HC Deb 30 May 1963 vol 678 cc1585-612

If the holder of an office or employment of profit is obliged as a condition of holding the same to engage in certain studies or to receive certain tuition or examination, any expenses necessarily incurred by him in carrying out such studies or in procuring such tuition or examination shall be deemed to be incurred wholly, exclusively and necessarily in the performance of the duties of the office or employment, to be defrayed out of the emoluments thereof and accordingly to be deductible from the emoluments to be assessed.—[Mr. Prentice.]

Brought up, and read the First time.

Mr. R. E. Prentice (East Ham, North)

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

The Temporary Chairman

With this new Clause No. 20 it might be convenient to the Committee to discuss new Clause No. 21, "Income Tax: teachers' books and refresher courses", new Clause No. 25, "Relief in respect of apprentices and technical education", and new Clause No. 47, "Income tax allowance for expenses on research and education".

Mr. Prentice

When the Chancellor of the Exchequer introduced his Budget, which now seems a very long time ago, he said that his theme was one of controlled expansion. I commend these new Clauses to the Committee and to the Government in particular because they are relevant to the question of expansion. In support of that, I quote from the first sentence of the first paragraph of the first page of the N.E.D.C. Report, "Conditions Favourable to Faster Growth": Economic growth is dependent upon a high and advancing level of education because of the improvements that education brings in human skills and the greater spread of knowledge. New Clauses 20, 21 and 25 are directed to using the tax system in a rather different way to encourage people to acquire skills and improve their knowledge. When we are talking about the importance of education as a means of improving the growth rate, we are concerned, among other things, with improving education at work, training for jobs and the way in which people can acquire extra skill through training courses of all kinds, whether at work, in a technical college, by correspondence courses or various other methods. New Clause 20 refers to a situation in which someone has as a condition of employment to engage in certain studies or receive certain tuition or undergo an examination. It seems to make the costs incurred as a result costs which can be taken into account in assessing income for tax purposes.

There is quite clearly a two-fold case for this Clause. The first is the question of being fair and just to the people concerned. The sort of costs we are talking about are the expenses of the job. In our submission they should be considered in the same way as business expenses and other expenses which are at the moment taken into account. The disposable income of the man concerned who has to pay for tuition is what is left after he has paid for it and therefore this, as a matter of justice, should be taken into account.

The Clause is also related, as all these Clauses are, to the vital question of raising the degree of skill and training of people in jobs of all kinds and at all levels of responsibility. It is relevant to the practical situation which faces thousands of young people every year in choosing a job. They face the choice of deciding to go into a job which involves arduous training for some years, with the sacrifice of evenings and weekends to study, and then acquiring qualifications which will lead to better things, or going into jobs which demand less of them, which have just as good if not better pay in the early years but not the same prospects. This is a difficult choice into which all kinds of considerations enter.

The tax system, as far as it is relevant to this, should be used to encourage people to make the right kind of choice in their own interests and in the national interest. We should be encouraging courses of training, whether in industry, commerce or the professions, where those people are doing something in the national interest as well as in their own interest and the interest of their employers. In some cases the employers help with the cost. In others they do not. I should like to see employers helping more, but where the costs fall on the person concerned they should be taken into account in the tax system.

People who make this choice will be making a personal sacrifice of leisure, and at the moment they have to pay the fees, which is a financial sacrifice. The Clause, in a modest way, would mitigate the financial sacrifice so that they would be encouraged to make the right choice.

The next Clause that we are discussing makes for teachers a similar kind of provision for the purchase of books or periodicals which they are obliged to buy to maintain their competence. The Clause also applies to refresher courses. Here again the same arguments apply. There is first the argument of equity, that this is necessary because of their employment and should be regarded as such. Secondly, there is the argument that we are anxious to do all we can to improve the supply of teachers and to encourage teachers to take these courses. The Clause should be seen against the background of the shortage of teachers and the need to encourage people to enter into and stay in the profession and not to leave to go into industry and commerce. Anything that can be done to improve the morale of the profession and to make teachers better teachers should be done by the Government, and the Finance Bill should be used as an opportunity to do it.

The third of these new Clauses which we are discussing provides a somewhat complex formula for giving an employer better tax reliefs in relation to the training which he provides for apprentices or other trainees, whether in his own place of employment or by paying sums of money to a technical college or some other institution for the training. Section 140 of the Income Tax Act, 1952, to which the Clause refers, gives relief for payments which an employer may make to a technical college and so on. This Clause would increase that relief and extend it to the cost of training at work.

5.45 p.m.

This subject was debated last year and in 1959. I felt it my duty to study the debate last year and I gathered that there were certain drafting difficulties which were pointed out by the present Minister of Education who was then at the Treasury. In trying to follow the arguments which he was using, I came across these words: It is some years since I took the school certificate, but, if I remember rightly. the sum of the convergent series one-third, one-ninth, one-twenty-seventh, and so on, is one half, and that for the sum to infinity of a geometrical progression the formula is R over 1 minus R."—[OFFICIAL REPORT, 29th May, 1962; Vol. 660, c. 1263.] When I got to that, I gave up studying why the drafting of the Clause presented the Government with difficulty. I content myself now with the traditional formula by saying that this Clause may not be drafted clearly but the intention is clear and if the Government are prepared to provide something in their own words to meet that intention it will satisfy my hon. Friends and myself.

The aim is important. It is to see that there is a different tax treatment for the employer who does his share of training of new workers compared with the employer who does not. We are trying to give a financial advantage to the employer related to the amount of training and the number of people he trains and to ensure that, relatively speaking, the employer who does not do his share of training is penalised under the tax system.

We have discussed this for some time in the context of debates on industrial training. We know that a number of firms provide training schemes of a high calibre and do their share, and even more than their share, of training. There are many others who do not but who rely on poaching skilled workers trained elsewhere, and they find it sometimes more economical to pay a slightly higher rate to attract those people than to finance their own training schemes. We therefore suggest that the financial system should be used to redress the balance and give some help to the firm which does its share, or more than its share, and not to the others.

In France, a similar system has existed ever since the tax d'apprentissage was established in 1918. It provides for a special levy on firms employing skilled workers and gives a rebate in accordance with the amount of training they do, whether within their own premises or by paying some quota to another institution to do the training for them. There is no doubt that this stimulates the amount and the quality of training in France, because to obtain the tax relief the firm concerned has to meet the requirements of an inspector. I think that that would be the consequence also of the Clause which we are now discussing.

This concept has had partial recognition from the Government. In a White Paper, Industrial Training: Government Proposals, published in December, 1962, they set out as one of the duties of the industrial boards which they propose to set up that these boards should be empowered to collect money from establishments in the industry by means of a leavy, and they said: The Bill would provide that rebates could be allowed from the levy where firms were providing industrial training of approved quality. We are entitled to say that this is something which we on this side of the Committee have been demanding for four or five years.

The noble Lord, Lord Robens, when he was a Member of this House, speaking at the Dispatch Box in a debate which followed the publication of the Carr Report, suggested that something of this kind should be done in this country. The Government have taken all this long time, as they always do, to catch up with the ideas of the Labour Party, but what worries me in the context of 1963 is that this is still merely a suggestion in a White Paper discussed by both sides of industry. If it is to be incorporated in a Bill this will not happen until the autumn at the earliest under the programme of the present Government, if the party opposite should still be the Government in the autumn.

Therefore, we are offering an opportunity to the Government to do something now—not to set up all the paraphernalia of industrial boards and so on which are outside the scope of the Finance Bill, but to use the Finance Bill as an instrument to do something now to encourage the firms which are doing their share of industrial training, and to penalise the others.

It seems to us that this is a method which must be used if any Government is really to do something positive to stimulate the quantity and quality of industrial training in this country. If we reject compulsion we have got to have some lever to use, and this is an important lever—a lever which has worked in France and in other countries in a different form, and it should be used in this country if we are to make real progress in this important respect.

I concentrate on this Clause, partly because I know that some of my hon. Friends will seek to catch the eye of the Chair on some of the other Clauses, and also because I want to stress the importance of industrial training, not only in industry in the narrow sense, but in commerce, in the service industries and so forth, and it is important to the whole concept of growth.

We are short of skilled workers, even in the areas of local unemployment. We have the paradox in those areas that there is a shortage of skilled workers and unemployment amongst semi-skilled and unskilled workers, often creating a bottleneck which aggravates the situation. If we are short of skilled workers in relation to the present economic performance, we shall be much more short of them in relation to any 4 per cent. growth rate. Therefore, this is a question of some urgency, and the Government have not shown any urgency in dealing with the problem. This is one thing which they should do now by accepting the spirit of this Clause, drafting it in a more practical fashion and bringing it forward on another occasion.

The other Clauses to which I have referred are all of a pattern because they are all designed to do something to improve the levels of skill of people in jobs and professions of all kinds. This is one of the most urgent social questions pressing this country, and the Finance Bill should be used in an imaginative way to discourage bad practices and encourage good practices, whether by the workers concerned or by the employers.

Mr. Charles Fletcher-Cooke (Darwen)

I agree with the arguments advanced by the hon. Member for East Ham, North (Mr. Prentice) in support of this group of Clauses. I should like to widen the basis of his arguments. He emphasised the social and economic value of these reliefs, and I do not disagree with that, but I should like to plead the argument on grounds of equity.

I do not think it is generally realised that the benefits, so-called, which persons enjoy from these compulsory systems of training which they are obliged to undertake, whether they like it or not, as a condition of their employment, are benefits upon which they are personally assessed. Whether it be subscriptions to polytechnics or night classes, or for books, or whatever it may be, since these persons are not actually working during such periods, even though they are obliged to undertake these courses or read these books, these expenses are regarded by the Revenue as benefits upon which they are personally assessed, even though they never see a penny of the money.

May I illustrate that fact from the case in which I last appeared at the Bar. The manager of a well-known bank was obliged by his employers to join a famous West End club. The subscription, which was paid directly by the bank to the club, was assessed upon the manager. The manager did not wish to join this club. Indeed, the evidence was that, broadly speaking, it was purgatory for him to go to the club. He hated every minute of it. Nevertheless, his personal tax account was assessed with the benefit of this subscription to this club because it was alleged, and indeed proved, to be of benefit to him that he should be a member of this club; and since he could not actually be working while he was having lunch at the club—not only because of the rules of the club but for other reasons—he was personally assessed on this benefit even though he never saw a penny of the money.

The same applies where trainees or employees are obliged, as a condition of their employment, to undertake courses at night schools or to read certain books. They are assessed personally on the benefit of these assets. It seems to me inequitable, apart from the fact that it is antisocial and anti-economic, that they should be so assessed, and this arises from the fact that they are assessed under one Schedule rather than under another. They are assessed under a Schedule which says that every benefit shall be taxed unless it is incurred not merely wholly, exclusively and necessarily but actually in the performance of their duties.

According to the decision of the courts, it cannot be said that while they are studying at a polytechnic or while they are undergoing periods of training they are actually working but that they are merely preparing themselves to be better workmen or employees, and that is not enough from the point of view of that Schedule. Therefore, they are personally assessed on these benefits.

That seems to me quite inequitable, and I hope my hon. Friend the Financial Secretary will look at this point in a slightly wider framework than the context of the present Clauses, important though those Clauses are, from the point of view of getting a better and more highly skilled working population. I have great pleasure in supporting these Clauses.

Mr. James Boyden (Bishop Auckland)

I agree with much of what the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) said about the equity of the two proposed new Clauses dealing with teachers' books and refresher courses, and apprentices and technical education. Indeed, the people who take evening classes, and study even when their employers want them to do so, are showing enterprise and initiative above the average. Certainly their wives and children see less of them as a result. Therefore, this is essentially a matter in which, by these amendments to the Income Tax law, justice should be done.

I should have thought that the moment was opportune for the Government to accept the substance of these proposed Clauses. The Ministry of Labour is about to embark on a very large scheme for increasing industrial training. The Ministry of Education is very short of teachers and has great need to expand the teacher training force. The Treasury Ministers responsible for the universities have a great need to extend the amount of post-graduate training for the provision of post-graduates to become teachers in universities.

In view of the existing shortages, surely the tax law ought to be tilted in favour of those individuals undertaking training at their own expense and at their firms' direction—in some cases the local education authorities or the universities—to improve their qualifications to assist the nation in its present difficulties. Of course. this sort of training goes on. Considerable numbers of teachers and lecturers in educational institutions take post-graduate studies at their own expense; they take degrees and diplomas very much to the advantage of the nation as well as to their own advantage.

I should like to see it recognised as a principle, in this struggle to get more trained people, that the State should provide full salaries for people who, as it were, "remuster". That was the word which was used when I was in the Royal Air Force. One remustered from a lower job to a higher job, to the benefit of the man remustering as well as to the benefit of the Royal Air Force. If this were an accepted principle, some of our difficulties would be overcome.

I will give an example. In the teacher training colleges there is not exactly a surplus of lecturers in biology but there are enough to go round. There is a severe shortage of physics and chemistry lecturers. I have advocated before that every incentive ought to be given to enable some of the lecturers in biology to remuster to the other subjects. This goes wider than the actual Clause, Mr. Williams. I use it only as an illustration because I know that you are very prompt to reprove anyone going out of order. it illustrates in a broad sense the narrower a-gument which we are deploying now.

6.0 p.m.

If the Treasury is not prepared to accept the substance of the new Clauses, this will he evidence of a lack of co-operation in the Government. No one can say that the Minister of Education is not very anxious to have the maximum number of teachers. At least, this is what he says at the Dispatch Box, although the details of what is done do not always match the speeches. Here the Treasury Ministers have an excellent opportunity to put the protestations about the need to increase the supply of trained staff of all kinds into practical form in our tax law.

There is one sort of training which is very popular among industrial firms. Both the firms and the individuals concerned are put to considerable expense by it. I refer to the many correspondence courses schemes which are undertaken, the firms saying to their young employees, "If you take these courses, you will have better chances of promotion, and, in any case, we want you to take them". I hope that the Minister will be able to extend the wording which we propose to cover this sort of encouragement, which is not exactly an obligation but which is tantamount to it. Different firms have different arrangements; some of them pay half the fees, some pay more and some pay none, but in all cases, I suggest, our Income Tax arrangements should be such that, wherever such schemes operate, a tax concession follows. In the United States this is done in a very big way in quite complicated branches of education, in electronics, nuclear engineering, and so on. I have been quite staggered to note the importance and significance of correspondence education at a very advanced level in the United States. We are now offering the Treasury a means of doing something to push us a bit more in that desirable direction.

Turning specifically to the new Clause which deals with teachers' books and refresher courses, I understand that university teachers already get some concessions in respect of subscriptions to learned societies, the purchase of books, and even—a very tiny one—the wear and tear involved in the wearing of gowns. Whether this is applied to all similar people in educational institutions, technical colleges, schools and so on, I do not know. I know that I enjoyed some such concession when I was at Durham University.

If it does not apply to other branches of the teaching world, I very much hope that the Treasury will do something about it by publicity or, at least, by putting it in the descriptions of our tax arrangements so that everyone may benefit. As things are, even in the universities the arrangements are rather niggardly; they do not cover anything like the full cost of books and subscriptions to learned societies.

Whatever be the arguments based on the national interest, there is no doubt that teachers who take part-time courses in their own time, young men who take correspondence courses to improve themselves, lecturers in technical colleges who read for post-graduate degrees at their own expense, and the like, are usually the most conscientious and most lively of the people concerned. Therefore, I end as I began, in support of what was said by the hon. and learned Member for Darwen, urging that such people should be encouraged both in the interests of equity and in the interests of the nation as a whole.

Mr. William Clark (Nottingham, South)

I am grateful to the hon. Member for East Ham, North (Mr. Prentice) not only for raising this debate, but for the very moderate way in which he put his case. There is a great deal of logic in what he and succeeding speakers have said about the need for tax incentives, to call them that, for educational purposes and training and retraining schemes. I understand that we are, at the same time, discussing the new Clause in my name and the names of several of my hon. Friends, "Income Tax allowance for expenses on research and education", and it is to this that I now direct attention.

The idea behind this Clause is somewhat narrower than that put by the hon. Member for East Ham, North. There is an anomaly in the Income Tax Act in that expenditure on research and education is allowable in a trade but not in a profession. I could give many examples, but the classic one is in engineering. If a man happens to be a constructional engineer in business, he can charge his education and research expenses. If he happens to be a civil engineer, that is, in the profession, he is not allowed to charge them. It seems obvious, with our emphasis on the need for retraining and the expansion of education, that this anomaly should be eradicated.

The anomaly has been on the Statute Book for far too long, since before 1952. I hope that the persistence of all my hon. Friends who have moved similar new Clauses in the past will meet with success today and that my hon. Friend the Financial Secretary will tell us that the Government are now ready to put matters right.

Mr. Tam Dalyell (West Lothian)

The reason behind the new Clause which deals with teachers' expenses can be put quite shortly. A teacher should have every opportunity to refresh himself. A teacher who does refresh himself becomes a better teacher. Therefore, every opportunity and encouragement should be given to him to do so.

Mr. Peter Walker (Worcester)

I support what has been said by the hon. Member for Bishop Auckland (Mr. Boyden) about correspondence courses. The extent to which much of commerce depends on the correspondence course method for training young recruits is often underestimated. Last Friday, we debated exports. One of the important factors mentioned was the invisible earnings of banking and insurance, and these are two businesses which depend almost entirely on the correspondence course method of education.

The incentive given by allowing a tax rebate to the pupil is, perhaps, not of great importance since many of the younger persons taking correspondence courses do not pay much tax, if any at all. However, there is every justification for ensuring that such expenses met by an employer are not apportioned to the employee concerned and that the employer is given every incentive to provide schemes of education through correspondence courses to his employees.

I hope that the Government will adopt a generous approach and accept a provision which will assist in this purpose.

Mr. A. E. Hunter (Feltham)

I support the new Clause the Second Reading of which was so ably moved by my hon. Friend the Member for East Ham, North (Mr. Prentice). It is a just Clause. A businessman is allowed to set his business expenses against tax. If he takes clients to lunch, he is allowed to make a claim against tax for that purpose. It is only fair that a student or teacher at a university, training college or school should be allowed to claim relief in respect of the books, periodicals or reference volumes which he buys to help him in his profession. I am very glad that this just proposal has been supported by hon. Members on both sides of the Committee. It is difficult to see what case the Government can make against it.

Mr. Kenneth Lewis (Rutland and Stamford)

I congratulate the hon. Member for East Ham, North (Mr. Prentice) on introducing the new Clause, because I think that the question of training will be of great importance in this country in the next few years.

Perhaps it is not possible to accept some of the suggestions which have been made, but I hope that the Chancellor of the Exchequer, when looking at the question of training, will bear in mind that some firms are bearing the burden of training. It is absolutely essential that the load should be spread and that we should take from those who are not giving the support to the training effort which they should and give to those who are so that there is an evening out of the load. We should use taxation to expand training. We should make it an essential part of any industrial undertaking's obligation that it should take apprenticeship training seriously and should make a contribution in that way to the national effort.

I believe that in trying to secure an expansion of university education we must consider the correspondence course. There is great scope for development here. Many young people want to take correspondence courses. At present, the obligation is entirely on them. I am not sure that the local authorities and, indeed, the Ministry of Education should not take some responsibility in this matter and accept it as part of the charge on education that people should have the same opportunity to take degrees through correspondence courses, paid for by the Government or local authorities, as they do if they attend university full-time.

Training is important in all its aspects. It does not matter how our young people get their training, whether they do it in or out of their own time. The important thing is that the end product is available to the country. Anything that we can do to encourage that end product will be to our advantage.

Mr. William Hannan (Glasgow, Maryhill)

I support the new Clause. I am not sure about the trend in England and Wales, but the trend in apprenticeship studies north of the Border is to get away from evening classes and into day-release classes and to take what are known as sandwich courses, during which the student goes to college for six months and then does a job of work for the remaining six months. In attending evening classes, a young student is involved mainly in transport costs. Now that the trend is going the other way, he is still involved in transport costs, but he cannot always get a meal at lunchtime without being involved in further expenditure.

We all agree about the need for more trained minds in industry. We have had the Industrial Training Council. The Government have been pressed by many of us to make day-release compulsory. Whatever may happen in future about that, should not the Treasury anticipate that happy prospect and make provision for our young people? We increase taxation in many respects, such as on gambling, betting and drinking, to dissuade people from forming certain habits. Cannot we look on this proposition as a positive form of encouragement for our young people? We want to encourage the desirable things in life. We all agree that this new Clause is very desirable from the nation's point of view, and I therefore hope that the Minister will accept it.

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

As a Member who, in past years, has tabled a new Clause similar to the one entitled "Income tax allowance for expenses on research and education", I add my support to what has been said by my hon. Friend the Member for Nottingham, South (Mr. W. Clark). There is an anomaly here which applies not only to the building industry, but to the shipbuilding industry. It is wrong that a firm which builds ships should have tax allowances for research and education whereas a firm which designs ships should have no such allowances.

The greatest undeveloped asset which we have in this country is brainpower, and any tax advantage which can be given to encourage the greater assimilation of knowledge is a capital investment, because if people have greater brainpower and greater ability they will earn bigger salaries and thereby will benefit the Exchequer by paying larger sums in taxation.

6.15 p.m.

Mr. A. R. Wise: (Rugby)

Every speaker so far has ignored one section of the community which has to make great sacrifices to carry on further education. I am not all that worried about firms which incur expenditure in training young people. I do not believe that the poaching done by firms which do not have such schemes is nearly as thorough as some people think. I am sure that firms which have training schemes, although they are patriotic and delightful men, have a shrewd idea that they are up on the deal on balance, whether their people are poached or not. Although this may be a form of incentive which is, perhaps, praiseworthy, it is not a vital point.

I do not think that the idea of my hon. Friend the Member for Rutland and Stamford (Mr. K. Lewis) of trying—

Mr. Prentice

Will the hon. Gentleman look at this against the background of the shortage of skilled workers in many vital industries? If he studies some of the statements of the Minister of Labour, he will see that there is this overall shortage which could be corrected if the firms not doing their share of training were doing as much as the firms which are carrying out training. Those are the firms at which we are aiming in the new Clause.

Mr. Wise

I do not think that that is the key point. I do not believe that firms which do not have training schemes will be induced to start them by a very minor tax concession on a very small part of their expenditure. I do not say that this tax concession may not be a good thing in itself, but I do not think that it would fulfil the purposes which the supporters of the new Clause have in mind.

The people whom I have in mind are parents. There are many parents who have great expenses in maintaining their children at universities, and these expenses cannot be offset, except in a very minor degree, against their income.

The Temporary Chairman

Naturally, I have a lot of sympathy with parents, but not under these new Clauses.

Mr. Wise

I did not realise that I was straying from the Question, Mr. Williams, but I have made the point that I wished to make.

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

The hon. Member for East Ham, North (Mr. Prentice) said that it seemed a long time since my right hon. Friend the Chancellor of the Exchequer delivered his Budget. Earlier this afternoon, I thought that it would seem even longer after we had got through all the various new Clauses on the Notice Paper. But anyone who has been here during this debate will agree that it has been a model debate in the sense that every speech—and quite a lot of hon. Members have spoken—has been concise and to the point. I will do my best to follow that excellent example.

The hon. Member for East Ham, North pointed out the vital importance of education and training, both technical and commercial, and the great contribution which such training can make to economic growth. He also reminded us of the truth that in some of the areas of high and persistent unemployment there is nevertheless a shortage of skilled workers. I agreed entirely with his opening remarks.

I start, therefore, with considerable sympathy for at least some of the objectives in the new Clauses, and I agree with my hon. Friend the Member for Nottingham, South (Mr. W. Clark) that the speeches have been both moderate and knowledgeable. I was particularly interested in what was said by my hon. Friends the Members for Worcester (Mr. Walker) and Rutland and Stamford (Mr. K. Lewis) and the hon. Member for Bishop Auckland (Mr. Boyden), who has special experience in these matters, about correspondence courses. I agree entirely, from my limited knowledge of these matters—to some extent I have been on the receiving end of correspondence courses—that these are very important.

There is some slight misunderstanding about the tax liability of a normal employee—an apprentice, for example. I am not talking about a person earning £2,000 a year or a company director but about the person who has his training expenses paid for him by his employer. Assuming that the course, be it a correspondence course or a course at a technical college, was connected with his work, then he would not be regarded by the Inland Revenue as receiving an assessable benefit and the payment would not attract tax liability. This is a general point relevant to more than one of the new Clauses, and there seems to be a misunderstanding about it.

It is not easy to deal with these four Clauses together because, although they all deal with matters of taxation in respect of education, they raise somewhat different points. The most convenient course, therefore, is for me to follow the hon. Member for East Ham, North and to deal as briefly as I can with them seriatim.

The first new Clause provides that where an office holder or employee is required as a condition of holding his office or employment to follow a course of study or to take examinations, he is to receive an Income Tax deduction for any expenses necessarily incurred by him for these purposes. The general rule at present is that expenses for which an employee or office holder can claim a deduction are limited to those incurred wholly, exclusively and necessarily in the performance of the duty of the office or employment. That rule precludes a Schedule E deduction of any expenses which are not incurred in the performance of the duties of the employment.

The new Clause raises the question whether the law should be changed to cover the kind of cases which have been mentioned. My hon. and learned Friend the Member for Darwen (Mr. FltecherCooke) said that he was concerned most of all with equity—and he referred to a case with which he had dealt in the courts. I think that he will agree that it is clear that any general change in the Schedule E expenses rule which substituted the employer's requirements for the existing statutory test would be indefensible, and yet I understand that this is what is proposed in the first new Clause.

Mr. Fletcher-Cooke

That would depend on how reasonable the requirements were. If an employer required an employee to go to John o'Groats and to do some fishing, however much he required it, nevertheless it would not be reasonable and desirable. If the requirements were reasonable in fitting and educating the employee to take up his employment or to improve as an employee, why should the expenses not be allowed just as much as expenses in the performance of the job?

Mr. Barber

I will come to that later, but I started by saying that one could not proceed on the basis of the new Clause. This is not a drafting point. The Clause refers specifically to studies or…tuition or examination which a person is obliged to undertake as a condition of holding the office or employment. That is fundamental to the Clause.

If we were to do as is proposed in the new Clause it would leave it open to an employee to obtain tax relief for all sorts of expenditure as long as he could show an order from his employer which required him to undertake that expenditure if he wished to keep the job. Nobody would deny that even in the limited field covered by the Clause there would be real possibilities of abuse. The great majority of employees who go to classes of one kind or another, do so—and this is very much to their credit—primarily for personal reasons, either in order to advance themselves in their chosen profession or to fit themselves for another job.

As the relief would be due under the Clause, whether or not the subjects of the classes related to the employment, if the employee could produce authority from his employer showing that he had been ordered to attend, to sign such a statement would enable the employer to provide tax relief for the employee at no cost to himself. I have not the slightest doubt that some employers would yield to the natural temptation to do their employees a good turn in this way. I should be very surprised if that did not happen.

Even if the Clause were amended so as to require, as my hon. and learned Friend the Member for Darwon suggested, a close link between the duties of the employment and the subject of the classes, the possibility of abuse would still remain, because the Revenue would not normally be able to dispute any certificate given by the employer for a matter of this kind. But there is more to it than that, as I will explain—and this is relevant to what was said by my hon. and learned Friend and the hon. Member for Bishop Auckland.

If relief were given on the lines proposed in the Clause—I am not concerned with drafting points—in practice it would not be possible to hold the line at cases in which the training is a condition of employment or stated by the employer to be a condition of employment. It would be impossible to justify giving tax relief to an employee in one firm for a course of training which he was required to undertake while at the same time refusing it to an employee doing comparable work in another firm and taking precisely the same course voluntarily and not under compulsion. That would be grossly unfair to the enterprising young man who happened to have picked the wrong employer.

But relief could not be given to the voluntary student without making a wide breach in the fundamental basis of the Schedule E expenses rule that expenses must be incurred in the performance of the duties and not incurred voluntarily, however laudable the motive for incurring such expenses might be. If we were to do that it would be very difficult to know where to stop. The hon. Member for East Ham, North did not pretend that he wanted to go any wider than is suggested in the new Clause. Quite apart from the merits, I must advise the Committee that the first Clause is such that, however one tampered with the drafting, the proposals would in my view still be both impracticable and inequitable.

The second new Clause provides that a teacher employed by the local authority is to be given tax relief in respect of any expenditure on books, periodicals and refresher courses which he is necessarily obliged to incur in order to maintain his Competence as a teacher in relation to education developments and to improvements or changes in teaching techniques. 6.30 p.m.

The hon. Member for East Ham, North said that what he wanted to ensure was equity. But I cannot, for the life of me, understand why the relief should be given only to teachers employed by local authorities. I cannot comprehend that. No doubt there is some hidden motive behind such a restriction, but it would seem grossly unfair. However, I am sure that the Committee will appreciate that there is another reason why this proposal cannot be accepted, certainly as it stands.

It would be quite impossible to give a tax relief of this kind—even if it were extended to all teachers—to teachers in isolation. The solicitors, doctors and surveyors in the employ of local authorities have just as much need as the teachers to keep up to date in their professional matters. The alternative course, if it were desired to give relief for such expenditure, would be a general provision making available to every Schedule E taxpayer relief on expenses of this kind incurred in connection with his employment.

It is really impossible to frame a general provision of this kind without going far too wide in relation to the difficulties. For example, it would permit claims for allowances for books for what would really be little more than general reading of a serious kind. Again, a civil servant could claim, with some justification under such a rule, a deduction for the cost of any book on public administration and even perhaps a book on the history of a particular overseas country with which he had to deal in his official work.

How could one effectively test whether certain books and periodicals were not otherwise reasonably available to teachers? I suppose that we would have to call for lists of expenses from those putting in claims and scrutinise each by reference to the nature of the claimant's job and making inquiries as to whether certain books and periodicals were justified. That would be a pretty large operation. Therefore, it would be particularly difficult to proceed on the general lines proposed for the case of one group of teachers.

Mr. Dalyell

Will the hon. Gentleman give an undertaking that he would be prepared to meet the N.U.T. on this subject?

Mr. Barber

I am always prepared to meet a responsible body like the N.U.T. if it wishes to meet me. But the N.U.T. has not approached me. No doubt if it wishes to do so it will make representations.

I cannot ask the Committee to accept the principle behind the Clause and I am sure that the hon. Member for East Ham, North himself would not wish to support a Clause which was restricted not merely to teachers but to a certain limited category of teachers—those employed by local authorities.

I hope that the Committee will acquit me of discourtesy if I deal rather shortly with the third new Clause we are discussing because, as the hon. Member for East Ham, North observed, it is somewhat complex. The reason why I hope that I may be permitted to pass over this without dealing with it in detail—although I will answer any points hon. Members like to raise on it—is not that it is unimportant. On the contrary it raises a most important point.

As I understand its intention, it would probably cost about £10 million a year. The Clause is in the same terms as one which was moved in 1959 and another moved last year. On both those occasions the Committee decided that the proposal was unacceptable.

The intention of the Clause is to give, through the taxation system, a Government subsidy, in effect, in aid of non-productive wages paid to apprentices released from normal duties to undergo formal instruction, and of other costs of their training. I should perhaps say that the Clause as at present drafted would do something else, but I think I understand the intention behind it.

Judging by one or two speeches about the existing tax treatment of expenditure associated with apprentice schemes, there appears to be some misunderstanding. As the tax code stands at present, both the revenue expenditure and the capital outlay which a trader incurs in connection with an apprenticeship training scheme receive due recognition. The revenue expenditure is deductible as a trading expense in the ordinary way in the computation of profits, and capital outlay on the provision of assets which the trainer himself uses for training purposes can form the subject of a claim for capital allowance appropriate to the type of asset in question.

I will not trouble the Committee again with the way in which this works out in practice. Of course, there is an urgent need to raise the amount and the quality of apprenticeship training, particularly in small firms. The hon. Member for East Ham, North referred to incentives to industrial training in France, but was fair enough to recognise that since last year, when we debated a new Clause on similar lines, the Government have published their own new proposals on industrial training. I will not remind the Committee of the details. Suffice it to say that they involve financing in part, by a levy on firms, and that the Minister of Labour will be empowered to make grants and loans. The hon. Member regretted that we have not made more progress with this, but when one is embarking on a venture which involves both the Government and various industries, I think one is bound to take a little time to finalise ideas. At any rate, these new proposals have been generally welcomed.

What objections to the proposals in this Clause remain? In particular, it would amount to using the tax system to give a Government subsidy towards the cost of apprenticeship training. I am sure that the best approach to this important matter is one adopted by my right hon. Friend the Minister of Labour, coupled with the existing tax treatment of expenditure associated with apprenticeship schemes. I would, therefore, advise the Committee to follow the same course as last year, when a similar Clause was debated.

I come now to the last of this series of new Clauses. It stands in the name of my hon. Friend the Member for Nottingham, South. It is rather different from the others. It would provide that a person carrying on a profession would get tax relief for certain expenditure on education and scientific research related to his profession, in the same way as a trader gets relief for like expenditure on education and scientific research related to his trade. All the reliefs referred to in this Clause are reliefs under Section 140, Section 335 and Section 336 of the Income Tax Act, 1952. I am sure that the whole Committee will be as familiar as I am with the details of those three Sections.

A proposal to extend the relief under Section 140 was debated last year and was not accepted. Indeed, this proposal was considered both before and during consideration of the Finance Act, 1959. The whole question was again considered by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) in 1961, and my right hon. Friend looked into it again this year before framing his Budget proposals. I am afraid that he came to the conclusion that there really are considerable difficulties about doing what is proposed.

Perhaps I should remind the Committee that Section 140 of the 1952 Act, which this Clause seeks to amend, provides that, notwithstanding the general rule that no deduction is allowed when computing taxable profits, for, inter alia, any form of capital expenditure, a person carrying on a trade may deduct any payment made by him to be used for the purposes of technical education related to that trade at a university, technical college or similar institution. Technical education for this purpose is defined.

I think everyone will agree that although the relief given by Section 140. which is the nub of my hon. Friend's proposed new Clause, may be justified, it is anomalous. I understand that the reason for it when introduced in 1946 was the need in the national interest for ever-increasing productivity. Certainly that needs remains today.

I quite understand the wish of those who want to extend this and the other provisions referred to in the new Clause to cover professions as well as trades, and I accept that the fact that the professions were deliberately excluded from the relief when first introduced is not conclusive. Furthermore, nobody nowadays would deny that the professions have a major part to play in the development of the economy. None of these factors I deny, but there are difficulties.

To extend the provision to professions would make it possible for a professional man to make a capital contribution to a college or school where, for example, shorthand is taught and to charge it as a revenue expense. I dare say that that sort of thing is not what my hon. Friends had in mind, but it would seem to follow. It would be far removed from the objective of the original provision, which was to foster technical education, although, as I say, that is not conclusive.

Mr. Geoffrey Stevens (Portsmouth, Langstone)

I do not have the Income Tax Act, 1952, with me, but I remember Section 140 reasonably well. I am fairly certain that the educational establishment has to be approved for the purpose by the Ministry of Education.

Mr. Barber

That may or may not be so. As the Clause is drawn, however, the sort of capital contribution to which I referred would be allowed. Without taking up the time of the Committee, it would be difficult for me to deal with the point. I will, however, pass my hon. Friend a piece of paper and we will be happy to accept whatever his interpretation of the Section may be. We agree that it is desirable to encourage general education, but I doubt whether a tax relief of this kind is the right way to provide that encouragement.

There is also the difficulty that the existing law works out in strange ways. For example, farmers are within the scope of Section 140, because the Income Tax Acts specially provide that farming is to be treated as a trade for tax purposes. One farmer has claimed a deduction for fees paid for his child at an agricultural college and in a recent case the High Court has upheld the farmer's contention. This case will in due course be considered by the Court of Appeal and, therefore, I can do no more than draw the Committee's attention to it.

I understand the purpose of the new Clause, which would cover professions such as civil engineering, to which my hon. Friend has referred, and other analogous professions. I hope, however, that I have said enough to convince the Committee that, quite apart from the merits of the proposal, there would be practical difficulties in ensuring that the relief in respect of professions was not claimed in circumstances which no hon. Member in the Committee would wish to cover.

This is not one of those cases in which I can promise effective consideration before Report, but in relation to the last of this group of new Clauses my right hon. Friend will consider the whole question during the coming year. I am sorry that I have taken so long to deal with this group of new Clauses, but they raise important issues and it was not possible to deal with them, as it were, all in one go.

Mr. Frederick Willey (Sunderland, North)

Our sorrow is not at the length of the Financial Secretary's speech but at the conclusion he reached at the end of it. I have no wish to destroy the languor which affects discussions on the Finance Bill, but we have had a very unsatisfactory reply in view of the amity and accord which existed on both sides of the Committee before the Minister's intervention.

6.45 p.m.

I should like to make one or two points. Previously the argument against proposals such as this—the Minister of Education made it, apart from the obscure references in the early part of his speech last year, when he deployed his argument against discriminatory taxes—has been that the Government could think of no worse form of taxation than one which discriminated, for example, between one area and another. I come from an area of heavy unemployment. That particular doctrine has been abandoned by the Treasury. I hope that we can make similar progress in this field.

I hope that the Financial Secretary will take a novel approach to the proposals contained in these new Clauses. I hope that he will go back to the officials who have so carefully briefed him, and to whom he has done such great justice this afternoon, and tell them to take an entirely different approach. He should call their attention to our debate today and say, "Here we have a position in which hon. Members, on both sides, have deployed reasonable arguments in favour of three propositions. They are that we should seek, if it be possible, through discrimination in taxation to help those young people who go into professions and who ought, admittedly in the interests of their professional careers but also in the interests of the professions, to continue and pursue their education; to consider teachers, who ought, admittedly in their own interests, too, but also in the interests of education, to pursue their studies after they have begun to teach, and also the broader question of providing if it is possible, by this means an incentive to apprenticeship."

The hon. Gentleman should go back to the Treasury and tell his officials that this would be a glorious holiday for them. They need not sit in their third floor back destroying every proposal which is made in the House of Commons with all the possible hypothetical objections that might be envisaged, the fantastic abuses that might result or the procedural difficulties that might arise. He should tell his officials that these appear to be three current, topical proposals which are important to both education and industry and that they should see what they can do.

That is what the hon. Gentleman can do. I am heartened by two facts. The first is that the essential argument which hitherto, until this Budget, has been deployed against proposals such as this has been abandoned. Secondly, for the first time when such Clauses have been discussed, neither a Minister from the Ministry of Labour nor a Minister from the Ministry of Education has accompanied the hon. Gentleman. In view of the role he played last year, I thought the Minister of Education might consider it a friendly gesture to sit next to the two Treasury Ministers in their isolation, but no. Even the Minister of Education has preferred to be absent. That is significant.

Let the Financial Secretary go back to the Treasury and say that these proposals have been made year after year, just as I have made proposals in the House or in the Committee year after year about discriminatory taxation to help particular areas. This was turned down in just the same way. These proposals have been made at a time when there is desperate need not only to do something to promote and encourage education but to give the appearance of doing it. That is what is required, and the same is true about apprenticeships.

In its humble way, the Treasury could help. I hope that the Financial Secretary will not be content to live only in his briefs—[Laughter.]—

Mr. Barber

I do not want to pursue the unfortunate line that the hon. Member is developing, but I recall to him that at the end of my observations I made it clear that at least the new Clause in the name of my hon. Friend the Member for Nottingham, South (Mr. W. Clark) envisaged certain proposals which, I thought, we should consider during the coming year; and this we will do. There is a case pending which refers to Section 140, and I am sure that the hon. Member would not wish me to say more than that.

Mr. Willey

I am delighted that I am attracting the hon. Gentleman outside his brief. But he is just peeping outside. I am asking him to jump outside it and to take a fresh look at this matter. I hope even now that between now and Report the hon. Gentleman will consult his advisers at the Treasury to see what can be done.

Mr. Hirst

I see the logic and the sense of the argument of my hon. Friend the Financial Secretary, particularly on Clauses No. 21 and 22, but there is a great difference with new Clause No. 47. I am a fairly old soldier in this Committee, although I see that there are some round about who are older. I see that my hon. Friend the Economic Secretary is smiling, but I must tell him that a similar remark was made before you took the Chair, Sir Robert. The fact is that we have heard these arguments before, although not necessarily always expressed as charmingly.

My hon. Friend was good enough to remind us of some of the occasions on which this matter has been discussed. I have taken part in debates of this sort, particularly under the leadership of my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) who has been fighting this battle from this side of the Committee for many years. We have constantly heard it said that the matter would be studied again in the course of the year. That is a phrase which chills the hearts of the old soldiers in the Committee precisely because we have heard it before.

I therefore press on the Treasury Ministers that they must realise that when the Inland Revenue or the Customs and Excise wants to do something, it does not matter who sits on the Treasury Bench, even if there are rows of Ministers, they are bulldozed into producing something to implement those wishes in the Finance Bill. This is a matter of will. Do the Government believe, in the context in which it has been argued, that there would be reasonable justice in including professions as well as trades in the list of suitable purposes mentioned by my hon. Friend the Member for Langstone?

I cannot remember anything about Section 140 of the Income Tax Act, 1952, but even if my hon. Friend the Member for Langstone is not right—and he usually is right, for he is very well informed on these matters—the Treasury ought to be able to think up some method of achieving our object and limiting the degree. It is a matter of will. If the Government consider that something of this kind is desirable and just, they have only to tell the drafting people to find the answer and they will do so. They do so every time the Treasury wants to push something on to Ministers, whether the Government want it or not, as we have seen dozens of times. We cannot go on year after year receiving the answer that the matter will be studied in the course of the year. It is not a matter of honesty but of the desire of the Government to do something. If the Government want to do something, they can do so without that excuse and it could all have been done before.

Mr. Boyden

I invite the Committee to cast its mind back to the days when Treasury Ministers were saying that it was impossible to abolish carnets for taking cars overseas. Practically every European country has since abolished them.

Mr. Barber

As I was the Economic Secretary, and therefore responsible for Customs and Excise, when the carnet was abolished, I think that I deserve a little credit for that. Knowing my hon. Friend the Member for Shipley (Mr. Hirst) as I do and knowing his constituency to be a very safe Conservative seat, I am sure that he will be with us for many years to come.

Question, That the Clause be read a Second time, put and negatived.