§ Mr. du Cann
I beg to move, in page 54. line 23, to leave out from beginning to the end of line 36 and to insert:
|(1) Inland bearer instrument (other than deposit certificate for overseas stock).||Duty of an amount equal to three times the transfer duty.|
|(2) Overseas bearer instrument (other than deposit certificate for overseas stock or bearer instrument by usage).||Duty of an amount equal to twice the transfer duty.|
|(3) Instrument excepted from paragraph (I) or (2) of this heading.||Duty of 6d. for every £25 or part of £25 of the market value.|
|(4) Inland or overseas bearer instrument given in substitution for a like instrument duly stamped ad valorem (whether under this heading or not).||Duty of 6d.|
§ I think that it might be for the convenience of the Committee if we discussed with this Amendment a number of other Amendments, Mr. Williams.
The Temporary Chairman
Yes, it might be convenient to the Committee to discuss with this Amendment the next six Amendments in the name of the hon.
750 Member for Nottingham, South (Mr. W. Clark), and the Government Amendments, which deal with the same subject.
§ Mr. du Cann
I suggest, Mr. Williams, that among that splendid collection of Amendments, we might also discuss the Amendment in page 55, line 27.
§ Mr. du Cann
I am sure that the Committee will be extremely grateful to you, Mr. Williams, for your kindness in suggesting that we should discuss all these Amendments together. They are a little complicated; indeed, this whole section of the Bill is a little complicated. I shall do my best to explain them concisely and clearly, and I hope that I shall satisfy the Committee in both those respects.
I hope that I may be allowed to say a short word on the subject of the Clause, simply to put the Amendments into context. As the Committee knows, its chief purpose is to halve the current rates of duty on bearer instruments. Its second purpose is to base the duty, where appropriate, on market value rather than on nominal values. This is especially important in the case of no par value shares which have no nominal value and on which, therefore, there can be no duty. In so far as overseas no par value shares have been liable for United Kingdom duty —of course, there have been overseas no par value shares when such shares have been impossible in the United Kingdom —they have escaped duty altogether. The last purpose of the Clause is to consolidate and redefine the law.
My right hon. Friend the Chancellor of the Exchequer has seen fit to table a number of Amendments which I hope my hon. Friend the Member for Nottingham, South (Mr. W. Clark) and my hon. Friend the Member for Halifax (Mr. Maurice Macmillan) will feel entirely meet the spirit of what they were intending to achieve.
The Amendments reduce the duty on overseas bearer instruments by usage and deposit certificates to bearer for overseas stock. I ought, perhaps, to attempt shortly to define those categories. Bearer instruments by usage are, in the main, 751 American and Canadian share certificates which are registered in what are known as marking names—that is, a limited number of names—and they pass by endorsement; they do not pass by reregistration. They are, in fact, bearer instruments by usage. The term is, perhaps, self-explanatory.
European deposit receipts arise in circumstances when, for example, a bank owns stock registered in its name and issues receipts against those stock certificates which it may hold to individuals who may wish to participate to a greater or less extent in the total holding. At least, the purpose of the Amendment is to reduce the duty on overseas bearer instruments by usage and on deposit certificates to bearer for overseas stock to 6d. for every £25 of the market value of the stock—that is, broadly one-tenth of 1 per cent. of market value. I hope that my hon. Friends, in particular, will appreciate that we have, so to speak, restored the status quo ante of the Bill. I shall be more particular presently as to our reasons for so doing.
The Amendments also reduce to 6d. the duty on a bearer instrument issued in substitution for an original bearer which was duly stamped ad valorem. I should like to explain by way of example circumstances which might arise in which that would require to be done. I will put it in the simplest terms. In the old days, a bearer certificate would be issued with coupons attached. Those coupons would probably be small pieces of paper which would entitle the holder upon presentation to payment of a dividend distribution. The Committee is probably familiar with this procedure.
When the number of pieces of paper ran out, owing to the passage of time, the holder of the bearer certificate would be invited by advertisement to appear at the Registrar's and exchange his certificate for a new one with, attached to it a new series of coupons or, if not to exchange it for a new certificate, simply to obtain a new issue of coupons. Generally, those coupons would last a long time and exchanges were not frequent.
Today, that is not always the case. I uderstand that the coupons are getting larger and larger until they are almost 752 in the form of cheques, and there is nothing rare nowadays in bearer certificates with coupons attached lasting for only four or five years in camparison with the twenty or thirty years that was more usual in other circumstances. [Interruption.] As the hon. and learned Member for Kettering (Mr. Mitchison) says, it is hard on shoe leather; and that, at least, is good for British business.
There are two more general matters with which the Amendments deal. I promised that I would say something about our reason for seeking to amend the original provision in the Bill. The Committee will understand that our original proposals envisaged, so to speak, two increases in duty. The first was an increase from one-tenth of 1 per cent. to 1 per cent., and the second was that the basis of valuation would be altered from nominal value to market value.
But in almost every case—invariably so in the case of no par value shares—market value is above nominal value. There would thus in effect, have been two increases—the first from one-tenth of l per cent. to 1 per cent. and the other by altering the basis of valuation. Strong representations have been made to the Government that the effect of a swingeing increase of duty of this sort—it is very large in context—must militate against what we hope to see as a result of this Clause—though with the qualification made by the hon. Member for Cardiff, South-East (Mr. Callaghan)— namely, further development of a capital market in London.
Indeed it has been represented to us that the volume of business which is currently done in American, Canadian and other overseas stocks in London would altogether disappear. Furthermore, other items of earnings accruing to our balance of payments, and acting as a convenience also—namely, the establishment of marking names and the like—would be seriously affected as well.
As I attempted to say in an earlier discussion, the virtue of the stamp duties proposed is that they are cheap to collect and do not constitute a serious drag on the transactions to which they relate.
753 We are entirely satisfied, from the representations made to us, that the second of these descriptions would certainly not apply if our original proposal stood. What is worse perhaps—it has also been made clear to us—and it bears out particularly what the hon. Member for Cardiff, South-East has said, with much of which I agree, that it would lead to business being diverted into other channels and that would be bad for our balance of payments.
In the circumstances, therefore, the Chancellor decided to put the rate of duty on overseas bearer instruments back to the old rate of one-tenth of 1 per cent. with the difference that, whereas under the existing law this rate is applied to nominal value, it will in future be applied to market value. That is the correct course to take. In some cases, the Stamp Duty payable will be considerably more than in the past, but in relation to the total value of the transactions it is plain that the burden will be very much lighter. I do not think that it will have the bad effect on the market in the United Kingdom which our original proposal would have done.
I think that is all I have to say on the subject of the main Amendment, but it would be appropriate to point out that the other Amendments in the name of my right hon. Friend are almost entirely drafting and consequential on the one I have moved. I was delighted today to see that the responsible commentators in The Guardian, The Times, and the Financial Times use almost the same phrase as the chairman of the Stock Exchange on this. He said:These Amendments will allay our anxiety.It has never been our intention to interfere with sound and successful business, and I am very pleased to make that clear.
§ Mr. William Clark (Nottingham, South)
May I say to my hon. Friend the Economic Secretary how grateful I am that he has at least accepted the main Amendment, except that he has changed it from nominal value to market value? There is one question which I should like to ask and which concerns the position of the London market when it arranges a loan abroad with British securities which would possibly never be used in this country. It should not be impossible for the London market to 754 arrange loans abroad in foreign markets with British securities without being burdened with Stamp Duty. I do not ask for an answer to this immediately but I should like my hon. Friend to consider it.
In subsection (4) of my hon. Friend's Amendment, the words are:Inland or overseas bearer instrument given in substitution for a like instrument duly stamped….I wonder whether that wording is sufficient, because there might be a substitution of part of a bearer security. I have worked out wording which I put on the record for the consideration of my hon. Friend. I would have thought that instead of "like instrument", one should say "like instrument or otherwise replacing in whole or in part one or more like instruments which have been duly stamped", and so on. Perhaps my hon. Friend will look at that.
I think that the feeling in the London market about the Government Amendment has been extremely favourable. I do not want to join issue with the hon. Member for Cardiff, South-East (Mr. Callaghan), but I think that it is somewhat naive to think that the London market attracts only hot money, if I may put it in jargon. The more that foreign investors come into the London market, the more help there is for our invisibles, shipping and insurance, and so on. No Government should do anything to drive any of that business away by increasing Stamp Duty and the like.
I suggest that Stamp Duty, not only in this case, but generally, can act as a deterrent to the foreign investor, and that when we are considering Stamp Duty on transfers it is well to remember that we are not considering short-term money, but securities in the industry of this country which do not affect our balance of payments because the foreigner cannot immediately take out his money as he can with short-term loans. There is some confusion in the country, if not in the Committee, about the hot money invested in this country. If the foreigner invests in shares, in securities, the adverse effect which that may have on our balance of payments is not as much as people may say.
I thought that I should say to my hon. Friend how delighted I am that at least 755 one of the Amendments has been accepted. I regret that we have gone over to market value. I would have thought that, administratively anyway, nominal value might have been better. I take the point about the no par value shares, but I would have thought that even in this country the day would come when we would have no par value shares; but it would be out of order to go into that now.
§ Mr. Diamond
This is an interesting series of Amendments which deal with some of the problems which have been raised previously, but I would not wish to broaden this into a discussion of the kind we had on the last Clause if only because I thought that what my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said was cogent, compelling and included everything worth saying on the subject and would be very useful as our brief and almost as our Bible in these matters. Nothing I can say would add to that.
I was very interested to hear the Economic Secretary refer to the weight of Stamp Duty. He avoided saying that on the previous Clause and kept it for this. He said that Stamp Duty was a very good kind of tax and did not bear heavily on or clog the activity to which it was attached.
§ Mr. Diamond
That is an extraordinary statement from the Government Front Bench. The hon. Gentleman did not say it and did not say anything like it. What he said—and if he will reread the words of his speech he will find it perfectly clear —was that Stamp Duty, as we know and as we have been saying and as my hon. Friend the Member for Cardiff, South-East said very forcibly on the previous Clause, is the kind of duty which is welcome to the Revenue because it produces revenue and because, on share transfers, it does not stop shares being transferred. In fact, the whole of his argument on the previous Clause was to this effect.
I do not want to delay any more on that. I want now to turn to the rather more technical points involved in the Clause and the Amendments. We recog- 756 nise the wisdom of the Government in switching from a nominal to a market basis. I heard what the hon. Member for Nottingham, South (Mr. W. Clark) said, but, with deference, I do not think he is right. I believe that the Government are right in making the switch. We shall be very wary indeed about any comments made or pressure applied to the Government to introduce no par value shares. To the other part of it we have no objection whatsoever. This part, however, is rather technical. They are bearer shares, or virtually so, and, as the Economic Secretary explained, the Canadian and American shares to which he referred are virtually bearer shares which pass not simply by delivery but by delivery and endorsement and are nearly in the same category as bearer shares. I am grateful to the Economic Secretary for not suggesting that they were ejusdem generis, a phrase that we too often hear in this Chamber.
We have hesitations about bearer shares. I want to make that absolutely clear. We think that bearer instruments are the kind which can be used by those who seek to avoid their proper tax liability. In this sense we do not wish to encourage inland bearer instruments. The way to deal with tax avoidance is not by Stamp Duty or by any of the methods adopted in the Clause. Therefore, in welcoming, or accepting, the Government Amendment we want to make it perfectly clear that we are not favouring or encouraging the growth of inland bearer instruments. These are mainly what are referred to in reference to giving benefit to overseas bearer instruments and enabling fair competition to take place. That is not in any sense contradictory to what my hon. Friend the Member for Cardiff, South-East said on a previous Clause. That is an entirely different matter. In so far as this is limited purely to assisting in that purpose, we have no wish to prevent the Government from getting the Amendment.
§ Mr. du Cann
I should like, in courtesy, to reply to the questions that I have been asked by my hon. Friend the Member for Nottingham, South (Mr. W. Clark) and to make two comments simply on what the hon. Member for Gloucester (Mr. Diamond) has said. I should also like, very shortly, to say a further word for the record on the very 757 large series of Amendments that we are discussing and to give an explanation to the Committee.
Replying to my hon. Friend the Member for Nottingham, South, the first question that he asked was highly technical, and I am not certain that I followed him entirely. What I thought he was interested in was the question of the liability of a United Kingdom company to pay United Kingdom Stamp Duty at bearer rates on issues of stock even if the issues were made abroad. I think that was his point.
§ Mr. du Cann
I am glad that I followed my hon. Friend and could define it accurately. I can tell him that we will most certainly look into the matter.
My hon. Friend also raised the question of subsection (4) of the Amendment. I am bound to tell him that we think the wording is adequate. We have considered i t with very great care. On the other hand, he was kind enough to make a new suggestion and put the wording on the record, and we will certainly look at that.
The third point raised by my hon. Friend was the question of no par value shares. The hon. Member for Gloucester referred to this, and this will be my first comment to him. I note that my hon. Friend is in favour and that the hon. Member for Gloucester has, on the whole, reservations. I suppose that the truth of the matter is that we shall have to await the debate on Jenkins—my views on this subject are known—and I think we shall have an opportunity to debate it, not that this is a matter for me, before very long. If I may make a joke of it, I always felt that I was one of the few people in England who was able to get away with the introduction of no par value shares, but I will not pursue that too far.
Secondly, the hon. Member for Gloucester warned us about the danger of inland bearer instruments. I dare say that he was right to do so, from a practical point of view. There are complications over the whole field, of which we are only too well aware. But he went on to make the point that we were here talking, on the whole, about overseas bearers. That is an entirely different kettle of fish.
758 In discussing the plethora of Amendments I thought it appropriate not to go an for too long, and not to refer to the other Amendments. I merely make the point that if the Committee approves the purposes that we are discussing in relation to the other Amendments, these, although dealing with another Clause, are relative to the earlier ones, in that they provide the machinery therefor.
§ Amendment agreed to.
§ Mr. du Cann
I beg to move, in page 54, line 37, to leave out "EXEMPTION" and to insert "EXEMPTIONS"
The Temporary Chairman
With this Amendment we can take the Government Amendments in page 54, line 40, and in page 56, line 2.
§ Mr. du Cann
That would certainly meet my convenience, Mr. Williams, and I think that it would be for the general convenience of the Committee. These Amendments deal with related matters. I can explain the point fairly shortly. We are concerned to clarify the position of allotment letters and other similar documents.
Certain doubts about the position of allotment letters and their liability for duty have been expressed. The Committee may remember the remarks which my hon. and learned Friend the Financial Secretary made during the Second Reading debate:I should make one point clear. There is no intention that Stamp Duty should be imposed on new issues or rights issues and allotment letters of British companies."—[OFFICIAL REPORT, 6th May, 1963: Vol. 676, c. 56.]Although it is true to say that the position under the Bill as originally drafted was not entirely clear, the Amendments make it clear that such instruments as allotment letters are exempt from duty under the Clause where their life is limited to six months or less, but where their life exceeds six months they are chargeable.
We considered the question of the time limit very carefully. This is an extremely important matter. There are some ordinary limits to the life of allotment letters in any case. One might relate to the administration arrangements of companies, and another, in appropriate cases, to the requirements of the London Stock 759 Exchange, but it seemed to us that it was not satisfactory to rely upon those limitations alone. It is possible to envisage a situation where an entirely new class of bearer instrument might develop, if some fixed limit were not set. We considered that a period of six months would be best as a condition of exemption from duty. It is long enough to cover all the ordinary purposes for which allotment letters are normally available.
Having said those few explanatory words, I hope that the Committee will feel that they are logical and sensible. The other Amendments with which we are dealing are entirely consequential.
§ Mr. Diamond
We share with the Economic Secretary the view that these matters should be made clear and, to that extent, this series of Amendments makes even clearer the content of the Clause as it stands.
It is difficult for my hon. Friends and I to express an opinion on the question of the six months. I should have thought that such a period was verging on the long side for a bearer of allotment, and so on. Might this period not be beyond the normal practice? However, this is a somewhat minor matter upon which we would not have sufficient experience to express a valuable contribution.
I am unable to understand how it comes about that this series of Amendments comes before us so late in our consideration of the Bill. We are, once again, in the position about which we complained a short while ago. On Second Reading, the Chancellor made it absolutely clear that this matter was to be considered and that, if necessary, Amendments would be put down. I apologise for referring to this again, because the Financial Secretary's apology on the last occasion was so full that no one but a "heel" would refer to it again. That is why it was so full, I suppose. Nevertheless, I must at least record the fact that this is not the first occasion on which the Government have thought fit, despite the fact that the matter was due for consideration, to table Amendments not at the last possible moment, but at a very late stage.
As far as I am aware, this group of Amendments was tabled during the last 760 few days. They are not actually starred, but they might have been had we started out consideration of the Bill only a day earlier. It is not helpful to the Committee that this habit should develop; that the Government should keep their Amendments until the last possible moment and, therefore, ensure that no one but the Government are aware of what the Amendments are driving at. By doing this, the debate is restricted and made more difficult.
The Government must not assume that simply because their distinguished representatives have nothing to do all day except read briefs explaining in detail what Amendments are all about that every other hon. Member, busy lawyers and solicitors perhaps, have nothing else to do but grab at the Order Notice Paper first thing in the morning and ask themselves, "What new Amendments have the Government put down today?"—and spend the rest of the day investigating what they are all about.
Many hon. Members have other duties —political ones, of course—in Parliament and elsewhere. It is not always possible for them to give the exclusive attention needed to obtain a full explanation of some Amendment. I think that I have said enough on this score. I do not wish to rub it in unduly and I am sure that the Economic Secretary will not find it necessary to repeat the words he used on the previous occasion.
It would be helpful to us all if, in future, a series of Amendments in the name of the Government were put down in a way and at a time when all hon. Members could have a reasonable opportunity of considering them.
§ Amendment agreed to.
Further Amendments made: In line 40, at end insert:
2. Bearer letter of allotment, bearer letter of fights, scrip, scrip certificate to bearer or other similar instrument to bearer where the letter, scrip, certificate or instrument is required to be surrendered not later than six months after issue.
3. Renounceable letter of allotment, letter of rights or other similar instrument where the rights under the letter or instrument are renounceable not later than six months after the issue of the letter or instrument.
In page 55, line 17, at end insert:
(iii) any deposit certificate to bearer.
§ In line 24 leave out "(iii)" and insert "(iv)".761
In line 25, at end insert:
(c) "deposit certificate" means an instrument acknowledging the deposit of stock and entitling the bearer to rights (whether expressed as units or otherwise) in or in relation to the stock deposited or equivalent stock; and "deposit certificate for overseas stock" means a deposit certificate in respect of stock of any one company or body of persons not being such a company or body as is mentioned in paragraph (a) above.
§ In line 27, leave out "(iii)" and insert "(iv)".
In page 56, line 2, after "stock". insert:
and any right to an allotment of or to subscribe for stock ".—[Mr. du Cann.]