HC Deb 10 May 1966 vol 728 c205
28. Mr. Grant

asked the Chancellor of the Exchequer, what steps he proposes to take to relieve water-ratepayers from the increased burden caused by the Corporation Tax.

Mr. MacDermot

None, Sir.

Mr. Grant

Is the Financial Secretary aware that many of my constituents served by the Colne Valley Water Company are very incensed indeed that almost half the increase is attributable to the Corporation Tax? What possible justification is there for this discrimination between the private undertakings and the public authorities? Will the Chancellor rectify this in the Finance Bill?

Mr. MacDermot

Perhaps the hon. Gentleman and the water companies would like to point out to his constituents that the reason is that the companies are no longer able to take advantage of an anomaly in our tax system under which they could pay dividends after deduction of Income Tax and did not have to pay a corresponding amount of tax to the Revenue, a practice which was condemned by the Public Accounts Committee. The exemption for local authorities was based on a much more practical factor, which was that, owing to the setting off of interest charges, very few local authorities were in fact liable to any tax at all.

Mr. Temple

Is the Financial Secretary aware that in some parts of the country as much as five-sixths of the increase in water charges is due to increases in taxation? Is he therefore aware that increases in taxation have a very serious effect on prices?

Mr. MacDermot

Of course they have an effect on prices, but it is not right that people should in effect have a hidden subsidy due to an anomaly in the tax system which ought not to be perpetuated.