§ (1) The trustee of an approved investment club shall submit to the Inspector a return of income and short-term capital gains received by him in respect of the funds of the club in his custody.—[Mr. Grant.]
§ Brought up, and read the First time.
§ Mr. Anthony Grant (Harrow, Central)
I beg to move, That the Clause be read a Second time.
I should make it clear at the outset that I am on the Executive Committee of the Wider Share Ownership Council, which is an all-party organisation, from which I receive no remuneration whatsoever. I have endeavoured at times to advise professionally the National Association of Investment Clubs, and I am not a member of any investment club. Having 1382 made that clear, I should say that my prime interest and concern is to advance the cause of savings generally and that of the small investor in particular.
Apart from a brief reference which I made about 5 a.m. during the Committee stage which you, Mr. Deputy-Speaker, properly ruled out of order, I do not think that investment clubs have been referred to at all during the passage of the Bill. I should, therefore, make it clear that there has been a most dramatic development in the growth of these clubs. In 1958, there were no more than about a dozen. Today, there are over 2,200. They have an average membership of 25, and they invest about £5 million per annum, which is more readily understood if I say that about £3 or £4 per member 1383 per month is invested through investment clubs.
These clubs cover a very wide section of the community. I know that there is at least one Young Conservative investment club, but there are also clubs for the Ford's assembly line, for the night workers of Pressed Steel and for the compositors of the Daily Mirror. All these people and many others throughout the country are interested in this movement. They are nearly all investors who are practising thrift and providing vital risk capital for industry. They are learning about investment and how the economy works. They are genuine long-term investors in the main, because the dividends and incomes which they earn from their investments are invariably ploughed back. They are doing what the First Secretary wants us to do, namely, channelling surplus income into investment in industry rather than into consumer spending or gambling.
As a result of the Bill, investment clubs find themselves in a quite impossible position. It should be understood that an investment club is not a legal entity as such. Its individual members are direct owners of a piece of every investment or cash holding in the club. The clubs, therefore, will have to prepare tax assessments for each member. This involves enormous complications, because members of clubs come and go from time to time and they contribute different amounts, not only between each member, but also because a member may from time to time vary his own contribution. The result is that each time a club sells a security each member has a different assessment from a Capital Gains Tax point of view, not only as a percentage of the total funds which he holds, but also according to how it is arrived at in terms of his monthly contribution.
As an example, let us consider the average club consisting of, say, 20 members and assume that it has an average portfolio of 20 investments. This involves the club having to make no less than 400 calculations per month, or 4,800 calculations per annum. But that is not all. A list has to be prepared involving the adding up of 240 figures for each member of the club. This list for each member has to be sub-divided to indi- 1384 cate the shares bought and sold within 12 months whilst the member was a member, shares sold within 12 months of purchase but purchased before he became a member, shares sold after 12 months of purchase but sold while he was still a member and shares bought while he was still a member but not sold until after termination of his membership. This latter group has to be subdivided into shares held less than and shares held more than 12 months. I am not sure what the assembly line workers at Ford's will make of all this, but I suspect that the language of their meeting would be very unparliamentary.
The problems of investment clubs are, in a sense, not entirely dissimilar from those of unit trusts, but there is a basic difference. The Capital Gains Tax is difficult enough for unit trusts, as we heard frequently in Committee, but a unit trust is at least a legal entity. It has the advantage of professional management and it can gain tax relief for its running expenses and the cost of management.
The position is quite impossible for investment clubs. They do not have professional management and they certainly cannot charge their expenses against tax. In view of the fact that, I understand, many meetings of investment clubs take place in licensed premises, that is, perhaps, particularly sad. It is not surprising, therefore, that the National Association of Investment Clubs reports a falling off of club formations, not only since the General Election, but even more so since the publication of the Finance Bill.
Two clubs at least to my knowledge have been disbanded. Perhaps I might indicate the rather pathetic situation from the point of view of these clubs by quoting from a letter from an investment club in Ilminster, which states as follows:At our annual general meeting we sadly decided to cease investment, sell our holdings and distribute to members. After much thought we felt that it was quite unreal to expect any person to undertake the work involved by the new taxes. This appears to be a job for a computer rather than a person.This is particularly sad and, as a result, in the present state of uncertainty, no new clubs are being formed.
I believe that there is a good social and economic case for excluding investment clubs altogether from Capital Gains 1385 Tax, but we are not asking for that in the new Clause. We do not ask for any monetary concession. All we ask is a modest reasonable working arrangement to enable investment clubs to continue.
The new Clause is designed to ensure that an inspector of taxes can calculate the overall tax liability of a club and then accept an apportionment made under the rules of the club for the purpose of assessing individual members. As there may be a slight concession in respect of short-terns capital gains, and because of the well-known sensitivity of the Treasury Bench lest there should be any danger of richer people benefiting—what I call my anti-tycoon proviso—we have provided that it shall not apply to clubs in which anyone holds more than £1,000. Furthermore, we propose giving to an inspector of taxes power to make assessments on the normal basis where he is of opinion that an individual is obtaining benefit exceeding £100.
The last time that I moved a new Clause in Committee on behalf of what I thought were the interests of small savers, I said that I was endeavouring to salve something out of the wreckage of the Bill. The last new Clause was sunk without trace. This one really is the last diver going down to the wreck to try to do something for small savers.
If the Government are opposed to the new investor or the small man in the spread of wealth, I could understand their rejection of the Clause and their neglect of the interest of investment clubs. I should not agree with it, but I could understand it. I do not, however, believe that that is the case. I believe that the Chief Secretary is quite genuine in his remarks on the question of savings. If, however, the Clause is rejected and if nothing is done for the investment club movement, I regret to say that the Chancellor will go down in history as the man who destroyed one of the more exciting phenomena of recent times, the do-it-yourself investment movement.
The Chief Secretary, who, I understand, is to reply, said on 24th June thatSavings are to be encouraged in every possible way—large savings, small savings.He went on in the same passage to express his personal view: 1386I think that saving is in every sense encouraging to the character of the individual, and wholly to be recommended from what-every point of view one looks at it. So there is no doubt where we stand about encouraging saving."—[OFFICIAL REPORT, 24th June, 1965; Vol. 714, c. 1976.]I take the right hon. Gentleman up on that phrase tonight and express the hope that we may see those fine words, with which I agree and which, I am sure, he holds sincerely, matched by deeds. In that hope, looking hopefully at the Chief Secretary, I move the Clause.
§ Mr. Deputy-Speaker (Dr. Horace King)
The Question is, That the new Clause, charmingly moved by the hon. Member, be read a Second time.
§ The Chief Secretary to the Treasury (Mr. John Diamond)
I hope, Mr. Deputy-Speaker, that if I achieve an equally successful and charming answer, that, also, will be recorded in your reply.
§ Mr. R. Gresham Cooke (Twickenham)
I should like to put on the record exactly my interest in this matter. I am a deputy-chairman of the Wider Share Ownership Council. In that position I have never received any remuneration or expenses at any time; it is an entirely honorary position. To put it on the record, as the hon. Member for Manchester, Cheetham (Mr. Harold Lever) is present—he is also one of the deputy-chairmen, and we are honoured to have his assistance—some six or seven years ago I moved a Motion in this House in favour of wider share ownership. It was very well received and passed.
As a result of that, I approached my then hon. Friend the Member for Halifax (Mr. Maurice Macmillan) and Sir Toby Low and between us we formed the Wider Share Ownership Council. Mr. Maurice Macmillan then became chairman and I have always remained deputy-chairman. We have been on an all-party basis. The hon. Member for Cheetham is a deputy-chairman as also is the hon. Member for Orpington (Mr. Lubbock) and we have members also in the House of Lords on an all-party basis. Having said that, I hope that the beneficial interest that we are trying to show is one that will receive the sympathy of the House.
1387 The new Clause, which has been so ably moved by my hon. Friend the Member for Harrow, Central (Mr. Grant), is a small administrative measure to help investment clubs. Investment clubs meet in canteens, public houses, private houses, after hours in offices, and so on. I have in front of me the story of one of them, which comes from Bridgwater, in Somerset. It started with 15 members and now has 33. They were clearly handicapped because they had among them no one with investment experience, no accountant and no stockbroker. However, they were later introduced to a London stockbroker. The first year proved disastrous, and though the club's first purchase, British Industrial Plastics, was later sold at a profit of 64 per cent., other purchases went the other way and included Vactric which, after a meteoric slump, finished in liquidation.
So it is not all a bed of roses. They go on to say that, despite the initial setbacks, the club held together and the £1 units which were at one point worth little more than 14s. have now recovered to nearer 28s.
Those are the sorts of clubs of which we are speaking. The Inland Revenue should help them because, as far as I can see, there is nothing in the Bill to help the small investor at all. I hope that the Chief Secretary will not tell us, "Well, we like the object of the Clause and would like to be able to help, but it is not legally sound, and it is no good passing the Clause." I feel that the Chief Secretary is like the headmaster who says, "This is good for you, but it hurts me more than it hurts you." I ask him not to be mean to these small people who are struggling with investments, and to pay attention to the words of the President of the Board of Trade when he was interviewed by small investors a year or so ago. They asked him, "Do you believe in wider share ownership?", and he said, "Yes, certainly." Their next question was, "What is your attitude to investment clubs?" and he replied, "I know a little about your movement, and many new investors are in need of a great deal of guidance.
"I would encourage reputable organisations, such as the National Association of Investment Clubs, to help give guidance 1388 and information to small investors." He realised what we must all realise, that these people want all the assistance they can get. Therefore, the suggestion in the Clause about the assistance of the inspector over the Capital Gains Tax is not asking for too much.
Whether the President of the Board of Trade's advice later in the interview was so helpful, I do not know. He went on to say, "I do not see why share prices should not rise under a Labour Government. There will be full employment and planned and regular expansion of production. That should be reflected in equity shares."
§ Mr. Harold Lever (Manchester, Cheetham)
In desiring to encourage investment clubs to buy ordinary shares, surely the hon. Gentleman has in mind the expectation that they will rise under a Labour Government.
§ Mr. Gresham Cooke
If we get galloping inflation, anything may happen to equity shares.
Here is a fairly simple Clause which invokes the help of the Government for the small investment clubs. It is obvious they cannot employ accountants at great expense to guide them. They cannot employ secretaries to make the necessary calculations, and they should be entitled to look to the State for some assistance. What would be better than for their own inspectors to help them? They are helpful men, and I see no reason why the inspectors should not help investment clubs in their particular districts.
I have much pleasure in supporting the Clause.
§ Mr. Geoffrey Lloyd (Sutton Coldfield)
I support the new Clause moved by my hon. Friend the Member for Harrow, Central (Mr. Grant). I also am a member of the Executive Committee of the Wider Share Ownership Association and president of the Birmingham branch of that association, but I have no personal financial interest of any kind, nor do I receive any fees or professional profits in any way connected with the organisation. I am interested in it as an important social and economic movement.
It is true that in the Finance Bill, whatever they may say, the Government have injured the interests of investors, particularly the interests of small investors in 1389 investment clubs and unit trusts. We are seeking by the new Clause to undo some of the harm the Government have done, particularly to investment clubs.
I should like to give a measure of the importance of this movement, without either exaggerating or minimising it. My hon. Friend mentioned the figure of some 2,000 investment clubs, but, as I think he will agree, within that figure there is a more precise one in the number affiliated to the National Association of Investment Clubs. It is obviously a smaller number, because not every club is affiliated to the Association, but it gives us an important measure of the growth of this movement. It started in 1958 with 16 clubs affiliated. In 1959, the number rose to 80; in 1960, to 324; in 1961, to 474: in 1962, to 585; in 1963, to 651; and in July of last year it had topped the 800 mark for the first time. As my hon. Friend said, this is the first year in the history of the movement that there has been a fall in the number of affiliations. There are now only about 700 clubs affiliated to the Association. More clubs ceased to be affiliated to the national organisation than became affiliated, and that is undoubtedly connected with the Labour Government and their Finance Bill.
A good measure of the vitality of the movement is provided by the number of people who apply for the manual issued by the Association for the formation of investment clubs. In the first quarter of last year, 264 of these manuals were applied for and issued. In the period from April to June of this year the number had fallen to 46. That is a great diminution, and it reflects the sense of disappointment and almost desperation of the clubs in the face of the Finance Bill. That is why we have brought forward the Clause.
My hon. Friend has said quite truly that there is a great variety in these clubs. That is a point which the House should face, because there is a problem here, and it is perhaps different for different kinds of clubs. Those associated with the movement will agree that there are two kinds of clubs. There are clubs of which the members are mostly professional people and junior executives with a good deal of business knowledge. On the other hand, there are clubs formed by working men in factories.
1390 The new Clause will help both but, if I may say so, the professional type of investment club is more capable of dealing with difficulties which arise than those formed in factories. It is the clubs in factories in which I take a special interest, because here I think we are dealing with quite a new social movement which enables a man who hitherto has had no interest at all in investment to put his toe into the water and make the first step with a minimum of personal risk. Therefore, in dealing with the Clause, I should like to point out the difficulties facing the kind of club which I have in mind.
I am thinking particularly of a club in the tool room of a big car firm in Birmingham. Perhaps I ought to mention in passing that the chairman of the club is a member of the Labour Party. It started in 1961 with 40 members. It now has 60, and altogether throughout the five years it has had 80 members. The club's subscription in 1961 totalled £8 a week. It now totals £22, and in relation to this Clause I ask the House to consider the subscriptions of individuals. Some of them subscribe 2s. a week. Others subscribe 4s., 6s., 8s., 10s., 12s., 14s. and some subscribe £1. No dividends have been declared in the five years, and all the money has been ploughed back. The club has a planned life of five years. The committee of seven members meets once a fortnight. In April, 1965, the book value of investments was £2,442, while the current value, in spite of the Labour Government, is £2,547.
The point that I should particularly like to make with regard to this club, and the six others that I shall mention in passing, is that it is the members of this type of club who find it difficult to deal with the complications imposed by the Bill. There is an important social point of view to be borne in mind here. Seven members of this club have now made their own individual investments. This is extremely interesting, because it shows that individuals, after their experience as members of an investment club, feel that they can become individual investors on their own. Whether they have acquired enough experience in so short a time to do it is perhaps a matter of opinion, but the fact is that they do.
1391 In these same works there is also the Works Engineers Department Investment Club which has 10 members, and the United Investment Club in the Cost Office Department, which has 10 members and invests £25 a month. There is also an investment club in the Material Costing Department. This club has 30 members, each of whom subscribes £2 a month. There are two investment clubs in the administration and supervisory block. Finally—and this is a club which I put before the House and ask that it be given sympathetic consideration—there is the Apprentices' Investment Club, which was started in January of this year, and has 20 members. The minimum subscription is £1 a month, and the company has lent £50 for a year to get the club going.
The apprentices' club differs in its philosophy of investment from all the other clubs in a way which I suppose is slightly characteristic of youth. It believes more in speculation, whereas the other clubs are more concerned with solid investment. I think we may feel that if the apprentices are attracted to taking a bit of a risk there is no harm in that at that age, and that they may sober up and become more careful investors as time goes on. This is a valuable social movement, and if it is not discouraged by this Bill it is likely to expand. It might expand on the lines of the American system, where there are about 10,000 clubs with investments of about £18 million in terms of dollars.
These clubs now feel that they are faced with the problem that when members leave the club they have to be paid out, they have to be provided with a certificate of their proportion of Capital Gains Tax, new members join the club, and from then on have to be included in the calculation of profit divisions for tax purposes. In addition, many club members can vary the amount of their sub-subscription to the club, and they are allowed to withdraw some of their capital from time to time. Because of all the foregoing reasons, the individual proportion of ownership of each separate investment will change month by month, and this is the kind of difficulty for which we seek a remedy, because while it is difficult for unit trusts with strong professional staffs to cope with the kind of problems that arise, the type of working man's 1392 club of the kind to which I have referred, which has not the same panoply of professional guidance, will find it much more difficult to cope with the difficulties facing it. They take the view that the Government expect them to have a computer to work things out, but this is too much to ask and so they close down.
I hope that the Government will either accept the Clause, which would be the best thing, or give us some prospect of a real solution of this problem.
§ Mr. Diamond
I think that I ought to follow the precedent which has been set so far and declare my interest. I am the Chief Secretary to the Treasury. For a period up to about December last I was an honorary occupant of that office, but now, thank heavens, I am paid. Having declared that interest, perhaps I can come to the point of the Clause and say that there is no difference between the two sides of the House about the desire, as I have said many times both from that side of the House and perhaps a little more authoritatively from this side, to help investors large and small, and to help the savings movement in every way that we can. I am anxious in particular—as is the right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd)—to help the savings movement in factories. Indeed, this is a very important part of the movement, and I repeat that we are anxious to help every kind of savings, large and small, in every sphere of life, so there is no difference between us on that score.
The Clause seeks to remove any administrative difficulty which would discourage savings of this kind. There is no difference between the two sides of the House on that either. The Government are as anxious as the Opposition are that no administrative difficulty should be put in the way of saving. What the supporters of the Clause are concerned about is that a literal interpretation of the present provisions might cause administrative inconvenience and therefore discourage saving.
This is not the first time that this problem has arisen. It arose in 1962, with the short-term gains tax, and the provision there had to be accommodated to the varied informal constitutions, or lack of constitutions, of these various savings clubs which we are now considering. 1393 Accordingly, discussions took place between the Revenue and the Association, as a result of which, under the previous Government, administrative arrangements were arrived at which, so far as I am aware, have worked perfectly well.
The Government are anxious that the same kind of conversations should take place so that administrative arrangements can be arrived at which will work well here, too. But the supporters of the Amendment—I am sure that they have not thought of it in this way—do not wish to allow this flexibility in administration, and want to tie it down in a way which, for reasons which I can demonstrate, will not work. But that is not the important part. The supporters of the Clause want to remove this flexibility.
If right hon. and hon. Gentlemen opposite think about it, they will realise that this is not the best way of going about the job. We are all agreed about our major objective of encouraging savings, and about our lesser objective of removing any discouragement or deterrent through excessive administrative difficulties. The way to remove the administrative difficulties is to allow the Inland Revenue and the Committee of the Association to get together and to work out an arrangement such as has been worked out previously for the short-term gains tax and which would accommodate the various difficulties which arise.
Difficulties arise because, by and large, these clubs are not trusts. The new Clause refers to trusts, and it would therefore be wholly unsatisfactory from the beginning—but that does not matter, because in the House we deal not with the words of a Motion but with the intentions in the mind of the mover. The majority are not trusts. Most of them have no constitutions of any kind. There are various arrangements. Some are members of the Association but a great number of them are not members of the Association. The turnover of membership within the clubs is continually changing. People get interested, invest, lose interest and sell their shares to somebody else.
There has been very little growth over some period in the number of clubs or in the amount of the portfolio held on average by each club. It is unfortunately 1394 rather static. We should like to encourage it to grow, as we should like to encourage all forms of saving to grow. In that respect there is no difference between the two sides of the House.
We are simply anxious to give to the Board the kind of flexibility which it needs to work out satisfactory administrative arrangements with a vast number of clubs of varying kinds, each of which has a different constitution from another or has no constitution at all. As this flexibility which we desire would be denied to us by the Clause, I hope that the House will not wish the new Clause to be pressed but will leave us free to do what the previous Government did—to work out an arrangement as between the Board and the Association which will ensure that the minimum of administrative difficulty arises and which will enable an administrative arrangement to be worked out which suits the capacity of the saving clubs, and the kind of knowledge and expertise which they have and which will enable them to work reasonably satisfactorily.
As we are all after the same objective, I hope that I have satisfied the House that although the moving of the new Clause has served a useful purpose in airing the topic, the Government are fully alive to the problem and are anxious to meet the needs of savers and to encourage all forms of savings, small and large, including this form, but believe that the best way is to allow the kind of flexibility which I have mentioned.
§ 5.45 p.m.
§ Mr. Raymond Gower (Barry)
On this side of the House we were reassured in large measure by the attitude which the Chief Secretary took in his speech. I had always hoped that the right hon. Gentleman the Chancellor of the Exchequer and the Labour Party in general would be as anxious as we are that small investment should be encouraged, and in particular that small investment of the kind which has been practised in investment clubs in recent years should receive every practical encouragement. Whatever his feelings about the details of the right hon. Gentleman's speech, I am sure that my right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd) was glad to hear the assurance that that is the Government's view.
1395 I have always had some anxiety about this, because there are some Socialists, perhaps more extreme Socialists than most, who would not particularly welcome a wider extension of investment. Indeed, they would feel that the success of these clubs would militate against the continuous growth of ideal Socialism because it would create a larger number of people who had a vested interest, if one may so describe it, in the extension of share ownership in the capitalist system.
Before we part with this Clause, however, we should like an assurance from the right hon. Gentleman that the powers which exist in present legislation, without any further amendment of the law, are sufficiently flexible to enable the Inland Revenue to make arrangements with clubs of such diverse characteristics. It would, indeed, be unfortunate if at this stage we did not amend the law and during the year ahead these clubs found themselves increasingly embarrassed by statutory difficulties. As the right hon. Gentleman pointed out, in 1962 they had to contend with a new dimension in the form of the short-term Capital Gains Tax. But I remind him that the longer-term tax which has been introduced as far more far-reaching and is greater in its effect on clubs of this kind.
My right hon. Friend the Member for Sutton Coldfield has mentioned the arrangements under which these clubs must work. I have become acquainted with one or two clubs, and as everyone else has declared some interest, I should explain that recently I have been associated with the Wider Share Ownership movement, without any financial benefit therefrom. The Chief Secretary is aware that even without any Capital Gains Tax of any kind, it is a rather difficult job for some of these clubs to maintain their secretarial organisation. It is a very involved business for them in any event, and then they suddenly have imposed this very difficult job. If it proves burdensome in the extreme to the investment and unit trust, how much more burdensome is it for trusts of this kind?
I hope that the right hon. Gentleman will be able to assure us that the existing powers will enable the Commissioners 1396 of Inland Revenue and the inspectors locally to meet the various requirements of these many trusts. That this is of very great importance has been shown by the news given by my right hon. Friend and repeated by my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) that since the General Election, and particularly since the publication of the Finance Bill, there has for the first time been a gradual decline in the appearance of new clubs.
§ Mr. Donald Box (Cardiff, North)
Does not my hon. Friend also agree that this provision is also essential for the sake of the Inland Revenue, because as the Bill stands the Revenue will be called upon to account for demands for very small sums. Did my hon. Friend notice the statement in the newspapers over the weekend that they had had to increase wage rates by 10 per cent. because they were so short of personnel?
§ Mr. Gower
I suggest to the Chief Secretary that although he may find the terms of my right hon. Friend's Clause too rigid, some such formula seems essential to meet the needs of Inland Revenue in the present system, which we fear must place great difficulty on the Revenue as well as on the clubs. I sincerely hope that the right hon. Gentleman's assurance will be justified in the months ahead. This is one of the most interesting developments of the post-war years. These are the investors of tomorrow. They were brought into investment by these clubs. Let us hope that these clubs will continue to function.
§ Mr. Joel Barnett (Heywood and Royton)
As so many of those who have spoken have declared that they are members of the Wider Share Ownership Committee, or some other such committee, may I immediately say that I am not a member of any such committee. Nor do I professionally advise any investment club. It has been alleged that Socialists 1397 may not want to see the growth of wider share ownership. I should have thought that the contrary would be the case. In view of this Finance Bill, there will be greater encouragement for plough-back to take place and a consequent growth in productivity. There will, therefore, be a growth in the capital value of the money invested.
I have considerable sympathy with the case which has been made for the encouragement of small savings. Unfortunately, most of those who have spoken in support of the Clause have dealt entirely with the question whether investment clubs should be encouraged to expand. They have not dealt with the Clause itself. As my right hon. Friend the Chief Secretary said, there cannot be many hon. Members who would not want to see a growth in savings, particularly of this type—that is small saving in industrial shares, the type where the return on the investment is ploughed back. It tends to be further invested and not spent in the way in which, for example, savings in the Post Office Savings Bank are spent, because they can be withdrawn merely by slipping round the corner. There is no doubt that most hon. Members would want to see a greater encouragement of small savings of this type.
Most of those who have spoken, however, have not given sufficient thought to where their arguments lead. Much of what they said would militate against investment in investment clubs. The right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd) said that many small investment clubs do not have professional management. I should have thought that the last thing that hon. Members would want to do would be to encourage small savers to invest in organisations which are not very well managed. Perhaps there should be a rather more fundamental examination of how best to encourage small savers. The best way might be to enable small investors to invest in a first-class unit trust on a weekly basis by buying locally, say at a local post office. A unit trust, by its very nature, is bound to be much better managed than an investment club, particularly some of those of the type which has been described.
§ Mr. Barnett
The hon. Gentleman should not be quite so naive as to suggest that decent management for investment clubs is needed only because of this Finance Bill. I am sure he is not suggesting that they did not need first-class professional management before. One crying consideration when deciding whether small savings should be encouraged via investment clubs is whether this method gives small savers the best type of investment, the one with the least degree of risk, the one with the best management, and the one which will give a growth of capital.
§ Mr. Eric Lubbock (Orpington)
Would not the hon. Gentleman draw a distinction between professional management and professional advice? Does he not recognise that, although many investment clubs are far too small to employ professional managers, there is nothing to stop or inhibit them from obtaining professional advice?
§ Mr. Barnett
I am not suggesting for a moment that they are not able to obtain professional advice, but it is still valid to argue that it would be easier for a large, well-managed unit trust to obtain better and wider spread advice than for a small investment club. I am arguing that hon. Members opposite who have spoken in favour of greatly encouraging the growth of investment clubs perhaps have not examined their case sufficiently.
§ Mr. Geoffrey Lloyd
I am sure that we would all agree that the unit trust is a very fine method of investment. However, would not the hon. Gentleman, in his analysis of the advantages or disadvantages of investment clubs vis-à-vis unit trusts, take into account the educational advantages of investment clubs, in that their members actually play a part in considering the merits of the various companies considered for investment? We think that this is a very important point.
§ Mr. Barnett
I am not saying that investment clubs are wholly bad. There are some very fine investment clubs. This type of investment, indeed any investment which encourages the growth of savings, 1399 merits examination, but we should at least be doing that.
Few hon. Members have spoken on the Clause itself. In my view, the Clause does not help. The hon. Member for Harrow, Central (Mr. Grant) spoke about adding up enormous numbers of figures. I have sympathy with those who have to do that. It is a long time since I did it myself, but I have had to do it in my time. Therefore, I can sympathise in the matter of the administrative problems and complications involved. But I repeat that the Clause would not help. It has been suggested that we must try to ease the burden on inspectors of taxes. Subsection (5) says:if the Inspector is satisfied that such apportionments are reasonable and not likely to give a substantial tax advantage …To leave this sort of problem to be decided by a tax inspector is not to ensure what the hon. Gentleman has in mind. I know that the hon. Gentleman is leaning over backwards to try to guard against any possibility of avoidance, but subsection (8), which is designed to deal with this point, would only make matters worse: It says:If in the opinion of the Inspector any individual who is a member of one or more investment clubs has obtained thereby a tax advantage exceeding £100 he may assess that individual with regard to the true value of his interest etc., etc ….This will hardly make for easier administration, either for managers of investment clubs or for inspectors of taxes.
What my right hon. Friend the Chief Secretary said is by far the most reasonable suggestion, namely, that investment clubs can consult local inspectors of taxes, who are very reasonable people. This would produce the most satisfactory results. I also hope that those who support the Clause will give more consideration to whether this is the best type of small saving to be encouraged.
§ Mr. Harold Lever
My interest having been declared for me by at least three hon. Members opposite, I want only to say a few words of welcome for the spirit in which the Clause has been put forward and, even more, for the response of my right hon. Friend the Chief Secretary, which was impeccable from the point of view of those who want to encourage 1400 wider share ownership. I shall not prolong the debate. I appeal to my fellow presidents and vice-chairmen not to divide upon the Clause, but to withdraw it, in the light of the spirit in which the Clause and the argument adduced in its support have been received by my right hon. Friend the Chief Secretary. Not to do so would be to do a disservice to the movement which we all wish to support. It would, wrongly, give the impression that the Government were in some way opposed to this movement. I hope that the Clause will be withdrawn.
§ Mr. Peter Walker (Worcester)
Before the Chief Secretary rejoices too much at being praised by his hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever), may I remind him that only a few days ago the hon. Member for Cheetham wrote an article saying what a good Finance Bill it was beginning to turn out to be? Two days ago we learned that a move was to be made to delete most of the Clauses.
In view of what the Chief Secretary has said, I would advise my hon. Friends to withdraw the Motion. However, may I express the hope that the Chief Secretary will ensure, in the negotiations which take place, that the genuine spirit of the Clause—he knows what we are trying to achieve by the Clause—is interpreted and put into practice.
Then I would draw attention to the fact that this position has previously been negotiated and there has been a satisfactory arrangement about the short-term Capital Gains Tax. During the last few years this movement has extended, as we have heard. Therefore, I would have thought it was possible for the Treasury to put into the Bill—
§ Mr. Walker
The Chief Secretary says "No", but I am certain that it would have been possible to put into the legislation the manner in which investment clubs would be treated. The fact that this has not been done means that investment clubs throughout the country will be unaware of the position until some arrangement is made, and then only those which are members of the National Association will be circulated with the details of the arrangements made. There 1401 will probably be considerable confusion in the coming months as a result of the position not being made clear at the time of this Bill being passed. This is a rather complacent attitude to a very important and hitherto expanding movement.
We had the usual declaration from the Chief Secretary, saying how he believes in encouraging savings and movements such as this. I should have thought that the Government would have been desperate at this time to encourage more savings. There has never been a time in recent years when the savings movement and personal savings needed more encouragement. It is important for the Government to encourage movements such as this, in the same way as they should encourage other forms of saving, because the Government's economic policy is being undermined by their failure to encourage savings—and not only their failure to encourage but their positive discouragement to savings in recent months.
Last week we heard that the increase in national savings in the first 12 weeks of this year was less than one-quarter of what is was in the same period last year. We have heard also that the sales of unit trusts in the first five months of this year are 25 per cent. lower than in the corresponding period last year. These are startling figures and they are undermining the policy which the Chancellor states he is trying to put into operation. With the Corporation Tax discouraging dividend distribution, with the Capital Gains Tax affecting investment throughout, and with this general lack of positive interest in the investment club movement, can one wonder that the saving situation is deteriorating quickly?
I very much regret that the Treasury did not take some initiative on an important movement such as this and take action in the Bill, giving perhaps even more encouragement than was sought by my hon. Friend the Member for Harrow, Central (Mr. Grant) and positively encouraging savings. We have moved this Clause to ensure that the investment club movement shall receive an appropriate administrative arrangement. The Chief Secretary has at least given us that assurance, and for that reason I suggest that my hon. Friend should withdraw the Clause.
§ Motion and Clause, by leave, withdrawn.