New Clause No. 2.—(OWN AS YOU EARN.)

HC Deb 14 June 1967 vol 748 cc694-732

(1) Where, in accordance with the provisions of this section, a special banking account (hereinafter referred to as an 'Employee's Savings Account') is opened on behalf of an individual, he shall be entitled to such relief from income tax as is provided in this section.

(2) An Employee's Savings Account shall be an account deposited with a joint-stock bank or with a trustee savings bank or such other institution as the Commissioners of Inland Revenue may on application approve, and the Commissioners shall on application approve any institution which is in their opinion capable of handling such an account, bearing in mind the conditions hereinafter provided, the interests of persons on whose behalf accounts are opened and the need to protect Her Majesty's revenue.

(3) An Employee's Savings Account shall be operated subject to the following conditions—

1. (a) it may be opened by any employer on behalf of an employee, or, in the case of a self-employed person on his own behalf;
2. (b) sums of money, stocks and shares or other securities may be placed in an account by an employer on behalf of the holder of the account, or, in the case of a self-employed person, on his own behalf;
3. (c) the total value of any moneys or shares or securities so deposited in an account shall not exceed in any year of assessment the sum of two hundred pounds;
4. (d) interests or dividends due on any money or securities held in an account may be paid into the said account;
5. (e) without prejudice to paragraph (g) below, no other money may be paid into an Employee's Savings Account, nor any other shares or other securities deposited there;
6. (f) any moneys or shares or other securities deposited in any account shall thereby become the sole property of the individual on whose behalf they have been deposited and this shall not in any way be affected by any subsequent change of employment;
7. (g) any individual on whose behalf an account has been opened may at any time at his own discretion sell shares or other securities held in his account, may withdraw or leave in the account the money raised by such sale, may purchase new shares or securities with funds standing to his credit in the account, or withdraw any money standing to his credit in the account;
8. (h) any joint-stock bank or other approved institution may offer and pay interest on moneys deposited in an account; and
9. (i) no person may have more than one Employee's Savings Account opened on his behalf.

(4) Where the total income of an individual for the year of assessment includes, or would but for this section include, any sum deposited in an Employee's Savings Account by his employer on his behalf or, in the case of a self employed person, by himself, or any sum equal to the value of shares or other securities so deposited, such sum shall be disregarded for all the purposes of the Income Tax Acts other than the furnishing Provided that in the event of any individual withdrawing any money from his account other than dividends or interest, an amount shall be chargeable to his assessment under Schedule E income tax for the year in which the withdrawal takes place equal to—

1. (a) the original amount of the money withdrawn from the account at the time at which it was deposited in the account, or, in the case of shares or other securities which have been disposed of and the proceeds withdrawn, their original value at the time at which they were so deposited; or
2. (b) in the event of any shares or securities being worth less than this at the time at which they were sold or exchanged, regardless of whether they were withdrawn from the account at that time or subsequently, the value realised in such sale or exchange.

(5) Where the total income of an individual for the year of assessment includes, or would but for this section include, any sum paid or credited to an Employee's Savings Account in respect of interest on moneys deposited therein, those sums shall be disregarded for all the purposes of the Income Tax Acts other than the furnishing of information if or in so far as they do not exceed fifteen pounds.—[Mr. Richard Wainwright.]

Brought up, and read the First time.

Mr. Richard Wainwright (Colne Valley)

I beg to move, That the Clause be read a Second time.

The Chairman

With this Clause we can discuss new Clause No. 40—"Tax relief for regular savings or insurance schemes", and new Clause No. 41—"Relief from income tax on the first £15 of investment income", with a Division on new Clause No. 40 if desired.

Mr. Wainwright

There is an error in the Clause as it appears on the Notice Paper. Unfortunately the words "of information" have been omitted at the end of line 41. Line 41 should therefore read: shall be disregarded for all purposes of the Income Tax Acts other than the furnishing of information. This formula appears from time to time in the Clause because, although we seek tax advantages for certain savings, we do not seek the extraordinary and ultimate advantage of National Savings Certificates, that of not being returnable to the inspector of taxes. We do not say that the savings we seek to encourage should not be returnable but that they should not be assessable.

The Clause would benefit the citizen and the Exchequer. The private citizen with a much wider effective choice of savings media would benefit especially when he had something, however small, to put by as a long-term investment and which he wanted to protect from the erosion of inflation. We also want to provide the Exchequer, for which we feel strong concern, with a much greater volume of savings.

On the cost of this provision, we follow the Chancellor's message in his 1966 Budget statement: The message is clear: 'More savings, less tax'."—[OFFICIAL REPORT, 3rd May, 1966; Vol. 727, c. 1440.] Unfortunately, the British public largely did not get that message and have not yet got it and we are offering the right hon. Gentleman a loudspeaker to get it over.

We seek definite and attractive tax advantages for a variety of savings. The last 50 years have proved that tax advantages enormously influence the success of savings schemes. If we join the E.E.C., one of the greatest things which we shall take in is some of the most varied, reliable and efficient methods of institutional savings in the world, which have been built up largely with the impetus of considerable tax advantages. Our pensions schemes, life assurance and industrial assurance schemes, the whole range of National Savings for the small saver and, of course, the building societies are all powerfully assisted by different tax advantages which Parliament has given.

Unfortunately, a price has been paid for the efficiency of the savings media and it is the comparative neglect of channels for taking small savings direct to industry. Compared particularly with the United States and West Germany, our assistance to the small saver to invest directly in industry is under-developed, and this is what we particularly want to remedy.

The Clause seeks four main forms of tax advantage for limited amounts of annual savings so long as they remain effectively saved. So long as these securities remain effectively saved, we ask that Income Tax should be wholly deferred, which means that if and when they are withdrawn from the banking institution authorised to hold them tax-free, they will be subject to Income Tax at the rates and under the rules prevailing. Therefore, in the fairly obvious instance of the employee or self-employed person who puts shares or money away when earning at a high rate and withdraws them in time of sickness and old age, his effective rate of tax will be lower than when he was fully employed.

The second advantage is that the umbrella of the banking institutions would be a complete insulation not only against the payment but against the computation of Capital Gains Tax.

Third, we propose that, while these monies are in the custody of the banking institution, any interest which they attract should be tax-free up to the now customary figure of £15 a year. This might excite some criticism from the Treasury Bench as each party, when in power, has been desperately anxious not to extend this privilege, which is extended to investors in the Post Office and Trustee Savings Banks.

However, since we are trying to provide an incentive to savings, it would be wrong to insist that they should be taxed on the interest while in the bank. The Exchequer may regret the generosity which allowed this tax-free privilege, but it is with us and should not be withheld from any acceptable form of savings.

The fourth major tax advantage which we seek is that there should be no assessment on the discount element of shares which an employer makes available to his employees. This is particularly important, as the history of those industrial countries which have encouraged employee shareholding shows that the issue of shares at a discount is particularly valuable.

The Financial Times of 14th March this year said: In 1960, only 12 per cent. of the manufacturers listed on the New York Stock Exchange had stock purchase programmes for their employees. Last year"— that is, 1966— this figure had risen to 22 per cent. In the course of the investigation by the National Industrial Conference Board in New York, which produced this informa- tion, is was found that about half the plans that they analysed allowed an employee to buy stock at a discount to provide him with additional protection if the price of his stock were to fall. This is of great importance when people are starting their careers as investors because an early fall in stock for which they have paid good money has an extremely discouraging effect.

10.0 p.m.

We recognise—as the Liberal Party has recognised for a long time—that a provision of this kind is only one form, and certainly not the only form, of securing worker participation in industry. However, it has the great merit of being easily and conveniently available and much good is to be achieved by the sort of tax incentive which the Clause provides. As Liberals, we look forward to a period when there will be much wider measures of employee participation in the control and direction of industry and a bigger share in its rewards. But in preparation for the time when this comes about, we want to see employees becoming familiar with the responsibilities of share ownership, with company structure and with all that goes with the role of an ordinary shareholder.

We have high hopes from the Government because the Clause is not new. It was, in substantially similar form, debated in Parliament in 1958 on the Finance Bill of that year. On that occasion the right hon. Gentleman who is now the President of the Board of Trade said: The aim of this Liberal revolution is thoroughly laudable. It is the spread of ownership of shares over a higher proportion of the individuals of the community."—[OFFICIAL REPORT, 2nd July, 1958; Vol. 590, c. 1496.] We see no reason why the right hon. Gentleman should have changed his mind in the intervening years and we see every reason why he should have influenced his colleagues to support his view.

Mr. MacDermot

I hope that the hon. Gentleman is not misleading the House into thinking that my right hon. Friend supported the proposal.

Mr. Wainwright

I was hoping, knowing the discipline of the party opposite, that over the years the right hon. Gentleman had influenced his colleagues into supporting the view he then adduced. I also hope that the same might be said of his party's management.

As for the Conservative Party, we hope that all that Conservative hon. Members have said in recent years about a share-owning democracy will lead them to support the Clause. The only argument which their Chancellor, now Lord Amery, was able to adduce against a similar proposal in 1958 was the curious Gladstonian argument that … Income Tax should fall impartially on all income from all sources …"—[OFFICIAL REPORT, 2nd July, 1958; Vol. 590, c. 1495.] Since then the Tory Party has been reinforced in the House by the members of the Bow Group and progressives of various schools of thought. We hope that we will see the fruits of the younger generation of Tories steering their older colleagues away from the purely Gladstonian view of the rôle of Income Tax.

We sometimes flatter ourselves that world prosperity in recent years has narrowed the gap between the wealth of different sections of the community. But I ask the Committee to consider whether this narrowing of the gap is not superficial and highly precarious because it is based far more on temporary income than on a real shift of ownership of wealth.

In a sense, the community is still divided between the few who are masters of their own savings—who control, so far as man ever can, their own fortunes—and the vast mass of the population who, although, broadly speaking, are more prosperous than their counterparts of a generation ago, are still precariously dependent on income from week to week. The object of the Clause is to clear part of the jungle which separates the mass of the people from share ownership and control over their own fortunes; control which, we believe, is their right.

Mr. Paul Dean (Somerset, North)

There will be agreement on both sides of the Committee with many of the points made by the hon. Member for Colne Valley (Mr. Richard Wainwright). I wish to concentrate on New Clauses 40 and 41. I am not claiming that these proposals—particularly Clause 40, which is fairly broad—are in any sense technically perfect, but I hope that the Financial Secretary will not rely on drafting arguments.

The main point we wish to put forward is what we regard as a sound principle and, like all sound principles, it can be stated simply and shortly. It is that thrift benefits the nation and the saver. It provides security for the saver and his family and the seed corn for future national prosperity. I hope that the Financial Secretary will not use narrow legalistic arguments about the canons of taxation law. After all, those are not unalterable; they are there to serve the needs of the community and not to be our masters. I hope, too, that he will not take his stand on what we sometimes hear from the present Treasury Bench about the purity of our taxation system. Far be it from a Government which have introduced Corporation Tax, Capital Gains Tax and Selective Employment Tax to talk about the purity of our taxation system.

It is also the case, as the hon. Member for Colne Valley has said, that tax relief is already granted to certain forms of savings. It is given in recognition of the extra expenses incurred by the man with a family. We grant tax relief on occupational pension schemes and on life assurances. Those are just examples of tax reliefs. We believe that they are right, and that they should now be extended.

We also totally reject the notion that tax allowances mean "giving away" money, and that they "cost" the Exchequer so much. We have not yet got to the stage where the Government of the day own the money we earn, although this Government are certainly trying to dictate how much we earn through their prices and incomes legislation. Tax allowances mean that the Government take a little less of our money than they other wise would. It is true that tax allowances mean a certain loss of revenue, but if the Government took less of our earnings, if they encouraged thrift, self-help and increased savings, the country would be a good deal better off than it is.

The case for the greatest encouragement of regular savings has been deployed on many occasions, not least by my hon. Friend the Member for Farnham (Mr. Maurice Macmillan) and the Wider Share Ownership Movement. I propose to say very little about that except to emphasise that we are constantly being told by the Government that we are consuming too much, with all the problems of inflationary pressures that that creates; that we are indulging, as the party opposite likes to call it, in expenditure on candy floss. In so far as there is any weight in those arguments, the more we can encourage people to put their money into savings the more those arguments are likely to be met. I propose to concentrate very largely on contractual insurance, which is dealt with in the Clause, and place it in our social services and taxation policy.

There is little doubt that the Government are facing a growing dilemma. They face a situation in which the momentum of the development of the social services is slowing down. And one has only to read or listen to the Socialist intellectuals to have this point demonstrated very clearly. I give only one quotation, and that is from Professor Brian Abel-Smith's pamphlet "Socialist Affluence". Looking at the calculations made in the National Plan that is now defunct, Professor Abel-Smith says: The calculation shows that the public services (current) and housing increased by 34.5 per cent. in constant prices between 1958 and 1964 and are planned to increase by only 28 per cent. between 1964 and 1970. Thus the absolute rate of growth was greater in the six years preceding 1964 than in the six years planned from 1964 onwards. There is no wonder that there is disillusionment on the benches opposite about the way in which the social services are developing, but those figures were on the basis of the National Plan, and we all know that that will not be achieved.

Not only do we have this slowing up, but we have had stiff increases in direct taxation. The Financial Secretary acknowledged this dilemma only last Friday when replying to a debate when he said: … growth in public expenditure on the social services is a matter of great concern to the Government, not least because of the claims that it makes on the resources of the economy, but also because of its implications for taxation."—[OFFICIAL REPORT, 9th June, 1967; Vol. 747, c. 1535.] Incidentally, what a contrast this is to the good old days of Tory Government when we had both substantial increases, real increases, in social service expenditure and reductions in taxation at the same time.

We know that the Government believe in high taxation—we have heard it from Treasury Ministers time and again during this Finance Bill—but even they admit that there are limits to the extent to which direct taxation can be put up, so they face the dilemma of the slowing down of the advance in the social services and rising taxation at the same time. We believe that one of the ways out of this dilemma is to encourage private provision so as to relieve the pressure on the State services and to bring additional resources to social welfare as a whole.

Why is this dilemma becoming more acute? It is partly because of the very large figures which are involved. Current expenditure on the social services is now well over £5,000 million a year, and that amounts to about 50 per cent. of all Government current expenditure, and of that figure no less than 70 per cent. comes out of taxes and rates. This must present a budgetary problem of a very difficult character to any Government.

But there is another equally important factor which in the long term is growing in importance, namely, the inevitable built-in growth factor in most of these services—the fact that standards are rising, that a social service benefit which five years ago was satisfactory is no longer adequate, the fact that medical science is improving all the time and that treatments are becoming more costly, the fact that we have and will continue to have a growing proportion of our population who are non-earners, who are either young or old.

The dilemma was stated extremely well in an article in The Times by Mr. Peter Jay on 31st May. It is interesting to note that most of the evidence which I am calling is from people who, on the whole, are sympathetic to the cause of hon. Members opposite. Peter Jay makes an interesting calculation. He estimated that social service expenditure at constant prices would rise by more than 60 per cent. between 1965 and 1975 to keep pace with current policies, not to improve, but simply to keep pace with them. He estimated that this would mean an increase in taxation of about £200 million each year, unless there were cuts in Government expenditure elsewhere. He came to this rather arid conclusion: Any further increase in taxes, additions to industrial costs and preemption of resources for Government social expenditure would entail a greater degree of austerity towards privately financed personal consumption than is commonly supposed to be politically possible. 10.15 p.m.

This is the dilemma in which the Government find themselves. I do not suggest that those figures are necessarily accurate, but the broad drift of the argument put by Mr. Peter Jay is one which has appeared increasingly in recent years and months. We should encourage people voluntarily to solve this dilemma for the nation and for themselves by devoting more of their income to family insurance. People are doing this already. Occupational pension schemes, encouraged as they are by tax reliefs, now cover well over half the population. Health insurance covers about 2 million people and is growing at the rate of 10 per cent. a year.

But for personal health insurance there is no tax relief. Anyone who takes out health insurance pays his taxation towards the National Health Service and his health insurance contribution but there is no tax relief of any kind. In other words, in this instance, as in the instance of education, the tax scales are weighted against private provision and self-help.

These occupational pension schemes and health insurance schemes are now by no means confined to a few rich people. They are spreading down the income scale, and surveys show that a substantial and growing number of people wish to provide much more for themselves. One recent survey asked, "If you were given the choice of paying increased taxation to improve the State services or greater encouragement through tax relief and the like to provide for yourself, which would you choose?", and over half the people questioned plumped for the second, to provide for themselves rather than to pay more taxation in order to have additional provision through the State services. We shall neglect this growing upsurge among a wide range of our community at our peril.

It is said that, if we were to encourage private voluntary insurance in this way, the State services would suffer. In fact, the very opposite is true. How many more millions of pounds would we be spending now on supplementary benefits were it not for occupational pension schemes and life assurance? The same is true for health insurance which gives cover for private treatment. One of the organisations, the B.U.P.A., has set up, through its sister organisation the Nuffield Nursing Homes Trust, hospitals and nursing homes to provide surgical and other treatment, and no fewer than 11,000 patients were treated in these homes last year. Here is a concrete example of the National Health Service being relieved of pressure at no cost to the State whatever. In other cases, where private patients go into private beds in National Health Service hospitals, they pay for their beds, they pay the full cost, thus providing additional revenue for the National Health Service. The same is true in education. How much more would our education service cost the State were it not for the 250,000 children being educated privately at no cost to the State whatever?

Another argument used is that the extension of private services through tax relief would draw off scarce medical resources from the State service. I believe that that also is incorrect. Under our present arrangements we are already faced with a serious and growing brain drain of doctors going abroad for a variety of reasons. It is at least arguable that with the extension of private provision some of those doctors would continue practising in this country.

The same happens with nurses. There are nurses who, for a variety of reasons, are not prepared or not able to work in the National Health Service, but are retained in health work because the private institutions can use their services. Therefore, I do not believe that either of those arguments is correct—either that the State services suffer or that scarce medical resources are drawn off. The opposite is rather the case.

My conclusion is that the desire for saving and accepting growing personal responsibility for welfare is increasing all the time, that it is socially and economically right, and that it can be the salvation for the standards and development of our State social services. Now is the time to give this healthy trend the boost and encouragement which it needs and deserves.

Mr. Barnett

I wish briefly to refer to new Clause 2, which was moved by the hon. Member for Colne Valley (Mr. Richard Wainwright) on behalf of the Liberal Party. It is nice to see so many Liberal Members here, and it is a pity that they do not move more new Clauses. But it would be fair to say that the Clause is a typical Liberal crackpot scheme. I could have understood some of his hon. Friends moving it, but I find it difficult to understand his doing so.

I am sure that the idea was put forward with the best intentions, but it clearly had not been thought out, because the loopholes for evasion and avoidance are absolutely massive. Either the hon. Gentleman was not aware of them or he did not think it necessary to mention them. I am rather surprised. I am sure that he must have thought of some of them, especially, for example, that the opportunity for self-employed people to reduce their taxable income by £200 a year would be something that no self-employed person could resist. Equally, with an employee, the opportunity to reduce his income by £200 a year would be irresistible, without having any real effect on net saving. There are opportunities of doing it either by borrowing, for example, or taking existing savings, withdrawing from them and switching yearly.

Mr. Richard Wainwright

Does not the hon. Gentleman agree that this switching is exactly what happens every time the Chancellor, as he has done this year and last, announces further facilities for National Savings Certificates to be purchased?

Mr. Barnett

I had misunderstood the hon. Gentleman. I thought that he and his party were looking for a new form of savings, for an increase in net savings. If he is now telling us that they are not looking for any new net increase in savings I wonder why he brought forward this crackpot Clause. Not only are the loopholes for evasion and avoidance enormous, but the Clause makes administrative nonsense, as the hon. Gentleman must have known. One has only to think for a moment about the difficulties in dealing with the P.A.Y.E. scheme, of withdrawals into a savings account and payments back into it, the adjustments in the code number or the tax deductible weekly—not annually—to understand the sort of administrative problems that would arise.

We talk about Capital Gains Tax being complicated, but it would have nothing on the scheme proposed in new Clause 2, which stems from Liberal ideals that one can get something new from gimmicks. If Liberal hon. Members had thought out this problem, I am sure that they would have understood—I am sure that the hon. Member for Colne Valley understands—that this idea, which I honour by calling it an idea, could not result in any net extra savings.

The whole concept of the Clause stems from the idea that there is some miracle to be performed by a massive increase in net savings. We all pay lip-service, and more, to the idea of trying to increase net savings. Every Chancellor has pointed out that if we could achieve this we could save increases in taxation. Strictly speaking, that is true. But we should at the same time honour the ingenuity of those concerned with the National Savings Movement over a long period because they have dealt with many forms of saving, both for small savers and for others. They have done it by way of gimmicks, as, for example, the Premium Bonds, which did not really result in any net savings either. Almost every form of savings has been tried, including the Post Office Savings Bank and National Savings Certificates.

If we go on pretending that there is some miracle whereby we can get a massive increase in net savings, we are in danger of doing ourselves a great disservice. One would like to think, and I suppose that it is true, that we could get some increase in net savings by using modern techniques of salesmanship—perhaps a television savings bond of some kind. But the real net savings increase overall, excluding switching, would not likely be so massive as many of us would like to see.

I would like to see the Government giving some thought to improving sales techniques of savings. I would also like to see hon. Members stop pretending that in some way we can reduce taxation in a big way by some form of new savings. But I hope that we shall not get the sort of stupid administrative idea incorporated in this Clause by the Liberal Party.

Mr. Bessell

I shall not bother to refer to the speech of the hon. Member for Heywood and Royton (Mr. Barnett). He always manages to combine offensive terms with his ludicrous speeches when he refers to the Liberal Party, and he does it with a facility which almost causes me to admire his efforts.

I want to refer to the new Clause moved so admirably by my hon. Friend the Member for Colne Valley (Mr. Richard Wainwright), because it contains in it one particular provision which the Liberal Party has always believed is of vital importance to the interests of that section of the community which has for too long been called the working class—I say for too long because it is thereby separated from the rest of the community in a way that is not only offensive but quite unnecessary in these days.

The Liberal Party has always believed that it is imperative for the people who work in industry at all levels to have a share not only in the profits of their labour but also to have a major share in the responsibilities of the administration of the company concerned. I do not hesitate to pay tribute to the Labour Party for its long history of jealous protection of the rights of the working people. It has done a job which is not only the envy of the rest of the world but which is admired on this side of the Committee as well as on its own side. But it is strange to me that it has never managed to take that one further step forward, the step which would break down this ugly division which exists in our country, the division which seeks to separate the people of this nation into two parts, those who employ and those who are employed.

10.30 p.m.

I do not believe that we can ever have maximum production from any of the branches of industry which thrive in Britain and are the natural source of our wealth till that division can be broken down, till we can bring about a genuine partnership in British industry, a partnership which is based on mutual trust because there is a mutual participation in profits and a mutual responsibility for the success of the company or firm concerned.

As the Committee will know, the Liberal Party has sought by one means or another—over many years—to introduce into successive Finance Bills Amendments which would provide an incentive for employers to embark upon schemes of co-ownership or co-partnership which, in my view and the view of the Liberal Party, would go a long way towards bringing about this partnership in industry between the two sides and rid the nation of this ugly barrier which divides the worker from the employer. We have never, it is true, been successful in persuading either of the other parties to accept in a Finance Bill a Clause or an Amendment to a Clause which would provide this incentive for employers.

This time we have sought, as my hon. Friend the Member for Colne Valley has already told the Committee, to provide that incentive through this new Clause which he moved so eloquently.

I should like just for a moment to dwell on the reasons why I consider that, if the Government could be persuaded to accept this new Clause, and if we could make a start towards a genuine partnership in industry, this would be of such enormous benefit to the nation as a whole. It is recognised that in the last few years we have not been able in this country to produce the kind of output in industry to enable us to compete effectively with those nations of Europe which are selling in many of the markets which were formerly almost exclusively our own. This is because of the fact that there is, in my view, an absence of genuine incentive to the working people today. They do not feel that they have the dignity of enjoying ownership within the company or firm by which they are employed; they do not have the same benefits in terms of profits which go to the shareholders and to many of the directors who control their activities; they do not have the same ability to sway decisions which are made by the directors, or by shareholders who, often, never see the factory floor.

We in the Liberal Party believe that the only way in which we can really see a genuine increase in production is by providing this incentive to the employees in industry, by giving them some of the dignity of being employers, by giving them some of the responsibility which at present is shouldered by only one section of the industry concerned, by giving them some of the profits which go into the pockets of the present shareholders.

I know that it is frequently argued that this would be unfair to those people whose capital is at present employed in industry and that it is right that they should enjoy the maximum profit from their investment, but the evidence of those companies and corporations in the United States of America and other parts of the world which have embarked on co-ownership schemes is that the increased production, the consequent lowering of production costs and the inevitable increase in sales to the public have resulted in an improvement in the net profit to the original shareholders or stock holders as well as providing a profit for those working on the factory floor.

This evidence, combined with the fact that this system of joint ownership in industry would break down the barriers to which I referred earlier, barriers between employer and employed, and bring about a greater dignity to those in the employed class of industry, and would bring a higher rate of production, is something which I ask the Chancellor to consider seriously. I ask him to rid his mind of the prejudice which has existed not only in the minds of members of the Labour Party, but in many trade unions, against any system of participation or joint ownership. I ask him to look at the thing purely on the merits of the case for improving productivity and thereby assisting Britain's export drive. I ask him to look at it, too, on the social merit of breaking down these barriers which we all know to have worked so much to the detriment of the progress of the nation.

I do not share the optimism of my hon. Friend the Member for Colne Valley and I do not think that the Financial Secretary will accept the Clause, but I hope that between now and Report the Chancellor will think about the arguments put forward, not only in the Committee tonight, but in many parts of the world by learned economists and sociologists about the advantages of a system which provides for voluntary co-ownership.

There is no reason why on Report an Amendment should not be introduced which, by one means or another, would encourage employers to spread the ownership, if they wish to do so, of their companies and firms and thereby at least take one step forward towards bringing about the kind of partnership which Liberals believe to be the only way, in the last analysis, of resolving the unrest, the suspicion and the mistrust which exist in British industry at many levels and which have hampered production and prevented the growth of a genuine property-owning democracy.

Sir Douglas Glover (Ormskirk)

Having listened to the debate so far, it is with great chagrin that I find myself supporting the hon. Member for Heywood and Royton (Mr. Barnett) more than the Liberals. Of course, emotionally we all want to bring about what the Liberals suggest in the new Clause. Nothing would give me greater pleasure than for the whole of industry in this country to be a sort of co-operative organisation in which all the employees were shareholders. But we have to accept that human beings are all different from one another.

There are some people, who, if they are given £100, would spend it in a week, while there are other,, about 5 per cent., who will buy shares, and save the money. The Liberal Party has the idea that people should buy shares in the company for which they work at a discount. My commercial attitude to this is that all the English people whom I know think that there must be something wrong with anything offered to them at a discount. If one tries to sell them shares in a company at two-thirds the market price they will ask: What is the gaffer up to now? He is trying to take us for a ride. They are suspicious. Every year they see great placards in shop windows, advertising goods at half price. They buy things and then decide that they are sorry to have bought them. If one starts selling shares at two-thirds the market price they will think that there is a catch in it. [An HON. MEMBER: "They may be right."] They may be right. This is one of the great problems about obtaining a widening of a share-owning democracy. There is nothing that I would love to see more than that everyone should own shares in the company for which they worked.

I do not think that life has altered much. We talk of Unilever, which is probably the largest company in this country, and about the third largest company in the world. Where did it start? My great-great-grandfather, who was a doctor, provided £100 for Mr. Lever to start making soap in his back kitchen.

He was the man who conceived it, and out of that developed Unilever, with its most extraordinary ramifications. At present there are young, vigorous people starting companies who cannot offer much to shareholders, to those who are working in the business. The business might go bankrupt in 12 months.

Suppose that I start a business with five employees and I ask them to give me £100 out of their salary and in 12 months' time we go bankrupt. I do not know if they would be very grateful to me, but in most cases they would probably have me in the courts. Suppose that I do not ask them for the money and 12 months later I have overcome the first hurdle and the business is growing. Now I have 25 employees, and I am not so keen on asking them to join, because it is my money and it is beginning to make a profit.

This is the way that businesses grow. They do not grow in theory, they grow in actual practice of people doing things. All these Amendments from the Liberal Party seem to suppose that there is a sort of business which stops at a certain point—when one stops all effort and says, "We will ask all employees to be shareholders." But the people working for the company then would not be the same as those who worked for it 12 months ago, and would not be the people working for it in 12 months' time. One is not dealing with a static working population.

Mr. Bessell

The hon. Gentleman has advanced his theory, to which I listened with great interest. Would he now be kind enough to address himself to the reasons why certain American companies, including Chrysler, and certain British companies, including I.C.I., and the John Lewis Partnership, have found it possible to embark on co-ownership schemes, if his argument is correct?

Sir W. Bromley-Davenport

I have the answer to that one.

Sir D. Glover

Take I.C.I. No person has been more disappointed than I over this. Statistics show that about 50 per cent. of the shares in the so-called I.C.I. share ownership system are sold within three months of being received. In other words, it is only another way of giving the employees a bonus. Some people hold on to their shares. There are others who, even if they had been paid the bonus in cash, would have bought shares. In other words, they are the people who want to acquire shares and will give up the benefits of today for the benefits of tomorrow.

10.45 p.m.

I know many people who, if they are given £500, will have a jolly good holiday and spend the money, but who is to say that in the long run they do not have a happier life? Other people, if given a similar sum, will invest it in I.C.I. There is an enormous difference between the mentality of the person who wants to become the owner of shares, and the person who wants to have a happy life and spend his money. There are not all that number of people who want to forgo the benefits of today for the benefits of tomorrow. Perhaps this is one of the great troubles with the nation at the moment. There are not enough people who want to forgo today's benefits for some increased benefits in 20 years' time.

Having given a great deal of time to the Liberal proposals, perhaps I can come to the admirable speech of my hon. Friend the Member for Somerset, North (Mr. Dean). This really follows on the remarkable debate that we had last Friday on a Motion moved by the hon. Member for Pembroke (Mr. Donnelly) on the simplification of Government. I made a speech, and perhaps I can tell the hon. Member for Heywood and Royton that afterwards one of his colleagues said to me, "Douglas, for the first time in my life I agreed with everything you said".

But what did I say? I said that in the social welfare field the public would pay by way of taxation only sufficient to provide what I would call the floor of that service, and therefore if we want to increase the benefits of the Health Service we must give people the right to pay for increased benefits in it, and it is that with which one hon. Gentleman opposite agreed. The right hon. Member for Sowerby (Mr. Houghton) went a long way towards saying the same thing. I have talked to many people, mostly, I think, supporters of the party opposite, since I made that speech, and they all agreed with me.

This House is way behind the thinking of all those who have really studied the problem of what we are going to do about social welfare. We have to take it that human beings are prepared to help their mates, their colleagues, but they are prepared to help them only to a certain level. They are not prepared to be deprived of the benefits of their efforts by taxation to the level that it really affects their standard of life if they can see people on the other side of the road enjoying an excess benefit from that social welfare.

If we are to get a really good Health Service we must provide the opportunities for people to spend, or insure—I think that insure is a better word—beyond the bottom level. If we do not do this, we will not only not make progress in providing for the well-being of people in this country, but the Health Service will break down.

It is not as though we are talking of a wonderful edifice rather like Constantinople, before it was attacked by Suliman the Magnificent, but an edifice which is breaking down and which needs money. The only way to get that is to have additional revenue and, therefore, I hope that the party opposite will begin to take more notice of this because they are the only people who can implement what is suggested.

If they are honest, they must admit in their own hearts that even the so-called progressives are finding an increasing appreciation of the fact that we shall never get really good welfare on the basis of the soup kitchen mentality for the simple reason that that way nobody will get above the bottom level. It is becoming fundamental thinking in the Socialist brains trusts, and the progressive societies and the ordinary people want to talk about this problem.

If we are to get the welfare society which provides the sort of standards which we want, it will require a great deal more private insurance than we have accepted up to this moment, and the final thing which I want to say—[Interruption.] Well, I do not mind if everybody gets bored and walks out. I shall still get into HANSARD. The final thing I want to say is that in the time during which I have been in the House, I have come to believe that the great weakness of democracy, and it is democracy about which right hon. and hon. Members opposite talk so much, is that we spend nearly all our time arguing about the problems of 20 years ago and not in throwing our minds into the future. Let us, for example, take the Health Service.

The Temporary Chairman (Mr. Bryant Godman Irvine)

That is not relevant.

Sir D. Glover

I think that it is relevant because the producing machinery would produce what I am going to say in a moment.

Mr. MacDermot

The way to accept order is to accept the Ruling of the Chair.

Sir D. Glover

I will accept order from the Chair, but not from the hon. and learned Gentleman.

Dealing with any Amendment of the sort which we are now discussing we have to try to think what it is that we are doing and why the whole atmosphere in this country is going to alter in the next 20 years. We on this side of the Committee are preparing for the right sort of pattern in which the people would want to live.

Mr. Maurice Macmillan (Farnham)

I support the Amendment standing in the name of two of my hon. Friends and the principle which underlies the Amendment tabled by the Liberal Party, although the massive increase is almost as over-optimistic as the principle. I would not associate myself entirely with the rather limited aspects of co-ownership and co-partnership implied in some of the speeches which have been made in support of this new Clause, although it is not specified in the actual wording of the Clause itself.

It is about 20 years now since the Wider Share Ownership Movement, to which reference has already been made tonight, was first talked of; and it grew, not from Liberal ideas, but from a Conservative Party pamphlet written and published by my noble Friend, Lord Aldington.

I am happy to say that since those days it has received noble support from the Liberal Party and from many right hon. Gentlemen opposite. Successive Governments have accepted the principles that we have put forward from time to time. But alas, few people have been moved, either by the logic of our case or the eloquence of our supporters, to put any of those principles into practice.

In making this statement I am not making a party political charge. When I refer to "the Government" I am not so much referring to the principles, economic or political, of the politicians, but to the position which emerges from the entire Governmental apparatus and machine. I confess that in my short stay in a junior capacity at the Treasury there was little I could do to alter these attitudes, although I initiated one or two ideas which have been put into practice. We have put forward various schemes of employee shareholding, not necessarily the employee holding shares in the company in which he works but more in the nature of the American pattern, with equivalent provisions for self-employed persons. Perhaps I am prejudiced, but I think they were more realistic than the proposals contained in the Liberal Clause.

My hon. Friend the Member for Somerset, North (Mr. Dean) referred to the results of the various schemes which are in operation. He mentioned that three-quarters of the employees who received shares in this way sold them and regarded them as a bonus. This is true, but it is rather like the optimist or pessimist looking at his glass and saying, "It is half full" or "It is half empty." Equally, one could say that one-quarter of the employees of I.C.I. now have shares in the business which they would not have had but for the operation of this scheme.

The hon. Member for Colne Valley (Mr. Richard Wainwright) referred to Lord Amory's defence of the impartiality of the tax system; that it should fall equally on all taxpayers, regardless of how they spent their income. That is the classic case which any tax expert would put forward. It is understandable for the Inland Revenue or a Tory Chancellor to adduce that argument, but I find it harder to understand when it is adduced, as it no doubt will be, by a Labour Financial Secretary, for the present Government seem curiously reluctant to use the fiscal system for social purposes in the way they accused us of being frightened of doing when the Tory Party was in power.

The record of the parties shows that while we may not have preached quite so eloquently, we were a little more efficient. In encouraging savings, we should seek to encourage all savings, and in doing so I would argue that the economic situation which confronts us, and which has confronted us for many years, is totally different from that which existed before the war. It is different in a way which has not yet been recognised by the attitudes of successive Governments; and that goes for the problems of savings, investment and shareholding.

One of the major pre-war problems was that of getting a level of investment that matched the then level of savings. Since the war the problem has been that of getting savings at a rate which matches the need for investment. The Chancellor is constantly referring to the necessity for people to save more so as to be taxed less. The surveys that have been made of the capital needs of the country, projected into the future, to 1975 and 1980, show that unless a substantial increase can be made in the level of personal savings, the capital required by industry will become provided, in increasing proportions, by major institutions and that the people will have a smaller direct investment in the production of wealth.

There is one other happy difference from the pre-war situation. Increased social security benefits, although there are problems, have largely eliminated fear as a motive for saving and investment. I am not so cynical as to assume that fear and greed are the only motives for human conduct, but the removal of the fear that the loss of one's savings will leave one destitute—which I am glad has been removed—nevertheless leaves a gap which successive Governments have not yet filled.

11.0 p.m.

Therefore, two major changes in our social life have not yet been recognised and should be recognised by this Government, in view of their past statements and accusations, as they fundamentally prefer the sort of system which produced the changes and the accompanying problems. The Clause would extend the small dividend privilege to all incomes and not just those received from lending to the Government. It has been argued that the privilege is much greater for the rich Surtax payer than for the small saver, but this bias becomes much less in investments on which the return is far greater than the miserable return to the small investor who lends to the Government. There is, therfore, a strong case for extending the allowance to all investment from income.

I hope that the Chancellor and the Financial Secretary have not eliminated the possibility of some form of contractual savings plan under the umbrella of National Savings to meet some of the possible criticisms of the existing National Savings certificates. The only comment I would add to the wonderful speech of my hon. Friend on the problems described in the new Clause is to hope that, by drawing it so widely, we will be told the Government's thoughts on contractual savings generally and the fiscal encouragement which may be given to such schemes, whether or not they include pensions schemes and a social service element.

Savings can be increased, although it is difficult, but it requires a new approach, not only to increase them but to maintain the existing level in an economic situation which is discouraging for the saver and investor. It is a question not only of increasing savings and investment but of social, as well as political and economic, purposes, of spreading the ownership of the country's wealth.

That is why I cannot go with the Liberal Party in its view of co-ownership and co-partnership, because it is not only the weekly wage earner who is concerned, but, in some cases, the relatively high-salaried employee also finds it difficult to become an owner in any significant sense. In some ways, it is very wrong that those on whose energy and initiative the creation of wealth so much depends should, owing to our fiscal system, find it so hard themselves to acquire part of the capital they have helped to create.

It is not so much a question of encouraging people to take part in the management and the responsibilities of the businesses that employ them, because that seems to me to be a confusion between the functions of workpeople, staff, management, directors and shareholders. It is rather that there is no reason why anyone, no matter what his individual rôle may be as a worker in industry, should not become the owner of industrial equity not restricted to their own company but in general terms.

As time goes on, the greater the difficulties that the earner, even the very high earner, finds in becoming an owner, and it remains relatively easy for the man or woman who is basically a dealer rather than an earner. There is an increasing need for private capital, private investment, and a widening spread of ownership.

I do not ask the Financial Secretary to accept any of these Amendments. I do not even expect him to do something on Report. I am being very modest in my request, which is that he will give a sign that the rigid attitude of successive Governments towards giving fiscal encouragement to savings, investment and ownership is at last becoming a little more flexible.

Mr. MacDermot

The hon. Member for Colne Valley (Mr. Richard Wainwright) said that the object of the new Clause was to encourage savings, especially from small savers, and to provide the Exchequer with a greater volume of savings. Any scheme which held out a fair and serious prospect of achieving that objective—and I assume that by encouraging savings the hon. Member meant new savings—would obviously receive very sympathetic and favourable consideration from any Chancellor of the Exchequer. But I fear that the criticisms of this scheme advanced by my hon. Friend the Member for Heywood and Royton (Mr. Barnet) are all too much to the point.

The difficulty that we encounter here, as with all schemes that I know of to date for the encouragement of savings by way of tax relief, is that no one has succeeded in devising a means of seeing that the benefit of the schemes would go to the new saver, or would do anything more than marginally to increase the actual volume of savings, and that the greatest benefit would not, in fact, go to people who already had saved—and the more they saved, the wealthier they were, the greater would be the benefit. These are the well-known difficulties.

Such a large and generous scheme as has been advocated tonight would be costly to the Exchequer in a way that could not be justified unless it could be proved to the hilt that it would produce some very tangible and substantial benefit to the economy. At the moment, there are reliefs under our taxation system for savings. By far the most important is life insurance relief in its many forms. That is something which has been accepted for a long time as being a reasonable exception to make to help people making provision for retirement or death or other emergency. It is accepted as being a specially deserving category.

Other exceptions all come within the field of National Savings where encouragement is given to people who are prepared to lend to the Exchequer. Some of these exceptions are directed particularly at the small saver. The whole of the National Savings Movement and the Trustee Savings Banks, which form part of it, has a long history of arrangements by which the Government agree to give favourable terms and favourable taxation exemptions to people who lend to the Government. In particular, these arrangements help the small saver. This applies to the £15 exemption for interest at the Post Office Savings Bank and Trustee Savings Bank ordinary accounts.

I would remind the Committee that the whole question of tax relief on savings was considered by the Royal Commission which reported on it in its Final Report, Command Paper 9474. Its view was that strictly speaking no tax relief on savings was equitable in that it meant that two people with equal incomes and otherwise equal circumstances paid different amounts of tax according to how their incomes were disposed of.

I do not know whether it was this kind of consideration that the hon. Member for Somerset, North (Mr. Dean) had in mind when he asked me to dismiss from my mind the canons of taxation law. They are not something we can dismiss from our minds. It is a basic princple which we all know and accept, that if we are to have a taxation system which will be generally acceptable we have first to convince the taxpayer that we are making it as fair and as equitable as we can. If two people find themselves receiving different taxation treatment by what seems to them arbitrary principles, we do not get that sense of justice.

I would apply this to the Liberal Party proposal that £200 of a person's income invested by his employer, or by himself if he were self-employed, in a particular type of bank account should be tax-free. Another person might be paying out £200 a year to buy his house. Although he might get some tax relief on the interest, he would not, in general, get any tax relief on the income out of which he makes the capital payment. There are many other forms of expenditure which are equally worthy, but which would not attract tax relief. The Royal Commission accepted that it was reasonable that there should be exceptions for life insurance.

Sir D. Glover

There is a fallacy in the argument that the Financial Secretary is putting to the Committee. A person buying a house is putting a claim on the resources of the nation whereas a person saving his money in Government stock of some sort is not putting a claim on the resources of the nation. Therefore, there is an argument that one is getting an advantage against the other.

If I might return to what my hon. Friend said, canon law was sacrosanct in this country until the trial of the seven bishops.

11.15 p.m.

Mr. MacDermot

We were talking not about the canon law, but about the canons of taxation law, a rather different thing.

Neither the Liberal Party's scheme nor any of the others which we are discussing on the new Clauses proposes to limit the exemption to cases where the moneys are lent to the Government. I agree with the hon. Member for Ormskirk (Sir D. Glover) to this extent, that this is a principle underlying the exemptions in respect of National Savings, the savings being in the form of money lent to the Exchequer.

I shall not go over the detail of new Clause No. 2, the Liberal Party's scheme. I should not adopt at this Box quite the terminology used by my hon. Friend the Member for Heywood and Royton (Mr. Barnett), but, with respect, it struck me as being a rather ill-thought-out scheme. Among its obvious defects is the absence of any provision for the person whose employer refuses to co-operate in the scheme, a defect which does not, however, handicap the self-employed, who could benefit from it.

One of the main difficulties of the Liberal scheme is that, whereas benefits under pensions schemes are drawn in regular amounts and the taxpayer can see the pattern ahead, and is liable to pay tax on them as he withdraws them, other savings and investments are drawn out less regularly and, frequently, are drawn in large lump sums to meet some substantial item of expense, be it the purchase of a house, a motor car, or whatever it may be. Under this scheme, if the savings when withdrawn are to be taxed as income of the year of withdrawal, they might be liable to a very high rate of tax, perhaps even bringing the ordinary taxpayer into the Surtax class for that one year. I suppose that, in theory, one could work out provisions for spreading, but this would make the scheme even more complicated and administratively difficult than it is now.

Apart from problems of that kind, the essential difficulty is that the Clause favours only one of many different kinds of savings. If the Government were to concede it, they would very soon be obliged to give similar tax relief to many other people, and this would result in a considerable extra cost to the Revenue, without any assurance that the concession was resulting in any worth-while new savings rather than being, as I have said, a method of switching existing savings or for distributing earnings tax-free under the guise of savings.

The cost of the scheme is guesswork. It is anyone's guess how much advantage would be taken of it, but, to give a basis of calculation to hon. Members who may care to make their own guesses, if one were to assume that 1 million people took advantage of the scheme, that the deposits averaged £50 each, and that the taxpayers concerned would normally be liable to £10 tax on that, which is not a high rate, the immediate cost to the Exchequer would be £10 million for each £50 million saved. And query—How much of that would be in new savings?

In submitting new Clause No. 40, the hon. Member for Somerset, North began modestly by saying that the Clause was not technically perfect. That is the understatement of the year. I do not think that the Clause can be taken seriously as a possible addition to this or any other Finance Bill, for it is, as drafted, no more than a declaration of intent—and we know of the criticisms made from the benches opposite about declarations of intent.

Mr. Dean

The hon. and learned Gentleman should address himself to the principle of it. I should be perfectly happy if he said that he accepted the clear principle behind the Clause and would bring forward his own draft on Report.

Mr. MacDermot

The hon. Gentleman had better wait for it. The Clause gives no definition of any kind of contractual insurance or savings schemes that are referred to and I thought that the hon. Gentleman's speech threw singularly little light on that. On the face of it, the scheme would include car or house insurance, or mortgage repayments. The Clause does not include any kind of limit on total allowable payments, such as applies to life assurance premiums.

But I shall not dwell on these matters, and shall assume that the sole purpose of the Clause was to provide a peg for a debate on the general subject of tax incentives for savings. We heard remarkably little from the hon. Gentleman on this subject as well. He made a very interesting and general speech which I thought was fairly characterised by his hon. Friend the Member for Ormskirk, who pointed out that he was continuing the debate we had on a Private Member's Motion last Friday. It was a very interesting debate and I thought that that was where we were again. But I had to strain to glean illumination from the speech about the intentions underlying the Clause.

As far as I could follow it, the hon. Gentleman's main suggestion was that, as was suggested last Friday, we should encourage the division of our health insurance into a sort of flat-rate basic system for everybody, with a graduated improved health service superimposed for those prepared to pay for it under an insurance scheme. What we learned today, and what seemed to be the Clause's chief intention, is that it is now proposed that the State should help subsidise superior private health services by means of tax relief. That is an interesting idea, but it would not commend itself to the Government as a measure that we could support in the Finance Bill.

The scheme does, in its generality, overcome the criticism I made of the Liberal Party scheme of being one that would just benefit one particular form of savings, because it is so wide that its intention seems to be to grant tax relief to almost any kind of savings.

What reason is there to think that to do this would have any substantial effect on the level of savings? Certainly, it would have an enormous effect for the Exchequer. Whether the hon. Gentleman likes to call it "cost" or "loss of revenue", the loss to the Exchequer would be vast. It is anybody's guess how much it would be. That must depend on the scope of the schemes to which it is to be applied, and the total amount that is saved under them.

The same generality extends to the more modest proposal in new Clause No. 41. That is a proposal to extend to investment income generally the existing Income Tax exemption of the first £15 of an individual's interest on ordinary deposits in the Post Office Savings Bank and Trustee Savings Bank. That exemption represents interest at 2½ per cent. on a deposit of £600. This exception has for long been recognised as a special concession to these savings institutions within the National Savings Movement. To quote what has been said before about the reason for this, there are two main features involved: First, that the rate of interest should be a static 2½ per cent., and that the money saved would pass directly to the Government. It would, therefore, assist the Government's monetary policy because more of the State's borrowing needs would be met without increasing the liquidity of the jont stock banks."—[OFFICIAL REPORT, 7th June. 1956; Vol. 553, c. 1437.] That statement of principle might appeal to the hon. Member for Farnham (Mr. Maurice Macmillan) more than anything I would say, because it was the answer given by his father when Chancellor of the Exchequer in resisting claims of this kind.

Mr. Maurice Macmillan

I have never found that filial piety implied agreement on economic policy. I have criticised previous Governments as much as this one. This system has been going on for a long time and that is why I want the hon. and learned Gentleman to alter it now.

Mr. MacDermot

But the hon. Gentleman must produce better arguments in favour of an alteration than the one he adduced tonight.

There is already a recognised exemption of £15 in this case, as I understand. There are special reasons for the exemption. It relates only to what is a guaranteed fixed low rate of interest on monies lent to the Government in a way which provides an elementary form of banking service for the investor at no charge to him. All these are circumstances which bear no relation to the claim of the proposed new Clause for a general exemption for all forms of investment income up to the £15 limit.

Mr. Maurice MacMillan

What the hon. and learned Gentleman is saying is that the low rate of 2½ per cent. is justified by a tax exemption which, of course, only benefits those who pay tax on higher levels and benefits most the Surtax payer. The smaller saver who pays no tax merely gets the disadvantage of 2½ per cent.

Mr. MacDermot

No. The small saver gets 2½ per cent. on moneys which he has lent through the facility of the Post Office Savings Bank and the Trustee Savings Banks. This is virtually the facility of a current bank account for which he pays no bank charges. He gets that facility to start with and gets a guaranteed fixed 2½ per cent. in addition, together with his capital guaranteed as well.

This is something which bears no relation, for example, to the position of a person who invests money, whatever it may be, in unit trusts or in company equity shares and for whom the hon. Gentleman proposes the £15 exemption should run. As I have said, the benefit of this and all these schemes would be the greater as one went up the scale. The higher a person's marginal rate of tax, the greater would be the benefit of any scheme of this kind.

The hon. Gentleman ended by inviting me to lend some encouragement to the thought that the Government had not turned their minds against any form of tax relief for savings. All I can say to him is that, from, all the proposals and schemes we have considered—and he himself knows that the Government have had various proposals put to them about this—we do not as yet see our way to accepting any such proposal, for the reasons I have given at the outset.

We would need to be assured before we could support any such scheme that it really would attract new savings, that it would not merely result in switching and that the cost involved to the Exchequer would produce a return if not to the Exchequer then certainly to the economy which would justify the expenditure involved. Of course, in particular, we would be attracted by a scheme which would serve to extend the savings habit and encourage people to save who do not save at the moment.

These are the criteria by which we try to judge proposals of this kind, and I am afraid we have not yet found one which satisfies the criteria.

11.30 p.m.

Mr. Richard Wainwright

The Yorkshireman is familiar with the experience that to reach a very desirable destination he finds that he has to drive through miserable and depressing Lancashire drizzle.

I am sorry that the hon. Gentleman the Member for Ormskirk (Sir D. Glover) is not in his place. What an exhibition he put up. If my great grandfather had had the good fortune to invest £100 on the ground floor of Unilever I would not begrudge people the opportunity to do the same in modern circumstances.

The hon. Gentleman then produced the hoary old tale that the "boys" of I.C.I., when they get their annual share bonuses, rush to the stockbroker to get rid of them and "go on the loose". I know of no evidence at all that those who disinvest out of their I.C.I. shares do not use the money in a responsible fashion.

I have many constituents who work for I.C.I. in the dyestuffs division and who share in its annual distributions. My experience is that a number of them do take the view, which is a view that the Conservatives often urge upon us, that it is unwise to have large investments in the company for which one works and have, therefore, got out of their shares at what they regard as a favourable moment and reinvested elsewhere.

I have personal evidence to that effect, and until somebody produces indications—and there has been none yet—that people are simply, on a large scale, turning their I.C.I. employees' shares into cash, and I shall not believe that particular story.

Then we have the hon. Member for Heywood and Royton (Mr. Barnett), with his abacus and his beads, protesting that he cannot add up these transactions and do the accountancy. He does great injustice to the splendid people he represents to suggest that news of the computer has not travelled as far as Heywood and Royton. There would be no difficulty at all, with the aid of the computers which the Inland Revenue is already using to some considerable tune, in conducting these particular transactions.

The hon. Member also parades the old Socialist idea, a modern version of the mercantilist theory, that there is a fixed fund of savings and that there is simply nothing we can do about it. Liberals repudiate this dreary doctrine entirely. Given sufficient incentives, and hope of protection against inflation, the volume of saving can be materially increased, and other countries have proved it.

The hon. Member for Farnham (Mr. Maurice Macmillan), who gave some tepid support to our new Clause, committed an indiscretion which is often noticeable when proposals on co-owner-ship are being discussed. He suggested—and it has been done before—that we want to shift the worker into management. Not at all. There is no evidence in any Liberal booklet on co-ownership that we want to interfere with management.

What we are saying—and it is a simple proposition—is that those workers—[HON. MEMBERS: "Young Liberals?"] I include young Liberals. We say that those workers who want to accept the responsibility of being shareholders should be encouraged to do so, and that those workers who prove themselves competent and can gain the confidence of their fellow workers should have an opportunity of taking part in the direction of industry, but not, under these schemes, in the management.

I come now to the observations of the Financial Secretary. He was eloquent about the dangers and difficulties of giving special tax concessions to savings. With this I concur, but if so, why does his right hon. Friend the Chancellor come to the House two years in succession making some parade of increasing the opportunities for investment in National Savings certificates and other forms of national savings with tax advantages?

If the Government were to appear before us tonight saying that they went along with the Royal Commission in insisting that Income Tax should fall completely impartially on all forms of income, whether saved or not, one could respect their position; but when they continually widen a certain field of tax-free investment, it is inconsistent to object to our scheme on those grounds. They should be willing to admit to their Socialist supporters that every time the Chancellor of the Exchequer increases the opportunities for buying National Savings Certificates he is making a substantial hand-out to Surtax payers.

The Financial Secretary tried to excite our sympathy on behalf of the worker who would not be able to get his employer to co-operate in making use of the advantages which would flow from our Clause. What are trade unions for? Is this objection ever raised to the enormous tax advantages of pension schemes? It is quite open to a stubborn, obdurate employer to say, "No, I will resist the tax attractions of pension schemes. I will have nothing to do with them. I will stick in my last ditch and pretend that the tax advantages are not there." That choice is open to an employer, but no Government have ever said that on those grounds they would withdraw all the tax concessions—and they are many—which apply to pension schemes.

The rest of the Financial Secretary's objections, I regret to tell the Committee, were dredged up from the reply of a Conservative Chancellor of the Exchequer to just such a Liberal Clause which was debated in Committee in 1958, and particularly the extraordinary objection that under our scheme it would be possible for somebody who was unwise enough to withdraw a very large amount of savings in any one year to incur Surtax. Indeed, that would be possible.

If a taxpayer was foolish enough to time his withdrawals so that the whole lot fell in any one tax year, I would think that a little Surtax penalty was what he deserved for his folly. Any taxpayer who was not able so to arrange his withdrawals that some fell on 4th April and some on 6th April would not deserve very serious consideration from the House of Commons.

The Financial Secretary in concluding at least indicated that he did not have a completely closed mind on the subject. He said that he wanted evidence of a scheme attracting new savings. Let me put this proposal to him, although it does not affect the attitude that my hon. Friends and I will take in the Division Lobby tonight.

The Financial Secretary and his colleagues are now taking the country to some extent into a policy of financial regionalisation, as we discovered in the debates earlier today. Let him, therefore, try a scheme of this kind in one region of the country. Let him, for preference, take one of the more prolifigate regions where the record of thrift is not as high as it is in my own area. I will not offer him the name of any particular region, but let him go to a region where the rate of savings has been disappoining. Let the scheme be introduced on a regional basis, and my hon. Friends and I are quite prepared to abide by the results.

Meanwhile, we shall certainly divide in favour of our new clause when the time comes.

Sir W. Bromley-Davenport

I will not detain the Committee more than one minute, but I would like to take up the Financial Secretary on one statement which he made. He referred to the security to the small saver who put his money in the Post Office. I have never heard people talk such tripe.

Think of the man who buys a £1 National Savings Certificate, which matures after, say, five or six years. By the time it matures, owing to the depreciation of the and inflation it is worth less than when he bought it. So do not let us have any nonsense about the security of putting money into the Post Office. If, in a depreciating currency, a person, instead of putting his money in the Post Office, invests his money in equities, he takes a risk, and may lose everything; on the other hand, he may double or treble his capital. But, after all, it was risk capital that made this country great.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 124, Noes 178.

Division No. 366.]	AYES	[11.40 p.m.
Alison, Michael (Barkston Ash)	Glover, Sir Douglas	Nicholls, Sir Harmar
Astor, John	Gower, Raymond	Noble, Rt. Hn. Michael
Atkins, Humphrey (M't'n & M'd'n)	Grant, Anthony	Osborn, John (Hallam)
Awdry, Daniel	Grant-Ferris, R.	Page, Graham (Crosby)
Beamish, Col. Sir Tufton	Gresham Cooke, R.	Pearson, Sir Frank (Clitheroe)
Bell, Ronald	Grieve, Percy	Pike, Miss Mervyn
Bennett, Sir Frederic (Torquay)	Grimond, Rt. Hn. J.	Pink, R. Bonner
Berry, Hn. Anthony	Gurden, Harold	Powell, Rt. Hn. J. Enoch
Bessell, Peter	Hall, John (Wycombe)	Prior, J. M. L.
Black, Sir Cyril	Hamilton, Michael (Salisbury)	Pym, Francis
Blaker, Peter	Harris, Reader (Heston)	Ramsden, Rt. Hn. James
Body, Richard	Harrison, Col. Sir Harwood (Eye)	Royle, Anthony
Boyd-Carpenter, Rt. Hn. John	Hawkins, Paul	Russell, Sir Ronald
Boyle, Rt. Hn. Sir Edward	Heseltine, Michael	Smith, John
Braine, Bernard	Higgins, Terence L.	Stainton, Keith
Brinton, Sir Tatton	Hiley, Joseph
Bromley-Davenport, Lt.-Col. Sir Walter	Hobson, Rt. Hn. Sir John	Steel, David (Roxburgh)
Brown, Sir Edward (Bath)	Holland, Philip	Stoddart-Scott, Col. Sir M. (Ripon)
Bryan, Paul	Hooson, Emlyn	Summers, Sir Spencer
Buchanan-Smith, Alick (Angus, N & M)	Hunt, John	Taylor, Edward M. (G'gow, Cathcart)
Buck, Antony (Colchester)	Hutchison, Michael Clark	Taylor, Frank (Moss Side)
Carlisle, Mark	Jenkin, Patrick (Woodford)	Temple, John M.
Clegg, Walter	Jopling, Michael	Thatcher, Mrs. Margaret
Cooke, Robert	Kimball, Marcus	Thorpe, Rt. Hn. Jeremy
Curdle, John	King, Evelyn (Dorset, S.)	Tilney, John
Corfield, F. V.	Kitson, Timothy	Turton, Rt. Hn. R. H.
Costain, A. P.	Lancaster, Col. C. G.	van Straubenzee, W. R.
Crowder, F. P.	Lloyd, Ian (P'tsm'th, Langstone)	Vaughan-Morgan, Rt. Hn. Sir John
Dance, James	Lubbock, Eric	Wainwright, Richard (Coins Valley)
Davidson, James(Aberdeenshire, W.)	Mackenzie, Alasdair (Ross & Crom'ty)	Ward, Dame Irene
Dean, Paul (Somerset, N.)	Maclean, Sir Fitzroy	Weatherill, Bernard
Deedes, Rn. Hn. W. F. (Ashford)	Macleod, Rt. Hn. Iain	Webster, David
Doughty, Charles	Macmillan, Maurice (Farnham)	White law, Rt. Hn. William
Eden, Sir John	Maginnis, John E.	Wilson, Geoffrey (Truro)
Elliott, R.W. (N'c'tle-upon-Tyne, N.)	Maude, Angus	Wolrige-Gordon, Patrick
Errington, Sir Eric	Maxwell-Hyslop, R. J.	Wood, Rt. Hn. Richard
Eyre, Reginald	Maydon, Lt-Cmdr. S. L. C.	Worsley, Marcus
Farr, John	Miscampbell, Norman	Wright, Esmond
Fletcher-Cooke, Charles	Monro, Hector	Wylie, N. R.
Fortescue, Tim	More, Jasper
Foster, Sir John	Morgan, Geraint (Denbigh)	TELLERS FOR THE AYES:
Gilmour, Ian (Norfolk, C.)	Morrison, Charles (Devizes)	Dr. M. P. Winstanley and
Gilmour, Sir John (Fife, E.)	Murton, Oscar	Mr. Russell Johnston.
NOES
Allaun, Frank (Salford, E.)	Crossman, Rt. Hn. Richard	Fraser, Rt. Hn. Tom (Hamilton)
Allen, Scholefield	Cullen, Mrs. Alice	Galpern, Sir Myer
Anderson, Donald	Dalyell, Tam	Gardner, Tony
Archer, Peter	Davidson, Arthur (Accrington)	Ginsburg, David
Armstrong, Ernest	Davies, Dr. Ernest (Stretford)	Gordon Walker, Rt. Hn. P. C.
Atkinson, Norman (Tottenham)	Davies, G. Elfed (Rhondda, E.)	Gray, Dr. Hugh (Yarmouth)
Bacon, Rt. Hn. Alice	Davies, Ednyfed Hudson (Conway)	Gregory, Arnold
Barrett, Joel	Davies, Ifor (Gower)	Grey, Charles (Durham)
Baxter, William	de Freitas, Rt. Hn. Sir Geoffrey	Griffiths, David (Rother Valley)
Bennett, James (G'gow, Bridgeton)	Delargy, Hugh	Hamilton, James (Bothwell)
Bishop, E. S.	Dell, Edmund	Hamling, William
Blackburn, F.	Dempsey, James	Hannan, William
Booth, Albert	Dewar, Donald	Harper, Joseph
Bottomley, Rt. Hn. Arthur	Diamond, Rt. Hn. John	Haseldine, Norman
Boyden, James	Dobson, Ray	Hazell, Bert
Braddock, Mrs. E. M.	Doig, Peter	Hooley, Frank
Bray, Dr. Jeremy	Dunn, James A.	Horner, John
Brooks, Edwin	Dunnett, Jack	Houghton, Rt. Hn. Douglas
Brown, Hugh D. (G'gow, Provan)	Dunwoody, Dr. John (F'th & C'b'e)	Howarth, Harry (Wellingborough)
Brown, Bob (N'c'tle-upon-Tyne, W.)	Ellis, John	Howarth, Robert (Bolton, E.)
Buchan, Norman	English, Michael	Howell, Denis (Small Heath)
Callaghan, Rt. Hn. James	Ensor, David	Howie, W.
Cant, R. B.	Faulds, Andrew	Hoy, James
Carmichael, Neil	Fernyhough, E.	Huckfield, L.
Coe, Denis	Fletcher, Ted (Darlington)	Hughes, Roy (Newport)
Coleman, Donald	Foot, Michael (Ebbw Vale)	Hynd, John
Conlan, Bernard	Ford, Ben	Irvine, A. J. (Edge Hill)
Crawshaw, Richard	Forrester, John	Jackson, Colin (B'h'se & Spenb'gh)
Crosland, Rt. Hn. Anthony	Fowler, Gerry	Johnson, James (K'ston-on-Hull, W.)
Jones, J. Idwal (Wrexham)	Morris, Alfred (Wythenshawe)	Silverman, Julius (Aston)
Jones, T. Alec (Rhondda, West)	Moyle, Roland	Small, William
Kelley, Richard	Newens, Stan	Snow, Julian
Kerr, Dr. David (W'worth, Central)	Oakes, Gordon	Steele, Thomas (Dunbartonshire, W.)
Leadbitter, Ted	Ogden, Eric	Stonehouse, John
Ledger, Ron	O'Malley, Brian	Thomas, George (Cardiff, W.)
Lee, John (Reading)	Orbach, Maurice	Thornton, Ernest
Lever, L. M. (Ardwick)	Orme, Stanley	Tinn, James
Lewis, Arthur (W. Ham, N.)	Oswald, Thomas	Urwin, T. W.
Lewis, Ron (Carlisle)	Owen, Dr. David (Plymouth, S'tn)	Varley, Eric G.
Lomas, Kenneth
Lyon, Alexander w. (York)	Owen, Will (Morpeth)	Wainwright, Edwin (Dearne Valley)
Lyons, Edward (Bradford, E.)	Page, Derek (King's Lynn)	Walden, Brian (All Saints)
McBride, Neil	Palmer, Arthur	Walker, Harold (Doncaster)
McCann, John	Parkyn, Brian (Bedford)	Watkins, David (Consett)
MacDermot, Niall	Pavitt, Laurence	Watkins, Tudor (Brecon & Radnor)
Macdonald, A. H.	Pentland, Norman	Well beloved, James
McGuire, Michael	Prentice, Rt. Hn. R. E.	Wells, William (Walsall, N.)
Mackenzie, Gregor (Rutherglen)	Price, William (Rugby)	Whitaker, Ben
Mackintosh, John P.	Probert, Arthur	Whitlock, William
Maclennan, Robert	Rees, Merlyn	Williams, Alan (Swansea, W.)
McNamara, C. Kevin	Rhodes, Geoffrey	Williams, Clifford (Abertillery)
Mahon, Peter (Preston, S.)	Roberts, Goronwy (Caernarvon)	Williams, Mrs. Shirley (Hitchin)
Marion, Simon (Bootle)	Robinson, W. O. J. (Walth'stow, E.)	Wilson, William (Coventry, S.)
Mallalieu, E. L. (Brigg)	Rose, Paul	Winnick, David
Manuel, Archie	Ross, Rt. Hn. William	Winterbottom, R. E.
Mapp, Charles	Rowland, Christopher (Meriden)	Woodburn, Rt. Hn. A.
Maxwell, Robert	Rowlands, E. (Cardiff, N.)	Woof, Robert
Mendelson, J. J.	Sheldon, Robert	Yates, Victor
Millan, Bruce	Shore, Peter (Stepney)
Miller, Dr. M. S.	Short, Rt. Hn. Edward (N'c'tle-u-Tyne)	TELLERS FOR THE NOES:
Morgan, Elystan (Cardiganshire)	Silkin, Rt. Hn. John (Deptford)	Mr. Walter Harrison and
		Mr. Charles R. Morris.

Mr. Iain Macleod

I beg to move, That the Chairman do report Progress and ask leave to sit again. This is an obvious natural break. The next Clause concerns tax relief for the blind. It is one to which we attach great importance, and we would like to start the day with it. If the Chancellor is willing, I suggest that we stop now.

Mr. Diamond

I have no hesitation in agreeing with the first part of the right hon. Gentleman's statement. It is a suit- able time at which to end our labours. We have not, numerically, made an enormous amount of progress, but I recognise that the new Clauses that we have been discussing are substantial ones, and I feel sure that the Committee will want to make perhaps even more rapid progress tomorrow. In that spirit, I assent to the right hon. Gentleman's Motion.

Question put and agreed to.

Committee report Progress: to sit again Tomorrow.