§ Mr. WadeI beg to move, in page 52, line 7, to leave out from "be" to end of subsection (1) and to insert "nil".
The effect of the Amendment is to abolish Stamp Duty on conveyances and transfers of sales. I welcome the Chancellor's proposal so far as it goes. Stamp Duty, which was raised to 2 per cent. in 1947, is being reduced by the Bill to I per cent., and it is also proposed that the ceiling of exemption of Stamp Duty on house purchase should be raised from £3,500 to £4,500. That is a step in the right direction.
In his Budget speech, the Chancellor gave his reasons for his proposal, and they might well apply to the case for abolition. He said, referring to the old, higher rate of duty:
It drives business, and, therefore, invisible earnings, from London. It is a strong disincentive to investment in Britain by people in other countries. It discourages investment in productive industry, not least by the small investor. It tends to raise the cost of issuing capital."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 488.]This argument could well be deployed as a case for the abolition of Stamp Duty. There is a particularly strong case so far as transfers of stocks and shares are concerned. For the sake of simplicity 713 in drafting, I have not made a distinction between conveyances of property and transfers of stocks and shares, my main purpose being to draw attention to the Stamp Duty of transfers.The only comment I make on the conveyancing of property is this: as I have said, I welcome the Chancellor's proposal as far as it goes but there has been a very great rise in the prices of houses, particularly in London and the South-East. Many people are now paying more than £4,500 for a house. Therefore, if the duty were not abolished I would be in favour of at least raising the exemption limit.
When one considers transfers, there are other factors to take into account. There is a tremendous number of transfers each year. A good deal of time is wasted over stamping of documents and it involves a certain amount of delay. There must be a considerable waste of manpower. It is also a very antiquated method of raising revenue. There is the observation by Professor Neumark, chairman of the Fiscal and Financial Committee of the E.E.C. reported in the Financial Times of 24th November, 1962. The report in the newspaper began:
Company officials concerned primarily with tax matters considered problems of tax harmonisation in the E.E.C. and the likely effect of harmonisation upon the British tax system…".This was a report of a two-day conference on taxation and the Common Market, which was held in London.?7.0 p.m.
Dealing with an investigation into the aspects of some particular taxes, Professor Neumark was reported as saying:
in some cases taxes which, though in terms of their relative share in the overall tax revenue seemed to be of minor importance only, might, because of their possible negative repercussions on economic transactions within a Common Market, need a close examination as to whether their harmonisation was useful or even necessary.He referred to Stamp Duty and went on:All, or nearly all, of these duties originated in times long past when, on the one hand, income and wealth, particularly the more mobile kinds of assets and the produce from them, were not yet taxed in an effective and adequate way by taxes on income and net value, and where, on the other hand, a general turnover tax was still unknown.Even apart from the necessities of a Common Market these duties should, in my opinion, be abolished as fast as possible.714 I am anxious that we should not be behind the Common Market in tax reform. I would rather see this country ahead of the Western European countries and that is a very strong argument for considering the case for the abolition of Stamp Duty on transfers.The cost of collection must be considerable. I do not put that forward as a major argument, but it appears to me that the cost of collection in terms of a percentage of gross receipts must be going up. I have examined the figures in Appendix 7, Stamp Duty, on page 282 of the Report of Inland Revenue for the year ending 31st March, 1962. I do not propose to quote the figures, but I have calculated that the cost of collection expressed as a percentage of gross receipts has gone up by about 25 per cent. in the year 1961–62 as compared with 1960–61.
Presumably, if the duty is to be reduced from 2 per cent. to 1 per cent., the cost of collection as compared with the amount collected will go up considerably more than it did between 1961–62 and the previous tax year. Furthermore, there must be a fair amount of expenditure, certainly of time, by those who are responsible for the payment of Stamp Duty and go to the Stamp Duty office to pay it. That is a factor which must be taken into account.
As anyone who has given any thought to this subject knows, a good deal of time and ingenuity is expended in avoiding Stamp Duty. It has been said that it is not so much what one does as the way in which one does it that is taxed. I have with me an interesting brief from the Liberal Research Department which, at considerable length, sets out ways in which Stamp Duty can be avoided. [Laughter.] It is avoided, not evaded; it is perfectly legitimate.
I congratulate those who have prepared the document. They have given a great deal of care and trouble to it, but I do not propose to quote from it. I do not think that it is tile proper duty of Members of Parliament to advertise methods of avoiding duty, however legitimate they may be. But this is evidence of the complexity of this duty. One has only to study Clauses 53 to 58 and the Amendments which the Chancellor proposes to them, after consultations with the City, to recognise how complex it is.
715 A great deal of time is expended not so much in paying the duty as in finding ways of avoiding payment.
No doubt there will be reference to the cost of what I suggest.
§ Mr. F. P. Crowder (Ruislip-Northwood)On a point of order. I am very interested in this document to which the hon. Member for Huddersfield, West (Mr. Wade) has referred. Am I right in saying that if, in a speech, an hon. Member refers the Committee to a document, the Committee is entitled to a sight of that document, be it in the Library or elsewhere, that there must be disclosure as in a court, where, if a document is referred to, it is exhibited? The hon. Member cannot have it both ways. The Committee must know what is in that document if he is to mention it.
§ The Deputy-ChairmanThe rule applies only to State documents, not to private documents.
§ Mr. WadeThe hon. Member for Ruislip-Northwood (Mr. Crowder) made an ingenious point, but it has no substance.
No doubt we shall be told what would be the cost of abolishing Stamp Duty. It would be out of order for me to suggest alternative methods of raising taxation, or to put forward major tax reforms. My object is to bring to the Committee's attention the whole issue of this rather antequated Stamp Duty and to urge the Chancellor to adopt a more radical approach than merely reducing it.
What is the Chancellor's intention? Does he accept the necessity of this method of raising revenue? Has he any objection to it in principle? Is it the intention merely to reduce it from 2 per cent. to 1 per cent.—a reduction which I welcome as far as it goes—or is this a step towards the abolition and more radical reform, which I would certainly welcome?
§ Mr. BarberAs the hon. Member for Huddersfield, West (Mr. Wade) said, the purpose of his Amendment is to abolish Stamp Duty on conveyances and transfers instead of merely reducing it from 2 per cent. to I per cent., as proposed by my right hon. Friend. This was an objective to which the hon. Member 716 referred during Second Reading. Those of us on this side of the Committee, and clearly hon. Members of the Liberal Party, also, agree that the rate of 2 per cent. imposed by Lord Dalton is too high for these times. A 2 per cent. rate of duty is substantially higher than that of any other country in Europe or North America. As the hon. Member reminded us, my right hon. Friend has already told us that it tends to drive business, and, therefore, invisible earnings, from London.
The simple question raised by the hon. Member is how far we should go. It can hardly be for me to commit my right hon. Friend or anybody else to action which may be taken on future occasions. Here we are concerned only with the proposals this year. My right hon. Friend's proposals to reduce the rate of duty to 1 per cent. will cost £16 million in the current year and £25 million in a full year. If to that one adds the cost of reducing the duty on conveyancing property, other than stocks and shares, those figures are increased to £24 million and £36 million.
The hon. Member's proposal is attractive, but at least it can now be said that the transfer duty at 1 per cent. will no longer be seriously out of step with the corresponding duties in many other countires. In France, for example, there is a duty of 0.6 per cent. imposed on both buyer and seller in the case of shares for cash, which is 1.2 per cent. in all, and in West Germany the normal rate of duty on transfers is 0.25 per cent., but there is a special duty of 2.5 per cent. which is levied on the first issue of shares.
The reduction of Stamp Duty on the transfer of houses and land is, as the Committee will recognise, an important aspect of the Government's policy in encouraging home ownership. There is no point in reducing Stamp Duty on transfers if the houses are not being built for private owners to buy. I was a little surprised to hear the hon. and learned Member for Kettering (Mr. Mitchison) say on another Clause, an hour or two ago, that the Labour Government had done more for owner-occupiers than we have. One only has to consider the remarkably contrasting figures. In 1951, only 11½ per cent. of the houses built were for private owners. Last year, about 60 per cent.
717 were for private owners, which is quite an achievement.
§ Mr. MitchisonI am not sure how far this is in order, Sir Robert, but I want to answer what has been put to me and no more. The hon. Gentleman, as usual, forgets the circumstances of the war. If he went back and looked at them he would find that there was a need in those days for rented houses which was even greater than it is now. What the Government have done is, no doubt, to increase the percentage of owner-occupied houses but only at the cost of depriving young married couples of the rented houses which they ought to have.
§ The Deputy-ChairmanThe hon. Gentleman was entitled to introduce the illustration which he did, but I think that it has now gone far enough.
§ Mr. BarberAll I can say, Sir Robert, is that, naturally, I bow to your observation.
It is, at any rate, because of the general desire of all hon. Members in the Committee to encourage people to live in their own homes that on three occasions since we have been in office the Government have reduced Stamp Duty on conveyances at the bottom of the scale. Now my right hon. Friend is proposing again to raise the exemption limit and at the same time cut the general rate from 2 per cent. to 1 per cent. In future, no duty will be payable on houses costing up to £4,500, and on houses costing between £4,500 and £6,000 the duty will be only ½ per cent. As for the more expensive—
§ Mr. MitchisonThe hon. Gentleman is talking about houses. As two-thirds of the concession goes in favour of transactions in stocks and shares, would he say something about public benefits from that part of the reduction?
§ Mr. BarberI thought that I had done so earlier. I started to quote what the Chancellor said in the Budget debate. I did not want to pursue that because I thought that hon. Members were familiar with what he said. But I certainly could not sum it up better than he put it. I wont on to explain that, certainly at the rate of 2 per cent., the transfer duty on stocks and shares was very significantly higher than in the case of most of our 718 competitors in Europe and also, I think, the United States and Canada.
I should have thought that it was certainly right, for all the economic and financial reasons which I should have thought would appeal to all hon. Members in the Committee, to try to bring ourselves more into line with our competitors in that way and also to make it easier for our industry to raise capital, which is, after all, a prerequisite of increasing growth—which, again, is something that we all want. If there is any particular point on transfer duty on stocks and shares, I should be happy to answer the hon. and learned Gentleman.
To complete what I was saying about the duty in respect of houses, for the more expensive houses, those over £6,000, the rate will be reduced to 1 per cent.
The Liberal Party wants to go further and help the purchasers of the more expensive houses, those costing more than £6,000 in particular, by abolishing the duty altogether. I must ask hon. Members in all seriousness whether they are really in favour of the complete abolition at this time of the duty on conveyances and transfers, bearing in mind the cost to which the hon. Member for Huddersfield, West very fairly referred. The cost of my right hon. Friend's proposals will be £36 million in a full year. Consequently the cost of the Liberal Party's proposals would be double that—more than £70 million a year—and I simply cannot believe that, in the !light of my right hon. Friend's proposal to halve the duty and the other major remissions of taxation which have been made this year, it would be right to do as the hon. Gentleman suggests and go further this year.
Therefore, I hope that the hon. Member will, on reflection, feel that this is not an occasion when he should press his Amendment to a Division.
§ Amendment negatived.
§ 7.15 p.m.
§ Mr. DiamondI beg to move, in page 52, line 31, at the beginning to insert:
subsection (6) of section 34 of the Finance Act 1958 (which imposes on the duty chargeable on a conveyance, transfer or letting to a charity an upper limit of 10s. for every £50 or fraction of £50 consideration) shall have effect with the substitution for the reference to 10s. of a reference to 5s.: but, save as aforesaid,".719 The Amendment deals with a very simple point which I am sure the Government will be prepared to accept. So short is the point that I am not armed with a long research department's brief, as the Liberal spokesman was on how to avoid tax. Indeed, the research department at Transport House would not dream of getting out a brief of that kind. In Transport House circles everybody is very conscious of his union responsibilities, and every member leaves these matters to the union or professional association which is most suitably equipped to carry out the task.
§ The Chief Secretary to the Treasury and Paymaster-General (Mr. John Boyd-Carpenter)This has resolved a problem which has puzzled many of us—what the Liberal Party research department really spends its time doing.
§ Mr. DiamondThe Amendment needs very little argument, because it is plain on the surface what it seeks to do. The figures are very straightforward. The case before the Clause was introduced was that Stamp Duty on transfers and conveyances of the kind referred to—that is, the majority of them—was at the rate of £2 per cent. and it is now being reduced to £1 per cent.—that is. by half.
Equally, it was the case that when Stamp Duty was at the rate of £2 per tent. those transfers and conveyances Which took place to charities were at the rate of 1 per cent.—a half. All that the Amendment seeks to do is to maintain that differentiation, with slight benefit in favour of charities, of 50 per cent., thereby making the Stamp Duty for transfers to charities at the rate of ½ per cent. instead of the proposed 1 per cent.
The arithmetic is as straightforward as may be. The principle does not need arguing because it is one which has been accepted by the Government; it is implicit in existing legislation. Therefore, I believe that there can be no good reason for my detaining the Committee. I merely add that we hold very clear and strong views on this matter, and we hope and believe that the Government will share our view that the benefit in favour of charities ought to be maintained.
§ Mr. du CannThe hon. Gentleman the Member for Gloucester (Mr. Diamond), 720 in pressing his Amendment, did not seek to argue that the Government's proposals in general to reduce Stamp Duty were bad and had something about them which adversely affected the position of charities. He argued simply that under existing legislation charities have a special position which he is anxious to preserve. I entirely understand that.
The purpose of the Amendments—because there is another one in Schedule 12 which is, no doubt, consequential upon this one—is to halve the rate of Stamp Duty chargeable on conveyances and transfers to charities, and in respect of premiums on leases to charities, that is to say, to reduce it from 1 per cent. to ½ per cent. The general intention of Part IV of the Bill is to restore the duties to their pre-1947 level. Thus, while the normal rate of duty on conveyances and transfers is to be reduced from 2 per cent. to 1 per cent., that on conveyances and transfers to charities remains unchanged at 1 per cent. Consequently, the discrimination in favour of charities, which has dated from 1947, disappears.
It may be helpful to point out—and I want merely to be helpful—that the Amendments contain two errors of drafting. The reference in subsection (6) to Section 34 is left in the air, in that that Section has been repealed. That is a minor technical point.
§ Mr. MitchisonI do not understand that. There is no proposal here to introduce a new subsection (6). Perhaps the hon. Member will make his objections a little clearer. They are not clear at present.
§ Mr. du CannI am sorry if I did not explain them appropriately. There is a proposal to introduce a substantial amount of wording into the Clause. The reference to subsection (6) of Section 34 would be left in the air.
The second point is that while the Amendment halves the duty in respect of premiums in leases it appears to leave unchanged the duty charged in respect of rents under such leases, which since 1947 has also been half that charged on other leases. I take it that that was not what the hon. Member had in mind, but that he wished to reduce the duty both on premiums and on rents.
Those difficulties are not important. I merely point them out to be helpful.
721 The real difficulty is that these Amendments are open to objection on grounds of principle, for the Stamp Acts do not contain any general relief from Stamp Duty in respect of charities. Stamp Duties are taxes on documents, or on the transactions to which the documents give effect, and are measured by reference to the character and magnitude of the transactions, and not in general by the status of the persons concerned. This principle is well illustrated by the relief for small transactions in property other than stocks and marketable securities, for the relief depends solely on the nature and size of the transaction, and takes no account of whether the person who will bear the duty is rich or poor.
A direct tax like Income Tax can look at the ability of the person to pay, but Stamp Duties are like Customs and Excise duties and Purchase Tax, in looking at the thing rather than the person and charging a common rate of tax regardless of the circumstances of the person who will ultimately bear the burden of the tax. That is the principle of the matter.
On the other hand, if the hon. Member should say—as I feel he is likely to say, because it was implicit in everything he said in moving the Amendment—that principle is one thing and heart is another, I want to go on to talk about matters of the heart. There is no question but that charities derive substantial benefit in other ways, even if they do not obtain it, or are not likely to obtain it, from the Bill.
In respect of Income Tax—which I have already suggested is the proper medium for graduation—charities are already most generously treated, since they enjoy complete exemption. I only wish that many others of us might say the same thing. Secondly, they are also exempt from local rates, to the extent of 50 per cent.
§ Mr. MitchisonIs the Clause concerned with local rates?
§ Mr. du CannIt is not, but it is fair to argue, in reply to the powerful case advanced by the hon. Member, that our tax laws already contain substantial benefits in favour of charities, and the relief proposed in respect of Stamp Duty would be very small by comparison with the reliefs which charities already enjoy.
722 I want to explain why charities were put in a specially favoured position under the 1947 Act. A good deal had happened in 1947, which leads one to suppose that the circumstances at that time were wholly exceptional. Charities then complained that their expenses had risen steeply at the same time that their investment income had dropped. They also complained—and I make no political point about it; I am concerned only to retail the facts—that they had suffered severely as a result of nationalisation. They complained, further, that their benefactors had been discouraged by the legislation of 1946, under which payments under deeds of covenant were no longer allowable for Surtax—a point which was extremely strongly put.
Lastly, they complained that some charities—and we must remember that this was not long after the war—had had their premises requisitioned or compulsorily acquired, and had had to find other accommodation, which had made added difficulties for them. I am arguing that the circumstances which put charities into a special position in 1947 do not now apply as they did then.
An added benefit has taken place since then. The Committee will be aware that we have recently passed the Trustee Investment Act, which has extended substantially the powers of charities to invest. This is no doubt a matter which has been of some benefit to them and is likely to benefit them increasingly as time goes on. They pressed hard for this concession.
To sum up: it is true that the cost of the relief would probably be small. It is impossible to estimate it exactly. If I could give the hon. Member a figure I would do so. It is not likely to be great. But I suggest that the types of reasons why charities were put into a favoured position in 1947 do not now apply to the same extent. All that is happening in this legislation is that duties in general are being reduced, and that the privileged position of charities is disappearing. It is sad that discrimination should go, but l do not imagine that the charities themselves would feel envious—for envy is not a charitable thing to express.
I am sure that charities will agree that it is right to reduce Stamp Duties in general, and that they would be happy 723 if the duties were reduced further. Nobody would disagree with them about that. But for the reasons that I have expressed, although I have some sympathy with the case advanced by the hon. Member, it is not possible to bow to it and to accept the Amendment.
§ 7.30 p.m.
§ Mr. DiamondI know from past experience that if anybody on the Government side can make a good case out of nothing it is the Economic Secretary. His arguments are always marshalled with cogency and courtesy, and are always put over with a smile. We know that when a case as poor and as feeble as that which we have just listened to comes from him there is no answer to the Amendment that we are pressing, and which we shall continue to press.
The Economic Secretary began by referring to two minor, very technical defects in the drafting of the Amendment. We were grateful to him for that and had he left the matter there we would have been quite happy to see what we could do to make the necessary adjustments on Report—and then the will of the Committee could have prevailed. Instead the hon. Gentleman went on to try to argue that the Amendment should not be accepted. "Look how well charities are being treated," he said, "in terms of Income Tax benefits, rating, and so on". He followed that by saying that it was not right that charities should be
§ well treated. It was right in 1947, but it is not right today, he tried to make out.
§ The hon. Gentleman cannot have it both ways. There is a simple situation here. We are not seeking, and I did not attempt to seek when moving the Amendment, to prove the case for it. That case has been accepted by the House of Commons since 1947 and for sixteen years charities have enjoyed preferential treatment for Stamp Duty and have generally been in a privileged position on most aspects of local and national taxation.
§ The Government's refusal to accept the Amendment is singling out charities for unsatisfactory treatment and my hon. Friends and I are not convinced that there is the slightest argument in support of that refusal. There is no argument on cost, for the Economic Secretary agreed that the cost was likely to be negligible. There is no argument on the grounds of the lack of administrative machinery, for that machinery already exists. The Stock Exchange works quite happily and differentiates between transfers when charities are involved. Charities have had this and other advantages for many years. We insist that there should be a similar and continuing advantage in this respect—an advantage which charities have enjoyed for sixteen years—and we shall put our views to the test.
§ Question put, That those words be there inserted:—
§ The Committee divided: Ayes 112, Noes 163.
725| Division No. 123.] | AYES | [7.32.p.m. |
| Albu, Austen | Edwards, Walter (Stepney) | Jenkins, Roy (Stechford) |
| Allaun, Frank (Salford, E.) | Fernyhough, E. | Johnson, Carol (Lewisham, S.) |
| Allen, Scholefield (Crewe) | Fletcher, Eric | Jones, Elwyn (West Ham, S.) |
| Bence, Cyril | Foot, Dingle (Ipswich) | Kenyon, Clifford |
| Bennett, J. (Glasgow, Bridgeton) | Forman, J. C. | Key, Rt. Hon. C. W. |
| Benson, Sir George | Fraser, Thomas (Hamilton) | King, Dr. Horace |
| Blackburn, F. | Gordon Walker, Rt. Hon. P. C, | Lawson, George |
| Bowden, Rt. Hn. H. W, (Leics, S. W.) | Griffiths, Rt. Hon. James (Llanelly) | Ledger, Ron |
| Boyden, James | Grimond, Rt. Hon. J. | Lee, Miss Jennie (Cannock) |
| Bray, Dr. Jeremy | Hale, Leslie (Oldham, W.) | Lewis, Arthur (West Ham, N.) |
| Brown, Rt. Hon. George (Belper) | Hamilton, William (West Fife) | Lubbock, Eric |
| Callaghan, James | Hannan, William | Mabon, Dr. J. Dickson |
| Carmichael, Neil | Harper, Joseph | McInnes, James |
| Castle, Mrs. Barbara | Hayman, F. H. | McKay, John (Wallsend) |
| Chapman, Donald | Henderson,Rt.Hn.Arthur(RwlyRegis) | McLeavy, Frank |
| Collick, Percy | Herbison, Miss Margaret | Mallalieu, J.P.W.(Huddersfield, E.) |
| Corbet, Mrs. Freda | Hilton, A. V. | Manuel, Archie |
| Cronin, John | Holman, Percy | Marsh, Richard |
| Crosland, Anthony | Houghton, Douglas | Mayhew, Christopher |
| Crossman, R. H. S. | Hughes, Emrys (S. Ayrshire) | Millan, Bruce |
| Dalyell, Tam | Hughes, Hector (Aberdeen, N.) | Mitchison, G. R. |
| Darling, George | Hunter, A. E. | Morris, John |
| Diamond, John | Irvine, A. J. (Edge Hill) | Moyle, Arthur |
| Ede, Rt. Hon. C. | Irving, Sydney (Dartford) | Neal, Harold |
| Dodds, Norman | Janner, Sir Barnett | Oram, A. E. |
| Donnelly, Desmond | Jeger, George | Pannell, Charles (Leeds, W.) |
| Parker, John | Royle, Charles (Salford, West) | Thompson, Dr. Alan (Dunfermline) |
| Prentice, R. E. | Shinwell, Rt. Hon. E. | Thorpe, Jeremy |
| Price, J. T. (Westhoughton) | Silverman, Sydney (Nelson) | Tomney, Frank |
| Pursey, Cmdr. Harry | Skeffington, Arthur | Wade, Donald |
| Randall, Harry | Small, William | Warbey, William |
| Rankin, John | Soskice, Rt. Hon. Sir Frank | Wells, William (Walsall, N.) |
| Redhead, E. C. | Steele, Thomas | Williams, D. J. (Heath) |
| Reynolds, G. W. | Stewart, Michael (Fulham) | Williams, W. T. (Warrington) |
| Roberts, Goronwy (Caernarvon) | Stonehouse, John | Willis, E. G. (Edinburgh, E.) |
| Robertson, John (Paisley) | Swingler, Stephen | Zilliacus, K. |
| Robinson, Kenneth (St. Pancras, N.) | Taverne, D. | |
| Ross, William | Thomas, George (Cardiff, W.) | TELLERS FOR THE AYES: |
| Mr. McCann and Mr. Grey | ||
| NOES | ||
| Allason, James | Fraser, Ian (Plymouth, Sutton) | Page, John (Harrow, West) |
| Arbuthnot, John | Gammans, Lady | Pearson, Frank (Clitheroe) |
| Atkins, Humphrey | Gardner, Edward | Percival, Ian |
| Awdry, Daniel (Chippenham) | Glyn, Sir Richard (Dorset, N.) | Pickthorn, Sir Kenneth |
| Balniel, Lord | Goodhew, Victor | Powell, Rt. Hon. J. Enoch |
| Barber, Anthony | Gresham Cooke, R. | Price, David (Eastleigh) |
| Batsford, Brian | Grosvenor, Lt.-Col. R. G. | Prior, J. M. L. |
| Baxter, Sir Beverley (Southgate) | Gurden, Harold | Pym, Francis |
| Bell, Ronald | Hall, John (Wycombe) | Rawlinson, Sir Peter |
| Bennett, Dr. Reginald (Cos & Fhm) | Hamilton, Michael (Wellingborough) | Redmayne, Rt. Hon. Martin |
| Berkeley, Humphry | Harris, Reader (Heston) | Rees, Hugh |
| Biffen, John | Harrison, Brian (Maldon) | Renton, Rt. Hon. David |
| Bingham, R. M. | Harrison, Col. Sir Harwood (Eye) | Ridley, Hon. Nicholas |
| Birch, Rt. Hon. Nigel | Harvey, John (Walthamstow, E.) | Ridsdale, Julian |
| Bishop, F. P. | Hastings, Stephen | Robson Brown, Sir William |
| Black, Sir Cyril | Hiley, Joseph | Roots, William |
| Bourne-Arton, A. | Holland, Philip | Russell, Ronald |
| Boyd-Carpenter, Rt. Hon. John | Hope, Rt. Hon. Lord John | Sharples, Richard |
| Boyle, Rt. Hon. Sir Edward | Hornby, R, P. | Shaw, M. |
| Braine, Bernard | Hornsby-Smith, Rt. Hon. Dame P. | Skeet, T. H. H. |
| Brewis, John | Hughes Hallett, Vice-Admiral John | Smith, Dudley (Br'ntf'd & Chiswick) |
| Brooman-White, R. | Hughes.Young, Michael | Smyth, Rt. Hon. Brig. Sir John |
| Brown, Alan (Tottenham) | Hutchison, Michael Clark | Spearman, Sir Alexander |
| Buck, Antony | James, David | Stevens, Geoffrey |
| Bulius, Wing Commander Eric | Jenkins, Robert (Dulwich) | Steward, Harold (Stockport, S.) |
| Burden, F. A. | Johnson, Dr. Donald (Carlisle) | Studholme, Sir Henry |
| Campbell, Gordon (Moray & Nairn) | Johnson, Eric (Blackley) | Tapsell, Peter |
| Carr, Compton (Barons Court) | Johnson Smith, Geoffrey | Taylor, Frank (M'ch'st'r,Moss Side) |
| Chichester-Clark, R. | Jones, Arthur (Northants, S.) | Teeling, Sir William |
| Clark, Henry (Antrim, N.) | Kerr, Sir Hamilton | Thatcher, Mrs. Margaret |
| Clark, William (Nottingham S.) | Kirk, Peter | Thompson, Sir Richard (Croydon, S.) |
| Cleaver, Leonard | Lancaster, Col. C. G. | Thornton-Kemsley, Sir Colin |
| Cooper, A. E. | Langford-Holt, Sir John | Touche, Rt. Hon. Sir Gordon |
| Cooper-Key, Sir Neill | Leavey, J. A. | Turton, Rt. Hon. R. H. |
| Cordeaux, Lt.-Col. J. K. | Leburn, Arthur | Tweedsmuir, Lady |
| Cordle, John | Linstead, Sir Hugh | van Straubenzee, W. R. |
| Corfield, F. V. | Longden, Gilbert | Vane, W. M. F. |
| Coulson, Michael | Loveya, Walter H. | Wakefield, Sir Wavell |
| Craddock, Sir Beresford (Speithorne) | Lucas, Sir Jocelyn | Walder, sir Wavell |
| Crawley, Aidan | Lucas-Tooth, Sir Hugh | Walker, David |
| Critchley, Julian | MacArthur, Ian | Walker, Peter |
| Crowder, F. P. | McLaren, Martin | Walker-Smith, Fit. Hon. Sir Derek |
| Curran, Charles | Maclean,SirFitzroy(Bute&N.Ayrs) | Ward, Dame Irene |
| Currie, G. B. H. | MacLeod, John (Ross & Cromarty) | Whitelaw, William |
| d'Avigdor-Goldsmid, Sir Henry | McMaster, Stanley R. | Williams, Dudley (Exeter) |
| Digby, Simon Wingfield | Marshall, Douglas | Williams, Paul (Sunderland, S.) |
| Doughty, Charles | Marten, Neil | Wilson, Geoffrey (Truro) |
| du Cann, Edward | Matthews, Gordon Meriden) | Wise, A. R. |
| Duncan, Sir James | Mawby, Ray | Wolrige-Gordon, Patrick |
| Elliot, Capt. Walter (Carshalton) | Maxwell-Hyslop, R. J. | Woodhouse, C. M. |
| Emery, Peter | Mills, Stratton | Woollam, John |
| Emmet, Hon. Mrs. Evelyn | Mlscampbeil, Norman | Worsley, Marcus |
| Errington, Sir Eric | Montgomery, Fergus | |
| Farr, John | Morgan, William | TELLERS FOR THE NOES: |
| Finlay, Graeme | Morrison, John | Mr. J. E. B. Hill and Mr. Peel. |
| Fletcher-Cooke, Charles | Nabarro, Sir Gerald |
§ Question proposed, That the Clause stand part of the Bill.
§ Mr. Anthony Crosland (Grimsby)I should like to make a few brief remarks, not on the whole of this Clause, but only on that part of it which halves the Stamp Duty on Stock Exchange transactions. We 726 on this side of the Committee do not oppose the part which deals with house property transfer, or those parts related to the Ninth Schedule which deal with small investments, but that part of the Clause which reduces Stamp Duty from 2 per cent. to 1 per cent. on the bulk of ordinary Stock Exchange transactions.
727 Those who heard my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) addressing the Committee on Clause 43 will agree that his return from Washington has served both to lower the political temperature of our debates and substantially to raise their intellectual level. I do not wish to fall below the high standard he sets, so I say at once that this Clause is an indefensible sop to the property-owning supporters of the Conservative Party. But the serious difference between Clause 43 and this Clause is that, whereas my hon. Friend was voicing merely a suspicion of a Clause which involved only quite small amounts of money, in this case we are voicing a certainty about a Clause in which large sums of money are involved.
The Chancellor, rightly or wrongly, used to be described as a Tory progressive, one of the group of young Butlerites alleged to be on the Left-wing of the party opposite. If this is true, I am very surprised that he has chosen to put this Clause into the Bill. In doing so, whether or not he has been faithful to ordinary Tory principle, I do not know, but he has certainly been unfaithful to the principles of Tory democracy.
One of the things which the Chancellor may have forgotten is that the first Chancellor to suggest a Stamp Duty of any kind on shares was Lord Randolph Churchill in the famous Budget which he prepared for 1878–79 but never introduced because he resigned between preparing the Budget and the date of its presentation. He could, therefore, be said to be partly responsible for the fact that we have a Stamp Duty on anything connected with securities. Perhaps it is not surprising that the present Chancellor did not attempt to do what Lord Randolph Churchill did, because his biographer, the right hon. Member for Woodford (Sir W. Churchill), had this to say of him:
He laboured to transfer the burdens, so far as possible, from comforts to luxuries and from necessities to pleasures. He applied much more closely than his predecessors that fundamental principle of democratic finance—the adjusting of taxation to the citizen's ability to pay.That is a principle which finds little expression in the Clause we are discussing.
§ 7.45 p.m.
§ Mr. Emrys Hughes (South Ayrshire)Is it not true that Lord Randolph Churchill took up a much stronger attitude on the war Estimates and resigned rather than agree to them?
§ Mr. CroslandThat was a very good precedent which my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) consistently follows. It was an objection to Navy Estimates which caused Lord Randolph Churchill to resign.
I should like briefly to consider the reasons given by the Chancellor for his actions in this case. They were given in the Budget debate, as reported at column 492 of the OFFICIAL REPORT,and have already been quoted by the spokesman of the Liberal Party, who characteristically not only approved of the Clause but wanted to give double the amount of money to this class. That is a rather curious reflection on the Liberal principles. They are certainly not radical Liberal principles.
The Chancellor, in his Budget speech, stated as his first argument for this concession, what also was quoted by the hon. Member for Huddersfield, West (Mr. Wade), that the 2 per cent. rate of duty was substantially higher than that in any other country in Europe or in North America. It is certainly true that it was higher here than in those countries, but the whole point is that, unlike most of those countries, we have no capital gains tax. To consider Stamp Duty in isolation, without considering the question of a capital gains tax, is to get the whole matter out of perspective.
The justification for the 1947 increase from 1 per cent. to 2 per cent. was that we in this country, unlike many other countries, did not have a tax on capital gains. At that time, Mr. Dalton, who doubled the Stamp Duty rate, decided against the capital gains tax, rightly or wrongly, on the ground that the Inland Revenue was extremely understaffed so soon after the war and would not be able to cope with it. Therefore, this was a partial substitute for a capital gains tax because, obviously, it fell very largely on the same class of persons. To say that our Stamp Duty rate is higher than that of other countries when 729 they have and we do not have a capital gains tax is, therefore, to give a false impression.
The Clause will largely benefit the very class of property-owners who are extremely lightly treated by our tax system. We not only do not have a capital gains tax but we have no wealth tax, despite the suggestions of N.E.D,C., and we have a form of Estate Duty which, to put it mildly, is easily avoided. The taxation borne by the property-owning classes is exceptionally low relative to the taxation borne by the receiver of earned income. So I do not find anything very convincing in the Chancellor's first argument.
His second argument was even more curious. He said:
It discourages investment in productive industry."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 489.]That is a most remarkable statement on which I hope the Economic Secretary will comment.Does the Chancellor really believe that industrialists over the last decade or so have been unwilling to invest because of a 2 per cent. Stamp Duty, or that they have been willing to invest but could not obtain the finance because of a 2 per cent. Stamp Duty? In this Committee and outside there has been endless discussion on the fact that investment has not been higher, but among the 150 reasons I have heard and seen advanced I have never heard the suggestion that the 2 per cent. Stamp Duty is the reason. It is nonsensical to suppose that if one thinks of the investment position of the typical firm over the last few years. To put the matter in the light most favourable to the Government, until a year ago, at any rate, we have had a considerable increase in investment in this country. As a proportion of the national income, it has gone up from 16 per cent. to 19 per cent., and done so perfectly happily still with a 2 per cent. Stamp Duty. No one can advance the suggestion that investment has been kept low because of the present Stamp Duty.
I suppose that the Chancellor could have used an ingenious argument. The right hon. Gentleman could have said, in theory, that the fact of having a Stamp Duty which falls mainly on switching, on the transfer of existing securities, 730 increased the cost of transactions to the point where very much less switching occurred so that turnover was reduced. and that this had the effect, when new issues were made, of reducing the amount available for taking them up. To put the matter crudely, new issues would have to rely solely on new money and would not have access to the money derived from the sale of old securities.
That case would be purely theoretical. No one can say that investment in this country has been held back in the last ten years by the difficulty of placing new issues. That may or may not have been the case for a few years after the war, but it has certainly not been the case for many years past. Therefore, that argument, again, will not stand up to examination.
The Chancellor's next argument in his Budget statement was a throw-away reference to the small investor. But the 2 per cent. Stamp Duty has little indeed to do with the small investor, who will not be significantly affected by the halving of the rate. Small investors are dealt with quite separately in Schedule 9, but, quite apart from that, the small investor is not significantly concerned with a Stamp Duty that falls primarily on switching.
The small investor is not typically the person who, once he has moved into the Stock Exchange, is constantly buying and selling securities. In any event, if he is, he ought not to be. It may be right to encourage the small investor, but not to encourage the small investor who then imagines that he can make money by constantly dealing in securities. Ideally, one wants that person to be a stable investor.
It is certainly the case that far more than 90 per cent. of the switching that will be facilitated and cheapened by this reduction is not done, and would not be done in any circumstances, by the small investor. In other words, 90 per cent. of this concession will go to the large investor. I therefore do not think that this halving of the Stamp Duty can he treated as a serious concession to the small investor.
The Chancellor's last argument was concerned with the balance of payments. He said, and it has been repeated by the hon. Member for Huddersfield, West, that this will encourage people in other 731 countries to invest in Britain. His exact words were that the 2 per cent. Stamp Duty
…is a strong disincentive to investment in Britain by people in other countries."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 488.]That seems to me to be an extremely dubious argument. I doubt whether the halving of the duty will make more than a marginal difference to investment from abroad, but, even conceding that it will, we had better start considering whether we want a great deal more portfolio investment in Great Britain.Hon. Members on both sides of the Committee—with, perhaps, the exception of some of my hon. Friends—would certainly say that they wanted to encourage direct investment by American firms in British productive industry —that is, American firms setting up subsidiaries in Britain. All the evidence is that that tends to increase the efficiency of the existing British industry. Further, that kind of investment from abroad is stable investment, not volatile, and I personally welcome it. I have done so in the past and will continue to do so.
That is not what the Chancellor is talking about. He is talking about portfolio investment from, say, the United States of America or the Continent of Europe. It seems very doubtful whether we want to rely much more on this type of investment to strengthen our balance-of-payments position. Portfolio investment is inevitably volatile, and our balance of payments is already vulnerable enough to speculation without increasing that vulnerability. If every time Wall Street is in a bearish mood and London is in a bullish mood, these funds should come into the country and, in the reverse mood, the funds flow back to Wall Street, this will simply increase the kind of speculative movement on capital account that I should have thought every hon. Member would have wanted to avoid.
In any case, even if we did want much more portfolio investment, it cannot be maintained that we must reduce Stamp Duty in order to get it. We know from the Government's own figures in the Economic Report, published just before the Budget, that both in 1961 and 1962 732 we had a very large inflow of portfolio investment—very much greater than in the previous years—even with a 2 per cent. Stamp Duty. Again, therefore, it seems that that argument will not stand up to examination. First, we can show that we have already had a considerable increase in this investment even with a 2 per cent. Stamp Duty and, more seriously, we should not lean too heavily on this kind of investment.
Another reason is that we are always trying to improve our balance of payments by seeking to get the capital account right, so distracting attention from what should be the Government's No. 1 objective, and the objective of all of us, which is to get our current account right—to get the balance of exports and imports right. There is no simple way of getting out of balance of payment crises.
Therefore, while we welcome the reduction of the Duty on house transfers and the concessions to small investors which are given separately in Schedule 9, we are very strongly opposed to what is the major part of this Clause—the reduction of the 2 per cent. Stamp Duty on the transfer of securities It is that reduction that accounts for by far the greater part of the cost of the Clause, and £16 million in the first year and £25 million in a full year are going to that part of the public, excluding small investors, who invest on the Stock Exchange. They constitute, perhaps, 3 per cent. of the population—the wealthiest group in the country. There is no reason why they should be given this large concession. This is the most indefensible Clause in the Bill, and we should have the greatest pleasure in voting against it if it were confined to this one item.
§ Mr. Maurice Macmillan (Halifax)I should like to take exactly the opposite line to that taken by the hon. Member for Grimsby (Mr. Crosland), particularly in reference to the small investor. I apologise for doing so at this stage. It is due to an error which, I understand, has been shared by other hon. Members, in putting down an Amendment to Clause 54 thinking that it would achieve my objective, which is to pursue here as well as outside the campaign to encourage and facilitate the ownership of ordinary shares by small savers and new investors.
733 I must, first, thank my right hon. Friends and hon. Friends on the Treasury Bench for going as far as they have in reducing the Stamp Duty on share -transfers by 1 per cent. I hope that they will not think me ungrateful in wishing that they could have gone the whole hog. My hon. Friend the Financial Secretary, in answer to a Parliamentary Question gave the cost of that, and quoted other figures this afternoon. It is a lot of money, but I think that it was an American Minister to the French Republic who, in 1797, said, "They can provide millions for defence but not one damn penny for the tribute." My right hon. Friend has gone a little further than that —to 1 per cent.—but I could have wished for more.
Even my right hon. Friend's priorities in giving tax concessions make it impossible for him now to give us more, perhaps he can give an assurance that, in future, he will first keep in mind a further reduction in, or the abolition of, Stamp Duty and, in addition, do something particularly for the small investor under Schedule 9, having regard to the fact that at the moment the level that he pays up to £100 is, on occasion, slightly above, rather than where I think it ought to be, slightly below that of the rate widely in force.
8.0 p.m.
Could my hon. Friend say anything this evening about how far it may be possible in future to treat the small saver and investor in a similar way to the smaller dealers in property? I think that this applies particularly to a person who is investing for the first time in industry, and especially perhaps to those investing collectively through investment clubs. From what knowledge I have of them, there would seem to be quite a number who invest through the Stock Exchange about £100 a month regularly, month after month.
The hon. Member for Grimsby appears to regard all people who wish to make profits on the Stock Exchange as rich. The Wider Share Ownership Council made a survey, under Dr. Mark Abrams —admittedly, it was a fairly small sample —and I should like to tell the hon. Member for Grimsby that three-quarters of the sample did own shares, including a large number who owned £500 worth or less. They expressed the attraction to 734 them of owning shares as capital gains, profits, making money or gambling. The hon. Gentleman may deplore that intention. But why take that high moral tone and allow it to the rich, but forbid to the poor? I take the slightly different point of view. I get upset when I walk down the street, as I did yesterday, and see "Investment Office" written up over a building, and find that it is, in fact, a betting shop.
§ Mr. CroslandWould the hon. Gentleman and his council really encourage the investor with less than £500 capital, as opposed to investing in a unit trust or an investment trust, to do a great deal of switching from one share to another? If so, it is indefensible.
§ Mr. MacmillanI would not suggest that it should he encouraged. The Wider Share Ownership Council makes clear that in its view it is very dangerous for anyone to invest in anything which may lose its value temporarily, unless the investor is prepared to leave his money in that investment sufficiently long to obviate the need to withdraw the money at a disadvantage.
But I do not see why the hon. Member for Grimsby must take such a strong moral line about the activities of the small investor. I am anxious that the small investor should have the same chance and freedom to invest his money where he likes and that the concessions which he obtains from taxation as a small investor—which I should be out of order were I to attempt to pursue further—should be the same wherever he may make his investment.
There is one other point which I should like to make and which I hope that I shall not be out of order in pursuing. It relates to the question of who, in fact, pays the Stamp Duty. By practice, but for no other reason, it is paid by the purchaser of the shares. I think that it might prove helpful were the practice to be changed and the Stamp Duty paid by the vendor. This would relieve from the burden of paying Stamp Duty the person investing for the first time, and it would, indeed, meet the point made by the hon. Member for Grimsby, because if the investor did not transfer he would not pay at all.
I believe that it is not a question on which it is possible to legislate, since the 735 Government, or the Treasury takes the view that it does not matter who pays it so long as the stamp is put on the document—
§ Mr. CallaghanA typical Treasury attitude.
§ Mr. MacmillanIf we could have an assurance on some of these points, some hon. Members who have been anxious, almost for years now, to abolish Stamp Duty would be able to add to the gratitude we already feel for the hon. Gentleman and his hon. Friends a sense of hope for the future.
§ Mr. R. Gresham Cooke (Twickenham)I wish to support and to thank the Chancellor and other Treasury Ministers for what they have done to reduce the Stamp Duty. I consider it to be one of the wisest steps taken in the Bill. It seems to me that it must surely be in the interests of everyone to widen the pool of investment and the number of investors. If British industry is to grow it has, from time to time, to go to its own shareholders for more money and, also, it tries to attract new shareholders. Therefore, the wider the pool of investment and the greater the number of potential shareholders, the greater the amount of money which will be available for industry for expansion in the future. One of the disincentives—
Mr. J. T. PriceIs the hon. Member seriously suggesting that the mere transferring of a block of shares in a company is necessarily adding anything to the finances of the company? The increment gained, or the loss sustained in the transfer, does not reflect itself in the central finances of the company.
§ Mr. Gresham CookeI am saying that suppose a fairly small company has 2,000 investors, and another 500 come in and pay £50 or £100 each, the company will have 2,500 investors. That is widening the pool of investment and making it easier for the company to raise more money from its shareholders, as it has to do from time to time in order to expand.
I dislike the argument advanced by the hon. Member for Grimsby (Mr. Crosland) that this is helping only 3 per cent. of the nation. I think that that gives a totally false impression of the 736 investors of the country. The large investors today are the pension funds, the insurance funds, and all the pension societies run by industry and by trade unions, and so on. When one breaks that dawn among pension holders and insurance fund holders, one finds that far from 3 per cent. of the nation owning British industry, the figure is about 30 per cent.
I welcome the Clause. I think that it will have a further advantage, as was said by the Chancellor in his Budget speech. The Stock Exchange is the only one which suffered under the disability of a 2 per cent. Stamp Duty. That has kept foreign investors from our shores. Despite what hon. Members opposite say, we wish to attract foreign investors in portfolios. It makes our capital larger and more valuable to the Treasury, and our balance of payments larger. On that ground alone, I should have thought that we were well justified in reducing the Stamp Duty from 2 per cent. to I per cent.
Therefore, I do not agree with what has been said by hon. Members opposite. I believe that this is one of the best steps taken by the Government to make British industry more democratic even than it is today.
§ Mr. du CannWe always expect an intellectual and an engaging speech from the hon. Member for Grimsby (Mr. Crosland) and we are never disappointed —at any rate, never in my experience. None the less, one should never give a left hand without giving a right hand, and I fault the hon. Gentleman's speech on several practical counts which I hope to specify.
The hon. Gentleman seemed to me to read into the speech of my right hon. Friend, and his Budget statement, inferences which were not there. He discussed at least one point which my right hon. Friend never made. He put up an argument on the subject of new issues and proceeded to demolish it to his own great satisfaction. I am bound to say that I agree with a great deal of what he said. But that was not one of the positive reasons why my right hon. Friend brought forward this proposal in the first place.
§ Mr. CroslandIt was a better reason.
§ Mr. du CannThe hon. Gentleman says that it was a better reason than that advanced by my right hon. Friend. That is untypically modest of the hon. Gentleman, if I may say so.
The hon. Gentleman said a certain amount about the wealth tax. It amuses me to note that he cannot get to his feet without mentioning the wealth tax. He is very enamoured of this development. The hon. Member for Cardiff, South-East (Mr. Callaghan) the hon. Member for Gloucester (Mr. Diamond) and the hon. Member for Grimsby—this unholy trinity —all say to me with one voice, "Neddy". One passing reference to a wealth tax in the N.E.D.C. Report, to the effect that it may
have some relevance in the taxation of growth",Is hardly. I should have thought, unqualified enthusiasm.The N.E.D.C. may well have mentioned the wealth tax casually, but that is not necessarily a strong recommendation for it. There is a great deal of opposition to the idea of a wealth tax, a substantial body of opinion which feels that such a tax would be a substantial penalty on enterprise.
I am one of those who agree with that opinion. But the hon. Member did not say whether the Labour Party would put the rate of Stamp Ditty up again. I do not know whether they are shy in advance of a General Election, but it is surprising that we have no Amendment on the Notice Paper to alter the situation if he thought that that were an appropriate thing to do.
It was particularly noticeable that the hon. Gentleman did not quarrel with a number of points which my right hon. Friend made. One was the claim that the 2 per cent. level to which Stamp Duty was lifted in 1947 by the late Lord Dalton was substantially higher than that in any other European or North American country. That is a fact, and the reduction has brought us more into line. My hon. Friend the Member for Halifax (Mr. Maurice Macmillan) wants us to go still further, while being good enough to acknowledge that we have already gone some way.
It is worth quoting the other European rates. In France, it is 0.6 per cent. on both buyer and seller—a commentary on 738 the point made by my hon. Friend the Member for Halifax—making a total of 1.2 per cent. We are, therefore, cheaper than France. In Western Germany, it is ¼ per cent. In Belgium, it is 0.3 per cent. on both seller and buyer, making 0.6 per cent. In America and in Canada, there is a very small Federal tax. It is fair, therefore, to claim that we have come down very much nearer to the European and North American rates, though there is still undoubtedly some way to go. What has been entirely clear is that with that rate at 2 per cent. our stock market has been at a substantial disadvantage by comparison with others.
The hon. Member for Grimsby discussed at some length whether we wanted portfolio investment in the United Kingdom. I agree with him that this requires looking at with a great deal of care, for it is a two-edged matter. We all acknowledge that. I have no doubt about it, nor has anybody else who has considered these matters carefully. It may or may not be right to encourage portfolio investment in the United Kingdom.
The hon. Member said that overseas investment in productive industry was probably a good thing. Again, I agree, although I think that a limit should possibly be set to that—and I note that he agrees with me on that point. What we want is to see the markets of securities in London, and there is no doubt that this high level of Stamp Duty has been a great deterrent. In practice, that is a matter of fact, and there is no gainsaying it. There is no question that foreigners, on the whole, have been reluctant to deal in the United Kingdom market while the level of Stamp Duty has been as high as 2 per cent.
The hon. Member for Grimsby suggested, I do not think seriously, that it was perhaps my right hon. Friend's intention to put everything in our balance of payments right by this single stroke. That is not so. It is a marginal matter, it is true, but it seems to me to be important. I do not think that it is right to look at the Stamp Duty in isolation. I do not wish to trespass beyond the rules of order, but may I draw attention to a later Clause, which we shall discuss in full, which deals with the facilitation of bearer issues and also to a Measure to which the chairman of the Stock Exchange 739 referred at his annual meeting yesterday—the Stock Transfer Bill.
These measures and others are bound to have an effect in improving the market facilities in London, and I believe that to be highly desirable and appropriate. It is important to remember that the Stamp Duty reduction should not be considered in isolation.
Mr. J. T. PriceI was interested in the hon. Member's reference to the Stock Transfer Bill, which he is using to support his argument. It has not yet been considered by the House.
§ Mr. Gresham CookeIt has had a Second Reading.
§ 8.15 p.m.
Mr. PriceOnly in the formal sense. It went to another place and comes back to Committee in this House next Wednesday. I am a member of the Standing Committee. If the hon. Member intends to quote this legislation in support of his argument, he should bear in mind that when it was considered in another place it was first considered as an administrative Measure to do away with much of the form filling and elaborate documentation which stockbrokers said were hampering them. It was only when it went into Committee in another place that noble Lords there strongly pressed the Government to abolish the Stamp Duty altogether and to put the cornerstone, as it were, on the Stock Transfer Bill. It is rather rich for him to argue this administrative Measure when the impelling force came from another place in the debate on 21st March, the OFFICIAL REPORT of which I have read.
§ Mr. DiamondDoes my hon. Friend mean rich in the singular or riches in the plural?
Mr. PriceI was speaking euphemistically. We usually regard the other place as a bit rich, in any case.
§ The Temporary Chairman (Mr. W. R. Williams)Order. I think that any reference to anything which is not in the Clause should be very sketchy indeed.
§ Mr. du CannYou are entirely right, Mr. Williams. What I was anxious to do was to put the matter in its context.
The hon. Member is right that on Wednesday a number of us will no doubt 740 be upstairs discussing a Measure which, I think, you would prefer me not to mention again. That is surely a good and desirable thing. It is an administrative matter, but we must look at these matters in context, and it is a good thing that the market facilities are being improved.
The hon. Member for Grimsby and my hon. Friend the Member for Halifax referred to Schedule 9, in which the steps are improved. I gather that this was warmly welcomed by the hon. Member for Grimsby, and I think that he was entirely right to do so, for the previous scale was in my opinion totally unsatisfactory. I have argued against it in the House and in many other places in the past.
To take an extreme example to illustrate the point, on a purchase consideration of £25 ls. one could pay Stamp Duty almost at the rate of 4 per cent. This was intolerable. My hon. Friend the Member for Halifax says that these steps are much improved, but suggests that later we might look at them again and endeavour to find a less steep graduation, bearing in mind even that in the Schedule we have reduced the steepness of the steps. I am bound to tell him clearly that there are certain practical difficulties in the way of doing that. If we introduce too great a number of steps there are bound to be delays in the stamping process. It seemed to us that the proper thing was to devise a number of steps which mitigated the difficulties which I have illustrated by that extreme example and, at the same time, did not result in any delay in dealing with the stamping processes. That is the reason for our coping with the matter in that way.
The hon. Member for Grimsby spoke about large investors, and he represented to the Committee, I think, on the whole, mistakenly, that the reduction in duty would be largely a matter of benefit to large private investors. I do not believe that to be the case, and I should like to say a word about the growth of share ownership.
My hon. Friend the Member for Halifax is chairman of the Wider Share Ownership Council, of which my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) is also a distinguished office holder. The Council has made a survey, admittedly, as my hon. Friend 741 said, on the basis of a fairly small sample, but which I believe to be accurate, which indicates that there must be about 3,500,000 shareholders in the United Kingdom. That is a very substantial number of individuals.
The chairman of the Stock Exchange, speaking in Liverpool a short time ago, and almost quoting an American Stock Exchange survey, said that he believed that at least another 500,000 people were on the threshold of investment. I imagine that that suggestion is correct. The Inland Revenue, in its 105th Report, dated January, 1963, stated that the number of ordinary shareholders alone rose by 130,000 between 1960 and 1961. The current rate of increase seems to be about 10,000 a month.
§ Mr. CallaghanPersons or holdings?
§ Mr. du CannPersons.
There are believed to be 1,200 investment clubs in the United Kingdom, to which my hon. Friend has also referred. Nearly all the clubs are believed to have about 20 members. The growth of these clubs is a remarkable social phenomenon. The total annual investment comes to about £1 million, not an insubstantial sum when one reflects that probably five years ago there were certainly not 100 clubs in the United Kingdom and probably not even 20. In the unit trust field there are about 1 million investors, whereas five years ago, to my certain knowledge, there were not more than 250,000. These unit trusts are taking increasingly large sums on a regular basis in amounts of 10s. or 5s.
There may be a number of rich people who own shares. Some of them may have large holdings, but, nevertheless, the facts seem to show conclusively that there is a very strong trend towards wider share ownership. For instance, I.C.I. has about 410,000 ordinary shareholders, Shell has 275,000, and of the 32,000 ordinary shareholders in Rolls-Royce, 65 per cent. hold under 300 shares. Seventy per cent. of the 110,000 ordinary shareholders in B.M.C. hold 1,000 shares. There are about 100,000 ordinary shareholders in Woolworths, of whom 30 per cent. have holdings of less than £500 in value. These are individual personal shareholdings.
On the other hand—and my hon. Friend the Member for Twickenham 742 made the point though he did not mention the figure—about two out of three adults in the United Kingdom are indirect investors through subscriptions and contributions to institutional investors. Pension funds, large industrial companies and other organisations, insurance companies, and even the trade unions, which have started their own unit trust, friendly and charitable societies, and so on, hold about half of all the securities quoted on the Stock Exchange.
The hon. Member for Grimsby is right when he says that, in general, the benefit of this concession will go to the large investor. This is inevitable, but the fact that so many millions of our citizens are indirectly interested in these institutional investors illustrates that they should eventually get the advantage. It illustrates a further point. It seems to me, and I hope that the Committee will think it right, that the proportions of small holdings which I have quoted, bearing in mind the figures for institutional holdings, are even more striking than they appear at first sight.
Mr. J. T. PriceThe hon. Gentleman is now taking refuge in generalities. While I fully understand the significance of all these institutional investors, nevertheless I prefer to see this proposition set out in the Committee in the form of figures. The only figures which the hon. Gentleman has quoted relate to investment clubs, of which there are large numbers. He says that they produce about £l million in investment each year, which is quite a substantial sum. But we should look at the cost of this concession of a 1 per cent. reduction in the duty. It is about £25 million and, therefore, this refers to a total investment of £2,500 million. In the light of that £2,500 million, which will attract this concession, I suggest that the small investors are a mere drop in the ocean and that the main benefit will clearly go to the large investors.
§ Mr. du CannWith respect to the hon. Member, either he has not entirely followed my argument, or, alternatively, I have not made my remarks as clear as I should have liked them to have been. The hon. Member's interjection inevitably gives a misleading impression to the Committee of what I said. I said, "Look at the trend. It is remarkable and extraordinarily clear. It is one of the most 743 remarkable social phenomena of our time, particularly in relation to investment clubs. That movement may be small, but look at the totality of it."
My hon. Friend the Member for Halifax spoke about the future. He will not expect me to be specific about that tonight. It would be fair to say that there can be no reason in principle for not reducing or abolishing stamp duties excepting in so far as they are revenue producers and, taken at the level at which they endure, they are not an interference with the market. It is claimed that they have been. British securities, for example, are being treated in Paris at present because it is cheaper there than it has been in London. This is absurd.
§ Mr. CallaghanWhy not?
§ Mr. du CannWhile I am very much in favour of competition, I am not in favour of British institutions and traders being put at a competitive disadvantage for any reason. That is why I am glad to see this Stamp Duty reduced.
I said earlier, and not at any length, for reasons of order, that this Stamp Duty matter cannot be considered in isolation. I have laid emphasis on the need to create, maintain, develop and exploit the market in London. I am clear that the whole Committee would think that to be a desirable thing to do, but I think that it is right to say that the Government can do only so much and that the reduction of Stamp Duty, or the passage of the Bill which we shall be discussing shortly, are only a part of the whole scene.
There are practical people involved who have to do their part. There are companies which have a strong obligation, as The Times pointed out clearly today, to modernise their procedures. We have to examine every aspect of this matter. We have to make certain that the machinery of brokerage charges is at an appropriate level in comparison with what others charge.
Be that as it may, I am convinced that this reduction in the duty is thoroughly beneficial to the country as a whole. It must be if it gives London a better opportunity to fulfil its responsibilities. I believe that the capital markets in Europe and in America are 744 not a patch on London and that London has an unrivalled opportunity to become the financial capital of the world. We have superb facilities, which are being improved. There is outstanding knowledge and expertise in the City of London and I hope very much that those who are active in these fields in the City will not fail, in the national interest, to seize this opportunity with both hands.
§ 8.30 p.m.
§ Mr. CallaghanWe have heard a very interesting speech from the Economic Secretary, a speech in which I caught echoes of previous speeches he has made from other parts of the House. He is very fortunate in being able to translate into practice from the Front Bench some of the things he has asked for when speaking on the back benches. Not all of us are so fortunate. Some of us have to watch hon. and right hon. Members opposite translating our views into practice, but the hon. Gentleman has had the opportunity of doing it with his own.
The hon. Gentleman has told us of the very great growth of shareholding, of the way shares are held, the pensions funds, the substantial increase in the number of I.C.I. shareholders, the 3½ million investors, and so on. He said that over the past few years—I quoted his words—the trend has been remarkable.
What is the need for the Clause? If we are getting this growth in shareholding, if it is so widely spread, if the trend is remarkable, why are we spending another £25 million in a full year? If the hon. Gentleman is looking about for reliefs, if he wants a way of spending £25 million, my hon. Friends can suggest plenty of ways of giving away another £25 million. Next week, he will be resisting Amendments asking for relief for the blind. He will be resisting Amendments asking for relief for the disabled. This Government can never find the money to give a car to a man disabled in industry. Yet, despite the remarkable trend and the growth in shareholding to which the hon. Gentleman points with a great deal of satisfaction—I do not dissent from that —he says that we must give away another £25 million in this fashion.
The hon. Gentleman's speech was really the most devastating argument against the Clause which I have heard. With due 745 deference to my hon. Friend the Member for Grimsby (Mr. Crosland), who made one of his usually attractive speeches—apart from a personal attack upon me—I thought that the Economic Secretary made an even more powerful case against the Clause than did my hon. Friend. There can be no justification for doing it if there is this remarkable trend in the growth of shareholding.
The simple truth—I come back to it, agreeing with what was said by my hon. Friend the Member for Grimsby—is that this is a gift to the City in election year in order to pacify Lord Ritchie and offer a sop to the Stock Exchange That is all it is. We know what it is for, and, incidentally, it is no less blatant for being concealed behind a number of specious arguments, however attractively presented.
I must join issue with the hon. Gentleman in what he says about the City of London. There is often a tendency to confuse the interests of the City of London with the interests of Britain. The two are not necessarily synonymous. When they are synonymous, I am in favour of the City of London performing its functions with the maximum efficiency and the maximum profit to the British balance of payments. But, in my view it is the balance of payments which counts, not the City of London. I have yet to be persuaded by all the arguments advanced by the hon. Gentleman and others who desire to make the City of London a very great financial capital again that this will bring about the long-term strengthening of the balance of payments. Yet it is only the strengthening of the balance of payments which matters. Neither the interests of the City nor the interests of anybody else matter apart from that.
My own view is that this country and sterling could very well be stronger. not weaker, if we had strong capital markets in other parts of Europe, if the German stock market were not so thin in stock as it is today, so that we did not have such fluctuations as occurred last week, and if the French Bourse had more stock to offer and more capital to hold. I do not share the view that, so long as sterling is as unprotected as it is today, it is our duty to attract and try to cope with more capital from other countries before we can secure protection for our own industry here.
746 The two things are not synonymous, and I beg the hon. Gentleman to think carefully before he, with the City, goes on attracting new capital to this country which can retreat as quickly as it comes. Certainly, this applies to portfolio investment and much more to short-term investment. One of the best things the hon. Gentleman could do would be to bend his very acute mind to getting an equalisation in short-term interest rates which would offset at least a certain amount of the fluctuations in the exchange.
We are really talking about a myth if we automatically believe in, and we all bow down to, as before the sacred calf, the interests of the City of London, imagining that they are necessarily the interests of the British balance of payments. The two can be in direct contradiction. This ought to be recognised and said clearly.
What I am saying is not an attack on the City of London, although, clearly, I cannot hope for many votes there. It is an attempt to put the matter in proportion. We ought always to keep it in proportion. There have been occasions during the 1950s when the interests of the City of London were diametrically opposed to the interests of British industry. So, unlike the hon. Gentleman, my thoughts turn in the other direction, in the direction of strengthening sterling and our balance of payments by taking some of the strain off sterling through building up the capital market in other parts of Europe. I believe that this would be more in our long-term interest because we do not have, and cannot have in the future, the domination of world trade which we had in the past.
The major point made by the hon. Member for Halifax (Mr. Maurice Macmillan) related to the small investor. The hon. Gentleman is a great expert in these matters, but I wonder whether his researches show how often the small investor switches. My hon. Friend the Member for Grimsby made this point. He is actively against encouraging small investors to switch, and so, I gather, is the hon. Member for Halifax. But surely the small investor—say, the widow with perhaps £1,500 or £2,000 split up among three or four investments —does not switch investments. The small investor leaves them where they are, sometimes for bad as well as good.
747 It is not these people who will get the advantage from this Clause. It is the investor who constantly hops in and out of I.C.I., out of equities into gilt-edged, from gilt-edged back into short-term loans, hopping around, making a quick dollar or a quick £, who will benefit from this Clause. That is why I thought the hon. Gentleman's case for the small investor was misconceived. Small investors will not get an advantage except on the occasion of the initial investment. Apart from that, I believe that they will do very little moving.
§ Mr. W. ClarkI am interested in what the hon. Gentleman says about this hopping in and out. With a capital gains tax, there is no hopping round, at least until after six months. If an investor makes a profit in he is caught by the captial gains tax. The hon. Gentleman must accept this.
§ Mr. CallaghanI hope that the hon. Gentleman will not get into trouble with his Front Bench, because we do not have a capital gains tax. What we have is a speculative gains levy, or something like that. I was rebuked last year for calling it a capital gains tax. I think that the then Chancellor of the Exchequer was right in rebuking me. We have not a capital gains tax, and that is one of the criticisms. I am not sure that there is a case for a Stamp Duty if we have a proper capital gains tax.
I will make the hon. Gentleman an offer: would he like to swop his Stamp Duty for the capital gains tax? There is no case for the hon. Gentleman offering us comparisons with the Stamp Duty rate in Belgium, because Belgium has a capital gains tax. That is the alternative. It is no use the hon. Gentleman talking about the United States, because there is no Stamp Duty in the United States, but there is a substantial capital gains tax.
I object, and have objected all the time, to our picking up—I know that we must do it for the purposes of this Commit. tee—these taxes in isolation and making individual comparisons with other countries, as though we are telling the whole story. My belief is that the whole tax system has a lot of fungus on it. It was designed by William Pitt to beat the French in 1798, and I am not sure whether it is suitable to beat President de 748 Gaulle in 1963. The whole tax system needs looking at—the wealth tax, capital gains tax, Stamp Duty. We may want to reduce some and increase others. Estate Duty is something that we want to look at.
The hon. Gentleman does not convince me, and I do not think that he convinces many other hon. Members, when he tells us what is the rate of Stamp Duty in Belgium, America, France and elsewhere without bringing into play the other forces and imposts that those who are purchasing shares in those countries have to bear. If this were to stand in isolation in the Clause, we would undoubtedly vote against it. But because it is in a miscellaneous group which will benefit the home owner and those purchasing houses, we would not want to vote against the Clause. But we express our opposition to what the Government are doing in this Clause, and on Report we will have an opportunity to single out and focus attention on this Clause and will be able to register our view on it.
§ Mr. McMasterI do not wish to detain the Committee at this late hour, but I am prompted by the speech of the hon. Member for Cardiff, South-East (Mr. Callaghan) to add one point in what has been a very important debate. The £25 million which is involved here has been criticised as being a gift to the City and as not in the long-term interests of this country. I venture to suggest that there are two important points which have been entirely neglected.
I applaud the reduction in tax, but agree with my hon. Friend the Member for Halifax (Mr. Maurice Macmillan) that it would have been much better if this tax had disappeared entirely. Basically, it discourages investment. I cannot agree with what has been said from the benches opposite about transfers of shares not encouraging investment as a whole. It is because there is a free transfer of shares that the market is good and people are willing to invest. It is because people invest in this country that we have our present capital equipment.
It has often been said in debates in this Chamber that we lag behind our competitors abroad in the amount that we are prepared to invest. Every step that we take to encourage investment is a step for the long-term benefit of this country.
749 Another aspect of this is that is so far as the small saver invests and does not spend, he leaves a surplus of consumer goods to be exported. The point was made by hon. Members opposite that the Chancellor of the Exchequer should take steps aimed at improving our balance of payments. This is a step which must help to improve our balance of payments, because in so far as it encourages investment, it puts more pressure on exports.
Speaking as a Member for a Northern Ireland constitutency, I say that we must have more investment if we are to reduce the level of unemployment in areas of heavy unemployment. Therefore, I applaud this proposal, and I hope that some of the investment which results will be channelled to those areas where it is most needed.
§ Question put and agreed to.
§ Clause ordered to stand part of the Bill.
§ Clause 53 ordered to stand part of the Bill.
§ Schedule 9 agreed to.
§ Clauses 54 and 55 ordered to stand part of the Bill.