PERQUISITES OF OFFICE—ANTI-TAX AVOIDANCE

HC Deb 10 July 1973 vol 859 cc1350-83

In section 200 of the Income and Corporation Taxes Act 1970 at end add— The said return shall include all expenses incurred in the United Kingdom, its colonies, Commonwealth or non-Commonwealth countries"'.—[Mr. Healey.]

Brought up, and read the First time.

7.45 p.m.

Mr. Healey

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

Mr. Deputy Speaker

It will be convenient also to discuss new Clause No. 54—Return of income not remitted to the United Kingdom.

Mr. Healey

I was deeply moved by the appeal of the Chancellor of the Exchequer yesterday to me to do my best to help him in the extremities into which his policies have plunged him. These new clauses have no other purpose than that in mind.

We have tabled the clauses, among a number of similar clauses, to assist the Prime Minister in improving what he called the unpleasant and unacceptable face of capitalism. In view of the Prime Minister's views and the talks into which the Chancellor of the Exchequer is shortly to enter with the TUC, I am astonished that the Chancellor of the Exchequer did not table these clauses himself.

I am particularly surprised—in view of the exchanges we had when the Chancellor took extraordinary care to introduce agricultural matters into the Report stage of the Finance Bill by putting down resolutions for which, so far as we know, there is no direct precedent—that he did not at least put down a Money Resolution to cover the question of tax avoidance, to which the new clauses are directed, so that the House would have a chance to take action to improve this unpleasant and unacceptable face. If the House accepts the two clauses which have been selected—and we know that it is not possible to discuss clauses which involve the raising of additional taxation—although we shall not be doing a great deal about the face we shall at least be cleaning up a little the lower right eyelid.

It is difficult to exaggerate the importance of immediate action to deal with the type of tax avoidance which was revealed during the so-called Lonrho affair. The whole of the Government's economic strategy depends upon the support, or at least the acquiescence, of ordinary working people in some form of prices and incomes policy when phase 2 comes to an end in the autumn. No one knows better than does the Chancellor how difficult it will be now to get that support.

The latest figures published by the Government show that there was no rise in real disposable income after tax during the first quarter of this year. If there was no rise overall, for millions there must have been a fall in real income. Prices are now rocketing as they have done at no time earlier during the so-called prices and incomes policy. This rocketing of prices is further boosted by the 18 per cent. devaluation over which the Chancellor has presided. I challenge him to deny that over the whole year since phase 1 of his Prices and Incomes Policy began last November it is scarcely conceivable that the rise in earnings will have been higher than the rise in the cost of living, although this is a period during which—as the Chancellor is always reminding us—the nation's wealth will have increased at the rate of about 5 per cent.

The Chancellor and the House must accept that, difficult as it will be to get the acquiescence of the working people in a prices and incomes policy after October, it will be impossible to do so if the Government continue to tolerate a tax system which literally involves one law for the rich and another for the poor, which is the position in our country today. The vast majority of the British people have their incomes rigidly controlled by the Government and under the PAYE system pay income tax on their earnings before they receive them. But for a minority of very wealthy people there is no effective control on earnings and their tax can be avoided quite legally in many cases. The House will recognise the stark brutality of the contrast if it looks at two individual cases which have recently come to light.

I take first the case of Mrs. Dorothy Summerfield, a shop assistant working for the Co-operative movement. Before the freeze in November 1972 she received a weekly wage of £16.65, and in that she was typical of 50,000 other co-operative workers. Under an agreement made by her trade union USDAW and her employers in 1971 she was due for a rise of £1 a week on 31st December 1972. On 4th February the Government forced through this House an order which froze this increase and sought to freeze it retrospectively. On 4th July the county court found that the order had no validity for the five weeks before the date on which it was passed. According to that judgment Mrs. Dorothy Summerfield is due an additional £5. I understand—and I hope that the Chancellor will be able to deny this—that the Government or the Incomes Board hope to appeal against this decision and to rob her of the £5 which has been effectively awarded by the court and which her employers are only too ready to pay. In any case, £1.50 of that £5 will be taken by the Government in income tax.

Under phase 2 of the policy that began in April Mrs. Summerfield's weekly wage has risen to £19.05. On this wage she will be paying £2.24 tax a week before she receives the residue. This lady, and millions like her, are trying to live on a take-home pay of less than £17 a week. She, like the vast majority of the British public, finds her earnings totally controlled by the Government and her tax collected by the Government before she receives her earnings.

I pass to another case, that of a right hon. Member of this House. I gave him notice that I would raise this and he told me that he was obliged to attend an important meeting and would not be able to listen to our proceedings. I raise this case because it created great public interest when, entirely by accident, it came to light. I raise it not because anything which our fellow Member did was in any sense illegal. On the contrary, the whole point of my argument is that the law gives him the ability to avoid tax in this way and to avoid Government control of his earnings at a time when the overwhelming majority of his fellow-citizens have no possibility of earning more than the Government decide and are obliged to pay tax on their earnings before receiving them.

The right hon. Member for Streatham (Mr. Sandys)—a very respected Member of the House and of the Conservative Party—was employed from 1968 as a consultant to a foreign subsidiary of the Lonrho Company, Lonrho South Africa, for a fee of £10,000 a year. On 1st September 1971 the fee which he received as a consultant was raised to £50,000 a year, and he was employed by the main Lonrho Company which is a British company. We do not know why this extraordinary increase in his salary was determined—we can only speculate—although The Sunday Times reported on 27th May 1973 that: During an off-camera discussion at London Weekend Television last Sunday, Lonrho's South African managing director Sydney Newman remarked forcefully that group deputy managing director Gerald Percy knew perfectly well why Sandys was paid £50,000 a year and that this could not be publicised. The story develops. Sir Basil Smallpeice—at that time a fellow director of the Lonhro company with the right hon. Member for Streatham—at the court hearing on 8th May gave written evidence to the effect that in a letter of 9th February 1972 the salary of the right hon. Member for Streatham as a consultant of £50,000 a year was raised to £51,000 and £49,000 of this was to be paid overseas.

On 4th April 1972, a couple of months later, the right hon. Gentleman was appointed chairman of Lonrho at a lower salary of about £40,000, but at the same time he was also offered by the Chief Executive the sum of £130,000 as compensation for this reduction in his earnings. So far as I can discover, the whole of this sum was paid to him overseas. If I am incorrect, then I will apologise. But when the accountants, Peat Marwick Mitchell, learned of the payment of the first instalment of £44,000 in relation to the sum of £130,000, through a firm called Consultancy Development Services, a subsidiary of Lonrho in the Cayman Islands, they also discovered that £23,000 of accrued fees had also been paid there for the right hon. Member for Streatham.

It later emerged that the £130.000 of compensation which was offered was offered without the authority of the Lonrho board. The right hon. Member for Taunton (Mr. du Cann)—not as chairman of the 1922 Committee, but as a director of Lonrho and head of the firm Keyser Ullman advising Lonrho on financial matters—investigated the matter. Incidentally, I congratulate the right hon. Member for Taunton on making £30 million in a recent property deal. He investigated the matter on behalf of the board and he said that, although faults were committed in that the board's authority was not sought, the motives for not seeking that authority were proper—although, according to Mr. Rowland, Chief Executive of Lonrho, in a television interview, the motive was that it would be embarrassing if as many as 14 people knew about it. I was glad to see that the right hon. Member for Streatham when he heard that there had been no board authority for this compensation payment repaid the first instalment, which was all he had then received. to the company.

That is the personal case which the House must put against the case of Mrs. Summerfield to which I first referred.

8.0 p.m.

The Chancellor of the Exchequer (Mr. Anthony Barber)

The right hon. Member for Leeds, East (Mr. Healey) has referred to a number of sums of money which he alleges were paid to my right hon. Friend the Member for Streatham (Mr. Sandys). I have no knowledge other than what I have read in the newspapers. On these new clauses, as I understand the situation, the whole of the present debate was to be concerned with taxation. Would the right hon. Gentleman like to say, because I have no knowledge—the Inland Revenue does not give me the information—whether he has any idea of the extent to which taxation is payable in respect of any of these sums to my right hon. Friend, whether they were paid or not, because I have no knowledge.

Mr. Healey

Exactly. It astounds me that the right hon. Gentleman the Chancellor of the Exchequer should ask that question. The purpose of these clauses is to give the Chancellor of the Exchequer the knowledge which he seeks. The law in its present form means that the Chancellor and the Inland Revenue have no means of knowing whether that proportion of a British resident's earnings paid overseas is rightly paid overseas because the whole sum is not necessarily declared to the Inland Revenue.

Mr. Barber

I should like to ask the question: does the right hon. Gentleman know whether the circumstances of these payments were such as to render them liable to tax or not?

Mr. Healey

No, of course I do not know. [HON. MEMBERS: "Oh."] No, with great respect. I have not for a moment suggested that the right hon. Member for Streatham acted in any way whatever illegally. I make the assumption that a Member of this House as respected as he is could not conceivably have acted illegally. My complaint is that he acted legally and that it is possible for a wealthy man to avoid taxation in this way, whereas a poor man working for a weekly wage has no such opportunity to avoid tax. This is the whole point of the debate, that there is one law for the rich and another for the poor.

Mr. Bruce-Gardyne

I submit that that was not the precise point on which the right hon. Member for Leeds, East (Mr. Healey) started. What he said—I took careful note of his words—was that the law gave my right hon. Friend the Member for Streatham the possibility of avoiding control of his earnings. That presumably meant that the law at the same time controlled other people's earnings. The right hon. Gentleman is referring to events in 1971 and 1972. Will he say which law he has in mind?

Mr. Healey

If the hon. Member for South Angus (Mr. Bruce-Gardyne) is pursuing that point, he is wise to drop the point raised by his right hon. Friend the Chancellor of the Exchequer which blew up in his face. The way in which these consultancy fees were handled would be perfectly possible at present under the prices and incomes freeze as it exists. It is possible to avoid control of earnings by changing the role in relation to which the earnings are paid. I would not deny that this type of avoidance can also take place at lower levels, but never without the connivance of the employer.

Perhaps we can pass on, now that the Chancellor has clarified the point.

Mr. Barber

I should like to ask the right hon. Gentleman this simple question. We are both in the same position in that each of us knows only what we have read in the newspapers about the circumstances of the case to which he referred. The right hon. Gentleman seems to be implying that there is some means of legal tax avoidance which he wishes to change, and he may be right in this in a general sense, but is he suggesting that any of these payments sent overseas escaped tax? I have no knowledge of an individual case, any more than he has, but is he or is he not suggesting that in this case?

Mr. Healey

Again I have no more knowledge than the Chancellor has on this matter. One of the points of the clauses is to elicit knowledge on which the Chancellor and the Inland Revenue can form a judgment.

Mr. Barber

If the right hon. Gentleman were successful in achieving the substance of what he sets out to achieve in the new clauses, it would still not be possible in the way we proceed in this country—and, thank goodness, we do proceed in this way—for any Chancellor of the Exchequer to know of the particular circumstances of any individual, even though the circumstances might have been disclosed to the Revenue.

Mr. Healey

I appreciate the point with which the right hon. Gentleman is dealing, and I shall come to it in a moment. This is one of the purposes of the new clauses. I hope the Chancellor will take into account, when he considers the new clauses which have been selected, the new clauses which have not been selected because he did not give the House an opportunity to debate them by tabling the appropriate money resolution. I understand from the Chief Secretary last week in Question Time that this was to be a broad-ranging debate on the general problems of tax avoidance as raised by the Lonrho affair. I shall seek to deal with the specific points raised by the Chancellor in a moment.

The point I was trying to make, when the Chancellor so helpfully intervened, was that if one contrasts the treatment of Mrs. Summerfield with the treatment of the right hon. Member for Streatham, which I assume was perfectly legal, one sees that the way the law operates in this country quite clearly means that there is one law for the rich and another for the poor. It is possible for the Chancellor of the Exchequer to maintain that Mrs. Summerfield might have made arrangements with the Co-operative society to have her salary, or 80 per cent. of it, paid in the Cayman Islands through a subsidiary of the Co-operative movement. But I suspect that even the ingenuity of the Chancellor of the Exchequer will not carry him so far as to suggest that she should have had recourse to this method of avoiding tax, although I know that the right hon. Gentleman has closed one loophole in the Cayman Islands by taking the Cayman Islands and other tax havens in the sterling area out of the sterling area thereby greatly complicating the problem for tax avoidance in terms of the exchange control regulations.

Mr. Peter Tapsell (Horncastle)

The right hon. Gentleman has not yet met my right hon. Friend's point. The right hon. Gentleman has again used some such phrase as "tax avoidance", but a moment earlier he admitted that he did not know whether tax avoidance was involved, because he did not know whether the payments in the Cayman Islands to which he referred were subject to tax under the present law. None of us knows. If these payments are liable for tax under the present law the right hon. Gentleman's whole argument breaks down.

Mr. Healey

The Chancellor of the Exchequer told us that he did not know whether these payments were liable to tax. However, he ought to know whether tax has been paid on them—

Mr. Bruce-Gardyne

On the contrary.

Mr. Healey

No doubt they have had tax paid on them at the Cayman Islands rate. But if the Chancellor of the Exchequer or any of his supporters believes that those payments were made into a subsidiary of Lonrho in the Cayman Islands which existed because of the economic, cultural and social attractions of the Cayman Islands to the right hon. Member for Streatham, he is not quite as intelligent, sensitive and aware of the way in which the world operates as I thought.

Life certainly is better under the Conservatives—for some. I must confess that having read this account in the newspapers I thought that it was hardly surprising that the right hon. Member for Taunton should have told the Lonrho shareholders when he was discussing strengthening the Lonrho Board: Fortunately, there is no shortage of really suitable candidates. I bet they were queuing up with their tongues hanging out. I wonder why the right hon. Gentleman did not give Mrs. Summerfield a chance. I think that she would have done at least as well on the Lonrho Board as some of its recent members.

Does the Chancellor of the Exchequer think that this story makes a suitable backcloth for his negotiations with the TUC on phase 3? If he does not think that, what is he doing about it? The Prime Minister was right about this, even if some of his back-bench supporters disagreed with him. This is the unacceptable and unpleasant face of capitalism. The Prime Minister was also right when he told the Conservative Women's Conference the other day that it was no part of his philosophy—it would have been less true two or three years ago, of course—that by one device or another vast sums of money should pass hands at the heart of our financial system as personal rewards—sums out of all proportion to the rewards available for high distinction in other professions and walks of life.

The issue to which our clauses are directed is the avoidance of taxation by the payment of money into what are called tax havens like the Cayman Islands, in those days, and tax havens still in the sterling area like Jersey or the Isle of Man.

There are many aspects of this type of tax avoidance in the Lonrho case. There is the story of Mr. "Tiny" Rowland's £350,000 house at Bourne End. Mr. Rowland was said to have broken his promise to the Lonrho Board to purchase the house and, according to the Sunday Telegraph, Mr. Rowland's counsel said that his client's tax position had some bearing on his failure to pay for the £350,000 company house. He went on: I am not going to give evidence —a very wise man— about where Mr. Rowland is resident for tax purposes, but the ownership of a large house in this country might have a material bearing on where one's place of residence was said to be for tax purposes. This is the situation about which the Chancellor of the Exchequer refuses to do anything during the Report stage of this Bill, although he found time to import a debate on agricultural affairs and Commonwealth sugar. There are very few Departments of his colleagues which have not been represented earlier today in debates on various Government new clauses.

No doubt it was for tax purposes that Mr. Rowland bought 31p worth of pork chipolatas from Harrods and asked Harrods to bill the Tweefontein United Collieries in South Africa for them. I am glad to see that right hon. and hon. Gentlemen on the Treasury Bench are sobered a little by this revelation.

In this country today tax avoidance is big business. Even The Times newspaper which has printed philippics against Lonrho by Bernard Levin and Mr. William Rees Mogg in its centre pages, provides running advice on tax avoidance on its back pages. There was an article only last Saturday about how to use trusts to avoid estate duty.

One of the biggest loopholes in our tax system is the right of British citizens, even if ordinarily resident in Britain, to avoid tax legally on their foreign earnings provided that they are not remitted to the United Kingdom—

Mr. Bruce-Gardyne

No.

Mr. Healey

—and providing such earnings are kept in a sterling area tax haven without falling foul of exchange control regulations—

Mr. Bruce-Gardyne

No. The right hon. Gentleman does not understand the law.

Mr. Healey

If I am wrong, I shall be delighted to have the Chancellor of the Exchequer put me right. No doubt that we shall see a sudden exodus of tax consultants to the Cayman Islands if I am proved wrong—

Mr. Bruce-Gardyne

Of course the right hon. Gentleman is wrong.

Mr. Healey

The fact is that there is no obligation on residents to declare such foreign earnings providing that they are held inside the sterling area, and if they are paid through a foreign subsidiary of a British company there is no means by which the Inland Revenue can discover them or decide, in a case where a proportion of such earnings is attributed to service abroad, that that proportion is the correct and honest one.

I share the view held by many that the facts which came to light during the Lonrho case simply through the accident of a row between members of the board represent only the tip of the iceberg. I am fortified in that by a quotation from the tax correspondent of The Times, Miss Margaret Stone. She writes: There is always a suspicion that anyone who works for a company with an overseas operation which enables him to take advantage of these rules will be tempted to receive a peppercorn salary for his work in this country and a fabulous sum for the work overseas This can happen, for there is no obligation to reveal income arising overseas (in the sterling area) which is not remitted. I believe that the only answer to this problem is to adopt the system which has always obtained in the United States of America—that is to say, to make all United Kingdom citizens liable to tax on their earnings world-wide unless they are permanently resident abroad or, under American tax law, unless they are resident abroad for 17 out of the 18 months which are relevant for tax. Even in those cases of permanent residence abroad or residence for 17 out of 18 months, American citizens escape taxation on their foreign earnings only on the first 20,000 to 25,000 dollars—£8,000 to £10,000—which is a very much smaller sum than those said to have been paid abroad in the Lonrho case, and again only if those earnings are made from foreign sources.

8.15 p.m.

Some of our new clauses would make such a change. Unfortunately, those new clauses are out of order because the Chancellor has chosen not to permit the House to discuss them by failing to put down a suitable Money Resolution. Therefore, we must be content today with new Clauses Nos. 2 and 54 which at least would compel the disclosure of income and expenses overseas and avoid some of the practices which came to light by accident during the Lonrho affair.

Frankly, I cannot understand why, after what the Prime Minister said about these Lonrho practices revealing the "unpleasant and unacceptable face of capitalism", the Government have not already acted. All of us assumed that they would do so. They had a wonderful opportunity on Report stage of the Finance Bill. Indeed, they could have put down some amendments in Committee, but they failed to do so. I confess that, like millions of my fellow countrymen, I cannot resist the suspicion that one reason they have not sought to deal with these methods of tax avoidance Is that they have a direct interest in the continuation of such practices.

It is a fact that the Conservative Party received £1½ million from big firms in Britain before the election. Those moneys were paid in the expectation of services to be rendered. Indeed, Mr. Ritchie, the chairman of Bowaters, a company which gave £10,000 to the Conservative Party during the 1970 election, told his company under a year later: We have already saved £400,000 in tax since the Conservatives came into office, and I think this is a good return on our investment.

He can say that again. A 4,000 per cent. return on the investment! The company could not have done better even out of property.

Indeed, let us take a more recent case. Lord Chelmer, a senior official of the Conservative Party at the moment, writing in The Times a month ago, said Surely the large companies which contribute to the Conservative Party do so because their boards believe that a Conservative Government provides the best conditions under which companies like theirs can operate to the benefit of both shareholders and employees.

Amen, says "Tiny" Rowlands.

The fact is that the "unpleasant and unacceptable face of capitalism" is the face of the Conservative Party. That is one more reason why the British people will sweep it out of power the first moment they have the chance.

Mr. Barber

Although the principal purpose of raising taxation is to secure the necessary revenue to finance the activities of the Government, it is also important to remember that the maintenance of a fair, just and effective tax system is essential to the proper functioning of the democratic system. But there will always be those who engage in methods, old or new, of tax evasion or of tax avoidance, ranging from the small proprietor who collects 50p from his customer and puts it into his pocket rather than the till to the sophisticated operator who works out a highly complex avoidance device. However, it is of the utmost importance to recognise and to accept that the great majority of taxpayers conduct their affairs in a legal, straightforward and fair manner.

Having said that, it is right that we should yet again review and re-examine the rules so that we can, if necessary, make any appropriate changes that are consistent with a proper degree of incentive, proper remuneration for tasks performed, and proper regard for personal freedom and the attainment of a prosperous society. I shall come back to this review in what I have to say later.

It is obvious from some of the remarks made by the right hon. Member for Leeds, East (Mr. Healey) that what really lies behind his comments this evening is not merely an abhorrence of one aspect of capitalism but a barely suppressed hatred of the entire system of capitalism.—[Interruption.] The country will note the jeers that come from certain hon. Gentlemen opposite. Most people in this country believe that capitalism, even with its imperfections that nobody can justify, is still the best and most effective system for Britain.

There is one preliminary point with which I must deal in the light of what was said by the right hon. Gentleman. All Inland Revenue officials are bound by statute to keep an individual's or company's tax affairs completely confidential. This is of fundamental importance in our tax administration. I have not asked the Inland Revenue for a report about the tax affairs of particular directors or companies. I do not intend to ask, and, if I did, I should not be told. But it will be within the recollection of the House that the right hon. Gentleman has made it clear today that if he had the opportunity and were at this Dispatch Box he would change this fundamental rule of Inland Revenue confidentiality—[HON. MEMBERS: "Nonsense."] Of yes, and I shall quote the right hon. Gentleman's words later—and that a future Labour Government would ensure that, as happens in some countries, politicians could legally call for the tax file of any individual citizen.

Mr. Healey

I am sure that the right hon. Gentleman, to whose scrupulous honesty I paid tribute previously when discussing an earlier clause, would not wish to misrepresent me. I made no such suggestion. I said that the Inland Revenue should have the right and power to discover what earnings were made by British residents anywhere in the world, just as the American tax authorities have that right and power, so that it is capable of judging whether a man has paid the right amount of tax. I do not think that the Chancellor will deny that under British law, as it now stands, it is not possible for the Inland Revenue so to judge payments that are made to sterling area tax havens by foreign subsidaries of British companies.

Mr. Barber

Perhaps I may quote the words used by the right hon. Gentleman. If he did not mean them, I shall accept that. I intervened to explain to the right hon. Gentleman that I had no knowledge of the tax affairs of a particular individual, and the right hon. Gentleman said in reply—and this will be within the recollection of those in the House—that I ought to know whether tax was paid by him. If the right hon. Gentleman did not mean that the Chancellor of the Exchequer should know whether tax is paid by an individual, I hope that he will say so immediately.

Mr. Healey

I confess to the House that the remark I then made was incorrect, but the Inland Revenue has the responsibility of recovering tax that is improperly withheld, and it also has a responsibility in major cases for prosecuting people who commit this type of offence. I believe that such prosecutions should take place far more often than they do, so that the Chancellor, the House, and the country can know that it does happen.

Mr. Barber

I am grateful to the right hon. Gentleman for clarifying that important point. I accept what he said, but he seemed to suggest that I should have some knowledge of the particular tax circumstances of an individual, and when dealing with a particular individual the right hon. Gentleman rather gave the impression that he knew all the tax circumstances of that person. This is an important matter. This is of great constitutional importance, because we in Parliament, and successive Governments, must make the tax system as fair and as just as possible, but it is a great strength of the British system that there can be no political vendettas.

Mr. Douglas Jay (Battersea, North)

Surely the Chancellor is making a false point. Everybody knows that information about an individual taxpayer by name is not made available to the Chancellor or to any other Treasury Minister by the Inland Revenue. We all know that, and nobody suggests that that should be changed, but surely the Chancellor must know in principle whether a particular type of income paid to an individual in certain circumstances in the Cayman Islands is or is not taxable. The Chancellor has only to ask his advisers that and they will tell him. If that is not known, what did the Prime Minister mean by talking about the unpleasant and unacceptable face of capitalism?

Mr. Barber

I was coming to deal—as I should do, in the light of what the right hon. Gentleman said—with the substance of these matters and to explain the position to the House. I shall have to go into a certain amount of detail.

The way in which we treat for tax purposes what I might call natives of this country—I cannot say "residents" because there are people domiciled overseas who are also residents, but I think the House knows what I mean—who go abroad to work for a while, and the way in which we treat nationals of other countries—technically persons who are not domiciled here but who come here to work for a period—is governed by legislation contained in the Finance Act 1956.

The Act was based on—though, in the event, it did not entirely follow—the recommendations of the Royal Commission in its final report in June 1955. The Royal Commission's report was not unanimous. There was a minority report, but that report specifically endorsed the Royal Commission's recommendations concerning the rationalization and codification of the rules relating to foreign employments. That minority report was signed by three gentlemen whose names will be familiar to right hon. and hon. Gentlemen on the Opposition benches—Mr. George Woodcock, Mr. Herbert Bullock and Mr. Nicholas Kaldor. I mention that because it was not a question of the then Government launching out on their own.

What the Royal Commission said can be spelled out in a reasonably short compass. It analysed the existing law under which a person resident in the United Kingdom was taxed on a remittance basis—that is, on the basis of income remitted to this country or received here—in respect of his income from foreign possessions. The Royal Commission explained that the phrase "foreign possessions" was a technical one, which could include income arising from a trade, profession or employment if it could be characterised as foreign, and it said it was plain that it was extremely difficult to say whether an employment that had an element of a foreign character was or was not to be treated as a foreign possession.

Not only was the nationality, the domicile or the residence of the employer relevant, but account had to be taken of the country in which the contract of employment was made, the country in which the moneys earned by the employment were paid, and the country in which the work was to be done.

This was obviously a wholly unsatisfactory state of affairs and the Royal Commission expressed the view that much the most important single test of the locality of an employment was the place in which the work was done. A test of this sort would, in the Commission's view, accord with the whole point of using a remittance basis at all where a resident had income from foreign employment—that is, that he would need to get money abroad for the expenses of working and living there and that it was only the money that he brought home that could be truly related to home income.

The Commission therefore recommended that a resident here in the United Kingdom should be taxed on the remittance basis in respect of income from an employment that is wholly performed outside the United Kingdom, but should pay tax on the whole income from an employment performed wholly within the United Kingdom. That is the position that now governs the case of a normal United Kingdom citizen.

8.30 p.m.

These were the recommendations that one of my predecessors, Mr. Harold Macmillan, brought forward in his 1956 Budget. As many hon. Members may recall, there followed a considerable outcry, not about the consequences for United Kingdom natives but about the effect of these proposals on those who were domiciled abroad—in the case of the normal United Kingdom individual.

The proposal would have resulted, for example, in American employees of American corporations who came here to work for a subsidiary company, as often happens, bearing tax on the whole of their earnings, notwithstanding that a large part of those earnings was never brought into this country and had, perhaps, to be spent in maintaining their families in their home country at costs reflecting the local levels of taxation and, of course, prices. It was represented with considerable force at the time that the effect of this proposal would be to drive away from this country employees of foreign companies living here and even the European headquarters of such companies, with considerable economic loss to this country.

So the proposal was changed. In making the change, Mr. Macmillan was not opposed by the Opposition, although, having looked at the record, I think it fair to point out that some criticism was expressed that a simple remittance basis was being retained. But as regards the remainder of the proposals—those under which the pay for a job the whole of which was performed outside the United Kingdom was taxed only on remittances—there was no criticism at all.

That is the position. The House should know what it is. If, like the generality of United Kingdom taxpayers, a person is domiciled here, has a job here, and the work is carried out here—or, indeed, even if the work is carried out partly abroad—it does not matter where the payment for that job is made; the whole of the pay is liable to United Kingdom tax, and that is the end of the matter. The law is clear, and it follows that the idea that all that is needed to pay no tax is to have a salary paid in a tax haven is without foundation.

So much for the United Kingdom resident who carries out his work in this country, or partly in this country and partly abroad. Next, there is the case of the resident here who has a job the whole of the duties of which are performed outside the United Kingdom. In this case, the pay is liable to tax only on a remittance basis, in accordance with the unanimous recommendations of the Royal Commission.

This obviously covers a range of cases, such as that of the man who goes abroad for, say, a year to act as an engineer superintending a particular contract but who, for tax purposes, remains technically resident in the United Kingdom during his absence, because the absence does not span a complete tax year. In his case, I should have thought, there were clearly arguments for saying that the remittance basis—I do not prejudge the matter, because all this is being reviewed—may be the right way to tax him. The tax treatment may, for example, have a bearing on the ability of employers to get suitable people to work in unattractive places and so affect their ability to win contracts in competition with firms from other countries.

But there are many other cases. There is, for example, the case of the man who works regularly in this country for six months and regularly abroad under another employer for six months. There is, for example, the professional cricketer, who plays here in the summer and, perhaps wisely, coaches in the sun during the winter. He would come into this category.

There can be different views on the question whether the remittance basis is justified at all, or whether it is justified in each of the cases that one can call to mind, but the Royal Commission recommended it, it was generally approved by the House and it is on the Statute Book. Having looked into this carefully, and not wanting to pre-judge the review that is now being undertaken, I doubt whether there are many cases in which the employment is not such that the application of the remittance basis is reasonably justified on the principle of the Royal Commission report. If one were thinking of getting rid of the remittance basis in this field, some careful thought would need to be given to the consequences if one were to get rid of it altogether.

Then there is the man who is not domiciled here but who works here for a non-resident employer. I am not clear how the Opposition has it in mind to treat him. There is no doubt that the United Kingdom has benefited greatly from inward investment in recent years, and the way in which people who are posted here by foreign employers are taxed is obviously a relevant factor in this context. I should have thought that it was self-evident, therefore, that any consideration of a tightening up of the tax rules that at present apply to this category must include careful consideration of what it might mean in terms of the overall economic advantage of this country. I do not rule this out; I merely say that it has to be considered very carefully. Because these are very difficult and important matters and need to be fully considered, the Inland Revenue is looking into the whole question of the remittance basis of taxation.

I should like to refer to certain aspects more specifically. First, there is the question of trades, professions or vocations that are carried on abroad. To get within the remittance basis of tax no part of such a trade has to be carried on here, and I am told that it is very difficult for an individual to order his affairs so that the remittance basis applies to a trade that he carries on alone. However, it may well apply to an individual here who is a member of a partnership carried on abroad, such as a partnership of accountants or solicitors. It is not, I think, necessarily wrong that the remittance basis should apply to such cases; there is at least an argument that if it did not, such persons, through having to bear our higher rates of tax, would be at a disadvantage compared to their locally-based competitors who were bearing only the local rates of tax.

Then there is the question of compensation for loss of office. In fact, under the existing law the place of receipt of payments of such compensation is quite irrelevant. But there is under present law, an exemption for some cases, including payments received by an individual who is not domiciled in the United Kingdom, in respect of services to an employer who is not resident in the United Kingdom. Similarly payments for compensation for the loss of an office held under a contract which did not require any of the duties to be performed in the United Kingdom are exempted.

It would be difficult to make a case that, for example, a foreigner who was here for a year or two as representative of his foreign company but who lost his job should have to pay tax here on the whole of any compensation that he received. We are talking about people who are resident in the United Kingdom for tax purposes. Similarly, it is difficult to argue that a man should pay tax here on compensation for the loss of a long-term job abroad, though different considerations may apply when the job is closely linked with another job which he held in the United Kingdom. But, naturally, if, as a result of the review that I have stated is being carried out by the Inland Revenue, there were to be changes in the scope of the remittance basis, the scope of these exceptions from the charge of compensation payments to tax might be affected and would certainly have to be considered. All this merely illustrates again that this is a far more com- plex and difficult subject than some seem to think.

Mr. Dalyell

I have been listening to the Chancellor as carefully as possible marshalling a complex argument. But if what he says is true, should not the Revenue, if not the Chancellor, have been told about the loss-of-office compensation to the right hon. Member for Streatham (Mr. Sandys)? Is it in order to ask whether these facts were known to the Revenue?

Mr. Barber

It is an absolutely fundamental rule in our constitution, which can be changed by the House if any party wishes to change it—unlike some other countries, and not just primitive countries—that the Chancellor of the Exchequer has no right and is not entitled to ask any question whatsoever about any individual citizen or taxpayer. I believe that that is of absolutely fundamental importance, and that that situation should continue. Therefore, I have no knowledge, any more than anyone else in the House, about the circumstances of any individual.

The right hon. Member for Battersea, North (Mr. Jay) suggested that even if I, as Chancellor, had no knowledge of the tax circumstances of any individual, I surely knew what were the circumstances in the generality of cases rendering people liable to tax or not.

I recognise that other hon. Members wish to speak and that other debates are to follow, and I have endeavoured to be as brief as I can. I have tried to cover the generality of cases but this is a very complicated matter and, in the light of what I have said, I hope that the House will agree that it would be wrong to anticipate the outcome of the review that is being undertaken by the Inland Revnue of taxing foreign income.

When one begins to go into this in detail it becomes apparent that any decisions we may take as a result of the review could have other repercussions, which we should also have to take into account. For example, as those who have had experience on this Bench know, a whole network of double taxation agreements between this country and other countries might be affected. I am sure that the House will agree that the course I have proposed is the right one to follow in the circumstances.

Mr. Denzil Davies

We have heard from the Chancellor that this is a complex problem. It is complex but no more complex than many other difficulties which Governments face in legislating for taxation. I do not believe that it is that difficult. I believe that it is fairly easy to lay down a simple proposition that a person resident and domiciled in this country shall pay British income tax on foreign earnings as they arise.

At present the law is that if foreign dividends arise to people resident or domiciled in the United Kingdom they pay tax upon them immediately. I see no practical difficulties to stop the same rule applying in the case of foreign income arising to persons resident and domiciled in this country.

I accept that there may be some difficulty about domicile. Therefore I exclude a person who is not domiciled. But a person resident and domiciled in this country, as are the vast majority of people who take advantage of this legislation, quite legitimately at the moment, I venture to guess are both resident and domiciled here.

If the Government and the Prime Minister wish to mitigate what the Prime Minister professes to call "the unacceptable face of capitalism", I see no reason why the Government cannot accept at least the second new clause that we have proposed, that about giving information to the Inland Revenue.

The point we have been trying to make is that the Inland Revenue does not—we accept that Chancellors should not be able to inquire into the tax affairs of individuals—have any power to inquire into income paid abroad in respect of an office or employment held in a foreign subsidiary where the work is carried out entirely abroad by the British resident. The Inland Revenue cannot ask questions and cannot be told about that income until it is remitted into this country—and most of it is not remitted into this country. I say that boldly although I do not know what the figures are. Most of the income is kept abroad, and it is converted into tangible assets, used to buy houses, to pay for holidays or to buy shares abroad. What income is remitted is in a form that is not taxable or by persons who are not then subject to taxation.

We are then told that there are exchange control problems, but the Bank of England also comes to the rescue and assistance of those who work for foreign subsidiaries abroad. I am told that for exchange control purposes a British resident who receives income abroad has to convert that income into sterling. One would have thought that in the process of converting it into sterling he would have to remit it into the United Kingdom and hand it to an authorised bank or an authorised depositor which would turn it into sterling and that that would be an act of remittance for sterling purposes.

8.45 p.m.

However, that is not so, because the Bank of England makes it so easy for him. It has over the years designated more and more banks in the Channel Islands and the Isle of Man as authorised banks and authorised depositors for this purpose. A person who works for a foreign company can fulfil his exchange control obligations legitimately and lawfully without remitting his income into the United Kingdom for tax purposes. This was why one of the new clauses, which was not called, was tabled.

We should not try to give the impression that the fiscal excesses in the Lonrho affair were isolated. I believe that the situation has changed since the Royal Commission. There are now more and more British companies with international trade which are setting up subsidiaries abroad, quite legitimately, and which are using those subsidiaries to pay their British directors some foreign remuneration at lower rates of tax which then will not have to be remitted to the United Kingdom.

As we learned from the Lonrho affair, some people go to the tax havens. Some go to South Africa. What about the large number of British subsidiaries in South Africa? The directors of the parent companies in London are also directors of the subsidiaries in South Africa. They may be paid £3,000, £4,000 or £5,000 a year as directors of South African companies; and the rate of tax in South Africa may be 30 per cent. or 40 per cent. They do not have to remit that income here. They pay their South African tax and they get a substantial marginal benefit, a much greater benefit than they would get if that income were taxable on the horizon principle. The oil companies use the Middle East for this purpose.

No one would suggest that some directors do not work hard for this purpose. Other directors fulfil their obligations, possibly, by flying to the Caribbean and staying there for a month and attending a few board meetings, or by going to South Africa and seeing to the company's trade there. For that they draw their remuneration. The Inland Revenue has no way of knowing whether the remuneration is legitimate and whether it is commensurate with the work that the director performs.

I hope that the Government will not take too long about reviewing this matter. I do not believe that there is any great problem. The only problem is that many of the directors of most of the major companies which contributed to the Tory Party before the last General Election benefit from this rule. Most of the companies that contributed to the Tory Party and most of the companies with international trade have directors or subsidiaries abroad that benefit. Those who are directors of foreign subsidiaries benefit directly from this rule.

As the General Election gets closer and as the treasurer of the Tory Party goes round the city looking for money for these companies, we shall see whether in next year's Finance Act the remittance basis will be changed. I do not believe that these people will invest in the Tory Party if they believe that their nest egg will be destroyed.

The Prime Minister's credibility is destroyed. He said that he would reduce prices at a stroke. He said that he would not take Britain into the European Economic Community without the full-hearted support of the British people. He has now confessed that the face of capitalism is unacceptable. We shall see what the Government do about these remittance directors. If they fail to act now the Prime Minister's credibility, like the £sterling, will continue to go down.

Mr. Dalyell

The Chancellor of the Exchequer—I am sorry that he is absent at present—has a habit of answering questions that are materially different from those that were asked. I think that he knew perfectly well that the question of mine that he answered just now was fundamentally different from the question that was asked.

The question that was asked concerned compensation paid to the right hon. Member for Streatham (Mr. Sandys). We take this only as an example. I would rather have it that it was not personal, but this is an example. The question was not—."Did the Chancellor know about it?"—because I know full well, and all of my hon. Friends know full well, that the Chancellor does not have this knowledge. Of course we accept that explanation. The question which was asked—I put it again to the Chief Secretary—was simply this: Did the Inland Revenue know about it? Surely, the Chancellor can tell us whether the Revenue knew. [Interruption.] If that be the situation, the Chancellor has no right to give the House a long and complicated argument to the effect, as I interpreted it, that all is well in the best of all possible worlds. That whole passage of his speech, if that intervention from the hon. and learned Member for Dover (Mr. Peter Rees) is right, was irrelevant.

Mr. Patrick Jenkin

As I do not intend to take the time of the House in replying to this short debate, perhaps I could answer the hon. Gentleman's question. That, too, would be covered by the Inland Revenue's oath of secrecy. The Revenue would not even be entitled to tell him whether it knew. I should have thought that the House would accept that that must be right in relation to the confidentiality of individual taxpayers' affairs.

Mr. Dalyell

Then we are operating in the dark. If that is the situation which obtains in this country, the Mrs. Summerfields of this world have some right to their discontent.

Mr. Joel Barnett

I emphasise what my hon. Friend the Member for West Lothian (Mr. Dalyell) has just said, that the examples used have been used only as examples. They happen to come from a case which caught public attention, to some extent because of the Prime Minister's own words, and none of us on this side—certainly not my right hon. Friend the Member for Leeds, East (Mr. Healey)—would expect the Chancellor to know about individual cases. It is worth adding, I think, that we should not have known of that case if there had not been a boardroom row.

I found the Chancellor's speech very interesting, because he told us, in effect, that he does not know the extent of any avoidance, or whether there is any at all. He does not know how many others might or might not be trying to avoid tax. He does not even know whether the right hon. Member for Streatham (Mr. Sandys) was trying to avoid tax.

We do not know whether there is a large or a small number involved in this sort of practice. We do not know whether it would make a great difference to the income tax yield if the law were changed as we suggest. Apparently, the Chancellor just does not know. What I find remarkable is that he tells us that he is not even aware of the background and circumstances underlying this sort of tax avoidance. It may only be a very small number—

Mr. Patrick Jenkin

With respect, that was not what my right hon. Friend said. He said—I reiterated it a moment ago in answer to the hon. Member for West Lothian (Mr. Dalyell)—that no Treasury Minister is entitled to ask or to be told the details of any individual case. He is not entitled to ask questions about an individual case. The hon. Gentleman is putting words into my right hon. Friend's mouth.

Mr. Barnett

This is too absurd. My right hon. Friend made the matter absolutely clear. What I find so remarkable is that it is possible that there is an enormous amount of tax avoidance going on in this way—I do not know the extent of it, but it is possible that an enormous amount is going on—but the Chancellor is not even aware that there is any tax avoidance.

The issue goes far deeper than whether the Prime Minister considers these things to be the unacceptable and unpleasant face of capitalism, or whether he and the Chancellor are concerned with the abuse of the system. What we are concerned with here is the system. It is not enough to stop the abuse. I do not know whether the Chancellor meant that if the right hon. Gentleman had taken only £1,000 instead of £50,000, and the board had approved it, that would have been all right. But if that be what he is saying, we do not agree. We do not think it right for any British taxpayer resident in this country so to be able to manipulate his tax affairs as to pay no tax at all, or very little, by arranging for his income to be untaxed through receiving it in the Cayman Islands or any of the other tax havens.

I do not know—I agree with the Chief Secretary to that extent—but what I find remarkable is that the Chancellor himself does not know. We are not talking about those who work abroad and are not resident in this country, whether British or otherwise. Such people are not and would not be allowed into tax. We are talking about those who work abroad regularly while UK residents and taxpayers.

Mr. Dennis Skinner (Bolsover)

Among the many groups of people who come into this category, is my hon. Friend thinking particularly of Members of this House who go across to the Continent as a result of our entry into the Common Market and who are now paid as Members of the European Assembly? Is he thinking in terms of those people salting their money away in Jersey or some other tax haven?

Mr. Barnett

To be perfectly honest that is not what I had in mind but I leave my hon. Friend to make his point perhaps on another occasion.

I accept that not all moneys earned abroad by people working abroad and not remitted are free from tax. Of course that is the case. This is covered by an involved and complicated section of our tax laws. But if anybody believes that there are British taxpayers who arrange to have their earnings sent to the Cayman Islands just because they like the Cayman Islands he will believe anything. I certainly do not believe it, but if the Chancellor and the Prime Minister do, what on earth were they talking about? I asked the Prime Minister once what he meant about the unpleasant and unacceptable face of capitalism but somehow he managed to avoid—one could even say evade—the question.

I am aware of the recommendation of the Royal Commission, but I am also aware of all the problems that the Chancellor spelt out for us, problems of foreign workers and so on. But it is absurd to suggest that clauses could not be devised in the Finance Bill to safeguard that element in our taxpaying system.

It is remarkable for the Chancellor to tell us that because something was contained in the Royal Commission Report therefore something contained in the Finance Act 1956 must be right. Anybody would believe that once we put Finance Bills on the Statute Book we never amended them. It is incredible that the Chancellor should believe that because it was true in 1956 it should remain so for all time, because that appeared to be his argument. He referred to the cricketer who pays tax in this country having toured abroad and he asked why that man should have to pay tax on his earnings. Why should a man in this country who works hard and pays tax on every penny of overtime pay that tax? He does, however, and we say that residents in this country—British taxpayers—should pay British tax on earnings wherever they are earned. Of course, there are exceptions. There are such things as unremittable income, but the Chancellor told us about compensation which may not be taxable.

If the £130,000 had been received—and it would have been if the board had approved the payment—and if it had been paid into the Cayman Islands, I assume that someone had worked out a very careful scheme to deal with it. I am under no illusions about that. I doubt if the right hon. Gentleman in question suddenly hit upon the idea of paying £130,000 into the Cayman Islands. I have no doubt that there are fine tax lawyers advising Lonrho and any other British company that has subsidiaries abroad. As has been pointed out, a large number of British companies have subsidiaries abroad.

9.0 p.m.

One of the arguments might well be that those taxpayers who go abroad to do some work part-time during the course of the year would not be prepared to do it unless it were tax free. It would be sad if our cricketers decided not to do a tour of the West Indies or of Australia if they had to pay tax on it, but we should have to bear with that in order to make matters equal with those taxpayers who pay tax on every penny they earn. It cannot be right for one United Kingdom taxpayer to be taxed less than another for a normal week because he happens to be working for that week outside the United Kingdom.

What was odd about the Chancellor's speech was that he did not refer at any time to the word "abuse". He did not even acknowledge that it might just be possible that there is abuse of the remittance system. I doubt whether he would deny that there is abuse of the remittance system, because of course there is. Everyone who has anything to do with it knows that there is. I may add that I do not blame those who, for professional reasons, advise how to do this sort of thing. That is one of the jobs for which they turn an honest penny, one might say. I doubt whether any hon. Member does not wish to avoid as much tax as he can. I doubt whether any hon. Member would refuse to take out a life assurance policy which would help him to avoid taxation. I would not blame him.

But our function as legislators should be to ensure that the tax system does not lend itself to the maximum tax avoidance. It is hypocritical of the Prime Minister and the Chancellor of the Exchequer to talk of the unpleasant and unacceptable face of capitalism when the Chancellor creates a tax avoidance paradise when he once again allows loan interest to be allowable against tax. If he is not aware of that kind of tax avoidance, let him go into the tax counsellors' chambers not so far from here or speak to some of his hon. Friends who are perhaps more in touch with some of these matters. If he does, he will learn what sort of tax avoidance he has created.

But what is particularly amazing is that the right hon. Gentleman did not in any way deal even with the amendments that have been allowed as being in order. Many of our amendments on the Order Paper are out of order because the right hon. Gentleman refused to put them in order by putting down the necessary financial resolutions, which, as we have seen earlier, he could easily have done. But it appears that now he is only just beginning to learn that there is the possibility of tax avoidance in the remittance system.

It should not take the right hon. Gentleman too long to learn just how much goes on. Our amendments which are in order would help him to learn rather more quickly because we seek to ensure that the Inland Revenue would have the maximum possible information. We do not consider that to be sufficient, however. Nor do we consider it sufficient that this matter should be dealt with by the Companies Act. It is right that the Act should deal with one aspect but that is not the only aspect of the matter. The real problem here is the extent of the abuse of a tax system relating to remittances.

That is a very complicated section of our tax law but that does not mean, just because it is complicated, that we should leave it as it is. If at the end of the day we have to amend that law and a few people suffer because of that amendment, I for my part would accept that in order to have a much more equitable tax system which taxed those under PAYE in no more harsh way than the rest.

However, these two new clauses would mean at least giving the Inland Revenue information about whether a taxpayer has income earned abroad and not remitted it, because, as the Chancellor himself said, it may be the situation that some taxpayers have arranged schemes to earn some money abroad and pay it into the Cayman Islands or elsewhere but have not prepared the schemes adequately. The Revenue would know nothing at all

about it. It would not know anything about it if the moneys were received by a British taxpayer who went abroad and earned it not only from a British subsidiary abroad but from a foreign company abroad. There would be no way whatsoever of the Inland Revenue knowing about it. These two clauses would at least give the Inland Revenue that power to know.

I would urge hon. Members to vote for new Clause No. 2 and new Clause 54. I trust that these new clauses on information will be seen as symbolic telling the Chancellor this is but a first step. We on this side of the House certainly want a fundamental change in the tax system. Tonight we are talking only about this clause, but the Chancellor must surely recognise that it is a major part of any incomes policy. It is outrageous to expect an ordinary worker to be satisfied with £1 plus 4 per cent. less 30 per cent. tax knowing that this sort of thing is going on. Taxpayers will want maximum disclosure. If there is any chance of persuading ordinary workers to accept restraint they will need to know that that restraint is equally shared. I hope that, for a start, these clauses are accepted.

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

The House divided: Ayes 221, Noes 248.

Division No. 193.]	AYES	[9.8 p.m.
Abse, Leo	Concannon, J. D.	Ewing, Harry
Albu, Austen	Crawshaw, Richard	Faulds, Andrew
Allaun, Frank (Salford, E.)	Cronin, John	Fernyhough, Rt. Hn. E.
Archer, Peter (Rowley Regis)	Crossman, Rt. Hn. Richard	Fisher, Mrs. Doris (B'ham, Ladywood)
Armstrong, Ernest	Cunningham, G. (Islington, S.W.)	Fitch, Alan (Wigan)
Ashton, Joe	Cunningham, Dr. J. A. (Whitehaven)	Fletcher, Ted (Darlington)
Atkinson, Norman	Dalyell, Tam	Ford, Ben
Bagier, Gordon A. T.	Davidson, Arthur	Forrester, John
Barnes, Michael	Davies, Denzil (Llanelly)	Fraser, John (Norwood)
Barnett, Joel (Heywood and Royton)	Davies, G. Elfed (Rhondda, E.)	Freeson, Reginald
Baxter, William	Davies, Ifor (Gower)	Galpern, Sir Myer
Benn, Rt. Hn. Anthony Wedgwood	Davis, Clinton (Hackney, C.)	Gilbert, Dr. John
Bennett, James (Glasgow, Bridgeton)	Davis, Terry (Bromsgrove)	Ginsburg, David (Dewsbury)
Bidwell, Sydney	Deakins, Eric	Grant, John D. (Islington, E.)
Bishop. E. S.	Delargy, Hugh	Griffiths, Eddie (Brightside)
Booth, Albert	Dell, Rt. Hn. Edmund	Hamilton, James (Bothwell)
Boothroyd, Miss B. (West Brom.)	Dempsey, James	Hamilton, William (Fife, W.)
Boyden, James (Bishop Auckland)	Doig, Peter	Hamling, William
Broughton, Sir Alfred	Dormand, J. D.	Hannan, William (G'gow, Maryhill)
Brown, Robert C. (N'c'tle-u-Tyne, W.)	Douglas, Dick (Stirlingshire, E.)	Hardy, Peter
Brown, Hugh D. (G'gow, Provan)	Douglas-Mann, Bruce	Harrison, Walter (Wakefield)
Brown, Ronald (Shoreditch & F'bury)	Duffy, A. E. P.	Hart, Rt. Hn. Judith
Buchanan, Richard (G'gow, Sp'burn)	Dunn, James A.	Hattersley, Roy
Callaghan, Rt. Hn. James	Dunnett, Jack	Hatton, F.
Cant, R. B.	Eadie, Alex	Healey, Rt. Hn. Denis
Carter, Ray (Birmingh'm, Northfield)	Edelman, Maurice	Hefter, Eric S
Carter-Jones, Lewis (Eccles)	Edwards, William (Merloneth)	Horam, John
Castle, Rt. Hn. Barbara	Ellis, Tom	Houghton, Rt. Hn. Douglas
Clark, David (Colne Valley)	English, Michael	Howell, Denis (Small Heath)
Cohen, Stanley	Evans, Fred	Huckfleld, Leslie
		Hughes, Rt. Hn. Cledwyn (Anglesey)
Hughes, Mark (Durham)	Mason, Rt. Hn. Roy	Sillars, James
Hughes, Robert (Aberdeen, N.)	Meacher, Michael	Silverman, Julius
Hughes, Roy (Newport)	Mellish, Rt. Hn. Robert	Skinner, Dennis
Hunter, Adam	Mendelson, John	Small, William
Irvine, Rt. Hn. Sir Arthur (Edge Hill)	Miller, Dr. M. S.	Smith, Cyril (Rochdale)
Janner, Greville	Milne, Edward	Smith, John (Lanarkshire, N.)
Jay, Rt. Hn. Douglas	Mitchell, R. C. (S'hampton, Itchen)	Spearing, Nigel
Jenkins, Hugh (Putney)	Molloy, William	Spriggs, Leslie
John, Brynmor	Morgan, Elysian (Cardiganshire)	Stallard, A. W.
Johnson, James (K'slon-on-Hull, W.)	Morris, Alfred (Wythenshawe)	Steel, David
Johnson, Walter (Derby, S.)	Morris, Charles R. (Openshaw)	Stewart, Donald (Western Isles)
Jones, Barry (Flint, E.)	Moyle, Roland	Stewart, Rt. Hn. Michael (Fulham)
Jones, Dan (Burnley)	Mulley, Rt. Hn. Frederick	Stoddart, David (Swindon)
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)	Murray, Ronald King	Stonehouse, Rt. Hn. John
Jones, T. Alec (Rhondda, W.)	Oakes, Gordon	Stott, Roger (Westhoughton)
Kaufman, Gerald	Ogden, Eric	Strang, Gavin
Kelley, Richard	O'Malley, Brian	Summerskill, Hn. Dr. Shirley
Kerr, Russell	Oram, Bert	Swain, Thomas
Kinnock, Neil	Orme, Stanley	Thomas, Jeffrey (Abertillery)
Lamborn, Harry	Oswald, Thomas	Tinn, James
Lamond, James	Paget, R. T.	Tomney, Frank
Latham, Arthur	Pardoe, John	Tope, Graham
Lawson, George	Parker, John (Dagenham)	Torney, Tom
Leadbitter, Ted	Parry, Robert (Liverpool, Exchange)	Tuck, Raphael
Lee, Rt. Hn. Frederick	Pavitt. Laurie	Urwin, T. W.
Lewis, Arthur (W. Ham, N.)	Pendry, Tom	Varley, Eric G.
Lewis, Ron (Carlisle)	Perry, Ernest G.	Wainwright, Edwin
Lipton, Marcus	Prentice, Rt. Hn. Reg.	Walden, Brian (B'm'ham, All Saints)
Lomas, Kenneth	Prescott, John	Walker, Harold (Doncaster)
Loughlin, Charles	Price, William (Rugby)	Wallace, George
Lyon, Alexander W. (York)	Radice, Giles	Watkins, David
Mabon, Dr. J. Dickson	Reed, D. (Sedgefield)	Weitzman, David
McBride, Neil	Rees, Merlyn (Leeds, S.)	White, James (Glasgow, Pollok)
McCartney, Hugh	Rhodes, Geoffrey	Whitehead, Phillip
McElhone, Frank	Roberts, Albert (Normanton)	Whitlock, William
McGuire, Michael	Roberts, Rt. Hn. Goronwy (Caernarvon)	Willey, Rt. Hn. Frederick
Machin, George	Roderick, Caerwyn E.(Brc'n & R'dnor)	Williams, W. T. (Warrington)
Mackenzie, Gregor	Roper, John	Wilson, Alexander (Hamilton)
Mackie, John	Rose, Paul B.	Wilson, William (Coventry, S.)
McMillan, Tom (Glasgow, C.)	Ross, Rt. Hn. William (Kilmarnock)	Woof, Robert
McNamara, J. Kevin	Rowlands, Ted
Melialieu, J. P. W. (Huddersfield, E.)	Sheldon, Robert (Ashton-under-Lyne)	TELLERS FOR THE AYES:
Marks, Kenneth	Shore, Rt. Hn. Peter (Stepney)	Mr. John Golding and
Marsden, F.	Short, Rt. Hn. Edward (N'c'tle-u-Tyne)	Mr. Donald Coleman.
Marshall, Dr. Edmund	Short, Mrs. Renée (W'hampton, N.E.)
NOES
Adley, Robert	Churchill, W. S.	Fox, Marcus
Alison, Michael (Barkston Ash)	Clark, William (Surrey, E.)	Fraser, Rt. Hn. Hugh (St'fford & Stone)
Archer, Jeffrey (Louth)	Clegg, Walter	Gardner, Edward
Astor, John	Cockeram, Eric	Gibson-Watt, David
Atkins, Humphrey	Cooke, Robert	Gilmour, Ian (Norfolk, C.)
Awdry, Daniel	Coombs, Derek	Gilmour, Sir John (Fife, E.)
Baker, W. H. K. (Banff)	Cooper, A. E.	Glyn, Dr. Alan
Barber, Rt. Hn. Anthony	Cordle, John	Gorst, John
Batsford, Brian	Corfield, Rt. Hn. Sir Frederick	Gower, Raymond
Beamish, Col. Sir Tufton	Cormack, Patrick	Grant, Anthony (Harrow, C.)
Bell, Ronald	Costain, A. P.	Gray, Hamish
Bennett, Sir Frederic (Torquay)	Critchley, Julian	Green, Alan
Bennett, Dr. Reginald (Gosport)	Crouch, David	Grieve, Percy
Benyon, W.	Davies, Rt. Hn. John (Knutsford)	Griffiths, Eldon (Bury St. Edmunds)
Berry, Hn. Anthony	d'Avigdor-Goldsmid, Maj.-Gen. Jack	Grylls, Michael
Biffen, John	Dean, Paul	Gummer, J. Selwyn
Biggs-Davison, John	Deedes, Rt. Hn. W. F.	Gurden, Harold
Boardman, Tom (Leicester, S.W.)	Digby, Simon Wingfield	Hall, Miss Joan (Keighley)
Body, Richard	Dixon, Piers	Hall-Davis, A. G. F.
Boscawen, He. Robert	du Cann, Pt. Hn. Edward	Hannam, John (Exeter)
Bossom, Sir Clive	Dykes, Hugh	Harrison, Col. Sir Harwood (Eye)
Bowden, Andrew	Eden, Rt. Hn. Sir John	Haselhurst, Alan
		Hastings, Stephen
Bray, Ronald	Edwards, Nicholas (Pembroke)	Hawkins, Paul
Brew's, John	Elliot, Capt. Walter (Carshalton)	Hayhoe, Barney
Brinton, Sir Tatton	Elliott, R. W. (N'c'tle-upon-Tyne, N.)	Hicks, Robert
Brocklebank-Fowler, Christopher	Emery, Peter	Higgins, Terence L.
Brown, Sir Edward (Bath)	Eyre, Reginald	Hiley, Joseph
Bruce-Gardyne, J.	Fell, Anthony	Hill, John E. B. (Norfolk, S.)
Buck, Antony	Fenner, Mrs. Peggy	Hill, James (Southampton, Test)
Bullus, Sir Eric	Finsberg, Geoffrey (Hampstead)	Holland, Philip
Burden, F. A.	Fisher, Nigel (Surbiton)	Holt, Miss Mary
Butler, Adam (Bosworth)	Fletcher-Cooke, Charles	Hornby, Richard
Carlisle, Mark	Fookes, Miss Janet	Hornsby-Smith, Rt. Hn. Dame Patricia
Carr, Rt. Hn. Robert	Fortescue, Tim	Howell, David (Guildford)
Channon, Paul	Foster, Sir John	Howell, Ralph (Norfolk, N.)
Chapman, Sydney	Fowler, Norman	Hunt, John

Hutchison, Michael Clark	Montgomery, Fergus	Simeons, Charles
Iremonger, T. L.	More, Jasper	Sinclair, Sir George
Irvine, Bryant Godman (Rye)	Morgan, Geraint (Denbigh)	Skeet, T. H. H.
James, David	Morgan-Giles, Rear-Adm.	Smith, Dudley (W'wick & L'mington)
Jenkin, Patrick (Woodford)	Mudd, David	Speed, Keith
Jennings, J. C. (Burton)	Nabarro, Sir Gerald	Spence, John
Johnson Smith, G. (E. Grinstead)	Nicholls, Sir Harmer	Sproat, Iain
Jones, Arthur (Northants, S.)	Noble, Rt. Hn. Michael	Stainton, Keith
Jopling, Michael	Normanton, Tom	Stanbrook, Ivor
Joseph, Rt. Hn. Sir Keith	Nott, John	Stewart-Smith, Geoffrey (Belper)
Kaberry, Sir Donald	Onslow, Cranley	Stodart, Anthony (Edinburgh, W.)
Kellett-Bowman, Mrs. Elaine	Oppenhelm, Mrs. Sally	Stokes, John
King, Tom (Bridgwater)	Osborn, John	Stuttaford, Dr. Tom
Kinsey, J. R.	Owen, Idris (Stockport, N.)	Sutcliffe, John
Kirk, Peter	Page, Rt. Hn. Graham (Crosby)	Tapsell, Peter
Knight, Mrs. Jill	Page, John (Harrow, W.)	Taylor, Edward M. (G'gow, Cathcart)
Knox, David	Parkinson, Cecil	Taylor, Frank (Moss Side)
Lamont, Norman	Percival, Ian	Taylor, Robert (Croydon, N.W.)
Lane, David	Peyton, Rt. Hn. John	Tebbit, Norman
Langford-Holt, Sir John	Pink, R. Bonner	Temple, John M.
Le Merchant, Spencer	Pounder, Rafton	Thomas, John Stradling (Monmouth)
Lewis, Kenneth (Rutland)	Powell, Rt. Hn. J. Enoch	Thomas, Rt. Hn. Peter (Hendon, S.)
Lloyd, Ian (P'tsm'th, Langstone)	Price, David (Eastleigh)	Thompson, Sir Richard (Croydon, S.)
Luce, R. N.	Prior, Rt. Hn. J. M. L.	Trew, Peter
McAdden, Sir Stephen	Proudfoot, Wilfred	Tugendhat, Christopher
MacArthur, Ian	Pym, Rt. Hn. Francis	Turton, Rt. Hn. Sir Robin
McCrindle, R. A.	Ramsden, Rt. Hn. James	Vaughan, Dr. Cerard
McLaren, Martin	Rawlinson, Rt. Hn. Sir Peter	Vickers, Dame Joan
Maclean, Sir Fitzroy	Redmond, Robert	Waddington, David
McMaster, Stanley	Reed, Laurance (Bolton, E.)	Weider, David (Clitheroe)
Macmillan, Rt. Hn. Maurice(Farnham)		Walker, Rt. Hn. Peter (Worcester)
McNair-Wilson Michael	Rees, Peter (Dover)	Walker-Smith, Rt. Hn. Sir Derek
McNair-Wilson, Patrick (New Forest)	Rees-Davies, W. R.	Wall, Patrick
Madel, David	Renton, Rt. Hn. Sir David	Ward, Dame Irene
Marten, Neil	Rhys Williams, Sir Brandon	Warren, Kenneth
Mather, Carol	Ridley, Hn. Nicholas	Weatherill, Bernard
Maude, Angus	Ridsdale, Julian	White, Roger (Gravesend)
Maudling, Rt. Hn. Reginald	Roberts, Michael (Cardiff, N.)	Wlggin, Jerry
Mawby, Ray	Roberts, Wyn (Conway)	Wilkinson, John
Maxwell-Hyslop, R. J.	Rodgers, Sir John (Sevenoaks)	Winterton, Nicholas
Meyer, Sir Anthony	Rossi, Hugh (Hornsey)	Wolrige-Gordon, Patrick
Miscampbell, Norman	Rost, Peter	Wood, Rt. Hn. Richard
Mitchell, Lt.-Col. C. (Aberdeenshire, W)	Russell, Sir Ronald	Worsley, Marcus
Mitchell, David (Basingstoke)	Scott, Nicholas	Wylie, Rt. Hn. N. R.
Moate, Roger	Scott-Hopkins, James
Money, Ernie	Shaw, Michael (Sc'b'gh & Whitby)	TELLERS FOR THE NOES:
Monks, Mrs. Connie	Shelton, William (Clapham)	Mr. Kenneth Clarke and
Monro, Hector	Shersby, Michael	Mr. Oscar Murton.

Question accordingly negatived.