considerable size and must draw its patients from a substantial catchment area.
  Normally, district general hospitals will have between 600 and 800 beds, serving a population of 100,000 to 150,000. Some which will provide special facilities, for example, radiotherapy, to serve a larger population, may be larger than this. Others may be smaller, but a district general hospital can rarely be of less than about 300 beds, since a hospital smaller than this could not normally provide a full range of facilities.
  Judging by these criteria, it hardly seems that it would be right to provide Stroud and its immediate surrounding area, whose population is about 50,000, with a district general hospital, and it seems likely that as hospital facilities are developed in larger centres, such as Gloucester and Cheltenham, a very appreciable part of the work now undertaken by hospitals in the Stroud area will pass to these new and better centres. Such a change will not be to the detriment of the patient, who in this way will receive the full benefit of modern medical practice and techniques.
  I should refer in some detail, perhaps, to the existing hospitals in the Stroud area, and to their future so far as can at present be foreseen. Stroud General Hospital has 52 beds and was originally a general practitioner hospital, but because of the shortage of consultant beds in the area

  1623
  it has been used in recent years as a specialist acute hospital staffed by visiting consultants from Gloucester and Cheltenham. As a small hospital with a limited range of work, Stroud General Hospital is difficult to staff, particularly with resident medical officers. It is clear that the burden of acute work there must move sooner or later to Gloucester or Cheltenham where a full range of consultant facilities will be available. This is not expected to happen for at least ten years.
  Stroud Maternity Hospital provides 23 general practitioner maternity beds. It was opened as recently as 1953 and it is expected to continue to provide a general practitioner maternity service for the area. Standish Hospital near Stroud, which has 270 beds, was originally a tuberculosis sanatorium. The majority of the beds there are now used for non-tuberculous chest diseases, traumatic and orthopaedic conditions and paediatrics. As Gloucestershire Royal Hospital is developed it is expected that Standish Hospital will gradually run down and eventually close.
  Cashes Green Hospital, near Stroud, which has 60 beds was originally an infectious diseases hospital. In 1956 it was adapted for use for the chronic sick and it is expected to continue to provide this service at least until the mid-1970s. Tetbury and District Hospital, which has only 17 beds, is a general practitioner hospital in a converted private house. The acute beds seem likely to be transferred to Gloucester, possibly before 1975, but the future of the hospital will have to be considered together with that of the Cotswold Hospital, also at Tetbury, which has 30 beds. This is a former Public Assistance institution now used for the chronic sick.
  Berkeley Hospital, which provides 39 general practitioner and maternity beds, is an extended dwelling house. With the development of a maternity unit, at Thornbury, and major acute developments at Bristol and Gloucester it seems likely that the major functions of this hospital will also be transferred elsewhere, although—like a number of other small hospitals—it may continue to provide for out-patient consultations, and may conceivably provide beds for medical cases which do not require specialist facilities.
  1624
  On staffing, I may say that the regional hospital board has proposals for increases in orthopaedic surgery for the Stroud area following the recommendations of the Platt Working Party. The proposals for Stroud will be considered with the board's other staffing proposals in the light of the board's revenue allocation.
  Often the smaller hospitals which are to be found throughout the country provide conditions for those who work in them, and for those who are patients in them, which are outmoded by modern standards. I do not think that my hon. Friend can lightly dismiss that. As district general hospitals are developed and as people come to appreciate more fully the contribution which the large, fully equipped hospitals can make to the treatment of patients, it is inevitable that many small hospitals will quite naturally be found to be no longer required for their present purposes. The hospital plan, therefore, contemplates that many of them will be closed. Some may be retained as maternity units in areas where the distance justifies this, some may provide long-stay geriatric units where elaborate treatment is not necessary. Others may be retained to provide out-patient consultative clinics or to deal with non-specialist medical emergencies in remote places. But for many, closure will be the right and natural course.
  I entirely agree with my hon. Friend that these small hospitals have a fine tradition of service to the community in which they are situated. Often they have attracted the devoted service of the leagues of hospital friends, and it is understandable that the initial reaction to what is regarded as a threat of closure is often one of regret or of protest. I make no complaint that my hon. Friend has raised this matter tonight in the way in which he has done, with his customary skill and eloquence. This is natural, but no hospital will be closed until better facilities are available elsewhere, and we believe that as better facilities are provided in the district general hospitals, people will realise that it is well worth while to travel rather further in order to obtain the full range of specialist treatment.
  It has been made clear on more than one occasion that the hospital plan does

  1625
  not represent final decisions, either on the change of use or on the closure of small hospitals. No final decision will be taken on the future of any small hospital until the alternative provision for the services it now provides has become available. Nor is there any danger of any hospital being closed suddenly.
  My hon. Friend said that the small hospitals in the Stroud area have a right to be heard. I agree. Before proposing the closure or change of use of a hospital, hospital boards are required to consult the bodies concerned with the provision of health services in the area and to arrange that any person interested may have an opportunity to express his view. Of course, the final decision rests with the Minister, and he will reach his decision in the light of the situation existing at the time.
  1626
  As I have indicated, the population of the Stroud area would hardly seem to justify a district general hospital, and it certainly seems to me that the best course is to press on with the major developments at Cheltenham and Gloucester, and then to review the position of the smaller hospitals in the light of the situation that then appears. Everything, therefore, that my hon. Friend has said tonight is very much in the mind of my right hon. Friend, and he can be assured that when the time comes to consider the future of any one of the hospitals that he or I have mentioned tonight, the fullest consultations will take place, and no hospital will be closed unless better facilities are available elsewhere.
  Question put and agreed to.
  Adjourned accordingly at five minutes past Five o'clock a.m.