(1) Every person carrying on a trade or business, who, out of the receipts of the trade or business, makes payments for political purposes, shall, if required to do so by notice from an inspector, make and deliver to the inspector, within the time specified in the notice, a return of all such payments made during a year specified in the notice, giving the names and addresses of the persons to whom the payments were made and stating in each case the amount of the payment:
(2) This section shall apply to payments made at any time after 6th April, 1962.
(3) In this section "payments for political purposes" means payments, whether for a consideration or otherwise, for the purpose of promoting or opposing changes of law, including payments in support of or in opposition to a political party or candidates for a parliamentary election, but not including any payments to be returned under section 69 (returns as to election expenses) of the Representation of the People Act 1949.
(4) The Income Tax Acts, and in particular Part II of the Income Tax Act 1952, shall have effect as if this section were contained in the said Part II between sections 29 and 30.—[Mr. Callaghan.]
§ Brought up, and read the First time.1578
The Clause is concerned with power to obtain information as to payments for political purposes. Hon. Members will see that companies which carry on a trade or business
shall, if required to do so by notice from an inspector, make and deliver to the inspector, within the time specified in the notice, a return of all such payments made during a year specified in the notice, giving the names and addresses of the persons to whom the payments were made and stating in each case the amount of the payment.
As the Clause goes on to say, that information would not be asked for where the payment made to any person did not exceed £5, nor for
a year ending more than 3 years before the date of the service of the notice.
The Clause would, however, apply to payments
made at any time after 6th April, 1962.
There is then a definition of what is meant by "payments for political purposes".
§ The purpose of the Clause is to ensure that Income Tax is properly paid on payments made by a company for political purposes, because there is evidence that tax is not being paid on a number of these contributions, and to that extent the taxpayers are financing the payment by companies of their political contributions.
§ I emphasise that the Clause deals with public companies, and not with individuals who make payments in their individual capacities, because those who pay contributions to political parties in their individual capacities pay them out of taxed income, and that is the same for everybody whoever they may be. There can be no quibble about that, and I know of no demand or request that individual contributions made out of taxed income to political parties should be made known.
§ We are concerned with the companies. Individuals may continue to make their contributions secretly in any form they like. The land speculator will still be free to contribute to the coffers of the Conservative Party, and no one will ever know anything about it until his name appears in the Honours List.
§ The difference between individuals and organised bodies was recognised 50 years ago, in the case of the trade unions. For the last half century they have been required to make detailed returns of 1579 political expenditure, down to the last halfpenny. I have referred before in this Committee, in conjunction with some of my hon. Friends who are here this evening, to the very stringent requirements laid upon trade unions if they desire to enter into political activities, including the balloting of their members before they embark on any such activities. They have to set up a separate fund, distinct from their own trade union fund, and there is a detailed requirement that, year by year, they shall account to the Registrar-General of Friendly Societies for the way in which the money has been spent.
§ They account in detail. Anybody who sees their accounts knows this to be true. There has always been a discrimination, in that private companies have never had the obligation to make these returns in the same way that trade unions have. This difference was not very significant in the early days, but it has become significant within the last 15 years because of the concerted drive that has been made by one of the major political parties to secure contributions towards its funds, directly or indirectly, by public companies.
§ This has reached the proportions of a large-scale business. Tory Party touts are operating in all the major industrial centres of Britain. Their purpose is to call upon companies—and I shall have something further to say about that later—and seek contributions towards Tory Party funds.
§ Mr. Albert Evans (Islington, South-West)
I suppose that my hon. Friend is aware that the invitations that go out to firms are not restricted to public companies. Private companies and partnerships are also invited to make contributions to the funds of the Conservative Party. As I understand the Clause, such private firms are also covered.
§ Mr. Callaghan
That is true, but we are in the major sense concerned with the activities of public companies, which are operating on shareholders' money. That is the major group with which we are concerned, and the Clause endeavours to bring under scrutiny the payments made.
The taxation position is not wholly clear. The law is much more dubious than Conservative Party collectors seem 1580 to think. Mr. Harold Williams, writing in the South Wales Echo last week, quoted a Conservative Central Office spokesman as saying:If they"—Conservative company directors—think it is in the interests of the company to pay a subscription to an organisation, they are at liberty to do so.The Leader of the House, speaking to the Foreign Press Association—and I cannot imagine that it was very interested in this subject—said, referring to our Clause:It is not an altruistic wish for information. It is because they hope thereby to stop subscriptions to the Conservative Party.We had better get it clear at the beginning that the issue is not as simple as all this, and that it is very doubtful whether many companies have a right to contribute to the Conservative Party under their articles of association, because it is not in pursuance of their trade. The view expressed by the Liberal and Conservative spokesman on the South Wales Echo is so sweeping as to be utterly misleading.
We are indebted to the hon. and learned Member for Northwich (Mr. J. Foster) for telling us a lot about the law on this matter. I should like to read what he said. He applied several tests for deciding whether a company's contribution to a political party can or cannot be allowed for deduction of tax. He said:It must be wholly and exclusively laid out or expended for the purposes of the company's trade.The hon. and learned Member quoted the relevant section of the Act, and went on to say:It is, therefore, possible for a payment to be disallowed as a deduction on the grounds that it was not made wholly and exclusively for the purposes of a company's trade: such a situation could arise if the motives of the company in making a payment were to benefit the whole industry of which it was a member, and not to benefit the company itself.The hon. and learned Member then referred to the latest case in which this question arose—on which he did not go into detail—namely, Joseph L. Thompson, Shipbuilders v. Chamberlain, Inspector of Taxes.
Joseph L. Thompson made a contribution to the Economic League, a body which, in my view, is of direct benefit to the Conservative Party. The company claimed this contribution as a deduction 1581 for tax purposes from its profits. This was resisted, and the case went to the courts. The judge concluded:When the whole of the evidence is considered the conclusion is irresistible that the payments were made and applied for the purpose of the Economic League. Those purposes are not confined to the Company's trade; they extend not only to shipbuilding generally but to the industry generally, and even include national purposes. The purposes of the Economic League are not the purposes of the Company's trade.It should be clearly understood by everyone that contributions to the Economic League cannot be and should not be allowed as a deduction from a company's profits for tax purposes.
This brings me to my first example, and it is the biggest example that I shall give. I understand from a shareholder that the leading manufacturers in the cement industry contribute 2d. a ton to the Cement Makers' Federation. Since 1,400 million tons of cement are manufactured each year, an income of about £100,000 a year is so provided. I understand that out of this sum the Federation contributes £5,000 per annum to Aims of Industry and £5,000 per annum to British United Industrialists. If this has been going on since the last General Election—and I have no concern with the preceding period—those two organisations have benefited to the tune of £50,000 from the cement industry alone.
We all know the work of Aims of Industry, and I do not wish to focus on that organisation at the moment, but British United Industrialists is not so well known. This organisation is indistinguishable from the Tory Party. It is a front organisation, which refrains from publishing accounts of its receipts and expenditure. It claims exemption on the ground that it is a private company. No one knows what sums are paid into this private company, or to whom it pays them out, although it said, after the last General Election, that for the years up to 1959 no less than 95 per cent. of its revenue had gone to the Conservative and National Liberal Parties and 5 per cent. to Aims of Industry.
In view of the decision of Mr. Justice Ungoed-Thomas, to which I have referred, it seems highly doubtful whether contributions to British United Industrialists are allowable for tax 1582 purposes. It cannot be claimed that these payments, which go straight into the coffers of the Conservative Party, are wholly or exclusively laid out or expended for the purposes of the company's trade
During the last 10 years some company directors seem to have thought that they could drive a coach and horses through the 1952 Income Tax Act. That arose out of a misunderstanding following the Tate and Lyle case, and it is as well that the legal position should be clearly stated, in so far as it is clear at present. There is no reason that I know of why anyone should acquiesce in the Cement Makers' Federation's financing its private political convictions out of shareholders' funds. If it wants to do that it should pay for it itself.
There is even less reason why these payments should be subsidised by the general taxpayer. I would hazard a guess—it can be no more; but I am taking a line through the fact that it has paid out £25,000—that the cement industry has probably collected over £1 million for Tory Party funds. I therefore ask the Chief Secretary whether he can tell us whether subscriptions to British United Industrialists are allowable, or allowed, as deductions for tax purposes. What is the practice in relation to this?
I come to my second illustration, and that is Allied Ironfounders. This company does not seem to be sure whether it has paid any money to the Conservative Party or not. Some editions of the Evening News tonight say:Allied Ironfounders Ltd. this afternoon denied that they had informed the Conservative Party that they would make no more contributions to Tory funds … The spokesman would not confirm that Allied Ironfounders had been giving undisclosed sums to the Conservative Party … A spokesman at Conservative Central Office this afternoon had no comment to make on the matter.This disappeared from the later editions of the Evening News. As the company is not sure, perhaps I ought to remind Allied Ironfounders, as well as the Conservative Central Board of Finance, that the cheque was sent in October. There was then a dispute about where it ought to go and on 26th February the Conservative Central Board of Finance stated that in reply to a request from Allied Ironfounders £150 was 1583 being devoted as part of a contribution to Ealing, North, Conservative Association, and that raised that association's special fund to the grand total of £1,957 10s. I hope that there will not be any dubiety in the mind of Allied Ironfounders about whether it has been making any contribution or not.
Has this contribution been made for the purposes of the company's trade? What services does it expect to get for it? Or has it been made as a political contribution to the Conservative Party? It so happens that it has been sent to Ealing, North, I imagine because there is a subsidiary of Allied Iron-founders in the constituency.
§ Mr. Callaghan
I agree with my hon. Friend. I will give a list of other places where there are subsidiaries: Bilston, Coalbrookdale, Audenshaw, Manchester, Falkirk, Long Eton, Thornaby-on-Tees, Welwyn, Wellingborough, and Mill Hill. Do they all get a share of the "swag"? Did every constituency where there is a a subsidiary company of Allied Ironfounders get part of this contribution? If so, for what purpose? If it was for the purpose of the company's trade, if it expected some return for it, all the more reason why it should be made public.
I have said here before, and everyone knows, that the miners make a contribution for which I am grateful—it is not large—to my expenses. That is known, so people can judge, when I speak about the miners, to what extent I am speaking for the miners and using my independent judgment. It is not known to everybody, when the hon. Member for Ealing, North (Mr. Barter) speaks, for whom he is speaking. When applications for planning permission are put in by Allied Iron-founders, to what extent does it hope to get a return?
Let me read what was said by the hon. and learned Member for Northwich about this in deciding whether a particular payment is within the power of the company to make and is reasonably exclusive to carrying on the contributor's business. Is it made bona fide? Is it done for the benefit and to promote the prosperity of the contributing company? 1584 Now listen to this. The hon. and learned Member said in his commentary:Only if a company were to make an entirely voluntary subscription, with no expectations of any service in return, would any questions arise whether the subscription was in its powers".I should like to know about Allied Ironfounders. Did it make this subscription which, in the words of the hon. and learned Member, would be within its power, in order to get a service in return? If so, what was the service? Or did it make it as a general contribution to the Conservative Party as an entirely voluntary subscription, in which case the question arises whether it is empowered to do so? It is time that some of these issues were understood. It is not open to any company to make political subscriptions to the Conservative Party, the Communist Party, or the Labour Party just because the directors like to think that it would be a nice thing to do.
I turn to Fisons. I mention this firm only because it illustrates the last question which I was asking in relation to Allied Ironfounders. I suspect that Allied Ironfounders' cheque was split up among the subsidiary companies in a number of constituencies, but as the company cannot remember whether it paid any money at all it is no use asking whether it has gone to individual constituencies. Fisons is clearer about it. It has admitted that it has been its practice for the last nine years to pay amounts ranging from £50 to £250 per annum to local Conservative association offices in those constituencies in which the company or its subsidiary companies operates factories or branch offices. As Lord Netherthorpe said during a recent by-election, the total last year was £2,320.
These payments are made, he said, direct to the Conservative Party. Under what authority? By what right? Is it challengeable and are they allowed for Income Tax purposes? These are questions in which, in my view, we are getting very close to corruption. It is quite reasonable to ask that an answer should be given to the question whether these payments have been allowed for tax deduction purposes. It would be intolerable if the taxpayers, inadvertently or deliberately, were being asked to subsidise this kind of payment.
The chairman of Fisons, in his address, after he had been pressed about 1585 this by a shareholder who was at that time living in Kenya, said that he was getting continual requests to contribute to charitable, educational, political and other appeals. I think that here he has a real point. Frequently, these political contributions are so mixed up, and mixed in, with other payments to charitable, educational and other appeals that they are indistinguishable to inspectors of taxes or to anybody else. I ask the Chief Secretary: how do inspectors of taxes apply themselves to this part of their duties? The purpose of the Clause is to ensure that these payments are distinguishable where the inspector has reason to believe they are made, and, therefore, he can separate them out and ensure that no tax is deductible by the company in these cases.
When I say that they are all mixed in, I can quote an example which has now ceased to exist, but it will be a little light illustration, especially for some of my hon. Friends. The Southwestern Electricity Board was nationalised in 1948. For several years afterwards it continued to subscribe to what were euphemistically described as other bodies, outside bodies. The outside bodies were the Conservative Party and the board continued for some years to contribute to the Conservative Party.
This went on for eight years before one of the members of the board, who had been recently appointed, discovered it, and then it was so indefensible that it was immediately stopped. There is a need—and it is to this that the Clause is directed—to disentagle these political payments from other payments.
§ Mr. Stratton Mills (Belfast, North)
Is not it possible for an inspector of taxes to ask for items on a balance sheet to be explained? Is it not also possible for him to inspect the books of a company in detail?
§ Mr. Callaghan
That is so and it makes this Clause all the more necessary. If they have powers and have not exercised them, it is about time that specific powers were written into our legislation.
I come to one example in which tax can be avoided by companies which want to help the Conservative Party, namely, through the use of subsidised advertising. I quote one example, that of the Birming 1586 ham Conservative Diary and Year Book, whose advertising director is Mr. H. E. G. Harvey. In the middle of last year he wrote a letter—it has taken a long time to amass this information, but it has gradually come in. It was marked "Confidential" and addressed to "just a few of our special friends". That is rather peculiar wording, I must say. He asked them to advertise in the year book. He emphasised, of course, that it would not carry the name of the Conservative Party. I suppose that it was so unpopular that he did not want to put people off. The subsidy to the Conservative Party in Birmingham at the expense of the taxpayer is because ridiculously high rates are charged for advertising in this book.
A whole page advertisement in the Birmingham Diary and Year Book costs £125. There is at least one hon. Member from Birmingham sitting below the Bar of the House who could no doubt tell us what is the circulation of the book. I doubt whether it is very great, but, to enable him to make a comparison, I have found that the cost of a whole-page advertisement in T.V. Times, with 1,000 readers, is not anything like £125. It costs 2s. 8d. In the Radio Times it cost 3s. 3d., and in the Reader's Digest 2s. 1d. Those businessmen who advertise in the Birmingham Diary and Year Book as a cover for raising Conservative Party funds are not only using shareholders' money uneconomically and in a way that is to be deplored, but they are also being subsidised by the taxpayer, because advertising is allowed as a genuine deduction for tax purposes.
There is a firm of advertising practitioners which supports an hon. Member opposite. I have not given him notice and, therefore, I do not propose to mention his name. The firm has written to a number of other companies asking for support for the hon. Member. It says in its letter that he has been very active in the Lobbies and in Committee in getting amendments made to the Television Advertising Levy. [HON. MEMBERS: "Name him.'"] I am not naming the hon. Member. The company says that to set an example—and it asks others to follow its example—it proposes to contribute immediately a sum equivalent to 1587 10s. per employee per head to the funds of the Conservative Party. I do not believe the firm has any right to make this contribution and could be challenged by the shareholders. Even if it has, we ought to know what hidden subsidies are going to hon. Members opposite in order to influence them in doing their work in this House.
This is an illustration of where a company is itself taking the initiative in trying to get other companies to subscribe. What causes the greatest resentment, according to my correspondence, is the open touting which goes on by agents of the Conservative Party for funds. Recently, a director of a public company told me that his secretary was telephoned and asked for a business appointment for someone from a city 50 miles away. When the person arrived he flashed a letter, which was meant to impress, signed by Lord Poole. The purpose was to assure the directors of the company and others—it was not an individual, personal letter—that the Conservative Party would not forget its friends, promising to remember any assistance given, and asking for a donation.
§ Mr. Callaghan
The director asked whether he could keep the letter, but he was told that was not possible. When he intimated that he was averse to making such a contribution, the agent adopted an arrogant attitude and said that his company was almost alone in the district in not contributing. Hon. Members opposite sometimes pretend that secrecy is a means of protecting people against pressure from a Labour Government. I assure them that many companies think that the reverse is true, and that if they do not contribute they will be in trouble. I assure the Chief Secretary to the Treasury and other hon. Members that there is a growing number of companies which would welcome the need for disclosure, because it would enable them to resist the pressing demands made upon them by Conservative Party touts.
It is time the Conservative Party realised that British industry is not the handmaiden of the Tory Party. One of the advantages of bringing these matters into the open and getting this information 1588 disclosed is that it will enable companies to stand up against the pressure which is being exerted. I think that the Committee will be interested in some replies given to shareholders who are taking an increasing interest in this matter. I will give the replies of 10 companies which have assured their shareholders that it is their policy not to make political contributions directly or indirectly.
English and Overseas Investments Ltd., says:This company has never contributed towards the funds of any political party, and it is not this company's intention to do so.The Metal Box Company says:We do not make any direct contribution to a political party. So far as we are aware we do not contribute indirectly to any organisation which includes political activities amongst its objects.Mecca Ltd. says:I confirm that this company makes no contributions either directly or indirectly to any political party or organisation.The Reed Paper Group says:It is not the practice of the company to contribute to political party or associated organisations.Fine Spinners and Doublers Ltd. says:Your Board holds the view that in a company such as this with a large number of shareholders many political views must be represented and it would be wrong to make contributions to any party.Radiation Ltd. says much the same and Pye says:I know of no donations made by this company to any political organisation.Wolseley Ltd., Leicester, says:It is not the policy of the company directly to support any particular political parties.The Halifax Building Society says:The Society has made no contribution over the last few years to political funds nor to such groups as Aims of Industry and the Economic League.I think that its intentions are absolutely clear. It does not want, and does not intend, to contribute directly or indirectly; and I am sure that many other companies do not wish to do so.
I now give a list of 20 companies which refused to say whether they do so or not.
§ Mr. Stratton Mills
On a point of order. You will note, Sir Robert, that the new Clause deals specifically with 1589 notice to be served by an inspector of taxes about details of political contributions. The hon. Member is now advancing an argument, which would be a suitable argument for a Companies Bill or a Representation of the People Bill—[An HON. MEMBER: "Are you a shareholder?"]—that full publicity should be given for each of these contributions, which is an entirely different point from that in the new Clause.
§ The Deputy-Chairman (Sir Robert Grimston)
I find nothing out of order in the way that the hon. Member is developing his case for the new Clause.
§ Mr. Callaghan
If it will comfort the hon. Member, at the end of each paragraph I will say how it relates to the particular Clause, though that may be a little wearisome. I can assure him that I will keep in order.
English Electric has a capital of £33 million. Its answer to a request to say whether, in fact, it makes any payments is as follows:In view of the many thousands of our stockholders, it would be quite impossible to deal with detailed questions regarding the running of our business. Moreover, to make information available to one stockholder which was not available to all would be invidious.That, I think, is a most ingenuous reply. When I recall that it has at least one strong member of the Conservative Party sitting on its board and one who takes the Conservative Whip in the House of Lords, it seems to me that it has a special responsibility to "come clean" on matters of this sort.
International Distillers and Vintners, with a capital of £110 million, says that the information is confidential and cannot be disclosed. It, too, has a member of the board who takes the Whip in the House of Lords. Land Securities relies on the old formula that it is unable to give information to a single shareholder which is not available to all. Its chairman, Sir Harold Samuel, was knighted last year.
§ Mr. Callaghan
Charringtons, of course, has a former Member of this House on its board. It says that a few companies make donations of insubstantial amounts to local constituency parties but it gives no detail.
1590 I come to Courtaulds—and with Courtaulds, of course we have special connections in the House and in the other place. It says:It has always been the policy of the board not to authorise payments to political organisations. From time to time in the past small payments have been to both Aims of Industry and the Economic League.It all depends what one means by "small". Fisons' chairman, Lord Netherthorpe, thought that its contribution of £2,000 was small in relation to the capital of the company, which was £6 million to £7 million. I remind the chairman of Courtaulds that its capital is £97 million and that against this a sum of £100,000 is rather small, too.
Next, what about A.E.I.? Here we have Viscount Chandos and Sir Robert Renwick, who is chairman of British United Industrialists Ltd., the man who sets out to collect the money for the Tory Party. I ask the House to listen to this for a dubious reply. I thought that I would bring this out for itself:The Company subscribes to many organisations, such as chambers of commerce, employers' associations, trade associations, etc., which by their nature are concerned with political affairs, but which exist for the representation and protection of the interests of members or subscribers. Aims of Industry is among the organisations of this kind to which we subscribe, as we believe that its work helps in the protection of the shareholders' interests. The Company does not subscribe to any political party; this has, I believe, been the Board's policy since the inception of the Company: it certainly has been the policy for the past seventeen years of which I can speak with personal knowledge".I should like to know whether Sir Robert Renwick, chairman of British United Industrialists Ltd. sends a letter to Associated Electrical Industries, on which he sits as director, asking for a subscription and whether it is made, because if it is, this is one of the most disingenuous letters I have ever seen. The director and secretary says that the company subscribesto many organisations … concerned with political affairs".But this is the key question which is dodged—and I do not suppose that the inspector of taxes knows the answer either! I am sure that he has no idea what is happening in this case. It may well be the case, until Associated Electrical Industries tells us the full amount 1591 of these payments, that the taxpayer is at present subsidising contributions to the Conservative Party made by Associated Electrical Industries.
The Leyland Motor Corporation, of course, also has a former Tory Minister on its board. It says:There are, of course, nearly 70,000 shareholders, and if the directors felt that the interests of these shareholders were more fully protected by making a donation of any kind, then it would be their duty to consider seriously making any such payment, and it would be a matter entirely in the discretion of the directors whether or not to contribute in this way".If that is the reply to a shareholder, I can only say that one gets much better service if one belongs to a trade union, because no general secretary would get away with a reply like that—and if he did, the Registrar-General of Friendly Societies would want to know why. On Ranks Hovis McDougall Ltd. we have a former member of the Cabinet sitting on the board—Lord Tenby. This might almost be a Ministerial reply. I admit that he had a great deal of experience in making such replies but it is a splendid reply to the question, "Do you contribute to political parties?" It is:I am able to say"—this is by Viscount Tenby—that no payments of this sort are made unless the board or a committee of the board unanimously resolve that such payments are in the interests of the company and therefore also of the share and stockholders".This is supposed to be giving information to a shareholder who asks a specific question.
Imperial Tobacco says that it makes no direct contributions to political parties—we have to watch every word in these replies—but it does subscribe to various national organisations.
A shareholder has written to me about a number of companies of which he is a shareholder and to which he has written. I will summarise his reply, because I have not seen the original letters. I have seen the originals of the letters which I have quoted so far.F. W. Woolworth",says the shareholder.are very cagey and probably do give. Bass, Mitchell and Butler give when it is in the interest of the company to do so. Shell 1592 Transport and Trading Company wrote a long screed which, I think, boils down to the fact that they do give, but they are not going to tell me.Thomas Firth and John Brown—and here is a variation in the replies—say:I am sure you will appreciate that it is not ethical that details of the company's activities should be disclosed to any individual shareholder.There is a whole variety of replies, like those of Powell Duffryn, Great Universal Stores, Tadcaster Brewery who say, in effect "We cannot tell individuals. It would not be proper to give to one individual this information …" I want to remove that disability from them.
§ 8.45 p.m.
§ Mr. Lubbock
The hon. Gentleman mentioned Shell a moment ago. I happen to have here a letter from the secretary of Shell, in which he refers to a booklet entitled "Shell Grants". In that booklet it is stated that organisations with political aims are not given support by any Shell company.
§ Mr. Callaghan
I am ready to accept that. I prefaced what I had to say by saying that at this stage I have not seen the original of the letter. I am quoting what I am told by a shareholder. The shareholder says:Shell Transport and Trading Co. wrote a long screed which, I think, boils down to they do give, but they are not going to tell me.Hon. Members may have different information. If so, they can quite easily clear the matter up.
Ideal Building and Land Development said:It is not the practice of the directors to disclose details.Allnatt London Properties said:As a matter of policy the directors do not make the information you request available to any one shareholder.Guest, Keen and Nettlefolds failed to reply to an initial letter written by a shareholder asking, among other questions, what sum was contributed by the company to the Conservative Party, but, being persistent, the shareholder wrote again. He then had a letter saying:I am very sorry that we have not replied.It made a general reply, but specifically refused to give any information in response to the direct question: do you contribute to the Conservative Party? 1593 Austin Reed was unable to give information to one shareholder.
The British Motor Corporation's reply was as follows:Any donations or subscriptions agreed by the board are always made in the best interests of the Corporation and it would not serve those interests to make further comment.The shareholder then proposed that the company should circularise his resolution on this subject of political contributions. He had a very enlightening reply. The company said that it would be glad to supply him with a list of shareholders, and he could do it himself, but that it would cost him £275 and—on receipt of your remittance we will put the work in hand".If the resolution was to be proposed—I now quote from its letter:We should also require a remittance to cover the cost of printing and circulating the notice of the resolution and, if the resolution has to be despatched separately this would be in the region of £1,400.Needless to say, the shareholder took the matter no further, but he never got a straight reply.
Finally, a company I am asked not to name, but the information has been given to me by a director known to a number of hon. Members who disagrees with the present practice of subscriptions and has subsequently persuaded his colleagues to withdraw from it. The subscription list he found in his company was as follows: Aims of Industry, 100 guineas; Economic League, 100 guineas, a highly dubious contribution; it is very doubtful whether it had the power to make it; local Conservative association, 100 guineas—again, highly dubious, and it is very doubtful whether it had the power to make it: Conservative Central Board of Finance, 100 guineas; two local "good works" organisations run by Conservative women, 22 guineas; campaign fund for no purpose other than to give this fund to the Conservative Party, £250—total £700.
§ Mr. Callaghan
Because the director has asked me not to, and I do not propose to do so. I have given hon. Members enough names this afternoon for my bona fides not to be called in question on this. This is the only company whose 1594 name I am not giving. I do not intend to give it, because there are plenty of people who need protection.
I think that the Committee will be amused finally to hear of a conversation which is reputed to have gone on in the board room of a company. One of my correspondents tells me that it ran like this, on a proposal by a director that a contribution should be made to the Conservative Party:Deaf director: I did not hear what this director is proposing.Chairman: He says that you should pay the subscription to the Conservative Party yourself.Deaf director: But I do.Chairman: This is the firm's subscription and he suggests that you might pay your share of it directDeaf director: But if we did it that way, I should have to pay the tax on it.I think that this is typical of the conversations which go on in a great many board rooms today. I believe that the taxpayers are subsidising the Conservative Party to the tune of hundreds of thousands of pounds over the life of a Parliament, money that should be paid by the directors themselves, if they have the authority to do so, but which is not and which is now paid partly by the Chancellor of the Exchequer.
There is a need to protect those companies and shareholders who wish to resist the strong-arm tactics of the Conservative Central Office, of which I have given some illustrations tonight. The inspectors of taxes should be armed with greater powers to enable them to obtain this information where they think that this sort of thing is going on and to disallow payment where it is being done in a way not susceptible to advancing the interests of the company.
I consider that it is impudence now to suggest that to support the Conservative Party is to support the interests of a company's trade. How can anyone suggest such a thing when we have had three years of stop-go? How can any director believe that he is advancing the best interests of his company to return to power a Government who have a stop-go after every General Election?
This is not a legal matter. We are verging on the edge of the political, because I suggest that it is more in the director's interest to support the Labour 1595 Party—with our endeavours, through an incomes policy and other means, to get rid of stop-go—than to have this lot in power. I am not suggesting that he would be right to finance the Labour Party because of this, but I suggest, equally, that it is wrong to support the Conservative Party, probably being ultra vires in doing so.
In moving the proposed Clause I have said sufficient to show that there is probably a need, in addition to the Clause, for other steps to be taken to revise company law procedure so as to make publication to shareholders a normal matter. When the Leader of the House says that we are bringing up this matter because we want to stop subscriptions to the Conservative Party, the answer is not that at all. These subscriptions, when made, should be made public. No one should be able to deny a shareholder the right to know what is being done in his name. They should be made in such circumstances that the inspectors of taxes can determine whether or not they are in the interests of the company's trade, and, if not, they should be disallowed.
§ Mr. Angus Maude (Stratford-on-Avon)
The comparative moderation with which the hon. Member for Cardiff, South-East (Mr. Callaghan) moved the proposed Clause has given a certain spurious air of responsibility to what was a purely political speech. If there should be any question among hon. Members opposite as to whether it was a purely political exercise, two things should clearly prove it.
First, the hon. Member admitted that there was no need for this Clause at all. He said that power already exists and that the inspector of taxes is already able to ask for this information if he needs it. If this is so, why does the hon. Gentleman, backed by a considerable and well organised campaign of muck-raking and trouble stirring—[HON. MEMBERS: "Withdraw."]—I do not in the least wish to withdraw that remark.
What the hon. Member for Cardiff, South-East has been doing has been deliberately to organise a campaign designed to cause trouble to those companies which genuinely believe that it is in their interests to make political 1596 contributions. He has done that in the hope that the shareholders of those companies will, by continually asking questions and writing letters, frighten the directors out of doing what they believe to be their duty. This is, therefore, a purely political exercise. The hon. Member admitted that the Clause is unnecessary and that powers already exist.
Secondly, this exercise has been undertaken in default of any economic or financial policy on the part of the Opposition. It is one of a long series of gimmicks and stunts which we have come to expect from them.
I now turn to one or two points in the hon. Member's speech—one of, I thought, considerable seriousness, because at one point he said that this was not simply a matter of contributions or, indeed, of Income Tax laws; he said that it was coming perilously near to corruption—[HON. MEMBERS: Hear, hear."]—I am interested to know that the hon. Gentleman and his hon. Friends consider that that was a helpful and reasonable contribution to the debate—
§ Mr. Maude
—so perhaps, it might be well if we were to get this quite clear for the record. On 7th December, 1949, the then Attorney-General—Sir Hartley Shawcross, as he was—said:So far as the electoral law is concerned, private citizens are entitled to make such donations to political funds as they think proper. This right is enjoyed by them both individually and collectively, thus, subject to the rules of their own constitution and of the general law, corporate organisations such as industrial concerns, the co-operative societies or trade unions, whether of employers or employed, are entitled to make contributions to party funds whether secretly or publicly, as in the two cases put to me.Later, he said:There is nothing whatever to prevent anybody, any hon. Members, any trade unions, any industrial companies, making subscriptions to political funds of any party which they choose. That is perfectly legal; it is legal now, and would be legal even in the middle of an election. That money goes into the bank. So long as it remains in the bank, it does not have the slightest effect on the conduct of the election. When it is taken out of the bank by the political party concerned and devoted to expenditure on propaganda calculated to promote one candidature or disparage another, then it comes within the scope 1597 of the statute, but nothing I have said and nothing that the statute says in any way restricts contributions by individuals or corporate bodies to political funds."—[OFFICIAL REPORT, 7th December, 1949; Vol. 470, c. 1889–97.]
§ Mr. G. R. Mitchison (Kettering)
Perhaps the hon. Member will allow me to intervene for a moment. Sir Hartley Shawcross was talking about electoral law. We are talking about Income Tax, and whether the taxpayer should be obliged, by these admissible deductions, to contribute to these political funds. Moreover, for this is a question of whether it is within the powers of the company or not, the statement was not made in that regard, and it cannot be judged without looking at the memorandum and the articles of the company in question.
§ Mr. Maude
I was dealing with the allegation of the hon. Member for Cardiff, South-East that what he had been describing came, I think he said, close to corruption—[Interruption.]—Hon. Members opposite are making my point for me. It is absolutely impossible to reconcile that ruling of the former learned Attorney-General—which, I agree, was in respect of electoral law—with the suggesion that there is something corrupt about companies making contributions to political funds.
Were it not for the necessity of the Opposition to carry out a political exercise like this, it would never have occurred to them particularly, and if there had not been a General Election imminent they would not have done that. It would never have occurred to them to attempt to suggest that there was justification for the hon. Member to say—
§ Mr. Maude
No. I do not want to detain the Committee too long. I have already given way once, and the hon. Member gave way once. I really think that there will be more time for the hon. Gentleman to represent his Liberal Party to the electorate.
I want to turn to the Clause itself and I shall have some general observations to make after that. In moving the Clause the hon. Member for Cardiff, South-East said that he was concerned only with industrial companies, but that 1598 is not what the Clause says. The words are:Every person carrying on a trade or business …The hon. Member and his hon. Friends might reflect a little carefully about the implications of those words because they are extraordinarily dangerous and suggestive.
"Every person carrying on trade or business" is the small shopkeeper—[HON. MEMBERS: "No."]—yes it is. This is the professional man, this is the jobbing gardener, and if we are to start on the slippery slope of trying to force him to disclose his political subscriptions and affiliations, I hope that hon. Members opposite realise precisely what it is that they are trying to suggest.
§ Mr. Callaghan
What we are suggesting is that where a trader claims this as a deduction he should be asked to prove it.
§ Mr. Maude
Hon. Members opposite must make up their minds who is conducting this case. I will give way to one of them but not to two alternately.
Subsection (3) of the proposed new Clause says:In this section 'payments for political purposes' means payments, whether for a consideration or otherwise, for the purpose of promoting or opposing changes of law, including payments in support of or in opposition to a political party or candidates for a parliamentary election …This is the most extraordinary piece of definition that I have ever heard.
I imagine that it would bring within the purview of the Clause anybody who made a subscription to a campaign for abolishing capital punishment, to a campaign for education, to the A.A. or the R.A.C. or anything that one would like to mention. [An HON. MEMBER: "So what?"] I will tell the hon. Member so what. It is because this is a deliberate first wedge driven into the whole democratic principle of our society. [An HON. MEMBER: "Go back to Australia."] Nothing more gratifies me or proves my case than the unthinking laughter of hon. 1599 Members opposite who have failed entirely to understand what are the implications of the election gimmick which their leaders have thought up.
Let us consider some of the results which might follow. The hon. Member for Cardiff, South-East said in a rather self-righteous sort of way that there is one law for the rich and one for the poor. The trade unions and the friendly societies have to follow the one, and industrial companies have to follow the other. There is a very good reason for this and it is as well that hon. Members should understand it.
It is perfectly true that a member of a trade union is entitled to contract out of payment of a political levy. The point is that in certain occupations he may very well be compelled to be a member of a trade union if he is to have a job at all, or a worth-while job. This is not so in the case of the shareholder, if he wants to question his directors and force them, in the last resort, to answer, he has the means of doing so at a meeting. Shareholders are not obliged to accept the first letter they receive from a director. They can go to a meeting and, if enough of them go and make a row, they have a perfectly well known means of redress open to them. Ultimately, if they do not like the decision which other shareholders take or which the directors take, they can sell their shares. The ordinary workman, on the other hand, cannot leave a trade union which is making a contribution under the political levy.
There would be some justification for this nonsense if the other parties were at all forthcoming in the breakdown of their political donations and subscriptions. In fact, they are not. Let there be no mistake about it. It is the disclosure of political affiliations by people who may not want to disclose them which is at stake here. Every individual in the country should realise that this is what is at stake. If we are once to assume that this kind of poking and prying into political affiliations—
§ The Deputy-Chairman
If the hon. Member who has the Floor does not give 1600 way, the hon. Member for Craigton must not persist.
§ Mr. Maude
I have given way several times and I do not want to take much longer. I wish to conclude with one or two general observations about the propriety or otherwise of companies making contributions to semi-political or political organisations.
The hon. Member for Cardiff, South-East said that the Tory Party had better realise that British industry is no longer its handmaiden. I thought that an interesting phrase because it is usually alleged that industrialists are our masters, and it is a little difficult to see how one can think of them as being simultaneously both our masters and our handmaiden. The hon. Gentleman then proceeded, as I understood him—it was a very interesting point—to say that a large and increasing number of companies do not want to contribute to the Conservative Party at all, which is not what most hon. Members have been saying. The hon. Gentleman wants to make it more difficult, obviously, for those who do.
§ Mr. Maude
Yes, of course he does. He said so explicitly at one point, and he implied it over and over again throughout his speech.
I have said already, and it cannot be denied, that shareholders can, in the last resort, force their directors to disclose what shareholders want them to disclose. [HON. MEMBERS: "How?"] They can get rid of their directors, if they do not like what is done. [HON. MEMBERS: "How?"] If hon. Members do not know that, they do not know anything at all. I have explained that, if shareholders are dissatisfied, they can, in individual cases, sell their own shares and buy shares in another company which subscribes to the Labour Party or to no party at all.
It is too ingenuous of hon. Members opposite to pretend that they know of no particularly good reason connected with business and trade for companies in this country to contribute to funds opposed to the nationalisation of their industries. The situation is quite obvious, and, after the speech this evening from that Dispatch Box, it must 1601 be more obvious than ever. Plainly, it is in the interest of companies in many industries to do everything they can to ensure that the Government of this country does not fall into the hands of right hon. and hon. Members opposite, not merely because they are asking for something very like a blank cheque to nationalise any industry which falls under their eye—[HON. MEMBERS: "Oh."]—if hon. Members will read tomorrow the concluding words of the speech of the right hon. Member for Belper (Mr. G. Brown), they will see exactly how accurate was my description of their desire. But not only that, and much more important, the hon. Member for Cardiff, South-East suggested that there was no good reason why any firm should want the country to be governed by this party rather than that. There are few companies, few boards of directors and few shareholders in this country who do not remember the results and the experience of being governed by the Labour Party from 1945 to 1951, and that in itself is a justification.
§ Mr. Walter Monslow (Barrow-in-Furness)
Is that why the hon. Member went to Australia? He should read again what he said then about the Tories.
§ Mr. Maude
I know that hon. Members opposite do not like this, but they had better listen. I come to the doubtful relevance of the hon. Gentleman's references in trying to drag this within the umbrella of the Income Tax. The words he used were, I think, that subscriptions were being subsidised by the taxpayer. That is the most arrant nonsense and indicates, as that sort of phraseology always does, the attitude of hon. Members opposite. Money not taken in tax is not the property of the Chancellor of the Exchequer and never has been.
We hear from hon. Members opposite—and this has been clear all through every Finance Bill debate—the idea that if taxes are reduced the Chancellor is giving something away. They appear to think that the money of individuals and companies is automatically the property—and certainly in the case of the Labour Government they did their best to make it so—of the State. It is high time that hon. Members opposite learned that individuals and companies do not regard their own property as something on which 1602 the State has a lien as soon as a Labour Government is elected. Despite political gimmicks of this kind they can be assured that this time there is not going to be a Labour Government.
§ Mr. Dingle Foot (Ipswich)
The Committee has just listened to a speech which was little short of fantastic. Not only did the hon. Member for Stratford-on-Avon (Mr. Maude) fail to understand the new Clause but he also failed to understand at every point the implications of his own argument, if indeed argument it could be called.
He started by asking what was the purpose of this new Clause. I would have thought that to anybody who listened to the speech of my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) the purpose of the Clause was quite obvious. Its purpose is to call attention to the considerable public scandal which affects the standards of our public life.
§ Mr. Stratton Mills
Surely the purpose of the speech of the hon. Member for Cardiff, South-East (Mr. Callaghan) was this: if you cannot beat them at the ballot box, stop the money.
§ Mr. Foot
The answer to the hon. Member is that we shall beat the party opposite in the ballot box very soon—and in Northern Ireland. Both in the United Kingdom and in Northern Ireland we shall deal with secret payments. The hon. Member for Stratford-on-Avon went on to quote opinions from Sir Hartley Shawcross in 1949. It was apparent from the extract that he read that Sir Hartley Shawcross was dealing simply with election law for the purposes of which subsidies may be given in support of a particular candidate in a particular constituency. He was not in the least concerned with tax law. He was not concerned with the position of a company vis-à-vis its shareholders.
Then the hon. Gentleman went on to refer to the new Clause. He gave us to understand that if we passed it we should be interfering with the freedom of small shopkeepers and other similar individuals. The new Clause does not interfere with anyone's freedom. If it becomes law every citizen will be just as free as he is now to make any subscription to any political body out of his taxed income. 1603 All that the new Clause does is to make sure that when he files his tax return, if he claims to deduct a payment of this kind, it is shown.
Then the hon. Gentleman spoke about the position of trade unions. Their position is perfectly clear and has been clear ever since 1913. Before a trade union can give any money for any political purpose, there has to be a resolution of the union and a vote in favour of the majority of the members. Only a month ago, under the Ten Minutes Rule procedure, I introduced a Bill to put companies in precisely the same position as trade unions—no better and no worse. What happened? Although it was a Private Member's Bill, and although there was no question of the Whips being on, I did not receive a single vote in support of it from the party opposite. Hon. Members opposite voted in favour of preserving the privileged position of companies compared with trade unions.
This is a very serious matter. What we on this side object to is not that directors should decide to give money to the Conservative Party or any other cause which commends itself to them. We say that what they give should be their own money. Do hon. Members opposite really think it right that the directors of any company should be entitled to give away the shareholders' money without their consent and even without their knowledge? That is the issue which I sought to raise in a Bill a month ago and which this new Clause seeks to raise tonight.
There are three forms of contribution. First, there is the contribution to the specific campaign. That was the sort of contribution which was concerned in the sugar case of Mr. Cube. In that case the proposal had been made that the Government would take over the assets of the company. It was held that it was legitimate for the company to subscribe to a particular campaign in order to resist that legislative proposal. That is one category.
There is the second category when one is dealing with the Economic League, Aims of Industry, or some other similar organisation. If an organisation exists to conduct a particular campaign that is rather more doubtful. A case was decided recently by Mr. Justice Ungoed- 1604 Thomas in which he held that it was not legitimate for tax purposes to make a contribution to an organisation which, in turn, would conduct a specific political campaign.
There is the third category which is the one with which we are chiefly concerned tonight, and that is contributions made direct to a political party. My hon. Friend the Member for Cardiff, South-East referred—and there have been a good many references in connection with this controversy in the Press and elsewhere—to the opinion given to Aims of Industry by the hon. and learned Member for Northwich (Sir J. Foster). Its purpose was to reassure those who were nervous about these gifts for political purposes. The hon. and learned Member wanted to reassure shareholders, and particularly directors, that they would remain within the law if they contributed to specific campaigns run by Aims of Industry. That was the purpose of the opinion.
It should, however, be made clear that the opinion given by the hon. and learned Member does not refer in any way to the third category: that is, contributions direct to the funds of a political party. That is quite different. I know that the excuse is made by Lord Netherthorpe and others that their companies are opposed to nationalisation and that the Conservative Party can be relied upon to resist further measures of nationalisation.
The fallacy of that argument is that nationalisation is only one political issue among many. It is not one of the major political issues. [HON. MEMBERS: "Oh."] That is a matter of opinion. Hon. Members opposite would not, however, dispute that the Conservative Party is concerned with a great many other issues besides nationalisation. There is its foreign policy, its policy in connection with the Commonwealth and its trade and its economic policy. Those are all matters with which a political party is concerned. When money is subscribed to a political party, it is not simply for one single purpose. It goes to support all the policies which that party supports. I suggest that contributions of this kind are, in the first place, of very doubtful legality.
My hon. Friend the Member for Cardiff, South-East referred to a passage 1605 in the opinion of the hon. and learned Member for Northwich when he said:The test of whether a particular payment is within the powers of a company is laid down in the case of Re: Lee Behrens & Co. Ltd.and he gives the reference, by Mr. Justice Eve. I pause there to say that that case had nothing whatever to do with political contributions. It was a case about the payment of an annuity to, I think, the widow of one of the directors. The hon. and learned Member goes on to say:Is a payment reasonably incidental to the carrying on of a contributor's business? Is it made bona fide? Is it done for the benefit and to promote the prosperity of the contributing company?He suggests, I have no doubt correctly, that to be lawful a gift must satisfy all those conditions.
This issue about contributions to a political party direct has never yet been tried out as far as I know in any court, but I suggest that there are at least two possibilities. It may well be—indeed, it is more than a possibility; it is extremely probable—that contributions direct to a political party would be held to be not deductible for tax purposes. Secondly, however, it might depend upon a company's memorandum, but it might well be held in any particular case that such contributions are either ultra vires the company or ultra vires the directors. It needs to be generally known that in that event the directors themselves could be held personally liable for these payments.
Those are the issues with which we are concerned tonight. It has emerged during the last few months, what very few people realised before—at least, few people on this side of the Committee or among the general public—that the party opposite largely subsists and carries on its operations on secret funds given without the knowledge of the persons to whom those moneys belong.
§ Mr. William Clark (Nottingham, South)
I followed with great interest the argument of the hon. Member for Cardiff, South-East (Mr. Callaghan). He does not seem to have read his OFFICIAL REPORTS. He has not, I imagine, referred to the debate on 25th June, 1963, when my right hon. Friend the Chief Secretary dealt with the specific point of the new Clause, saying:It follows that no allowance is due, in computing profits, for payments for political purposes such as contributions to political 1606 or party funds or electoral expenses."—[OFFICIAL REPORT, 25th June, 1963; Vol. 679, c. 1286.]I should have thought that had the hon. Gentleman done some homework on this there would have been no point in moving the Clause. I can only think that his reason for moving it is to air the view that the Labour Party is now the champion of the shareholders and to do a little electioneering.
What is asked under the Clause is that a return shall be made to the inspector of taxes. It does not say why. Reference to the 1963 debate will show that these expenses are not allowable for tax purposes. The Clause does not say why there should be a return to the inspector of taxes. It also does not say that the inspector should not ask everybody. Does it mean that the inspector will be directed as to from whom he should request the information? The Clause is being seriously put forward by the Labour Party and hon. Members opposite should have thought out the implications. I also do not think that anybody on this side of the Committee or many hon. Members opposite would altogether agree with the retrospection in the Clause.
The hon. Member for Cardiff, South-East indicated that a private individual was not affected by the Clause. We need not argue the wording of the Clause, because under that wording a private individual would be affected. To be fair, the hon. Member intimated that a private individual would not be affected, and presumably a partnership or a director-controlled company would not be affected because it is the money of the people running the business and not of the taxpayer. The hon. Member for Cardiff, South-East should withdraw his accusation that the Tory Party is being partially subsidised by the taxpayer. He knows that if a contribution is made to any political party, it is not allowed for tax purposes, and he also knows that the taxpayer does not come into it.
This leaves us in the position that we are dealing only with public companies. We have to be careful about realising what a "payment" is. The hon. Member for Cardiff, South-East mentioned advertising in local magazines. I should not think that it is only Conservative constituency organisations which have 1607 monthly or quarterly magazines. Consequently, I should not think that it would be a very easy job for any inspector to say whether a contribution to a magazine of £10, £20, £50 or £100 was good or bad advertising for the organisation.
If we are thinking purely of the interests of the shareholders of public companies, why should we restrict this to political advertising? What about charitable advertising and advertising in church magazines? If we are to get into the sphere where we give the Inland Revenue such a power, we must think out a Clause much more carefully than the hon. Member for Cardiff, South-East has apparently done.
§ Mr. Stratton Mills
If the argument were accepted, power would have to be given to the inspector of taxes to consider whether any particular advertisement was justified by the return, which would be an excessive power.
§ Mr. Clark
I had intended to deal with that point later.
Let us take a public company and the rights of shareholders in such a company. Let us see what a shareholder wants from the directors of a public company. If he invests £100, he knows what return he will get on it. Let us assume that his return is 5½ per cent. I should have thought that, being a shareholder, he would leave the control of the company to the directors. That is what happens with 99 per cent. of shareholders. What a shareholder wants is not only a return on his investment in a company, but that the company should be managed correctly and economically, and that the fall in the value of the £ is compensated for by an increase in the capital value of his shares.
I am not talking about making huge capital gains. I am talking about the average shareholder. All that he wants is a reasonable return on his investment, and to keep in front of any fall in the value of the £. If a director of a company gives a shareholder what he wants, I should have thought that he had carried out his duty to him.
§ The Clause does not protect shareholders at all. Hon. Members who have studied it will realise that that is so. Presumably the hon. Gentleman is not particularly wedded to the wording of the new Clause. Its purpose is to show that the Labour Party is the champion of every conceivable person in the country, including those whom it has loathed in the past, the so-called capitalist who owns shares. The party opposite is now the champion even of shareholders.
§ But if one accepts that shareholders must have the right to interfere in the management of companies, as my hon. Friend the Member for Belfast, North (Mr. Stratton Mills) said, it means that if there is prestige advertising by a public company, a shareholder will be able to kick up a fuss and question the directors on the matter. What hon. Gentlemen opposite forget is that a shareholder has many rights. If he is prepared to go to the annual general meeting of his company, he can kick up a fuss about any conceivable thing. [HON. MEMBERS: "No."] It is no good hon. Gentlemen opposite saying "No."
§ If we accept the premise that a shareholder in a public company is interested in a return on his investments, plus the capital value of his investments remaining static, or perhaps increasing, I should have thought that it was in his interests to make certain that the directors, who are his agents, did not let the assets of the company be nationalised by any political party. That is one thing which we have to get clear on the question whether directors of public companies are entitled, either morally or legally, to invest in, or to make contributions to, organisations such as Aims of Industry.
§ Let us assume that a small shareholder invests in a company which is nationalised. Instead of getting a stake in the equity capital of that particular industry, all that he gets is fixed interest bearing stock—Daltons. I would not have thought that that was the sort of thing which shareholders wanted.
§ I know that this is something to which hon. Gentlemen opposite do not like to listen, and which they will not admit. There are more than 4 million small investors in this country. They have a 1609 vital interest to see that no political party nationalises the industries in which they have invested and changes their equity capital into fixed interest bearing stock, because when that happens their investment either remains static or falls in value unless the Government manipulate the interest structure of the market—something which, between 1945 and 1951, the party opposite found was not a runner.
§ I should have thought that after the song and dance made about the Clause we would have been given a tremendously long list of all the wicked industrialists who were supporting the Tory Party. The hon. Member for Cardiff, South-East read out a list of 10, 12, or 15 firms who would not say whether or not they contributed. I should not have thought that this was the rôle of a so-called Shadow Chancellor. I should have thought that it would be better for him to spend his weekends doing a little solid work on economic and financial matters which might concern the party opposite if, in the unlikely event, it was returned to power.
§ In referring to these 12 or 15 firms, there was no mention of the co-operative societies. The hon. Member must be fair. He cannot have two rules. He says that private industry must not make these contributions. Is anybody suggesting that co-operative societies do not also make contributions?
§ Mr. A. E. Oram (East Ham, South)
Surely the hon. Member understands that what is at stake in this Clause is the question whether or not shareholders should know what contributions are being made. I can assure him that all the political expenditure of the co-operative societies is authorised by the shareholders, who are fully acquainted with what goes on.
§ Mr. Clark
I am sure that the hon. Member is trying to be helpful. I thought I said earlier that the Clause does not help shareholders at all, and that we are really talking about the spirit behind the wording. I am not arguing that the Clause helps shareholders; it cannot possibly help them, because the information asked for is presumably only a matter between the taxpayer and the inspector. As I have said, this information is already in the possession of the taxpayer. We must keep to the spirit of what we are discussing, 1610 and we should not try to say that the Clause does this, that or the other. We all know that the Clause, as drafted, is utter nonsense.
One extremely serious matter has come out of the debate, namely, the inference or innuendo behind all this talk about private companies giving money to various organisations—whether direct to Conservative associations or to Aims of Industry. The innuendo in the speech of the hon. Member for Cardiff, South-East is that some sort of influence is being exercised by these firms who may or may not contribute to these organisations.
I should have thought that it would be much more honest for the party opposite not to use the cloak of the privilege of this Committee to make accusations and innuendos as to the corruption that is going on in private industry. Directors of public companies have a duty to protect their shareholders according to their lights and according to their way of running the company. It seems extraordinary that most industrialists and investors—and most Labour supporters—do not like nationalisation. I cannot see why directors of public companies who support Aims of Industry, which is fighting nationalisation, should be criticised.
If a shareholder does not like the management of a particular company, and at the company's annual general meeting he cannot convince the other shareholders of his views, he can sell his shares. It is absolutely vital to remember this when comparing the legal position of shareholders with that of trade unionists. Many trade unionists have to belong to a trade union in order to keep their jobs. They can, if they wish, contract out of the political levy because they do not like their union subscribing to the Labour Party, but they cannot opt out of their trade union without risking being out of work and this is something to which members of the party opposite should pay more attention.
Something happened the other day which may have been sparked off by the speech of the hon. Member for Cardiff, South-East. The Birmingham Corporation has a superannuation fund with about £3½ million invested in equities. This Socialist-controlled Cor 1611 poration decided to write to the stockbroker to the Corporation asking which of the 1,500 companies whose shares were involved subscribed to political funds. This is something else we have to think about more deeply. We have to remember that the Birmingham Corporation superannuation fund is voluntary to employees—[HON. MEMBERS: "No."]—voluntary contributions are made by 15,000 employees of the Birmingham Corporation. I should like to know—perhaps with his financial acumen and knowledge the hon. Member for Cardiff, South-East can tell us; he has done so much research that he might have done a little more in Birmingham—whether the Birmingham Corporation asked the 15,000 employees, whose money is in the fund, whether they were interested in whether a political contribution was being made by the 1,500 firms involved.
The Birmingham Corporation runs its superannuation scheme on behalf of 15,000 employees who may or may not be affiliated to a political party. There were 1,500 letters which had to be sent out for which someone had to pay. Did the cost of this political investigation by the Birmingham Corporation come out of the superannuation fund or from the funds of the ratepayers of the City of Birmingham? This is something that we have to find out.
§ Mr. Clark
What I cannot understand, is why, when a problem has been posed and half a question asked, the Opposition will never listen to the full question. I am asking, did the money come out of the superannuation fund or from the funds of the ratepayers? It must have come from someone. Secondly, if the answer came back that some of the firms did contribute to political funds, would the Birmingham Corporation swop its equities for gilt-edged? It must be honest about this. I will now give way to the hon. Member.
§ 9.45 p.m.
§ Mr. Denis Howell
I am grateful to the hon. Member for giving way. The point I put to him is that the chairman 1612 of the finance committee made it very clear that the purpose of seeking the information was to get knowledge. I put it to the hon. Member that five minutes ago the cardinal point of his case was that if the shareholders did not like what the directors did with their money they could withdraw their investment. I ask him if it is not a little odd that he now objects to Birmingham Corporation even finding the information.
§ Mr. Clark
This is typical Socialistic philosophy. When hon. Members opposite are asked a direct question they ignore the question and put another question which has nothing to do with the case. If Birmingham Corporation wants information, why does it not get information on the money which is its own and not on money which belongs to 15,000 employees?
§ Mr. Clark
The hon. Member may think that it belongs to Birmingham Corporation, but I am sufficiently old-fashioned to think that Birmingham Corporation, whatever the structure, is merely the agent for 15,000 employees. The Birmingham Post was absolutely right in dealing with this episode in its editorial on 17th June when it said that this Birmingham effort was electioneering. I suggest that, through the hon. Member for Cardiff, South-East, Labour is again attacking a windmill in order to draw attention away from its lack of policy. I hope that the Committee will reject the Clause.
§ Mr. Roy Jenkins (Birmingham, Stechford)
The debate on this new Clause seems to have a very odd effect on hon. Members opposite. I am torn in my mind as to which I find the more depressing, the spectacle of the hon. Member for Nottingham, South (Mr. W. Clark) trying to speak above his intellectual level, or the spectacle of the hon. Member for Stratford-on-Avon (Mr. Maude) trying to speak below his, which is exactly what we have heard in this debate so far. The hon. Member for Stratford-on-Avon, for whom I have a great admiration, has one virtue. When he is arguing a really unconvincing case he makes it quite clear that he knows it is unconvincing. He made that absolutely clear in his speech.
1613 In common with the hon. Member for Nottingham, South he made a point that there should be a difference between trade unions and companies in this matter for one overwhelming reason. That apparently was that anyone can sell his shares in a company but no one can contract out of a trade union. As this provision in trade union law dates, with a certain interruption which has been pointed out by my hon. and learned Friend the Member for Ipswich (Mr. D. Foot), from 1913, I should be interested to hear in which occupations the hon. Member for Stratford-on-Avon or the hon. Member for Nottingham, South thinks that membership of a trade union was compulsory in 1913 in order to secure a job. If not, it would be difficult to argue that this fundamental difference in the law should have been made in 1913.
The hon. Member for Nottingham, South had a great deal to say about the activities of Birmingham Corporation in this matter. As a Member for the City of Birmingham I am extremely happy to comment on this. Reading from a Birmingham local newspaper, the hon. Member quoted almost verbatim in the course of his arguments, but I, reading another Birmingham newspaper, understood that the hon. Member for Birmingham, Selly Oak (Mr. Gurden) had announced that with the other Birmingham Conservative M.P.s he would intervene in force in this debate to attack the Birmingham Corporation. I am sorry to say that he thought—I believe mistakenly—that his case would be better handled by the hon. Member for Nottingham, South.
§ Mr. Harold Gurden (Birmingham, Selly Oak)
I am grateful to the hon. Member for intervening in that way because it gives me an opportunity to intervene, too. I was quite ready to do this, and I had no idea that my hon. Friend the Member for Nottingham, South (Mr. W. Clark) was about to speak on the subject. In fact, he did it very well. As far as the intellectual level is concerned, the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) has always tried to persuade us that he is way above the the clouds. Everybody knows this. We should like him to come down some time.
§ Mr. Jenkins
I am glad to know that the hon. Member was expecting to intervene in our debate at any moment. He must have unusual faith in you, Sir Robert, if he expected that you would call him from a sedentary position which, as far as I can see, he has adopted consistently throughout the debate until this moment, when he rose to his feet. I do not know what he means by shaking his head in that way.
§ Mr. Jenkins
I will leave the hon. Member and return to the more important point about the activities of Birmingham Corporation. I am informed that at a recent meeting of the Finance Committee of the City of Birmingham, it was proposed by a most distinguished ex-lord mayor, a former chairman of the finance committee, that the city should write to its brokers and ask them to inquire from the companies in which the City's superannuation fund was invested—contributed to partly by the employers of the corporation, but also by the ratepayers of the city of Birmingham—whether they made political contributions. That resolution was put forward.
§ Mr. Jenkins
The result—[HON. MEMBERS: "Give way."] Unlike hon. Members opposite, I will certainly give way if some other hon. Member rises to his feet to intervene, but the hon. Member for Chigwell was so courteous as to sit down again as soon as he had got to his feet and I had no opportunity to give way to him.
§ Mr. Biggs-Davison
I thought that the hon. Member wanted to finish the sentence which he had started, and I did not want to prevent that. But as he has so kindly given way to me, could he, for the information of the Committee, say whether this inquiry by the brokers was directed towards contributions to any form of political party or organisation or towards contributions to a specific political party or political organisation? Was there any mention of the Conservative Party or Aims of Industry, or was there also mention of other organisations and, if so, which were they?
§ Mr. Jenkins
I think that certain examples were given. The question asked was whether there were any political contributions, and the purpose of giving examples was not to hide any contribution which might be made to the Labour Party or Liberal Party but to prevent any front organisation from escaping under the terms of the inquiry. That is a reasonable method of proceeding.
But when the hon. Member interrupted I was a little further back in describing what happened. This resolution was proposed. Whether because they were taken unawares or because they were perplexed, I do not know, but the Conservative members of the finance committee of the City of Birmingham did not oppose it. They abstained. When a vote was taken they abstained upon it, and the inquiry therefore went forward; and the brokers are undertaking this inquiry. There is no intention, as I understand it, on the part of the finance committee of the City of Birmingham to switch from equities. Recently they have led the way in the move in investing this fund partly in equities, although still more than 50 per cent. is in Treasury stock. But there has been a growth in this direction. If the Corporation received replies indicating that certain companies gave contributions to political parties. I think that it would receive and weigh up that information. I do not think that there would be any automatic switch.
The point, which hon. Members opposite to a remarkable extent seem completely incapable of appreciating in the debate tonight, is that there are two distinct questions. There is, first, the question whether a political contribution is inappropriate from the point of view of directors acting on behalf of shareholders. There is, secondly, the question why, if it is appropriate, it should have to be made under the cloak of secrecy. There are two separate issues. I would in some cases, perhaps in a large number of cases, argue that tax-free it might be inappropriate, but the main point is not whether it is inappropriate. The main question is whether, if directors believe that it is in the interests of their shareholders that they should make such substantial contributions, they should not at any rate have the courage to stand 1616 up and announce in public what they are doing.
This is a fundamental principle and I do not understand what the hon. Member for Nottingham, South means by shaking his head in mat way. Does he think that directors do this already? If they do, what is the argument about? The hon. Gentleman knows full well—my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) indicated this over and over again by his quotations—that directors not only make these contributions but are ashamed of doing it and are afraid to tell their shareholders what they are doing.
Of course, directors are entitled to a certain amount of freedom in how they interpret the interests of their shareholders, but I did not understand why the hon. Member for Nottingham, South drew a distinction between the freedom which directors should have to act on behalf of their shareholders and the freedom which city councillors should have to act on behalf of their wage earners. The system of council elections may have certain imperfections, the poll may not be as high as we would always wish it to be, but as a form of democracy, compared with what happens in most of our public companies, it is without question positively Athenian.
There is no question but that the city councillors of Birmingham have been the subject of publicity. Everybody knows what they have been doing. They have been brought under the eye of public scrutiny. They have been talked about and criticised in the Birmingham papers and in the national Press, and even by the hon. Member for Nottingham, South in the House of Commons. There is no question of them sheltering under the protection of silence.
The important point is that, if these contributions are to be made, they should be made publicly and clearly, and directors should say what they are doing and stand up and answer to their shareholders. It is no good hon. Members opposite—it is no good the hon. Member for Stratford-on-Avon, who has now disappeared—trying to argue, with some totally inapposite quotation from a former Attorney-General, that, because there is no legal corruption in regard to election expenses under the 1949 Act, there can be no corruption in a broader 1617 sense of the word. It is a very old hackneyed quotation from Lord Randolph Churchill that he, after all, equated secrecy and corruption at a time when there was no question of any limit on election expenses. Therefore, the matter cannot be interpreted in this narrow sense.
I beg at any rate some hon. Members opposite who have a respect for the standards of public life to realise that, however convenient it may be for the Tory Party to have these secret contributions, the day when it is tolerable is drawing to an end and it is a blot upon our national life.
§ Mr. Stratton Mills
We have listened to a speech by the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) which, I think, can best be described as some political whitewash for the electioneering of Birmingham Corporation. We have also listened to a speech by the hon. Member for Cardiff, South-East (Mr. Callaghan) which leaves one in very little doubt about his motives for making it in the House of Commons this evening. The motives were nothing else than to raise a scare campaign and indulge in political intimidation. That was the purpose of his speech.
This is well demonstrated by two points. First, there is the question of making it three years' retrospective. [Interruption.] Secondly, throughout this discussion there has been the underlying threat that if the names were given of firms which contributed directly or indirectly to the Conservative Party, if the Labour Party gained office those firms would be at some disadvantage in State and public contacts. [Interruption.] I have no doubt that this will be denied when the Opposition spokesman replies to some of the points made during discussion on the Clause. Nevertheless, this threat will remain in the minds of business houses.
While the hon. Member for Cardiff, South-East was moving the Clause he largely accepted my intervention when I suggested that there already exists power to enable the inspectors of taxes to ultimately look at company account books to see whether they are contributing to political parties. It is clear that this power exists and it is equally clear that 1618 Income Tax is payable on any contributions to political parties.
The hon. Member for Cardiff, South-East attempted to argue—and subtly skated over this—that certain companies were contributing directly to political parties and were avoiding paying tax. Despite making this allegation, he produced not a shred of evidence to support it. It is perfectly legitimate for any company to group together with other companies to oppose State interference. They will continue to do that until the party opposite is drawn away from its nineteenth century dogma and dragged into this century.
It seemed to me that the hon. Member for Cardiff, South-East came to the Committee very much in a white sheet. I assumed, therefore, that when I looked at the Labour Party's accounts I would find some information about its donations which would be of great interest to me.
§ Mr. Stratton Mills
I looked, too, to find what direct equity holdings the Labour Party might have. I thought that it might have shareholdings in some companies. There must be very few investment funds which have done as modestly as the one I found—£320,000 is the value of the fund and it contains only one equity holding. It was purchased at a cost of £370, and so great is the investment skill of the Labour Party that the holding, which is in Buenos Aires Car and Tramways Ltd., is worth not £370, or £3,700, but the princely figure of £37.
The next thing at which I looked in its accounts followed my assumption that there must be people who contribute to the Labour Party and give it subscriptions because they feel that by doing so they are serving some public purpose. This is a natural assumption for anyone to make. We presume, on this side of the Committee, that if people wish to contribute to our funds there will be other people who would wish to contribute centrally to the Labour fund. However, the accounts for the year ended 31st December, 1962, are revealing. Of course, local Labour Party subscriptions are shown, as are trade union subscriptions—and it should be remembered that 1619 the Co-operative lobby in this House, which equals the television lobby, also has its subscriptions shown.
I can find no trace of subscriptions by individuals to the Labour Party, except that, not in the income and expenditure accounts, but in what is called the "General Fund", there is shown that in 1961 there was a donation of just under £64,000 under the heading of "Donations and Special Appeal." Despite what the Gallup polls may show, the year 1962 showed a drop from just over £64,000 to over £37,000, but I would be interested to know whether there was any breakdown of how the moneys were made up—
§ Mr. Callaghan
We are all hoping that in due course we shall get from the hon. Gentleman a similar analysis of Conservative Party funds—something that none of us has ever seen, or are ever likely to see. I would point out that the special appeals which brought in £64,000 in one year and £37,000 in the second year were to make up the deficit under which the Labour Party was working at that time, because the hon. Gentleman will find from the 1960 and 1961 accounts that we were running heavily into a deficit. As we do not have hidden sources of funds, we needed to have special appeals to trade unions and local labour parties. Could we have a similar honest statement about the financial position of the Conservative Party?
§ Mr. Stratton Mills
My hon. Friends probably thought that the hon. Gentleman rose not to deal with these special funds, but with what were the individual subscriptions to the Labour Party that are not shown in the accounts at all. There is no heading in these accounts for individual subscriptions to the Labour Party. Are we to assume that there are none, or are we to assume that these accounts are not worth the paper they are printed on?
We always get a variety of good purposes, good intentions, and a fair volume of waffle, from the Liberal Party. I assumed that we might have heard something from Liberal hon. Members in this debate. I have looked at that party's accounts for 1962. Again, I think that there must be very few investment funds in the country that are actually worth 1620 less than the price at which they were bought, but, despite a long period of boom, and growth in the economy, the Liberal Party's investment funds are standing at less than their purchase value—but I let that pass.
Nevertheless, I wonder whether the Liberal Party delivers full details of its funds. The truth is otherwise. There is a general heading called "Subscriptions, donations, bonds and bequests". Does the £20,592 under that heading include the contributions from merchant bankers of well-known Liberal sympathy? Who, in fact, contributes money to that fund? Is it shown anywhere or, again, is it hidden in the accounts, so making these figures and this information not worth the paper on which they are printed. If the hon. Member for Bolton, West (Mr. Holt) would like to intervene to give us the information, I will gladly give way.
§ Mr. Arthur Holt (Bolton, West)
If the hon. Member will pay us the courtesy of attending one of our annual conferences he will hear these appeals being made publicly, and the names of the people who subscribe read out to the whole audience, including the Press.
§ Mr. Lubbock
The hon. Member is being very childish. He has gone completely off the new Clause. What does he think would be the point in putting in a list of three or four thousand names of all the people who have attended the Liberal Party conference and have subscribed amounts ranging down, in some cases, to 2s. 6d.?
§ Mr. Stratton Mills
I cannot help feeling slightly irritated at being called childish by the hon. Member for Orpington (Mr. Lubbock), but if the point made by the party opposite, that details should be given, is valid, £20,592 for a party of the size of the Liberal Party is quite a lot of money. Indeed, if it were divided amongst the number of Liberal Members they would have over £4,000 each.
§ Mr. Stratton Mills
I should like to examine two points which arise in the debate. The first is how much detail 1621 is a shareholder in a public company entitled to have. My hon. Friend the Member for Nottingham, South (Mr. W. Clark) dealt fully with that point. The other is what threat to democracy is contained in this idea of hon. Members opposite.
§ Mr. John Biffen (Oswestry)
I am sure that my hon. Friend the Member for Belfast, North (Mr. Stratton Mills) would like to have on the record the comments from the Front Bench opposite that no one from Northern Ireland can comment on democracy.
§ Mr. Stratton Mills
Yes, I hope that the remarks of the hon. Member for Cardiff, South-East will be underlined in HANSARD by the attention drawn to them by my hon. Friend the Member for Oswestry (Mr. Biffen). I am sure that that is not the view of the Northern Ireland Labour Party, who, I am quite sure, will want to repudiate that statement.
The arguments put forward by hon. Members opposite are probably very similar to the arguments which we heard in this Chamber when discussion was being entered into on whether there should be secret or private ballots. I am sure that people like hon. Members opposite said then, "It is important that we should know how our friends, our families and neighbours vote." This is a very similar point but, looking at the matter from the company point of view, what happens?
What are the questions on which a shareholder is entitled to have detailed knowledge? As has been said, the shareholder leaves general control and the daily running of the company in the hands of the directorate. He has no alternative and he can replace the directors if they are not doing a satisfactory job. If we accept the arguments of the hon. Member for Cardiff, South-East there are many other kinds of questions which inquisitive shareholders would feel justified in having written into a Statute by the House of Commons. People might feel entitled to have a list of all the charities to which a company sub 1622 scribes. [HON. MEMBERS: "Why not?"] Hon. Members ask why not. Prima facie, one could say that there is something in that argument—
§ Mr. Stratton Mills
The subscriptions of a company could give rise to a complaint. A religious organisation, for example, might disagree. [HON. MEMBERS: "Ah."] A company might give a subscription to the Mormon Church, which has been under great attack in many areas, and there could be considerable pressure to ensure that that subscription was cancelled.
The hon. Lady the Member for Blackburn (Mrs. Castle), for example, might like to know with which countries a company did business. Did it do business with South Africa? The Arab League might want to know whether it did business with Israel. Others might want to know whether it did business with Spain. Shareholders might also want to know from whom the company bought components and where they sent their goods. There is no end to the possible inquisitiveness of shareholders and the consequences cannot always be seen.
There is also the point, which is a real one, that a company in a constituency in an area which returned a Labour Member to the House with a 40,000 majority might be contributing to Tory Party funds, as it is perfectly entitled to do, as the hon. Member accepted. [HON. MEMBERS: "No."] Oh?
§ Mr. Callaghan
If the hon. Gentleman had paid attention to the earlier part of the debate, he would have heard that it is extremely doubtful law to suggest that any company has the right to subscribe to Conservative Party funds.
§ 10.15 p.m.
§ Mr. Stratton Mills
That is not the point with which I was dealing. Let us assume that, by some mischance, there is a period in which the Labour Party holds a very large majority in the House and has a position of great power in the country. A company in an area which is 90 per cent. Labour is making 1623 contributions to the Tory Party. Is there not a danger of some of the wild men on the benches opposite, or some of the Trotskyites in the trade movement—I am not speaking of responsible trade union leaders—putting pressure on that company to stop its contribution to Tory funds? That would be a very real threat to democracy in this country.
1624 This debate was started as an election gimmick. It has been shown by the examples which have been given on this side of the Committee, and which will, no doubt, be given by my right hon. Friend, to have been a hollow failure by hon. Members opposite.
§ Mr. Lubbock
We have just listened to the most ridiculous and childish speech that it has ever been my lot to hear in the House of Commons. It is quite remarkable that the hon. Member for Belfast, North (Mr. Stratton Mills), a Member for Northern Ireland, should dare to talk about a scare campaign and make suggestions about political intimidation.
Everyone knows that this sort of thing goes on all the time in Northern Ireland. The Tory Party has its committee rooms in caravans outside the polling stations, and Tory workers have managed to convince the gullible electorate in some parts of the province that, unless they can obtain a piece of paper from the people in the committee room, they are not entitled to vote at all. The hon. Gentleman forgets all about the religious discrimination which goes on in Northern Ireland. We do not hear enough about this in the House. It is almost as bad as what has been happening recently in South Africa. It comes ill from the hon. Gentleman to make the sort of speech which he did.
The hon. Gentleman ignored the fundamental distinction between the contributions which are made by individual members of the Labour and Liberal Parties to their political funds and the contributions made by companies to political funds on behalf of their shareholders. The contributions made to our funds are made at our assembly in the open light of day. The names of people who make the contributions are announced so that the Press, television or whoever is there may hear them. This does not happen in the hon. Gentleman's party, of course. The people who contribute to our funds do so voluntarily, out of their own pockets, out of taxed income.
The contributions which we are discussing under this Clause are contributions which are decided on in secret by directors on behalf of their shareholders.
§ Mr. Lubbock
On behalf of their political friends—my hon. Friend corrects me. That is probably nearer the truth.
The only criticism which I make of the Clause is that it does not go far 1626 enough. I should say that probably the reason for that is that the rules of order required it to be put down in this form. I should much sooner have seen a new Clause which would have required contributions to political funds to be stated in the profit and loss account of the company. That is the desirable thing which would not only open this matter to the inspection of the tax people but also to the inspection of the shareholders.
Hon. Members opposite say that the contributions are taxable. Obviously they have read the booklet of the hon. and learned Member for Northwich (Sir J. Foster) which makes this point by implication. I say that it depends on whether the inspector of taxes knows about these contributions. The position would be quite different from one tax inspector's area to another. Some may be conscientious and ask for all these details, others may not be. As some of the letters which the hon. Member for Cardiff, South-East (Mr. Callaghan) read out have made clear, in some cases these companies may make contributions to a very large number of organisations, and it would be impossible for the auditors or tax inspectors to go through every one individually to see whether it had a political connotation.
Therefore, the only satisfactory solution is to place the onus on the board of the company concerned and to require it to show these amounts as separate deductions from the profit and loss account, as has to be done in arriving at the net profit in the case of, for example, directors' remuneration.
§ Mr. Martin Maddan (Hitchin)
How does one define the recipients of these funds which one has to declare? [HON. MEMBERS: "Read the Clause."] I have read it. How does it work?
§ Mr. Lubbock
The hon. Member forgets that I am not responsible for the drafting of the Clause. Also, I am not the Chancellor of the Exchequer. It is not for me to suggest how such a definition should be drafted.
I accept that this is a matter of considerable difficulty, but I wonder whether a clue has not been given inadvertently by some hon. Members opposite who questioned why the Clause should be applied to political contributions only 1627 and not extended to other outside bodies which have no apparent connection with the purposes of the businesses concerned. This is the operative point, because there may be some outside organisations to which it is perfectly legitimate to contribute because they may in some way affect the conduct of the business.
To give one example, I once worked for a company whose headquarters were in a provincial town. The company used to make contributions to the local repertory theatre on the ground that in order to attract high level staff to go to live in the town there had to be a certain type of amenity there which could be offered to people when they applied for the job. This was one way in which the company tried to encourage the cultural life of the community which it thought would indirectly be for the benefit of the company itself. I would accept that as perfectly legitimate, but I think that the shareholders would be entitled to know about it just as much as they would be entitled to know about contributions to political funds.
The hon. Member for Stratford-on-Avon (Mr. Maude), who has returned to his place, said. I think, that the new Clause would not do anything for the shareholders' interests if it did anything for the taxpayer. It was either he or the hon. Member for Nottingham, South (Mr. W. Clark) who said that all the shareholders want to know is that the company is being properly managed. I do not think that that is quite good enough. If a board of directors is making contributions to a political party or to an organisation which is primarily one with political objects, it is questionable whether it is competent, because this expenditure cannot possibly be for the benefit of the business. If the directors made that error of judgment on what may be a comparatively minor sum compared with the undertaking as a whole, how are the shareholders to know that they have not made a much more major error material to the profit and loss account?
I have been waiting to hear an explanation from hon. Members opposite of how a contribution of this nature could possibly have any beneficial effect upon the profit and loss account of a 1628 business. All that they have said is that it might prevent the business from being taken over by a future Labour Government and that the directors were entitled to take this into account and to base their contributions on that possibility.
Even that might not be altogether true, because in some circumstances it might be to the benefit of the shareholders for the business to be taken over. I happen to be an opponent of nationalisation, but I would be secretly delighted if after the next General Election the Leader of the Opposition were to offer me 25s. for my Steel Company of Wales shares. I am being a little lighthearted, but I wanted to make it clear that the directors are not necessarily acting in a sense which would maximise the future profit potential of the shareholders by making contributions to an organisation which seeks to avoid nationalisation. I have said this while making perfectly clear my opposition, as I have already done in the Lobby this evening, to any further nationalisation.
I want to pursue for a moment the question of how extensive is this practice of making contributions. The hon. Member for Cardiff, South-East quoted a few examples and I have one or two more. If, as is quite clear, the Clause will not be accepted, it is up to ordinary individuals to bring out the maximum possible information and to throw what light they can upon these contributions which have been made.
I, too, have a list of companies, although there are not quite as many as were given by the hon. Member for Cardiff, South-East. I have only 14 and not 15. The first one is particularly interesting. It is the Peninsular & Oriental Steam Navigation Company. A shareholder attended the annual general meeting, as shareholders were advised to do by the hon. Member for Nottingham, South. The shareholder asked the chairman what contributions of this nature were made. The chairman gave a long and interesting explanation why he considered this practice was undesirable, which I should like to quote to the Committee. The chairman said:I think there are several reasons why stockholders might question any contributions by any company to political or quasi-political funds of any sort.1629 That is fairly sweeping, I must say.One reason is that a lot of people feel that donations to any political party or government are somewhat distasteful; they do not like the general idea of them. That was more true in the past perhaps, than it is now, but it still remains the feeling in a good many people's minds and I think you can take it that it remains the feeling in the minds of your Board, multiplied, I may add, by about 25 because we deal with a good many countries in the world, and I suppose that there would be at least 25 countries which we deal with who might at some time expect to jolly us, or hope that they might, to contribute to any particular political party; so that cur natural distrust is not just dislike of doing anything here, but a dislike of doing anything at all, and the more so because we might be expected to.That is a fairly good case in favour of the idea behind the new Clause. I am glad that the chairman of the Peninsular & Oriental Steam Navigation Company feels like that and is willing to give such an extensive explanation of his philosophy on the subject to a shareholder at an annual general meeting.
I do not, however, believe that that would be the general rule. I think that in many cases directors and chairmen are much more reluctant to give the kind of information which might legitimately be demanded by shareholders even if, as was suggested by one hon. Member, one did not accept the refusal in the first place but wrote several letters in pursuance of this aim.
I will just run through my list, though I shall not quote in detail all the letters which I have here. First of all I mention the companies which do not make any contribution to political parties or to organisations which support political objects. It is interesting that those companies which do not make any contribution of this kind always seem quite willing to say so in their replies to the shareholders, and the inference which I draw is that the ones which refuse to give this information must be making such contributions, or they would issue a denial.
There are two companies I have listed here which overlap the list of the hon. Member for Cardiff, South-East. Metal Box, I agree, does not make any contribution, and this letter which I have from the secretary to Shell Transport Ltd., says that that firm does not either. I have already mentioned the P. and O., 1630 although I must qualify that by saying that they would if they felt it was necessary, though from the quotation I have read from the chairman's reply at the annual general meeting it is obvious that it would be some very exceptional circumstances which would make them feel that way. George Wimpey does not. I.C.I. does not, but pays what it calls a modest subscription to the Economic League. Here there arises the question which was raised by the hon. Member for Cardiff, South-East: what does "modest" mean in relation to the assets of a company of the size of I.C.I.? This may be a very big proportion of the expenditure of the Economic League for all we know, unless it is willing to divulge the amount. Sears Holdings does not; the Beecham Group does not make any contribution to political parties, but contributes to British United Industrialists, Ltd., a body which has already been mentioned. United Drapery Stores Ltd. does not.
§ Mr. George Wigg (Dudley)
In his investigations into the subscriptions of these companies which are clearly directed to the purposes of the companies and for the companies' good, does the hon. Gentleman know whether I.C.I., which makes a subscription to the Economic League, which helps the Tory Party, subscribes to the Communist Party in Russia as well?
§ Mr. Lubbock
They do not actually say so in this letter which I have here, and in fact the motive for their subscription to the Economic League stems largely from that body's strong opposition to Communism.
Westminster Bank Ltd. makes no payment to political parties, but here is one of those small payments, in this case, to Aims of Industry. Again, one would like to know what a small payment is in relation to a firm of the size of the Westminster Bank. Shell, as I have mentioned, does not support any organisation with political aims.
Now I come to a list of five companies which my informants have been able to obtain no information from whatsoever. The first is Dorman Long. I suppose that one could justifiably suppose that they have been making subscriptions of this kind. Another two companies in the 1631 steel industry are United Steel Companies Ltd. and Guest, Keen and Nettle-fold. Both of these refuse to say. The Distillers Company has refused to say, and finally Wallpaper Manufacturers Ltd.,—[HON. MEMBERS: "A monopoly."]—a particularly interesting company in view of the recent report on monopolies.
This is a fair cross-section of some of the biggest companies in British industry, and the conclusion which I draw from these researches, which have been undertaken by some friends of mine, is that the practice of making contributions either to political parties or to organisations which have political objects is very much more widespread than anyone in this country has yet imagined. I quite agree with the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), who, I think, made this point, that until these last few months—or certainly not more than a couple of years ago—no one realised what an immense proportion of the financial strength of the party opposite was drawn from this kind of contribution.
§ Mr. A. E. Cooper (Ilford, South)
In his researches, has the hon. Member made inquiries about the amount of money which Montague L. Meyer provides to the Labour Party—the company which once employed the right hon. Gentleman the leader of the Opposition at £3,000 a year and now subscribes a substantial sum annually to the party funds? Has he found out what the Bernstein family and the Samuels provide to the Labour Party? Are all these contributions recorded in the published accounts of the Labour Party?
§ Mr. Lubbock
If the hon. Member for Ilford, South (Mr. Cooper) had been in his place when I started to give the information about these companies, he would have heard that I said I had information relating to 14 of them—
§ Mr. Lubbock
If the hon. Member has been in his place for as long as he says he has, it only shows that he has not paid much attention to what I have said. In any case, I do not think he can expect me to answer on behalf of the Labour Party. There are plenty of hon. Members present who would be delighted to answer for the Labour Party later on.
The contributions which are made by individuals to the Liberal and Labour Parties are published in those parties' accounts. The hon. Member for Belfast, North has already given this information to the Committee. As has already been said, if anyone wishes to attend the Liberal Assembly which takes place every year, he can get the name of every person who makes a contribution. It really surprises me that the hon. Member for Ilford, South can think of no better tactic than to talk about the accounts of the Liberal and Labour Parties, bearing in mind the party opposite has got no accounts at all.
§ Mr. A. Lewis
If the hon. Member for Ilford, South (Mr. Cooper) had been here earlier, he would have heard his hon. Friend the Member for Belfast, North (Mr. Stratton Mills) refer to the Liberal Party accounts and go into the Labour Party accounts in detail, but he had to confess that there are no published accounts of the Ulster Unionist Party or the party opposite. He just cannot find them.
§ Mr. Lubbock
The hon. Gentleman is quite right. Obviously the hon. Member for Ilford, South has not been paying the slightest attention to the debate.
§ Mr. Lubbock
No. I have given way enough. When I attempted to intervene during the speech of the hon. Member for Stratford-on-Avon earlier, not once but several times he refused to give way. Bearing that in mind, I think I have been very courteous in giving way several times to hon. Members opposite. I do not intend to do so again.
1633 One important question which has been raised is whether or not the contributions are deductible for tax purposes. I agree with the hon. Member for Cardiff, South-East that it would appear from the booklet of the hon. and learned Member for Northwich that expert opinion makes it quite clear that these expenses are not deductible for tax purposes. He says in his conclusion:It is possible for a payment to be disallowed as a deduction on the grounds that it was not made wholly and exclusively for the purposes of a company's trade.I tried to show at the beginning that under no conceivable feat of curious logic could a board of directors pretend that this kind of payment was wholly and exclusively for the purposes of the company's trade. I hope this will be made clear by the Chief Secretary so that Income Tax inspectors may read what is said in the OFFICIAL REPORT and take action on it accordingly.
Finally, could anyone possibly maintain that it is ethically right for boards of directors to make this kind of contribution without consulting their shareholders? Certainly in many cases it may be legally wrong. As the hon. and learned Member for Ipswich (Mr. D. Foot) pointed out, unless a clause is contained in the memorandum of the company entitling it to make this kind of contribution, it may well be ultra vires. But, even supposing there is some phrase which entitles it to do this, I still think that it is ethically wrong and that it should not be permitted to do it without disclosing the fact to the light of day.
Therefore, although the Clause may be defective in respect of its wording, although it does not go as far as I should like it to in that it does not compel boards of directors to publish these sums in their profit and loss accounts, I hope very much that it will be given a Second Reading.
§ The Chief Secretary to the Treasury and Paymaster-General (Mr. Boyd-Carpenter)
It might be of service to the Committee if I addressed a few observations to it at this stage, the more so because we have a good deal of work still before us on the Bill before we depart tonight.
This has been a very curious debate for a debate on a new Clause on the Finance Bill, and there have been 1634 moments when we have seemed to be discussing all sorts of interesting and, it seemed to me, rather controversial topics not necessarily very closely related to the new Clause moved by the hon. Member for Cardiff, South-East (Mr. Callaghan) two and a half hours ago.
The first point we want to establish from the hon. Member and his supporters is whether the Clause is put forward as a genuine and sincere attempt to protect the Revenue by improving the tax law—
§ Mr. Boyd-Carpenter
—or, as a right hon. Member opposite says, as something to do with moral standards. Is it a serious proposal in relation to enforcement of the Revenue, in which case I can deal with it on that basis, or is it intended as a kind of political manoeuvre to enforce publication of information which hon. Members opposite think, rightly or wrongly, may be politically advantageous to them?
I suggest that one has only to look at the new Clause and listen, as I have, to every speech made in the debate to see clearly that it is the second alternative which is the real purpose. That appears if one looks at the Clause itself. It is fantastically wide. It relates not only to companies but to any individual—every person carrying on a trade or business, an individual trader, a one-man business or an individual shopkeeper. If is true that in the course of the debate the hon. Member for Cardiff, South-East said that the Opposition were aiming at companies, but the Clause goes, and, I suggest to the Committee, deliberately goes, very much wider than that.
Nor is it confined to cases in which subscriptions; to political bodies are claimed as expenses for tax purposes. It is not limited to that. It even covers, or would cover, the case, which I understand is not uncommon, in which a company makes a contribution either to a political party or to a charity outside the scope of charities which are allowable for tax purposes as a deduction in respect of that company, informs the inspector, and indicates that no claim in respect of expenses is being made.
1635 No distinction is made, or sought to be made, between the class of contribution which under our law as it now stands is allowable as a deduction for tax purposes—I have in mind the class of case covered by the Tate & Lyle decision—and an ordinary contribution to an ordinary political party which, as I understand the law, is not so allowable. No distinction whatever is made, and it proposes to empower the Inland Revenue to demand the completion of this form in every one of those cases. That, of itself, obviously would raise in the minds of even naive people a suspicion that this has very little to do with the enforcement of the tax law. It is also completely unnecessary for the protection of the Revenue.
Where any payment is claimed as a deduction for tax purposes, inspectors of taxes have the power—which they exercise frequently—to challenge the expenses claimed, to ask for particulars, and, if they are not given, to disallow the claim. It is the greatest nonsense to say, as some hon. Gentlemen have said in the course of the debate, that contributions, subsidised by the taxpayer, are being made to the Conservative Party. If a claim is made for the expenses of a trade which, without disclosing it and with intention to defraud, include a political contribution of the kind that is not allowable, that is an offence; and if a deduction is disguised as something else and a false return is made, the normal penalties will apply. The form of notice proposed therefore adds nothing to the existing powers.
If the hon. Gentleman really thinks that it does, why does he confine this new weapon which he proposes for the Inland Revenue to political contributions? Many other things may be, and I regret to say sometimes are, sought wrongly to be claimed as expenses of the business. Charitable subscriptions outside the allowable character could be so claimed, and far more important from the point of view of the enforcement of taxation are personal expenses or improvements disguised as repairs.
If the hon. Gentleman really has found a new way of teaching the Inland Revenue to do its business and he puts this forward as a means of improving the armament of the Inland Revenue, why does he confine it to political contri 1636 butions which, whatever their significance in other directions, are plainly not as significant from the point of view of the Revenue as the kind of things to which I have been referring?
The hon. Gentleman knows—though I do not think that many of his hon. Friends do—that even for what quite plainly is the real purpose of this proposal, namely, to obtain publication of the details of political subscriptions, this Clause would be wholly and completely ineffective. As the hon. Gentleman knows, the officers of the Inland Revenue are bound by an oath, which they take with the greatest seriousness, not to disclose the information obtained in the course of their duties to anyone outside the Inland Revenue.
The suggestion that the Clause would enable secret contributions and all that kind of thing to be dragged into the daylight rests on a complete fallacy, unless it is the view of hon. Gentlemen opposite that officers of the Inland Revenue should disregard the oaths which they have taken. It would take a great deal more than hon. Gentlemen opposite to make that honourable body of public servants do anything of the sort.
The hon. Member spent a large part of his speech, as foreseen in the trailers which he put out at the week-end, by reading out a large number of names of companies and of replies which had been obtained from them. I hope that he will agree with me that he made no suggestion that in any of these cases was there any irregularity or evasion of tax. He used the word "corruption." Other hon. Members have used the words "subsidised at the expense of the taxpayer." In fairness to these companies, run, as we know, by honourable men. I think that it should be made plain "Aye" or "No" by the hon. Member whether he is alleging that they are evading the tax laws. If the hon. Member lacks the courage to answer that question I will ask him another.
§ Mr. Boyd-Carpenter
I will answer that. The hon. Member for Cardiff. South-East is singularly loyal to the odd and not very intelligent ideas which have dominated him throughout his 1637 political life. I will ask him another question. He read out the answers to questions. The Committee knows that the form of an answer very often follows the form of the inquiry. He told us nothing about the inquiry. From whom were the inquiries? They were not by any chance, were they, from Birmingham Corporation? Will the hon. Member tell us that? The hon. Member spent a great deal of time this afternoon advocating the value of bringing things out into the open—no secrecy, no concealment—but he seems to have forgotten his own fine principles as the evening has passed.
§ Mr. Gurden
Does my right hon. Friend realise that in a speech trying to excuse the Birmingham Corporation for using the ratepayers' money for the collection of this information the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) deliberately misled the Committee by saying that in this inquiry of companies, which was requested by the Corporation—
§ Mr. Anthony Wedgwood Benn (Bristol, South-East)
On a point of order. Is it in order for an hon. Member to say that another hon. Member has deliberately misled the Committee.
§ The Chairman
Order. I hope that the hon. Member will first bear in mind that he is intervening in the Minister's speech and, secondly, that I expressed the opinion that it would be better if the words "deliberately misrepresented" were withdrawn.
§ Mr. Gurden
I withdraw the word "deliberately," but I still go on to show that the hon. Member misled the Committee, even though it was inadvertently in his opinion, by using the words "to all political parties. That inquiry was not made by the Birmingham Corporation. They just made—
§ The Chairman
Order. The hon. Member's intervention in the right hon. Gentleman's speech is too long. Mr. Boyd-Carpenter.
§ Mr. Boyd-Carpenter
This interval has given the hon. Member for Cardiff, South-East time to reflect on the question I put to him. By whom were these inquiries made?
§ Mr. Callaghan
We are in Committee and I am entitled to make another speech at the end of the Chief Secretary's remarks, if he would prefer it that way. Otherwise, if he wishes. I will give him the answers to his two questions now—in which case he can comment on them, following which I will make some remarks. Would the right hon. Gentleman rather I continued now?
§ Mr. Boyd-Carpenter indicated assent.
§ Mr. Callaghan
The Chief Secretary asked, first, who were the inquiries from. The answer is that they were from individual shareholders who were disgusted at what is going on and who volunteered the information to me in the light of the statements I have made. Oddly enough, the Chief Secretary replied in the debate last year to my remarks on this topic. He may remember that I moved a similar new Clause on that occasion. It was after that that I began to get communications from shareholders. As I have answered that question, perhaps the right hon. Gentleman will now withdraw the suggestion he made about my lacking courage.
He asked, secondly, if these companies are evading tax. In the absence of the information, I do not know. That is what I said in my first speech. On that occasion I asked the right hon. Gentleman a question, which I repeat; are these subscriptions paid to British United Industrialists, which go as to 95 per cent. to the Conservative Party, allowed by the inspectors of taxes as a deduction? If the Chief Secretary will answer this question I will then reply to his question about whether or not some of these people are evading tax.
§ Mr. Callaghan
I will go so far as to say this, to be absolutely just. I believe that where the subscriptions are brought out and it is easy for the inspectors of taxes to distinguish, there is no evasion. But where, as I have shown, 1639 boards consolidate subscriptions, there may be a measure of evasion going on.
§ Mr. Boyd-Carpenter
The hon. Gentleman, having disclosed that he knows nothing to support any charge of tax evasion against—[Interruption]—any one of those companies which he saw fit to mention by name, it would have been better for him to have withdrawn the allegation.
As to his question about the law, it is not for me—if necessary, it is for the courts—to lay down the law. But the law is, on this branch, reasonably clear; that if these subscriptions are covered by the decision in the Tate and Lyle case they would, as I understand it, be allowed for tax purposes. If they were not, they would not be so allowable. That is the position.
§ Mr. Callaghan
As this special organisation of British United Industrialists has been set up to collect large sums for the Conservative Party, I will repeat my question. Does the Inland Revenue allow subscriptions to the Conservative Party as a deduction for tax purposes? If it does—and I am ready to take the answer from the right hon. Gentleman either way—there is a substantial subsidy going from the taxpayer straight into the pockets of the Conservative Party.
§ Mr. Boyd-Carpenter
The hon. Gentleman knows perfectly well that it must depend on the circumstances of particular subscriptions. As he knows, in the Tate and Lyle case the payment was made by Tate and Lyle to Aims of Industry to conduct a campaign to protect the interests of that company. Unless I know the circumstances of each and every subscription made in each case and by every body to which the hon. Gentleman referred, it would be very wrong of me to seek to lay down the law.
§ Mr. Boyd-Carpenter
The duty is on the inspectors of taxes to get the facts of the case, to apply, in the first place, their own knowledge of the law and to come to a decision; and if their decision is wrong, it can be appealed against and taken, if necessary—as happened in 1640 the Tate and Lyle case—to the highest court in the land. The hon. Gentleman knows that perfectly well.
§ 11.0 p.m.
§ Mr. Callaghan
As the articles of association of British United Industrialists show quite clearly that the aims are political, there is surely a general instruction to inspectors of taxes as to the manner in which these payments should be allowed. May I ask whether such an instruction exists? If it does not, does the right hon. Gentleman intend to issue one in respect of these payments? Finally, as this body has probably collected, as far as can be estimated, anything up to £1 million for the Conservative Party, what steps has he taken to ensure that the integrity of the Revenue has been safeguarded?
§ Mr. Boyd-Carpenter
The hon. Gentleman knows perfectly well, first of all, as I have already said to the Committee, that straight subscriptions to political parties are not admissible. I have already said that and, if it pleases the hon. Gentleman, I will say it again. It would certainly be extremely wrong of me to say anything as to the instructions that the Inland Revenue may or may not issue in respect of particular organisations. The hon. Gentleman knows that as well as I do, and perhaps better. I think that it comes very ill from the hon. Gentleman, having made charges—half made charges—and admitting that he had not a scrap of evidence to justify them, then to come forward and demand particulars about the treatment of a particular taxpayer.
§ Mr. Cooper
Is my right hon. Friend aware that Mr. Ian Mikardo, the prospective Labour candidate for the Poplar division, recently circulated all the industrialists in that division, under the guise of his public relations business, asking for this precise information about which industrialists were providing funds for this or that political party? May I ask my right hon. Friend whether the expenses incurred by Mr. Mikardo's business are liable to be tax deductible?
§ Mr. Boyd-Carpenter
I am afraid that I must reply to my hon. Friend, as I replied to the hon. Member for Cardiff, South-East, that the affairs of an individual taxpayer are plainly not matters 1641 I should disclose to the Committee, and I am sure my hon. Friend will appreciate that.
The hon. and learned Member for Ipswich (Mr. D. Foot) took the point that the purpose of this Clause was to call attention to a considerable public scandal. He will now realise that whether that is the purpose it is certainly not the effect. It has nothing whatever to do with it.
But the hon. and learned Gentleman further suggested that, tax apart, contributions by a limited company to political funds might be outside the powers of a board of directors—might be ultra vires the company. Obviously, no one could form a view of that without knowing the articles of association of the particular company, but it has been a feature of life in this country for very many years for public companies to make contributions in a variety of directions. I do not recollect any case in which the right of a board to make these payments as a matter of law has ever been challenged. That, I must say, leaves in my mind the very considerable doubt as to whether the hon. and learned Gentleman's apprehensions are well founded. If they are, the answer lies with anyone interested. The courts are open. If the hon. and learned Gentleman or his friends want to challenge the action of a particular company, no one can stop them.
§ Mr. D. Foot
I am sure that the right hon. Gentleman is wrong. I am thinking in particular of a railway company which in the days before nationalisation subscribed to an exhibition in London and that was held to be ultra vires the company. There have been a number of cases where subscriptions have been held to be ultra vires the company. What I have suggested here is that it ought to be more widely realised that subscriptions of this kind may be very well held to be ultra vires the company and that, therefore, the directors would be personally liable for these payments.
§ Mr. Boyd-Carpenter
I do not think that the hon. and learned Gentleman could have heard what I said. I said subscriptions to political organisations. None of the cases to which he has referred relate to political organisations. Therefore, the hon. and learned Gentleman, with respect—and I have always 1642 respected him since he gave me my first speech on the paper at the Oxford Union—is not discussing what is material here, contributions to political parties. Unless and until the practice of a great many years has been ruled by a court of law to be outside the authority of a particular company I shall be inclined to believe that what has taken place under the practice of many years is within their powers.
The fact that this proposal has not been put forward in a way that bears any relationship whatever to what is intended does not detract from the fact that its purpose is plain; nor does it leave it, I think, on its merits free from criticism or not entitled to an answer. Quite bluntly, the hope of hon. Members opposite is that if companies are bound to publish their subscriptions to a political party they can be intimidated from giving that support. Trouble can be organised with the unions and with their labour. Trouble can be organised with some of their customers. Trouble can be organised with Labour-controlled local authorities where they happen to operate. Hon. Members opposite know that and, if they were honest with themselves, that this is the purpose of the Clause.
I accept, and this at least we can agree on, that if that intimidation were successful—and intimidation in this country is not often successful—the main sufferer would, of course, be the Conservative Party. It is not our fault that the overwhelming majority of people with practical experience of running a business would regard the coming into office of a Labour Government as a disaster from which they think it right to try to protect their companies and their shareholders.
They remember the ineptitude with which Labour when in office handled our economy. They remember the biennial financial crises. They remember 1947 when the Labour Government were kept going only by American loans which we are still repaying. They remember 1949 when they were forced to devalue the £. They remember 1951 when they produced the financial crisis from which they ran away rather than dare tackle. They remember the threats of nationalisation, which we heard repeated this afternoon by the right hon. Member for Belper (Mr. G. Brown) who explicitly threatened nationalisation over the 1643 widest possible sector of our economy; and they remember, too, the sneers of the right hon. Gentleman the Leader of the Opposition about industry with its begging bowl.
It is not altogether surprising that in these circumstances people in responsible positions and with a knowledge of the working of our economy would regard the return to office of right hon. and hon. Members opposite as a disaster. The fault is theirs—theirs and their policies—that this is so.
What is the objection to publicity? I will ask the Committee to recall that the ballot is secret. That is to prevent intimidation. Indeed, if we look throughout the world secret ballots are regarded as the basis of freedom because, in the absence of secrecy of the ballot, pressures can be brought to bear upon people to conceal their political opinions and to abstain from supporting views in which they believe.
If we are going to force, as this Clause would propose, everyone—not only the great companies, which can probably take care of themselves but the small trader and the small shopkeeper in the small town—to publish such subscriptions, which is the Opposition's intention, it will prevent subscriptions being made. If the small trader and shop keeper is to be forced to publish, the Committee knows perfectly well that in many cases this may succeed in preventing him from making that subscription at all.
As to limited companies, we are told that the individual shareholder should know in order that, if he wishes, he should be able to challenge. That indicates an ignorance of the principle on which limited companies are run. They are run successfully only if the shareholders have confidence in the board and if the board has considerable freedom to handle the assets of the company. If we are to start saying that a shareholder must know of a political contribution in order that he may challenge it, where will we stop? He could equally demand to know about a charitable contribution in order to challenge it—[HON. MEMBERS: "Why not?"]—or a wage payment. Why not? Because it would bring the operations of limited companies to a standstill if 1644 one did not have confidence in one's directors. If a shareholder has no confidence in his board his expedient is simple. He can sell his shares and go elsewhere, and that is the difference between a shareholder and a trade unionist.
§ Mr. Boyd-Carpenter
There have been three separate and two simultaneous attempts to intervene and it would show discrimination of the crudest character if I gave way to anybody. I hope that at this stage the Committee will forgive me, because I hope that soon we shall be able to come to a decision.
There is a distinction which I would seek to make between a trade union and a company. A shareholder even in a company which has the good sense to contribute to the Conservative Party can always, without detriment to himself, sell his shares and go elsewhere. A member of a trade union has no such expedient open to him. If he leaves his union he leaves the employment in which his skill has been acquired.
There is also a profound difference in the legal position of the two bodies. If it is seriously suggested that trade unions with their great privileges, their freedom from action for torts, and so on, are to be placed in the position of companies, I suppose that the similarities should be extended over the whole field. I have never known a trade union leader to ask for that. I suggest that if one has a board of directors one should trust them as a shareholder to manage the affairs of their companies with the right to make political contributions which will protect the companies, first of all, from the threat of nationalisation—and the courts have ruled that in certain circumstances this is an allowable expense—or to protect them from the damage which they would suffer from a Government composed of hon. and right hon. Members opposite. In those circumstances I suggest that directors are not only entitled but are bound to take that action. We have been told how clear the Labour Party is in this matter and how it publishes its accounts and discloses its subscriptions.
§ Mr. Roy Jenkins
Would the right hon. Gentleman like to tell the Committee, when he advances the argument that directors are bound to do this, 1645 whether he thinks that the directors of companies like Shell, which has announced that it is not making contributions, are misrepresenting the interests of their shareholders?
§ 11.15 p.m.
§ Mr. Boyd-Carpenter
I said that, when they take the view, which seems to be a very reasonable one to take, that the interests of their company would be menaced by certain political developments, it is quite right for them to make their contributions.
I do not criticize those who take the other view. I do not criticize wealthy men who support the party opposite. I have not even so far asked about their contributions—Mr. Sidney Bernstein, Mr. Jack Hylton, Mr. Lewis Cohen and other wealthy, distinguished and eminent people who publicly support the party opposite and, I am sure, as generous people, subscribe to it. We have not been told what their subscriptions are [Interruption.] Perhaps the hon. Member for West Ham, North (Mr. A. Lewis) would like to tell us what their subscriptions are.
§ Mr. A. Lewis
What I was about to tell the Minister is that the members of the Labour Party are able to find out what are the contributions from every source, unlike shareholders of private companies. If the right hon. Gentleman were a member of the Labour Party and he wanted to do so, he could find out, too.
§ Mr. Boyd-Carpenter
If I understand him, the hon. Gentleman knows the answer to the question what these gentlemen have contributed, and he will not tell the Committee.
§ Mr. Boyd-Carpenter
We know that the Labour Party's disclosure is very partial indeed. Headquarters accounts are published, but I remind the Committee that, in 1962, less than half the proceeds of trade union political levy, £750,000 a year, with reserve of £1¾ million, appeared in the headquarters accounts. The rest was, presumably, spent for political purposes, either spent direct by the trade unions or paid to constituency parties. The Labour Party headquarters accounts show only £1,000 of the co-operative movement's political expenditure. None of the rest.
There was an interesting article by Mr. Martin Harrison, lecturer in Government at Manchester University, about contributions in kind outside the political levy altogether, by trade unions to the Labour Party. I commend this article to hon. Members.
§ Mr. Callaghan
Plainly, the right hon. Gentleman does not understand the Central Office brief and he does not understand how a trade union functions. The simple truth, as he ought to know, is that every sum of money paid out by a trade union for political purposes, whether it be paid to the headquarters at Transport House or whether it be paid to a local constituency party, is shown in the return made to the Registrar of Friendly Societies by the trade unions. Therefore, if hon. Members want to do a little simple arithmetic, all they have to do is to go to the Registrar of Friendly Societies, find the accounts of the trade unions, and then add up the total sum which is paid out by the unions, whether to local constituency parties or to the headquarters of the Labour Party. There is no possible parallel between that and the secrecy with which Tory financial affairs are conducted.
§ Mr. Boyd-Carpenter
The hon. Gentleman, deliberately, I think, misses the point. First, what he said must have been true, or I should not have been able to give the evidence to the Committee, but 1647 what he did not appreciate is that these payments are shown as going to various organs of the Labour Party, and, unless they go to the headquarters, it is not shown how they are spent. I commend to hon. Members opposite Mr. Harrison's article on the support which is given outside the political levy and outside all these disclosures we are told about—organisers sent to assist at elections, motor cars, premises, poster sites—all used to support the Labour Party.
The hon. Gentleman the Member for Cardiff, South-East, has completely missed the point. He stood clothed in a metaphorical white sheet because the headquarters accounts were published. He omitted to tell us that expenditures far larger than those involved in the headquarters accounts are not published at all.
§ Mr. Callaghan
The Chief Secretary is completely in ignorance. There are a great many trade unions whose local branches have no control over the political funds. When the sums are paid, they are paid centrally into the funds of the local constituencies. This is not universally true, but it is true of nearly every trade union. When the Chief Secretary has finished, he still will not have explained away the researches which show that the Conservative Party has at its command funds at least three times as great as those of the Labour Party.
§ Mr. Boyd-Carpenter
The hon. Member, in that rather lengthy intervention, has only confirmed what I was saying: that the Labour Party is in no position to vaunt itself because its headquarters accounts are published without admitting that by far the largest sums which go to support it are not covered by those accounts.
This debate has been characteristic—[Interruption]—of the Labour Party that anything which is not to their advantage is unfair or, indeed, they venture to hint, corrupt. I remind the Committee that the proposal on which we shall be asked to vote proposes to use the public service to do their dirty work for them. It is significant that they must know that the Clause would fail in the purpose which, they have now admitted, lies behind it unless the officers of the Inland Revenue 1648 broke the oaths which they have taken. If the Labour Party, therefore, intend to vote on the Clause—
§ Mr. Boyd-Carpenter
—they will make it clear to the country either that this is an insincere proposal disguised to deceive people into believing that it would be effective to do what hon. Members opposite know that it cannot do, or that they are prepared to serve their squalid party purposes by prostituting the public service.
§ Mr. Mitchison
I hope not to take up the time of the Committee for more than a minute or two. I realise that hon. Members, on both sides, would like to divide. I am not suggesting that anybody has been out of order, but we have been roaming into all sorts of funny places—dark caverns, board rooms full of Tory politicians, Ulster democracy—
§ Mr. Mitchison
—and—[Interruption]—darkest of all, the recesses of the Chief Secretary's mind. His speech was one of the most remarkable efforts I have ever heard and I shall not trouble the Committee by going into it now.
We are discussing whether certain taxpayers are to be obliged, on demand, to give information for the purposes of the Revenue. If that information ought to be given and is not given, the people who will suffer are other taxpayers, because they will have to find the money if these people get out of it.
It is said that the phrase "for political purposes" is widely drawn. Of course it is. I am not as contemptuous of the intelligence of the inspectors of taxes as their political chief appears to be. They will, presumably, only ask for this information when they require it and when there is reason to require it. If they are to do that, it is necessary, to meet all the shifts that the Tory Party has continually used to disguise what are, in effect, political contributions to it, that the definition should be wide.
I turn now to the essential reason why the information is particularly required. 1649 The Clause follows two other Sections in the Revenue legislation. One is about bank credits, the other is about commissions and fees. If the information can be got in any other way, why on earth were those Sections put into Revenue legislation?
All that they are doing here is to provide inspectors of taxes with the power to find out the purpose for which these contributions are being made. The Chief Secretary was perfectly correct in saying that contributions by a company to the Conservative Party, Aims of Industry, the Economic League, and that other shadow front organisation, the British something-or-other, are all inadmissible for deductions.
The trouble begins when one gets beyond that. The right hon. Gentleman is also perfectly correct in saying that
§ the inspectors must know the facts, for the essential question with which we are concerned is one of facts, and the sole purpose of this proposed Clause is to get those facts available for the Revenue. Yet, the Revenue, through its political head, refuses the power.
§ I ask the Committee to say without hesitation that the Revenue should be protected and that those not entitled to make deductions should not be able to conceal not only their evasion of tax, but their avoidance of tax by the withholding of facts. I ask the Committee to support this Clause.
§ Question put, That the Clause be read a Second time—
§ The Committee divided: Ayes 85, Noes 159.1651
|Division No. 111.]||AYES||[11.26 p.m.|
|Ainsley, William||Holt, Arthur||Pavitt, Laurence|
|Benn, Anthony Wedgwood||Houghton, Douglas||Peart, Frederick|
|Boston, T.||Hynd, H. (Accrington)||Pentland, Norman|
|Bottomley, Rt. Hon. A. C.||Irvine, A. J. (Edge Hill)||Price, J. T. (Westhoughton)|
|Bowden, Rt. Hn. H. W.(Leics, S. W.)||Hynd, John (Attercliffe)||Probert, Arthur|
|Bowen, Roderic (Cardigan)||Janner, Sir Barnett||Randall, Harry|
|Brockway, A. Fenner||Jeger, George||Redhead, E. C.|
|Broughton, Dr. A. D. D.||Jenkins, Roy (Stechford)||Rees, Merlyn (Leeds, S.)|
|Butler, Herbert (Hackney, C.)||Jones, Dan (Burnley)||Short, Edward|
|Callaghan, James||Lee, Frederick (Newton)||Slater, Joseph (Sedgefield)|
|Carmichael, Neil||Lewis, Arthur (West Ham, N.)||Sorensen, R. W.|
|Castle, Mrs. Barbara||Loughlin, Charles||Soskice, Rt. Hon. Sir Frank|
|Cliffe, Michael||Lubbock, Eric||Stones, William|
|Craddock, George (Bradford, S.)||McBride, N.||Swingler, Stephen|
|Crossman, R. H. S.||McCann, J.||Taverne, D.|
|Dalyell, Tam||MacColl, James||Taylor, Bernard (Mansfield)|
|Davies, C. Elfed (Rhondda, E.)||MacDermot, Niall||Thomas, Iorwerth (Rhondda, W.)|
|Diamond, John||Mallalieu, E. L. (Brigg)||Thorpe, Jeremy|
|Evans, Albert||Marsh, Richard||Wainwright, Edwin|
|Fernyhough, E.||Mason, Roy||Warbey, William|
|Fitch, Alan||Mendelson, J. J.||Whitlock, William|
|Foley, Maurice||Millan, Bruce||Wilkins, W. A.|
|Foot, Dingle (Ipswich)||Milne, Edward||Willey, Frederick|
|Foot, Michael (Ebbw Vale)||Mitchison, G. R.||Willis, E. G. (Edinburgh, E.)|
|Griffiths, Rt. Hon. James (Llanelly)||Morris, Charles (Openshaw)||Winterbottom, R. E.|
|Griffiths, W. (Exchange)||Oliver, G. H.||Woof, Robert|
|Hart, Mrs. Judith||O'Malley, B. K.|
|Hilton, A. V.||Oram, A. E.||TELLERS FOR THE AYES:|
|Holman, Percy||Oswald, Thomas||Mr. Grey and Mr. Ifor Davies.|
|Atkins, Humphrey||Buck, Antony||du Cann, Edward|
|Awdry, Daniel (Chippenham)||Carr, Compton (Barons Court)||Elliot, Capt. Walter (Carshalton)|
|Barter, John||Carr, Rt. Hon. Robert (Mitcham)||Elliott, R. W.(Newc'tle-upon-Tyne, N.)|
|Berkeley, Humphry||Chataway, Christopher||Errington, Sir Eric|
|Bidgood, John C.||Chichcster-Clark, R.||Farey-Jones, F. W.|
|Biffen, John||Clark, William (Nottingham, S.)||Farr, John|
|Biggs-Davison, John||Cleaver, Leonard||Fell, Anthony|
|Bishop, Sir Patrick||Cooke, Robert||Finlay, Graeme|
|Black, Sir Cyril||Cooper, A. E.||Fisher, Nigel|
|Bossom, Hon, Clive||Courtney, Cdr. Anthony||Fletcher-Cooke, Charles|
|Bourne-Arton, A.||Crawley, Aidan||Fraser, Ian (Plymouth, Sutton)|
|Box, Donald||Crowder, F. P.||Freeth, Denzil|
|Boyd-Carpenter, Rt. Hon. John||Curran, Charles||Gammans, Lady|
|Boyle, Rt. Han. Sir Edward||Dance, James||Gardner, Edward|
|Bromley-Davenport, Lt.-Col. Sir Walter||d'Avigdor-Goldsmid, Sir Henry||Gibson-Watt, David|
|Brown, Alan (Tottenham)||Deedes, Rt. Hon. W. F.||Giles, Rear-Admiral Morgan|
|Bryan, Paul||Drayson, G. B.||Glyn, Dr. Alan (Clapham)|
|Goodhew, Victor||McLean, Neil (Inverness)||Scott-Hopkins, James|
|Green, Alan||MacLeod, Sir John (Ross&Cromarty)||Shaw, M.|
|Griffiths, Eldon (Bury St. Edmunds)||McMaster, Stanley R.||Shepherd, William|
|Grosvenor, Lord Robert||Macmillan, Maurice (Halifax)||Smith, Dudley (Br'ntf'd & Chiswick)|
|Gurden, Harold||Maddan, Martin||Spearman, Sir Alexander|
|Hall, John (Wycombe)||Maitland, Sir John||Stainton, Keith|
|Hamilton, Michael (Wellingborough)||Marten, Neil||Summers, Sir Spencer|
|Harris, Reader (Heston)||Maude, Angus (Stratford-on-Avon)||Tapsell, Peter|
|Harvey, John (Walthamstow, E.)||Maudling, Rt. Hon. Reginald||Taylor, Sir Charles (Eastbourne)|
|Hastings, Stephen||Maxwell-Hyslop, R. J.||Taylor, Frank (M'ch'st'r, Moss Side)|
|Hill, J. E. B. (S. Norfolk)||Maydon, Lt. Cmdr. S. L. C.||Taylor, Sir William (Bradford, N.)|
|Hirst, Geoffrey||Mills, Stratton||Temple, John M,|
|Hobson, Rt. Hon. Sir John||Miscampbell, Norman||Thatcher, Mrs. Margaret|
|Holland, Philip||More, Jasper (Ludlow)||Thomas, Sir Leslie (Canterbury)|
|Hopkins, Alan||Morrison, Charles (Devizes)||Thompson, Sir Kenneth (Walton)|
|Hornby, R. P.||Neave, Airey||Thompson, Sir Richard (Croydon, S.)|
|Hughes-Young, Michael||Orr, Capt. L. P. S.||Thornton-Kemsley, Sir Colin|
|Iremonger, T. L.||Page, John (Harrow, West)||Touche, Rt. Hon. Sir Gordon|
|James, David||Page, Graham (Crosby)||Turner, Colin|
|Johnson, Eric (Blackley)||Pannell, Norman (Kirkdale)||Turton, Rt. Hon. R. H.|
|Johnson Smith, Geoffrey||Partridge, E.||van Straubenzee, W. R.|
|Jones, Arthur (Northants, S.)||Pearson, Frank (Clitheroe)||Vaughan-Morgan, Rt. Hon. Sir John|
|Joseph, Rt. Hon. Sir Keith||Peel, John||Walder, David|
|Kaberry, Sir Donald||Percival, Ian||Walker, Peter|
|Kerans, Cdr. J. S.||Pickthorn, Sir Kenneth||Walker-Smith, Rt. Hon. Sir Derek|
|Kerr, Sir Hamilton||Pitman, Sir James||Wall, Patrick|
|Kirk, Peter||Powell, Rt. Hon. J. Enoch||Webster, David|
|Kitson, Timothy||Prior, J. M. L.||Wells, John (Maidstone)|
|Lambton, Viscount||Prior-Palmer, Brig. Sir Otho||Williams, Dudley (Exeter)|
|Langford-Holt, Sir John||Proudfoot, Wilfred||Wilson, Geoffrey (Truro)|
|Leavey, J. A.||Rawlinson, Rt. Hon. Sir Peter||Wise, A. R.|
|Legge-Bourke, Sir Harry||Redmayne, Rt. Hon. Martin||Wood, Rt. Hon. Richard|
|Lilley, F. J. P.||Rees, Hugh (Swansea, W.)||Worsley, Marcus|
|Litchfield, Capt. John||Rees-Davies, W. R. (Isle of Thanet)||Yates, William (The Wrekin)|
|Lloyd, Rt. Hon. Selwyn (Wirral)||Renton, Rt. Hon. David|
|Longbottom, Charles||Ridsdale, Julian||TELLERS FOR THE NOES:|
|MacArthur, Ian||Russell, Sir Ronald||Mr. McLaren and Mr. Pym.|