§ Before I come to my major taxation proposals, I have a number of lesser ones to put forward.
§ Building sub-contractors
§ My right hon. Friend the Minister of Public Building and Works has already announced measures to control sub-contracting in the building and civil engineering industry by means of a register of sub-contractors. As the House will be aware, the uncontrolled spread of sub-contracting has led to evasion of income tax, and a widespread resentment at the unfairness involved. I therefore propose to make use of the register which my right hon. Friend is establishing to require contractors who make payments under sub-contracts with unregistered sub-contractors to deduct on account of in- 1238 come tax a sum approximately equal to the standard rate of income tax less earned income relief and pay it over to the collector of taxes.
§ At present rates of tax, the sum would be 32 per cent. At the end of the year, when the sub-contractor produces his accounts and his tax liability is worked out, he will be able to set the deduction he has suffered in this way against his liability, and any excess will be repaid to him. If he fails to produce accounts, or if he disappears, he will, nevertheless, have borne tax on his income. Those who register will be traceable through the register, and those who do not will, under this proposal, be unable any longer to evade payment of tax on their earnings.
§ The income tax deduction scheme cannot be brought into operation until the register has been established, and I therefore propose that it should be effective from 6th April, 1971; thereafter, the estimated yield for a full year is about £8 million.
§ Tax treatment of superannuation arrangements
§ The Finance Bill will include provisions to simplify and rationalise the tax treatment of superannuation arrangements for employees and to take account in this connection of the earnings-related State pension which will become payable under the National Superannuation and Social Insurance Bill, now before the House. The main lines of the proposals have been set out in a document which the Inland Revenue issued with my authority on 26th February last and I will not, therefore, go into them in detail.
§ In general, the changes are intended to take effect from the introduction of the new earnings-related pension scheme, the target date for which is 6th April, 1972, but legislative provision is being made this year so that the trustees of pension funds and those engaged in working them can know the new rules as soon as possible, and be able to take them into account when deciding what adaptations are needed to take account of the new State scheme. Those who wish to adopt new arrangements before 1972 will be able to do so.
§ For technical reasons it is also necessary for the Finance Bill to prescribe the tax treatment of contributions to, and benefits from, the new State scheme. This 1239 will broadly follow their existing treatment.
§ Estate duty
§ I propose to increase the rate of interest on unpaid estate duty, which has stood at 2 per cent. since 1943. In present-day conditions, I think that an increase is appropriate, but it has never been intended that this interest should be a penal charge—bearing in mind that many estates include substantial elements of property which earn little or no income—and I propose only a modest increase to 3 per cent. This change will apply to interest accruing after the passing of the Finance Act. It is estimated to yield £1¾ million for the full year and about £1 million this year. But the yield of estate duty in the current year is estimated to increase by £5 million as a result of earlier payment.
§ Decimalisation
§ On the introduction of decimal currency, next February, exact conversion of some rates of Customs and Excise duties, drawbacks and allowances would introduce inconvenient fractions. I therefore propose to take power to reduce by Order certain rates to the nearest lesser amounts which will be suitable and convenient. I also propose that motor vehicle licensing authorities should be authorised from 15th February, 1971, to round the payment and refund of vehicle excise duty down to the nearest new penny.
§ Stamp duties
§ In the field of stamp duties, a number of changes will have to be made to take account of the change to decimal currency. My general approach to this question was indicated by my hon. and learned Friend the Financial Secretary in reply to a Question last summer. He then explained that I had no intention of making decimalisation an excuse for increasing the overall yield of the stamp duties; and, secondly, that I aimed to make the necessary changes in such a way that all charges to stamp duty should in future be in multiples of 5 new pence. I reserved the question of the 2d. duties on cheques and receipts for further consideration.
§ The point that has weighed with me in regard to the cheque duty is that, while 1240 it produces the useful revenue of £11 million to keep it would inevitably mean increasing the duty to 1 new penny, an increase of 20 per cent. A similar increase would also be necessary in the receipt duty. I am anxious to avoid any increase in these duties purely as a consequence of decimalisation; but in any case I regard both as somewhat anachronistic.
§ There are at present probably at least 10 million persons who hold bank accounts on which cheques can be drawn. The duty is thus an irritant which affects a great many people and it is, moreover, a form of discrimination against this particular method of making payments. I have, therefore, decided to propose the abolition of both the duty on cheques and the receipt duty as from Decimalisation Day, 15th February, 1971.
§ I propose also to abolish the 6d. fixed duty on agreements and the 6d. duty on accident and other non-life insurance policies; to exempt policies of life assurance up to £50; and to reduce the duty on mortgage deeds from 2s. 6d. per £100 to 2s. per £100. These changes will take effect from 1st August, 1970.
§ The cost of all these changes in the present financial year is estimated at £1 million and, for a full year, £13½ million. This sum, of course, includes the cost of the remission on cheques and receipts. I shall thus have more than carried out my undertaking not to seek an increased revenue from stamp duties in connection with decimalisation.
§ The remaining stamp duty changes are of a minor nature, with no substantial consequence in terms of revenue, and are introduced in order to produce a reasonable result on the change of currency. The details will appear in the Finance Bill.
§ Betting and gaming
§ I have certain adjustments to propose to the duties on betting and gaming. The bookmakers have represented to me that they regard a tax on turnover as more equitable than one based on the rateable value of premises. They have made proposals which would result in a substantial reduction in the total yield from the betting duties, and I cannot see my way to agree to that. But I propose to meet them as regards the system of taxation by 1241 repealing the betting premises licence duty and increasing the rate of general betting duty to 6 per cent., except for on-course betting, where it will remain at 5 per cent.
§ I also propose to relieve on-course hedging bets from duty altogether. These changes will take effect from 27th April; the appropriate proportion of the licence duty for the current licence year will be remitted or repaid. These changes taken together should, on balance, leave the total yield from betting unchanged.
§ I explained last year that a general review of casino taxation must await the full operation of the Gaming Act, 1968. The remaining provisions of that Act will be brought into effect on 1st July, and it is, therefore, appropriate to make changes in the structure of the duty this year so as to relate it more closely to the level of gaming in clubs.
§ The existing duty is related only to the rateable value of the premises used for gaming. I propose to replace it by a charge in two parts, consisting of a basic element related to the rateable value and an additional progressive charge increasing with the number of tables provided for gaming. In its new form the duty will apply to clubs licensed under Part II of the Gaming Act for general gaming.
§ I also propose that the duty should in future be paid twice yearly on six-monthly licences, instead of in one annual lump sum. The licence duty payable each six months will range from £750 for a small club to £32,000, plus £5,000 for each additional table over five, in the case of the largest clubs. The details are set out in the Budget Report. The new rates will apply to licences expiring after 30th September, 1970, and I estimate that they will yield about £1 million a year extra revenue.
§ I do not propose to make any changes this year in the rates of duty on gaming machines, but, to take account of decimalisation of the currency, I propose that the scope of the holiday season gaming machine licence should be extended to cover machines which may be played by the insertion of a single new half-penny or of a single new penny.
§ Regulator
§ It will not surprise the House to know that I propose to extend for a further 1242 year the power given to the Treasury to vary the Customs and Excise revenue duties and the purchase tax, either up or down, if the national economy should require it, by means of the regulator.