HC Deb 26 May 1965 vol 713 cc673-729
The Solicitor-General (Sir Dingle Foot)

I beg to move Amendment No. 136, in page 24, line 1, to leave out subsection (3) and to insert: (3) On the occasion when a person becomes absolutely entitled to any settled property as against the trustee all the assets forming part of the settled property to which he becomes so entitled shall be deemed to have been disposed of by the trustee, and immediately re-acquired by him in his capacity as a trustee within section 21(5) of this Act, for a consideration equal to their market value. This Amendment looks formidable on the face of it, but it is purely of a drafting character. There is no change in the intention behind it. It might be supposed on the face of it that there was some contradiction between Clause 21(5) and Clause 24(3), but the scheme of the Bill is that at the point of time a person becomes absolutely entitled to a trust a Capital Gains Tax becomes chargeable. That is the moment of disposal or of notional disposal.

But suppose that the trustee does not actually hand over the property at that moment of time. Suppose the actual hand-over takes place later than the notional disposal. For example, a beneficiary may be abroad and does not, in the physical sense, actually take up possession of the property until he returns. Therefore, the property remains in the hands of the trustee, but under the operation of the earlier Section he is now a mere nominee. After the notional disposal applies and the trustee becomes a mere nominee it is desired to avoid any possibility of the tax becoming chargeable a second time.

This Amendment takes the place of the earlier subsection and provides, in the first place, for the disposal by the trustee of the settlement to himself as trustee for the beneficiary. Secondly, it provides for the disposal to be regarded as taking place at the market value of the assets in question. This is a very technical point and I am trying to make it as clear as I can, but I am sure that the Committee will find it does not involve any new departure at all. We are simply trying to spell this out a little more clearly than was done in the original Clause.

Mr. Peter Walker

I thank the Solicitor-General for his explanation of the Clause. As far as we gather, this is to make the position clear and it is a departure in the sense that for the first time during our debates there has been an attempt on the part of the Government to avoid double taxation. Therefore, we welcome the Clause.

Amendment agreed to.

6.45 p.m.

Mr. Peter Walker

I beg to move Amendment No. 251, in page 24, line 5, leave out subsection (4).

The Deputy-Chairman (Sir Samuel Storey)

With this Amendment we can take Amendment No. 424, in line 11, at end insert: Provided that the liability to pay tax on the notional gains arising may at the option of the trustees be postponed until such time as such assets or securities are disposed of and meanwhile the amount outstanding under the provisions of this section shall accrue interest at the rate of 2 per cent. per annum.

Amendment No. 252, in line 12, leave out subsection (5).

Amendment No. 426, in line 15, leave out "ten" and insert "twenty-one".

Amendment No. 427, in line 17, leave out "ten" and insert "twenty-one".

Amendment No. 253, in line 21, leave out subsection (6).

Amendment No. 334, in line 22, leave out "ten" and insert "twenty-five".

Amendment No. 335, in line 24, leave out first "ten" and insert "twenty-five".

And Amendment No. 336, in line 24, leave out second "ten" and insert twenty-five".

If it is so wished Amendment No. 424 can be moved formally for a Division, later.

Mr. Walker

This particular Amendment is almost identical in principle to the debates we have just had on the Question, That the Clause, as amended, stand part of the Bill and I do not intend to repeat the arguments which took place then except to say that one presumes that the hasty disappearance of the Prime Minister and the Chancellor of the Exchequer after the last Division is an indication of their anxiety over the fact that had the three hon. Members opposite who expressed their views against the Clause voted in the same way as they spoke the Government would have been defeated by a majority of two.

Mr. Neil McBride (Swansea, East)

On a point of order, Sir Samuel. I have promoted a film show in the Committee Room in Westminster Hall and on the occasion of the last Division no bell rang to intimate there was a Division.

The Deputy-Chairman

I will have inquiries made.

Mr. Walker

On this particular principle the position of the Government was that they would have been defeated if hon. Members had voted in accordance with their speeches and we hope that it will be recognised by the Government that there are very widespread anxieties over this principle of applied Capital Gains Tax at the time of death. I appeal to my hon. Friends to press this Amendment to a Division, in complete accordance with the views expressed in the previous debate and I hope that after a little reflection those hon. Members opposite who so obviously agree with us on this principle may join us in the next Division.

It has been agreed that several other Amendments may be discussed with this Amendment and I would like to refer to those Amendments applying to the revaluation, over 10 years, of property in the form of settlement. This is a principle which can result in a very considerable amount of difficulty and problems, particularly in the case of family businesses or of farms that are subject of being such a settlement. It means that every 10 years there will be a possibility of a Capital Gains Tax assessment being made on a gain that has not been realised. This will result in the trust concerned having to dispose of part of that business or part of that fund and this is something which must obviously cause considerable concern on both sides of the Committee.

I would have thought it difficult to argue in logic that where a particular property is subject for a settlement it should be taxed in a very different way to the taxation if the property is held by an individual. If one holds a business or a property as an individual one does not have to have it valued every 10 years and one does not have to pay Capital Gains Tax on it every 10 years. One pays Capital Gains Tax at the point of realisation. The principle of subsections (5) and (6) of this Clause are, in fact, collectively to apply a 10-year valuation.

The Government must have received many representations on this issue. I think that it is probably true to say that the technical, financial, and accountancy Press has been unanimous in saying that this period of 10 years is unreasonable. I recognise the argument that unless something is done to see that Capital Gains Tax is paid under such settlements, settlements could go on for ever and there would never be a point of paying any tax. If the Government pursue their policy towards double taxation, in logic, at the point of death, they should con- tinue to include subsection (4), but what they cannot argue is that if a gain has not been realised within the settlement, and if there is no capital benefit to the people who benefit from the settlement, it is reasonable, every 10 years, to impose a Capital Gains Tax of this type.

There is an Amendment in the name of the right hon. Member for Orkney and Shetland (Mr. Grimond) which reflects one of the difficulties involved in not being able to pay Capital Gains Tax at the time that such an assessment is involved. This is a thoroughly bad way of dealing with this settlement. It will result, as the previous Clause will result, in the breaking up of many important family businesses and farms. It imposes a level of taxation different from, and more than, that imposed on the individual, and for this reason I hope that the Committee will have no objection to dividing on the Amendment, and in so doing indicate its disapproval of the whole system outlined in the Clause.

Mr. Grimond

I, too, appreciate the difficulty of the Government. Unless some provision is made, it will be possible to have a trust that runs on indefinitely and never becomes chargeable for Capital Gains Tax. But unless whoever replies to the debate can make a very much better case for the particular method of meeting this difficulty than has so far been made in the Bill, I hope that the Government will think about it again.

We are continuing an argument about involuntarily or notional transfers or disposals of assets. My first point is that this will not only impose injustice on the beneficiaries, but will create difficulties for the trustees. Under the 10-year rule it may well be that the assets, for a purely temporary reason, are highly valued at that moment. If that was the case, the trustee might feel bound to dispose of them, because if they were to fall heavily in value after paying 30 per cent. in tax, it would be a great injustice on the beneficiaries. But there are many trusts which hold assets which cannot be disposed of as easily as all that, and it would be wrong to do so.

Our Amendment is designed to meet a part of that difficulty, by giving the trustee some latitude in the disposal of assets for the payment of the tax, but I am arguing that not only will he have to dispose of assets to pay the tax, but he will be in difficulty if the assets are valued fortuitously at the moment when they are unnaturally high, at a level which will not be maintained. It is possible that, having paid 30 per cent. in tax, at the end of the period of the trust it could be less in value than it was when it was founded, and, as far as I can understand, no credit will be given for this. There is no allowance for losses.

Further, there are particular sorts of trusts which would seem to be very harshly treated under this provision, and treated in quite a different fashion from what they have been up to now. For instance, it is a common practice to give a widow a surviving life interest in her husband's estate. As I understand, this has involved no second payment of Estate Duty when she dies, but under this Clause it will involve the notional sale of assets, and they will come under the capital gains charge. I would have thought that the same argument applied in the case of Capital Gains Tax as in the case of Estate Duty, and if it is considered proper to relieve the trust of a second charge to Estate Duty it seems proper to relieve it of Capital Gains Tax.

Again, it is common form, and there is no objection to it, to form trusts for infants under 21 so that they may accumulate funds which they do not require at the time. These are relieved from any charge to Estate Duty if the infant should die, but they are apparently to be valued under the notional provision in 10-yearly periods, and I would have thought that this would be unjust to beneficiaries and create difficulties for the trustees.

It is also common practice to encourage people under 21 who have been left, or have been given, large sums of money, to put that money into trust. This has no tax advantage. It means that the person concerned cannot fritter it away, and if the money belongs to a girl, she cannot run away with an unsuitable man who may be after her purely for her money. Most solicitors will be unwilling to recommend putting money into trust, because if they do the assets will come under Capital Gains Tax, and at a wholly unknown time when it may be most inconvenient to realise them, and when their value may be greatly inflated.

I think that we are, in fact, debating a wealth charge. We have moved from the Capital Gains Tax. What the Government are saying is that wealth should be taxed periodically. There is a case for this, but there is no case for it at 30 per cent. Yet we are to levy a rate which some think is high for a capital gains charge merely on wealth. I ask the Government to look at this again, because it may act most unfairly. It will stop desirable forms of protection for young people. It may well be a lawyers' and accountants' paradise, and I would not have thought that we would want to encourage still further these lucrative professions to take on further business when they are overworked already and are not complaining about having no further work to do.

I hope that the Solicitor-General will look at these objections, which, I think, are reasonable, and which have been made not for political reasons, but by people dealing with human beings, and not with theory. They have been made by people who are trying to catch up with the mass of legislation and make sense of it, and by people who are not attempting to evade taxation, but are trying to enable their clients to make the best use of funds available, and to protect young persons and widows whom I cannot believe it is the Government's intention to soak in the interests of some national incomes policy.

The Government greatly overestimate the jealousy and cupidity of the average man. I do not believe that he goes round saying that someone else has got something which he has not. I agree that large loopholes in tax avoidance should be stopped, but I think that the Government have been taken in by the sort of view that people say, "He is avoiding a little tax which I am not. You had better get after him". One of the troubles with our general legislation on taxation is that we hit everybody in sight, on the off chance of hitting someone who deserves to be hit.

We very often cut off our nose to spite our face. When I say "our face", I do not mean the Solicitor-General's face, or my face. I mean the national face. We inflict a considerable amount of harm for the sake of catching a few people whose total mischief may not amount to much. I am not talking about big evasions. I am talking about stopping up small holes in the net. In so doing we are causing a lot of harm to perfectly legitimate businesses.

7.0 p.m.

Mr. Harold Lever

I feel it my duty to say a few words from this side of the Committee without going into the technical details. The tax which we are discussing is not really a Capital Gains Tax, but a capital gains realisation tax. The general application of the tax is a Capital Gains Tax, and the general intention is that realised capital gains shall be taxed. By the last Clause we stopped the loophole of suicide as a means of evading or avoiding this tax. Now we are invited to stop up any avoidance loophole by means of trusts.

I may as well begin by saying what, inevitably, I have had to say at the conclusion of each speech which I make on this Bill. I shall vote with the Government. Hon. Members opposite always imagine that I am sincere in criticising the Measures introduced by the Government. For that, they accept my sincerity, but they think that I am insincere when I say that nothing would persuade me to do anything which might bring back a Conservative Government. It requires an extra special sensory perception on the part of hon. Members opposite to appreciate my sincerity with regard to the technical details, but not my sincerity in wishing to do everything to prevent another 13 years, or even 12 months, of Tory rule.

Therefore, let me disappoint any expectations on the part of hon. Members opposite by telling them in advance that I propose to support the Government.

Sir D. Glover

I am sure that it would cut out a lot of tedious repetition on the part of the hon. Member, if I said, on behalf of hon. Members on this side of the Committee, that we accept implicitly what he has said, so that in every other speech he makes he need not refer to it again.

Mr. Lever

That will save a great deal of the time of the Committee and prevent any false hopes being raised among the more naïve occupants of the benches opposite. It will save them from wasting their time and from giving me the kind of advice which they may well believe to be of enduring benefit to me.

We are asked to accept, in general, the application of the concept of a Capital Gains Tax—a realised capital gains tax—not because it is not well understood that such a form of tax on capital is fraught with many anomalies. Non-realised gains—even when they are on a vast scale may escape, and small realised gains may immediately attract, the attention of the tax gatherer. I may make £2 million of unrealised capital gain on my investments and, reassured by this, I may spend some of my liquid resources in order to live exceedingly well, in the sure knowledge that I have £2 million of aggregate wealth not bearing tax, being of a capital nature. Everyone realises this anomaly, which is inherent in a realised Capital Gains Tax. I have already expressed the hope that this will prove to be only a temporary way of dealing with the question and I hope that the Government will replace it with a more realistic wealth tax, or capital accretion tax, in the more immediate future.

When I say I want a wealth tax I do not want—as was pointed out by the Leader of the Liberal Party—a wealth tax at a rate of 30 per cent. or 40 per cent.; and this is a wealth tax applying at 30 per cent. I do not know what worries the Government in relation to this argument about trusts. If, temporarily as I hope—I am reassured by nods of agreement from very informed quarters—the anomalies of a realised capital gains tax are accepted, it is on the basis that we can accumulate, without realisation, capital gains till the day we die—not afterwards, of course—without paying a penny piece.

The ground for this is that if we do not realise our capital gains, we cannot spend them and, therefore, cannot taunt, tantalise or torment the P.A.Y.E. earner in the manner which is supposed by official Treasury thought to occur when people spend capital gains. I agree with the Leader of the Liberal Party that there is too much preoccupation with that thought.

Though the tax gatherer may be universally popular, in the view of both political parties, that view is not generally adhered to. It is assumed by many hon. Members that their obsession is shared by their fellows who want nothing more than to pay the maximum rates of tax. This is not an opinion held outside this Committee, though I am ready to take at its face value the idea that it is a view which is popular in the Committee. At all events, the rationale of this realised Capital Gains Tax is that if people do not realise capital gains they cannot indulge in the kind of opulent living which provokes the workers into making demands for wage increases and the like. I will not expatiate on the difficulties which will arise if this tax is enforced. It seems to me that the Government, inevitably, will want to accept a measure of amendment to protect the taxpayers from the manifest evils which will result.

I wish only to say a few words more on the question of trusts. At the back of my mind I have the feeling that the Treasury is seeking to deal with discretionary trusts the beneficiaries of which are not certain and which are in law unknown and cannot be reached. If the Treasury does not like discretionary trusts let it deal with them in a direct and open manner. Let the Treasury come to the Committee, where the majority of hon. Members have done their best so to arrange their affairs as to pay the maximum amount of tax—and evince deep resentment if anyone else does not share their passion—and no doubt the Committee will, rightly, deal brutally and fully with all discretionary trusts and such-like devices. But please do not ask us to deal a blanket-covering blow at all trusts in a manner which has been outlined already and, I have no doubt, will be exemplified still further by following speakers.

Mr. Kimball

I should like to express agreement with the hon. Member for Manchester, Cheetham (Mr. Harold Lever) that this Clause is a sly way adopted by the Treasury of getting at the whole principle of the discretionary trust. I find that subsection (4), like so much of this Bill, appears to have been inadequately thought out. As I understand it, the charge for capital gain arises at the termination of a life interest in all or in part of a settled property. There is a little concession tacked on to the end of the Clause, that if any life interest terminates within ten years the charge is postponed for another ten years. Capital Gains Tax is paid only once every ten years.

This is not a concession. The more one looks at it the more one realises that it may cause great hardship and difficulty in the working of the tax. Take a simple example. A grandfather made a considerable settlement on his six grandchildren with the proviso that they all took their share at the age of 25. The first grandchild is about to come up to the age of 25 and definitely the charge for capital gains will arise as soon as he takes his share. During the period of the next seven years the next four grandchildren come up to the age of 25 and take their shares.

As I understand it, and as I am advised, there will be no charge arising from capital gain because it will be within the 10-year period. It so happens that on the 10th anniversary of the first child becoming 25 there is only a one-sixth share left in the trust, the share of the youngest grandchild. In the typical manner in which the party opposite legislate, the whole balance of the capital gain charge which would have fallen on all the other five-sixths shares, has to be paid by the youngest member of the family.

I hope that the Government will look seriously at this case, as it is typical of the many hardship cases which may crop up on the Finance Bill. I hope that we shall get a firm assurance from the Minister that he will look very carefully at this.

Mr. George Younger (Ayr)

I am most surprised that the Chancellor allowed this Clause to be put into the Bill, because it differs materially from what I recall were the Chancellor's first words in the House about the Capital Gains Tax. Most of us were listening very carefully to this, and we were very interested to hear him make it very clear then that the whole point of a Capital Gains Tax was that it would be payable when the asset was realised. I remember his using very nearly those words. He has allowed himself to be drawn away from this. That is why he is getting into trouble on this Clause. This is another case where this tax will be levied on assets which will not necessarily be realised. This raises the most immense difficulties. I hope that the Chancellor or the Minister without Portfolio will realise that a Capital Gains Tax on realised assets is one thing and that this is not part of it. These assets are not being realised, yet they are to be taxed.

It has been pointed out what immense trouble this will cause people who, quite fortuitously, have their assets valued on a given and unchosen day and told that they will have to produce the necessary tax as if there had been a capital gain at that moment. If the Minister thinks a little outside the sphere in which we are all talking and thinks about his ordinary life and things outside, he will perhaps remember that when one thinks out what one owns in life and, if one has a few securities, calculates what they are worth, it is desperately misleading to say, "I am worth £5,000, because these shares are today, according to the paper, worth £5,000". It does not necessarily follow that one can sell them immediately and get £5,000. Yet the people who will be affected by this Clause will have to realise them on a completely notional basis.

The position of trustees and beneficiaries has been referred to. This provision could be awkward for both these parties, against whom we should feel no antagonism and whom we should treat as worthy of consideration. The trustee is a fine person who does his job voluntarily and not for financial gain. The position of the beneficiary is not only voluntary, but he is often quite unskilled in these matters, and unable, without advice, to look after his own interests. These people will have to find sums of money. I think that, if this is put through, the beneficiary, who is very often a daughter, a son, or a young person, not well-skilled, will be told by his trustees, "The ten-year period is up. We are liable to find X hundred £s or X thousand £s now to pay Capital Gains Tax. We cannot realise the assets."

7.15 p.m.

There are many reasons that this may not be possible at a particular time and many more reasons that it might be possible, but most disadvantageous. The beneficiary will be told by his trustees, "We have to find this money and I have no means of getting it, or of realising it. The only thing to do to get the trust going and the settlement solvent and going properly is for you, the beneficiary, to find the money to pay back the capital gain." I have no doubt that the trustee would make it as easy as he could and say, "This is once in ten years, and perhaps by the end of the next ten years, the law may be altered"—

Sir Arthur Vere Harvey (Macclesfield)

Or a new Government.

Mr. Younger

Or a new Government, as my hon. Friend says. These will be totally innocent parties, who have no control over when this will happen or over the circumstances in which it will happen; they will be in an intolerable position.

I beg the Government not to imagine that they are bringing in a high-sounding Clause which will catch a small number of incredibly rich people who can easily afford to pay. This may be so, in a few cases, but this will hit most hardly the people who can least easily bear it. The Government would be very well advised to cast aside the idea which they seem to have that hon. Members on this side of the Committee are making these points for political advantage. They should realise that there are genuine and definite difficulties over this Clause. I hope they will alter it.

Mr. Woodrow Wyatt (Bosworth)

I am glad to support some of the remarks made by my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever). I cannot believe that the Government intend some of the effects which might flow from the Clause. Do they seriously propose that every trust should be valued every ten years? This is a most awkward and difficult thing to do in most cases, and probably could not be done adequately. It would lead to an enormous increase in the number of valuers which we should have to employ. Do not the Government realise that they are encouraging the trustees to put their money into businesses and organisations which are stagnant rather than those which are industrious and dynamic and which multiply and fructify, because of the fear that, if the business does well, they will be forced to pay Capital Gains Tax every ten years out of money which, perhaps, they do not have?

For example, a trust may have a minority of the shares in a private company, and that may be all that the trust owns. The company may be doing well and doing all the things which the Government hope that industry will do. At the end of the ten-year period, the value of those shares may have gone up considerably, but they have no other assets than the shares which they have as minority shareholders in this company. What will happen? Do the Government propose that the trustee should be made bankrupt? Obviously, the majority shareholders will not dispose of the assets, in order that the minority shareholder, which is the trust, can pay its Capital Gains Tax. It would not be possible. This, in many cases, is the only way in which the money could be raised in order to pay the Capital Gains Tax.

I think that there is a fallacy in the Government's thinking, in assuming that all trusts consist of a variety of interests. They do not. It is true that many trusts have wide portfolios and publicly quoted shares. But there are many trusts which have interests only in private companies, or in land, and have only a minority interest in those concerns. If they have only a minority interest and no other assets, the only conclusion which we can draw from this Clause is that the Government propose that, every ten years, the trustees of any such trusts will be made bankrupt. There is no other way of raising the money. I hope that they look at this again, because the only other course which the trustee can take is to ensure that the property does so badly that there is no capital appreciation but capital diminution, so that they will pay no Capital Gains Tax.

I am sure that this cannot be the Government's intention. I appeal to the Government to look at this again. They are trying to catch the wrong people with the Clause. I can see what they have in mind. They are looking for the discretionary trust which, I think, is an undesirable form of trust in any case, and is clearly designed to avoid paying tax, whereas there are many genuine trusts, the trustees of which will be made bankrupt if the Clause goes through.

Mr. Fletcher-Cooke

I assumed that by now the Minister would have risen to say that this was one of the concessions which the Chancellor of the Exchequer promised us about 48 hours ago, because this is clearly not only the strongest anomaly in the whole principle of the tax but it is the clearest injustice. The anomaly has been pointed out by my hon. Friend the Member for Ayr (Mr. Younger), who explained that some time ago the Chancellor pinned his flag to this mast namely that it was only on realisation that this tax would be levied. Here we have an important breach in that principle of a very serious kind concentrated not on companies or other forms of holding, but on trusts and trusts alone, as if they were particularly wicked.

I am waiting to hear what defence there can be, because once the tax is applied to trusts it will gradually spread its taint into other forms of holding. How monstrous it is becomes apparent when one realises that this was just the form of thing which mediaeval kings of England did when they found that people were not turning over their money quickly. The statutes of mortmain were designed to prevent estates from getting into hands which held them for too long and thus prevented the mediaeval kings from levying a tax at the point of marriage, death and other times when it was easy to get the money. If the money went into the monasteries, of course the monasteries never married and never died and, therefore, the kings could not get the money.

This is exactly the same attitude. It can be the only defence. We abolished the rule of mortmain, but this Government have a passion for mediaeval things, and they have brought it back. This is what they say, "If money gets into the hands of people who do not switch quickly enough we should catch them as if they had switched". That is the only possible motive of the Clause. The Government are afraid that trustees will cling on to the money in the sense that they will not change the investment fast enough. Since trusts are perhaps likely to last longer than any particular life, they will not get to the point of payment as fast as if the money were held in other ways. That is a very sinister principle.

I want to ask the Minister without Portfolio a question about possible double taxation which, I think, is very important here. I take not the case of a trust with life interest, but the case of trust with three beneficiaries, three children, which has been formed with £2,000. As I understand, the trustees pay tax when thy switch their investments. That is the general principle of the Bill. Except in the case of a nominal trust where there is one beneficiary of full age who can put an end to the trust at any time that he wants to do so, it is the trustees who pay the Capital Gains Tax when they change the trust's investment.

Suppose they have £2,000 in securities and in the forth year of the trust those securities have appreciated to £2,500 and as prudent trustees they decide to realise these investments and to reinvest. With the sale of the original investment, they make a capital gain of £500 after four years. I assume that they have to pay Capital Gains Tax on that £500. Four years later the second lot of securities has made another capital gain, say of £200, and they decide to take that profit. As prudent investors looking after the beneficiaries, they decide that the securities may fall in value and that it is best to take the profit. But they have to pay another Capital Gains Tax of £200, so that they have paid on £500 and £200.

They then invest the capital in some other securities. At the end of 10 years they find that the holding is worth £2,700 or possibly £3,000. Let us say that the third lot of securities has not appreciated after the eighth year, because that makes the sum easier. It means that at the end of ten years the trust is worth £2,700. It is then valued and another Capital Gains Tax has to be paid on this £700, although each time the trustees switched they had to pay a Capital Gains Tax at the end, say, of the fourth year and at the end of the seventh or eighth year.

I do not believe that this is right. It is so incredibly unfair that I cannot believe that it is right, and I hope that the Minister without Portfolio will rise immediately and tell me that I am wrong in my understanding of the provision. But nothing in my reading of this great book persuades me that I am wrong, and if I am not wrong it means that this is the most montrous piece of double taxation even in the true and pure and "Cheetham" sense of the word of double taxation. I think that hon. Members will agree.

The truth, as the hon. Member for Manchester, Cheetham (Mr. Harold Lever) said, is that the Government have been aiming at the discretionary trust and they have hit everyone with one big swipe. This is not good enough. It is an anomaly which will work very unfairly through double taxation and which will cause the most immense amount of anguish and pain to trustees, many of whom do all these things quite voluntarily and who are belaboured quite enough by the law as it exists without any further belabouring.

Of all the provisions of the Bill this 10 year rule seems to me the most improper, outrageous, anomalous and wholly bad, and I am glad to see the hon. Member for Cheetham indicating that he agrees with every word that I have said.

Sir Charles Mott-Radclyffe (Windsor)

The Government have got themselves into a grave dilemma. They are on the hook and somehow must get off it. I am sure that when the Clause was drafted, the hon. Gentleman and his colleagues in the Treasury and the Law Officers did not realise the implications of Clause 24. I am not sure that they understand them now.

I hope that the Minister without Portfolio will listen very seriously to the arguments which have been put forward from this side of the Committee and also by hon. Members behind him. The hon. Members for Cheetham (Mr. Harold Lever) and Bosworth (Mr. Wyatt) both put forward arguments against the Clause which cannot be brushed off lightly.

If the two hon. Members will forgive me for saying so, when I saw them sitting below the Gangway, with the hon. Member for Buckingham (Mr. Maxwell) further down, I wondered whether the bench below the Gangway ought to be called "Millionaires Row". Perhaps now that the hon. Member for South Ayrshire (Mr. Emrys Hughes) has returned to the Front Bench below the Gangway, there has been a change of address but no letters will be forwarded.

Mr. Emrys Hughes (South Ayrshire)

Is the hon. Member referring to me?

Sir C. Mott-Radclyffe

The reference was to the hon. Member for Buckingham.

The Government decided to bring in a Capital Gains Tax on the basis of making all hardship universal. They decided that they had to catch all trusts whether they were discretionary or otherwise. This, I am sure, is how the logic worked. They decided that as certain discretionary trusts could build up, they should have a guillotine falling every 10 years.

But suppose there is a trust the only asset of which is agricultural land, for example, an agricultural holding or an agricultural estate. The only asset which the trustees hold is in land. What happens if, every 10 years, the Capital Gains Tax is to bite on the purely notional value? It is bad enough to have a Capital Gains Tax anyway, but to have one on an asset which has not been realised at all seems grossly unfair. Nevertheless, the Government have done it.

If an agricultural estate or agricultural holding which is held in trust is to bear tax every 10 years I must say straight away to the Minister without Portfolio that at the end of perhaps 30 years, when the tax has been paid three times, there will be no assets left. The only asset which the trustees can dispose of to pay for the incidence of the Capital Gains Tax is the land.

7.30 p.m.

Suppose the Capital Gains Tax should fall three times in 30 years, but that those three periods should follow on the death of the original owner, so that the estate paid Estate Duty and by the will of the late owner when the trust was set up. The asset would have borne Estate Duty and three lots of Capital Gains Tax in 40 years. Is this what the party opposite calls social justice? I cannot believe, whether it be in terms of agriculture or anything else, that the Government really consider that this is in the interest of the nation. Or is it that they are so incompetent that they do not understand what the Clause means? Would the Minister without Portfolio explain what he is trying to do, what he is not trying to do, who he is trying to catch and who he is not trying to catch?

My hon. Friends and I have tabled an Amendment designed to meet the Government. On this question of a dis- cretionary trust, if it were to go on building up one might say, "We cannot have a trust that never bears any tax". We have, therefore, tabled what we regard as a fair compromise for the benefit of the Chancellor. Instead of the 10-year period we suggest 25 years, which might be normally regarded as a life interest. I hope that the Minister will look with favour on the Amendment, which any reasonable person would regard as a good compromise.

Mr. Eric Lubbock (Orpington)

I agree with the hon. Members for Manchester, Cheetham (Mr. Harold Lever) and for Bosworth (Mr. Wyatt) that the Clause is designed to cover discretionary trusts and that the Government, intentionally or otherwise, have dealt a severe blow at all trusts. Judging from the rest of the Bill, I suggest that they have done this intentionally; that they had every desire to get at all trusts, irrespective of their nature. They have certainly succeeded in doing that because trusts are being treated more harshly than private investors.

Whereas the private individual can obtain relief from the 30 per cent. Capital Gains Tax rate provided that his marginal rate of tax is not in the Surtax bracket, he may have a trust the beneficiaries of which are children who have no income or whose income is well down the bracket; say, £400 or £500. Despite this, they will have to pay the Capital Gains Tax at the standard rate of 30 per cent. and obtain no relief whatever.

Amendment No. 424, standing in the names of my hon. Friends and myself, is a moderate and reasonable proposal. It deals with the difficulty of how trusts will find the money to pay the tax. I commend that Amendment to the hon. Members for Cheetham and for Bosworth, because while they feel that it would be dangerous to support Amendment No. 251—lest that should result in the return of a Tory Government—I do not think that any such danger would arise if they were prepared to favourably consider Amendment No. 424.

The difficulty of trustees having to find this money every 10 years to pay the tax that is liable has been pointed out. Our suggestion merely states that the trustees could, in effect, continue to owe such taxation to the Inland Revenue and pay interest of 2 per cent. on the amounts outstanding until such time as the assets have been disposed of. This would not decrease by a penny the amount of revenue which the Government would receive from this type of tax, but it would make it a little easier for trustees to overcome this difficulty.

Consider, also, trustees who hold shares in private companies. Such shares are not readily saleable. I doubt whether anyone who owns shares in private companies will make many capital gains once the Bill goes through and once they are compelled to distribute 60 per cent. of their earnings if they happen to be close companies. In certain circumstances the only answer for trustees in the difficulties we have been discussing would be to go into liquidation. Therefore, the effect of the Clause may be that a large number of private companies will have to go into liquidation to meet their tax liabilities. Even hon. Gentlemen opposite must realise that that would dislocate the economy and be to the benefit of nobody except monopolies, and we have been given to understand that the Government are against monopolies. It would concentrate industrial power in the hands of the big companies and force the liquidation of small private companies.

The position of minority shareholders in private companies is even worse, because there is not a market for their shares. Hon. Gentlemen opposite may know that in many private companies the articles contained what is known as preemption rights which provide that a shareholder who wishes to sell can sell only to other shareholders in the company. Such other shareholders may be limited in number and perhaps they are not prepared, if it is a forced sale, to offer what the shares are really worth. One can imagine the situation at the end of the 10-year period. If the other shareholders are not well disposed towards the trustees they may consider it a good opportunity to acquire shares for much less than they would normally have to pay.

Suppose the assets happen to be in the form of a farm. The hon. Member for Windsor (Sir C. Mott-Radclyffe) spoke of land. How are these things to be valued? Would the farm be valued as if there was a sitting tenant, or with vacant possession? Will the trustees still have the livestock and what will happen to the land? I have talked with a number of farmers about this and they have expressed anxiety about the way in which trustees in such circumstances will go about finding the money to pay the tax.

I draw the attention of the Committee to an article which appeared in the Financial Times last Monday. It stated: … the rule will operate harshly in cases where the whole of a family's resources are tied up in the business and there are no liquid assets with which to pay the tax. Those are the circumstances which I have described. It went on: If the whole of the gain was a real profit, this would be hard but not unendurable; as it is, however, a large element of the gain taxed each 10 years will be purely inflationary. In other words there will be gains tax payable on 'a non-gain' on the occasion of a hypothetical sale". That sums up extremely well the effect which the Clause will have.

I have given but a few examples of the injustices that will be created as a result of this provision. It will mean the diminution and ultimately the complete elimination of the funds about which we are speaking and it will in many cases work to the detriment of people who hon. Gentlemen opposite so often defend—widows, orphans and old people.

Mr. Robert Maxwell (Buckingham)

I support the Government for several reasons. We all agree that one of the practices of the Budget is to prevent people from retaining funds to distribute them at a later date as capital gains. The Budget seeks to achieve—and this is surely in the national interest and in the interest of every business enterprise—a situation in which funds are used for positive purposes for gainful investment. It would have been intolerable if the Government had not introduced legislation to make it impossible for funds to be salted away, in the hope of paying them out one day as capital gains.

True, in this proposed legislation there are anomalies that may even be termed harsh and a little unfair, but let the Committee remember that this legislation as it stands will require this gain to be paid over 10 years. There will be ample time for the Government, in one of their next Budgets, to deal with any anomalies. It is certainly quite impossible to do so today. Were they to agree to any Amendment of any kind on this issue, we would end up by having a mushrooming of such trusts set up overnight. It would be a haven for lawyers and accountants. It would be quite intolerable, and make a nonsense of the entire purpose of the Budget.

It would undermine the purpose of making sure that funds are not retained in order to be paid out later as capital gains, but are mobilised for gainful investment—

Mr. Terence L. Higgins (Worthing)

I think that the hon. Gentleman is basing his argument on a misconception. He argues that funds invested are immobilised, but in reality what is important is not whether the funds are immobilised, but who has control of the economic assets which the funds represent. The fact that people may have given up control over economic assets to others does not mean that the economic assets are immobilised. This is a purely financial transaction, a mirror on the surface of the sea.

Mr. Maxwell

I take the point, and I think that it is fair, but everyone knows of many thousands of trusts where the trustees are just sitting on assets and not investing them properly, because they are just letting them accumulate—

Mr. Harold Lever

I am interested in this argument, because trustees who sit on funds and leave them unused, unproductive and neglected will not be in the smallest degree inconvenienced or at all affected by this Clause. Otherwise, my hon. Friend's argument is overwhelming.

Mr. Maxwell

Nevertheless, the point still stands that the Government could not possibly allow these trusts just to go scot-free at the moment. Any correction required can be made in a later Budget.

To come back to the point made by my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever), the psychological effect on trustees who will show that they will be required to pay out 30 per cent. of capital appreciation on their assets will be a jolly good inducement for them to see that the funds are managed properly and more effectively—[Interruption.] If I cannot persuade hon. Members opposite of the justness of this cause, I must leave it at that.

Many hon. Members have said that the tax as it stands will lead to people who have invested in private companies not making any capital gains; that the 30 per cent. Capital Gains Tax is a terrible tax. That is utter nonsense. As far as one can see in the United States, where this tax has prevailed for years, the number of millionaires has increased very rapidly—

Mr. Emrys Hughes

And in Great Britain.

Mr. Maxwell

And in Great Britain, too. I expect that this tax will in no way diminish the opportunity for people to become millionaires. There is absolutely no justification whatsoever why capital gains should escape the rightful—

Mr. Heath

For reasons that we know and understand, the hon. Member for Buckingham (Mr. Maxwell) has not been able to attend any sittings of the Committee so far, but have we to go over all the ground we have already covered when we are trying to make rapid progress in order to please his right hon. Friends?

Mr. Maxwell

The fact remains that of all the arguments I have been able to listen to for the rejection of this Amendment on trusts, I certainly have not heard anything to show why the Government should yield on the point. I hope that they will not, because there is no justification for that at all. Any anomalies can be ironed out in a later Budget.

7.45 p.m.

Sir Hugh Lucas-Tooth (Hendon, South)

Apparently, it is only the realm of high finance that is prepared to support the Government—on this Clause, at any rate. I want to ask one rather technical question and make one rather simple point. My question is concerned with subsection (4), which states: On the termination at any time after 6th April 1965 of a life interest in all or any part of settled property, all the assets forming part of the settled property, except any"— and here I insert the words of the Amendment that I assume will be made, as it is a Government Amendment— which at that time cease to be settled property shall be deemed for the purposes of this Part of this Act … to be disposed of, and therefore subject to the tax.

How do the Government think the words "or any part" will operate? Very often, in the case particularly of small settlements, it is most desirable to make an advance for the benefit of children. A typical case is that of an advance of a few hundred £s to enable a son to be apprenticed, or make his way through university, or start him in life in some way. As I understand it, if any such advance is now made there will be a termination of part of the settlement, with the result that the whole of the funds will immediately have to be valued and be subject to tax. If that is correct, all such advances will stop at once. That seems to be wholly undesirable from everyone's point of view.

The point I wish to make is on the generality of these Amendments which impose the need to value trust funds once every ten years and to subject them to tax at that valuation. I am not certain whether there has not been some misunderstanding on the part of hon. Members. I do not think there is duplication here. I think that what happens is merely that the tax will become payable somewhat earlier than it otherwise would be in pieces instead of one lump on the disposal of the assets in the ordinary way. Various hon. Members, and particularly the hon. Member for Bosworth (Mr. Wyatt), argued that this would produce great hardship for trusts comprising nothing but shares in private companies. I agree with the hon. Gentleman, but, on the whole, that is a relatively rare case.

There are much more common cases where greater hardship would be produced. One of the commonest cases is where a man dies, leaving a farm to his widow for life, and then to one or more of his children. If the widow lives for ten years or more after the man, I understand that the farm will immediately have to be revalued and be subject to tax on any increase in its value that may have taken place meanwhile. If so, I want to know where the Government think the widow will find that money? It may be, of course, that the present Government's policy in regard to farming is such that there is no chance of such improvement in farm property at all.

One of the commonest cases is where a man during his life has saved some money and invested it in two or three houses. On his death he leaves those houses to his widow for her life and then to one or more children. All of us have many such cases in our constituencies. We know of a widow living in a house whose income is provided by means of letting another house. In North London the value of house property has risen something like three- or four-fold in the last 20 years. It will certainly continue to rise under the present Administration, and, I fear, in almost any circumstances.

As I understand it, under this Clause in that type of case every 10 years the house or houses held in trust to provide an income for a widow during her widowhood will have to be valued and any increase in the value of the house will immediately attract tax. Where is that tax to come from? How is the necessary capital to be raised to pay it? Is it to be raised by means of a mortgage at present rates? What is to happen? This is a question to which the Government should make an absolutely plain answer at this stage, because there will be a tremendous injustice for many thousands of people with relatively small means. The Clause is unjust and wholly improper. Whatever one's views about Capital Gains Tax, this Clause should be struck out.

The Minister without Portfolio (Sir Eric Fletcher)

Many questions have been put to me by hon. Members on both sides of the Committee in support of the series of Amendments we are discussing. I hope I shall be able satisfactorily to answer the various points raised.

First, may I put the basic reason why this Clause is an essential part of the structure of a Capital Gains Tax. The Committee has agreed to the introduction of a Capital Gains Tax. It has also agreed that charge to tax will arise on the death of an individual. Assets will become chargeable to Capital Gains Tax when they are in the hands of an individual when he disposes of them, or when he dies. It is manifestly not only reasonable but just that some similar provision should be made for attracting a Capital Gains Tax on assets in the hands of trustees.

Mr. Wyatt

But people do not die every ten years.

Sir Eric Fletcher

Obviously some arrangements must be made—once it is conceded that it would be quite impracticable to allow assets in the hands of trustees to remain forever without attracting charge to Capital Gains Tax—for deciding the time at which assets in the hands of trustees, whether realised or not, become subject to charge. In the case of trusts where there are life interests, obviously the sensible arrangement to make as the moment when the charge arises is on the termination of a life interest. That is what is provided in subsections (3) and (4) of the Clause. Arrangements are also made whereby if there are a number of life interests and a succession of deaths of life tenants there is a minimum period before the assets become subject to charge again, and the period provided is 10 years.

Then there is the case of discretionary trusts where there are no life interests and where quite obviously some other arrangements have to be made to ensure that at some time the accretion in the value of the assets of the trust is valued in order, to preserve equity with all other taxpayers, that Capital Gains Tax becomes chargeable on those assets. It follows that the liability for Capital Gains Tax must be a liability falling on the trustees, that is to say, falling on the capital corpus of the trust and not on the income.

I have been asked a number of questions of detail. The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) asked what would be the position where trustees switched investments during the course of time. I should have thought it was obvious that if trustees changed their investments then, like any individual, liability to Capital Gains Tax arises on the disposal of the asset. An equally common case will be that in which the assets are not changed. I shall come to the various instances which have been given to the Committee of the kind of inconvenience and, I am perfectly prepared to admit, hardship, which in some cases will arise where the trust assets consist, for example, of a holding of agricultural land which it is difficult to sell, or shares in a family concern or a private company which are difficult if not impossible to sell.

The hon. and learned Member for Darwen put the case of a switching of investments followed by the arrival of the 10-year period and he wondered what would be the position then. The answer is that each 10 years, or whatever other period the Committee decides, a trust will pay tax on the gains in the assets in the trust and those gains will be calculated on the difference between the market value of the assets at that date and the market value 10 years earlier if the assets have been in the hands of the trustees for 10 years, or if they have been in the hands of trustees for a shorter period the cost of acquisition at the time of acquisition. In that respect the liability of the trustees for Capital Gains Tax will be precisely the same as that of an individual.

Sir H. Lucas-Tooth

The hon. Gentleman has referred to this, but he has not said how it is to be done.

Sir Eric Fletcher

I am coming in a moment to the questions put to me by the hon. Member for Hendon, South (Sir H. Lucas-Tooth). The hon. Member for Windsor (Sir C. Mott-Radclyffe) has an Amendment in his name suggesting that the period of 10 years is too short. The suggestion of that Amendment is that the period should be extended in the case of trustees under a discretionary settlement falling under subsection (6) from 10 to 25 years. There is also an Amendment in the name of the hon. Member for Orpington (Mr. Lubbock) and others suggesting that in the case of settlements falling under subsection (5) the period of 10 years should be extended to 21 years.

8.0 p.m.

The hon. Member for Orpington also pointed out the difficulty which will arise, and wanted the Government to admit it, for trustees where a liability to Capital Gains Tax arises and where the only assets of the trust are of a nature which are not readily realisable. The Committee will appreciate that, however inconvenient that may be, that is nothing different in nature from the situation which frequently arises where a person dies and Estate Duty becomes payable in respect of an estate which is not readily or quickly realisable. That is one of the unfortunate incidents of having to pay Estate Duty.

Mr. Stratton Mills


Sir Eric Fletcher

I had better finish this, because, as my hon. and learned Friend the Financial Secretary said, it tends to prolong a debate if a Minister does not finish dealing with the points to which he has been asked to address his mind. I was saying that the Government are not unsympathetic to the difficulties which from time to time arise when, as a result of a death, personal representatives have to find or provide or raise cash to meet Estate Duty liabilities. Once the Committee has decided that it is a reasonable part of our fiscal law that there should be a Capital Gains Tax, there is no new departure in the fact that problems will from time to time arise, particularly in the case of trustees who have to pay Capital Gains Tax and who find that cash has in one form or another to be raised for that purpose.

The suggestion of the hon. Member for Orpington is that in those circumstances there should be an extension of time at the option of trustees for meeting their liabilities, with, as his Amendment suggests, a rate of interest calculated from the date when the liability arises until payment is made. There are difficulties about accepting any such solution.

Mr. Lubbock


Sir Eric Fletcher

I will explain why. It would be an inconvenience and an undesirable provision to write into our fiscal arrangements. The Committee will know perfectly well that the Inland Revenue has plenty of experience in this kind of matter in dealing with Estate Duty claims. Anyone who has had any experience of dealing with the Inland Revenue will know that it always approaches such problems with the greatest sympathy and leniency. [HON. MEMBERS: "Oh."] Yes. That is my experience. I am sure that it is the experience of other hon. Members. It has not been necessary to legislate precisely for that purpose in the sphere of Estate Duty, nor will it be necessary or desirable to do so in connection with Capital Gains Tax. The same attitude will arise.

The hon. Baronet the Member for Hendon, South asked me a question the substance of which, as I understood it, was whether, in the case of a particular trust, it would still be possible to make advances, if advances were permitted under the terms of the trust. Obviously it is impossible for me to advise or give the Committee any guidance on the provisions of any particular trust. They vary to an infinite degree. The hon. Baronet can take it from me that there is nothing whatever in the imposition of a liability to Capital Gains Tax which will fetter the ordinary discretion and rights of trustees, with regard, for example, to the advancement of capital for education or any other purpose.

Sir H. Lucas-Tooth

Does the hon. Gentleman mean this, although he has not in fact said it? I would like to know if I am right in my understanding. I ask the Committee to consider the case of a shop owner who dies fairly young, having made a trust leaving £2,000 or £3,000 to his widow and two children. I ask the Committee to assume that it is thought desirable to raise, say, £100 for the benefit of one of the children. Will that act immediately import the provisions of subsection (4) and require the whole of the property to be valued and any tax to be paid immediately? Am I right about that?

Sir Eric Fletcher

The hon. Baronet is wrong about that. No such liability would arise. I am advised that, if in the case supposed the trustees make an advance of a capital sum, that does not give rise to any charge for a Capital Gains Tax. The only circumstances in which a liability for Capital Gains Tax arises is on the death of a tenant for life or some extended period.

I am anxious, as I am sure the Committee is, to bring this matter to a conclusion. I want, finally, to turn to the Amendments which suggest that the period of 10 years might be extended to either 21 years or 25 years. The Committee will agree that, if it is desirable to make any extension of the period of ten years, it should operate equally, both in respect of settlements where there is a series of life interests and also in the case of settlements of a discretionary trust character under subsection (6). My right hon. Friend has given very careful thought to this and is aware of the representations which have been made on this subject and is aware of the inconvenience that will arise to trustees out of this new tax.

My right hon. Friend proposes—I hope that this will meet the wishes of the Committee and will go a great way to removing any kind of injustice that is felt on this subject by trustees—to say that, if these Amendments are withdrawn, the Government themselves will, between now and Report, table Amendments extending the period of 10 years provided in subsections (5) and (6) to a period of 15 years. I hope that, with that concession, we shall be able to conclude our discussions on this question.

Mr. Peter Walker

The replies coming from the Government Front Bench are getting worse and worse. It is rather incredible how, in debate after debate, the valid points made from this side of the Committee are left unanswered. They are treated almost with contempt. All the human and practical problems involved are swept aside because of the insistence on keeping to the logical principles of a fairly bad Bill.

The points made by the Leader of the Liberal Party and by the hon. Member for Orpington (Mr. Lubbock) about the difficulties involved for trustees and the fact that this would be a perpetual rate of tax were completely unmet by the Minister concerned. The point about double taxation made by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) was not even mentioned in the reply of the Minister. It was a fundamental point, a point completely against all the principles of British taxation. Yet the Minister, in replying, cast it aside and did not even mention the fact that, obviously, wherever Capital Gains Tax has been paid, already there will be double taxation at the point of valuation.

None of the difficulties mentioned by my hon. Friend the Member for Ayr (Mr. Younger) as to what happens if one cannot sell an asset at the time that Capital Gains Tax is assessed and the point about the difficulty of selling under the market value price of assessment was met by the Minister without Portfolio in reply. In this debate the Minister had the disadvantage of being attacked by several of my hon. Friends with cogent and pungent points. The hon. Members for Manchester, Chetham (Mr. Harold Lever) and Bosworth (Mr. Wyatt) both attacked him and both pointed out a difficulty.

Mr. Harold Lever

I wish the hon. Gentleman would not say that I attacked the Minister. I criticised the Bill and the Clause. I did not attack the Minister.

Mr. Walker

The hon. Member thoroughly attacked the Bill, and the only Member who came to his support was the hon. Member for Buckingham (Mr. Maxwell); and that proved to be his biggest disadvantage because it indicated quite clearly that the only person who would support his attitude on the Amendment was somebody who had not read it or the Clause.

Mr. Maxwell

May I ask one simple question? Although I have not had the privilege or pleasure of being here throughout the debate, for reasons which are known, will the hon. Member please tell the Committee what is wrong with the Chancellor and his colleagues sticking to the logical principles of the Budget?

Sir Richard Thompson (Croydon, South)

Inhuman and unworkable.

Mr. Walker

If the hon. Member for Buckingham had heard of all the human difficulties and problems involved in logical sticking to a thoroughly bad principle he would not have put that question. This is the attitude of the Government in not recognising real problems where they exist.

To give an example, under the Clause one can have a situation where in 1966 a trust can be taxed for Capital Gains Tax for increases which have taken place in the value of the trust over the past decade. One realises therefore, that this is a thoroughly bad Clause, and the Amendments in the names of my hon. and right hon. Friends and of the Liberal Party all express these very real problems. None of these have been answered and the concession offered by the Minister was an insult after the debate. It has been obvious throughout the debate that the Government are unwilling to listen to realistic arguments and that it is a waste of time for us to argue against them.

I therefore strongly urge my hon. and right hon. Friends to divide the Committee.

Mr. Emrys Hughes

I detect a note of unrighteous prefabricated indignation in speeches from the benches opposite. The hon. Member for Windsor, (Sir C. MottRadclyffe) referred to this bench below the Gangway as "Millionaires' Row". I have spoken in this debate as an ex-bank chairman looking after my small investors in a municipal bank which is more interested in the investors than in wealthy shareholders. Now that the personnel is slightly changed the average income of this "Millionaires' Row" has decreased.

A large number of people in this country are not impressed by the argument which seems to have been produced in the mood of an annual meeting of a Landowners Association family trust. I have consulted my hon. Friend the Member for Derbyshire, North-East (Mr. Swain), who sits next to me. I asked him whether he had formed a private company. [An HON. MEMBER: "What did he say?"] I will translate what he said into appropriate Parliamentary language which would not be out of order. My hon. Friend has given a great deal of his life to the service of the community. He has worked in the coal mines for 34 years and the only land that he has acquired is the coal that still sticks to the inside of his lungs. He has not formed a family trust. The great majority of people who are affected by the Budget are people who are not worried about the complexities and difficulties which hon. Members opposite have been voicing today.

I am amazed at the simplicity and innocence of the hon. Member for Orpington (Mr. Lubbock). If he consults his hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. David Steel), who is sitting next to him, he will be told that the land of Scotland is not divided into small parcels owned by small farmers who have formed themselves into small limited companies and are worrying about this problem. I have with me the facts about a small private company which owns some of the land in the constituency of the hon. Member for Roxburgh, Selkirk and Peebles, and who no doubt will be able to confirm what I say.

Mr. Lubbock

When I talked about farms I was not referring to farms owned by private companies. The example which I gave was of trustees who owned the farm directly in trust.

8.15 p.m.

Mr. Hughes

The whole atmosphere of this debate has been one from the point of view that farms are in the hands of trustees who will be ruined if this Capital Gains Tax is put into operation. I assure the hon. Member for Orpington that some of these small private companies, though small in numbers, own a large acreage. I believe that these people who have gained substantially from recent increases in the value of land should pay up and contribute their fair share towards the cost of running the country. The farmers whom I represent perpetually call attention to the fact that under the 1957 Act they have lost security of tenure, and when the farmer dies the farm is held to ransom and enormous capital gains are made.

I can give an example to the Committee from the Daily Express of 8th September, 1964, of a small company which is interested in capital gains. The paper said that the gentlemen concerned auctioned off two Lanarkshire farms yesterday, bringing in £97,750 for 2,128 acres. I see no reason why the capital gains of this landowner should not be taxed so that a contribution should be made to the revenue of the country when it is in a difficult situation. The paper said that the sale did not make too serious an inroad into the acreage of the land owned by this company.

The Temporary Chairman (Sir Leslie Thomas)

The hon. Member must assure the Committee that the example which he has given is of shares in a settled property, in a settlement.

Mr. Hughes

Certainly, I am prepared to have the fullest possible examination made of this company.

The Temporary Chairman

Order. The hon. Member must satisfy the Committee how the example which he has given comes within the terms of the Amendment.

Mr. Hughes

I am satisfied that I am giving the Committee very relevant evidence why this capital gains Clause should be passed as quickly as possible.

On a recent estimate the estates of this particular small company run by these trustees included 56 large farms in Lanarkshire alone. I hear my hon. Friend the Member for Derbyshire, North-East asking who this person is. Since I am pressed, I will tell the Committee that the leading shareholder in this private company is the present Leader of the Opposition.

I have given the figures for only two farms in Lanarkshire. If the hon. Member for Roxburgh, Selkirk and Peebles, before his radicalism expires, wishes to pursue his investigations, he will be able to find out about other farms in his constituency to which I have not referred. I shall look forward with interest to finding out what are the values involved and what are the difficulties of these companies in the Borders.

I am using these facts to put the whole question of poor private companies owning land in its proper perspective. It is the same sort of argument as we have heard about poor small investors, behind whom are the big tycoons. We hear about the difficulties of small trustees with their investments in land, and all these arguments are trotted out to hide the fact that under this Bill for the first time the big landowners will be expected to hand back to the community some of the money they have made out of the farmers.

When I hear that two farms were sold for £97,750, I want to see some of that increase come back to the community. Why not? I am presenting the real picture of land owning in Scotland, and it is complete misrepresentation to suggest that there is here a conspiracy on the part of a wicked Socialist Government to victimise small farmers.

I urge the Government not to make any concessions at all. I do not want concessions to be given to the Leader of the Opposition so that, in 10 years, the value of his land will go up and up. I want to tax these big estates to extinction. [HON. MEMBERS: "Ah."] Certainly. I want to ensure that one man or one small group of private companies is not able to exploit the labour of the farmers I represent. How do 2,128 acres come to have the value of £97,750? By the work of the landlord? Not at all. A lot of it comes from the fact that sheep are subsidised by the Government so that, when the farmer bought this land after its valuation, he knew that he was getting the value of the subsidies from the nation.

Mr. Maxwell

Is my hon. Friend aware that, when land is acquired by the community for community purposes, the landowner receives vast capital gain appreciation, but the tenant farmer receives only two years' rent or two years' profits, which is absolutely iniquitous?

Mr. Hughes

Yes, and I know from experience in my own constituency the grievances felt by the farmers who do the work, not the landlords who exploit the farmers.

We have heard hon. Members opposite speak in these debates whose only interest is in holding on to the vested interests of big vested landlords, sheltering behind all the hocus-pocus and make-believe about the poor small farmer and small investor. It reminds me of the story told in the First World War that the Germans drove women and children to the front in order that the heavy battalions could shelter behind them. In all these tiresome debates, there is always the pretence, the mockery and the falsehood of the Opposition representing the small investor, the small man and the small farmer.

Mr. Heath

Does the hon. Gentleman realise that he is gravely insulting his hon. Friend the Member for West Stirlingshire (Mr. W. Baxter), who explained from his own practical experience as a small man who has built up a business from nothing the way that this will affect him?

Mr. Hughes

I know my hon. Friend the Member for West Stirlingshire better than the right hon. Gentleman does, and I am quite sure that, if he were here, he would support every word I am saying.

Mr. Heath

He did not.

Mr. Hughes

I know my hon. Friend. If he has made any money, he has made it by the sweat of his brow, which is more than many hon. Members on that side of the Committee have done.

I hope that the Government will not make any concession at all. I want them to realise that the country is on their side and that they should proceed with the proposals in the Bill in the knowledge that the people will back them overwhelmingly when the issues are explained as clearly as I have just explained them.

Questions put, That the words proposed to be left out, to the word "in" in line 6, stand part of the Clause:—

Division No. 140.] AYES [8.27 p.m.
Abse, Leo Griffiths, David (Rother Valley) Padley, Walter
Albu, Austen Gunter, Rt. Hn. R. J. Page, Derek (King's Lynn)
Allaun, Frank (Salford, E.) Hamilton, William (West Fife) Palmer, Arthur
Allen, Scholefield (Crewe) Hart, Mrs. Judith Pargiter, G. A.
Armstrong, Ernest Hattersley, Roy Park, Trevor (Derbyshire, S.E.)
Atkinson, Norman Hazell, Bert Parker, John
Bacon, Miss Alice Healey, Rt. Hn. Denis Parkin, B. T.
Barnett, Joel Herbison, Rt. Hn. Margaret Pavitt, Laurence
Benn, Rt. Hn. Anthony Wedgwood Hill, J. (Midlothian) Pearson, Arthur (Pontypridd)
Bennett, J. (Glasgow, Bridgeton) Holman, Percy Prentice, R. E.
Binns, John Houghton, Rt. Hn. Douglas Price, J. T. (Westhoughton)
Blackburn, F. Howell, Denis (Small Heath) Pursey, Cmdr. Harry
Boardman, H. Howie, W. Rankin, John
Boston, T. G. Hoy, James Redhead, Edward
Bottomley, Rt. Hn. Arthur Hughes, Emrys (S. Ayrshire) Rees, Merlyn
Bowden, Rt. Hn. H. W. (Leics S.W.) Hunter, Adam (Dunfermline) Reynolds, G. W.
Boyden, James Hunter, A. E. (Feltham) Robertson, John (Paisley)
Braddock, Mrs. E. M. Hynd, H. (Accrington) Robinson, Rt. Hn.K.(St. Pancras, N.)
Brown, R. W. (Shoreditch & Fbury) Hynd, John (Attercliffe) Rogers, George (Kensington, N.)
Buchanan, Richard Irving, Sydney (Dartford) Ross, Rt. Hn. William
Butler, Herbert (Hackney, C.) Jackson, Colin Rowland, Christopher
Butler, Mrs Joyce (Wood Green) Janner, Sir Barnett Shinwell, Rt. Hn. E.
Callaghan, Rt. Hn. James Jeger,Mrs.Lena(H'b'n&St.P'cras,S.) Shore, Peter (Stepney)
Castle, Rt. Hn. Barbara Jenkins, Hugh (Putney) Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)
Coleman, Donald Jones, Dan (Burnley) Silkin, John (Deptford)
Conlan, Bernard Jones,Rt.Hn.Sir Elwyn(W.Ham,S.) Silkin, S. C. (Camberwell, Dulwich)
Corbet, Mrs. Freda Jones, J. Idwal (Wrexham) Slater, Joseph (Sedgefield)
Cronin, John Kelley, Richard Solomons, Henry
Crossman, Rt. Hn. R. H. S. Kenyon, Clifford Soskice, Rt. Hn. Sir Frank
Cullen, Mrs. Alice Kerr, Dr. David (W'worth, Central) Stones, William
Dalyell, Tarn Lawson, George Swain, Thomas
Darling, George Leadbitter, Ted Swingler, Stephen
Davies, I for (Gower) Lee, Rt. Hn. Frederick (Newton) Taverne, Dick
Davies, S. O. (Merthyr) Lever, Harold (Cheetham) Thomson, George (Dundee, E.)
Delargy, Hugh Lewis, Ron (Carlisle)
Dempsey, James Lomas, Kenneth Thornton, Ernest
Diamond, John Loughlin, Charles Tinn, James
Dodds, Norman Mabon, Dr. J. Dickson Tuck, Raphael
Doig, Peter McBride, Neil Urwin, T. W.
Driberg, Tom MacColl, James Varley, Eric G.
Dunn, James A. MacDermot, Niall Wainwright, Edwin
Dunnett Jack McKay, Mrs. Margaret Walden, Brian (All Saints)
Edwards, Rt. Hn. Ness (Caerphilly) Mackenzie, Gregor (Rutherglen) Walker, Harold (Doncaster)
English, Michael Mackie, John (Enfield, E.) Wallace, George
Ensor, David Mahon, Slmon (Bootle) Wells, William (Walsall N.)
Evans, Albert (Islington, S.W.) Manuel, Archie Whitlock, William
Fernyhough, E. Mapp, Charles Wigg, Rt. Hn. George
Mellish, Robert Wilkins, W. A.
Finch, Harold (Bedwellty) Mikardo, lan Williams, Albert (Abertillery)
Fletcher, Sir Eric (Islington, E.) Molloy, William Williams, Mrs. Shirley (Hitchin)
Floud, Bernard Monslow, Walter Wilson, Rt. Hn. Harold (Huyton)
Foot, Sir Dingle (Ipswich) Morris, Charles (Openshaw) Wilson, William (Coventry, S.)
Foot, Michael (Ebbw Vale) Mulley,Rt.Hn.Frederick(SheffieldPk) Woodburn, Rt. Hn. A.
Fraser, Rt. Hn. Tom (Hamilton) Murray, Albert Wyatt, Woodrow
Freeson, Reginald Neal, Harold Yates, Victor (Ladywood)
George, Lady Megan Lloyd Newens, Stan
Ginsburg, David Noel-Baker,Rt.Hn.Philip(Derby,S.) TELLERS FOR THE AYES:
Gourlay, Harry Oakes, Gordon Mr. Joseph Harper and
Greenwood, Rt. Hn. Anthony Ogden, Eric Mrs. Harriet Slater.
Gregory, Arnold O'Malley, Brian
Alison, Michael (Barkston Ash) Bessell, Peter Buxton, Ronald
Allan, Robert (Paddington, S.) Birch, Rt. Hn. Nigel Chichester-Clark, R.
Amery, Rt. Hn. Julian Black, Sir Cyril Clark, William (Nottingham, S.)
Anstruther-Gray, Rt. Hn. Sir W. Box, Donald Cole, Norman
Astor, John Boyd-Carpenter, Rt. Hn. J. Cooper, A. E.
Atkins, Humphrey Boyle, Rt. Hn. Sir Edward Cooper-Key, Sir Neill
Awdry, Daniel Brewis, John Costain, A. P.
Baker, W. H. K. Brinton, Sir Tatton Craddock, Sir Beresford (Spelthorne)
Barlow, Sir John Bromley-Davenport,Lt.-Col.SirWalter Crowder, F. P.
Batsford, Brian Brooke, Rt. Hn. Henry Curran, Charles
Beamish, Col. Sir Tufton Bryan, Paul Currie, G. B. H.
Bennett, Sir Frederic (Torquay) Buchanan-Smith, Alick Dalkeith, Earl of
Berry, Hn. Anthony Buck, Antony Davies, Dr. Wyndham (Perry Barr)

The Committee divided: Ayes, 173, Noes 171.

d'Avigdor-Goldsmid, Sir Henry Johnston, Russell (Inverness) Pickthorn, Rt. Hn. Sir Kenneth
Deedes, Rt. Hn. W. F. Jopling, Michael Pitt, Dame Edith
Dodds-Parker, Douglas Kaberry, Sir Donald Price, David (Eastlel[...]gh)
Errington, Sir Eric Kerby, Capt. Henry Prior, J. M. L.
Eyre, Reginald Kilfedder, James A. Pym, Francis
Fell, Anthony Kimball, Marcus Ramsden, Rt. Hn. James
Fletcher-Cooke, Charles (Darwen) King, Evelyn (Dorset, S.) Redmayne, Rt. Hn. Sir Martin
Fletcher-Cooke, Sir John (S'pton) Kitson, Timothy Rees-Davies, W. R.
Foster, Sir John Langford-Holt, Sir John Russell, Sir Ronald
Fraser.Rt.Hn.Hugh(St'fford & Stone) Legge-Bourke, Sir Harry Sharples, Richard
Galbraith, Hn. T. G. D. Lewis, Kenneth (Rutland) Shepherd, William
Gilmour, Sir John (East Fife) Litchfield, Capt. John Sinclair, Sir George
Glover, Sir Douglas Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield) Smith, Dudley (Br'ntf'd & Chiswick)
Godber, Rt. Hn. J. B. Lloyd, Ian (P'tsm'th. Langstone) Spearman, Sir Alexander
Lloyd, Rt. Hn. Selwyn (Wirral) Stanley, Hn. Richard
Goodhew, Victor Longden, Gilbert Steel, David (Roxburgh)
Gower, Raymond Loveys, Walter H. Stoddart-Scott, Col. Sir Malcolm
Grant, Anthony Lubbock, Eric Studholme, Sir Henry
Grant-Ferris, R. MacArthur, Ian Talbot, John E.
Gresham Cooke, R. Mackenzie, Alasdair (Ross&Crom'ty)
Griffiths, Peter (Smethwick) Mackie, George V. (C'ness & S'land) Taylor, Sir Charles (Eastbourne)
Grimond, Rt. Hn. J. McLaren, Martin Taylor, Edward M. (G'gow.Cathcart)
Hall, John (Wycombe) McMaster, Stanley Taylor, Frank (Most Side)
Harris, Frederic (Croydon, N.W.) MeNalr-Wilson, Patrick Teeling, Sir William
Harrison, Brian (Maldon) Maginnis, John E. Temple. John M.
Harvey, Sir Arthur Vere (Macclesf'd) Mathew, Robert Thatcher, Mrs. Margaret
Harvey, John (Walthamstow, E.) Maude, Angus Thompson, Sir Richard (Croydon,S.)
Harvie Anderson, Miss Maxwell-Hyslop, R. J. Thorpe, Jeremy
Hawkins, Paul Maydon, Lt.-Cmdr. S. L. C. Tiley, Arthur (Bradford, W.)
Heald, Rt. Hn. Sir Lionel Meyer, Sir Anthony Tweedsmuir, Lady
Heath, Rt. Hn. Edward Mills, Peter (Torrington) van Straubenzee, W, R.
Hendry, Forbes Mills, Stratum (Belfast, N.) Walder, David (High Peak)
Higgins, Terence L. Miscampbell, Norman Walker, Peter (Worcester)
Hill, J. E. B. (S. Norfolk) Mitchell, David Walters, Dennis
Hirst, Geoffrey Morrison, Charles (Devizes) Ward, Dame Irene
Hobson, Rt. Hn. Sir John Mott-Radclyffe, Sir Charles Weatherill, Bernard
Hogg, Rt. Hn. Quintin Munro-Lucas-Tooth, Sir Hugh Webster, David
Hooson, H. E. Murton, Oscar Whitelaw, William
Hopkins, Alan Neave, Airey Wills, Sir Gerald (Bridgwater)
Hordern, Peter Nicholls, Sir Harmar Wilson, Geoffrey (Truro)
Hornsby-Smith, Rt. Hn. Dame P. Nugent, Rt. Hn. Sir Richard Wolrige-Gordon, Patrick
Howe, Geoffrey (Bebington) Orr, Capt. L. P. S. Woodnutt, Mark
Hunt, John (Bromley) Page, John (Harrow, W.) Younger, Hn. George
Iremonger, T. L. Page, R. Graham (Crosby)
Irvine, Bryant Godman (Rye) Pearson, Sir Frank (Clitheroe) TELLERS FOR THE NOES:
Johnson Smith, G. (East Grinstead) Peyton, John Mr. Ian Fraser and
Mr. Jasper More.
Mr. Lubbock

Is it possible to have a Division on Amendment No. 424?

The Temporary Chairman

We shall have a decision on that when we reach it. In the meantime, I am taking the Amendments in order.

The Solicitor-General

I beg to move Amendment No. 137, in page 24, line 6, after "interest" to insert "in possession"

This is purely a drafting Amendment. The distinction is between interests in possession and reversionary or contingent interests. There is a reference in each of the following subsections to interests in possession, and it does not—[Interruption.]

The Temporary Chairman

Order. It would be for the convenience of the Committee if hon. Members could hear what the Solicitor-General is saying.

The Solicitor-General

The Amendment makes no difference to the sense of the Clause or to what it intended. I therefore invite the Committee to accept it.

Amendment agreed to.

The Solicitor-General

I beg to move Amendment No. 138, in page 24, line 7, to leave out from "any" to "shall" in line 9 and insert: which at that time cease to be settled property". This, too, is a drafting Amendment. It follows directly from the first Amendment to this Clause which the Committee accepted.

Amendment agreed to.

Amendment proposed: In page 24, line 11, at end insert: Provided that the liability to pay tax on the notional gains arising may at the option of the trustees be postponed until such time as such assets or securities are disposed of and meanwhile the amount outstanding under the provisions of this section shall accrue interest at the rate of 2 per cent, per annum—[Mr. Lubbock.]

Division No. 141.] AYES [8.41 p.m.
Alison, Michael (Barkston Ash) Griffiths, Peter (Smethwick) More, Jasper
Allan, Robert (Paddington, S.) Grimond, Rt. Hn. J. Morrison, Charles (Devizes)
Amery, Rt. Hn. Julian Hall, John (Wycombe) Mott-Radclyffe, Sir Charles
Anstruther-Gray, Rt. Hn. Sir W. Harris, Frederic (Croydon, N.W.) Munro-Lucas-Tooth, Sir Hugh
Astor, John Harrison, Brian (Maldon) Murton, Oscar
Atkins, Humphrey Harvey, Sir Arthur Vere (Macclesf'd) Neave, Ai[...]rey
Awdry, Daniel Harvey, John (Walthamstow, E.) Nicholls, Sir Harmar
Baker, W. H. K. Harvie Anderson, Miss Nugent, Rt. Hn. Sir Richard
Barlow, Sir John Hawkins, Paul Orr, Capt. L. P. S.
Batsford, Brian Heald, Rt. Hn. Sir Lionel Page, John (Harrow, W.)
Beamish, Col. Sir Tufton Heath, Rt. Hn. Edward Page, R. Graham (Crosby)
Bennett, Sir Frederic (Torquay) Hendry, Forbes Pearson, Sir Frank (Clitheroe)
Berry, Hn. Anthony Higgins, Terence L. Peyton, John
Bessell, Peter Hill, J. E. B. (S. Norfolk) Pickthorn, Rt. Hn. Sir Kenneth
Birch, Rt. Hn. Nigel Hirst, Geoffrey Pitt, Dame Edith
Black, Sir Cyril Hobson, Rt. Hn. Sir John Price, David (Eastleigh)
Box, Donald Hogg, Rt. Hn. Quintin Prior, J. M. L.
Boyd-Carpenter, Rt. Hn. J. Hooson, H. E. Pym, Francis
Boyle, Rt. Hn. Sir Edward Hopkins, Alan Ramsden, Rt. Hn. James
Brewis, John Hordern, Peter Redmayne, Rt. Hn. Sir Martin
Brinton, Sir Tatton Hornsby-Smith, Rt. Hn. Dame P. Rees-Davies, W. R.
Bromley-Davenport,Lt.-Col.SirWalter Howe, Geoffrey (Bebington) Russell, Sir Ronald
Brooke, Rt. Hn. Henry Hunt, John (Bromley) Sharples, Richard
Bryan, Paul Iremonger, T. L. Shepherd, William
Buchanan-Smith, Alick Irvine, Bryant Godman (Rye) Sinclair, Sir George
Buck, Antony Johnson Smith, G. (East Grinstead) Smith, Dudley (Br'ntf'd & Chiswick)
Buxton, Ronald Johnston, Russell (Inverness) Spearman, Sir Alexander
Chichester-Clark, R. Jopling, Michael Stanley, Hn. Richard
Clark, William (Nottingham, S.) Kaberry, Sir Donald Stoddart-Scott, Col. Sir Malco[...]lm
Cole, Norman Kerby, Capt. Henry Studholme, Sir Henry
Cooper, A. E. Kilfedder, James A. Talbot, John E.
Cooper-Key, Sir Neill Kimball, Marcus Taylor, Sir Charles (Eastbourne)
Costain, A. P. King, Evelyn (Dorset, S.) Taylor, Edward M. (G'gow.Cathcart)
Craddock, Sir Beresford (Spelthorne) Kitson, Timothy Taylor, Frank (Moss Side)
Crowder, F. P. Langford-Holt, Sir John Teeling, Sir William
Curran, Charles Legge-Bourke, Sir Harry Temple, John M.
Currie, G. B. H. Lewis, Kenneth (Rutland) Thatcher, Mrs. Margaret
Dalkeith, Earl of Litchfield, Capt. John Thompson, Sir Richard (Croydon,S.)
Davies, Dr. Wyndham (Perry Barr) Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield) Thorpe, Jeremy
d'Avigdor-Goldsmid, Sir Henry Lloyd, Ian (P'tsm'th, Langstone) Tiley, Arthur (Bradford, W.)
Deedes, Rt. Hn. W. F. Lloyd, Rt. Hn. Selwyn (Wirral) Tweedsmuir, Lady
Dodds-Parker, Douglas Longden, Gilbert van Straubenzee, W. R.
Errington, Sir Eric Loveys, Walter H. Walder, David (High Peak)
Eyre, Reginald MacArthur, Ian Walker, Peter (Worcester)
Fell, Anthony Mackenzie, Alasdair (Ross&Crom'ty) Walters, Dennis
Fletcher-Cooke, Charles (Darwen) Mackie, George Y. (C'ness & S'land) Ward, Dame Irene
Fletcher-Cooke, Sir John (S'pton) McLaren, Martin Weatherill, Bernard
Foster, Sir John McMaster, Stanley Webster, David
Fraser,Rt.Hn.Hugh(St'fford & Stone) McNair-Wilson, Patrick Whitelaw, William
Fraser, Ian (Plymouth, Sutton) Magi[...]nnis, John E. Wills, Sir Gerald (Bridgwater)
Galbraith, Hn. T. G. D. Mathew, Robert Wilson, Geoffrey (Truro)
Gilmour, Sir John (East Fife) Maude, Angus Wolrige-Gordon, Patrick
Glover, Sir Douglas Maxwell-Hyslop, R. J. Woodnutt, Mark
Godber, Rt. Hn. J. B. Maydon, Lt.-Cmdr. S. L. C. Younger, Hn. George
Goodhew, Victor Meyer, Sir Anthony
Gower, Raymond Mills, Peter (Torrington) TELLERS FOR THE AYES:
Grant, Anthony Mills, Stratton (Belfast, N.) Mr. Eric Lubbock and
Grant-Ferris, R. Miscampbell, Norman Mr. David Steel.
Gresham Cooke, R. Mitchell, David
Abse, Leo Bennett, J. (Glasgow, Bridgeton) Broughton, Dr. A. D. D.
Albu, Austen Binns, John Brown, R. W. (Shoreditch & Fbury)
Allaun, Frank (Salford, E.) Blackburn, F. Buchanan, Richard
Allen, Scholefield (Crewe) Boardman, H. Butler, Herbert (Hackney, C.)
Armstrong, Ernest Boston, T. G. Butler, Mrs. Joyce (Wood Green)
Atkinson, Norman Bottomley, Rt. Hn. Arthur Callaghan, Rt. Hn. James
Bacon, Mist Alice Bowden, Rt. Hn. H. W. (Leics S.W.) Castle, Rt. Hn. Barbara
Barnett, Joel Boyden, James Coleman, Donald
Benn, Rt. Hn. Anthony Wedgwood Braddock, Mrs. E. M. Conlan, Bernard

Question put, That those words be there inserted:—

The Committee divided: Ayes 172, Noes 175.

Corbet, Mrs. Freda Hynd, H. (Accrington) Pearson, Arthur (Pontypridd)
Cronin, John Hynd, John (Attercliffe) Prentice, R. E.
Crossman, Rt. Hn. R. H. S. Irving, Sydney (Dartford) Price, J. T. (Westhoughton)
Cullen, Mrs. Alice Jackson, Colin Pursey, Cmdr. Harry
Dalyell, Tam Janner, Sir Barnett Rankin, John
Darling, George Jeger,Mrs.Lena(H'b'n&St.P'cras,S.) Redhead, Edward
Davies, Ifor (Gower) Jenkins, Hugh (Putney) Rees, Merlyn
Davies, S. O. (Merthyr) Jones, Dan (Burnley) Reynolds, G. W.
Delargy, Hugh Jones,Rt.Hn.Sir Elwyn(W.Ham,S.) Robertson, John (Paisley)
Dempsey, James Jones, J. Idwal (Wrexham) Robinson, Rt. Hn.K.(St. Pancras, N.)
Diamond, John Kelley, Richard Rogers, George (Kensington, N.)
Dodds, Norman Kenyon, Clifford Ross, Rt. Hn. William
Kerr, Dr. David (W'worth, Central) Rowland, Christopher
Doig, Peter Lawson, George Shinwell, Rt. Hn. E.
Driberg, Tom. Leadbitter, Ted Shore, Peter (Stepney)
Dunn, James A Lee, Rt. Hn. Frederick (Newton) Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)
Dunnett, Jack Lever, Harold (Cheetham) Silkin, John (Deptford)
Edwards, Rt. Hn. Ness (Caerphilly) Lewis, Ron (Carlisle) Silkin, S. C. (Camberwell, Dulwich)
English, Michael Lomas, Kenneth Slater, Joseph (Sedgefield)
Ensor, David Loughlin, Charles Solomons, Henry
Evans, Albert (Islington, S.W.) Mabon, Dr. J. Dickson Soskice, Rt. Hn. Sir Frank
Fernyhough, E. McBride, Neil Stones, William
Finch, Harold (Bedwellty) MacColl, James
Fletcher, Sir Eric (Islington, E.) MacDermot, Niall Swain, Thomas
Floud, Bernard McKay, Mrs. Margaret Swingler, Stephen
Foot, Sir Dingle (Ipswich) Mackenzie, Gregor (Rutherglen) Taverne, Dick
Foot, Michael (Ebbw Vale) Mackie, John (Enfield, E.) Thomson, George (Dundee, E.)
Fraser, Rt. Hn. Tom (Hamilton) Mahon, Simon (Bootle) Thornton, Ernest
Freeson, Reginald Manuel, Archie Tinn, James
George, Lady Megan Lloyd Mapp, Charles Tuck, Raphae
Ginsburg, David Mellish, Robert Urwin, T. W.
Gourlay, Harry Mikardo, Ian Varley, Eric C.
Molloy, William Wainwright, Edwin
Greenwood, Rt. Hn. Anthony Monslow, Walter Walden, Brian (All Saints)
Gregory, Arnold Morris, Charles (Openshaw) Walker, Harold (Doncaster)
Griffiths, David (Rother Valley) Mulley,Rt.Hn.Frederick(SheffieldPk) Wallace, George
Gunter, Rt. Hn. R. J. Murray, Albert Wells, William (Walsall N.)
Hamilton, William (West Fife) Neal, Harold Whitlock, William
Hart, Mrs. Judith Newens, Stan Wigg, Rt. Hn. George
Hattersley, Roy Noel-Baker, Francis (Swindon) Wilkins, W. A.
Hazell, Bert Noel-Baker,Rt.Hn.Philip(Derby,S.) Williams, Albert (Abertillery)
Healey, Rt. Hn. Denis Oakes, Gordon Williams, Mrs. Shirley (Hitchin)
Herbison, Rt. Hn. Margaret Ogden, Eric Wilson, Rt. Hn. Harold (Huyton)
Hill, J. (Midlothian) O'Malley, Brian Wilson, William (Coventry, S.)
Holman, Percy Padley, Walter Woodburn, Rt. Hn. A.
Houghton, Rt. Hn. Douglas Page, Derek (King's Lynn) Wyatt, Woodrow
Howell, Denis (Small Heath) Palmer, Arthur Yates, Victor (Ladywood)
Howie, W. Pargiter, G. A.
Hoy, James Park, Trevor (Derbyshire, S.E. TELLERS FOR THE NOES;
Hughes, Emrys (S. Ayrshire) Parker, John Mrs. Harriet Slater and
Hunter, Adam (Dunfermline) Parkin, B. T. Mr. Joseph Harper.
Hunter, A. E. (Feltham) Pavitt, Laurence

A mendment proposed: In page 24, line 27, at end insert: except in cases where the trustees have no funds, in which event liability shall remain as a charge deferred until the trustees have acquired realised funds".—[Mr. Chichester-Clark.]

Division No. 142.] AYES [8.52 p.m.
Alison, Michael (Barkston Ash) Boyd-Carpenter, Rt. Hn. J[...]. Curran, Charles
Allan, Robert (Paddington, S.) Boyle, Rt. Hn. Sir Edward Currie, G. B. H.
Amery, Rt. Hn. Jullan Brewis, John Dalkeith, Earl of
Anstruther-Gray, Rt. Hn. Sir W. Brinton, Sir Tatton Davies, Dr. Wyndham (Perry Barr)
Astor, John Bromley-Davenport, Lt. -Col. SirWalter d'Avigdor-Goldsmid, Sir Henry
Atkins, Humphrey Brooke, Rt. Hn. Henry Deedes, Rt. Hn. W. F.
Awdry, Daniel Bryan, Paul Dodds-Parker, Douglas
Baker, W. H. K. Buchanan-Smith, Alick Errington, Sir Eric
Barlow, Sir John Buck, Antony Eyre, Reginald
Batsford, Brian Buxton, Ronald Fell, Anthony
Beamish, Col. Sir Tufton Chichester-Clark, R. Fletcher-Cooke, Charles (Darwen)
Bennett, Sir Frederic (Torquay) Clark, William (Nottingham, S.)
Berry, Hn. Anthony Cole, Norman Fletcher-Cooke, Sir John (S'pton)
Bessell, Peter Cooper, A. E. Foster, Sir John
Birch, Rt. Hn. Nigel Cooper-Key, Sir Neill Fraser,Rt.Hn.Hugh(St'fford & Stone)
Black, Sir Cyril Costain, A. P. Galbraith, Hn. T. G. D.
Blaker, Peter Craddock, Sir Beresford (Spelthorne) Gilmour, Sir John (East Fife)
Box, Donald Crowder, F. P. Glover, Sir Douglas

Question put, That those words be there inserted:—

The Committee divided: Ayes 173, Noes 177.

Godber, Rt. Hn. J. B. Legge-Bourke, Sir Harry Ramsden, Rt. Hn. James
Goodhew, Victor Lewis, Kenneth (Rutland) Redmayne, Rt. Hn. Sir Martin
Gower, Raymond Litchfield, Capt. John Rees-Davies, W. R.
Grant, Anthony Lloyd,Rt.Hn.Geoffrey (Sut'nC'dfield) Russell, Sir Ronald
Grant-Ferris, R. Lloyd, lan (P'tsm'th, Langstone) Sharples, Richard
Gresham Cooke, R. Lloyd, Rt. Hn. Selwyn (Wirral) Shepherd, William
Griffiths, Peter (Smethwick) Longden, Gilbert Sinclair, Sir George
Grimond, Rt. Hn. J. Loveys, Walter H. Smith, Dudley (Br'ntf'd & Chiswick)
Hall, John (Wycombe) Lubbock, Eric Spearman, Sir Alexander
Mackenzie, Gregor (Rutherglen) Stanley, Hn. Richard
Harris, Frederic (Croydon, N.W.) Mackie, George Y. (C'ness & S'land) Steel, David (Roxburgh)
Harrison, Brian (Maldon) McLaren, Martin Stoddart-Scott, Col. Sir Malcolm
Harvey, Sir Arthur Vere (Macclesf'd) McMaster, Stanley Studholme, Sir Henry
Harvey, John (Walthamstow, E.) McNair-Wilson, Patrick
Harvie Anderson, Miss Maginnis, John E. Talbot, John E.
Hawkins, Paul Mathew, Robert Taylor, Sir Charles (Eastbourne)
Heald, Rt. Hn. Sir Lionel Maude, Angus Taylor, Edward M. (G'gow.Cathcart)
Heath, Rt. Hn. Edward Maxwell-Hyslop, R. J. Taylor, Frank (Moss Side)
He[...]ndry, Forbes Maydon, Lt.-Cmdr. S. L. C. Teeling, Sir William
Higgins, Terence L. Meyer, Sir Anthony Temple, John M.
Hill, J. E. B. (S. Norfolk) Mills, Peter (Torrington) Thatcher, Mrs. Margaret
Hirst, Geoffrey Mills, Stratton (Belfast, N.) Thompson, Sir Richard (Croydon,S.)
Hobson, Rt. Hn. Sir John Miscampbell, Norman Thorpe, Jeremy
Hogg, Rt. Hn. Quintin Mitchell, David Tiley, Arthur (Bradford, W.)
Hooson, H. E. More, Jasper Tweedsmuir, Lady
Hopkins, Alan Morrison, Charles (Devizes) van Straubenzee, W. R.
Hordern, Peter Mott-Radclyffe, Sir Charles Walder, David (High Peak)
Hornsby-Smith, Rt. Hn. Dame P. Munro-Lucas-Tooth, Sir Hugh Walker, Peter (Worcester)
Howe, Geoffrey (Bebington) Murton, Oscar Walters, Dennis
Hunt, John (Bromley) Neave, Airey Ward, Dame Irene
Iremonger, T. L. Nicholls, Sir Harmar Weatherill, Bernard
Irvine, Bryant Godman (Rye) Nugent, Rt. Hn. Sir Richard Webster, David
Johnson Smith, G. (East Grinstead) Orr, Capt. L. P. S. Whitelaw, William
Johnston, Russell (Inverness) Page, John (Harrow, W.) Wills, Sir Gerald (Bridgwater)
Jopling, Michael Page, R. Graham (Crosby) Wilson, Geoffrey (Truro)
Kaberry, Sir Donald Pearson, Sir Frank (Clitheroe) Wolrige-Gordon, Patrick
Kerby, Capt. Henry Peyton, John Woodnutt, Mark
Kilfedder, James A. Pickthorn, Rt. Hn. Sir Kenneth Younger, Hn. George
Kimball, Marcus Pitt, Dame Edith
King, Evelyn (Dorset, S.) Price, David (Eastleigh) TELLERS FOR THE AYES:
Kitson, Timothy Prior, J. M. L. Mr. Ian MacArthur and
Langford-Holt, Sir John Pym, Francis Mr. Ian Fraser.
Abse, Leo Dodds, Norman Hughes, Emrys (S. Ayrshire)
Albu, Austen Doig, Peter Hunter, Adam (Dunfermline)
Allaun, Frank (Salford, E.) Driberg, Tom Hunter, A. E. (Feltham)
Allen, Scholefield (Crewe) Dunn, James A. Hynd, H. (Accrington)
Armstrong, Ernest Dunnett, Jack Hynd, John (Attercliffe)
Atkinson, Norman Edwards, Rt. Hn. Ness (Caerphilly) Irving, Sydney (Dartford)
Bacon, Miss Alice English, Michael Jackson, Colin
Barnett, Joel Ensor, David Janner, Sir Barnett
Benn, Rt. Hn. Anthony Wedgwood Evans, Albert (Islington, S.W.) Jeger,Mrs.Lena(H'bin&St.P'cras,S.)
Bennett, J. (Glasgow, Bridgeton) Fernyhough, E. Jenkins, Hugh (Putney)
Binns, John Finch, Harold (Bedwellty) Jones, Dan (Burnley)
Blackburn, F. Fletcher, Sir Eric (Islington, E.) Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Boardman, H. Floud, Bernard Jones, J. Idwal (Wrexham)
Boston, T. G. Foot, Sir Dingle (Ipswich) Kelley, Richard
Bottomley, Rt. Hn. Arthur Kenyon, Clifford
Bowden, Rt. Hn. H. W. (Leics S.W.) Foot, Michael (Ebbw Vale) Kerr, Dr. David (W'worth, Central)
Boyden, James Fraser, Rt. Hn. Tom (Hamilton) Lawson, George
Braddock, Mrs. E. M. Freeson, Reginald Leadbitter, Ted
Broughton, Dr. A. D. D. George, Lady Megan Lloyd Lee, Rt. Hn. Frederick (Newton)
Brown, R. W. (Shoreditch & Fbury) Ginsburg, David Lever, Harold (Cheetham)
Buchanan, Richard Gourlay, Harry Lewis, Ron (Carlisle)
Butler, Herbert (Hackney, C.) Greenwood, Rt. Hn. Anthony Lomas, Kenneth
Butler, Mrs. Joyce (Wood Green) Gregory, Arnold Loughlin, Charles
Callaghan, Rt. Hn. James Griffiths, David (Rother Valley) Mabon, Dr. J. Dickson
Castle, Rt. Hn. Barbara Gunter, Rt. Hn. R. J. McBride, Neil
Coleman, Donald Hamilton, William (West Fife) MacColl, James
Conlan, Bernard Hart, Mrs. Judith MacDermot, Niall
Corbet, Mrs. Freda Hattersley, Roy McKay, Mrs. Margaret
Cronin, John Hazell, Bert Mackenzie, Gregor (Rutherglen)
Crossman, Rt. Hn. R. H. S. Healey, Rt. Hn. Denis Mackie, John (Enfield, E.)
Cullen, Mrs. Alice Herbison, Rt. Hn. Margaret Mahon, Simon (Bootle)
Dalyell, Tam Hill, J. (Midlothian) Manuel, Archie
Darling, George Hobden, Dennis (Brighton, K'town.) Mapp, Charles
Davies, Ifor (Gower) Holman, Percy Mellish, Robert
Davies, S. O. (Merthyr) Houghton, Rt. Hn. Douglas Mikardo, Ian
Delargy, Hugh Howell, Denis (Small Heath) Molloy, William
Dempsey, James Howie, W. Monslow, Walter
Diamond, John Hoy, James Morris, Charles (Openshaw)
Mulley,Rt.Hn.Frederick(SheffieldPk) Redhead, Edward Tinn, James
Murray, Albert Rees, Merlyn Tuck, Raphael
Neal, Harold Reynolds, G. W. Urwin, T. W.
Newens Stan Robertson, John (Paisley) Varley, Eric G.
Noel-Baker, Francis (Swindon) Robinson, Rt. Hn.K.(St. Pancras, N.) Wainwright, Edwin
Noel-Baker,Rt.Hn.Philip(Derby,S.) Rogers, George (Kensington, N.) Walden, Brian (All Saints)
Oakes, Gordon Ross, Rt. Hn. William Walker, Harold (Doncaster)
Ogden, Eric Rowland, Christopher Wallace, George
O'Malley, Brian Shinwell, Rt. Hn. E. Wells, William (Walsall N.)
Oram, Albert E. (E. Ham, S.) Shore, Peter (Stepney) Whitlock, William
Padley, Walter Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.) Wigg, Rt. Hn. George
Page, Derek (King's Lynn) Silkin, John (Deptford) Wilkins, W. A.
Palmer, Arthur Silkin, S. C. (Camberwell, Dulwich) Williams, Albert (Abertillery)
Pargiter, G. A. Slater, Joseph (Sedgefield) Williams, Mrs. Shirley (Hitchin)
Park, Trevor (Derbyshire, S.E.) Solomons, Henry Wilson, Rt. Hn. Harold (Huyton)
Parker, John Soskice, Rt. Hn. Sir Frank Wilson, William (Coventry, S.)
Parkin, B. T. Stones, William Woodburn, Rt. Hn. A.
Pavitt, Laurence Wyatt, Woodrow
Pearson, Arthur (Pontypridd) Swain, Thomas Yates, Victor (Ladywood)
Prentice, R. E. Swingler, Stephen
Price, J. T. (Westhoughton) Taverne, Dick TELLERS FOR THE NOES:
Pursey, Cmdr. Harry Thomson, George (Dundee, E.) Mrs. Harriet Slater and
Rankin, John Thornton, Ernest Mr. Joseph Harper.

9.0 p.m.

Mr. Jasper More (Ludlow)

I beg to move Amendment No. 337, in page 24, line 35, at the end to insert: and for the purposes of this section a life interest in settled property held by a minor (or a person who under the terms of the settlement shall become absolutely entitled to the settled property on attaining a specified age) shall be counted a life interest in possession". This exploratory Amendment is designed to obtain clarification regarding a settlement on a person under age. Clause 24, as now amended by Amendment No. 137, makes clear the position about life tenancies in possession. The object of this Amendment is to make clear what settlements are affected by subsection (6) where the 10-year rule applies. As drafted, the Amendment suggests two different cases affecting persons under age.

There could be the case of a settlement specifically on a person for life who when he comes in possession is under age. There could be another case of a settlement with power to apply the income to benefit a person under age; they might apply part or all of the income. A third case would be where the income is not specifically dealt with but the capital might be provided to come to an infant contingent on attaining the age of 21. In such a case either all or part of the income might be applied for the infant until attaining the age of 21.

The object of the Amendment is to ask the Government to make clear where the dividing line is to be drawn between cases where the charge is imposed on death and where it is imposed under the 10-year rule.

The Solicitor-General

This is a very small point and I can meet the hon. Member for Ludlow (Mr. More). We must draw a distinction when dealing with minors between cases where a minor has an interest in possession, as he has even if his actual drawings may depend on trustees, and cases where he has a contingent interest. I should say that the first case is certainly covered by subsection (9,a). I do not wish to take up time going into this. We are as anxious as the hon. Gentleman to protect the position of minors. We think that the purpose of this Amendment is already covered by the words of the Clause. We want to be certain about it—we are in the realm of extreme technicalities—and if it would meet the hon. Gentleman, we are prepared to look at the matter again to make sure that the position of minors is fully covered.

Mr. More

I thank the Solicitor-General for what he has said and, on that understanding, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

The Solicitor-General

I beg to move Amendment No. 139 in page 24, line 36, to leave out subsection (7) and to insert: (7) On the occasion when a person becomes absolutely entitled to any settled property as against the trustee, any allowable loss which has accrued to the trustee in respect of property which is, or is represented by, the property to which that person so becomes entitled (including any allowable loss carried forward to the year of assessment in which that occasion falls), being a loss which cannot be deducted from chargeable gains accruing to the trustee in that year, but before that occasion, shall be treated as if it were an allowable loss accruing at that time to the person becoming so entitled, instead of to the trustee. This Amendment is consequential on the first Amendment to this Clause, which the Committee accepted earlier. Therefore, without argument, I would ask the Committee to accept this, also.

Question put, That the words proposed to be left out stand part of the Clause.

Sir M. Redmayne

On a point of order. We ought to have some guidance from the Government.

The Temporary Chairman

I shall put the Question again.

Question, That the words proposed to be left out stand part of the Clause, put and negatived.

Sir D. Glover

On a point of order. I distinctly heard the Government Whip, the hon. Lady the Member for Stoke-on-Trent, North (Mrs. Slater) say, "Aye". What is the application of the rules of the Committee in this case? Does this not mean that the words stand part of the Clause?

The Temporary Chairman

I distinctly heard the hon. Lady say, "Aye", but immediately correct herself to say "No".

Sir Harmar Nicholls

Is it not wrong that, when we are dealing with obvious technicalities, we should have no clear guidance from the Government? They are leading the Committee very badly astray if we have to pass Amendments without any noises, either "Aye" or "No", being made, because we lack the guidance which the Government ought to give.

Proposed words there inserted.

Sir Henry d'Avigdor-Goldsmid

I beg to move Amendment No. 206, in page 25. line 43, to leave out subsection (12).

The Temporary Chairman

Hon. Members should appreciate that we are, at the same time, discussing Amendment No. 317, in page 25, line 44, to leave out from "as" to the end of line 7 on page 26 and to insert: if the settlement had been created on 5th April 1965".

Sir H. d'Avigdor-Goldsmid

These Amendments deal with a point arising out of subsection (12) of this Clause. We have here an extraordinarily complicated method of arriving at the time when the discretionary trusts are valued for Capital Gains Tax. We have what is a rather absurd position under this subsection, that where a trust is created after 6th April, 1965, it will fall to be caught by the revaluation for Capital Gains Tax on the tenth anniversary of that settlement.

The date 6th April has the consequence that if a trust had been formed by 5th April, 1965, it would not be caught for Capital Gains Tax assessment until the 10th anniversary of 5th April, 1965, which would be 5th April, 1975. If it is unfortunate enough to be made on 5th May, it is caught by the assessment a few days after Budget day.

We know that the longer right hon. Gentlemen opposite stay in office the less chance there is of any capital gain of any sort accruing because of their depressing effect on the state of the market and the economy. It is absurd that we should have this ridiculous anomaly, that the trusts set up within a month or an hour should fall for revaluation at a distance of 10 years. The Financial Secretary shakes his head, so I hope that he will explain to me what he feels the position to be.

If a trust is set up on 5th April in any given year it will not fall for revaluation until ten years after that date, whereas if it were made on 15th April, and the active years were 1925, 1935, 1945 and 1955, a trust set up on 15th April, 1955, would be caught by this tax as at 15th April this year. If it were made on 5th April, 1955, it would escape this Measure until 5th April, 1965. This seems to be adding inconvenience to impracticability.

Having brought in this entirely new principle of taxing discretionary trusts as if there had been a disposal after 10 years, a principle which does not exist in any law that I have heard of previously, and which has been brought in to make sure that no person escapes this net, the simplest thing to do would be to take the line which I have suggested in my Amendment, which is to give the existing trust 10 years and to tax it at the end of 10 years.

Instead, everyone must look up the date on which the trust was made. We do not all live in lawyers' offices. There are many trusts in this country which have been made and put away. The bank holds the securities. The trustees do not know the date of the trust, and everything has to be looked up. This is making for enormous and quite unnecessary inconvenience.

A simple solution is in the Amendment of my right hon. and hon. Friends to leave out the subsection altogether or in my own suggestion—I hope that the Financial Secretary will give it consideration—to treat all trusts as if they had been created the day before the Budget was introduced, to give them 10 years, at the end of which an assessment could be made. One advantage is that the people chiefly concerned know what were the prices of shares on 5th April, 1965, which makes it much easier.

I know that a point will be taken against me that this is the only basis on which a tax could be levied, but I emphasise that my proposal is a simplification. Goodness knows, we have been moving deeper and deeper into complications over the six days we have spent on the Measure, and no doubt we shall do so during the next 30 days which we shall devote to it. We feel that it would be easy for the Government to accept this simplification, which does not transgress the principles of the tax, with which we by no means agree, in any case.

9.15 p.m.

The Solicitor-General

I am afraid that I must invite the Committee to reject both Amendments. They raise somewhat different issues. Amendment No. 206 proposes to delete the whole of subsection (12). That subsection is really just a machinery Clause which is necessary to carry out the purposes of subsection (6). If subsection (6) is to remain part of the Bill we must have some machinery to bring it into operation. It is difficult to see how the first occasion of charge could be fixed except by reference to Budget day—that is, 6th April, 1965—and, therefore, it would make the Bill unworkable if we accepted Amendment No. 206.

On Amendment No. 317 the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) suggested that we should start from 5th April, 1965, and that every assessment should be made at the end of a 10-year period. I see the force of the argument, but, administratively, it would be impossible to work. It would mean that on certain dates each 10 years—on 5th April, 1975, 5th April, 1985, 5th April, 1995, and so on—an assessment would have to be made on gains accumulated in the previous 10 years in respect of the portfolios of all trusts which had no life tenants in possession. That would involve work which would have to be bunched, so to speak, in the 10 yearly peaks, which would be an extremely inconvenient thing to do. Indeed, it would be almost impossible for those who must administer the Measure and it would cause great difficulties for the trustees themselves. I must, therefore, advise the Committee that the proposal made in Amendment No. 317 would be impossible in operation.

On one point I think that the hon. Member for Walsall, South may be under a misapprehension. There is no element of retrospection here. Suppose that one has a trust which had come into existence some years before 1965 but which had only two years to go after 5th April, 1965, for the purpose of the possible application of the tax. We are here concerned with those two years. I do not wish to pursue this unduly because we are now very much in the realm of extreme technicalities, but, for the reasons I have given, we cannot accept either Amendment.

Mr. Peter Walker

I appreciate the reasons which the Solicitor-General gave for not wishing to accept the two Amendments. As he said, Amendment No. 206 would delete the machinery by which the Clause will work. My hon. Friends and I tabled that Amendment basically to raise the point mentioned by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) about the injustice of having a situation in which one trust which was started a day before another will be assessed for Capital Gains Tax on a differential of more than 10 years ago.

There are several aspects to which I hope the Solicitor-General will give consideration, perhaps before Report. The first concerns administrative convenience. It is agreed between the two sides of the Committee that there will be a considerable administrative burden placed on the Inland Revenue in the coming months and years in putting these two taxes into operation. This means that one is merely adding to that administrative inconvenience if one now starts to tax immediately the trusts for valuation in 1965–66. Indeed, one is creating a situation in which all trusts reaching their anniversary dates today or in a week's time must go through this process of valuation under the Clause. That will continue during the next 10 years as they fall due for this process. Therefore, the solution on the administrative argument would be to take the anniversary dates for the year 1975 rather than for the year 1965.

Another problem is that the Government are bringing into being valuations in the years 1966–67, which is in the very near future, for these trusts. I agree that that will apply to those which have been established since 5th April this year hut, in certain circumstances, we will be considering assets which have gone up during that period and, in this situation, trustees will have had very little time in which to get into a liquid position to meet the Capital Gains Tax which will fall due. I think that the fair way to handle this would be to say that trusts formed from now on will be valued on their tenth anniversary, while those trusts previously formed will be valued on their tenth anniversary after the next ten years. However, all I ask is that the Solicitor-General should consider this suggestion between now and Report.

Mr. MacDermot

We shall certainly consider what the hon. Gentleman says, and carefully read his words in print. At one moment I understood him to suggest that the provisions of the Bill as they stand would require that every trust, for example, whose tenth anniversary fell within, say, a week after the Bill came into force would have to be assessed during that week. That is not so. They only have to be assessed when an occasion for charge arises; if there is a termination of a life interest. This is a protective period for a trust, so that if a life interest falls in more rapidly than that there cannot be another charge except within a ten-year period—and it has been suggested that the period should be extended to 15 years. People talk as though this provision means that, automatically, there will be a charge every ten years, but that is not the case. If a life interest does not fall in there may not be a charge for 20 or 30 years.

Sir H. d'Avigdor-Goldsmid

Trustees are honourable people, and are usually professional men. They will be under an obligation to revalue their trust on the anniversary date, and if that anniversary date takes place on, say, 10th May, they must then get a valuation. We are not concerned only with stocks and shares but with land. This is a complicated business—why go in for it?

Mr. MacDermot

No, the trustees will not automatically have to revalue every ten years. That is the misunderstanding I seek to clear up. It is only if a life interest has fallen in that the situation arises and there has to be a valuation, but the 10-year provision limits the minimum period within which there must be a revaluation.

Sir H. d'Avigdor-Goldsmid

We must be at cross-purposes here. We are dealing now with discretionary trusts—trusts which, by their very nature, do not change hands on a life interest. This is the particular point with which we are dealing. We have this 10-year anniversary—

Mr. MacDermot


Sir H. d'Avigdor-Goldsmid

The hon. and learned Gentleman speaks a great deal and I speak very little, and he should do me the politeness to listen to me. The whole point is that I am dealing with discretionary trusts, where it is not a question of a life or a death. These discretionary trusts are caught by this ten-year revaluation. The point of the Amendment is that it is manifestly inconvenient that the trustees should have to go through the whole business of revaluation, as they will have to do, to ascertain what, if any, capital gain has been achieved between the Budget date and whatever the anniversary of the trust is. That is why we suggested a ten-year truce, at the end of which time the valuation would fall into place, as my hon. Friend the Member for Worcester (Mr. Peter Walker) has suggested. Questions of life and death do not come into it at all.

Mr. MacDermot

The hon. Baronet is quite right, and I apologise. It is perfectly correct that, in terms of discretionary trusts, the revaluation is automatic after whatever period we determine. I will gladly look into the point that he and his hon. Friend have raised as to what should be the effective starting point in such cases.

Mr. Peter Walker

In view of the Financial Secretary's undertaking to review the position between now and Report, I beg to ask leave to withdraw the Amendment.

The Temporary Chairman

It is for the hon. Member who moved the Amend-

Division No. 143.] AYES [9.25 p.m.
Abse, Leo Gourlay, Harry Morris, Charles (Openshaw)
Albu, Austen Greenwood, Rt. Hn. Anthony Mulley,Rt.Hn.Frederlck(SheffieldPk)
Allaun, Frank (Salford, E.) Gregory, Arnold Murray, Albert
Allen, Scholefield (Crewe) Griffiths, David (Rother Valley) Neal, Harold
Armstrong, Ernest Gunter, Rt. Hn. R. J. Newens, Stan
Atkinson, Norman Hamilton, William (West Fife) Noel-Baker, Francis (Swindon)
Bacon, Miss Alice Harper, Joseph Noel-Baker,Rt.Hn.Philip(Derby,S.)
Barnett, Joel Hart, Mrs. Judith Oakes, Gordon
Benn, Rt. Hn. Anthony Wedgwood Hattersley, Roy Ogden, Eric
Bennett, J. (Glasgow, Bridgeton) Hazell, Bert O'Malley, Brian
Binns, John Healey, Rt. Hn. Denis Oram, Albert E. (E. Ham, S.)
Blackburn, F. Herbiton, Rt. Hn. Margaret Owen, Will
Boardman, H. Hill, J. (Midlothian) Padley, Walter
Boston, T. G. Hobden, Dennis (Brighton, K'town.) Page, Derek (King's Lynn)
Bottomley, Rt. Hn. Arthur Holman, Percy Palmer, Arthur
Bowden, Rt. Hn. H. W. (Leics S.W.) Houghton, Rt. Hn. Douglas Pargiter, G. A.
Boyden, James Howell, Denis (Small Heath) Park, Trevor (Derbyshire, S.E.)
Braddock, Mrs. E. M. Hoy, James Parker, John
Brown, R. W. (Shoreditch & Fbury) Hughes, Emrys (S. Ayrshire) Parkin, B. T.
Buchanan, Richard Hunter, Adam (Dunfermline) Pavitt, Laurence
Butler, Herbert (Hackney, C.) Hunter, A. E. (Feltham) Pearson, Arthur (Pontypridd)
Butler, Mrs. Joyce (Wood Green) Hynd, H. (Accrington) Prentice, R. E.
Callaghan, Rt. Hn. James Hynd, John (Attercliffe) Price, J. T. (Westhoughton)
Castle, Rt. Hn. Barbara Irving, Sydney (Dartford) Pursey, Cmdr. Harry
Coleman, Donald Jackson, Colin Rankin, John
Conlan, Bernard Janner, Sir Barnett Redhead, Edward
Corbet, Mrs. Freda Jeger,Mrs.Lena(H'b'n&St.P'cras,S.) Rees, Merlyn
Cronin, John Jenkins, Hugh (Putney) Reynolds, G. W.
Crossman, Rt. Hn. R. H. S. Jones, Dan (Burnley) Robertson, John (Paisley)
Cullen, Mrs. Alice Jones,Rt.Hn.Sir Elwyn(W.Ham,S.) Robinson,Rt.Hn.K.(St.Pancras,N.)
Dalyell, Tam Jones, J. Idwal (Wrexham) Rogers, George (Kensington, N.)
Darling, George Kelley, Richard Ross, Rt. Hn. William
Davies, Ifor (Gower) Kenyon, Clifford Rowland, Christopher
Davies, S. O. (Merthyr) Kerr, Dr. David (W'worth, Central) Shinwell, Rt. Hn. E.
Delargy, Hugh Lawson, George Shore, Peter (Stepney)
Dempsey, James Leadbitter, Ted Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)
Diamond, John Lee, Rt. Hn. Frederick (Newton) Silkin, John (Deptford)
Dodds, Norman Lever, Harold (Cheetham) Silkin, S. C. (Camberwell, Dulwich)
Doig, Peter Lewis, Ron (Carlisle) Slater, Joseph (Sedgefield)
Driberg, Tom Lomas, Kenneth So[...]omons, Henry
Dunn, James A. Loughlin, Charles Soskice, Rt. Hn. Sir Frank
Dunnett, Jack Mabon, Dr. J. Dickson Stones, William
Edwards, Rt. Hn. Ness (Caerphilly) McBride, Neil Swain, Thomas
English, Michael MacColl, James Swingler, Stephen
Entor, David MacDermot, Niall Taverne, Dick
Evans, Albert (Islington, S.W.) McKay, Mrs. Margaret Thomson, George (Dundee, E.)
Fernyhough, E. Mackenzie, Gregor (Rutherglen) Tinn, James
Finch, Harold (Bedwellty) Mackie, John (Enfield, E.) Tuck, Raphael
Fletcher, Sir Eric (Islington, E.) Mahon, Simon (Bootle) Urwin, T. W.
Floud, Bernard Manuel, Archie Varley, Eric G.
Foot, Sir Dingle (Ipswich) Mapp, Charles Wainwright, Edwin
Foot, Michael (Ebbw Vale) Mason, Roy Walden, Brian (All Saints)
Fraser, Rt. Hn. Tom (Hamilton) Mellish, Robert Walker, Harold (Doncaster)
Freeson, Reginald Mikardo, Ian Wallace, George
George, Lady Megan Lloyd Molloy, William Wells, William (Walsall N.)
Ginsburg, David Monslow, Walter Whitlock, William

ment to seek the leave of the Committee to withdraw it.

Sir H. d'Avigdor-Goldsmid

In that case, I can do no better than follow the example of my hon. Friend the Member for Worcester (Mr. Peter Walker) and beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Question put, That the Clause, as amended, stand part of the Bill:—

The Committee divided: Ayes 177, Noes 165.

Wigg, Rt. Hn. George Wilson, William (Coventry S.)
Wilkins, W. A. Woodburn, Rt. Hn. A. TELLERS FOR THE AYES:
Williams, Albert (Abertillery) Wyatt, Woodrow Mr. William Howie and
Williams, Mrs. Shirley (Hitchin) Yates, Victor (Ladywood) Mrs. Harriet Slater.
Wilson, Rt. Hn. Harold (Huyton)
Alison, Michael (Barkston Ash) Gresham Cooke, R. Miscampbell, Norman
Allan, Robert (Paddington, S.) Griffiths, Peter (Smethwick) Mitchell, David
Amery, Rt. Hn. Jullan Grimond, Rt. Hn. J. More, Jasper
Anstruther-Gray, Rt. Hn. Sir W. Hall, John (Wycombe) Morrison, Charles (Devizes)
Astor, John Harris, Frederic (Croydon, N.W.) Mott-Radclyffe, Sir Charles
Atkins, Humphrey Harrison, Brian (Maldon) Munro-Lucas-Tooth, Sir Hugh
Awdry, Daniel Harvey, Sir Arthur Vere (Macclesf'd) Murton, Oscar
Baker, W. H. K. Harvey, John (Walthamstow, E.) Neave, Airey
Barlow, Sir John Harvle Anderson, Miss Nicholls, Sir Harmar
Batsford, Brian Hawkins, Paul Nugent, Rt. Hn. Sir Richard
Bennett, Sir Frederic (Torquay) Heald, Rt. Hn. Sir Lionel Orr, Capt. L. P. S.
Berry, Hn. Anthony Heath, Rt. Hn. Edward Page, John (Harrow, W.)
Bessell, Peter Hendry, Forbes Page, R. Graham (Crosby)
Birch, Rt. Hn. Nigel Higgins, Terence L. Pearson, Sir Frank (Clitheroe)
Black, Sir Cyril Hill, J. E. B. (S. Norfolk) Peyton, John
Blaker, Peter Hirst, Geoffrey Pickthorn, Rt. Hn. Sir Kenneth
Box, Donald Hobson, Rt. Hn. Sir John Pitt, Dame Edith
Boyd-Carpenter, Rt. Hn. J. Hogg, Rt. Hn. Quintin Price, David (Eastleigh)
Brewis, John Hooson, H. E. Prior, J. M. L.
Brinton, Sir Tatton Hopkins, Alan Pym, Francis
Bromley-Davenport,Lt.-Col.SirWalter Hordern, Peter Ramsden, Rt. Hn. James
Brooke, Rt. Hn. Henry Hornsby-Smith, Rt. Hn. Dame P. Redmayne, Rt. Hn. Sir Martin
Bryan, Paul Howe, Geoffrey (Bebington) Rees-Davies, W. R.
Buchanan-Smith, Aliek Hunt, John (Bromley) Russell, Sir Ronald
Buck, Antony Iremonger, T. L. Sharples, Richard
Buxton, Ronald Irvine, Bryant Godman (Rye) Sinclair, Sir George
Chichester-Clark, R. Johnston, Russell (Inverness) Smith, Dudley (Br'ntf'd & Chiswick)
Clark, William (Nottingham, S.) Jopling, Michael Spearman, Sir Alexander
Cole, Norman Kaberry, Sir Donald Stanley, Hn. Richard
Cooper, A. E. Kerby, Capt. Henry Stoddart-Scott, Col. Sir Malcolm
Costain, A. P. Kilfedder, James A. Studholme, Sir Henry
Craddock, Sir Beresford (Spelthorne) Kimball, Marcus Talbot, John E.
Crowder, F. P. King, Evelyn (Dorset, S.) Taylor, Sir Charles (Eastbourne)
Curran, Charles Kitson, Timothy Taylor, Edward M. (G'gow.Cathcart)
Currie, G. B. H. Langford-Holt, Sir John Taylor, Frank (Moss Side)
Dalkeith, Earl of Legge-Bourke, Sir Harry Teeling, Sir William
Davies, Dr. Wyndham (Perry Barr) Lewis, Kenneth (Rutland) Temple, John M.
d'Avigdor-Goldsmid, Sir Henry Litchfield, Capt. John Thatcher, Mrs. Margaret
Deedes, Rt. Hn. W. F. Lloyd.Rt.Hn.Geoffrey (Sut'nC'dfleld) Thompson, Sir Richard (Croydon,S.)
Dodds-Parker, Douglas Lloyd, Ian (P'tsm'th, Langstone) Tiley, Arthur (Bradford, W.)
Errington, Sir Eric Lloyd, Rt. Hn. Selwyn (Wirral) van Straubenzee, W. R.
Eyre, Reginald Longden, Gilbert Walder, David (High Peak)
Fell, Anthony Loveys, Walter H. Walker, Peter (Worcester)
Fletcher-Cooke, Charles (Darwen) Lubbock, Eric Walters, Dennie
Fletcher-Cooke, Sir John (S'pton) Mackenzie, Alasdair (Ross&Crom'ty) Ward, Dame Irene
Foster, Sir John Mackie, George Y. (C'ness & S'land) Weatherill, Bernard
Fraser,Rt.Hn.Hugh(St'fford & Stone) McLaren, Martin Webster, David
Fraser, Ian (Plymouth, Sutton) McMaster, Stanley Whitelaw, William
Galbraith, Hn. T. G. D. McNair-Wilson, Patrick Wills, Sir Gerald (Bridgwater)
Gilmour, Sir John (East Fife) Maginnis, John E. Wilson, Geoffrey (Truro)
Glover, Sir Douglas Maude, Angus Wolrige-Gordon, Patrick
Godber, Rt. Hn. J. B. Maxwell-Hyslop, R. J. Woodnutt, Mark
Goodhew, Victor Maydon, Lt.-Cmdr. S. L. C. Younger, Hn. George
Gower, Raymond Meyer, Sir Anthony
Grant, Anthony Mills, Peter (Torrington) TELLERS FOR THE NOES:
Grant-Ferris, R. Mills, Stratton (Belfast, N.) Mr Ian MacArthur and
Mr Geoffrey Johnson Smith.

Clause, as amended, ordered to Stand part of the Bill.