HC Deb 22 December 1964 vol 704 cc1037-42
19. Mr. Peter Mills

asked the Chancellor of the Exchequer what representations he has received from the Gilt-edged Security Holders' Association regarding his capital gains tax proposals; and what answers he has sent.

20. Mr. Prior

asked the Chancellor of the Exchequer what provision he intends to make to relieve from capital gains tax long-term holders of Government stock who are forced to sell at prices below their purchase price but above their value on Budget day, 1966.

Mr. Callaghan

I received from the Association of Gilt-edged Security Holders on 19th November a letter suggesting that holders of undated Government stock should be exempted from the provisions of the capital gains tax on the grounds that they should not be taxed when selling stock at a price above its 1965 Budget day valuation but below the original purchase price. A reply was sent on 3rd December explaining that I do not propose that the charge to capital gains tax arising on a sale after next Budget day should be on an amount greater than any gain that is realised. There will thus be no charge when there is in fact an overall loss. This point was again made clear in my Answer of 8th December.

Mr. Mills

Is the Chancellor in broad sympathy with the Gilt-edged Security Holders' Association? Does he realise the very real plight of many of the holders of this stock?

Mr. Callaghan

On this point, yes, but to go wider and talk about the general aims of the Gilt-edged Security Holders' Association would be outside the limits of the Question.

Mr. Prior

Whilst I am grateful for the Chancellor's reply, may I ask whether he realises the grave concern which exists generally about gilt-edged stocks? Will he make a further announcement now which would remove some of the anxiety and the clouds now hanging over these stocks?

Mr. Callaghan

Question No. 21 deals with that.

Mr. Maudling

The question of the position of gilt-edged really is a serious one. Cannot the Chancellor do something to help in this matter? It would be very valuable if he could clear up this uncertainty about the position of gilt-edged securities.

Mr. Callaghan

Question No. 21.

21. Mr. Peter Mills

asked the Chancellor of the Exchequer if, in view of the concern caused to holders of undated Government stock by his forecast proposals on the operation of a capital gains tax, he will exempt such stock from its operations.

44. Mr. Woodnutt

asked the Chancellor of the Exchequer if he will make provision to avoid liability to tax on apparent capital gains arising from a fall in the purchasing power of the £ sterling.

45. Mr. Eldon Griffiths

asked the Chancellor of the Exchequer if he will exclude bloodstock from his proposed capital gains tax.

48. Captain Orr

asked the Chancellor of the Exchequer what steps he proposes to take to exempt small family businesses from the effects of his proposed capital gains tax.

51. Mr. Higgins

asked the Chancellor of the Exchequer what steps he is taking to allow for changes in the value of money in assessing capital gains for purposes of taxation; and whether he will suggest a suitable index to be used as a deflator.

54. Sir Knox Cunningham

asked the Chancellor of the Exchequer his plans for off-setting losses in his proposed capital gains tax; and whether capital losses made by reason of forced sales of Government stock will be balanced against other capital gains.

56. Mr. Grimond

asked the Chancellor of the Exchequer why the capital gains tax will not be charged on betting and gambling gains.

59. Sir W. Bromley-Davenport

asked the Chancellor of the Exchequer whether stamp collections will be assessable for capital gains tax; and whether parents will be liable to any capital gains achieved by their children in this field.

62. Mr. Kershaw

asked the Chancellor of the Exchequer what proposals he has to exempt owner-occupiers of land from the provisions of the proposed capital gains tax; and whether he will make a statement.

65. Mr. Biffen

asked the Chancellor of the Exchequer if, when framing his proposed capital gains tax, he will consider exemption in cases where property has to be realised as the result of compulsory purchase orders.

Mr. Callaghan

In my Answer of 8th December, I stated that in reforming the taxation system I was ready to consider proposals that representative bodies might care to put forward. These are now reaching the Board of Inland Revenue and I am considering them in the course of formulating my detailed proposals. Meantime, I have nothing to add to the Answer I have already given.

Mr. Mills

In thanking the Chancellor for answering the Question, may I ask him to look carefully at this problem as many of the people concerned are elderly folk, particularly in my constituency, and they have enough problems already without adding the problems of a capital gains tax?

Mr. Callaghan

I do not think that the problem of undated Government stock concerns elderly people in view of the Answer which I have given to the hon. Member on the previous Question. It is a far different problem.

Mr. Higgins

Would not the Chancellor agree, in regard to the first part of Question No. 51, that this is not something upon which he need spend any further thought? It is simply a question of saying that this will not be a capital tax but only a capital gains tax if it comes about. He must surely be in a position now to say that he will take into account the effect which changes in the value of money may have on assets. Therefore, he should now be able to assure the House that he will use some deflator to ensure that the change in the value of money is taken into account. Otherwise, the tax merely becomes a charter for inflation.

Mr. Callaghan

Despite the tempting nature of that question, I cannot answer it now. It would be introducing a wide and new principle in the whole of our taxation system.

Sir Knox Cunningham

Can the right hon. Gentleman say when he will be in a position to make a much fuller statement than the one he made on 8th December?

Mr. Callaghan

I shall certainly do so when the legislation is introduced into the House next year.

Mr. Grimond

When the Chancellor is considering the matter, will he bear in mind that it would be anomalous if gains on gilt-edged stock were taxable but gains on gambling were not?

Mr. Callaghan

I follow the point made by the right hon. Gentleman. By definition, a capital gain arises when an asset is disposed of. A football pool winning does not require the disposal of an asset.

Mr. Kershaw

In connection with Question No. 62, will the Chancellor realise the dilemma in which he is placing owner-occupiers of land, who are faced with the problem of whether they should value their holdings today as against a possible sale in the long-term future? The position is difficult both technically and financially. Will the right hon. Gentleman make a statement as soon as he possibly can?

Mr. Callaghan

A number of difficulties are being made which do not exist. The proposal for a capital gains tax was clearly included in the manifesto on which we fought the election. Everybody has known ever since the manifesto was published that there would be a capital gains tax. I have tried to meet the convenience mostly of hon. Members opposite by making a lengthy statement about the general structure of the tax and I do not think that it would be in the public interest to go further at present.

Mr. Maudling

Reverting to the question of the gilt-edged market, the right hon. Gentleman said that he was considering representations. Surely, he does not need any representations from anybody to realise the state of the gilt-edged market. Cannot he do something to clear up this important and urgent point?

Mr. Callaghan

I cannot add to the answer which I have already given.

Mr. Woodnutt

Question No. 44, which the Chancellor has also answered, is rather wider. In view of the fact that we are all quite clear that the purchasing value of the £ will drop during the term of office of the present Government, will he give an assurance that at least he will make provision to allow for this in his capital gains tax? I am not asking him to give exact details, but will he give an assurance that he will make allowance for this?

Mr. Callaghan

I seem to remember that in the last thirteen years, when I sat on the benches opposite, substantial capital gains were coupled with a dramatic fall in the value of the £.

Mr. Box

Does the Chancellor appreciate the intolerable burden that these uncertainties are placing upon trustees who have the responsibility for acting in the best interests of the beneficiaries of various trusts? Will he bear this very much in mind when considering whether he cannot bring forward a statement to remove these uncertainties on the gilt-edged position?

Mr. Callaghan

I do not think that there are uncertainties in this field—[Interruption.]—which are not inherent in a change of this nature in the taxation system in order to make our tax system more fair. Naturally, in a transitional period, there is bound to be a certain amount of uncertainty, but at least I hope now to introduce a system with the support of the House that will ensure that capital gains are taxed just as much as earnings of a wage earner.

Mr. Albu

Would not my right hon. Friend agree that there is no more uncertainty than exists from year to year between one Budget and the next if Chancellors of the Exchequer introduce changes in taxation? May I ask my right hon. Friend to do nothing to weaken the effect of this vary much overdue capital gains tax?

Mr. Callaghan indicated assent.