EXPENSES ALLOWANCES TO DIRECTORS AND OTHERS (Hansard, 16 July 1974)

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

§ Mr. Deputy Speaker
With this new Clause we are to discuss new Clause 15—Expenses returns [P 11 D].

§ Dr. Gilbert
The effect of the clause is that the special legislation relating to taxation of expenses allowances and benefits in kind will, for the tax year 1975–76 and subsequent years, apply to employees whose earnings, including expenses and benefits in kind, are at the rate of £5,000 a year or more rather than £2.000 a year as at present.

§ Mr. Brian Sedgemore (Luton, West)
On a point of order, Mr. Deputy Speaker. Can you help the House in the matter of the selection of the clause? In the Committee. of which I was a member, a similar clause was tabled by the hon. Member for Worthing (Mr. Higgins) and some of his hon. Friends. They sought leave to withdraw it, but were refused. and the clause was emphatically voted down by the Committee. In those circumstances. I wonder why the Chair has selected an amendment which hon. Members have shown they do not want.

§ Mr. Deputy Speaker
Mr. Speaker has discretion in the selection of amendments. In its wisdom, the House does not require him to explain why he selects any amendment.

§ Mr. Sedgemore
Further to that point of order. Are we not entitled to expect Mr. Speaker to protect back benchers from the tyranny of the two Front Benches when the matter has clearly been debated and decided in Committee?

§ Mr. Deputy Speaker
There is no need for us to spend much time on this matter. There is plenty of other business before us. The position is quite clear. Mr. Speaker has discretion, and he has exercised it. The House gave him the discretion, and now we had better accept his judgment.

§ Dr. Gilbert
I think that in a moment can come to some of the points that are legitimately concerning my hon. Friend the Member for Luton, West (Mr. Sedgemore). My hon. Friend the Chief Secretary and I gave assurances in Committee that we would introduce on Report a new Clause with the effect of new 298 Clause 9, and we are honouring that commitment.
The effect is to raise the limit for employees from £2,000 a year to £5,000 a year. For directors, however, the present legislation will continue to apply, irrespective of the level of their earnings.
I refer briefly to new Clause 15, tabled by the hon. Member for Basingstoke (Mr. Mitchell) and two of his hon. Friends. The hon. Gentleman will see that the Government's clause has the same effect as his. I hope that he will accept our's as the best way to proceed in this matter.
The £2,000 limit was fixed as long ago as 1948. Originally, we considered whether to introduce a clause of this kind ab initio. We recognised the need to raise the limit because of the quite unnecessary administrative complications involved for companies of all kinds and the fact that it operated below the average industrial wage.
Having said that, I hope that my hon. Friend the Member for Luton, West (Mr. Sedgemore) will accept my assurance that we are not to be taken as agreeing that the increase in the limit from £2,000 to £5,000 leaves the law in a satisfactory state. The previous Government were undertaking a review of benefits in kind. We are undertaking just such a review ourselves. If, on consideration, we think it proper that, irrespective of the level of his earnings, an employee should be taxed on certain benefits which after all are only another form of remuneration, we shall have no hesitation in introducing the necessary amendments to the law for the House to consider and, we hope, to bring into effect. It is not our intention to open the way to large-scale tax avoidance through payments in kind rather than payments in cash or by cheque.
I hope that that makes the position clear to my hon. Friend the Member for Luton, West. We would have preferred to introduce the results of our review of benefits in kind and the substantive amendment that we make in new Clause 9 simultaneously. However, circumstances did not work out conveniently enough to enable us to do that. In any event, I do not think that any harm will come from taking this clause first, and I assure my hon. Friend that we are proceeding with our review with all dispatch.

§ Mr. David Mitchell (Basingstoke)
I welcome the new clause and the fact that the Government have tabled it in the form that they have. It is very similar to new Clause 15 which I and a number of my hon. Friends who are interested in the problems of small businesses—in which I declare an interest—sought to move. The Government are to be congratulated on having brought the matter forward themselves. As I understand it, the clause makes no change in the taxable position of the persons concerned, but it removes a substantial load from the shoulders of company secretaries and others who have to sign returns annually. The clause is particularly welcome for that reason.

§ Mr. Michael Latham (Melton)
I wish to associate myself with my hon. Friend and cousin the Member for Basingstoke (Mr. Mitchell) regarding the P11D change which is now before the House. This new clause gives me a degree of personal pleasure.
To my certain knowledge a proposal of this kind has been put forward every year by the National Federation of Building Trades Employers, with which I was associated before coming to this House, in its Budget representations since 1967. I have always said that on the first occasion on which a proposal is put forward it is said to be impossible, on the second occasion it is said to be difficult, on the third that it is worthy of consideration, and on the fourth or fifth it is accepted. I therefore say to organisations outside this House, "Whenever you put forward representations to successive Chancellors of the Exchequer, keep trying. One day, you may win."

§ Mr. Sedgemore
I make no apology for saying that I regret that the Chancellor of the Exchequer has tabled this amendment, which flies in the face of the decision of the Committee and in the face of every single Government supporter who served on that Committee, including my hon. Friends the Chief Secretary and the Financial Secretary. It seems odd that a provision of this kind should be introduced before the results of the Government's general review are known, and it was made clear in Committee that it was the Will of the Committee that an amendment of this kind should not be moved by the Government on Report.
300 All lawyers know that design and calculation are entirely different. I accept that it may not be the Government's design that payments in kind should replace increments in salaries or wages. However, it seems to me that the clause is calculated to do that and that people who try to use it will do so easily. We know that the accountancy profession will help people to use it in that fashion.
There are of course exceptions in the accountancy profession, some of whom sit on the Treasury Bench today, but it seems difficult to invite millions of workers to accept restraint when we are introducing such a clause. To some extent, it sums up the rank hypocrisy with which we approach different sections of our society. Apparently, even we find it difficult to take the right decisions in these matters.

§ Mr. Terence Higgins (Worthing)
The Opposition welcome the amendment, which is in conformity with the undertaking given in Committee. We acknowledge that the Government have carried out their promise. It was in the light of that that my right hon. Friend the Member for Carshalton (Mr. Carr) and I decided that it would be inappropriate to vote on this issue, and I am sure that it is right that the Government should have taken the eminently sensible view that they have. We understand that they are carrying out a broader review, but the clause will result in considerable administrative savings, and that is a situation towards which we ought to work. It is wrong to suppose that there are not some members of trade unions who will benefit from the change. In view of that, it cannot be regarded as a partisan measure.

§ Mr. Gwilym Roberts (Cannock)
I support the doubts expressed so ably by my hon. Friend the Member for Luton, West (Mr. Sedgemore) about the introduction of this clause on Report. I accept the Financial Secretary's remark that it may not open the door to the use of benefits in kind and to large-scale tax avoidance, but there is no doubt that the feeling amongst rank and file trade unionists will be that the door is being opened by a provision of this kind.
If there was any need for such a provision, in my view it would have been wiser to have delayed it till after the completion of the general review of payments 301 in kind. I feel strongly that ordinary workers on the shop floor will be worried when they see a move upwards in the limit of 150 per cent., and that they will want to know who will be cashing in on it. It may not happen, but it is very unwise in industrial relations terms to put such a provision on the statute book at this stage.

§ Dr. Gilbert
I believe I can set my hon. Friends' very legitimate concern at rest on two points. My hon. Friend the Member for Luton, West (Mr. Sedgemore) suggested that my hon. Friend the Chief Secretary and I voted against such a clause in Standing Committee and were bringing the same clause to the House now on Report. In fairness to my hon. Friend and myself, this is not precisely the case.
In Standing Committee we were voting against a different clause. That clause in Committee—and this is a very important point—sought to make relief available with respect to the current tax year, and this was for the Revenue administratively absolutely impossible. The clause we are now putting forward is one which my hon. Friend and I then undertook to bring forward with regard to future tax years. That is the difference between the two, and we have been in no way inconsistent in what we said in Committee and now on this matter.
My hon. Friend the Member for Cannock (Mr. Roberts) expressed fears about the growth of tax avoidance through this clause. It makes no change whatsoever under tax law to the liability for tax of any individual. It really relates to the reporting requirements of firms to the Revenue. My hon. Friend says he fears that tax avoidance may open up as a result of this new clause. I can only give him an assurance that we are prosecuting this review of benefits in kind with great diligence and thoroughness. If there should be a General Election before October and we win it there will not be any extension of tax abuse in this matter. If we do not win the election it will be beyond my hon. Friend's power and mine to do anything about it.