HC Deb 26 May 1965 vol 713 cc745-91
Captain L. P. S. Orr (Down, South)

I beg to move Amendment No. 95, in page 28, line 13, to leave out "one" and to insert "five".

The Chairman

With this Amendment we are discussing Amendment No. 96, in page 28, line 16, to leave out "one" and to insert "five".

Captain Orr

In the absence of my hon. Friend the Member for Belfast, South (Mr. Pounder), whose name heads the list of names to the Amendment, I shall move it formally. I understand that the next Amendment which we are to take is of very great importance to the whole nation. In view of the state of the gilt-edged market today, I should have thought that the Chancellor might have something to say on the next Amendment.

Accordingly, I simply ask why the figure "one hundred" was chosen in the Clause. It seems extraordinarily low—pitifully low, in view of the inflation which is going on at present and which we may expect if the present Government lasts any longer than tonight. Will the Financial Secretary tell us why £100 was chosen?

The Chairman

The hon. and gallant Member has moved his Amendment briefly rather than formally.

Mr. MacDermot

I respond to the hon. and gallant Genlteman's invitation to deal with the matter briefly. We discussed whether £100 was a suitable limit, or whether there should be a higher limit when considering the Clause dealing with short-term tax. There is no magic about any particular figure which one chooses. The object was to choose a figure which would cover the normal personal and perhaps family gift of a modest nature which

Division No. 146.] AYES [10.29 p.m.
Abse, Leo Fernyhough, E. Lever, Harold (Cheetham)
Albu, Austen Finch, Harold (Bedwellty) Lewis, Arthur (West Ham, N.)
Allaun, Frank (Salford, E.) Fletcher, Sir Eric (Islington, E.) Lewis, Ron (Carlisle)
Allen, Scholefleld (Crewe) Floud, Bernard Loughlin, Charles
Armstrong, Ernest Foot, Sir Dingle (Ipswich) Mabon, Dr. J. Dickson
Atkinson, Norman Foot, Michael (Ebbw Vale) McBride, Neil
Bacon, Miss Alice Fraser, Rt. Hn. Tom (Hamilton) MacColl, James
Baxter, William Freeson, Reginald MacDermot, Niall
Benn, Rt. Hn. Anthony Wedgwood George, Lady Megan Lloyd McKay, Mrs. Margaret
Bennett, J. (Glasgow, Bridgeton) Ginsburg, David Mackenzie, Gregor (Rutherglen)
Binns, John Gourlay, Harry Mackie, John (Enfield, E.)
Blackburn, F. Greenwood, Rt. Hn. Anthony Mahon, Simon (Bootle)
Boston, T. G. Gregory, Arnold Manuel, Archie
Bottomley, Rt. Hn. Arthur Mapp, Charles
Braddock, Mrs. E. M. Griffiths, David (Rother Valley) Mason, Roy
Brown, R. W. (Shoreditch & Fbury) Hamilton, William (West Fife) Mellish, Robert
Buchanan, Richard Hannan, William Mikardo, Ian
Butler, Herbert (Hackney, C.) Harper, Joseph Molloy, William
Butler, Mrs. Joyce (Wood Green) Hart, Mrs. Judith Monslow, Walter
Callaghan, Rt. Hn. James Hattersley, Roy Morris, Charles (Openshaw)
Castle, Rt. Hn. Barbara Hazell, Bert Mulley,Rt.Hn.Frederick(SheffieldPk)
Coleman, Donald Healey, Rt. Hn. Denis Murray, Albert
Conlan, Bernard Heffer, Eric S. Neal, Harold
Corbet, Mrs. Freda Herbison, Rt. Hn. Margaret Newens, Stan
Cronin, John Hobden, Dennis (Brighton, K'town.) Noel-Baker, Francis (Swindon)
Crossman, Rt. Hn. R, H. S. Houghton, Rt. Hn. Douglas Noel-Baker,Rt.Hn.Philip(Derby,S.)
Cullen, Mrs. Alice Howell, Denis (Small Heath) Oakes, Gordon
Oalyell, Tam Hoy, James Ogden, Eric
Darling, George Hughes, Emrys (S. Ayrshire) O'Malley, Brian
Davies, lfor (Gower) Hunter, Adam (Dunfermline) Oram, Albert E. (E. Ham, S.)
Delargy, Hugh Hynd, H. (Accrington) Owen, Will
Diamond, John Irving, Sydney (Dartlord) Padley, Walter
Dodds, Norman Jackson, Colin Page, Derek (King's Lynn)
Doig, Peter Janner, Sir Barnett Palmer, Arthur
Driberg, Tom Jeger,Mrs.Lena(H'b'n&St.P'cras,S.) Pargiter, G. A.
Dunn, James A. Jenkins, Hugh (Putney) Park, Trevor (Derbyshire, S.E.)
Dunnett, Jack Jones,Rt.Hn.Sir Elwyn(W.Ham,S.) Parker, John
Edwards, Rt. Hn. Ness (Caerphilly) Kelley, Richard Parkin, B. T.
English, Michael Kenyon, Clifford Pavitt, Laurence
Ennals, David Kerr, Dr. David (W'worth, Central) Pearson, Arthur (Pontypridd)
Ensor, David Lawson, George Prentice, R. E.
Evans, Albert (Islington, S.W.) Leadbitter, Ted Pursey, Cmdr. Harry

might be made and which would not be open to abuse as a means of wholesale evasion of the tax.

It does not impose any kind of limit on people's generosity in making presents to members of their family. They are open to make gifts up to any amount they like on objects which are not subject to charge. They can make gifts of chattels up to £1,000 which are not subject to charge. They can make the gift of a motor car up to any value which is not subject to charge. But if we were to allow a great freedom to dispose of chargeable assets by way of gifts it would be possible by means of gifts within and amongst members of a family—only quite a few members of the family—to achieve a very considerable evasion of the tax. That is the reason that we arrived at that figure.

Question put, That "one" stand part of the Clause:—

The Committee divided: Ayes 167, Noes 161.

Rankin, John Slater, Joseph (Sedgefield) Walker, Harold (Doncaster)
Redhead, Edward Solomons, Henry Wallace, George
Rees, Merlyn Soskice, Rt. Hn. Sir Frank Wells, William (Walsall N.)
Reynolds, G. W. Stones, William Whitlock, William
Robertson, John (Paisley) Strauss, Rt. Hn. G. R. (Vauxhall) Wigg, Rt. Hn. George
Robinson, Rt. Hn.K.(St. Pancras, N.) Summerskill, Hn. Dr. Shirley Wilkins, W. A.
Rose, Paul B. Swain, Thomas Williams, Albert (Abertillery)
Ross, Rt. Hn. William Swingler, Stephen Williams, Mrs. Shirley (Hitchin)
Rowland, Christopher Taverne, Dick Wilson, Rt. Hn. Harold (Huyton)
Shore, Peter (Stepney) Thomson, George (Dundee, E.) Wilson, William (Coventry, S.)
Short, Rt.Hn.E.(N'c'tle-on-Tyne,C.) Thornton, Ernest Wyatt, Woodrow
Silkin, John (Deptford) Tuck, Raphael Yates, Victor (Ladywood)
Silkin, S. C. (Camberwell, Dulwich) Urwin, T. W.
Silverman, Julius (Aston) Varley, Eric G. TELLERS FOR THE AYES:
Slater, Mrs. Harriet (Stoke, N.) Walden, Brian (All Saints) Mr. George Rogers and
Mr. William Howie.
Alison, Michael (Barkston Ash) Grimond, Rt. Hn. J. Morrison, Charles (Devizes)
Allan, Robert (Paddington, S.) Hall, John (Wycombe) Mott-Radclyffe, Sir Charles
Amery, Rt. Hn. Julian Harris, Reader (Heston) Munro-Lucas-Tooth, Sir Hugh
Anstruther-Gray, Rt. Hn, Sir W. Harrison, Brian (Maldon) Murton, Oscar
Atkins, Humphrey Harvey, John (Walthamstow, E.) Nicholls, Sir Harmar
Awdry, Daniel Harvie Anderson, Miss Nugent, Rt. Hn. Sir Richard
Baker, W. H. K. Hawkins, Paul Orr, Capt. L. P. S.
Barlow, Sir John Heald, Rt. Hn. Sir Lionel Osborn, John (Hallam)
Batsford, Brian Heath, Rt. Hn. Edward Page, R. Graham (Crosby)
Beamish, Col. Sir Tufton Hendry, Forbes Pearson, Sir Frank (Clitheroe)
Bennett, Sir Frederic (Torquay) Higgins, Terence L. Peyton, John
Berry, Hn. Anthony Hill, J. E. B. (S. Norfolk) Pickthorn, Rt. Hn. Sir Kenneth
Bessell, Peter Hirst, Geoffrey Pitt, Dame Edith
Biggs-Davison, John Hobson, Rt. Hn. Sir John Price, David (Eastleigh)
Birch, Rt. Hn. Nigel Hogg, Rt. Hn. Quintin Prior, J. M. L.
Blaker, Peter Hooson, H. E. Pym, Francis
Box, Donald Hordern, Peter Ramsden, Rt. Hn. James
Boyd-Carpenter, Rt. Hn. J. Hornsby-Smith, Rt. Hn. Dame P. Redmayne, Rt. Hn. Sir Martin
Boyle, Rt. Hn. Sir Edward Howe, Geoffrey (Bebington) Rees-Davies, W. R.
Brewis, John Iremonger, T. L. Russell, Sir Ronald
Brinton, Sir Tatton Irvine, Bryant Godman (Rye) Sharples, Richard
Brooke, Rt. Hn. Henry Jenkin, Patrick (Woodford) Shepherd, William
Bryan, Paul Johnson Smith, G. (East Grinstead) Sinclair, Sir George
Buck, Antony Johnston, Russell (Inverness) Spearman, Sir Alexander
Buxton, Ronald Kaberry, Sir Donald Stanley, Hn. Richard
Carlisle, Mark Kerby, Capt. Henry Stoddart-Scott, Col. Sir Malcolm
Clark, William (Nottingham, S.) Kilfedder, James A. Studholme, Sir Henry
Cooper, A. E. Kimball, Marcus Talbot, John E.
Cooper-Key, Sir Neill King, Evelyn (Dorset, S.) Taylor, Sir Charles (Eastbourne)
Custain, A. P. Kitson, Timothy Taylor, Edward M. (G'gow.Cathcart)
Crowder, F. P. Langford-Holt, Sir John Taylor, Frank (Moss Side)
Curran, Charles Legge-Bourke, Sir Harry Teeling, Sir William
Currie, G. B. H. Lewis, Kenneth (Rutland) Temple, John M.
Dalkeith, Earl of Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield) Thatcher, Mrs. Margaret
Davies, Dr. Wyndham (Perry Barr) Lloyd, Ian (P'tsm'th, Langstone) Thompson, Sir Richard (Croydon,S.)
d'Avigdor-Goldsmid, Sir Henry Longden, Gilbert Tiley, Arthur (Bradford, W.)
Deedes, Rt. Hn. W. F. Loveys, Walter H. Tilney, John (Wavertre[...])
Dodds-Parker, Douglas Lubbock, Eric Tweedsmuir, Lady
Doughty, Charles Mackenzie, Alasdair (Ross&Crom'ty) van Straubenzee, W. R.
Errington, Sir Eric Mackie, George Y. (C'ness & S'land) Walder, David (High Peak)
Eyre, Reginald McLaren, Martin Walker, Peter (Worcester)
Fell, Anthony McMaster, Stanley Walters, Dennis
Fletcher-Cooke, Charles (Darwen) McNair-Wilson, Patrick Ward, Dame Irene
Fletcher-Cooke, Sir John (S'pton) Maginnis, John E. Weatherill, Bernard
Foster, Sir John Marples, Rt. Hn. Ernest Webster, David
Fraser,Rt.Hn.Hugh(St'fford & Stone) Mathew, Robert Whitelaw, William
Fraser, lan (Plymouth, Sutton) Maude, Angus Wills, Sir Gerald (Bridgwater)
Gammans, Lady Maxwell-Hyslop, R. J. Wilson, Geoffrey (Truro)
Gilmour, Sir John (East Fife) Maydon, Lt.-Cmdr. S. L. C. Woodnutt, Mark
Glover, Sir Douglas Meyer, Sir Anthony Yates, William (The Wrekin)
Godber, Rt. Hn. J. B. Mills, Peter (Torrington) Younger, Hn. George
Goodhew, Victor Mills, Stratton (Belfast, N.)
Gower, Raymond Miscampbell, Norman TELLERS FOR THE NOES:
Gresham Cooke, R. Mitchell, David Mr. Ian MacArthur and
Griffiths, Peter (Smethwick) More, Jasper Mr. Dudley Smith.
Mr. Nigel Birch (Flint, West)

I beg to move Amendment No. 312, in page 28, line 20, at the end to insert: (4) British Government Securities shall not be chargeable assets.

The Chairman

We can discuss, at the same time, Amendment No. 313, in page 28, line 20, at end insert: (4) Securities issued by L[...]al Government bodies shall not be chargeable assets. Amendment No. 314, in page 28, line 20, at end insert: (4) Dominion and Commwonealth Government Securities shall not be chargeable assets. and Amendment No. 229, in page 28, line 21, at end insert: (4) Four per cent. Victory Bonds when credited at par against the estate duty due on the deceased's estate shall not be chargeable assets.

Mr. Birch

These Amendments intend that Government, local government, and Commonwealth securities should be excluded from the operations of the Capital Gains Tax. This Amendment does not deal with the special point of switching which comes in Amendment 481—in Schedule 7, page 147, line 50, at end insert: (iv) the disposal of a fixed interest Government, local authority or Dominion bond or stock where the proceeds of a sale are reinvested in a fixed interest Government, local authority or Dominion bond or stock. That is a very important issue, but it is subsidiary to the main question. This question is of great importance and involves not only the honour but the interests of our country.

Over the last 20 years I have frequently had the privilege of addressing the Committee on the market in Government securities. I do not believe that it is possible to run a sophisticated economy like ours without a healthy bond market. The market has not been healthy for years—not since the great Daltonian disaster of 2½ per cent. stock. But the Government, during recent months, have dealt the gilt-edged markets a series of hammer blows. The first is a very rapid rise in prices. The Chancellor of the Exchequer very justly conceded, when speaking on the regulator the other day, that that price rise has hardly started.

The gilt-edged market is also affected by certain provisions in the Corporation Tax. The first effect is that dividends on gilt-edged securities will not be franked income under these provisions, which make their relative attractions, particularly to insurance companies (much less than they were before. Another important effect of the Corporation Tax is that it will be difficult and expensive for companies to raise money by shares or rights issues. They will, therefore, be forced to issue more debentures. The flood of debenture issues has not yet started, but if the Bill goes through as proposed by the Government there will be a flood of debenture issues, forcing up the rate of interest and competing directly with the gilt-edged market.

So much for the background. Now to the main point about honour. The reason why so many people have invested their savings in gilt-edged securities is that they have believed that the letter and spirit of the bond will be kept and that there can be no question whatever of the terms being varied. Once that faith is broken it will be very difficult indeed to get back that confidence again, and it will have a permanently damaging effect on Government credit and on the gilt-edged market.

I should like to deploy this argument with some care. Surely there is no analogy whatever between a capital gain on an equity share and a capital gain resulting from the redemption of gilt-edged securities. If one invests one's money in risk securities one may or may not win—for example, if one invests in Mr. Kaldor's "Investment in Foreign Growth Stocks" one loses.

This is an entirely different question from investing in Government securities redeemable at par or premium at some fixed date. The whole point there is that there is no risk involved. This is a question of a contract which must be fulfilled. No one would have bought any of those securities at the prices they did if they had known that a Capital Gains Tax would be put on the capital element in the ultimate profit when the security was redeemed, because they would not have been worth the price at that time if this tax was to be put on the profit.

It is no answer to say, as the Financial Secretary and the Chancellor have said, that to take this line would mean that a Government could never change taxation—they could, of course, change both Income Tax and Surtax. They have no relevance to this. It would be honourable to say that future securities sold at a discount would be subject to Capital Gains Tax, and once that was said one would not be able to sell them at anything like the prices in the past.

The whole concept is that this tax involves retrospection in the most odious terms. My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) will be speaking, no doubt, on an Amendment on Victory Bonds, but there the case is crystal clear. After the First World War, Victory Bonds were issued at between 80 and 85, and one of the considerations that induced people to buy them was that they were tender-able for death duties at 100. Therefore, obviously, they were made much more attractive by this provision.

10.45 p.m.

As I understand, under the Bill they would still be tenderable at par, but would be liable for Capital Gains Tax. This, again, is retrospection in its most odious form. It is analogous to a foreign Government taking over a British enterprise, agreeing on the price and then passing a Bid to tax that compensation. If any foreign Government did that, we should say—indeed, we have said in the past when it has been done—that their conduct was dishonourable and fraudulent and must be put right. But here the Government are doing the same.

I cannot help feeling that the Government themselves must feel some guilt here, because they have exempted from this provision Government securities issued under the National Savings scheme. They have exempted Premium Bonds. There, of course, one gets a tax free gain if one is lucky enough to draw a number. I do not want to argue that, however, although the Government's addiction to gambling is well known and anyone who gambles gets a tax free profit.

The really important issues are National Defence Bonds and National Development Bonds. There are five issues still outstanding of National Defence Bonds and National Development Bonds and these bonds are redeemable at premiums of 2, 3 and 5 per cent. A tax-free capital profit is offered to the holders.

It is no good arguing that this is a question of de minimis, because, after all, anyone who makes a profit on a share has to return it in his tax returns however small. Many of these bonds are held by Surtax payers, to whom they are attractive. That is why maximum holdings are limited. In the case of the current issue of National Development Bonds, the maximum holding is £2,500, but it is possible for someone to have a bond himself and for his wife and each of two children to have a bond each. Thus, on a holding of £10,000, the capital profit would be anything between £200 and £500.

That is to be tax free. Why? I want to ask the Government this question. Why is it that this capital profit, which may be very substantial, is tax free whereas capital profits on other Government securities are not? Could it be possible that the Government think that there are a lot of votes in it? I do not know. It might be so. The Government might feel that the fraud was too obvious to too many people. But if they think that, they should realise that it is not by any means a few people who are affected by the tax that they are paying on other Government securities.

The number of holders is very large indeed. I understand that there are 34 issues still outstanding which were issued at a discount and that the total amount of stock they represent is just about £10,000 million. There are many thousands of private holders. These stocks were issued at prices between 80 and 99½, but, in fact, the nominal issue price of a bond does not necessarily reflect the actual price at which it was issued to the public.

For example, Funding 3½ per cent. 1999–2004 was issued at 80, but sold by the Government broker down to 63. If a tax-free capital gain had not been held out as an inducement, he would not have been able to sell them at that price. Enormous numbers of people have acquired these bonds at discount, very often substantial, in consideration of the fact that, by giving up some current income, they would be building up capital when the Government bonds either matured or got near maturity.

There is another point which is very material. Let us take the case of a holder of Treasury 2½, known as "Daltons". These went to a discount getting on to 40 points during the life of the post-war Labour Government. A great many people holding them or other irredeemable securities, or securities redeemable at Government option, have tried to get back their capital losses by buying redeemable securities. So, over a period of years, they would at any rate get some part of the money back which they had lost.

Having seen the purchase power of their money decline, having had to give up income, they are now to be mulcted by Capital Gains Tax. If one treats people like that, one cannot expect them to be very keen investors in Government securities. I cannot see that the future of the market is at all bright. So much for the moral side of it—what I believe profoundly to be a fraud.

What about interest? This year, there the Government maturities of £1,700 million. An overall Budget deficit of £743 million was estimated. It is notoriously difficult to forecast how a Budget deficit will turn out, but I would not be very surprised if that were exceeded. As all have noticed, since the Budget there has been a flood of increases in wages in the public sector. I would guess that practically all the increase in indirect taxation has already been swallowed up. This week B.O.A.C. crews got a backdated increase of 18 per cent. That sort of thing is going on the whole time.

Therefore, it may be necessary to raise in new Government loans this year anything up to £2,500 million. Suppose that by their measures—Corporation Tax, Capital Gains Tax and the increase in the cost of living—the Government make it certain, as I think is very likely, that they will have to pay ½ per cent. more for their money than if they had not taken all these measures, it will cost the Exchequer another £125 million more than it would otherwise have done. We do not know what the Capital Gains Tax will bring in, but I should be very surprised if it brought in anything like £125 million. Therefore, the Government have played with the devil for nothing.

There are one or two other material points on the damage done to the market. It has been one of the strengths of our market that we have been able to issue a lot of long-dated Government securities. I think that, in 1964, 46 per cent. of the non-official holdings of Government securities had a life of 15 years or more. One of the effects of this is that the Government may be forced back into issuing nothing but short-dated bonds. They may find it impossible to issue long-dated bonds. If that happens—given our always precarious banking position—we are at very grave risk.

Hon. Members will have noticed that. owing to the most regrettable habit of the local government authorities of borrowing short at seven days' notice to build their sewers, they have recently been forced to pay up to 9⅜ per cent. for weekly money, and they are still paying 7 per cent and over for it. If the great weight of the Government debt is to be very short-term, at any time that we run into difficulties the management of the market from the Government's point of view may be next to impossible, and it will be a grave additional burden on the country just at a time when we are in our greatest difficulty.

I have two last points on management. I want to talk about switching. The effect is to lock the life offices, because it means that the ordinary exchanges of stock do not take place and the flexibility of the market goes. A more important point is the means by which Government loans are redeemed and the market is managed. When one sees in the newspapers an advertisement for the issue of £1,000 million worth of Government stock and reads that the offer closed at one minute past ten o'clock, the simpler types may think that people have subscribed £1,000 million in a minute. But they have not. It is possible that they have not subscribed anything.

The way the market is managed is that any maturing issue is gradually paid off in the last year or so of its life, but against that the Government have other stocks, generally described as tap stocks, which they think they are most likely to be able to sell and which they peddle out gradually over the months. We are not faced with a sudden shock of £1,000 million being suddenly thrown on to the market or taken out. It can be managed gradually.

The pernicious effect of this tax comes if someone sells a maturing bond to the Government. The Government always want them to do so, and for the ordinary public a short bond is quite unsuitable. If he does that he is mulcted from Capital Gains Tax, whereas if he holds for conversion he is not mulcted for the tax. The temptation will be for everyone to hang on to see if they can get a decent conversion, but they cannot know what that conversion stock will be and it may be highly unsuitable. We shall, therefore, be faced with the danger of sudden masses of stock being thrown on the market because there is nothing suitable for those people who hold a maturing debt. This is a technical point, but one of very great importance which is worrying the gilt-edged market very much indeed.

What has been done is, I believe, morally wrong. I believe that it is intensely damaging to the credit of the country. I believe that the Government, instead of getting money out of it, will lose money. They will make the whole of their management of the debt more difficult and much increase the danger to our banking position.

The Chancellor of the Exchequer (Mr. James Callaghan)

I apologise for having a relaxed throat, but I trust that the Committee will be able to hear me.

I agree entirely with what the right hon. Member for Flint, West (Mr. Birch) said about the need for a healthy gilt-edged market. I think that he was historically accurate when he said that it has not been healthy for some years. All of us would like to see it healthier. I most certainly would; and I think that anyone who has anything to do with the management of the Government debt wishes to see the gilt-edged market, in so far as it is possible, flourishing as a reflection of the economic policies of the country. It may be over-emphasised by some who do not recognise the full degree of management which takes place.

However, we are faced with a market—and I shall not stir passions now—which, I felt, was not very healthy at the time when I became responsible for these affairs. It would not be a sensible policy unduly to damage it, or indeed to damage it at all. One should try to build it up. The right hon. Member, no doubt because of compression, failed to give anything like a complete picture of the range of holdings that are affected in the gilt-edged market. One would assume that every operator in the gilt-edged market was to be subject to Capital Gains Tax. The right hon. Member will know better than most—because from the review that he gave us obviously he is a keen student of these matters—that this is not true.

A great many institutions which operate in the gilt-edged market at the long end, with which he was particularly concerned, are and have long been exempt from Profits Tax and Income Tax and will be exempt from Capital Gains Tax. I refer to the charities and other institutions. At the other end of the spectrum—I am giving a complete picture—there are those institutions such as the banks who have always been assessed on their so-called capital gains because they partake of the nature of income.

11.0 p.m.

Therefore, there are operating in the gilt-edged market today two very large groups accounting for a substantial percentage of the gross figure which the right hon. Gentleman gave, which are at the moment unaffected completely by the changes that are proposed in the Bill. To that extent, therefore, in so far as this is a question of the fluidity of the market, these institutions will have no less and no greater incentive than they have had hitherto to switch or to make any other changes that they desire in their investments.

There is the third band, on which the right hon. Gentleman concentrated exclusively, where undoubtedly there will be an effect, because under the Bill these institutions will pay Capital Gains Tax, which they have not so far paid. It is upon that third category that the right hon. Gentleman concentrated. I invite the Committee, however, to remember my preliminary words: that there is a large number of holders who are completely unaffected by this tax.

The Amendment would amount to giving almost complete exemption from tax on gilt-edged securities to the major operators in this market. Under some of the schemes of which I have read in the Press, tax would be payable on final disinvestment from the market. Some have suggested that this would be a good thing to do. Many of the major operators, however, never disinvest. They will always remain there as far as the human eye can see. The proposal in the Amendment does not even provide for taxing the gain accruing up till final disinvestment. This might not be the intention of the right hon. Gentleman the Member for Flint, West.

I will address my remarks to the general proposition that some of the gains in gilt-edged transactions should be exempt from tax. That proposition is open to the basic objection that to exempt one large class of gains would drive a coach and horses through the tax. I do not think that the exemption could stop—and the right hon. Gentleman recognised this, I think, in one phrase he used—at the Government-issued and Government-guaranteed stocks. The claims of Commonwealth and Colonial stocks would be pressed as well as those of local authorities. There are even advocates of exemption for gains realised on all fixed-interest securities.

These are some of the considerations that must have weighed with the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), who faced a similar agitation when he imposed a short-term Capital Gains Tax. He resisted the agitation. Woe was prophesied. Disaster was forecast. It has not happened. It cannot be denied that the right hon. and learned Member met a storm of criticism from those operating in the market when he attempted to introduce, and succeeded in introducing, a short-term Capital Gains Tax.

I quite agree that the present suggestion is not wholly analogous, but the criticism is the same. The prophecies of woe are the same, the forecasts of disaster are the same and there is sometimes a great temptation to shout rather loudly; and then, in the event, one finds that the result is nothing like what was forecast. Certainly, in the case of the right hon. and learned Member for Wirral, who had all the abuse in the world hurled at him, much worse than I am getting, the prophecies of woe have not come true. Everybody knows that.

I have said that a number of institutions remain unaffected for one reason or another. Life insurance companies will have to pay the tax, but they could hardly be made exempt without reopening the whole question of the general exemption of life policies, which I am recommending to the Committee in the next Clause. I am recommending that to avoid the argument of double taxation. I do not see how one could—unless, of of course, the suggestion is made to exempt a very large segment of income of one sort or another from Capital Gains Tax with all the repercussions which would result—I do not see how one could exempt life assurance companies from tax on their capital gains once we have decided, as I trust we shall, to exempt policy holders. I do not think that I want to argue the case at great length tonight, because I have made my position clear in my Budget statement.

But I want to make an announcement now, because I said at the outset of our consideration of the Bill—and this was one of the matters I had in mind—that I would be willing to listen to representations and amend its terms whenever I thought a case was made out for doing so. The right hon. Gentleman said that a major part of his case was based on honour. I acknowledge that many people feel that in the case of dated stocks issued before Budget day the difference between the price of issue of a Government or Government-guaranteed stock and its redemption price should not be subject to Capital Gains Tax.

The view is held, and I acknowledge that it is held very strongly, that an implicit pledge was given by Her Majesty's Government on the issue of these stocks that any appreciation in their value should not be taxable, as the rate of interest which was originally fixed took account of the issue price. I shall not argue the contrary case again tonight. I must, however, leave it on record that where matters of honour are concerned we have different conceptions, and that I am not wholly convinced by this argument in the light of the position then. But I shall not argue it. What I am anxious about, especially in view of the state of the gilt-edged market which has persisted over a long period for a number of reasons is this. I am anxious that no one should be left with a sense of grievance about this.

I have, therefore, come to the conclusion that it would be reasonable to concede this point. The concession, therefore, that I propose to recommend to the Committee will apply to past issues made at a price below par of British Government or Government-guaranteed dated stocks. It would not extend to issues after Budget day.

What I propose is that gains arising from price movements between the price of issue and the redemption price of such stocks should not be taken into account for the purpose of calculating capital gains. It follows, of course, that movements in this same price zone would not give rise to claims for losses either. Accordingly, in all transactions where both buying and selling prices fall between the price of issue and the redemption price—that is, in what may be called the neutral zone—there would be neither gain nor loss for the purposes of the tax. These arrangements will apply to all disposals after Budget day.

If the buying price is below the neutral zone and the selling price falls within that zone the taxable gain would be the difference between the buying price and the price of issue. If the buying price is within the neutral zone and the selling price is above that zone the taxable gain would be the difference between the redemption price and the selling price. Similarly, that part of any loss which falls outside the neutral zone would be allowable for this purpose.

Where a stock has been issued in two or more tranches at different prices I propose to make a further concession here, with the agreement of the Committee, that the price of issue for the purposes of the relief would be taken to be the lowest issue price of the individual tranches. Where conversion issues are concerned the price of issue will be adjusted by the amount of any cash payment on conversion.

I will give examples in a moment. I propose, on Report, to put down an Amendment to the Bill to give effect to these proposals. I am arranging for a number of examples of the way this will operate to be available. I hope that they are in the Vote Office. A list of issue prices as calculated for the purposes of the relief will also be available. I will give a few examples. To take the price of issue—

Mr. Heath

I am grateful to the Chancellor for this announcement. Could he give his examples at a slightly slower speed, as this is a complicated matter?

Mr. Callaghan

I will take a basic stock issue at 96 points and redeemed at 100. If one buys that stock at 96 and redeems it at 100, the gain, for Capital Gains Tax purposes, is nil. I think that that is clear—that if one buys at the issue instead of at the issue price, the increase of four points is disregarded. If one buys the stock issued at 96 at 93 and sells it at 100, for the purposes of the Capital Gains Tax, the gain would be three points, between 93 and 96—

Hon. Members


Mr. Callaghan

Because that is not within the neutral zone.

If one bought a stock issued at 96 at 93 and sold it at 97, the gain, again, is three points, the difference between 93 and 96. If one bought stock at 100 and sold it at 96, the loss is nil for this purpose, because it is within the neutral zone, the zone within which the price of issue and redemption price is nil. If one bought stock at 97 and sold it at 93, the loss would be three points, the difference between 96 and 93. If one bought it at 102 and sold it at 97, the difference would be two points, the difference between 100 and 102.

If one bought it at 102—this is the most complicated example of all—and sold it at 93, the loss for this purpose would be five points, that is to say, the difference between 100 and 102, and the difference between 93 and 96. This is a very substantial concession—

Sir Charles Taylor (Eastbourne)

It is not.

Mr. Callaghan

The hon. Member does not like the word "concession", so I will not use it. May I use the word "relief"? Will he accept that?—He will not accept anything.

This is a very substantial change, which will be very welcome. It meets completely the point made by the right hon. Member for Flint, West about honour, the honour of the Government which is involved in this. It meets completely the point of honour on which he rested his case. No one can say that if someone buys a stock art 96 and it is redeemed at 100 and he is charged no Capital Gains Tax on it there is any dishonour on the part of the Government. No pledge has been broken. Somebody who buys stock at 96 and holds it through to maturity does not suffer Capital Gains Tax on the depreciation of the stock.

It is very important that this should be understood. No one who buys a stock issued at a discount, at, say, 96, and holds it through to maturity will be charged Capital Gains Tax. This must completely meet the point about honour. It has been said that he has bought these stocks at a discount, intending to hold them through, and has found that what he thought was a capital gain will not be taxed. I think that this relief will meet the major case on this issue—

Mr. Harold Lever


Mr. Callaghan

I will finish this point, if I may.

The future of the gilt-edged market will depend on the movement of interest rates, and the general health of the economy. No one is more keen than I am to see that one goes down and the other improves. I think that we shall all have to bend our efforts to ensuring this, because this is what the long-term health of the gilt-edged market will depend on. I shall try to follow those policies which will make this possible. If it were thought necessary to give additional support to the bond market, that will have to take place in entirely different circumstances and at an entirely different time to what we are talking about now.

I think that I can claim wholly, fully and completely to have met the case of those who felt that the Government bad broken a pledge on taxing capital gains in this way.

11.15 p.m.

Mr. Birch

The whole of this plan, as far as I can see, is hitched to the issue of bonds, but very small amounts of these bonds—the right hon. Gentleman will find, change hands at the issue price. Vast quantities have been sold by the Government Broker much below the issue price and he would not have been able to sell these unless the buyers thought that the capital gain was tax free. I can instance a funding of 3½ at 99, dated 2004, issue price 80 which the Government Broker sold down at 63. These are paid down at 63, yet the whole price between 63 and 80 is completely disregarded and the buyers of these think that they have a complete grievance which has not been met.

Mr. Callaghan

I have no doubt, that if he holds it he would like relief from the Capital Gains Tax. This is not the case made up to this moment. That case, which I am meeting completely, is that of the stock which is issued at a certain price.—[HON. MEMBERS: "No.".]—Hon. Members opposite may shout about it, but this is the case which has been made and which I am meeting—that where stock has been issued at a price on the assumption that it is to be redeemed on a date at a higher price. I am meeting completely, wholly and faithfully that point and nothing hon. Members can say disturbs that.

Mr. Harold Lever

Before my right hon. Friend sits down can he help me define what he considers—

Mr. Grimond

I think that the Committee will need some time to consider what the Chancellor has said. I am grateful for the concession and am glad that he has at any rate recognised the case for some different treatment of gilt-edged stock.

The ordinary investor, let alone the operators in the bond market—and I do not pretend to speak for them—when he invests in gilt-edged stock, never considers the issue price. I have never heard of anyone saying that he would buy certain stock because of the issue price. People are concerned with the price they pay and the redemption price.

I do not want to be dogmatic, but it is a somewhat theoretical and remote attitude to say that if there is a case for exempting gilt-edged stocks this is met by setting up a neutral zone between the issue price and the redemption price. If there is a case at all it is surely that people who acquire gilt-edged stock, whether they acquire it at the issue or the buying price, believe that it is to be redeemed in full on a certain date at a certain price.

Having to some extent given way to the principle. I think, quite frankly, that the Chancellor will have difficulty standing on the ground which he has chosen. This is a moot point. There will be people who will have bought debentures, and so forth, who were also under the impression that they were to get the full redemption price. The Chancellor, having given way on the principle of Government stock, I am puzzled about why he should attach so much importance to the issue price. I am sure that the ordinary investor will feel that this has not met the point at all.

The right hon. Gentleman has not told us how far this concession will improve the bond market. If it will, that would be good reason for it. I am grateful for any concession, but I think that the ordinary investor will find this difficult to understand.

Many people will have held Government stock, gilt-edged stock, on 6th April, or whatever the date is, and will become liable to the tax on the difference between the value of the stock on 6th April and the redemption date, or the date on which it is sold. As I understand, if on the relevant date, 6th April, it is in the neutral zone, it will pay no Capital Gains Tax. Similary, if it is acquired at any date before the Budget at a higher price, it will be free from Capital Gains Tax, because the Chancellor has said that he will have a retrospective element in favour of the investor to the extent that he will not be charged capital gains if he bought it above the price on Budget day, even though it may have appreciated afterwards.

However, if an investor finds himself in the position of having bought these stocks very much lower down, possibly 63, I believe that the right hon. Member for Flint, West (Mr. Birch) spoke of the Government Broker peddling them out at 63, he will be liable for the whole of the capital gains between that and the issue price in the 80s.

Mr. Maxwell

What is wrong with that?

Mr. Grimond

That is a question from a sitting position. This is a difficult enough argument to make standing up without having to deal with questions from a supine position.

Mr. Maxwell


Mr. Grimond

I appreciate that the Chancellor has made a concession, and I do not want to appear to be hostile, but people will want to be clear about where they stand. I understand that the previous concession for people who bought lower down will still stand, but that they will have to pay the full capital gain between anything below the neutral zone and the neutral zone itself.

I believe that many people will be puzzled about why so much importance is attached to the issue price. I should very much like the Chancellor to tell the Committee something of what he expects the practical effect to be. I am not an expert in these matters, but if the right hon. Member for Flint, West is right, and the bond market is in a bad condition and lacking confidence, will confidence be restored by this concession? If so, that would seem to be the main argument for the concession.

May I again make a comment with which, I hope, the Chancellor will be sympathetic? I say again that I find it totally anomalous that in a society which is trying to encourage genuine savings for investment a Capital Gains Tax should be imposed on those savings and not on winnings on the pools. That would be unpopular and I have no doubt that that is the real reason for not doing so. But it is no good talking of changing to a serious society which is anxious to invest in industry and to save money and to put it to useful purposes, and then exempt gambling winnings; and if this is a hot one I am not ashamed to say it.

Sir H. d'Avigdor-Goldsmid

If the statement by the Chancellor of the Exchequer has come as an enormous surprise, I must frankly say that that is because of its ineptitude. We had great confidence in the competence of the right hon. Gentleman. We felt that, on the whole, he was on top of what he was trying to do. We did not agree with what he was trying to do, but we felt that he understood it. I now want to ask him a few questions based on this list.

There are two stocks—British Gas 4 per cent. Guaranteed Stock, 1962–72, issued at 98, and British Transport 3 per cent. Stock, 1968–73, issued at 73½. The prices of these stocks, due to their relatively early redemption dates, are very near to each other. But the holder of the British Gas stock will have to pay Capital Gains Tax on any redemption he receives, while the holder of British Transport Stock has his holding free of Capital Gains Tax. Where is the equity in that?

As the right hon. Gentleman the Leader of the Liberal Party pointed out, one of the things which one does not inquire into when buying stock is its historic price. The price of a stock is governed by its dividend and its redemption date. Its historic price has never been a concept. What really happened was that the Chancellor saw the force of the Amendment which we were moving, and particularly I thank him for the Amendment on Victory Bonds concerning which he has met the point that I sought to make. Therefore, that Amendment is covered, but I am quite sure, too, that the Treasury said, "It is much too expensive to give way on everything," and so we come to this ridiculous and anomalous conclusion.

The list does not include 2½ per cent. Savings Bonds. Those bonds, which are redeemable in 1967, are a very well-known stock which stands a long distance below par. My suspicion is that the experts whom the right hon. Gentleman consulted said, "Well, if you give the redemption profit on 2½ per cent. Savings Bonds free of tax this will really play into the hands of the people who use them as an investment to secure short or medium-term gains".

As those bonds were issued at about par it does not arise, because they will be caught for Capital Gains Tax. It seems wrong that at this hour of the night we should be arguing on the merit of one or other British Government stock. The whole strength of the market in British Government stocks is that each one is as good as its word. Now the Chancellor has imported an entirely new concept into the market and that at 11 o'clock at night. I am glad that the Stock Exchange is closed, but I have no doubt that the result of the right hon. Gentleman's action will be apparent at 9.30 tomorrow morning, when a large number of stocks will appreciate and a lot will fall as a result of this arbitrary decision.

Frankly. I would have had much more confidence in the Chancellor if he had turned us down flat rather than give this partial and, to my mind, artificial concession.

Mr. Harold Lever

As I understand the Chancellor, he has said that he is to concede a case—which is an open case—that honour requires that the Government should treat as free of Capital Gains Tax any difference between the price of stocks that have been issued and the redemption price promised. I rather agree with the Leader of the Liberal Party that this is rather a difficult and moot point. I have come to the conclusion, for what little value it has, and offer it with considerable diffidence, that, on balance, the wise thing is to concede this case. Having decided to do that, then it has to be fully conceded. I want the Chancellor to reflect on this. He has conceded it and he cannot half-concede it, having once said that honour requires it.

My right hon. Friend has conceded that the difference between the price at which the Government issue stock and the redemption price should be free of Capital Gains Tax, so everything turns on the interpretation of the word "issue". It is not a magic word when it comes to gilt-edged stock, or any stock. The issuing of stock when one comes to deal with the Government amounts to saying, "Sell the stock." So the interpretation which occurs to me immediately is that what must, on the Chancellor's concession, be tax-free is the difference between the price at which the Government have sold the stock at one time or another and the redemption price.

I have very great sympathy for the Chancellor in a very difficult decision, but I am bound to say that, otherwise, what is intended as a concession turns out to be a mere play on words. The Chancellor is an open-minded and reasonable man. He has listened to the arguments and has made a greater concession on the point than he might have made. He was entitled to take as obdurate and as unsympathetic a stand as the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) took upon his ill-famed and rather bogus short-term Capital Gains Tax. But my right hon. Friend has not taken that position. My right hon. Friend has conceded that the difference between price of issue and price of redemption is to be free of Capital Gains Tax. The position can never be the same again after my right hon. Friend's express concession of that point.

11.30 p.m.

I ask my right hon. Friend to think, and not to make a hurried decision about, whether he ought not to regard the term "issue" as covering every sale made by the Government. I only want to put my point briefly now so that my right hon. Friend may consider it. When the Government issue stock, it is true that often enormous tranches in the stock are issued, in the sense that they are moved from one pocket of the Government to another pocket of the Government. They are only truly issued later on, very often, in small parcels to the public by the Government, at prices very much below the official issued price. The official issued price is a mere convenience for getting the stock into a marketable condition. It is moved from the left-hand pocket of the Government to the right-hand pocket of the Government so that it can be fed out in penny parcels to the requirements of the Government.

I ask the Chancellor not to commit himself upon this. He has promised us that he will listen to all the arguments on this very difficult and complex matter. So far, he has been persuaded into a declaration of principle. I now ask him to reflect very carefully as to what he has, in fact, committed himself to by that declaration of principle. I shall not press him any further tonight. I hope that he will reflect upon the interpretation and not commit himself further tonight upon the meaning of "issued price".

Sir Alexander Spearman (Scarborough and Whitby)

I support what the hon. Member for Manchester, Cheetham (Mr. Harold Lever) has said. The Chancellor has assumed that there are only two ways of acquiring Government stock—one by a public issue, for which one applies, and the other by buying in the market at the current market price. In fact, there is a third way, which is a very usual way indeed. That is that the Government Broker has on tap a stock which he wants to sell at a price which may be entirely different from the price of original issue. That is the price at which the public buys it, on the assumption that they will get par for it on redemption date. The Chancellor has entirely overlooked that third way.

The Chancellor has not dealt at all with the other issue put so powerfully by my right hon. Friend the Member for Flint, West (Mr. Birch). That is the need to support the gilt-edged market. Perhaps, as I have a City connection, I should declare an interest. I believe that free switching of Government stocks is enormously important. This is so, first, because it contributes to making London the freest financial centre in the world, which is a great asset to this country. It is so, secondly, because it is of enormous value to the Government when they have stocks to place on tap in the way I have described, and the Government Broker peddles out stocks. I believe that switching is very important indeed for that. I do not believe that the Chancellor's concession, as he describes it, will go far towards meeting that difficulty. though I would naturally like to think over what the right hon. Gentleman said and examine it in the morning.

I was amazed when the Financial Secretary said this two days ago: a capital gains tax should have no effect on the volume of switching."—[OFFICIAL REPORT, 25th May, 1964; Vol. 713, c. 321.] It has no effect on the value of switching by pension funds, because they do not pay tax. It has no effect on the volume of switching—or very little—by the composite insurance companies, because they pay the tax anyway but they never did the switching. The enormous amount of switching was done by the life assurance companies. I can assure the Financial Secretary that they are not doing that today.

I will give two examples to show what folly it would be if they did do it. Suppose that an institution has a stock which has five years to go, that it had bought at 90, that it was originally issued at 100 and that it could sell it at 100 and switch into a more attractive stock, which would have the advantages to the Chancellor and the country which I have been describing. It would then have to pay Capital Gains Tax on that 10 points now, in spite of the Chancellor's Amendment, whereas if it did not do the switch it would not have had to pay it for five years; and it might hope that there would be a very different Chancellor by then.

Take an institution which had bought a stock at 100 and could now sell it at 90 and switch it into a more attractive stock. If it keeps its present stock until maturity, it pays no tax. But if it switches it into a more attractive stock, it pays a tax on redemption.

These are not exceptional cases. It is for those reasons that switching in the gilt-edged market has declined very sharply. I do not blame the Financial Secretary personally that he did not know this when he made his statement, but it is very disturbing that Treasury Ministers should be so out of touch with affairs.

Take an institution which had bought a stock at 100 and could now sell it at 90 and switch it into a more attractive stock. If it keeps its present stock until maturity, it pays no tax. But if it switches it to more attractive stock, it pays tax on redemption. These are not exceptional cases.

It is for those reasons that switching in the gilt-edged market has declined very sharply. I do not blame the Financial Secretary personally that he did not know this when he made his statement, but it is very disturbing that Treasury Ministers should be so out of touch with affairs.

Mr. Maxwell

The hypocrisy of the Liberal Party throughout the Bill and during the debate on the Budget has reached its height tonight. The Leader of the Liberal Party, the right hon. Member for Orkney and Shetland (Mr. Grimond), made out a case to show why the Government should allow capital gains free on gilt-edged stock when for years his party has been preaching to the country that it is in favour of a Capital Gains Tax.

The fact that my right hon. Friend has ironed out the anomaly about the issue price will be welcomed very warmly by the gilt-edged market tomorrow. If the Conservative Party or the Liberal Party believe in the fairness and necessity of a Capital Gains Tax, how can they demand that this Committee should allow capital gains free for people who deal in gilt- edged stocks? If the Chancellor were to allow this, it would be a racket and would nullify the principle of introducing fairness into the Capital Gains Tax. If the Liberal Party is serious about its determination to see fairness in the tax system, it should have the decency of supporting the Government in their view that Capital Gains Tax should apply to gilt-edged stock.

Sir Harmar Nicholls

I do not think that the sort of extremism displayed by the hon. Member for Buckingham (Mr. Maxwell) helps.

The Chancellor of the Exchequer intended and wanted to help. What he has done is to make a psychological miscalculation. My hon. Friends have suggested that the Chancellor's statement is the result of the Amendments on the Notice Paper and because of the arguments adduced during our discussions. I do not think that they have anything to do with it. I believed that the right hon. Gentleman made the statement because he is truly disturbed about the state of the gilt-edged market and that he properly wants to take action, as he said, to keep it in a healthy condition because it is vital for the financial stability of the country that that should be so.

I believe that, psychologically, it was a great mistake to give this impression of being gruding in the concession—as the right hon. Gentleman called it—that he has made. I am certain that if he had based his statement tonight on the price paid and not on the price of issue it would have shown a realisation of the disturbing mood in the market. If I am right on the psychological point, I forecast that the Chancellor's statement will not have the effect which he wishes it to have and which it is desirable it should have. The right hon. Gentleman may well have to come to the House of Commons next week and give this extra to try and get confidence back in the market.

This is why I deplore the rabid extremism of the hon. Member for Buckingham (Mr. Maxwell). I ask the Chancellor to face the mood of the market. It is the creation of a feeling that there is a lack of generosity in it that will prevent his statement from ensuring the objective which the Chancellor wants. We should thank the right hon. Gentleman for making the statement, because it shows that he recognises the problem that is hitting the market at the moment, but we can ask him to face the psychological effect and to be more generous in the terms. If he does that he will achieve what he should achieve and what the Committee wishes him to achieve.

Mr. A. E. P. Duffy (Colne Valley)

The right hon. Member for Flint, West (Mr. Birch) loosely bandied about ethical concepts like honour, faith and moral wrong, none of which bore any relationship to the matter under discussion. The issue of gilt-edged stock has never been associated with any assurance whatsoever about the future level of taxation. The ordinary salary and wage earner receives no guarantee about the future level of taxation. Newly-weds receive no guarantee whatsoever about future interest rates, and old-age pensioners have received no guarantee in recent months about the future purchasing power of money. Yet hon. and right hon. Members opposite seem to think that gilt-edged stockholders should receive guarantees about all these things, that is to say, they should run no risk whatsoever of adverse changes in taxation or interest rates or the value of money.

All that the gilt-edged stockholder is guaranteed, and nothing more or less, is a fixed money income and a fixed sum at redemption. As the Chancellor said, the right hon. Member for Flint, West did not make out his case. Nevertheless, my right hon. Friend has made a statement that amounted to a concession. I am not at all sure at this stage that my right hon. Friend has not gone too far. It certainly is a concession. In so far as any obligation is involved—and I am not sure yet that there is any obligation on my right hon. Friend—it is with reference to the issue price, and nothing else.

I wish to deal briefly with another matter on which the right hon. Member for Flint, West touched. It is something in the gilt-edged market to which no one can be indifferent. I would not ask my right hon. Friend to persist in past attitudes, or to hold my view that stocks may not have to be offered in future at slightly more favourable terms, but this could be balanced by the yield from the new tax as reduced tax avoidance.

11.45 p.m.

The right hon. Member for Flint, West said that the cost in a full year could be about £125 million. Presumably, he has borne in mind what the Chancellor pointed out—that a considerable section of the gilt-edged market is exempted, not merely pension funds and other gross funds but banks as well. But the people who are not exempt and who presumably the Chancellor has in mind, just as the right hon. Member had them in mind, will not be exempted, and they are the individuals at high levels of taxation who, buying low coupon, short-dated Government bonds as Surtax payers in the past, have obtained considerable yields. Moreover, they have financed them very often by borrowing in ways that have been tenable and in this way they have done so at the expense of the Inland Revenue.

These are the people whom the Amendment seeks to protect and whom hon. Members on this side will want to see exposed to the full blast of the Capital Gains Tax. On the other hand, I am not indifferent to the state of the gilt-edged market and I would have thought that the Chancellor would have looked more in the direction of switching by way of shoring up the market rather than making pure concessions that are not even appreciated by hon. Members opposite even though they are not offered on grounds of equity.

Mr. Heath

I would like at this stage to offer some comments on the Chancellor's statement and then, if I may, put a proposal to the Chancellor and to the Committee. The Chancellor has made a very important statement. He has shown that he recognises that this matter concerns very many individuals, but, also, is of the greatest importance for the nation as a whole, particularly at this juncture in our history, for reasons which he knows full well.

The right hon. Gentleman has, therefore, attached great importance to his statement, and quite rightly. We are in some difficulty in discussing it on this occasion, because, as the right hon. Member for Orkney and Shetland (Mr. Grimond) pointed out, it is complicated and I do not think that the Committee is entirely responsible for this. The Chancellor could, if he had wished, put this down in the form of an Amendment—the Government have so far put down just over 120 Amendments—and then we would have been able to study it before debating it. On the other hand, there are probably strong reasons why he was not able to do that beforehand and for doing it in this form, and that we can all appreciate.

The right hon. Gentleman has shown, I think, that he still has some personal reservations on the points ably and lucidly put by my right hon. Friend the Member for Flint, West (Mr. Birch) about the honourable obligations of the Government to their own stock. He has, nevertheless, accepted the principle and he has said so very clearly. He has also shown us the way in which he thinks he can best carry out this principle.

This has already met with some doubts from hon. Members on both sides as to whether this is the way to meet the honourable obligations, in particular, the point first raised by my right hon. Friend but also pursued by the hon. Member for Manchester, Cheetham (Mr. Harold Lever) as to the relevance of the issue price or the price at which people bought from the Government Broker, determined in the light of their expectations. I believe that that is, as hon. Gentleman on both sides have emphasised, a fundamental point.

The second point which concerns us is the extent to which the solution to which the Chancellor has come meets the situation in the market at the moment and—what I think is particularly in our minds—the problem of future Government borrowing and the management of the Government debt. These two points—the question of the issue price and the question of the future management of the market—are really the crux of the statement with which we are dealing.

On the first point, there immediately arises the matter: if, in honour, it was right to take the price at which the Government Broker sold rather than the issue price, is it practicable now to handle the matter on this basis? This, I think, is where the Committee is in very great difficulty. My view, and, I think, the view of some of my right hon. and hon. Friends, would be that it is very difficult now to handle it on that price. I notice the Chief Secretary nodding in agreement. That was one of the reasons why we were led to table the Amendment to exempt the stocks altogether—because of the difficulties of dealing with this problem. The Chancellor has come to the other solution, which some hon. Members have indicated they find lacking. Probably our general feeling on this side would be that it is lacking to an extent, though I recognise that the Chancellor has gone beyond his own personal inclinations in trying to meet the Committee on this point.

It seems to me that in this situation which is of very great importance not only for individuals but for the country as a whole, the Committee—if I may suggest it—would not be wise to continue this discussion at this moment, that it would meet the needs of the Chancellor best—I hope that the right hon. Gentleman will agree with this—if we were now to report Progress at this point without the Committee attempting to come to a conclusion on this—because there is an Amendment before the Committee—if we were given time to reflect, consider it and discuss among ourselves and with those most intimately concerned with it, so that we could tomorrow afternoon resume the Committee stage in the light of our reflection and then be able to offer our views to the Chancellor so that he could consider the matter further.

For this reason, I should like to move to report Progress at this stage. I ask the Chancellor to consider this seriously as a genuine indication of our desire to examine with the utmost care the proposal which he has put before us. I remind him that the Committee sat until after six o'clock this morning, and that we have been sitting today since half-past three and it is now nearly midnight. [Interruption.] A large number of hon. Members were sitting here until six o'clock in the morning, including hon. Gentlemen on the other side of the Committee.

I suggest that in these circumstances we shall not serve the Chancellor's interests best by continuing the debate, particularly in the vein in which it was just beginning to develop in the speech by the hon. Member for Colne Valley (Mr. Duffy), if he does not mind my saying so. I have no wish to be controversial, but I accept that this is a controversial matter in many respects. We would, I think, best serve the Chancellor's interests and the interests of the Committee if we were to report Progress and reflect on the matter and return to it at the beginning of our sitting tomorrow.

I beg to move, That the Chairman do report Progress and ask leave to sit again.

Mr. Grimond

I, too, believe that it would be a great mistake for the Committee to vote on this matter, at any rate at this stage. I speak as one who has genuine doubts about whether Government stocks are in a different position from, say, local authority loans, which, equally, are issued with a redemption date and a figure for the redemption of them.

The Chancellor has been good enough to come here and he has circulated—which I think is unusual, and we are very grateful for it—particulars of what he has to say about this matter. I feel that it would be a courtesy to the Chancellor himself if we took rather longer to study the proposals which he has set out in some detail.

I see the Chancellor's difficulty. He may want to make progress on the Bill. But I think that this is an unusual situation. As the right hon. Member for Bexley (Mr. Heath) said, there were reasons, clearly, against tabling an Amendment, but they are not the fault of the Committee, on either side. If we were now to be forced to take a decision on these concessions—I grant that they are concessions—I think that it would not be in accordance with the desire of the Committee. I do not think that it would be a desirable way of carrying on with the Bill. I support the suggestion that we report Progress.

Mr. Callaghan

I acknowledge the manner in which the proposition was put that we should report Progress, but I must point out both to the right hon. Member for Bexley (Mr. Heath) and the Leader of the Liberal Party, the right hon. Member for Orkney and Shetland (Mr. Grimond), that we are not voting on my proposals tonight. What we are voting on is an Amendment which would exclude British Government securities as chargeable assets for the purposes of capital gains. It is very important that a conclusion should be reached on this. One of the reasons why we cannot put down Amendments in advance is, I am sure the right hon. Gentleman will appreciate on reflection—

Mr. John M. Temple (City of Chester)

I wished to ask the right hon. Gentleman whether he was aware that his proposals were not in the hands of all hon. Members of the Committee at this time.

Mr. Callaghan

That only reinforces the point I am making. They certainly are in the hands of all hon. Members who were here to listen to me [HON. MEMBERS: "No."] They have listened and heard and if they cannot understand, that is not my fault. [HON. MEMBERS: "Oh."] There are limits even to my patience and tolerance on this subject. I have done my best to meet the convenience of the Committee by making a full statement. I am not bad tempered; I am good tempered, on the whole. I have done my best to meet the convenience of the Committee by circulating a statement. If not every hon. Member has a copy, I am sorry, but we are not voting on it. It was circulated as a matter of convenience, but what we are discussing is an Amendment to exclude British Government securities.

It is very important that we should reach a conclusion on this. [HON. MEMBERS: "Why?"] For the sake of some certainty so that those operating in this market should know where the Government stand on this matter. It is important that I should make clear at once without any wish, as it were—let me see how I put this, I do not want to convey to right hon. Gentlemen opposite that my mind is closed, but I am afraid that it must be in these circumstances. I cannot go any further. The Committee, the country and the market must know what are the Government's intentions and they must be clear about them. I must make clear the Government's intention, whatever may be the dulcet tones of my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) or the logical reasoning of the right hon. Member for Bexley. The Government's intention is to move an Amendment on Report along the lines I have brought to the Committee and which, for convenience' sake, I have outlined.

That is where the Government stand and must stand. On no other basis would anyone be able to conduct business. I must be absolutely clear and firm about this. This is what we intend to do. In passing—and I do not intend to continue this discussion too long—I think that the basis for the Government's case which made the right hon. Member for Flint, West write his initial letter to The Times, which I studied, was that the Government's honour was involved. The Government Broker buys and sell stocks every day in the market place. This is what he was recommended to do by the Radcliffe Committee and he has been doing it a great deal, but the contract between the Government and the purchaser is to issue at a certain price and redeem at a certain price. [HON. MEMBERS: "No."] That is my interpretation of the responsibility of the Government and for the moment I am afraid that it is my interpretation which will have to stand the test of time.

Many people are concerned. They will say that this is a genuine attempt to deal with this particular allegation. In so far as the right hon. Member for Orkney and Shetland asks whether this will restore the position in the gilt-edged market, I can only say to him, in the words of the right hon. Member for Flint, West (Mr. Birch), that if they thought that the Government were breaking faith he thought—and I am inclined to agree—that this would be a deterrent to investing in the gilt-edged market. No one can say that from now on. All that people can say is that the Government are not exempting gilt-edged stocks from the Capital Gains Tax. This is an entirely different matter from whether this segment should or should not be exempted.

12 m.

Mr. Donald Box (Cardiff, North)

Will the Chancellor assure us that the scheme which he is proposing has the full approval of the Government Broker?

Mr. Callaghan

No, I do not have to assure the Committee on that. The Government take their own responsibility for this. We have not put the job into commission yet. It was some hundreds of years ago. This is my responsibility. [Interruption.] I have been accused on occasion of listening to too many experts. I am not indicating whether the Government Broker is in agreement. That has nothing to do with this situation.

Although I should have liked to accept it, I must resist the proposal to report Progress. I should like to ask the Committee to reach a conclusion on the Clause—at least, on the Amendment, to vote on it so that we know where we are. We can proceed from there, and then the Government will put down an Amendment on Report on the lines I have indicated tonight.

Mr. Hirst

Before the Chancellor sits down, may I ask him—

Hon. Members

He has already sat down.

Mr. John Peyton (Yeovil)

The Chancellor of the Exchequer has taken an extraordinary course to resist the Motion of my right hon. Friend the Member for Bexley (Mr. Heath). I do not claim to be expert in the activities of the Government Broker, but the Chancellor is saying something strange when he suggests that the only thing with which the Government are concerned is the issue price and the redemption price. He is leaving out one quite important person, namely, the purchaser who has brought from the Government Broker, who is the agent of the Government and is able to pledge the Government's credit. We are discussing the creditworthiness of the Government, and the right hon. Gentleman—

Mr. Arthur Lewis (West Ham, North)

On a point of order. Are we not discussing whether to report Progress, Sir Samuel?

The Deputy-Chairman

We certainly are. I was waiting for the hon. Member to relate his remarks to that Motion.

Mr. Peyton

It is entirely my intention to do that, Sir Samuel.

My right hon. Friend the Member for Bexley has suggested, in view of the important announcement made by the Chancellor, that you should report Progress, Sir Samuel, and ask leave to sit again. In view of the importance of the fundamental issue, I cannot see that the Chancellor is justified, on the basis of what he has said tonight, to ask the Committee to continue sitting through the night—which we will certainly do if he wishes—without being much more convincing that he has been.

When you suggest, Sir Samuel, that I I am not talking to the Motion, I hope that you will recall what the Chancellor has been talking about. In answering my right hon. Friend, the Chancellor adduced these very arguments. I am only saying that his answer to my right hon. Friend is wholly unworthy of a Chancellor of the Exchequer. It is not worthy of the attention of the Committee. It is a bogus and wholly inadequate ground for resisting a very reasonable proposition. I hope very much that the Committee will give it the short shrift and scant attention that it deserves.

Mr. Hugh Fraser (Stafford and Stone)

We are inadequately supplied with papers tonight by the Chancellor. This is an important point about whether to report Progress—

Mr. Walter Monslow (Barrow-in-Furness)

On a point of order. This is the first occasion, as I remember, when a circular has ever been issued by the Chancellor of the Exchequer for the convenience of the Committee. Is this the way my right hon. Friend is to be treated for the courtesy he has extended?

The Deputy-Chairman

That is not a point of order.

Mr. Fraser

It is very relevant to the paper which has been issued by the Chancellor this evening to show what precisely the prices of these various stocks were at the close of the market tonight. This is a very important point which must be discussed by the Committee, because, as so many of my hon. Friends have said, there is brought in a totally new element for the valuation of gilt-edged stock. The late Lord Bracken once said that the Labour Government had turned the gilt-edge market into a gilt-edged casino. They are turning it more into a casino than ever. Without actual Stock Exchange prices, it is almost impossible to compute whether any justice is really being done. Therefore, I feel that we should report Progress now and sit again when all these facts and papers are available.

Mr. Heath

I should like to put two points to the Chancellor of the Exchequer. The first is that we are about to take, or will in due course take, a decision on the Amendment moved by my right hon. Friend and not, of course, on what the Chancellor has put before the Committee. I think he will agree that he has issued the circular to the Committee because of the complexity of the statement he made and the difficulty of following it as he was making it. But, of course, the Committee takes a decision on the Amendment in the light of what the Government spokesman has said, and it would be only normal to expect us to take a decision on our Amendment in the light of what the right hon. Gentleman has said. It is for that reason—

Mr. Arthur Lewis

On a point of order. Did not the right hon. Gentleman the Member for Bexley (Mr. Heath) move the Motion to report Progress? Is he allowed to speak twice on the Motion?

The Deputy-Chairman

Yes. We are in Committee.

Mr. Heath

It was for that reason I moved to report Progress, so that the Committee would have an opportunity of deciding, in the light of the statement the Chancellor has made, what action it should take upon the Amendment. I believe this to be a perfectly reasonable proposition.

The point which the Chancellor made with considerable emphasis was that he wished to have a degree of certainty. Surely he must realise that there can be no certainty about these matters till this Bill has passed through all its stages here? There can be no certainty, because the Chancellor has yet to put his own Amendment down, which cannot be done till Report. The House then, and this Committee now, will continue, I have no doubt, to argue these matters, and will be influenced by argument, and perhaps take upon them different decisions from any now deemed likely. Therefore, I cannot accept the argument of the Chancellor that if we were to resume our discussion of this matter tomorrow afternoon there would be left a degree of uncertainty which he cannot possibly accept.

Therefore, I urge upon the right hon. Gentleman these two considerations which I believe are both relevant to the Motion which I have moved, but I must tell him that if he is going to insist on this attitude, which, I suggest, is not the best to meet his own needs on the matter, we on this side of course must take the necessary decisions.

The Deputy-Chairman

The Question is, That I do report Progress and ask leave to sit again.

Sir J. Foster

On a point of order. I wish to speak on this Motion, Sir Samuel. The Committee, when it debates a Motion to report Progress, very often only considers the wishes of the Members of the Committee. There is a very important point here—that the effect on the staff is going to be very serious. It is, perhaps, not realised by the Treasury Bench—

The Deputy-Chairman

Is the hon. and learned Member addressing me on a point of order, or is he continuing the debate?

Sir J. Foster

It is on a point of order that I wish to speak.

The Deputy-Chairman

The Question is—

Hon. Members


Mr. Hirst

My right hon. and learned Friend was addressing the Committee on the Motion to Report progress. He was only attracting your attention to speak on it, Sir Samuel, whilst you were trying to close the debate while he was still speaking.

The Deputy-Chairman

The hon. and learned Gentleman said that he was raising a point of order because he wished to speak. That is not a point of order. The Question is—

Sir J. Foster

On a point of order. Is it not in order on a Motion to Report progress that any hon. Member who wishes to speak has a right to speak?

The Deputy-Chairman

The hon. and learned Gentleman has the right to speak, but he said that he was raising a point of order, which he did not. If the hon. and learned Gentleman wishes to speak, he may do so.

Sir J. Foster

I dare say it was my phrase, but when I said that I wished to speak I meant that I wished to speak. [Interruption.]

The Deputy-Chairman

I hope that right hon. Gentlemen on the Government Front Bench will let me hear what is being said by the hon. and learned Gentleman in possession of the Floor.

Mr. Monslow

On a point of order. Did I understand you to put the Question or not, Sir Samuel?

The Chairman

The Question is not put until all the voices have been heard. It is still open to an hon. Member to speak.

Sir J. Foster

I might perhaps reinforce the point which my right hon. Friend has made by suggesting to the Committee that there is no certainty. If my right hon. Friend's Motion is carried, we still do not have any certainty about the proposals of the Chancellor of the Exchequer. The Chancellor's argument for certainty, therefore, does not hold water at all. If the Amendment is defeated, all that he will have advanced is that the Amendment is defeated. There is still the consideration of the Committee as to whether his proposals will or will not obtain.

I was seeking to draw your attention to the fact that the staff of the House of Commons—I am thinking particularly of the doorkeepers—have been without sleep since eight o'clock yesterday morning. The doorkeepers came on duty yesterday at eight o'clock. The Committee rose at 6.15, and it was then possible for the doorkeepers to have about an hour in which to make a cup of tea. They did not even have time to change their clothes before they were on duty again. If the Committee sits all through the night, these gentlemen, upon whom the whole administration of the House depends, will have been in those uncomfortable clothes from 8 a.m. yesterday until four, five or six o'clock this morning—

Mr. Monslow

Sheer humbug.

Hon. Members


Mr. Monslow

I will not withdraw it, either.

Mr. Michael English (Nottingham, West)


Sir J. Foster

The hon. Member for Barrow-in-Furness (Mr. Monslow) has just said that this is humbug—

Mr. Monslow

The hon. and learned Member is the humbug.

Hon. Members


The Deputy-Chairman

I think I heard the hon. Member for Barrow-in-Furness call the hon. and learned Member for Northwich (Sir J. Foster) a humbug. If he did so, he must withdraw it.

Mr. Monslow

I made the reference to the subject matter which we are now dilating. The hon. and learned Member for Northwich was speaking at 5 o'clock this morning. I say that it is humbug to make the reference which he is making to the staff. However, I withdraw.

The Deputy-Chairman

The hon. Member described the hon. and learned Gentleman as a humbug. He must withdraw that.

Mr. Monslow

I will bow to your Ruling, Sir Samuel, and retain my feeling. [An HON. MEMBER: "The hon. Member said that he would not withdraw."]

Sir J. Foster

In spite of the hon. Member having withdrawn that remark, I think that I must deal with him, because he says that he still retains his feeling. This afternoon I was very much exercised by the prospect of the Chancellor not being willing—

Mr. Maxwell

On a point of order. Would it be in order for an hon. Gentleman to call all right hon. and hon. Members opposite humbugs?

The Deputy-Chairman

That is not a point of order.

Sir J. Foster

In order to refute the hon. Member, who says that he still retains his feelings, I would like to say to the Committee that this afternoon I was exercised by the effect of these prolonged sittings on the Committee and the organisation and the staff on whom we depend so much.

12.15 a.m.

There is no doubt that the long sittings affect the doorkeepers more than others. The police and many others are affected, but the doorkeepers came on duty at eight o'clock in the morning and they have to remain here all through the night.

I made inquiries about whether they had had any rest. It is a reflection on our humanity that if we decide to sit throughout the night—[Interruption.] Are hon. Members suggesting that the sitting of the Committee should be continued without considering the fatigue of the doorkeepers? I seriously suggest that because we have a tradition in this country of being humane employers. [HON. MEMBERS: "Oh."] The attitude of hon. Members opposite, who are the worst employers, is curious. I do not know how they reconcile their consciences with wanting to keep the Committee sitting at the expense of the fatigue of the doorkeepers.

Mr. English

Is the hon. and learned Gentleman aware that many of the staff, such as the librarians, hope that the Committee will go on until 2 a.m., as they will then get a day off tomorrow?

Sir J. Foster

That reinforces my case. Unfortunately, the doorkeepers and some other staff will not get a day off tomorrow. I was not referring specifically to the staff of the House, but to others as well. They have to be here as long as the Committee goes on. The job of the doorkeepers is not only sedentary. One attached a pedometer to his foot and found that he walked 15 miles in a day. They do not have to be only in the Chamber. They also attend Standing Committees and deliver messages and form a connection between hon. Members and the Press Gallery. They are the nerve centre of the administration of the House of Commons in the sense that Members depend on them for the services which they render. These men cannot complain and cannot suddenly go on strike and have to be here all through the night for the second night running.

Mr. Monslow

Will the hon. and learned Gentleman kindly inform the Committee what time Boodles and White's Clubs close?

Sir J. Foster

In conclusion, I appeal to the good sense and humanity of the Committee not to decide to sit through the night and so jeopardise the health of these loyal servants, not all of them young.

Question put:

Division No. 147.] AYES [12.21 a.m.
Alison, Michael (Barkston Ash) Griffiths, Peter (Smethwick) Morrison, Charles (Devizes)
Allan, Robert (Paddington, S.) Grimond, Rt. Hn. J. Mott-Radclyffe, Sir Charles
Amery, Rt. Hn. Julian Hall, John (Wycombe) Munro-Lucas-Tooth, Sir Hugh
Anstruther-Gray, Rt. Hn. Sir W. Harris, Reader (Heston) Murton, Oscar
Atkins, Humphrey Harvey, John (Walthamstow, E.) Nicholls, Sir Harmar
Awdry, Daniel Hawkins, Paul Orr, Capt. L. P. S.
Baker, W. H. K. Heald, Rt. Hn. Sir Lionel Osborn, John (Hallam)
Batsford, Brian Heath, Rt. Hn. Edward Page, R. Graham (Crosby)
Beamish, Col. Sir Tufton Hendry, Forbes Pearson, Sir Frank (Clitheroe)
Bennett, Sir Frederic (Torquay) Higgins, Terence L. Peyton, John
Berry, Hn. Anthony Hill, J. E. B. (S. Norfolk) Price, David (Eastl[...]el[...]gn)
Bessell, Peter Hirst, Geoffrey Prior, J. M. L.
Biggs-Davison, John Hogg, Rt. Hn. Quintin Pym, Francis
Birch, Rt. Hn. Nigel Hooson, H. E. Ramsden, Rt. Hn. James
Box, Donald Hordern, Peter Redmayne, Rt. Hn. Sir Martin
Boyd-Carpenter, Rt. Hn. J. Hornsby-Smith, Rt. Hn. Dame P. Rees-Davies, W. R.
Boyle, Rt. Hn. Sir Edward Howe, Geoffrey (Bebington) Sharples, Richard
Brewis, John Iremonger, T. L. Shepherd, William
Brinton, Sir Tatton Irvine, Bryant Godman (Rye) Sinclair, Sir George
Brooke, Rt. Hn. Henry Jenkin, Patrick (Woodford) Smith, Dudley (Br'ntf'd & Chiswick)
Bryan, Paul Johnson Smith, G. (East Grinstead) Spearman, Sir Alexander
Buck, Antony Johnston, Russell (Inverness) Steel, David (Roxburgh)
Buxton, Ronald Kaberry, Sir Donald Studholme, Sir Henry
Carlisle, Mark Kerby, Capt. Henry Talbot, John E.
Clark, William (Nottingham, S.) Kilfedder, James A. Taylor, Sir Charles (Eastbourne)
Cooper, A. E. Kimball, Marcus Taylor, Edward M. (G'gow.Cathcart)
Cooper-Key, Sir Neill King, Evelyn (Dorset, S.) Taylor, Frank (Moss Side)
Costain, A. P. Kitson, Timothy Teeling, Sir William
Crawley, Aldan Langford-Holt, Sir John Temple, John M.
Crowder, F. P. Legge-Bourke, Sir Harry Thatcher, Mrs. Margaret
Curran, Charles Lewis, Kenneth (Rutland) Thompson, Sir Richard (Croydon.S.)
Currie, G. B. H. Lloyd, lan (P'tsm'th, Langstone) Thorpe, Jeremy
Dalkeith, Earl of Longbottom, Charles Tiley, Arthur (Bradford, W.)
Davies, Dr. Wyndham (Perry Barr) Longden, Gilbert Tilney, John (Wavertree)
d'Avigdor-Goldsmid, Sir Henry Loveys, Walter H. Tweedsmuir, Lady
Deedes, Rt. Hn. W. F. Lubbock, Eric Vickers, Dame Joan
Dodds-Parker, Douglas MacArthur, lan Walder, David (High Peak)
Doughty, Charles Mackenzie, Alasdair (Ross&Crom'ty) Walker, Peter (Worcester)
Errington, Sir Eric Mackie, George Y. (C'ness & S'land) Walters, Dennis
Eyre, Reginald McMaster, Stanley Ward, Dame Irene
Fell, Anthony McNair-Wilson, Patrick Weatherill, Bernard
Fletcher-Cooke, Charles (Darwen) Maginnis, John E. Webster, David
Fletcher-Cooke, Sir John (S'pton) Marples, Rt. Hn. Ernest Whitelaw, William
Foster, Sir John Mathew, Robert Wills, Sir Gerald (Bridgwater)
Fraser,Rt.Hn.Hugh(St'fford & Stone) Maude, Angus Wilson, Geoffrey (Truro)
Fraser, lan (Plymouth, Sutton) Maxwell-Hyslop, R. J. Woodnutt, Mark
Gammans, Lady Maydon, Lt.-Cmdr. S. L. C. Yates, William (The Wrekin)
Younger, Hn. George
Gilmour, Sir John (East Fife) Meyer, Sir Anthony
Glover, Sir Douglas Mills, Peter (Torrington) TELLERS FOR THE AYES:
Godber, Rt. Hn. J. B. Mills, Stratton (Belfast, N.) Mr. Martin McLaren and
Goodhew, Victor. Miscampbell, Norman Mr. Jasper More.
Gresham Cooke, R Mitchell, David
Abse, Leo Crossman, Rt. Hn. R. H. S. Foot, Sir Dingle (Ipswich)
Albu, Austen Cullen, Mrs. Alice Foot, Michael (Ebbw Vale)
Allaun, Frank (Salford, E.) Dalyell, Tam Freeson, Reginald
Allen, Scholefield (Crewe) Davies, Ifor (Gower) George, Lady Megan Lloyd
Armstrong, Ernest Delargy, Hugh Ginsburg, David
Atkinson, Norman Diamond, John Gourlay, Harry
Bacon, Miss Alice Dodds, Norman Greenwood, Rt. Hn. Anthony
Baxter, William Doig, Peter Gregory, Arnold
Benn, Rt. Hn. Anthony Wedgwood Driberg, Tom Griffiths, David (Rother Valley)
Bennett, J. (Glasgow, Bridgeton) Dunn, James A. Hamilton, William (West Fife)
Binns, John Dunnett, Jack Hannan, William
Blackburn, F. Edwards, Rt. Hn. Ness (Caerphilly) Harper, Joseph
Bottomley, Rt. Hn. Arthur English, Michael Hart, Mrs. Judith
Brown, R. W. (Shoreditch & Fbury) Ennals, David Hattersley, Roy
Buchanan, Richard
Butler, Mrs. Joyce (Wood Green) Ensor, David Hazell, Bert
Callaghan, Rt. Hn. James Evans, Albert (Islington, S.W.) Heaiey, Rt. Hn. Denis
Coleman, Donald Fernyhough, E Heffer, Eric S.
Conlan, Bernard Finch, Harold (Bedwellty). Herbison, Rt. Hn. Margaret
Corbet, Mrs. Freda Fletcher, Sir Eric (Islington, E.) Howell, Denis (Small Heath)
Cronin, John Floud, Bernard Howie, W.

The Committee divided: Ayes 152, Noes. 153.

Hoy, James Morris, Charles (Openshaw) Short,Rt.Hn.E.(N'c'tle-on-Tyne.C.)
Hughes, Emrys (S. Ayrshire) Mulley, Rt.Hn. Frederick(SheffieldPk) Silkin, John (Deptford)
Hunter, Adam (Dunfermline) Murray, Albert Silkin, S. C. (Camberwell, Dulwich)
Hynd, H. (Accrington) Newens, Stan Silverman, Julius (Aston)
Irving, Sydney (Dartford) Noel-Baker, Francis (Swindon) Slater, Mrs. Harriet (Stoke, N.)
Jackson, Colin Noel-Baker,Rt.Hn.Philip(Derby,S.) Slater, Joseph (Sedgefield)
Janner, Sir Barnett Oakes, Gordon Solomons, Henry
Jay, Rt. Hn. Douglas Ogden, Eric Soskice, Rt. Hn. Sir Frank
Jeger,Mrs Lena(H'b'n&St.P'cras.S.) Oram, Albert E. (E. Ham, S.) Stones, William
Jenkins, Hugh (Putney) Owen, Will Strauss, Rt. Hn. G. R. (Vauxhall)
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.) Padley, Walter Summerskill, Hn. Dr. Shirley
Kelley, Richard Page, Derek (King's Lynn) Swain, Thomas
Kenyon, Clifford Palmer, Arthur Taverne, Dick
Kerr, Dr. David (W'worth, Central) Pargiter, G. A. Thomson, George (Dundee, E.)
Leadbitter, Ted Park, Trevor (Derbyshire, S.E.) Thornton, Ernest
Lee, Miss Jennie (Cannock) Parker, John Tuck, Raphael
Lever, Harold (Cheetham) Parkin, B. T. Urwin, T. W.
Lewis, Arthur (West Ham, N.) Pavitt, Laurence Varley, Eric G.
Lewis, Ron (Carlisle) Pearson, Arthur (Pontypridd) Walden, Brian (All Saints)
Loughlin, Charles Prentice, R. E. Walker, Harold (Doncaster)
Mabon, Dr. J. Dickson Pursey, Cmdr. Harry Wallace, George
McBride, Neil Rankin, John Whitlock, William
MacColl, James Redhead, Edward Wigg, Rt. Hn. George
MacDermot, Niall Rees, Merlyn Wilkins, W. A.
McKay, Mrs. Margaret Reynolds, G. W. Williams, Mrs. Shirley (Hitchin)
Mackenzie, Gregor (Rutherglen) Robertson, John (Paisley) Wilson, William (Coventry, S.)
Mahon, Simon (Bootle) Robinson, Rt. Hn.K.(St. Pancras, N.) Wyatt, Woodrow
Manuel, Archie Rogers, George (Kensington, N.) Yates, Victor (Ladywood)
Mason, Roy Rose, Paul B.
Mikardo, lan Ross, Rt. Hn. William TELLERS FOR THE NOES:
Molloy, William Rowland, Christopher Mr. George Lawson and
Monslow, Walter Shore, Peter (Stepney) Mr. Brian O'Malley.

12.30 a.m.

Mr. Heath

The Government are now obviously in the shakiest position they have been in on the whole Bill. The Chancellor—[Interruption.]

The Deputy-Chairman

Order. Mr. Heath.

Sir D. Glover

On a point of order. Es it in order for the Government Chief Whip to make speeches from his seat?

The Deputy-Chairman

I did not hear him making a speech. I merely saw him waving a piece of paper.

Mr. Heath

The Chancellor has said that he wants to have a decision on the Amendment. He is, therefore, forcing the issue and challenging the Committee to express its view upon the Amendment which we have placed before it. We now propose to do so. I want to place it on record that, from the examination we have been able to give to the Chancellor's statement and from the explanation he has given us when he circulated it, we find that it is unsatisfactory and does not meet the case we have made. We do not believe that it meets the point which was emphasised both by my right

Division No. 148.] AYES [12. 34 a.m.
Alison, Michael (Barkston Ash) Anstruther-Gray, Rt. Hn. Sir W. Baker, W. H. K.
Allan, Robert (Paddington, S.) Atkins, Humphrey Batsford, Brian
Amery, Rt. Hn. Julian Awdry, Daniel Beamish, Col. Sir Tufton

hon. Friend the Member for Flint, West (Mr. Birch) and by the hon. Member for Manchester, Cheetham (Mr. Harold Lever) in relation to the requirements of what the Chancellor described as the honourable obligations of the Government of the day. We do not believe from our consideration of it that it will meet the requirements of the money market at the moment from the Chancellor's point of view, nor enable there to be satisfactory management of the Government debt and Government issues in the future.

For these reasons, I believe that we should strongly support our own Amendment. I advise my right hon. and hon. Friends to divide the Committee immediately upon this point and to support the Amendment, in order to indicate to the Chancellor that we believe that the proposition in the Amendment is the only way of meeting the present situation and of urging him to reconsider his own proposal before he brings it forward to us again on Report.

Original Question put, That those words be there inserted:—

The Committee divided: Ayes 152, Noes 153.

Bennett, Sir Frederic (Torquay) Heald, Rt. Hn. Sir Lionel Murton, Oscar
Berry, Hn. Anthony Heath, Rt. Hn. Edward Nicholls, Sir Harmar
Bessell, Peter Hendry, Forbes Orr, Capt. L. P. S.
Biggs-Davison, John Higgins, Terence L. Osborn, John (Hallam)
Birch, Rt. Hn. Nigel Hill, J. E. B. (S. Norfolk) Page, R. Graham (Crosby)
Box, Donald Hirst, Geoffrey Pearson, Sir Frank (Clitheroe)
Boyd-Carpenter, Rt. Hn. J. Hogg, Rt. Hn. Qulntin Peyton, John
Boyle, Rt. Hn. Sir Edward Hooson, H. E. Price, David (Eastleigh)
Brewis, John Hordern, Peter Prior, J. M. L.
Brinton, Sir Tatton Hornsby-Smith, Rt. Hn. Dame P. Pym, Francis
Brooke, Rt. Hn. Henry Howe, Geoffrey (Bebington) Ramsden, Rt. Hn. James
Bryan, Paul Iremonger, T. L. Redmayne, Rt. Hn. Sir Martin
Buck, Anton[...]y Irvine, Bryant Godman (Rye) Rees-Davies, W. R.
Buxton, R. C. Jenkin, Patrick (Woodford) Sharples, Richard
Carlisle, Mark Johnson Smith, G. (East Grinstead) Shepherd, William
Clark, William (Nottingham, S.) Johnston, Russell (Inverness) Sinclair, Sir George
Cooper, A. E. Kaberry, Sir Donald Smith, Dudley (Br'ntf'd & Chiswick)
Cooper-Key, Sir Neill Kerby, Capt. Henry Spearman, Sir Alexander
Costain, A. P. Kilf[...]edder, James A. Steel, David (Roxburgh)
Crawley, Aldan Kimball, Marcus Studhelme, Sir Henry
Crowder, F. P. King, Evelyn (Dorset, S.) Talbot, John E.
Curran, Charles Kitson, Timothy Taylor, Sir Charles (Eastbourne)
Currie, G. B. H. Langford-Holt, Sir John Taylor, Edward M. (G'gow.Cathcart)
Dalkeith, Earl of Legge-Bourke, Sir Harry Taylor, Frank (Moss Side)
Davies, Dr. Wyndham (Perry Barr) Lewis, Kenneth (Rutland) Teeling, Sir William
d'Avigdor-Gold[...]smid, Sir Henry Lloyd, Ian (P'tsm'th, Langstone) Temple, John M.
Deedes, Rt. Hn. W. F. Longbottom, Charles Thatcher, Mrs. Margaret
Dodds-Parker, Douglas Longden, Gilbert Thompson, Sir Richard (Croydon.S.)
Doughty, Charles Loveys, Walter H. Thorpe, Jeremy
Errington, Sir Eric Lubbock, Eric Tiley, Arthur (Bradford, W.)
Eyre, Reginald MacArthur, Ian Tilney, John (Wavertree)
Fell, Anthony Mackenzie, Alasdair(Ross&Crom'ty) Tweedsmuir, Lady
Fletcher-Cooke, Charles (Darwen) Mackie, George Y. (C'ness & S'land) Vickers, Dame Joan
Fletcher-Cooke, Sir John (S'pton) McMaster, Stanley Walder, David (High Peak)
Foster, Sir John McNair-Wilson, Patrick Walker, Peter (Worcester)
Fraser,Rt.Hn.Hugh(St'fford & Stone) Maginnis, John E. Walters, Dennis
Fraser, Ian (Plymouth, Sutton) Marples, Rt. Hn. Ernest Ward, Dame Irene
Gammans, Lady Mathew, Robert Weatherill, Bernard
Gilmour, Sir John (East Fife) Maude, Angus Webster, David
Glover, Sir Douglas Maxwell-Hyslop, R. J. Whitelaw, William
Godber, Rt. Hn. J. B. Ma[...]ydon. Lt.-Cmdr. S. L. C. Wills, Sir Gerald (Bridgwater)
Goodhew, Victor Meyer, Sir Anthony Wilson, Geoffrey (Truro)
Gresham Cooke, R. Mills, Peter (Torrington). Woodnutt, Mark
Griffiths, Peter (Smethwick) Mills, Stratton (Belfast, N.) Y[...]ates, William (The Wrekin)
Grimond, Rt. Hn. J. Miscampbell, Norman Younger, Hn. George
Hall, John (Wycombe) Mitchell, David
Harris, Reader (Heston) Morrison, Charles (Devizes) TELLERS FOR THE AYES:
Harvey, John (Walthamstow, E.) Mott-Radclyffe, Sir Charles Mr. Martin McLaren and
Hawkins, Paul Munro-Lucas-Tooth, Sir Hugh Mr. Jasper More.
Abse, Leo Dunn, James A. Howell, Denis (Small Heath)
Albu, Austen Dunnett, Jack Howle, W.
Allaun, Frank (Salford, E.) Edwards, Rt. Hn. Ness (Caerphilly) Hoy, James
Allen, Scholef[...]eld (Crewe) English, Michael Hughes, Emrys (S. Ayrshire)
Armstrong, Ernest Ennals, David Hunter, Adam (Dunfermline)
Atkinson, Norman Ensor, David Hynd, H. (Accrington)
Bacon, Miss Alice Evans, Albert (Islington, S.W.) Irving, Sydney (Dartford)
Baxter, William Fernyhough, E. Jackson, Colin
Benn, Rt. Hn. Anthony Wedgwood Finch, Harold (Bedwellty) Janner, Sir Barnett
Bennett, J. (Glasgow, Bridgeton) Fletcher, Sir Eric (Islington, E.) Jay, Rt. Hn. Doug[...]las
Binns, John Floud, Bernard Jeger,Mrs.Lena(H'b'n&St.P'cras,S.)
Blackburn, F. Foot, Sir Dingle (Ipswich) Jenkins, Hugh (Putney)
Bottomley, Rt. Hn. Arthur Foot, Michael (Ebbw Vale) Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Brown, R. W. (Shoreditch & Fbury) Freeson, Reginald Kelley, Richard
Buchanan, Richard George, Lady Megan Lloyd Kenyon, Clifford
Butler, Mrs. Joyce (Wood Green) Kerr, Dr. David (W'worth, Central)
Callaghan, Rt. Hn. James Ginsburg, David Leadbitter, Ted
Coleman, Donald Gourlay, Harry Lee, Miss Jennie (Cannock)
Conlan, Bernard Greenwood, Rt. Hn. Anthony Lever, Harold (Cheetham)
Corbet, Mrs. Freda Gregory, Arnold Lewis, Arthur (West Ham, N.)
Cronin, John Griffiths, David (Rother Valley) Lewis, Ron (Carlisle)
Crossman, Rt. Hn. R. H. S. Hamilton, William (West Fife) Loughlin, Charles
Cullen, Mrs. Alice Hannan, William Mabon, Dr. J. Dickson
Dalyell, Tam Harper, Joseph McBride, Neil
Davies, Ifor (Gower) Hart, Mrs. Judith MacColl, James
Delargy, Hugh Hattersley, Roy MacDermot, Niall
Diamond, John Hazell, Bert McKay, Mrs. Margaret
Dodds, Norman Healey, Rt. Hn. Denis Mackenzie, Gregor (Rutherg[...]en)
Doig, Peter Heffer, Eric S. Mahon, Simon (Bootle)
Driberg, Tom Herbison, Rt. Hn. Margaret Manuel, Archie
Mason, Roy Pearson, Arthur (Pontypridd) Strauss, Rt. Hn. G. R. (Vauxhall)
Mikardo, lan Prentice, R. E. Summerskill, Hn. Dr. Shirley
Molloy, William Pursey, Cmdr. Harry Swain, Thomas
Monslow, Walter Rankin, John Taverne, Dick
Morris, Charles (Openshaw) Redhead, Edward Thomson, George (Dundee, E.)
Mulley,Rt.Hn.Frederick(SheffieldPK) Rees, Merlyn Thornton, Ernest
Murray, Albert Reynolds, G. W. Tuck, Raphael
Newens, Stan Robertson, John (Paisley) Urwin, T. W.
Noel-Baker, Francis (Swindon) Robinson, Rt. Hn.K.(St. Pancras, N.) Varley, Eric G.
Noel-Baker,Rt.Hn.Philip(Derby,S.) Rogers, George (Kensington, N.) Walden, Brian (All Saints)
Oakes, Gordon Rose, Paul B. Walker, Harold (Doncaster)
Ogden, Eric Ross, Rt. Hn. William Wallace, George
O'Malley, Brian Rowland, Christopher Wigg, Rt. Hn. George
Oram, Albert E. (E. Ham, S.) Shore, Peter (Stepney) Wilkins, W. A.
Owen, Will Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.) Williams, Mrs. Shirley (Hitchin)
Padley, Walter Silkin, John (Deptford) Wilson, William (Coventry, S.)
Page, Derek (King's Lynn) Silkin, S. C. (Camberwell, Dulwich) Wyatt, Woodrow
Palmer, Arthur Silverman, Julius (Aston) Yates, Victor (Ladywood)
Pargiter, G. A. Slater, Mrs. Harriet (Stoke, N.)
Park, Trevor (Derbyshire, S.E.) Slater, Joseph (Sedgefield) TELLERS FOR THE NOES:
Parker, John Solomom, Henry Mr. George Lawson and
Parkin, B. T. Soskice, Rt. Hn. Sir Frank Mr. William Whitlock.
Pavitt, Laurence Stones, William
Mr. Callaghan

I beg to move, That the Chairman to report Progress and ask leave to sit again. I imagine that after the previous vote I shall have the unanimous support of the Committee. We have done what I hoped we would do, and I am much obliged to the right hon. Member for Bexley (Mr. Heath), who is leading the Opposition at the moment, for getting the debate in the way which seemed appropriate. Having got that, it would not be appropriate now to ask the Committee to continue to sit further. Therefore, in view of the earlier vote, which was narrowly won, we can now translate that into the unanimous view of the whole Committee.

12.45 a.m.

Mr. Heath

Having demonstrated for the second time tonight that the Government's life hangs by a thread, and although the conduct of the Government over the past three hours may appear to the Committee to be completely incomprehensible, nevertheless we can now understand very clearly why at this moment the Chancellor has moved to report Progress. To enable the Committee to bring its deliberations to a close for tonight in order that it may be able later today to resume with the next Amendment on this Clause. I support the Motion.

Question put and agreed to.

Committee report Progress; to sit again this day.