Commons Sitting of 22 January 1975

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
ORAL ANSWERS TO QUESTIONS
  SCOTLAND

    North Sea Oil (Aberdeenshire)
    Mr. Fairgrieveasked the Secretary of State for Scotland if he will take steps to ensure that ratepayers in Aberdeenshire do not have to meet the extra finance that will be required to produce the necessary infrastructure for the new oil and oil-related industries moving into the area.
    The Minister of State, Scottish Office (Mr. Bruce Millan): We have already done so, as is explained in paragraph 27 of the report—published on 20th January—on the Rate Support Grant (Scotland) Order 1975.
    Mr. Fairgrieve: I thank the Minister for that reply. When does he think the first payments for this purpose will be made? When they are made will he take into account the moneys already spent and being spent by this local authority for these purposes?
    Mr. Millan: The payments will start in 1975–76 and will, like the rate support grant generally, be paid throughout the year. It is not possible to take account of expenditure before 1975–76, except to the extent that any continuing commitments taken on will affect expenditure in that year. A good deal of it is capital expenditure, with continuing revenue commitments which, from 1975–76 onwards, will come in for the help that will be given.
    Mr. Grimond: I agree that the Government have done something in this regard but does the Minister agree that a great deal more needs to be done?
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    Will he represent to the Chancellor and others that if the Government have large sums of money for investment in connection with oil they would do better to address at least a large proportion of it to infrastructure rather than to the highly specialist oil business, and get their money from the oil business by taxation?
    Mr. Millan: That is a rather different and wider point. The right hon. Gentleman knows that oil-related infrastructure developments already receive preference in Government allocation of public expenditure. The Question is directed to seeing that this additional expenditure does not impose undue burdens on the ratepayers. We have taken care of that.
    Mr. Buchanan-Smith: The hon. Gentleman said on Monday, and repeated again today, that this expenditure related mainly to loan charging. Has he any idea of the total amount of capital expenditure which this rate support grant will generate in this area?
    Mr. Millan: I cannot give precise totals until we see all the returns and analyse what is eligible for help. The sum of £2½ million is provided for in the order concerned. The level of grant on the expenditure which we consider eligible for this additional help will be a high percentage, as I hope will be clear when I am able to make a final announcement shortly.
    Mr. MacCormick: I agree with the Minister and his right hon. Friend over their decision about oil-related developments in Argyll, but is the hon. Gentleman aware that I would welcome their assurance that equal attention will be paid to the question of infrastructure in Argyll as compared with the North-East of the country?
    Mr. Millan: I can give that assurance. As the hon. Gentleman knows, we are already in touch with the county council about the particular matters affecting his constituency. We are anxious to see that infrastructure developments go hand in hand with industrial developments in his and other areas.
    Mr. Sproat: Will the Minister say whether, under this measure, it will be possible to offset in whole or in part the cost of the desperately-needed lorry park for oil-related traffic in Aberdeen?
    Mr. Millan: I am not sure whether the local authority concerned included that in its return. If it did, it will receive consideration. I cannot commit myself at the moment.

    Truancy
    Mr. Dempseyasked the Secretary of State for Scotland what action he proposes to take following the report by the committee investigating truancy in Scottish schools; and if he will make a statement.
    The Under-Secretary of State for Scotland (Mr. Robert Hughes): The Pack Committee of Inquiry into Truancy and Indiscipline was set up in the late summer of last year and has not yet reported.
    Mr. Dempsey: Will my hon. Friend bear in mind that this problem has been a serious one for the past few years? Does he agree that it is due, among other things, to the shortage of teachers, the lack of an attractive curriculum for these young people aged from 15 to 16, and the slum school accommodation which they are expected to occupy? Would it not ease the problem immediately if the Secretary of State allowed such children to leave school on the day they turn 16? Would this not also help them to take up employment which they are frequently offered but lose because they have to wait until the official school-leaving date?
    Mr. Hughes: As my hon. Friend has recognised, the problems of truancy and indiscipline have many origins. As for the point that he makes about the leaving date, he will know that my right hon. Friend told my hon. Friend the Member for Dunfermline (Mr. Hunter) on 14th January that a review of school leaving dates is at present being undertaken.
    Sir John Gilmour: Has the Minister seen the report in today's Press about a large number of children—a number running into many hundreds—who have been taken up by the police in the borough of Lambeth while playing truant? Does he think that it would be a good thing to have a similar swoop in some Scottish cities?
    Mr. Hughes: I have seen the report. I would need to consider the matter before drawing any conclusions.

    Vandalism
    Mr. Galbraithasked the Secretary of State for Scotland if he has any proposals to curb vandalism.
    The Under-Secretary of State for Scotland (Mr. Harry Ewing): Such measures as the strengthening of the police force, crime prevention campaigns and the provision of better recreational facilities are valuable and important, but the greatest contribution to reducing this mischief would be a stronger sense of community responsibility, and this it is my object to encourage.
    Mr. Galbraith: Is not talk of community responsibility altogether too vague? Is not something much more positive wanted from the Government to deal with this great social evil? Why cannot the Minister consider the suggestion made by his hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey)—a suggestion which I have made in the House—that these guilty people should be made to help put right what they have disfigured? Will the hon. Gentleman consider that positive move towards overcoming this grave social evil?
    Mr. Ewing: The Government are fully aware of the problems caused by vandalism and have been vigilant in introducing new and helpful measures to deal with the problem, but in our view the hon. Gentleman's suggestion would not be helpful.
    Mr. Buchanan-Smith: With respect to the hon. Gentleman, is he not being rather complacent? Surely he should treat more seriously a suggestion made by both the Opposition and his hon. Friend. Is he aware that the Criminal Justice Act, which allows reparation by the offender, has been tried out in some areas of England and Wales with considerable success? Will he not do something about this, instead of sitting back and doing nothing?
    Mr. Ewing: There is certainly no complacency on my part, or on the part of the Government. We are very concerned about vandalism. Of that there can be no doubt. The figures of committals from the children's panels in Scotland are up by a substantial percentage, and most of those committals were as a result of

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    vandalism. It does not become the hon. Gentleman to say that no measures are being taken. The Government are very much aware of the problem of vandalism, and they are doing and will continue to do everything in their power to resolve it.

    Irvine New Town
    Mr. Lambieasked the Secretary of State for Scotland if he will pay an official visit to Irvine New Town.
    The Secretary of State for Scotland (Mr. William Ross): I have no immediate plans to do so, but look forward to the possibility at a convenient future date.
    Mr. Lambie: When my right hon. Friend decides to visit Irvine New Town, will he remember that his Minister of State and the Under-Secretary of State for Energy got lost several times when they last visited North Ayrshire, and that on the next day, again because of the bad roads in North Ayrshire, 14 Labour Members of Parliament took an hour and 40 minutes to go from Cambuslang to Largs, and missed an important appointment? When will the Secretary of State start the motorway link, from North Ayrshire to the M74 and the M8 to serve Hunterston and Irvine New Town, which was promised by both Conservative and Labour Governments? It is especially important now that oil-related developments are going to the area.
    Mr. Ross: If and when I visit the new town officially, my hon. Friend may take it that I shall not get lost. He probably knows my familiarity with the area. For my hon. Friend's information, I shall be there unofficially in a fortnight's time. Not everyone in Ayrshire is entirely agreed on the line which the motorway should take.
    Mr. Lambie: They are now.
    Mr. Ross: My hon. Friend has been in communication with my noble Friend the Minister of State on this subject, and he will be aware that we require much more hard information about the generation of traffic—it will not all be going from Irvine to Cambuslang—before we can embark on a massive project of this nature.
    Mr. Corrie: Is the right hon. Gentleman aware of the tremendous damage
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    caused by heavy wagons which have to use the old coastal road on their journey to Hunterston, and of the danger caused by the excessive speed of lorries going through West Kilbride? Will the right hon. Gentleman look into that?
    Mr. Ross: I am aware of the difficulties. There are always difficulties when a major project causes roads to be used for purposes for which they were never designed. This matter must be considered in future.
    Mrs. Bain: After the Secretary of State has visited Irvine New Town I shall be delighted if he will visit Cumbernauld New Town. I should like to discuss with him the question of employment for our young people—
    Mr. Speaker: Order. The hon. Lady may make statements to the Secretary of State on that occasion. Today she must ask a question.
    Mrs. Bain: Is the Secretary of State aware that in Cumbernauld young people have great difficulty in securing employment? There is only one job for every 40 girls leaving school, and one job for every 16 boys leaving school. The development corporation, the town council and I would welcome the opportunity to discuss this matter with him.
    Mr. Ross: I should be glad if the hon. Lady would put down a Question on that subject, but she had better be careful. She asked me to visit Cumbernauld after I had visited Irvine. I make no commitment, but I might visit Cumbernauld before visiting Irvine.

    Sports Council
    Mr. Monroasked the Secretary of State for Scotland what is the amount of grant that will be available to the Scottish Sports Council for 1975–76; and what increase this is on 1974–75.
    Mr. Robert Hughes: My right hon. Friend is still considering the matter and will announce a decision as soon as possible.
    Mr. Monro: That is disappointing news. By this time last year the sports council had been awarded a substantial grant by the Conservative Government. When does the chairman of the sports council hope to announce his decision on the inquiry into Hampden Park? Will the

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    Government commit themselves to giving official assistance towards the rebuilding of that important national stadium?
    Mr. Hughes: I understand that the report on the future of Hampden Park is expected in the spring. The committee is aware of the urgency and importance of the problems concerned. The Government will have to see what the report says and consider the financial implications before committing themselves to any specific grant.
    Mr. Michael Clark Hutchison: If there is any spare money going, would it not be better to put it into the grant-aided schools?

    Economic Affairs
    Mr. Teddy Taylorasked the Secretary of State for Scotland if he will publish a White Paper outlining his plans for the Scottish economy in 1975.
    Mr. William Ross: I have nothing to add to my reply to my hon. Friend the Member for South Ayrshire (Mr. Sillars) on 6th November.—[Vo1 880, c. 107.]
    Mr. Taylor: Is the Secretary of State aware that there is concern and alarm in Scotland about the almost daily reports of factory closures and extended short-time working? Has he the agreement of the Cabinet to an emergency package of measures if unemployment reaches an unacceptable level in Scotland?
    Mr. Ross: The answer to the first part of the supplementary question is "Yes, I am aware". To the second part of the supplementary question, the answer is "No". The hon. Gentleman will be aware of the plans that we have put forward about the Scottish Development Agency, the legislation for which we hope to get through the House in the present Session of Parliament if certain hon. Members do not obstruct the Government's legislative programme.
    Mr. Canavan: Does my right hon. Friend agree that one of the problems facing the Scottish economy is the lack of public accountability of private industrialists who are not slow to take advantage of public funds, such as Government grants and the regional employment premium and advance factories? Is he aware that in my constituency in the past few months four advance factories have been
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    closed, throwing more than 400 people out of work? What steps does the Secretary of State intend to take to make private industry more accountable to the Scottish work force?
    Mr. Ross: Accountability is one matter which we shall be discussing and hope to cover in the proposed Industry Bill.
    Mr. Younger: Is the Secretary of State aware of the vitally important part that a large number of small businesses play in Scotland's economy and the catastrophic effect on these businesses of the current proposals in the Finance Bill? Will the right hon. Gentleman summon a special meeting of the Scottish Economic Council, of which he is chairman, to discuss this before it is too late and small businesses have all gone under?
    Mr. Ross: On the matter of summoning a special meeting of the Scottish Economic Council, I do not know what the council is because, if the hon. Gentleman remembers rightly, the Conservative Government let it lapse. Things were going so well that the Tories obviously forgot about its existence.
    On the point which was raised about small businesses, I appreciate the important part they play in the development of the Scottish economy and I have made it my task to ensure that these firms take the initiative, in terms of expansion. This is one of the tasks which the SDA will be able to perform. We shall have for that purpose an instrument which we have not had hitherto in Scotland. I do not accept all the implications of the hon. Gentleman's remarks about the Finance Bill.
    Dr. Bray: Is my right hon. Friend aware that the announcement of new oil platform construction sites is maintaining the pace of oil-related developments in Scotland? Will he see that it is given greater depth when the Prime Minister visits Scotland next month, so that momentum is imparted to the steel and heavy engineering industries?
    Mr. Ross: There is no doubt that industry in Scotland, small and large, is playing a greater part in the opportunities afforded by oil developments. This is one of the most heartening features of the Scottish economy at present. I have seen figures showing that, directly and indirectly, the number of jobs

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    created in this respect is approaching 28,000.
    Mr. Crawford: Does the Secretary of State agree that one of the best ways of curing industrial problems today is to support the call made by the SNP for an easing of restrictions which the Bank of England has imposed on Scottish clearing banks, thus preventing those banks from making available as much resources as they would like to afford to Scottish industry, or is he content to see Scottish industry suffer from credit restrictions and from an economic medicine being administered for an economic illness which does not exist in Scotland?
    Mr. Ross: It is a pity that the hon. Gentleman, in his prepared supplementary question, did not take account of the fact that the Scottish banks have disowned the attitude of the SNP.

    List D Schools (Tayside)
    Mr. Doigasked the Secretary of State for Scotland what percentage of pupils in List D (approved) schools in the Tayside Region comes from other regions.
    Mr. Robert Hughes: Seventy-seven per cent.
    Mr. Doig: I thank my hon. Friend for that reply, although it is substantially different from the information which I was given in my region. Does he not agree that the transfer of large numbers of pupils away from the regions in which these schools are situated must cause considerable extra expense? Has he looked into the effects of a policy which has resulted in drawing away pupils from other areas, and does he think that the extra expense is justified?
    Mr. Hughes: It is the responsibility of the children's panels to decide where pupils in need of care and attention should go. My hon. Friend may be referring to the fact that expense is incurred by social workers going from one area to another to visit children within their responsibility. At present there are no reciprocal arrangements covering such activities. I shall consider putting these matters to the directors of social work departments to see whether unnecessary expense—and perhaps, more important, loss of valuable man hours—can be reduced.
    Mr. Russell Johnston: Does the hon. Gentleman agree that the basic problem lies in the List D places? Will he say when he will be in a position to offer a sufficient number of places because, unless action is taken the Social Work (Scotland) Act cannot be properly implemented?
    Mr. Hughes: It is true that there is a shortage of places, but the waiting list has been reduced a little. I have not the precise figures, and I do not disguise the fact that there is a shortage of List D places, but, as I have emphasised time and again, List D places are not the only answer when children are in difficulty. All kinds of avenues should be explored, and local authorities are already doing so. They are examining other schemes, such as intermediate treatment schemes. There will be more List D school places, but I repeat that that is not the only way to tackle these problems.

    Teachers
    Lord James Douglas-Hamiltonasked the Secretary of State for Scotland what official representations he has had from the Scottish teachers since the rising of Parliament before the Christmas Recess; and whether he will make a statement on the present state of education in Scottish schools.
    Mr. William Ross: The answer to the first part of the Question is "None, Sir".
    So far as the second part is concerned, hon. Members will be aware that an agreement was reached in the Scottish Teachers Salaries Committee on 30th December on a revision of salaries for school teachers within the total cost recommended by the Houghton Committee. The teachers' side agreed to recommend to its constituent organisations that industrial action in support of pay increases should cease.
    Work to rule unrelated to pay continues in some schools, and I intend shortly to discuss this with employing authorities and teachers' representatives.
    Lord James Douglas-Hamilton: Is the right hon. Gentleman aware that owing to a dramatic doubling of fees for those who send children to grant-aided schools in Edinburgh and elsewhere in Scotland, there may be a mass exodus from those schools? Is he also aware that many parents are extremely concerned and

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    have reason to fear that if they have to send their children elsewhere, the other schools in Edinburgh will not be able to accommodate their children? Will he take into consideration the interests of the thousands of children involved and seriously consider making an immediate increase in the grants to grant-aided schools?
    Mr. Ross: The hon. Gentleman's supplementary question is unrelated to the Question on the Order Paper. [Interruption.] He will be aware that there is another Question on the Order Paper that deals with this subject.
    Mr. Teddy Taylor: Will the Secretary of State stop trying to hide behind the wording of a Question later on the Order Paper—a Question he knows will probably not be reached? Does he not agree that the policy on grant-aided schools is not a policy at all, but a mean and spiteful vendetta that could cause chaos throughout the whole of Scotland and is causing damage to children's education? Will he not abandon this mean and spiteful policy and adopt, in its place, a sensible policy? There may well have to be a change in future, but the right hon. Gentleman's present policy will create chaos in Edinburgh and will cause enormous hardship, for no good educational reason.
    Mr. Ross: I can well understand why the hon. Gentleman does not wish to face the Question which relates to official representations I have had
    "from the Scottish teachers since the rising of Parliament before the Christmas Recess; and whether he will make a statement on the present state of education in Scottish schools"
    not grant-aided schools. Having fallen flat on his face over his attitude to the troubles before Christmas, he is now proceeding to fall flat on his face over grant-aided schools.
    Mr. Taylor: This is an outrage.
    Mr. Buchan: Does my right hon. Friend agree that the inordinate number of fee-paying places, whether independent or grant-aided, has bedevilled education in Edinburgh for everybody for too long? It has been harmful to pupils in schools in the State sector, and it is time that it was diminished. Will he say whether any professional educationist or teaching body has made a
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    protest about the proposals on grant-aided schools?
    Mr. Ross: What my hon. Friend says may be true, but it is not related particularly to this Question.
    Mr. Taylor: In view of the totally unsatisfactory nature of the Minister's answer, I beg to give notice that I shall ask leave to raise the matter on the Adjournment at the earliest possible moment.

    Rents and Incomes
    Miss Harvie Andersonasked the Secretary of State for Scotland what was the ratio of the average local authority house rent to the average household income in Scotland for the year 1973.
    The Under-Secretary of State for Scotland (Mr. Hugh D. Brown): About 5 per cent.
    Miss Anderson: Will the Minister say whether those figures include rents rebated? Does he recognise that if rebated rents are taken into account this may be an extremely low figure? Does it not justify the provisions of the Housing Finance Act? Would it not be more realistic to stand by those provisions and to use the resources thus saved for the building of badly-needed houses?
    Mr. Brown: One thing we are not convinced about is that the 1972 Act, whatever other virtues it may have, produced more housing for the Scottish people. On the specific point raised by the right hon. Lady, the figures are taken from the family expenditure survey of 1973 and relate to rebated rents. The ratio between rents and income has been increasing. The figures require a lot more study before we can justify any excessive increases in local authority rents.
    Mr. Canavan: Is my hon. Friend aware that Scottish tenants were very grateful for the rents freeze implemented by the Labour Government? Will he, in turn, congratulate Scottish Labour local authorities which, over the years, have managed to keep rents of council houses at a reasonable level? Will he tell my constituent the right hon. Member for Renfrewshire East) Miss Harvie Anderson), that it ill behoves those who live in large country mansions to criticise the rent levels of council tenants who are

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    obliged to live in much humbler circumstances?
    Mr. Brown: There has been a unanimous welcome by local authorities for our decision to give back to them freedom to determine their own rent levels. Most constituents—unfortunately, not all of them—voted for us at the last election. Most council tenants, not because they are council tenants, certainly appreciated the freeze on rents which was introduced as part of the counter-inflation measures.
    Mr. Sproat: Does the Minister agree that the average income of private tenants living in private rented accommodation is less than the average income of those living in council houses? In those circumstances, why are the Labour Party and he himself, as Minister in charge of the recent Bill, still supporting an unjust system, under which those who are poorer support those who are richer?
    Mr. Brown: I challenge some of the assumptions behind that question. Many people in the private sector pay rents which are far too high for the type of slum accommodation in which they live. I would rather approach the matter on the basis of being fair, As a general rule, it is not wise to hand out public money unless there is a proven need for it. There are other sections of the community in which no income tests are applied—including owner-occupiers—so it is very difficult to generalise and apply a policy in an attempt to be fair to all sections. I am convinced that we have the right housing policies for the people of Scotland.

    Kidney Transplants
    Mr. Dalyellasked the Secretary of State for Scotland what easily available figures he has to indicate the number of people in Scotland on kidney machines, and the number of those who have had a successful kidney transplant; and if he will make an estimate of approximately how many would opt for a kidney transplant if matching tissue were obtainable.
    Mr. Robert Hughes: At 31st December 1974, 171 people were on kidney machines in hospital units or at home. A total of 241 kidney transplant operations, including 15 relating to second kidney transplants, have been carried out
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    in Scotland since 1960. Of the 226 patients who received kidneys, 134 are still alive. As regards the last part of the Question it is not possible to make an estimate, but 38 patients resident in Scotland have been notified to the national organ matching and distribution service at Bristol as potential recipients.
    Mr. Dalyell: Do such figures persuade the Government to support a contracting-out scheme?
    Mr. Hughes: I am afraid that that matter will have to await discussion on the Second Reading of my hon. Friend's Private Member's Bill.

    Tied Cottages
    Mr. Robin F. Cookasked the Secretary of State for Scotland what representations he has received concerning legislation on tied cottages.
    Mr. Hugh D. Brown: I have received direct representations from the National Farmers' Union of Scotland, the Scottish Landowners' Federation and the Aberdeen and District Milk Marketing Board. They all expressed concern about the possible adverse effect on Scottish agriculture of the proposal to abolish the tied cottage system.
    Mr. Cook: What consultations has my hon. Friend had with the Department of the Environment about any proposed legislation? Will this apply to all tied housing, or only to the 10 per cent. in agriculture? Does he also agree that the problem of tied housing in agriculture is largely a reflection of the shortage of housing in rural areas generally? If legislation is not brought in this Session, will he consult local authorities about measures to alleviate this shortage?
    Mr. Brown: Yes, I can certainly give my hon. Friend that assurance. There have been discussions with all interested parties in Scotland and in the United Kingdom as a whole, but the House should be reminded that there are sometimes different circumstances in Scotland, so the effects of our policy will require careful consideration. However, the Government are convinced that the existence of tied cottages is detrimental to social justice, and causes hardship in many cases. We therefore intend to ensure that these injustices are removed. But this is

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    a complex matter and I want it to be seen in the context of tied houses generally.
    Mr. Corrie: Does the Minister realise the cruelty which can be inflicted on cattle if stockmen do not actually live on the farms where they work?
    Mr. Brown: This point is put to me regularly. I remind farmers that when my daughter was born, the midwife did not sleep with me—and I reckon that my wife is more valuable than any cow that the hon. Member has.
    Mr. Sillars: I certainly have no intention of venturing on to that ground. May I bring my hon. Friend back to his original answer? Was I right in understanding that he has not received representations or views from individual farm workers, who are the people most affected by the agricultural tied cottage system? Will he consider advertising in the farming industry's own Press to invite independent points of view from ordinary farm workers on a confidential basis? He will understand, I am sure, that there is a difficulty in organising these people.
    Mr. Brown: I am always willing to meet people, but I am a little reluctant to give that specific commitment. It could, perhaps, be arranged privately. If my hon. Friend has any ideas on the subject, perhaps he will discuss them with me. There are unions involved in this, so I can take account of the official representations made at both Scottish and United Kingdom level. I emphasise that we recognise that there is a difference in the Scottish scene. Bearing in mind that new district authorities are coming into being in May, I would not see it as a top housing priority in Scotland at the moment. However, we have given a commitment in our manifesto, and it will certainly be honoured.
    Mr. McCormick: Does the Minister appreciate that in the west of Scotland, where farms are scattered, the real problem is providing housing for farm workers once they have left their tied cottages on retirement, and that the provision of such housing would solve the whole problem?
    Mr. Brown: Yes, I agree, but it is not as simple as that. The hon. Member must make up his mind whether he is on the side of the local authorities, the farm workers or the farmers. This is a com
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    plex problem. I want to discuss these matters with local authorities in the context of the provision of housing for general needs as well as those which might arise from the abolition of tied cottages.
    Mr. Monro: Does the Minister accept that the House appreciates his reasonable approach at this stage to this complex problem? Does he not also accept that the key issue is the new district authorities? Will he put on them all the pressure he can, with support from all parts of the House, to provide a stock of housing to which people retiring from farm work, or the police or local authority service, will be able to move? This is the crux of the matter, not the individual industries.
    Mr. Brown: My dilemma is a personal one. I have two hats, one representing agriculture and the other housing. With my agricultural hat on, I would say that it has been the backwardness of local authorities which have been Tory-dominated in the past which has failed to face up to this problem—
    Mr. Monro: Dumfries?
    Mr. Brown: Dumfries County Council is probably one. But with my housing hat on, as I have said, I want to approach this matter with some urgency, bearing in mind the other demands made on housing resources.

    Energy Conservation
    Mr. Alexander Fletcherasked the Secretary of State for Scotland what energy conservation measures he has introduced in Government Departments and other offices under his control.
    Mr. William Ross: My Departments are co-operating with the Property Services Agency in implementing the measures applying to Government offices announced by my right hon. Friend the Secretary of State for Energy on 9th December. There are also detailed standing instructions to my staff on economies in the use of fuel for all purposes.
    Mr. Fletcher: Does the right hon. Gentleman realise that he should be setting the pace in energy conservation in Scotland and not following meekly in the timid steps of the

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    Secretary of State for Energy? Is he aware that Edinburgh Chamber of Commerce is leading a local campaign to save energy? Will he take its advice on how to introduce an effective conservation programme?
    Mr. Ross: The hon. Gentleman had better be careful when he tells me to set the pace. One of the things that we are trying to do is get people to slow down, so as to save energy. He will appreciate that the actual buildings are the responsibility not of the Secretary of State for Scotland but of the Department of the Environment.
    Mr. Fletcher: But the people are the right lion. Gentleman's responsibility.
    Mr. Ross: The people are. I assure the hon. Gentleman that the advice which was given by the Government of whom he was a supporter over the last winter has been retained, and we have carried it on and strengthened it as far as we could all this time. We are not letting up. If anyone else has anything to offer us in the way of advice and suggestions we shall gladly consider it.

    Forth and Tay Road Bridges
    Sir John Gilmourasked the Secretary of State for Scotland what estimate he has made of the number of years which will elapse before the total debt on the Forth and Tay road bridges will be repaid by the tolls levied; and if he will make a statement.
    Mr. Millan: In present circumstances any forecasts must be speculative, but the most recent reviews suggest that with the present level of tolls the repayment periods for the Forth and Tay bridges would be about 20 and 40 years from today's date, respectively.
    Sir J. Gilmour: Does not the Minister of State agree that it would be a good plan, if he cannot implement the bad things in his own party's programme, to implement the Conservative Party's programme to abolish the tolls on both these bridges?
    Mr. Millan: It had escaped me that that was in the programme. It had certainly escaped me up to February 1974.
    Mr. William Hamilton: Does my hon. Friend recognise that, in principle, I have
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    always been against tolls on these bridges? Now that we have some very late conversions to this principle, will he look at the matter again? It is quite clear that the imposition of tolls is unnecessary and inconvenient, and that it will never pay for the cost of the bridge, and should not be expected to do so.
    Mr. Millan: As I think my original answer made clear, the debt will be re, paid in the period I have mentioned. I know that there are strong feelings about tolls. I am sorry to tell my hon. Friend that I see no prospect of having these tolls removed.
    Mr. Fairbairn: As the toll booths are never all in operation at once, will the Minister explain why it has been necessary to spend £300,000 to erect eight more, which are not yet open? If his figure of 20 years is correct, does he appreciate that I, for one, will be a major contributor in paying off the debt?
    Mr. Millan: That is one of the cheerful aspects of the situation. I shall look into the question of the extra toll booths. I think that they were started by the Conservative Secretary of State.
    Mr. Adam Hunter: Is my hon. Friend aware that Fife County Council is mounting a campaign to get these tolls abolished on both road bridges? What can we expect when those representations are made?
    Is my hon. Friend also aware—this answers the hon. Member for Fife, East (Sir J. Gilmour)—that a deputation of Members of Parliament from Fife, Edinburgh and other areas went to see the hon. Member for Ayr (Mr. Younger) a few years ago, and he turned us down flat?
    Mr. Millan: I am aware of that. I note that a campaign is being mounted. I think that there has been a permanent campaign. I am sorry to make these discouraging noises, but I honestly do not see that these tolls can be abolished in present circumstances. I may as welt state that absolutely frankly.

    Empty Houses
    Mr. Buchananasked the Secretary of State for Scotland what is the number of houses built for the corporation of

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    Glasgow since 1945 which are now unoccupied and unlet; how many have been unoccupied and unlet for periods of four, eight, 12 and over 12 weeks, respectively, at the latest convenient date; how much revenue in rent and rates has been lost to the city of Glasgow in the most recent 12 months; how much is the current monthly loss; and whether Her Majesty's Government are still paying subsidies on these empty houses.
    Mr. Hugh D. Brown: I do not have the information readily available in the form requested. However, at the end of November 1974 Glasgow Corporation had 263 houses available for letting but unlet for more than eight weeks. I shall write to my hon. Friend giving what further information can be provided. Government subsidies are not affected by temporary vacancies in houses available for letting.
    Mr. Buchanan: Is my hon. Friend aware that I, too, was unable to obtain the relevant statistics? Is he aware also that in my constituency and in his constituency, on any criteria, the number of empty council houses, ignoring those vacant because they require modernisation, must run to about 1,000? This is quite unacceptable in a city like Glasgow, which is terribly short of housing accommodation. Will he set up an inquiry into all aspects of housing, including demolition, construction, modernisation, repair and letting in the city of Glasgow?
    Mr. Brown: My hon. Friend is quite right. He does not need to remind me that I have some of this problem in my constituency. However, in fairness to and in appreciation of the efforts Glasgow has made, it should be said that the number of unlet houses has been reduced from 900 to below 500 in the last few months, so there has been a considerable improvement.
    As for any longer-term assistance that we can give to Glasgow to help it to cope with its housing problem, together with my noble Friend I have had two meetings with the Glasgow authority to see in what way we can assist it to overcome some of its problems.
    Mr. Teddy Taylor: Does the figure of 263 for Glasgow, to which the Under-Secretary referred as houses which were
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    available for letting, cover houses which are not available for letting but which are empty and awaiting maintenance workers to put right the results of vandalism or disrepair? The hon. Gentleman and I both represent large housing estates. Is he aware that there appears to be a major problem of houses lying empty for a long time and damaging the amenities of the area, simply because there is some delay in maintenance? Will he, with his officers, look into the question of maintenance procedures in Glasgow?
    Mr. Brown: As the hon. Gentleman knows, the proportion is about half and half. Half of the number of houses due at any one time are empty because they are ready for letting but are not taken up. The other half are empty because they are being repaired or undergoing modernisation or some other treatment. There have been considerable improvements in this regard and I hope that the efforts that Glasgow has made in the last two months will continue.

    Licensing Laws
    Mr. William Hamiltonasked the Secretary of State for Scotland what plans he has for implementing the recommendations of the Clayson Report on the reform of the Scottish licensing laws.
    Mr. Harry Ewing: My right hon. Friend is considering the various recommendations but is not yet in a position to make a statement.
    Mr. Hamilton: My right hon. Friend must be very late developer, if that is the case.
    Is there any prospect of getting legislation next Session? Quite clearly there is no prospect for this Session. If there is no prospect for next Session, will my hon. Friend give an undertaking that drafting assistance will be given to a private Member to introduce a Bill and that representations will be made by the Scottish Office to the Leader of the House that time should be provided to enable this very important report to be implemented?
    Mr. Ewing: My hon. Friend hits the nail on the head in saying that this is a very important report. It is also a very

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    complex report. Therefore, the Government require time to consider its implications. I cannot give the assurances that my hon. Friend seeks.
    Mr. Buchanan-Smith: I appreciate the problem of the pressure on time in the House. Will the hon. Gentleman consider publishing the representations which have been made to him, so that at least the House may have some idea of the Scottish people's attitude to the report? Will he make representations to the Leader of the House that the report would be a very suitable matter for a debate? There is great concern about it and interest in it in Scotland.
    Mr. Ewing: The report was published in 1973 and was sent by the hon. Gentleman's own Government to a wide variety of organisations and bodies. The previous Conservative administration did not state their views on the Clayson Report before the February election. However, I shall consider what the hon. Gentleman has suggested.

    Government Departments and Public Authorities
    Mr. Rifkindasked the Secretary of State for Scotland how many Government Departments, or public authorities, with United Kingdom responsibilities have established their headquarters in Scotland over the last five years.
    Mr. William Ross: A headquarters unit of the National Savings Bank has been established in Glasgow and the headquarters of the Offshore Supplies Office of the Department of Energy has been transferred there. The Forestry Commission headquarters will move to Edinburgh in the course of this year, and we have announced that the British National Oil Corporation will be set up in Scotland.
    Mr. Rifkind: I am sure that the whole House will welcome these very real and meaningful forms of devolution in terms of employment and decision making.
    Will the Secretary of State confirm the report in today's Glasgow Herald that the Government have decided to set up the Scottish assembly at the former Royal High School in Edinburgh? If that is the case, will he inform the House whether the Government will provide meaningful facilities to Edinburgh Cor
    1464
    poration to ensure a new home for Edinburgh Art Gallery?
    Mr. Ross: I have seen those reports. It is true that we are looking closely at the whole question of the siting of the assembly, but no decision about any particular building has been taken, provisionally or otherwise.
    Mr. Grimond: Is any planning going on for the necessary changes in staffing and accommodation generally, apart from houses which will be necessary when the assembly is set up in Scotland?
    Mr. Ross: The right hon. Gentleman can take it that all the practical aspects and implications of this matter are being given consideration.
    Mrs. Winifred Ewing: With regard to the devolution of jobs, will the Secretary of State say whether he dissociates himself from the published views of William Kendall, the General Secretary of the Civil and Public Services Association, that devolution to a Scottish assembly will reduce the effectiveness of the British Civil Service?
    Mr. Ross: I am sure that we do not want to introduce anything which would reduce the effectiveness of the British Civil Service—
    Mrs. Ewing: Scottish.
    Mr. Ross: —the Civil Service, shall we call it? Its effectivenes is related to all those ways in which an assembly or Parliament is able adequately to utilise its services in the policies which are pursued.

  CRIMINAL OFFENCES (NON-PROSECUTION)
  Mr. Buchananasked the Lord Advocate under what circumstances his office instructs procurators fiscal not to proceed with a prosecution for a criminal offence; and why his office instructed the procurator fiscal at Glasgow not to proceed in the case of vandals concerned in the fatal accident which caused the death of engine driver Joseph Conroy.
  The Lord Advocate (Mr. Ronald King Murray): There are various reasons for instructions by Crown counsel not to proceed with a prosecution. For example, the facts disclosed may not constitute a crime.

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  Alternatively, the evidence may not be sufficient to warrant a conviction. In the case to which my hon. Friend refers, the evidence available to the Crown was considered to be insufficient to warrant a conviction.
  Mr. Buchanan: I have great sympathy for my right hon. and learned Friend in the making of such decisions, but does he realise that his decision here will cause considerable anger among railway men, and, among the police, frustration and discouragement in their constant battle against vandals? Having been caught, arrested and charged, the miscreants were set free without trial. Will my right hon. and learned Friend look into the procedures in his Department?
  The Lord Advocate: I appreciate the feelings of frustration which must have been generated in the quarters to which my hon. Friend refers, but one has to look at this matter in a wider setting. In this case it was felt that if a decision against taking proceedings had not been made before the fatal accident inquiry, the boys, on being advised that they need not answer any questions tending to incriminate them, would have said nothing. Equally, had a prosecution been taken, on the view that there might have been enough evidence, the chances are that the boys would have said nothing, or would have given evidence very different from what they said at the fatal accident inquiry.
  Matters of this kind are always difficult, as I am sure my hon. Friend appreciates, but, to my mind, in this case the overriding public interest was to determine the true facts, which, as my hon. Friend implies, were shocking. I think that it was right to have the facts fully exposed so that the public could be alerted to the fatal dangers involved in mindless vandalism, the best safeguard against which is a vigilant public.

  DEPARTMENTAL RESPONSIBILITIES
  Mr. Rifkindasked the Lord Advocate what is the division of responsibilities between himself and the Solicitor-General for Scotland.
  The Lord Advocate: There is no formal division of responsibilities between
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  myself and the Solicitor-General for Scotland. The Solicitor-General assists me generally in the discharge of my functions. In particular, since my parliamentary and ministerial duties require me to spend a substantial proportion of my time in London, the Solicitor-General, in practice, plays a large and valuable part in carrying on the work of the Crown Office in Edinburgh.
  Mr. Rifkind: Does the Lord Advocate appreciate that there is a strong feeling that the undoubted talents of successive Solicitors-General for Scotland, including the present incumbent, have not been fully used, simply because, in the normal course of events, they have not had a place in the House of Commons? Will the right hon. and learned Gentleman do his best to prevent this situation continuing by seeking to ensure that, when the new assembly is set up, although he himself may remain a Member of the House of Commons and be a responsible Minister of the British Government, the Solicitor-General will be, at least ex officio, if in no other way, a member of the Scottish assembly?
  The Lord Advocate: I have no doubt that what the hon. Gentleman says will have been noted. I agree that it is desirable, where possible, that both the Law Officers should be Members of the elected House of Parliament. I note what the hon. Gentleman says with regard to the future Scottish assembly. Plainly, that assembly will require legal advice, and the way in which this can best be done is under active consideration.
  Mr. Buchan: I hope that the Lord Advocate will not give any support to the highly undemocratic suggestion just made by the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), that a member of the proposed democratic assembly for Scotland should be non-elected. Will he reject that out of hand?
  The Lord Advocate: If my hon. Friend had attended closely to the wording of my reply he would have noted that I referred to elected assemblies. I certainly intended the implication to be that it is highly desirable that the Law Officers of the Crown should be elected members, not ex officio.

  ROCKALL
  Mr. Monroasked the Lord Advocate if he will pay an official visit to Rockall.
  The Lord Advocate: I have no plans to pay an official visit to Rockall.
  Mr. Monro: That is sad news. I thought that the right hon. and learned Gentleman might have undertaken a hang-gliding course when he got there. But, seriously, will he publish a document setting out our precise legal rights around Rockall in relation to fishing and oil exploration? It would seem that friction is building up, possibly with Denmark, and it might be far better to clarify the position at the earliest opportunity.
  The Lord Advocate: I note what the hon. Gentleman says, but I can give no undertaking, for my part, to publish any such document. The general law relating to fishing, as the hon. Gentleman is aware, is governed by the present international law, and our own limits are set out in the Fishery Limits Act 1964. Rockall generates its own fishing limits, like any other part of United Kingdom territory.
  As regards exploitation of the Continental Shelf, as the hon. Gentleman will again be aware, this matter was canvassed, albeit inconclusively, at the Law of the Sea Conference at Caracas, and that conference has only been adjourned. Nevertheless, under the present international law, in the Government's view, the island of Rockall generates its own Continental Shelf, and we are content to rely on that basis for the exploitation of oil and other purposes.
  Mr. Watt: Will the Lord Advocate reconsider his decision not to visit Rockall? It would be very advantageous if he were to do so and take the opportunity, on going there and coming back, to count the number of foreign boats which are fishing in those waters and taking away all the herring which should be going to our own fishermen.
  The Lord Advocate: Perhaps I gave an unnecessarily categorical assurance that I had no intention to visit Rockall. It may well be that as a comissioner of the Northern Lighthouses Board, which I am, I shall have a chance to be in the
  1468
  near vicinity of Rockall. If I am in that situation, I shall certainly undertake the exercise which the hon. Gentleman invites me to undertake.

  EUROPEAN ECONOMIC COMMUNITY
  Mrs. Winifred Ewingasked the Lord Advocate how often he has visited the EEC; and what plans he has to visit the EEC in the future.
  The Lord Advocate: Since taking office, I have visited the EEC on one occasion, when I was a member of the United Kingdom delegation to the meeting of the Council and Conference of EEC Ministers of Justice held in Brussels on 26th November 1974. So far as the future is concerned, I am in fact leaving this afternoon for a visit to the Court of Justice of the European Communities in Luxembourg, and I propose to go from there to Brussels, where I hope to meet members of the legal service of the Commission of the European Communities.
  Mrs. Ewing: As the Lord Advocate is the defender of the constitutional Scottish legal system, will he ensure that whenever fundamental matters touching the jurisdiction of Scots law are to be dealt with in the institutions of the EEC his pleasant and informed voice will be there, through his attendance in person? Second, will he say a word about his Department's scrutiny of EEC secondary legislation?
  The Lord Advocate: I cannot guarantee that I shall be present on all occasions when questions of Scottish jurisdiction arise, but this is a matter on which I am most anxious to ensure that the separate nature of Scots law and the Scottish legal system is fully understood in all parts of the Community, including the organs at Luxembourg and Strasbourg, and, above all, in Brussels. As regards scrutiny, I assure the hon. Lady that my Department plays the fullest part, and will continue to play the fullest part, in ensuring that the special doctrines of Scots law are fully taken into account and that the special requirements of Scotland are allowed for.
  Mr. Sillars: Before going to Brussels, will my right hon. and learned Friend

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  give us an assurance that, unlike the hon. Member for Moray and Nairn (Mrs. Ewing), he will not be carried away by the heady wine of Commission flattery and hospitality, but will be able to resist all the blandishments of the bureaucrats in Brussels, so that he will come back the good anti-Marketeer that he is, unlike the hon. Lady?
  The Lord Advocate: I hasten to say that no blandishments or excesses will make any difference whatever to my judgment. I should stress, however, that the visit I am making today is in no way connected with our continued membership or otherwise of the European Communities.
  Mr. Younger: Will the right hon. and learned Gentleman take it that we all hope that when he comes back from Brussels he will have a better reception from his own party than the hon. Lady had from hers?

  OFFSHORE OIL (DUMPING OF DEBRIS)
  Mr. Hendersonasked the Lord Advocate how many prosecutions have been initiated against oil developers for illegal dumping of debris in the sea to the most recent convenient date for which figures are available.
  The Lord Advocate: None.
  Mr. Henderson: Is the Lord Advocate aware that his reply will cause astonishment and anger among the fishing community in Scotland? Is he further aware that the Secretary of State for Scotland regularly receives representations from the fishery officer in Peterhead giving instances and details of cases where fishing gear is being lost through the activities of oil developers? I am sending him yet another representation which I received from Peterhead, in respect of a fisherman who lost £1,275 worth of gear, in a case in which there was grave danger to the safety of the vessel and its crew.
  The Lord Advocate: I see that the hon. Member has put down a Question to my right hon. Friend the Secretary of State dealing with this matter. In so far as his Question was addressed to me, I must confine my attention to prosecutions and complaints which might give rise to
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  prosecutions. I assure the hon. Member that no complaints which might give rise to prosecutions have come to my notice or that of my Department.
  I emphasise that the scope for prosecutions is limited under existing legislation. The discharge of oil, for example, is covered by the legislation, as is the dumping of debris if that debris is waste. However, I think that many of the things to which the hon. Member objects do not legally come within the category of waste and therefore are not touched upon by the Dumping at Sea Act 1974.
  Mr. Sproat: Will the Lord Advocate pass on my sincere thanks to the Secretary of State for his part in helping to set up a compensation fund, and, in particular—and perhaps more important—to the oil industry for agreeing to this? However, appreciative though the industry is about the fund, the prime problem remains of getting it to stop flinging debris overboard before any prosecutions can begin. The fishing industry still has the growing problem of drifting oil buoys and suspended wellheads.
  The Lord Advocate: I answer both question in the affirmative.

BILLS PRESENTED
  PRICES
  Mrs. Secretary Williams, supported by Mr. Secretary Foot, Mrs. Secretary Castle, Mr. Secretary Ross, Mr. Secretary John Morris, Mr. Secretary Rees, Mr. Fred Peart, Mr. Edmund Dell, Mr. Robert Sheldon, and Mr. Robert Maclennan, presented a Bill to amend sections 1, 2 and 9(4) of the Prices Act 1974 and to make consequential amendments in the Schedule to that Act: and the same was read the First time; and ordered to be read a Second time tomorrow and to be printed [Bill 63].

  SOCIAL SECURITY (STATUS OF MEMBERS OF PARLIAMENT)
  Mr. Eldon Griffiths, supported by Mr. Paul Hawkins, Mr. John Gorst, Mr. Ralph Howell, and Mrs. Elaine Kellett-Bowman, presented a Bill to provide that Members of Parliament shall be treated as self-employed earners for the purpose of calculating their contributions under Part I of

  1471
  the Social Security Act 1973: and the same was read the First time; and ordered to be read a Second time upon Friday next and to be printed [Bill 65].

STATUTORY INSTRUMENTS
Ordered,
That the draft Ships and Mobile Offshore Installations Construction Credits (Increase of Limit) Order 1975 be referred to a Standing Committee on Statutory Instruments.—[Mr. Edward Short.]

QUESTIONS TO MINISTERS
Mr. Atkinson: On a point of order, Mr. Speaker. Will you tell the House whether it is your intention to allow a Private Notice Question from myself about Cyprus, or whether you intend to allow a Minister from the Foreign Office to answer Question No. 35 which stands in my name on the Order Paper? I ask this mainly because of the situation which has developed in Cyprus and the responsibility of the British Government as cosignatory guarantors under the treaty. Would you not think it appropriate for some statement to be made on the situation there?
Mr. Speaker: I have received no such application concerning the Question on the Order Paper. I suggest that the hon. Member should pursue the matter with the Leader of the House during business questions tomorrow.
Mr. Atkinson: Further to the point of order, Mr. Speaker. Surely it is for you to exert your own authority in granting a Private Notice Question. As I understand it, it is not within the province of the Leader of the House to grant permission for me to ask a Private Notice Question; it is for you to make such a decision.
Mr. Speaker: Indeed it is, and whether or not I allow a Private Notice Question is a matter which is never discussed on the Floor of the House. If the hon. Member will have a word with me privately I shall talk to him about it.

MEMBERS OF THE HOUSE OF COMMONS (REMUNERATION AND CONDITIONS OF SERVICE)
3.35 p.m.
Mr. Evelyn King: I beg to move,
That leave be given to bring in a Bill to provide for the setting up of a new permanent review body to examine and make recommendations to Parliament from time to time upon the emoluments, expenses and conditions of service of Members of the House of Commons.
It is inevitable under the procedure of this House that one must give notice of a Bill of this kind, and I gave that notice many months ago. I could not at that time have foreseen that on 19th December the Lord President would make a statement on the matter. My first thought when he had done so was that I had better withdraw what I proposed to do. On reflection, however, and on rereading what the right hon. Gentleman said and noticing that he had invited hon. Members on all sides of the House to make their views known and, indeed, anticipated some of the things I intended to say, I considered that since Lord Boyle might read what is said it would be as well if I proceeded.
First, I have two points to make. I am not concerned with, nor do I intend to mention, the level of salary which any Member of Parliament should be paid. That is a matter for the Government of the day and is not a subject on which in this context I have any views. I am concerned with the machinery by which that figure is arrived at, and that is the major point of the Bill. Second, I would suggest that if the Bill becomes effective it should become effective only from the first day on which the next Parliament meets. I object to a Parliament changing salaries during its life.
I now proceed to the principle upon which the Bill is based. It is wrong for any person or any body of persons to fix their own salary. Perhaps it is particularly wrong in the case of Members of Parliament, because of the influence they have. I appreciate the difficulties and I shall seek to meet them. There are admirable precedents in other matters for Parliament putting certain things at a distance from itself, whether it be the nationalised industries or the BBC. There

1473
are certain things which, whilst we remain ultimately responsible for them, are hived off by Parliament, and I suggest that that is acceptable here. The problem is whether we can devise sensible machinery which will have that effect. I believe that we can.
First, one may reasonably say "Haven't we got Lord Boyle?" I pay tribute to what Lord Boyle has done and the skill with which he has done it, but there are still faults in the system. First, he is asked to prescribe all too frequently. Secondly, there is room for pressure within the House and elsewhere to bring his machinery into operation. Thirdly, he can, without any impropriety, be prodded into action by the Lord President or any one of us. I should like to see machinery which is so remote that that cannot happen. I want to find machinery which will have that effect. I went to find machinery which will provide that that matter is discussed once and will not be discussed again. I also want to devise machinery which is seen to be fair.
Clearly, in the discussions of this kind of thing one is always open to amendments. However, my suggestion is that a High Court judge—and if I were asked to name one I would suggest the Vice-Chancellor of the Chancery Division of the High Court, because I am advised that he has arithmetical expertise—should on or before 1st December each year, by whatever means seem to him appropriate, take evidence and obtain three figures. The first would be the average weekly earnings in this country. The second would be the salary level of an assistant secretary in the Civil Service, and the third would be the salary level of a circuit judge.
I have selected these three after careful thought. The first I select because it links us to some extent with the prosperity or lack of it, of the people we represent. I select the second because I do not think it should lie in us to have any better opinion of ourselves than is necessary. I do not think anyone could say we were guilty of that fault if we linked ourselves to that status. I suggest the third, the circuit judge, because I am advised that he is, if I may put it without offence, the lowest form of judge and has recesses similar to ours. His salary is a little high, the average weekly wage is a little low,
1474
and the assistant secretary comes appropriately in the middle.
It should be that judge's function, a fairly simple function, to strike an average of those three salaries. I shall not state the figure, but the Bill should say that the salary of a Member of Parliament shall for ever after be X per cent. of that average. It is for the Government to fix the X.
I hope it does not seem complicated. I do not think it is. The purpose of it all is that we shall not again be put in the position, which I believe to be deeply embarrassing, of trying ourselves to say what we should be paid. I well remember that after an election some years ago a political opponent offered me mild congratulations, and then said "I suppose the first thing you will do will be to raise your own salaries." That was an offensive observation, but I felt in no position to resent it because it turned out to be absolutely true. If we have regard to the repute of the House in which we serve, we should so arrange matters that that sort of remark cannot justly be made again.
I entered the House 30 years ago. I have never known a period exceeding three or four years in which we have not had to revert to this argument. I want to get rid of it for ever.
Perhaps I may say with humility that I am an appropriate person to raise the matter, because I shall have little interest in it. I near the end of my career, and anything I may say can affect only those who come after.
I hope that Lord Boyle, who may decide the matter, is listening with his customary patience and tolerance. I also hope that a Bill of the kind I propose will appeal to hon. Members throughout the House as the final decision on the question, subject to any revision of detail that seems appropriate to be taken by the House.
Question put and agreed to.
Bill ordered to be brought in by Mr. Evelyn King, Mr. Peter Doig and Mr. Alan Beith.

MEMBERS OF THE HOUSE OF COMMONS (REMUNERATION AND CONDITIONS OF SERVICE)

  MEMBERS OF THE HOUSE OF COMMONS (REMUNERATION AND CONDITIONS OF SERVICE)
  Mr. Evelyn King accordingly presented a Bill to provide for the setting up of a

  1475
  new permanent review body to examine and make recommendations to Parliament from time to time upon the emoluments, expenses, pensions and conditions of service of Members of the House of Commons: and the same was read the First time; and ordered to be read a Second time upon Friday 9th May and to be printed. [Bill 64.]

ORDERS OF THE DAY

  FINANCE BILL
  (Clauses 5, 14, 16, 17, 33 and 49)
  Considered in Committee [Progress, 21st January].
  [Mr. GEORGE THOMAS in the Chair]

  FINANCE BILL
    Clause 17

      CAPITAL TRANSFER TAX
      Question again proposed, That the clause stand part of the Bill.
      3.43 p.m.
      The Chairman: Before I call an hon. Member to speak, I wish to make an appeal to the Committee. In addition to the major business we are about to discuss, there are several other major issues to which the Committee will have to give its attention in the course of the evening and the night. I hope, therefore, that, although a considerable number of hon. Members left the Chamber last night with a heavy burden of an undelivered speech, they will try, in the interests of the Committee and our business, to make their contributions as brief as possible.
      Mr. John Nott: I am grateful for the opportunity to re-open the debate, for although I am not sure that the capital transfer tax is the most important tax measure since the war—to use the Chancellor's terms—it is certainly likely to have a greater long-term impact upon society and the shape of industry and the countryside than any financial measure that I can remember since I joined the House in 1966.
      Although the Opposition's contribution to the debate last night was admirably opened by my right hon. Friend the Member for Finchley (Mrs. Thatcher), I thought that by the end of the evening we had been somewhat diverted from the main point at issue, as was particularly evident in the Chancellor of the Exchequer's winding-up speech. It is, of course, necessary to re-examine the effect of the proposed tax on forests, charities and historic homes. But what is at stake in the debate and vote on the clause is

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      what I think the Chancellor himself described, in the final remarks of his opening speech, as the social and economic structure of the nation—indeed its very future.
      If the right hon. Gentleman meant what he said, and if, with respect to him, he is his own man rather than the mere creature of one of the militant factions who sit behind him, I think he will ponder further on his statement yesterday that he does not seek to destroy the essential base of saving, investment and employment upon which this country is founded. It is so much easier to destroy that continuity which is England than to preserve it, and England is nothing—
      Mr. T. G. D. Galbraith: Britain.
      Mr. Nott: I can include Scotland, Ireland, Wales and Cornwall. I represent the Celtic fringe myself.
      England is nothing without its traditions and history and its family firms and farms. The Tory Party used to represent what the small family firm and the small farm are all about. I hope that we still do. If we do not, I see it as my main task in politics to ensure that we do so once again. There may be Whigs in both parties who feel that they can represent all interests but, in fact, never succeed in representing any of them. But I believe that the Tory Party exists as much as anything to represent the continuity of family life and the family business and family farm.
      It was a gross over-simplification for the Chancellor to state yesterday that more than 95 per cent. of the population, or whatever proportion he took, are below the threshold of the tax. That is beside the point, because the truth is that well over half the working people of this country, almost the whole of our countryside, a major proportion of our exports and all our investment are directly affected by the proposed tax—in my view, adversely.
      It is too much that this short debate should hang under the threat of a closure at any time, when informed opinion in the Committee and outside is only just beginning to grasp the massive implications of what we are about. That goes for both sides of the Chamber. I know that very well from what several Labour hon. Members have told me.
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      My time is limited. I shall comment first on the structure and rate of the tax. In doing so, I ask the Committee to believe me when I say that I am not against the taxation of capital or inherited wealth, or against stopping up the loopholes in what is now the estate duty. Indeed, when my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) and I were in the Treasury together we genuinely wanted to make a start on the reform of capital taxation. If we had done so we would have taken into full account that we already have the most extensive taxes on capital in the world. Any measure that we would have considered would have embraced the reform of estate duty, the reform of capital gains tax—I believe probably its abolition—and perhaps the replacement of those measures with an overall tax upon wealth. However, it would not have been a tax of the kind that is increasingly being forced upon us—namely, taxes upon the creation of wealth. That is the distinction that we must make. The capital transfer tax, alas, misses that distinction altogether.
      I now turn to the structure of the capital transfer tax. I believe that it is unacceptable to any reasonably minded man. With the respect that I have for the Inland Revenue and its top people, I do not understand how it could ever have produced such figures or how Ministers could ever have accepted them. The result of the grossing-up effects of this tax and the interaction of capital gains tax is that rates well in excess of 100 per cent. can be levied on even a modest family business. That is the position without the effect of the wealth tax. I am meant to be sitting shortly on the Select Committee on the wealth tax.
      Time permits me to give only one example—namely, a 300-acre farm worth £500 an acre. My example could equally well be the small engineering business in the Midlands employing 50 men and worth about £150,000. We can assume that for the 300-acre farm capital gains tax since 1965 would amount to £22,500. Capital transfer tax at 20 times the annual rent of £15 an acre—I am talking about the relevant rate, which is 45 per cent. CTT—would mean a CCT liability of £48,333. The total tax payable by the donor—that is, the capital gains tax and

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      the proposed CTT rate—would be £70,833 or half the market value of the farm. That is against a present tax liability under estate duty with the 45 per cent. rebate of £36,987.
      That is the result of capital transfer tax on a relatively modest family business which would not produce for its owner any great income. The tax liability will be approximately double the present liability. If rents move up in agriculture—I believe that they must do so—and the market value is to be taken into account rather than the annual rent, total taxes on the 300-acre farm would be over 100 per cent. Therefore, the whole of the value of the farm would go in tax and more besides.
      Mr. John Chown, the taxation correspondent of the Financial Times, gave a more extreme example in another vein. He made a number of assumptions, but none of them was absurd. He took the example of a parent with a handicapped child who not unreasonably wanted to provide £2,000 a year in real terms for the child for 60 years. The child would need under the new proposals £828,000. The cost to the donor of leaving that amount, after capital transfer tax, rises to £2.4 million. I do not understand how the Government could have come forward with even draft legislation of that sort.
      The legislation that has been presented to the House will, of course, go through Committee. But it should never have been presented in its present form. It seemed that the Chancellor yesterday evening showed a glimmer of understanding of the enormity of what he had in draft terms. I should like to feel that in winding up today he will indicate that he has grasped what he is doing.
      I may be a minority of one on the Conservative benches when I say that I believe the Chancellor's macro-economic policies are broadly right. I just happen to agree with his broad macro-economic policies. However, the right hon. Gentleman has been too busy with the general economy and with gallivanting around on international jamborees to follow what his Department has been doing with the tax system in his absence. It is no use getting us through the next two years without a bloody revolution—after all, that is the Chancellor's task—if, in doing so, there are tax measures
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      passing through the House which will undermine the basic long-term structure of our society.
      I shall now quote Lady Burton of Coventry, who is, I believe, a Socialist in another place. In a letter to The Times last week she said:
      "I am writing"—
      she was on the theme of the middle classes—
      "not because of the anger of the middle class but because of the despair and fear, of those people in all classes of modest means and now retired, who have no hope to sustain them in their remaining years. … I am speaking not of the rich but of the millions of decent, hard-working people who saved a modest amount of money over their working years, and who put this into a building society or bought life assurance for their old age."
      That letter was written by a Socialist in another place. She was referring to the efforts last week of the Treasury Bench on investment income. The Government's measures in that clause are just a mean little act resulting from foolish commitments made whilst in opposition. Clause 17 is far more far-reaching. We are dealing with the destruction of the family business, much of our landscape and the basis on which the private sector of the economy is now founded.
      I am in a critical mood and I fear that I am not critical only of the Government. It was my party—I was a member of the previous Conservative Government and I take full responsibility—which for all sorts of well-meaning reasons agreed that dividends should rise under the prices and incomes policy at only 5 per cent. a year. That started the undermining of the savings principle. It was a foolish act for a Tory Government to take. It was my party—this was much more suspect, and the motives were not so good as they were based on electoral expediency—which failed to vote against the Second Reading of the Rent Act 1974.
      I quote those two examples in suggesting that the traditional concept of property—I refer to property in the widest sense of the word and in the sense in which it has always been referred to in British history—has been diminished, if not forgotten. Property in the widest sense means life assurance, family businesses, savings and building society deposits. Property in that sense cannot be distinguished from the continuity of

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      family life. That is why I feel so strongly about capital transfer tax, which goes to the very heart of the issue.
      I do not like the term "the middle classes". I think it is a silly term. Perhaps it is that sector of society that can be referred to a the bourgeoisie. When we use the term "the middle classes" I think we mean the saving classes rather than the spending classes. The real income of that class has been falling very fast. The demoralisation of the bourgeoisie is no minor matter. It is the single most important factor, in my view, in present politics.
      Dr. Jeremy Bray: Does the hon. Gentleman acknowledge that much the greatest part of savings in this country is made in pension contributions by working people?
      Mr. Nott: Yes, but who owns the pension entitlements? They are owned by the very people to whom I am referring, those who subscribe to pension schemes and who as a result of the premiums that they pay are entitled to their share of the assets of the fund. That goes to the heart of the matter.
      We all know that power now resides outside the House of Commons. In my view, our institutions no longer reflect the broad base of interests in the country. Whitehall, Westminster and private industry merely react to the pressures of organised labour.
      Every tax depends ultimately, the The Times said this morning—God forbid, I never thought that I would find myself in agreement with a leading article in The Times but I did this morning—the whole basis of the tax structure depends upon consent, upon the consent of the governed and the taxed. The Government, in this and other tax measures, are engaged in pulling down almost the last edifice which supports the remaining powers of government in this country—that is, respect for the tax system.
      4.0 p.m.
      We hear a great deal about the powers of the miners and of the electricity workers. But a power resides in the hands of the taxpayer which far exceeds the power which lies in the hands of the miner. Once this basis of consent is undermined—the Inland Revenue knows this only too well—and once people start
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      withholding their taxes because they have become penal and objectionable, the whole structure of government in this country will collapse. That could happen very easily indeed.
      I conclude with only one positive suggestion, which I hope the Chancellor will take in the spirit in which it is intended. We have had Green Paper discussions and Select Committees on many taxes in the past few years. I do not need to list those that we have had. We now have a Select Committee on the Wealth Tax. But that Committee is proceeding in parallel with Lord Diamond's committee—the Royal Commission on the Distribution of Income and Wealth. Frankly, we are both considering, in parts of our work, very similar things. Yet the Select Committee is not privy to Lord Diamond's figures, so both of us are working side by side on essentially the same problem.
      In the capital transfer tax we have a tax which, quite clearly, interacts with the wealth tax and the work of Lord Diamond's committee. How is the House of Commons to perform its functions seriously if we isolate the wealth tax from the capital transfer tax? They should not be isolated. They are all now part of the same overall problem.
      Therefore, if this is the most important tax since the war, I suggest to the Chancellor that it deserves some rather more lengthy, non-partisan consideration which embraces the whole concept of the wealth tax and taxes on capital, and a limit on the overall amount of tax. It should embrace all these things. I ask for consideration—not today but over the next week or two—of whether we might not take this matter out of the Bill for now and refer it to the Select Committee on the Wealth Tax, broadening the base of that Committee's working to include capital transfer tax. I am not the chairman of the Select Committee, so I must defer to him, but I am sure that we could finish our considerations by the summer and take account of these matters which, with great respect to the Treasury Bench, Treasury Ministers must know by now that they have not considered properly at all.
      Mr. Wm. Ross: I want to talk about the position of Northern Ireland in relation to the new tax. First,

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      I want to speak about the forestry industry in Northern Ireland.
      Northern Ireland's forestry is principally coniferous and planted by the public. This position has been built up over many years. The reason why public planting has consisted primarily of softwoods is simply that the land on which trees have been planted, by public money, is not suitable for the growing of hardwoods. Therefore, practically all hardwood planting is carried out by private land owners. In Northern Ireland that means that hardwoods are planted on very small patches of land which are unsuitable for agriculture—because the land slopes steeply, because perhaps a corner is cut off or the land is too wet, or because there is something else wrong with it from an agricultural point of view. Some of these trees are planted as shelter belts for stock and, therefore, come under the heading of being ancillary to agriculture. But some are planted with a view to investing for the future in timber.
      All Governments recognise that we have need of trees. Northern Ireland is one of the most tree-less landscapes in Europe. We have encouraged planting, but if we are to have continued planting there must be a profit which must be of benefit to the land owners. This profit can be realised only when the trees are cut down. If trees have to be cut down to pay taxes, they will not necessarily be cut down at maturity. They will be felled whenever the tax money is needed. The effect of the tax will simply be that as people exhaust their cash in the bank to pay the tax when it falls due, the trees will be cut down regardless of their state of growth. They will be turned into cash, and the land will not be replanted. This will lead to a complete destruction of the few private pieces of forestry that we have, and to more and more land becoming derelict in Northern Ireland.
      I have no doubt that the Committee will be interested to learn that Northern Ireland has at present almost half a million acres of land which is unsuitable for agriculture and is not used in any way. On this land we should encourage the planting of trees. This can be done only by the private sector because in general the land exists in parcels which are much too small individually to be
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      taken over and planted by public authorities.
      I come now to the farm structure in Northern Ireland. This is totally different from that pertaining on this side of the Irish Sea. Practically all the land there is owner-occupied and farmed by the owners. The holdings are much smaller, on average, than they are in Britain, but they have been growing in size due to the economic factors operating in farming over the past 30 years or so. Size and viability have much in common. Size means the number of acres, or the size of the business actually carried on on small acreages.
      When one considers the cost of increasing one's acreage of land in Northern Ireland, one has to take into account some social factors, one of which is the competition for the land available on the market, and the position of the land that is being sold. The price paid for that land when it is sold in the open market does not necessarily reflect the economic value of the land which is bought to increase the size of the holding. This brings into question the whole capability of the farming community in Northern Ireland to raise the money out of the income from the land to pay the tax on that land.
      This is because the return on agricultural land, taking the market value as the base, is very much lower than that in most other industries. Family farmers do not buy land as a hedge against tax. They buy land in the way a labourer would buy a spade. It is a tool with which to earn a living—neither more nor less. It is a necessity for their way of life. A farmer without enough land cannot grow food and he cannot fulfil his object in life.
      The Chancellor has implied that the loss of outside money would bring about a drop in land prices. However, that is not necessarily so. Even if it diminishes the value of the land, what happens to the farmer? What will he use as security whenever he goes to the bank for money? Farmers use the value of their land in order to get liquid capital with which to invest. At a time of inflation, when prices are rising so rapidly, it is vitally necessary that farmers have the ability to invest in the plant and machinery they need to carry on.

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      The Bill will lower the farmer's purchasing power, right across the farming industry. When one considers the amount of farm machinery that is sold and the effect that such a loss of purchasing power will have on the economy of this country, one appreciates that this is a matter which the Chancellor would be well advised to look at again very carefully.
      The Chancellor has also said that forests have been raised in price by the tax relief under estate duty. But it is not the sale value of the forest that counts. It is the value of the spendable income from the land on which the forest grows over the life of the forest. If the profit to the land owner from a forest is less than that which he can get from grazing sheep on the land, he will stop growing trees and will graze sheep. The spendable income from the forest must be taken as an annual income over the entire life of the forest. Looked at in this light, the spendable income per annum from a forest after paying tax will be so low that it is simply not worth planting the trees.
      In Northern Ireland, and I think throughout Britain, the family business is a powerful force in society. Despite what some hon. Members opposite may think, people do not work for the tax man. They work for themselves and for their children. People work for their children so that their children may have a better standard of living and a better life than that which they themselves enjoyed. Therefore, they want to give their children a better start in life.
      When the Chancellor of the Exchequer says that one person in 10,000 will pay more tax he misses the point. The point is that all businesses of over £15,000 in value will eventually be caught. Not in one year but in a generation every land owner and business owner will be caught by the tax and the result will be the destruction of society as we know it.
      One serious result of that in farming will be a reduction in production. Family farms depend upon the families who farm them. Father and son, wife and daughter do the work. Anyone who denies that has never lived on a family farm. If a farmer or business man believes that there is no future for his children in the farm or business he will put them into a profession or trade and, therefore, the farms and businesses will eventually collapse.
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      They will grow into large corporate units or fragment. Either result will be disastrous to our way of life.
      When people find that they have to pay not only the capital transfer tax but capital gains tax the spirits of even the stoutest will quail. The Chancellor of the Exchequer spoke of a lifetime accumulation of £15,000. That has been treated as a vast sum by hon. Members opposite. The present cost of building a very moderate council house in Northern Ireland is at least £10·50 per square foot, or over £11,000 per house. There is hardly a person in a reasonable job, even among the poorest workers, who does not wish to own his house and who is not prepared to make sacrifices for it. But when those sacrifices are taxed people simply will not make the effort. Why should they?
      The Chancellor of the Exchequer spoke about 1,000 acres of land or a quarter of a million pounds. I draw attention to the amendment in the name of the hon. Member for Caernarvon (Mr. Wigley), which attempts to get round the problem in a rather subtle way by referring to the quality of land. Other methods could be used in farming. There is a system known as man days to prove the viability or otherwise of a farming business. One could consider the income from the farm over a period of years. But possibly the simplest way of dealing with the matter is to take the market value. If one does that, why worry about the size of the farm?
      We are told that one of the aims of the Bill is to make the tax compulsory and not voluntary. Any tax depends upon the willingness of the governed to pay it. In my experience, people will pay bills, whether they be tax bills or any others, as long as they think that they are reasonable, just and justified. But when people as a group or as a national body are convinced that the tax is not reasonable they will make every effort to avoid paying it. That leads swiftly and inevitably to crookedness and corruption in the nation's life.
      4.15 p.m.
      I draw attention to the statement of the Chancellor of the Exchequer about relief for the Army and the police. I am unable to understand what he meant. My reading of Schedule 7 indicates that the relief is to be extended to members of

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      the armed forces up to at least 1984. On 9th December I asked the following Question of the right hon. Gentleman's Department:
      "… whether, when members of the UDR, the RUC and the RUCR are killed, as a result of terrorist activity in Northern Ireland, their estates are free from estate duty in the same way as the estates of members of the armed forces".—[Official Report, 9th December 1974; Vol. 883, c. 43.]
      The reply was "Yes".
      How does that fit in with what the Chancellor of the Exchequer said last night when he denied that the relief was extended to members of a police force? I realise that it is not in the present legislation, but I think that it should be incorporated in the legislation. If we ask men and women to defend this country either against terrorism within its borders or against armed attack from without, it is only reasonable that the nation should protect the defenders of the nation. It is atrocious to deny this relief to people who defend our way of life and our soil.
      I have been trying to discover the position regarding civilians who die as a result of terrorist activity. I find they are excluded from relief. But they were not excluded in the 1939–45 war. I asked the Library about this matter, and a few days ago it supplied the answer. It said that total exemption from death duties was granted in respect of the first £5,000 worth of property passing to the widow, widower or any other relation or to the brothers and sisters and their descendants of any person who died as a result of enemy action.
      Is there any good reason why that should not be incorporated in the Bill and the relief extended to civilians and their dependants who die as a result of enemy action within or without our borders? Furthermore, today £26,329 would be needed to give the same level of relief as £5,000 in 1941. In these circumstances, there is an excellent case for increasing the base starting point for the tax to almost double the £15,000 proposed.
      The Chancellor said that he would be prepared to listen to reasonable arguments. I think that the points that I have made are more than reasonable. Therefore, I trust that the right hon. Gentleman will accept them and act upon them at once.
      Mr. Jasper More: I should like to say how much I agreed with the speech of the hon. Member for Londonderry (Mr. Ross). I wish I could say the same about the speech of the Chancellor of the Exchequer last night. However, it would be ungracious not to say that we were grateful to the right hon. Gentleman for saying that he would consider some of the points made in the debate. I should like to take up one or two matters with him. It is difficult to know where to begin, although the best course is always to begin at the beginning. However, this is not a question of historical reminiscences or of airing my knowledge.
      The Chancellor said that estate duty was introduced before the twentieth century began, to prevent vast aggregations of inherited wealth being passed on from generation to generation. If the Chancellor will read his history he will find out that the tax was introduced because the Liberal Government of the day were short of money and had to build many warships. Estate duty was introduced as a money-raising Bill, in which the existing probate duties and death duties were scrapped, with an estate duty brought in at a slightly higher rate in spite of the opposition of the then Prime Minister and Liberal leader, Mr. Gladstone.
      In 1910 the concept, which the Chancellor of the Exchequer attributed to the nineteenth century, began to take shape in the famous Budget of Mr. Lloyd George. He introduced much higher rates of tax, partly with a view to financing the great social services then being launched and partly having in mind the present Chancellor's ideas about inherited wealth. At the same time he introduced Section 61(5) of the Finance Act. It was an amendment. It was introduced by Mr. Lloyd George expressly to exempt forestry from the effect of estate duty at the greatly increased rates imposed in 1910. The amendment was proposed not by any Tory land owner but by the Chancellor of the Exchequer, and it has remained on the statute book for the past 65 years.
      The relevance of this is that it was done on commonsense principles. It was not desired to apply this penal form of taxation to a totally unsuitable industry such as forestry.

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      Speaking about forestry, the Chancellor of the Exchequer said that in recent years half the planting had been done by the Government, and that, of the other half, four-fifths had been done by investment companies as a hedge against inflation. Later he mentioned investment trusts.
      The Committee should have a picture of what has been happening in forestry, which is now divided into three sections. Half of the planting is done by the Forestry Commission, and the other half, which is carried out neither by investment trusts nor investment companies, is carried out by private owners—half of them doing it on their own. Here I must declare an interest, as I am involved, together with my agents and employees. The rest of the planting is done by forestry companies, which are working companies responsible for management and planting and are owned by woodland owners, the employees and the timber industries. However they neither own nor deal in land. They provide jobs in rural areas and implement Government policy as directed by the Forestry Commission. There is no secret about their names. There are four principal companies. They are responsible for managing about half the private sector. Their incomes derive from the services which they provide. The land they manage is dedicated not by the forestry company but by the owner concerned.
      I believe that the provisions—or nonprovisions—concerning forestry in the Bill have been actuated by suspicions of forestry being used as a method of tax avoidance. I should like to impress on the Chancellor that it not possible to avoid tax by planting trees. But it is possible to avoid tax to some extent by buying forestry land and selling it at the right time. The forestry companies follow a consistent policy of discouraging that sort of thing, which is of no help to them, although some short-term operators have tried, by means of advertisements, to interest people in these schemes. On a number of occasions the forestry companies have suggested to the Inland Revenue a simple means by which legislation could be brought in to prevent that type of tax evasion without damaging the industry in the way that now seems inevitable.
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      To sum up, forestry in the private sector receives aid from the taxpayer partly in the form of the income tax code introduced by the Attlee Government in 1947 and partly in the estate duty concession introduced in 1910, while in contrast the whole of the burden of the Forestry Commission planting is borne by the taxpayer.
      I do not know whether it is worth while to refer to the point which seemed to weigh so heavily with the Chancellor of the Exchequer last night when he seemed to imply that there was something guilty or immoral about the fact that the planting done by "investment trusts" was done overwhelmingly in softwoods, alleging that the planting of hardwoods was done overwhelmingly by the Forestry Commission.
      These are the facts of life about forestry. For defence and economic reasons, it is essential that the bulk of our forestry planting should be in softwoods, which is what we shall need if we experience a siege economy. We need softwoods to help our balance of trade. On two aspects of forestry policy—namely, rural employment and what is called amenity—we need hardwoods, which to a minor extent are also valuable in the economic and defence spheres.
      The argument is hardly worth pursuing. I am not surprised that nobody wished to argue it with the Chancellor, because it is irrelevant to our discussion on the Bill.
      I declare my belief that the need in this country is for a continually expanding forestry industry both in the public and the private sectors. I very much regretted the decision taken in 1958 by the Conservative Government to scale down Forestry Commission plantings. I should like the Government to register the fact that this deficiency has been to a large extent made up by the useful activities of the forestry companies I have described.
      Having declared my interest as a private forester, I wish to speak briefly about ordinary private forestry. Those engaged in it plant a greater proportion of hardwoods than either the Forestry Commission or the forestry companies. We are very much concerned with small woodlands. It is difficult to see who else could be properly concerned with them.

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      An important aspect is terminology. We have to invent suitable names for small woods. I started that process when I was a keen and promising Member of Parliament, and I resorted to the use of the names of Leaders of the Conservative Party. There is a Macmillan Wood on our property and the Home Covert. We are now focusing on an area called the Heath Plantation. We have only one thatched cottage on the estate, and, unfortunately, the wood next door already has a name. If the necessity arises, I am not sure whether we shall be able to call it Thatcher Wood.
      This is an important aspect of private forestry, which contributes to the beauty of the countryside we want to preserve and to rural employment.
      It would be an ironical result of this Bill if those who like myself during a lifetime have obtained no benefit from planting, which is all a matter of spending money, were to be penalised in times of posterity by a Bill allowing nothing to be inherited by anybody.
      Mr. Marcus Kimball: Referring to what my hon. Friend the Member for Ludlow (Mr. More) said about the naming of woods, the only place where the Chancellor of the Exchequer would find refuge on my hon. Friend's estate would be in the Dog Kennel Plantation.
      I have listened to the many speeches made in this debate but I have not heard one speech in favour of the tax. Even the hon. Member for South Ayrshire (Mr. Sillars) could find nothing very much in favour of it. Even he had to ask the right hon. Gentleman for some concessions in so far as the tax affects charities. Only the Labour Party could produce a tax which operates so unfairly on families. If a man has one child he can give it one gift of £15,000 and £1,000 a year. But anyone with four children finds that each of them can have only a quarter of that and an annual gift of £250.
      4.30 p.m.
      Much of last night's debate missed the Press, but no one can say that the first leader in The Times today on taxation and consent, which has been referred to already by my hon. Friend the Member
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      for St. Ives (Mr. Nott), was written as a result of the debate in the early hours of this morning. That leading article emphasised first the punitive rates of the tax, and it went on to widen the argument to include the effect of the capital transfer tax on discretionary trusts and on family settlements.
      Trusts as a whole have a long and respectable history of protecting wealth. They protect it from the profligate spender who may for a short time be the beneficiary of the wealth. But far worse damage will be done by this Government, who will just dissipate the wealth through this tax. We shall not solve inflation by taking away people's savings and using them up in current Government expenditure.
      Throughout our debates on this Bill, the Chancellor of the Exchequer has shown a growing awareness of the full implications of what he is proposing. He made some comforting noises to the foresters. He made some sympathetic comments about charities and about small farmers. When he intervenes again today, I hope he will show that at least he is prepared to give further consideration to the effect of the capital transfer tax on money put into trusts and on money paid out by trusts and to the iniquitous harm which will be done by the 10-year levy on the undistributed assets of discretionary trusts.
      I hope, too, that the right hon. Gentleman will make favourable noises about the retrospective element in this legislation. We have a classic example on the statute book already of a Government changing their mind about retrospective legislation and its effect on the old death duties. When foreign real property was brought into the net of the old death duties by a Conservative Government, the point about retrospection was accepted. Where someone received foreign real property thinking it free of death duties and had resettled it, it was accepted as not being liable to death duty. The same applies to settlements and discretionary trusts, and I hope that the right hon. Gentleman will look favourably at the retrospective element of what he proposes, especially where existing trusts were made in good faith by a settlor domiciled abroad who then returns to this country and is caught by the

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      capital transfer tax when the trust is held by non-resident trustees. This is the worst kind of retrospective legislation.
      We had a little bit of sanctimonious unction from the right hon. Gentleman when he tried to disguise his real intent. We heard a great deal about small farmers and owner-occupier farmers. Does the right hon. Gentleman accept that 46 per cent. of all the land farmed in this country is farmed on a landlordand-tenant relationship? He tried to get a few cheap cheers from his supporters by talking about the increase in the value of land brought about by the present death duty repayment of 45 per cent. However, I do not accept that. I believe that the landlord-and-tenant system has brought two kinds of capital into British agriculture—the working capital of the tenants and the capital of the landlords. It is capital which is badly needed by the industry.
      Has the right hon. Gentleman worked out what will be the effect on food production in 10 years of no maintenance and no modernisation on half our farming land? That will be the effect of the capital transfer tax.
      I expect that the right hon. Gentleman will say that he did not realise the effect of the tax. Probably he will say that he did not realise the effect of interest not being allowed to be charged against income tax and surtax where owners of land make use of the eight-year provision for paying their death duties. Here, the right hon. Gentleman is frustrating a concession which has been used by people for many years by the way in which he is treating the interest. If that is deliberate, it is fair enough and we understand. If it is another of the right hon. Gentleman's mistakes because he does not really understand what he is doing, I hope he will look again at the provision.
      The tax which the right hon. Gentleman proposes is a prevention-of-gifts tax. It will ensure that one third of all businesses—agricultural and other small businesses—will be owned by senile people. No one will transfer businesses or wealth. What is worse, at some stage one third of the people of this country may end up being employed by senile female ownership under the provisions of this Bill.
      Mr. Patrick Cormack: It is a geriatrics' charter.
      Mr. Kimball: I agree with my hon. Friend. It is a geriatrics' charter.
      For the first time since becoming a Member of this House, this weekend I received a joint deputation in Lincolnshire from the chamber of trade, the chamber of commerce, the CLA and the NFU. It is the first time that I have known all these groups feel so strongly about any one issue.
      I want finally to say a few words about forestry. The skyline of North Lincolnshire is dominated by Pelham's Pillar. It was erected by the Pelham family to commemorate the planting of their one-millionth tree. More than 3,500 acres of private woodland are owned by one family in my constituency. They employ 22 men and produce 50 tons of sawable and marketable timber each week. This enterprise is threatened by the right hon. Gentleman's provisions.
      My right hon. Friend the Member for Finchley (Mrs. Thatcher) spoke about the one-generation society which this tax will bring about. Even if we repeal this tax at some time in the near future, the next generation which inherits will have to pay some duty on the assets which they receive and hold for their lifetime. But, with any luck, they will hold those assets long enough to build them up and repair the damage which any form of inheritance tax may inflict. I dare say that some form of tax of this kind can be fairly devised. The trouble about the present proposal is that the damage that it is likely to do will be irreparable.
      Mr. Esmond Bulmer: I begin by declaring my own interest as a member of a family company. I understand only too well that the Government's proposal means the death of successful family companies in the second generation.
      The creation of many enterprises cannot be properly measured in the term of one human life, whether they be family businesses, woodlands or certain forms of agriculture. Such activities have to be built up over generations. If it is to be impossible to do this for reasons of tax convenience, the country stands to lose a great deal. That is the implication of this tax, and it demands a

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      longer debate. I do not believe that it is right that in a few hours the work of families over many generations should be set at naught.
      Before any debate takes place on whether the family company is an advantage to our community, I urge the owners of such businesses to invite Government supporters to look round their factories and businesses and to say to them "We have been here for generations. We have provided employment. We have provided what our customers want. We have been sensitive to the needs of the neighbourhood. You are putting us in a position where we have to slow down investment or sell up in order to pay this tax. Are we to sell to the Arabs, to the Germans or to the Americans? If we do that, will they be sensitive to our neighbourhood? Will they support the repair or the rebuilding of the cathedral? Will they support the local football team? Will they support the local college of further education? Will they become part of our society? You are passing ownership to an alien group." That deserves serious attention by Government supporters.
      The Chancellor of the Exchequer should recognise that fundamentally we are a trading nation. In origin, our great exporting companies are either family businesses or amalgamations of them. Distillers, Beechams, Unilever and ICI are all amalgamations of family businesses, and their component parts could not have emerged if they had faced the battery of taxes which the present Government are developing against them.
      Other companies like Guinness, Cadbury and Marks and Spencer have been able to carry on through the generations only because of discretionary trusts. Would it have been in the national interest if they had been broken up? Would it not have been the case that, if death duties were not to some extent voluntary, they would have been broken up? Is it conceivable that, if they had been broken up, the penal levels now ruling would still continue? Would there not have been an outcry against the unemployment which would have developed and about the degree to which our assets had passed into foreign hands? I believe there would.
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      All of us in business are worried about the extent to which this sort of legislation is drafted by people who have never created wealth of any sort and who have no understanding of the needs of the consumer and of how difficult it is to meet those needs. Of new products that are started perhaps one in 10 is still going after 10 years. For new companies the figures are about the same order. It is extraordinarily difficult to create a successful enterprise. It is only too easy to destroy it.
      I ask the Chancellor to look at our overseas competitors. Are those who are successful the ones who penalise initiative? Do we find in Germany or the United States that capital taxes are higher than they are here, that income tax is higher than it is here? Of course not. These countries recognise that starting a family business involves great sacrifice, often great risk, and that the families concerned are prepared to put present advantage behind the realisation that they are creating something that is of worth and will be of benefit to their families and, hopefully, to the community.
      We understand that these proposals are put forward in some measure as part of the social contract and that equality of sacrifice is demanded. Some people would have difficulty in finding equality of sacrifice when contrasting a 30 per cent. wage increase with the destruction of the work of a family over generations. Nor do I see in this the basis on which an appeal can be made for unity. Nor do I believe that it really serves the interests of those who are party to the social contract.
      Does not the standard of living of us all depend upon investment, and does not this measure threaten investment at its very core? I do not think that the Chancellor should underestimate the psychological impact of his measure. When we consider a rate of inflation of 20 per cent. and we ask what return is necessary on an investment to produce any increase in real net worth to a company we find that the answer is in the region of 40 per cent. Where can we find any activity today giving that sort of return? Because of inflation, most companies are cutting back. This move can only reduce their confidence further.

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      The Chancellor would appear to be offering the entrepreneur three temptations. The first is to go abroad. Is that what the regeneration of British industry is about? The second is to spend, spend, spend on imports and foreign travel. Does that help the balance of payments? The third is to run down the assets of a business to keep them in the family. Think what that means. Factories and farms are run down and woodlands are ravaged. Many people will not yield to these temptations. They will say to the Chancellor "Get you behind me, Satan." They will to some extent be encouraged by the vision of the "Blessed Margaret", pledged to restore hope to the enterprising and reward to the thrifty and to light up the dark motives of the Left.
      Let us not mistake the strategy of the Left. It is to provoke owners to act irresponsibly and thereby to justify expropriation. What is happening to family businesses today is following on the Chilean model, if not yet the Chilean scale. If owners are forced to sell, I hope that they will talk to those who are members of their companies and will say that they are being put into a position when they cannot carry on because of the Government's measures and inflation. I hope they will say that it is in the interests of their shareholders that they should sell to the highest bidder. Who is the highest bidder? Naturally it is the company with which the synergy is highest. In that case obviously, because the price is high, there will be far more unemployment than would otherwise be the case.
      Is this what the trade unions want? Of course not. We must recognise that to a large extent the shareholders of the companies which deserve to have the highest price are the pension funds of the trade unions. They must see where their real interests lie. If, as could be the case, such action leads to sit-ins, ultimately the Government should remember that the rest of the world cannot be compelled to buy what we produce. The Chancellor may compel nationalised industries to buy from co-operatives or from companies that are non-viable for a period. Finally, however, our success as a nation depends upon successful companies. They are always family companies in their origin.
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      I appeal to the social democrats in the Labour Party to do their homework and to discuss with management and trade unions in companies in their constituencies whether they really believe that the family company has been found wanting in providing employment, fostering innovation, providing an environment where people can talk to each other and see where each fits into the pattern as a whole or in being sensitive to local needs and resisting monopoly. Every inquiry which has been undertaken suggests that the great majority of people would rather work in small companies than in large ones, in the private sector rather than in the nationalised industries. At the end of the day we all like the management of our companies to have a human face. I urge the Chancellor to accept the sensible suggestion of my hon. Friend the Member for St. Ives (Mr. Nott) and defer this proposal.
      4.45 p.m.
      Mr. Patrick Mayhew: Last night the Chancellor sat and listened to speech after speech in which he was castigated for the consequences of this clause. Not a friendly voice did he hear, with the possible exception of his hon. Friend the Member for South Ayrshire (Mr. Sillars), and the right hon. Gentleman did not look particularly grateful for that. The Chancellor professed to be surprised, even shocked, by the consequences that were pointed out to him and the vehemence of protests made from the Conservative benches and from his own about the consequences of this clause. He said he would see whether anything could be done about it.
      I do not believe that the Chancellor had failed to perceive what would be the consequences of this clause to forestry, farming, small businesses and charities. To no one with the intellect or the access to advice enjoyed by the Chancellor could these consequences possibly have come as a surprise. Just in case they did I want to do my best to encourage the Chancellor to take a harder look at what he is proposing.
      For that purpose I want to tell him about 100 acres of woodland at Horsmonden in the Weald of Kent. Until not very many years ago those 100 acres supported only useless scrub. They did

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      not look anything, and in productive terms they were quite valueless. But a man improved that land, and spent money draining it and planting it. He is a constituent of mine. He does not look for an immediate return, or even a medium-term return, from his investment. He is looking to the long term. Little of his planting will mature before the end of the century and, because some of his planting is oak—which does better in the Weald of Kent than anywhere else—another 100 years or so will have to pass before maturity. But, with the provisions of the clause, it is probable that none of it will mature, for the owner cannot afford to let that happen. It would add to the burden of taxation on his back which the low yield from his farming activities would not allow him to carry. His is not one of those broad backs to which the Chancellor, in his serialised Budget Statements and speeches this year, has so often and with such relish referred.
      I hope that the Chancellor will give his mind to the threads that go to make up the story and look at what this land owner has done. He has taken something which was at the outset useless. To that he has applied capital and enterprise. He has, by the application of capital and enterprise, transformed this originally useless land to something which is now a burgeoning asset. It is an asset not just to him but to the countryside and the country as a whole, because he is growing something which is in short supply, for which the world demand, with an increasing population, is growing, and which is something which we already have to import in large quantities.
      To do that he has devoted his money not to consumption, not to short-term expenditure, but to investment on the longest term. That is an example which the Government, on reflection, might perhaps wish to encourage. If it were followed throughout the private sector of industry many of our economic problems would be at an end.
      What must the Government do to encourage the example of my constituent? It is pathetically simple. They have to do no more than allow him to pass the land on to his son, not without any tax, but upon fair and reasonable tax terms,
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      so that his investment may mature in the hands of a member of his family. Is that wrong, selfish, acquisitive or unreasonable?
      Why do not the Government do that? The ostensible reason is to be found in one of the earliest sentences of the Chancellor's first intervention last night, when he said that this tax was needed to ensure the equality of sacrifice without which we cannot meet the problems that confront us.
      I wish to express my fervent agreement with what was said by my hon. Friend the Member for Kidderminster (Mr. Bulmer) about the inequality of sacrifice that the clause will impose. I ask the Chancellor what section of the community is being asked to make a sacrifice of anything in equal proportion to that which is being imposed upon land owners by the clause. But if there is to be no equality of sacrifice among producers, there is certainly to be equality of sacrifice among those who are recipients of gifts, or who are beneficiaries under trusts.
      For example, a disabled person or a mongol child, fortunate among that unfortunate class in having been able to live at home because his parents have been able through their lifetime to support him, need not look for relief from the Government for a trust, or for a gift of capital, to enable him to continue to live at home and to be looked after, for there is no such relief to be found from this Government, the Government of such vaunted compassion.
      I trust that the Chancellor, if he was taken by surprise at the vehemence of the protests uttered last night against this monstrous clause, will go away and think about it again.
      Mr. Emlyn Hooson: The provisions of the clause remind me of a piece of indiscriminate bombing. Somehow, some time, somewhere, no doubt one of the bombs will hit the target intended. In the meantime a great deal of unnecessary and undesirable damage will have been done.
      With the target which the Chancellor laid down last night I entirely agree. For greater accuracy I will quote from The Times report as the Official Report

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      is not yet available. The Chancellor is reported as saying that:
      "the first and overriding purpose of the tax was to make estate duty an effective tax.
      No MP could object to making effective a tax which was universally agreed to be fair, which had been in existence for 80 years, but which had been avoided on a colossal and increasing scale."
      The Chancellor had a defined target. What the legislation needed was discrimination in the way that that target was aimed at, and the bomb aimer should have been more accurate.
      I do not agree with hon. Members who suggest that it is a good thing for the country that estate duty was a voluntary tax. How can that be justified? Because many of the people who should have paid the tax have not done so the rate of the tax has had to be higher. The tax threshold has been lower because many people who should have paid the tax dodged it, and those who dodged it were generally the wealthiest people who should, of all concerned, have paid.
      For many years Government of all complexions have accepted that estate duty was a fair and just tax. Had it been levied properly we should not be in this situation now.
      Mr. Peter Rees: The hon. and learned Gentleman, drawing on his great legal experience, will, I am sure, concede that estate duty was not conceived as a gifts tax. That being so he cannot properly talk about avoidance, let alone evasion, if people chose to give away their property and not pay the tax. Will the hon. and learned Gentleman be more discriminating in his use of language?
      Mr. Hooson: It was stated, correctly, from the Front Bench that since 1910 a levelling-out of wealth has been intended. Because people have been allowed to get away with avoidance for so long the so-called middle classes have suffered. Wealthy people in the cities have put their speculative gains short-term into land to avoid taxes, and that is why our genuine farmers are now threatened.
      The hon. Member for Ludlow (Mr. More) is a famed estate owner and a great authority on forestry. He looks after his woods with loving care. He is one of many people who are threatened because for years Governments have
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      allowed people who have never seen a tree save from a car or a railway carriage window to put their money into investment companies to buy land as a means of avoiding this tax.
      When a tax is imposed Parliament and successive Governments have a duty not to discriminate between taxpayers and to make sure that the tax is applied fairly. The Chancellor is now taking an excessively blunt weapon to try to deal with this matter and will crush many worthwhile people in the process.
      5.0 p.m.
      Mr. Galbraith: Surely the hon. and learned Gentleman's analysis cannot be correct. Death duties have been in existence for 60 or more years.
      Mr. Hooson: For 80 years.
      Mr. Galbraith: Well, for 80 years, and yet the high price of land about which he complains is quite recent. It did not happen between the wars and has nothing to do with the so-called avoidance of estate duty. It is quite different.
      Mr. Hooson: The hon. Gentleman's intervention reminds me of Mark Twain's advice to a young man: "Buy land, young man, they don't make it any more." There is a great deal of truth in that. It partly accounts for what happens in an inflationary society to the value of land, especially when tax concessions are given. One only has to own land by purchase for 10 minutes before one dies to get 45 per cent. death duty relief. Who can possibly justify that? That provision, with no limits to it, partly contributed to the high price of land.
      I believe that the Chancellor of the Exchequer would be well advised to withdraw the clause and reconsider the matter. The whole subject of capital gains in a highly inflationary situation, together with the whole question of land, should be considered as an entity and not in separate sections, as we are considering it in this Bill and in other Bills. I believe that the Chancellor's main objectives are right, but what he is doing is quite different from what Lloyd George sought to do in 1910. He tried to curtail the excess amassing of wealth and to tax great property holdings because they brought with them sustained power and influence which was entirely due to ownership of property and not to the

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      ability to create wealth. I can understand the attack that was made on the system at that time, and this country would not tolerate the vast unjustified inequalities of wealth which we had in the past, and to a considerable extent still have today. Nevertheless, I believe that there should be certain specific reliefs. It has already been pointed out that the tax will have a devastating effect on forestry. Lloyd-George in 1910 exempted forestry because he had a far greater knowledge of the rural scene than has the present Chancellor of the Exchequer, who no doubt has a far greater knowledge of the industrial scene than had his illustrious predecessor.
      This tax could have a devastating effect on farming and farm units, and a much more careful look is needed at the proposed farming exemptions. I agree with the views expressed by the hon. Member for Caernarvon (Mr. Wigley) on the farming problem, and I would also grant concessions to genuine agricultural estates where there are genuine tenancies, but there would have to be an upper limit.
      There should, clearly, be considerable changes in respect of charities and concessions to enable the national heritage to be safeguarded.
      I am certain that the weapon adopted by the Chancellor in this clause is not worthy of him. What was necessary—and this should have been done years ago, and proposals on this score were not accepted by Conservative or Labour Governments—was that the loopholes in the tax system should be closed to make sure that the many systems of discretionary trusts, and so on, were brought under control. It should have provided that people who were intended to pay estate duty should have paid it and there should have been many and precise exemptions in the national interest. But the Chancellor with this proposed tax is bound to cause all kinds of troubles which no doubt he does not envisage or intend. It will cause hardships which, in the national interest, we should avoid.
      Mr. John Parker: I wish to support all that has been said by other speakers about the importance of our national heritage, and I wish to emphasise one or two points.
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      It is important that amenity land surrounding historic houses should be included in any scheme, and I also believe that the chattels within those houses should be covered in Clause 29 and, if necessary should be accepted by the Treasury in lieu of tax if kept in the house.
      It is also important that the Historic Buildings Council should vet claims on tax exemptions. That council already has much experience in dealing with claims for assistance in the restoration of houses and would be the right body to deal with the matter. Furthermore, we should take the opportunity to put right the way in which value added tax discriminates against the repair and maintenance of historic houses. It is quite ridiculous that when a house is pulled down and a replica put in its place VAT need not be paid, but if the house is repaired VAT is imposed. That is one anomaly that should be cleared up, because the view now in all parts of the House is that we should as far as possible maintain the use of existing buildings rather than pull them down and rebuild.
      I turn to the subject of forestry. I was a little disappointed to hear my right hon. Friend the Chancellor on one aspect of this problem. I agree that we should kill any attempt to dodge tax in this respect and, as has been said earlier, there has been speculation in land, but I should like to remind my right hon. Friend that it has been Labour Party policy for many years to encourage forestry. That involves the planting of further areas as well as keeping existing forests in being. We need a scheme in which the Government assist in planting without its being used as a way of speculating in land. More planting certainly needs to be undertaken.
      My right hon. Friend's predecessor, Hugh Dalton, had a great love of trees and believed in the expansion of forestry, and in his Budgets allocated more money to the forestry authorities. However, we must recognise that we cannot meet the programme drawn up after the war to run to the end of the century, without a firm planting policy. The plan was that there should be a planting policy up to the year 2000, to reach 5 million acres inclusive of existing forests and their renovation. We are still a million acres short of that programme. We should be going ahead now to complete that programme by the year 2000.

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      Much should be done and can be done by the Forestry Commission, and if my right hon. Friend can put more money at its disposal, so much the better. But we should also welcome assistance from private capital and investment in forestry to help in the completion of that programme. If we can give assistance, as we rightly do, to hill sheep farming, we should give similar assistance to forestry farming. I am sure that a scheme could be drawn up to give comparable assistance to forestry using private capital, without at the same time allowing the abuses which have happened in the past in tax fiddling and land speculation. Therefore, I ask my right hon. Friend to look sympathetically at new planting of forests, because we need that extra million acres by the end of this century. We should take as much help as we can get in doing so from private capital.
      Mr. Wyn Roberts: Is the hon. Gentleman aware, as I am sure he is, that the future livelihood of 10,000 forestry workers not employed by the Forestry Commission is at stake on this clause?
      Mr. Parker: I was coming to that point. I took the chair this week at a meeting at which we heard the views of representatives of many of these people. I agree with my hon. Friend the Member for South Ayrshire (Mr. Sillars), who said last night that whatever changes we make in the law now, we must think of the people working in private forestry, and avoid putting them out of work.
      I remember, as a very young man, the disastrous May Committee set up by the Labour Government of 1929–31, which reported in favour of an enormous number of economies in those pre-Keynsian days. It was battles over that report which brought down the Labour Government. The succeeding National Government largely carried out those economies, one of which involved the destruction of vast numbers of young trees in nurseries ready to be planted. Planting programmes everywhere had to be drastically cut, by both the Forestry Commission and others. Bonfires were made of vast numbers of young trees.
      We do not want another such bonfire, but planting programmes are being cut. Whether such trees are planted by the Forestry Commission or private interests,
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      that is a national disaster. We need a positive approach. A great deal of our land is better used for forestry than for any other purpose. Much of the upland rushland, which can never make good sheep herbage, would be better devoted to this purpose. We should not attach too much importance to representatives of town organisations, like the Ramblers' Association, which do not like trees and are frequently anti-conifer fanatics. I am all in favour of mixed forest from the point of view of amenity, but from a national point of view much of our land is suitable only for conifers. By the end of the century 5 million acres of land actively producing timber will provide an important contribution to our balance of payments, which we shall always be able to use.
      Without agreeing with the various tax fiddles which have taken place, I believe that constructive help to private forestry is needed. All over western Europe, private forestry has to have some government assistance of the sort that we give to hill sheep farming. I do not depreciate the great work of the Forestry Commission, which I hope will be expanded, but that does not preclude a positive approach to all sides of forestry.
      Mr. Michael Latham: If I had been able to catch your eye last night, Mr. Thomas, I would have made many of the points that the hon. Member for Dagenham (Mr. Parker) has made about woodland and agriculture, but many other hon. Members have already done so, so I do not propose to follow him in that. It is obvious from the speeches which we have heard in this debate, especially the magnificent speech, yesterday, of my right hon. Friend the Member for Finchley (Mrs. Thatcher), that the Chancellor does not have the political support to carry this tax unamended as regards woodland. I think that he realises that changes will have to be made.
      I want to talk about something which has not been raised today—the effect of the tax on the building industry. Under our new rules, I should declare a prospective interest, having been asked to join the board of a building company. I have provisionally accepted, but it has not yet been finalised.
      Those hon. Members who know the industry will know that building firms are

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      normally small and local, doing a number of different things—usually family businesses. Very few industries—agriculture, of course, is another example—are so family based. A number of hon. Members have used the phrase, "when we go into Committee" but since we actually are in Committee, it will not be unreasonable, I think, to mention a couple of factual points to assist the argument.
      5.15 p.m.
      There are basically six components in what is loosely known as the construction industry. The first comprises very large general contractors dealing with all sorts of building and civil engineering work. In April 1970, only 78 firms out of 73,400 in the whole country employed more than 1,200 men. The second component consists of substantial firms employing between 600 and 1,200 men, of which, in April 1970, there were only 132. Third, there are medium-sized firms employing between 115 and 600 men, of which, in April 1970, there were 1,053. Fourth, there are small firms of general builders employing between 14 and 114 men. There were 10,738 such firms at that time. The fifth component consists of the very small firms employing between two and 14 men, of which there were 21,000. Finally, there are the self-employed people working on their own—not "Jumpers" but such people as village carpenters—of whom there were 20,355.
      Those figures clearly show that the building industry is made up overwhelmingly of small firms employing very few men—basically family businesses. This tax will have an absolutely ruinous effect on the industry's structure unless it is changed. The Chancellor may disapprove of the structure of the industry, but he should not try to change it, by fiscal means, without a proper explanation to the country. That is what will happen. I want to give three examples of the effect of the tax.
      The first example is that of a medium-sized building firm operating near London, worth just over £1½ million, which has been earning annual net profits in the two most recent years of £104,000. It employs more than 400 people. If the chief proprietor were found to own two-thirds of the business and to have outside possessions—residence, furniture, private investments, and so on—of no
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      more than £40,000, the capital transfer tax scale in the Bill would entail a tax, on his death, of £630,000, the proportion attributable to his share in the business being £606,000.
      To meet a liability of £606,000, quite apart from any charge for interest incurred by his executors, would thus almost fully absorb his entire share of the profits—nearly £70,000, assuming them to continue at the current level—for between eight and nine years. I need hardly stress the practical impossibility of withdrawing funds on anything like that scale when the need will be to plough back large sums for investment and to finance stock appreciation. In fact, more than 90 per cent. of the book profits of that firm have been ploughed back over the last few years.
      My second example is that of a rather smaller firm, employing 230 people, which is worth £530,000 or so and has average annual profits of £31,000. The tax payable on a two-thirds share of the firm as part of the estate of a proprietor with £40,000 of outside possessions, which would come to £180,000, would once again amount to between eight or nine times the entire yearly net profits earned by that proprietor's stake in the business.
      My third example is that of an even smaller local building firm, with 75 employees, worth about £90,000, which has been yielding profits between £4,000 and £5,000. Even in the lower reaches of the CTT table of rates, a two-thirds proprietor's share in the business would give rise to a tax bill of almost £17,000, which would absorb nearly six times his yearly share of the net profits. Those are all absolutely ruinous figures. It would mean the destruction of those businesses and lead to a basic change in the structure of the building trade. This tax has not been thought through, or discussed, or examined and it cannot be made to work.
      Small building firms are the firms which repair people's houses, which build houses in small numbers, and which do the small jobbing work on local houses which is so essential. If, by compulsion, because of this tax, small building firms are merged with bigger firms, that sort of work will not be undertaken, because it does not appeal to the larger building

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      firms. That is why the tax must be changed. It is a bad tax. I shall have the greatest possible pleasure in opposing the clause.
      Mr. Nigel Lawson: You asked me to be brief, Mr. Thomas. In response to your request, I shall be as brief as I can. I shall achieve that by trying to avoid going into some of the very important points of detail here, partly because we shall be going back to them in Standing Committee.
      We need a great deal more clarification from the Chancellor on some major points of principle concerning the clause and the capital transfer tax in general. Even before this Government came into office, as the Green Paper introduced by the Conservative Government made clear, we had the highest burden of capital taxation of any developed country and no doubt of any country in the world. Whether it is measured as share of gross national product, share of total taxation, or taxation per head, we had the highest burden. Therefore, why has the Chancellor thought it right, or proper, or necessary, either economically or socially, to increase this burden still further, not merely by the capital transfer tax but also by the proposed wealth tax?
      Why this particular capital transfer tax? We know that there were defects in the old estate duty. That is why the Green Paper was produced. Some of those defects or loopholes were not of great consequence. Others were serious imperfections in estate duty, which could be rectified, and the Green Paper pointed out ways of doing this.
      We now have something which goes far beyond that. When the Government's programme goes through completely this will be the second fresh instalment in a multiplicity of taxes on capital. To these should be added the surcharge on investment income. In the last century there was a great argument on the question whether the tree, the capital, or the fruit, being the investment income, should be taxed. Here, both the tree and the fruit are taxed heavily.
      On the subject of trees, because of the time factor I shall not follow the points which have been made about the damage to forestry. It will be very serious. This is symbolic. It is very often said of private companies with great truth—
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      "Tall oaks from little acorns grow."
      Here, the Chancellor is not merely clobbering the private companies. To show what he is doing he is clobbering the symbol as well and trying to cut down the oaks and, indeed, destroying the acorns and the saplings in between.
      We need to know why this tax has been introduced. We have had no sort of explanation. The right hon. Gentleman has given us a number of reasons which justify the idea of a capital transfer tax, perhaps, but quite why we need a wealth tax and a capital transfer tax we have yet to be told.
      Many of my right hon. and hon. Friends will not agree with me on this, but I think that there is a reasonably strong case for a wealth tax at a modest rate on all wealth, subject to certain exceptions, in replacement of all other taxes on capital, including the capital gains tax and the surcharge on investment income.
      The question arises—why the capital transfer tax, and why the capital transfer tax at this swingeing rate? We must ask whether the Chancellor really knew what he was doing—whether he changed his mind after the Budget Statement, or what happened. In the Budget Statement he referred to the capital transfer tax, naturally enough, and said:
      "I therefore propose to introduce this year in my second Finance Bill a tax on lifetime gifts … but the rates will not necessarily be as high as in estate duty."—[Official Report, 26th March 1974 Vol. 870, c. 313.]
      Anybody hearing that was entitled to assume that the right hon. Gentleman was talking about the rates on gifts. It now turns out that he was talking about nothing of the sort. It appears that he was talking about the rates on the diminution in the value of the donor's estate, that diminution taking into account the tax payable. This is not a tax on the gift at that rate. This is a tax on the gifts plus the tax. In other words, the rates of tax on the gift itself are far higher than the estate duty rates.
      The estate duty rates were as high as they were because it was understood that they applied to only a proportion of a deceased's estate, because he would give a certain amount during his lifetime and the tax would be on the remainder. This is a totally different concept and it is therefore wholly inapplicable to say that

      1511
      if those rates were appropriate to a certain proportion of the estate, they, let alone much higher rates, as these are, are applicable to the lot.
      As the hon. Member for Welwyn and Hatfield (Mrs. Hayman) rightly pointed out, the Chancellor said in his White Paper that the treatment of charities under this tax would be no less generous than the treatment accorded them under the existing estate duty legislation. This is manifestly not so. It has been demonstrated that the treatment of charities in this legislation is far harsher than under the previous estate duty legislation. The Chancellor, who, I see, has the White Paper, will find that that statement is in it, categorically and unequivocally.
      How was it possible for that statement to be made and for a Bill then to be introduced on totally different lines? Was the Chancellor unaware of the change, or did he change his mind? The Committee is owed an explanation. The fact that the right hon. Gentleman last night announced that he intends to make some concessions to charities—which I welcome—proves my point.
      I move on to the question, what lies behind the tax itself? This is an attack on private property of all kinds. It is a total attack on private property, which will wholly alter the type of society in which we live. It is also an attack on the family. It is specifically an attack on the family business—the combination par excellence of the family and private property as represented by the family business. It has been pointed out that this tax will make it impossible for a family business to go beyond one generation. If a business cannot go beyond one generation, most people will not think it worth while to build up a family business.
      I fully realise that many Labour Members will welcome this and would like to see the end of the private company, the end of the family business, and, indeed, the end of all private property of any significance. I do not believe that the Chancellor and some of his colleagues share those views. My reason for not believing that the Chancellor shares those views is that he has made speeches about the need for a vigorous and thriving private sector.
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      5.30 p.m.
      I cannot believe that the Chancellor shares those views, but he must answer this question: is it his intention to create a Marxist economy and a Marxist society in place of the mixed economy and the society which we now have? If that is his intention, we can readily see what is behind the Bill. If it is not, he must reconsider this clause, because that will be the effect of it, whatever his intention, fairly soon. It is possible that there will not in fact be too serious an effect, since I do not expect the present Government to last beyond this Parliament, after which a Conservative Government pledged to repeal the tax, will come in and certainly do so. But if the tax were to continue for longer than the lifetime of this Parliament it would undoubtedly have the effect which we have described. Is that what the Chancellor wants?
      The Chancellor said that he wanted to avoid distortions, but he has introduced a new distortion here, because it is only the transfer of material capital which gives rise to the tax. That gives an incentive for distortion, for wealthy people, if any such still exist, to buy for their children the most expensive form of private education they can find—perhaps the Chancellor wants that—so that their earning power may be increased. That form of investment in their children will not attract this punitive tax, whereas any other form of investment will. Does the Chancellor welcome distortion of that kind? That inevitable consequence was pointed out by Professor Harry Johnson, of whom, no doubt, the right hon. Gentleman has heard.
      The Bolton Report confirmed—if confirmation were needed—the importance of small companies and private companies in our economy. We all know how much better industrial relations are in small companies and private companies. Does the right hon. Gentleman deny that? Does he want to do away with it? Does he want to destroy this form of company?
      As for the family, I put one point to the Chancellor, and I am sure that the hon. Member for Bolsover (Mr. Skinner) will be with me here. The Chancellor talked last night of his great attachment to widows, telling us how he was trying

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      desperately, through this tax, to help widows, of whom he was fond and for whom he had such genuine concern. How many hon. Members are aware that, under this proposed tax, if one of them were to invite his widowed mother to make her home with him, saying, "Do not be alone in your old age; we shall have you with us and look after you", he would be liable to be taxed on the rent he would have charged his widowed mother, had he charged her a market rent? There could be no more direct attack than that on the very concept of the family.
      I come now to the question of avoidance and evasion. I shall not go into matters of avoidance. The Chief Secretary is a well known expert there, and he will no doubt be able to tell us whether or not the tax avoidance advisers will get the better of the Bill. I do not know. What I do know is that this tax will lead to evasion on a massive scale. It is a form of tax which is easy to evade. The Government know that. That is why they have introduced a sort of snooper's charter into the Bill. They want taxpayers' professional advisers to snoop and help the Government.
      It is an easy tax to evade, and it will be evaded. It will lead to a deterioration in tax morality. What is more, those who evade the tax will have support not from me but from the Government. I remind the Committee of what the Secretary of State for the Environment said on 6th November last, when he defended what the Clay Cross councilors had done, saying that the Housing Finance Act
      "infringed the tacit agreement as to what is permissible and what is not … it offended a basic sense of natural justice"—
      adding that he had
      "never known an Act of Parliament which so outraged the feelings of large numbers of moderate councillors up and down the country."—[Official Report. 6th November 1974; Vol. 880, c. 1077–81.]
      There will be a feeling of outrage about this tax among a great number of people—many more than there are councillors in this country. There will be a feeling of offence against natural justice, of offence against the basic instinct of human kind—the desire to own property, the desire to have independence, and the desire to help fellow members of the family. This tax will be felt to be contrary to natural justice and contrary to
      1514
      humanity. That is why it will be evaded. I ask the Chancellor to think again and to withdraw this clause and the tax, pending further consideration.
      Mr. Hugh Fraser rose—
      Mr. Brian Sedgemore rose—
      The Chairman: Mr. Hugh Fraser.
      Hon. Members: Hear, hear.
      Mr. Fraser: Thank you for catching my eye, Mr. Thomas.
      Mr. Dennis Skinner: The third man.
      Mr. Fraser: Like the Chancellor of the Exchequer, I have been here day and night on this Bill, and, in a way, I regret that the member of the new triumvirate who has just joined us, the hon. Member for Luton, West (Mr. Sedgemore), is at this stage not allowed to participate in the debate. I hope that he will be able to catch the eye of the Chair at some stage.
      Without doubt, Clause 17 is to be regarded not just as a provision in the Bill but as a parting of the ways for this country. Having heard what hon. Members on both sides have made clear to the Chancellor, I am convinced that it will be the great divide, as was said late last night, between a mixed economy and an economy falling more and more under the control of one small and diminishing group.
      I am interested in forestry, but I am far more interested in the social effect which the tax will have on the country as a whole. Already in the newspapers it has been called penal or Draconian. To call it a Draconian tax is an insult to the memory of the tyrant Draco. Draco at least made himself famous by introducing the death penalty for idleness. This tax will introduce a major penalty for the industrious. The idle shall glory, and the industrious shall suffer. That is what this is all about.
      The proposals made by my right hon. Friend the Member for Finchley (Mrs. Thatcher) and my hon. Friend the Member for St. Ives (Mr. Nott) should have the most serious consideration—either drop the tax or put it back to be properly looked over and worked out, with proper consultation.

      1515
      Yesterday, one excuse given by the Chancellor for not following the excellent proposal made by the Liberal Party—that the recipient of the gift rather than the donor should be the taxworthy party—was administrative inconvenience. He chucked that proposal out, on the ground of the Treasury's fear of administrative inconvenience.
      Let the knights of the Treasury—this applies to the Treasury under both parties—consider who it is who suffers. It is not they who suffer from administrative inconvenience. The ordinary industrialist in this country has been suffering that inconvenience over the past 25 years.
      Mr. Clement Freud: Under the Conservatives, too.
      Mr. Fraser: Yes, under both Governments—and under a Liberal Government even more, if there ever was one. During the past 25 years there have been no fewer than 420 major changes in company taxation in this country. In Germany during that period there have been 20 such changes. In America there have been about 40. I sometimes think that the Treasury is inhabited by gremlins or harpies, with the privilege, throughout the ages, of power without public responsibility. To say that the Government cannot move because of administrative inconvenience is the last resort of a political knave.
      I turn to the question of what faces the country today. I believe that this tax, masked though it is by the case of the rich widow, or by this or that concession, will eventually move inevitably to the creation of a great division between those who wish to acquire wealth and those who wish to spend it as fast as they get it. I believe that in order to make democracy function properly, all political parties must aim not to achieve the nationally divisive. It may be blamed on my party that there has been a confrontation with the trade unions, but if we are now going to have a confrontation from the other side with those who wish to put by for their families, the whole system of democracy in this country may well be undermined. I take no less serious a view of the situation than that.
      Today, we see an economic situation which, however optimistic one may be,
      1516
      seems somewhat out of control—a situation in which the people are inebriated with inflation, and companies are horrified for the future, where the talk is of eat, drink and be merry. We have a sort of economic Balthazar's feast, and now we have the writing on the wall, if this Bill goes through. "MENE, MENE, TEKEL, UPHARSIN". I believe that this is one of the great issues in the history of our country, as the Chancellor said last night. I believe that the aim of a political party, the aim of society, the aim of the House of Commons, is not to proletise the people or to embourgeois them, but to try to ennoble those things which are in the human spirit, and that consists of the reward of energy, initiative and drive. It is for this issue that the Tory Party will fight and fight and fight again.
      Mr. Russell Fairgrieve: I would not aspire to reach the heights of oratory which were attained by my right hon. Friend the Member for Stafford and Stone (Mr. Fraser), and for that reason I shall, like other speakers, make my remarks brief. I am concerned with the effect of the tax on Scotland. The tax, or its effects, may amuse the hon. Members for Bolsover (Mr. Skinner), Keighley (Mr. Cryer) and Luton, West (Mr. Sedgemore), who have just arrived, but I can assure them that it is no laughing matter in Scotland. I wish to deal briefly with the subject of forestry. Scotland possesses about half the United Kingdom's total of forestry, and half of that is in private hands. It gives direct work to about 20,000 people in Britain and can give indirect work to about 200,000. We know that, taking the top possible limit, the life of softwood is 75 years and of hardwood up to 150 years. That is three and six generations respectively, and three and six times that such owners will pay tax.
      Only recently the House was talking about the problem of beef producers who could not change in three years from beef to cereals, as is possible in such industries as textiles, of which I have a passing knowledge. In forestry, the change would take a generation, and that is totally and utterly impossible. This country pays a £2,000 million import bill for forestry products, and it is disgraceful that, of all European countries, Britain has the third lowest percentage of acreage under trees,

      1517
      when Scotland should have the highest percentage.
      5.45 p.m.
      I need not go into the question of amenity and conservation, which has been dealt with by other speakers. However, the very thought of this Bill has hit at morale and the thoughts for the future of those in the industry. Already, in my constituency an order for 50,000 young trees has been cancelled, and forestry workers are worried about their prospects.
      There is one dangerous point about this legislation. Even if it is not implemented—even if it only goes as far as the draft Bill—that has been enough to make people think about their future. If the proposal has reached the stage of a draft Bill now and goes no further, within two decades from now it could still reappear and become law, and where would that leave the forestry industry?
      Mr. Douglas Crawford: Does the hon. Member agree that a Scottish Government would not do to forestry what the United Kingdom Government are seeking to do now?
      Mr. Fairgrieve: That would depend entirely on the calibre of the Scottish Government and on which party formed that Government. If it were the party which the hon. Member represents I could not hazard a guess what would happen, because he and his hon. Friends have different policies depending on which of the two main parties they belonged to initially.
      I wonder about the drafting of the clause. What will it do for small companies, charities, agriculture and forestry? Are these points left up to the draftsmen, or do the politicians provide the leadership? In other words was the Bill drafted by fools or knaves? Was it drafted by morons or Marxists?
      In the past we have all agreed that agriculture—it is even more the case with forestry—must not become a political football. In its present form the clause is too bad to amend. The Chancellor must take it back and rethink the whole issue.
      Mr. George Thompson: I do not know whether I qualify under the strictures delivered on my party by the hon. Member for Aberdeenshire West (Mr. Fairgrieve), but I can put my
      1518
      hand on my heart and say that I came from neither of the parties that he mentioned. I joined the SNP directly, and it is the only party I have ever belonged to.
      I should like to clarify a matter which was not directly touched upon by my hon. Friend the Member for Moray and Nairn (Mrs. Ewing) last night. The Scottish National Party wants to see the gap between excessive riches and extreme poverty narrowed. If it could be abolished I am sure that that would suit the majority of the Scottish people. In the sort of world we live in, however, I do not expect that to happen until the Day of Judgment, when we expect that the rich will be sent empty away. In any case, you cannot take it with you.
      It is interesting that all the bodies which have approached me on the subject of the tax have agreed that there should be some form of tax on inheritance, so that it would appear that everybody is in favour of some sort of tax. I do not share the sentiments expressed by some Conservative Members because I am not on the side of the great land owners. There are plenty of hon. Members in the House who will speak for them. I came here to speak for the ordinary folk of Galloway. I have not looked up the history of my constituency, but I should not be surprised if I were the first person out of the common folk of Galloway ever to have represented that constituency in the House. In other words, I speak for the people who could not give their daughters a marriage gift of £5,000. Indeed, I speak for many people who could not give them 5,000p.
      I have another advantage in speaking in the debate, which is that I have been a forest worker. For seven years I was a servant of the Forestry Commission, for two years as a labourer, when I earned about £6 a week. That was in about 1953–54. When I left the commission's service in 1960, having worked as a humble forest surveyor with a compass and chain, I was earning, as a ganger, the princely sum of £13 a week. It is for the forest workers that I want to speak. I compliment the hon. Member for South Ayrshire (Mr. Sillars) on his spirited defence of them last night.
      It has be said that loopholes needed to be plugged, and that there has been

      1519
      speculation through forestry. Unfortunately, if I had to choose between some speculation and jobs for my friends in Galloway, and no speculation and no jobs, I should have to tolerate a little speculation—but I hope that the Chancellor will find a way to stop the speculation and continue the jobs.
      If it is a case of the great estates gradually falling to pieces, I hope that the Government will see to it that when farms go on to the market there is a way to provide capital for young men who want to farm them themselves, and that there will not be an excuse for investors who do not know one end of a cow from another to buy the farms.
      I hope that I may congratulate the Chancellor on his assurances of last night about forestry. Being a forest worker is a contemplative occupation, because one person plants and somebody else reaps. It is only right that the crop should be taxed once in the rotation.
      I also hope that the Chancellor's rather short night's sleep will have allowed him to sleep on his assurances, and that he will be able to tell us more about them today. It is his final attitude to farming, forestry and small businesses that will determine my attitude to the Bill tonight and in its final stages.
      Mr. Paul Hawkins: There have been excellent speeches in the debate, both last night and today. Mine will not be of that calibre, but I know something about some of the matters which have been mentioned.
      My interest, which I must declare, is that I have a small business. It was started by my grandfather, and my son is now a partner in it. I have, I hope, a fifth generation coming along. The business is representative of many small firms throughout the country giving employment to 40 to 100 people. The death knell for these small businesses would mean the destruction of employment in the countryside and of the whole of our way of life there.
      I also have a forestry interest, in that I have a part in the management of seven or eight estates in Norfolk, all of which have many small woodlands. Despite what many people have said, these wood
      1520
      lands are given over to hardwood production. I doubt whether they are run for profit. They are certainly not run for tax evasion. They are beautiful, and make quite a difference to the landscape, as do the beech woods in Gloucestershire. If we see the hardwoods felled all over England, the countryside, which hundreds of thousands of people from America come to see, will be totally changed.
      Like the hon. Member for Galloway (Mr. Thompson), I have worked in woodlands, but I was not paid to do so. When I was a prisoner of war I went to work digging up tree stumps in the woodlands. It was probably the hardest work I am ever likely to do, but it was also the most pleasurable I have ever done, because it meant getting outside the barbed wire.
      The Forestry Commission and the private woodlands in my part of the country work hand in hand. They both employ excellent workers, many of whom we saw here the other day. Those workers and the farm workers are some of the best workers in the land. I entirely agree that their pay, which is low, is by no means enough. They are fine men and skilled men. Anyone who has to fell trees, trim trees, plant trees and look after them, or to look after the machinery on small farms, including corn machinery and harvesting machinery, which now costs many thousands of pounds, must be highly skilled.
      The lack of confidence engendered by the new tax is extraordinary. Representatives of the National Farmers' Union's Norfolk branch today told the Norfolk Members that that lack of confidence is leading to a drastic cut in investment in farming. That will mean a cutback in food production, when we want every ounce of food that we can grow in this country to improve the balance of payments by saving on expensive imports. In my part of the world we need investment in new or improved sugar beet factories, and we need to grow more sugar beet.
      If many small farmers have to sell up, and cannot pass on their farms to their children, confidence in the industry will be reduced, and in due course that lack of confidence will spread throughout the countryside.

      1521
      The keen interest that the Chancellor has taken almost throughout the debate has convinced me that he did not realise the full damage that the tax would do. In fact, he admitted that it would do far more damage to forestry than he had thought. Therefore, I ask him to reconsider the clause and, if necessary, present it again, but after full consultation with those who know what they are talking about in the various branches of this great countryside industry.
      6.0 p.m.
      Mr. John Gorst: I shall not weary the Committee with a long speech after the many long hours of debate. After listening to many of the speeches I feel that I have heard a similar theatrical performance elsewhere. I have in mind the spine-chilling third act when the felling of the orchard takes place in Chekhov's play "The Cherry Orchard". We all know the symbolic importance of that act as the precursor to the Russian Revolution.
      I am delighted that my right hon. Friend the Member for Finchley (Mrs. Thatcher) has made the commitment to repeal this vicious confiscatory tax. At least we have a spark of hope from that promise. I shall not attempt to summarise the excellent speech of my right hon. Friend the Member for Farnham (Mr. Macmillan). However, I shall try to summarise the underlying attitudes of the angry middle-class workers who have recently, in myself, acquired—I hope—a modest person to articulate at least some of their views, despite the highly significant jeers from the Labour Members accompanied by the sneers of the Chancellor of the Exchequer. Those sneers will not go unnoticed in the country outside.
      Mr. Brian Sedgemore: To which country is the hon. Gentleman referring?
      Mr. Gorst: The hon. Member for Luton, West (Mr. Sedgemore) asks, "which country?" The question that we shall be dividing on is simply whether we believe in a collectivised society—a society in which the individual counts for nothing and the State for everything—or in a free society, in which invention, thrift and ingenuity can germinate at the grass roots of industry and society and grow from one generation to another, from self-
      1522
      employed units to much larger units embracing organised unions.
      This is a pernicious, damaging and malicious clause, which will do a whole range of things to change the face of our society. It will destroy the mobility of ownership, it will encourage the squandering of growing resources before they have ever grown beyond the seedling stage, and it will result in the pre-emptive nationalisation of emergent new small businesses belonging to self-reliant and self-employed people before they have even had a chance to come to fruition. It will drive into exile skilled and trained talent from our society. That talent will seek its livelihood in other parts of the world. It will strangle charity, assassinate thrift and smother all undeveloped initiative and invention.
      Who wants to invent things to be put on the market in a country which will grab them whenever there is a transfer of ownership? I can think of few occasions when I shall go into the "No" Lobby with more determination. I shall be determined to reject an abhorrent and obscene offspring of humbug and malice which has been conceived in almost total ignorance, and certainly by the ignorance of back-bench Labour Members.
      Mr. Cormack: My hon. Friend the Member for Hendon, North (Mr. Gorst) spoke with eloquence and anger. I have heard every speech in this debate and I now feel more angry than when I entered the Chamber last night I have no interest to declare in a business that I own or might inherit or any acres that I might inherit. I have none of those things. Labour Members should get rid of the folk myth that Conservative Members come only from rolling acres. We do not. Many of us have backgrounds no more affluent than those of many Labour Members.
      I wish to dedicate my political life to advancing various propositions. One of them is that there can be no freedom without economic freedom. That means the freedom to earn and to own, to give and to save and to prosper.
      I have always been unhappy about the principle of estate duty. I must make that plain. What has been taxed during life is plundered at death. CTT does away with one of the more gruesome acts of plunder. We welcome that for widows,

      1523
      for example, but up to now people have been deluded. Some have given this tax a welcome that it does not deserve. I hope that the forceful and eloquent debate that has taken place over the past many hours will dispel any illusions that people may have. This is the most penal fiscal measure ever to be laid before the House. It is the most dramatic illustration of the Government's revolutionary concept of taxation. Its purpose is not to raise revenue but to change the whole structure of society. This is government by confiscation on a scale that is unknown this side of the Iron Curtain.
      Last week in Committee on the Finance Bill I referred to the Government as the scourge of the saving classes. Today we see Clause 17 cast success as a deadly sin and make a virtue of envy. The Government's motto is to punish the thrifty, smother the inventive and outlaw the man of enterprise. Can those be the aims of men of sensitivity? I accept that there are men of sensitivity on the Government benches.
      Mr. John Biffen: Who are they?
      Mr. Cormack: There are not many here. When we consider the present company it would be extremely difficult to name them.
      Mr. Sedgemore: Name them.
      Mr. Cormack: There are in the Chamber people who revel in the destruction of what has taken lifetimes to build. I have a fundamental belief in British democracy, and I cannot imagine that there is a true majority on the Government benches who would see that best of ambitions, the striving for one's family, made an unfair practice.
      It is one thing to tax a man's earnings and to tax all his transactions, but it is quite another to say that he shall be discouraged from using the fruits of his success to build a stake in society, to maintain his business and to give security to his family. It is a curious logic to proclaim, as the Chancellor has done, a belief in a mixed economy and to bemoan the level of investment in industry, and then to urge the use of what I would describe as a fiscal blunderbuss to those who take heed of what has been said.
      1524
      It is strange too for those Labour Members who often and rightly decry the more materialistic aspects of modern society to erect a tax system which will effectively destroy the desire to save and invest in objects of lasting worth. The worker who receives £3,500 a year—there are many of them these days—and who fills his house with trashy perishables, spending his substance on passing fancies, is to be prized above the man of care, taste and discrimination who saves for his family and who might, through taste and discernment, acquire possessions which appreciate in value. The spendthrift might find comfort in the bosom of a Socialist Brittania, but the Government are impaling the saver on the trident.
      I cannot believe that the clause could be the calculated design of any true British Government. Are they totally in the grip of those who would wreck the social order so that from the ashes of a mixed economy a Marxist Valhalla may be built? If it is fairer opportunities and greater equality that Labour Members want, the opportunity to aspire to nobler things as my right hon. Friend the Member for Stafford and Stone (Mr. Fraser) so eloquently said, we should offer greater equality to enjoy the best in life.
      In the estimation of certain Labour Members, that might involve the taxing of gifts. I see the Patronage Secretary—it is rather unusual to see him here at this stage of the day—nodding his head. It might be necessary to involve the taxing of gifts in the estimation of Labour Members; it might be necessary to tax wealth. If that is necessary, however, they should look for examples of how to do it to the west of the Iron Curtain and not to the east of it. There may be philosophical objections, and very strong objections, which I share, to the very principles of this tax, but at least if we are to have it I hope that the Chancellor will heed the many pleas which have been made from the Opposition on behalf of forestry in particular, an industry which is of paramount importance to this country and which will be killed within a generation unless there are true concessions.
      I hope, too—the Chancellor gave some indication last night—that our national heritage will be safeguarded. My hon. Friend the Member for Bristol, West (Mr.

      1525
      Cooke) spoke eloquently about that in our debate last night. By safeguarding that heritage, another of our prime industries—tourism—would be safeguarded. But although there are millions of people who can visit our stately homes and admire our woods and beautiful countryside—and long may they be able to do so—there are millions who wish to save and prosper on their own account, to found their own businesses and to carry on the traditions that have been left to them. If this tax is passed, in its present penal and confiscatory form, they will have no tomorrow to which to look forward and we shall have a peculiar mixture of the peasant economy and the corporate State erected on the ruins of the present Government's financial policies. This country will become what Turkey was in the nineteenth century—the sick man of Europe.
      Mr. Stephen Hastings: This is probably the most important debate on any Finance Bill that has been before the House of Commons since I came to this place nearly 15 years ago. One proof of that is surely that the standard of the speeches from both sides of the Committee has been almost uniformly high. With that remark I should like instantly to couple the contribution of my hon. Friend the Member for Staffordshire, South-West (Mr. Cormack).
      At least the importance of this proposal has been echoed by the Chancellor, because last night—the debate occurred too late for it to appear in Hansard this tins morning—he referred to it as the most far-reaching tax proposals since the war, although whether he realised its implications when he launched into it so precipitously is much more doubtful. But all of us, and particularly those who are alert to the implications of this legislation, must not be lulled by the Chancellor's indulgence and fair words—though they were appreciated last night—about charities, forestry, small farms and historic houses. All he has done is to hint at the possibility of partial reprieve from certain ruin for some very worthwhile institutions. This remains an iniquitous proposal which is designed to change the whole nature of our society—in my view, immeasurably for the worse.
      1526
      Some hon. Members have referred to an article which appeared this morning in The Times. I make no apology for repeating its concluding words:
      "These sections of the Finance Bill … in several respects go beyond what is acceptable in a free society, or at least go beyond what will in practice be accepted by free men."
      I certainly could not put it better. I do not think that any serious or responsible critic could have put it more strongly than that.
      Apart from the implications of the legislation, the second reason why this debate is of the deepest importance to us was also expressed in the same article when it said:
      "The level of public understanding of what is being proposed could hardly be lower. The great majority of Members of Parliament themselves, probably, have little idea of the revolutionary consequences that would flow if these sections of the Bill were enacted in their present form."
      I believe that to be true. People have no idea about it and I make no apology for reading quotations from that article.
      I do not mean the simple-minded, bottom-form Marxists such as are sitting on the Government side of the Committee, some of whom were there yesterday too, giggling and gloating as if they were the knitting women before the guillotine in the Place de la Concorde. There are people who still believe that Marx-Leninism has something to do with equality. [Interruption.] There are some, and there is the proof of it.
      I refer to the main misconcepts on which the proposal has been launched. The first is that it constitutes in some form a redistribution of wealth. It will prevent that. That has been explained again and again. The second is that the damage is to be confined to a tiny minority. It is not. Millions will be affected.
      6.15 p.m.
      Let us turn for a moment, however, to what the Chancellor yesterday repeatedly referred to as a small or tiny minority, who doubtless, in his view, deserve all that he intends they should get. Let me say a word about them.
      I take it that the Chancellor means large estates and landlords in the country as much as he means anyone. Very few hon. Members—a few from this side, notably my hon. Friend the Member

      1527
      for Dorset, South (Mr. King)—mentioned landlords yesterday, and only a few have mentioned them today. There is a virtual taboo about the subject. I agree that if minorities are held to be unimportant, they are unimportant. Yet the Chancellor responded over historic houses, once or twice I think. A way must be found, he said, to preserve their contents as the nation's heritage. I say to him that the presumption is breath-taking. He sets out deliberately to ruin anything like a large estate and then graciously agrees to prevent the victims from selling anything to keep things going. Of course they should be preserved, but by allowing the estates to remain viable.
      We are so bemused in this place with egalitarianism in its various guises that our sense of truth and realism deserts us. This is not a Soviet society. These places are not the heritage of the Chancellor or of myself or anyone else's heritage, except in a very indirect way like the Albert Hall or Lords cricket ground. They are the heritage of those who, some for generation after generation, some through recent investment, have preserved them, looked after them and loved them, and preserved them against assault upon assault from many quarters, particularly from Governments, one upon another, and before that from kings of England, too.
      Has the Chancellor any idea of the complexity and devotion which goes into the administration of country estates; of the number of people employed and the part those estates play in a hundred different ways in the rhythm of village and country life? Does he really think that those who work upon them or who are tenant farmers will bless the day they have to depend on the local authority or the Ministry of Agriculture for their jobs, security or welfare? If he does, he needs to see a psychiatrist.
      I have dwelt on this matter for a while not because it is the most important issue in my mind but because yesterday it went almost by default. The Chancellor should weigh the consequences very carefully. He should pay due attention to the CLA, the NFU, the Amenities Council and others involved, who will doubtless be making or have made representations to him. If he persists in his attempts to ruin large
      1528
      and well-administered estates, he will end by bringing great unhappiness to very many ordinary people besides those families who have preserved them—to those who work on them, to tenant farmers and to myriads of people from town and village who benefit in one way or another. And who will benefit if the Chancellor has his way and ruins them.
      I concede there may well be a case for replacing estate duty, and I accept much of what the Chancellor said about estate duty at present being a voluntary tax, though I suggest that avoidance would never have grown to the extent that it has if the rate had not been so penal. I accept that there may be a case for a gifts tax. However, it is not the principle but the proposed practice to which I object. It is the venomous way in which it is to be implemented.
      There have been so many contributions to the debate by now that I shall not go over this ground again. I mention merely a few aspects: the high rates as compared with anything in Europe or the United States; the lack of any concession to families; the unfairness of the grossing-up system; the retrospective effect; and this nasty little proposal in Schedules 4 and 5 by which any professional adviser is compelled to report any settlement to the Revenue within three months, and not only the details of the settlement but anything which the Revenue thinks may be "relevant". [An HON. MEMBER: "Big Brother."] Yes, if it is not "Big Brother" or a charter for spying and snooping, I do not know what is.
      Another aspect on which I want to dwell for a moment is the destruction of trust law. I am no tax expert, but it seems to me that the essence of the Government's proposal is that they seek to divide trusts into two classes, approved and disapproved. Thirty per cent. of the CTT rate is to be levied on disapproved trusts every 10 years, and if the unfortunate trustees seek to change a disapproved trust to an approved trust the whole trust fund will be taxed at the full rate. The Government must wish to destroy the whole gamut of trust law.
      I searched for a simile. Imagine the Grand Inquisitor in the Spanish Inquisition. He lays down arbitrary rules for identifying heretics from their past actions and then decrees that one arm or one

      1529
      leg should be removed every 10 days. If anyone is unwise enough to embrace the true faith, he has both arms and one leg removed immediately. That is a precise analogy to what the Chancellor of the Exchequer intends to do to trusts, and it cannot be said to constitute any proper standard of fiscal morality. In fact, it is plain dishonest.
      But my main objections are twofold and they far outweigh any other consideration. Not in principle but in form and content, this is a political tax. It is the dreadful price which the nation is being forced to bear for a worthless deal between the two wings of the Labour movement. Here is the Danegeld. Private enterprise as we know it will perish in a generation. The pattern of life in our countryside which it has taken centuries of careful husbandry to make unique and from which we all profit, wherever we live, is to be destroyed—for what? For a pretence; for a sham agreement which already lies in ruins because of the arrogant power of the Left-wing union bosses.
      Sic transit gloria. But there lies no glory in it for this poor thing of a Government. Therefore, let them even at this hour show some courage. I am sure that the Chancellor of the Exchequer in his heart follows me. I understand very well how hard his road is. I suspect that he is bedevilled by as many enemies among his supporters as he has elsewhere. But let him and his true friends at last assert themselves and rethink this iniquitous proposal.
      I leave the Chancellor with this last reflection. We suffer in this country from no fewer than nine taxes: income tax, surtax, capital gains tax, stamp duty, estate duty—or capital transfer tax—development gains tax, value added tax and rates; and on top of all those is to come the wealth tax. Yet to date it is fair to say that the administration of these taxes has been good by any standards anywhere in the world. Perhaps one could even say that it has been the best. This is due, first, to the fact that the majority of taxpayers are honest and co-operative, and secondly to the high standard and fair treatment of the majority of Revenue officials. Both sides accept that, broadly speaking, the rules are fair. There are already signs that this happy state of affairs is ending because the pressures are too great.
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      But when the consequences of the capital transfer tax are known it will be the last straw. There will no longer be any acceptable basis of fairness. It is possible that strikes by taxpayers will follow, and strikes by tax collectors are just as likely. What is absolutely inevitable is a vast increase in inaccurate returns. When that state of affairs comes about, and unless the Bill is changed, it can be said that the Marxists will have won their class struggle. They will have destroyed a class of citizens who are both honest and thrifty and will replace it with a class which is neither. This tax is an attack on the very concept of private property. In these diabolical proposals the free society is placed formally at risk.
      I ask the Chancellor of the Exchequer to reflect on one undoubted historical fact. Above all, it was grinding taxation—the fiscus—which destroyed the integrity of Rome. The analogy is frightening. Unless these proposals are drastically altered or repealed they will do the same to us.
      Mr. Peter Rees: However dulcet the tones of the Chancellor of the Exchequer had become by the early hours of this morning, his speech in opening the defence of his misshapen child was uninformed, insensitive and insolent. I use the word "insolent" only because the Chair yesterday ruled it to be a parliamentary expression. That was a pity, because it is time that we had a serious debate about the place of private property in our society.
      The introduction of this tax at this time is a massive irrelevance—as though we had been asked to debate Harcourt's Estate Duty Bill in 1914. The pretext that this tax is an element of the social contract could have come only from the Chancellor of the Exchequer, with his capacity for ponderous irony. The issue on which he has to convince the Committee and the country is this: do savings and property bear their fair share of tax? The mere parrot-like repetition that the tax which the right hon. Gentleman has devised, if indeed he has, is fair will not make it so.
      The Chancellor has not reminded us, although other hon. Members have, that we have income tax on so-called unearned income, investment income, up

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      to the rate of 98 per cent. We have a capital gains tax, with no allowance for inflation, at 30 per cent. We have a stamp duty of 2 per cent.—and I remind the right hon. Gentleman, if he has forgotten, that stamp duty was devised as a form of capital transfer tax. We have estate duty at rates up to 75 per cent.
      I concede that estate duty is not an entirely satisfactory tax, but it is not a voluntary tax. It may be a capricious tax, but death is not predictable. The estate duty rates are far too nigh and should have been reduced. Tax at those levels would be intolerable if the tax were made comprehensive. It is quite wrong to pretend, as the Chancellor claims, that his tax is merely a logical development of estate duty. Not content with the capital transfer tax and all the other taxes I have outlined which, for weight and range, are unparalleled in Western Europe, the Chancellor has devised a wealth tax.
      Against that background, we are entitled to ask what possible justification there is for a capital transfer tax. It can only be that, incapable of creating wealth, the right hon. Gentleman has a rage to destroy it. Some Labour Members affect to believe that the tax will touch only a privileged few—the bastions of privilege. The range of speeches from hon. Members on both sides of the Committee will have demonstrated to the Chancellor that it will touch practically every aspect of our national life. Even if the number of people who pay the tax is numerically small, the number of people indirectly affected by it will be considerable.
      The Chancellor would have us believe that he is concerned for the small farmer. Why not the large farmer too? He makes his contribution. The economic trend all the time is towards large farms. Does the right hon. Gentleman want farms to be fragmented? Does he wish the landlord and tenant system to be destroyed, with the replacement of the private landlord by the State or by the institutions? I shall not touch on the question of forestry, although I declare a small private interest in it, but I ask the right hon. Gentleman to tell us before Report what advice he has received from the Forestry Commission. The inevitable consequence of his measures will be that eventually all planting will have to be done by the
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      Forestry Commission. Is it happy about this prospect? What have Lord Taylor and the members of the commission said to the right hon. Gentleman on this subject?
      It may surprise Labour Members to know that the trade unions will be affected. If it turns out that the penalties inflicted on the AEUW in the summer were paid by an individual, he will pay a capital transfer tax on the grossed-up equivalent of £50,000. His generosity will be rewarded by a bill of perhaps £100,000 or £150,000. It will be interesting to know whether the AEUW will pass round the hat for him.
      This will be a tax on charities, and in view of the time left to us I shall not enlarge on that matter. But I ask the Government to consider whether we should have had Wolfson and St. Antony's Colleges if this tax had been enacted when those colleges were founded with such princely generosity.
      6.30 p.m.
      The rôle played by trusts in our society has been much misunderstood although possibly not by the hon. Member for Luton, West (Mr. Sedgemore), who studies these matters through Private Eye. Some of his colleagues are perhaps less well informed. I remind them that there are trusts for employees, who will be affected. Is that what the Government intend? The Government have told us that they have designed, through this tax, an irreversible shift of wealth and power. However, that will not be a shift from individual to individual. It will be a shift from the individual to the State. One of the myths by which we order our affairs in the House of Commons is that we have control over the State. In our hearts we know that to be a myth.
      There will be other consequences, namely, a drift of capital and enterprise from this country. More subtly and more corrosively than that, there will be another consequence. The line between taxation and confiscation is a fine one, but it is recognised by taxpayers. The Chancellor of the Exchequer said in a television interview that his fiscal and perhaps his social attitudes were formed by his experiences as a young officer in Italy after the war. That demonstrates how little he knows about his own country. The relevance of his experience

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      to what happens in this country is tenuous in the extreme. He may, however, have noticed the Italian attitude towards tax-paying. That will be reproduced in this country. There is a social contract between taxpayers and the Government, and it has grown increasingly fragile. I believe that it will be broken by this tax if it is passed in its present form.
      In the short time in which he has presided over our economic destinies, the Chancellor of the Exchequer has shown himself to be impotent and incredible. He has shown himself to be impotent because while capable of analysing our problems he has proved incapable of solving them and incapable of introducing the measures which he knows in his heart of hearts the situation requires. He has shown himself to be incredible because to the end of his political life his claim that inflation was running at the rate of 8¼ per cent. will be remembered and quoted against him.
      Perhaps to atone for his ineffectiveness the Chancellor of the Exchequer now wishes to inflict something else on the country. The traces of his own past still hang around him. I know not and care not whether he still carries a Communist Party card in his pocket. But I know that his thinking still bears the stamp of Karl Marx. He wants to put the Marxist stamp on this country as his own contribution to our public life. Whatever the majority of people in this country voted for an 10th October, I know they did not vote for that.
      [Mr. ALAN FITCH in the Chair]
      Mr. Nicholas Fairbairn: From time to time since 1945 Labour Governments have conceived of a variety of measures to achieve what is euphemistically called the redistribution of wealth, and CTT is but the latest of these supposedly philanthropic measures. If any of the ancestors of this tax either had that intent or effect, that is neither the intent nor the effect of this tax. Let us be quite clear that the purpose of this tax is to break for ever the independent, of whatever means or station in society, and to break the spirit of independence which has been the inspiration of this country and which is so resented by the recidivists in the Government.
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      If we are looking, as the Government are, for an irreversible shift of wealth to the working classes—and I object when the hon. Member for South Ayrshire (Mr. Sillars) regards only wage earners who are trade unionists as those who work—we shall not see an irreversible shift of wealth to anybody. We shall see an irreversible shift of wealth from those who have not been spendthrifts to a spendthrift State, presently personified by the Chancellor of the Exchequer whose benign smile throughout the debate seems to me to be the smile of the tiger in anticipation of the prospect of eating the carnal beast of private capital. When last night he benignly, blandly and innocently told us that he was worried about the effect on forestry, agriculture, charities, our heritage and small businesses, which he had not appreciated until the matter had been brought to his notice, my immediate throught was "Timeo Danaos et dona ferentes". However, on reflection I thought that in this case it should be "Timeo Danaum et dona confiscantem".
      When the right hon. Gentleman said that he had not appreciated the effect of his tax, I felt that either he was guilty of a naïivety and incompetence such as would compel his immediate resignation—I shall say nothing to prevent that—or that he was guilty of deliberate deceit, because despite all the advice from the agricultural and forestry industries he introduced the Bill in that form and thus postponed a whole year's planting, certainly in my constituency.
      Quiet, docile and simple, these 20 words are in fact a vicious and lethal measure which I believe is intended to be vicious and lethal. If the Government do not wish us to be indistinguishable from the drab orthodoxies of the Eastern dictatorships, they should understand just how lethal and vicious it is.
      This measure flies in the teeth of the professed policy of the Government, expressed only six months ago, to help agriculture. It flies in the teeth of the policy expressed six months ago to help forestry. It flies in the teeth of the professed interest in the balance of payments with respect to timber imports. It flies in the teeth of the professed interest in our heritage.
      Although not all the country houses with great collections are open to the

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      public, there are many great houses as we saw in a recent exhibition, which will be compelled to be destroyed and their fine contents distributed because of this tax. The skills, traditions, industry, diligence and pride which one generation has passed to another will come to an end.
      The Chancellor of the Exchequer says that planting has taken place to avoid the payment of tax. In that case hurrah! The money was not spent. It was used to plant trees which would not otherwise have been planted.
      Estate duty is said to be a voluntary tax. All taxes are voluntary. I do not believe that the Chancellor of the Exchequer can say "I will voluntarily pay more than I can get away with." I do not believe that a trade union will do that. Indeed, we have the remarkable situation that the Government legislate to force the individual to pay tax which we willingly avoid, and the same Government legislate to force us to repay from our taxation the taxes paid intentionally by a trade union.
      In my constituency, in the heartland of Scotland, the livelihood of every member of the community will, in a generation, become untenable. There are few wealthy land owners. On the whole they have carried on the trust for generations. They have produced the work which all those who live in that community perform, and who works harder, for less, or longer, than the agricultural worker? All the independent people will suffer from this tax.
      Are we to conclude that all these fatal results are the unintended result of a naive tax which was conceived by an incompetent Chancellor in his sleep—in which case let us scrap it and drop him—or are we to conclude that it was the intended result of the capital transfer tax and that the purpose of this provision is once and for all to take the rural community and all who are independent to the guillotine?
      The lesson we must learn is that whatever Socialist pretensions there may be about caring for employment, and about interest in the humble, in the worker, in the rural community, in food production, in forestry and in our heritage—and I have no doubt that the Government are taking part in European Heritage Year—and, above all, whatever their pretensions
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      may be about treating all men as equal providing they are not men of whom they disapprove, it is just so much callous humbug which can be temporarily swallowed to achieve the destruction of all those in our society who have the effrontery to show the spirit of independence and industry.
      That is the sin for which the Labour Party has prescribed the supreme penalty of the capital transfer tax. The purpose of it is to destroy those who have built up and bequeathed to us over generations any woodland, farm, house, garden or painting. In destroying them, the Government will destroy the independent people of this country. They may think that that is what they wish to achieve. But they will also pull down others who depend for their livelihood on the independent members of our society.
      Mr. Evelyn King: It is a traditional function of the Treasury to raise revenue. However, I am sure that all right hon. and hon. Members will agree that that is not the function of this tax. Some people will describe the tax as a piece of social engineering. Others will describe it as a piece of social vengeance. Those are the two opposing views.
      My remarks will be confined within the ambit of a single industry, that of agriculture. I want first to revert to the speech of the hon. and learned Member for Montgomery (Mr. Hooson), who said that no one would defend the 45 per cent. reduction in death duty for those who owned land. That was a piece of agricultural ignorance.
      I invite hon. Members to consider agriculture for a moment. Throughout two centuries, and probably longer, capital made in the City of London has been translated into the farm to the enormous advantage of English agriculture and to our standard of living. But there were exceptions, and one of them occurred between the wars. Agriculture fell into a desperate state. Farms were overrun, weeds took over and farmers were ruined. Then came the war. Food was needed. The desperate efforts of agricultural executive committees, of farmers and of farm workers all over England saved the country with the food that they produced.
      After the war there came a Government which I have special reason to remember. It was the universal view held

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      by Mr. Attlee, Mr. Dalton, Mr. Churchill and Mr. Clement Davies, who then led the Liberal Party—there was no dissenting voice—that agriculture must never fall into those straits again. In that context it was agreed that capital must be attracted to it and that capital invested in land could yield no reasonable return unless there were special incentives.
      That was the basis of the 45 per cent. reduction in death duty, if it be a reduction. After all, if anyone invests his money in agricultural land he will be lucky to get 2 per cent. or 3 per cent. a year. If he invests money in the City, he may well at various times get 15 per cent. or 20 per cent. a year. The 45 per cent. reduction in death duty was simply a quid pro quo. Anyone who was prepared to take the 2 per cent. would gain something from the 45 per cent. after perhaps 20 or 30 years.
      That is the history of the 45 per cent. reduction, and that is why, in the context of agricultural land, I appeal to the Chancellor to consider the industry and what he is doing to it.
      I represent part of the county of Dorset, in which there are a large number of fair-sized estates. I do not seek to defend the big land owner. Nor do I seek to attack him. I seek to describe him.
      I could take hon. Members to estates where two, three or four tenanted farms comprising thousands of acres are owned by individuals. Some of these estates are the most efficient in England, if not in the world, and every competent agricultural person knows that.
      6.45 p.m.
      I regret that we do not have the Minister of Agriculture with us today. I am sure that this proposal is not really a financial one. It is one which affects farming more than any other proposal that we have made in Parliament in the past 30 years. It is an agricultural problem. That being so, I earnestly hope that the Chancellor of the Exchequer is receiving expert advice from the Ministry of Agriculture. I should be extremely surprised if any official in that Ministry could say with his hand on his heart that this proposal will do anything other than ruin farms and increase the price of food.
      I do not want to be unsympathetic to the Chancellor of the Exchequer—
      Mr. Peter Rost: Why not?
      Mr. King: Because I understand his difficulty. But if the right hon. Gentleman wants to make social change, there are many areas in which he can make it genuinely, and he can do it without creating harm.
      It is not in the context of the desirability or otherwise of social change that I want the right hon. Gentleman to consider this matter. I want him to consider it in the context of national prosperity. Surely every Government supporter—Left, Right or any other wing—must listen to an appeal of this kind. I thought that it was universally acceptable in this Committee that agriculture had always had one difficulty—that of allowing the person with outstanding ability but without capital to climb the ladder to owning a farm. Some have done it, but they have done it by being tenants on a small scale first. Having been successful there, many have ended up owning thousand-acre farms. But they started at the bottom.
      Everything depends on starting as a tenant. But how can anyone be a tenant if there is no landlord? I remind hon. Members that 41 per cent. of our farms are still tenanted. I thought that we heard too much from both sides of the Committee last night about the family farm. The impression was that family farms were all owned. They are not. Nearly half of them are tenanted. If our estates are smashed up, the first sufferers are those at the bottom of the ladder. I cannot think that that is what Government supporters really want.
      I come now to some remarks which may seem to be a little out of character. I say to Government supporters that if they really want to smash up the landlord and tenant system, with all its complications, with all its methods for introducing capital and with all the delicate balances which sustain big estates, I can see the argument for doing so. I can see that, from the Socialist point of view, that may be a necessary objective. If the Chancellor of the Exchequer says that, I accept his sincerity. But even he will accept in turn that, if one system is smashed, another must be substituted for it. That is what the Government are not doing.
      If the Government like to take the example of a 20,000-acre estate and say

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      that the State can run it better than the individual—though I doubt it—I can understand the argument. But the Chancellor of the Exchequer is not even saying that. He is saying that no one will run it. By means of this tax the right hon. Gentleman is smashing up the whole constitutional basis on which agriculture and food production are based. For that, on any count, there can be no defence. Forget for a moment the natural ambitions of a young agricultural worker. What will happen if this is followed through, if a 10,000 or 5,000-acre estate is made available? Who will buy this?
      Mr. Rost: The sheikhs.
      Mr. King: That is what I was about to say. It may be the Arabs who will buy up the land which produces cheap food. Nothing will go in its place. I have tried to describe the genuine dilemma which is certain to face every Dorset land owner and every land owner throughout the country. I do not believe that the right hon. Gentleman really intends the effects which his tax will produce. I beg him to consult with those with expertise who know beyond doubt what the results will be.
      Mr. Edward Gardner: No doubt, many hon. Members read, as I did, at the weekend an outstandingly good article in the Sunday Telegraph, warning about the consequences of the capital transfer tax. I wondered whether it was true, as was said, there that there is no realisation among the general public of the significance of this tax. That may be right. I am, however, satisfied that there is a realisation of the significance of this tax among farmers because many of them have come to see me and have written to me about it.
      One farmer who wrote to me yesterday pointed out that farming was a high-risk, low-return industry. He also said—and I wonder whether the Chancellor knows this: he should—that the industry simply cannot generate sufficient capital to meet the tax levels contemplated by the Government. It has not only to meet capital transfer tax but has to meet double taxation which follows capital gains tax, and we know that waiting in the wings, to come on to the stage and dominate it, is the spectre of the wealth tax which is
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      The cumulative effect of this taxation will be an economic holocaust for agriculture. It will be a blight of despair for the industry. If the Government had set out deliberately to do this they could not have found a more effective way of poisoning the land, destroying the crops, killing the cattle, and robbing agriculture of its present and future prosperity. I am appalled by this tax. Whatever the effect of the land hunger of a new town such as the Central Lancashire New Town upon the countryside, by robbing it of good agricultural land, it will be as nothing compared with the devastating effects of this tax.
      This is a creature of Socialism. It was sired by spite out of envy. If it is let loose upon this country the loss of production and employment will be such as to live with us for generations. It will be something for which this country will never forgive the Government.
      Mr. Charles Morrison: I want first to support a point made very well in the excellent speech of my hon. Friend the Member for Eastleigh (Mr. Price) last night. He rightly said that a tax of such importance as this should be debated in full on the Floor of the House. I entirely agree. If my memory serves me correctly the Committee's consideration of the Finance Bill was moved into Standing Committee largely due to pressure of business on the Floor of the House. It would be no bad thing if that pressure were reduced and we were to have less legislation to deal with here. It cannot have gone unnoticed throughout the country that the health of the nation seems to have deteriorated in inverse proportion to the increasing amount of legislation, under all Governments.
      I thought that the opening speech of the Chancellor last night was one of the most depressing I have ever heard from the Government Front Bench, not just because of its content, but because of the way it demonstrated the right hon. Gentleman's lack of knowledge about the effects of his proposals. When he came to speak a second time he had become a little more conciliatory. It seemed that there was some glimmer of hope. It is all very ends, but the consequences of his pro-well for him to pursue his egalitarian posals must be considered, too.

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      I hope that the right hon. Gentleman has now heard enough to realise that capital transfer tax is one of the most ill-thought out pieces of legislation ever to come before us. I hope that he has learned something of the interdependence of the country's assets. I hope he has learned that if we clobber the small business man we destroy a major section of British industry. If we clobber forestry we remove the employment of thousands of forestry workers. If we clobber the land owners we shall incidentally be clobbering and destroying tenant farmers. If we clobber the farmers we shall be reducing home food production. If we clobber the country house owner we shall be destroying the English heritage. That seems to be an ironic way for the Government to be celebrating European Architectural Heritage Year.
      My hon. and learned Friend the Member for South Fylde (Mr. Gardner) referred to the effects of this tax on agriculture as a blight of despair. It is worthy of notice that there is one category of farmer which avoids this tax completely, namely, the public corporation—lifeless or deathless—the companies such as ICI, and even the Co-operative Society. They will, therefore, benefit from the fact that they do not have to pay it.
      About half our farmers are owner-occupiers. In the old days they often paid little or no capital taxation. They were able to make use of the seven-year rule to avoid estate duty by making a lifetime gift. Alternatively, if there was a transfer at death then the 45 per cent. rebate operated. Under the capital transfer tax proposal they have a horrible choice. Either they undertake a lifetime transfer, in which case they are liable to iniquitous double taxation under capital gains tax and capital transfer tax, or they can transfer at death with a relief from capital transfer tax described in the Farmers Weekly as "an empty gesture." If there is transfer at death it is likely, under this tax, that it will be by an old man to a middle-aged man.
      7.0 p.m.
      What opportunity will there be for the young farmer? I am talking not only about large farmers but about the mass of owner-occupiers who farm farms varying in size from 20 acres to several thousand acres. There must be better
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      relief for the smaller farmers if the Chancellor's generosity cannot be extended to cope with the problems of the larger farmers. If not, the effect on the farm structure of the United Kingdom will be appalling and our production will suffer. Only too often we hear complaints about the poor European farm structure. Under this tax the same will occur in the United Kingdom.
      What magic is there in the figure of 1,000 acres up to which the remission will be given? In my constituency and throughout much of East Anglia and the whole of the chalkland areas of the South there are many highly productive, highly capitalised farms of more than that acreage. It is in the national interest that they should continue to be highly capitalised and highly productive, but once they are affected by the tax they are likely to be broken up or undercapitalised.
      The position of the tenant farmer is endangered in two ways. First, the landlords will be literally erased. Only a few tenants will be able to buy the land they farm, and, if they do so, many will be farming with inadequate capital, to the disadvantage of the productive potential of their farms. The second danger affects the larger tenant farmer who loses the 45 per cent. abatement of estate duty. Such are the proposed levels of capital transfer tax and the extent of the investment of tenant farmers that a tenant who is farming more than about 600 acres will be much worse off under this tax than he is under estate duty.
      The tax proposal is causing grave concern throughout the countryside among farmers, land owners and those who undertake forestry operations. Yesterday I received a letter from my county naturalist trust expressing concern about the effect of the tax on the county's environment. I hope that the Chancellor, after taking careful note of all that has been said, will take away this tax and come back with a more sensible proposal.
      Mr. Wyn Roberts: I should like to go back to the speech made last night by the Chancellor, when he referred to the economic and social consequences of the tax. It was his singular lack of awareness of the social and economic consequences of the tax that largely inspired this debate. If the debate has achieved nothing else.

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      I hope that it has opened the Chancellor's eyes to some of the economic and social consequences.
      On Monday many hon. Members were lobbied by forestry workers. Is the Chancellor fully apprised of the fact that there are more than 10,000 people employed in forestry outside the Forestry Commission? Surely he must have some regard to the future livelihood of these people which is now in jeopardy?
      I am concerned with the effect of the tax on the rural areas of the United Kingdom and of Wales in particular. The rural areas have already suffered greatly under the Labour Government as a result of increased petrol and transportation costs, increased rates, and the most erratic agricultural policy that we have seen in years. The capital transfer tax will contribute further to the impoverishment of the countryside in years to come. We have spoken of many spectres, but the one I see is the spectre of deserted villages in Wales, the country so dear to my heart. Not only is the tax a death blow to private forestry and the thousands employed in it, it also poses serious threats to agriculture and food production in several ways. The debate has not been sufficiently concentrated on the threats to agriculture.
      To obtain the working farmer concession, land owners will themselves increasingly take their land in hand, and that is bound to result in a shortage of farms to rent. There is already a shortage of farms to rent for our young people in Wales and the tax will add to that problem. In Wales there are about 9,000 tenanted farms and 2,500 holdings comprising more than 50 per cent. rented land. What is to happen to this sizeable tenant farmer population when land owners take over their farms? In time there is bound to be a gradual exodus from the countryside. There has already been a sharp reduction in the farming population in Wales for other reasons, and the tax will further exacerbate that situation.
      It may be argued that as land owners are forced to sell to meet their tax liabilities there will be more opportunities to buy, but buying involves more capital than does renting, and our farmers are finding it difficult enough to get working capital or rented farms, let alone capital for land purchase as well.
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      For the future, I cannot see land owners continuing to help their tenants—as many do—with land improvement schemes by providing fixed equipment and buildings for livestock. They will be discouraged from investing and encouraged to run down land values so that they pay as little of the tax as possible. To pay the tax, owners will have to split up viable farming units created over the years by amalgamation. The result will be the negation of the sensible policy of past Governments who have encouraged the growth of bigger and more viable farming units.
      The tax will starve the land of capital—capital needed to build up its food-producing potential. There is a saying in Wales "If you starve the land, the land will starve you", and that is what the Government are proposing to do, with all the disastrous consequences involved.
      One consequence which should have a particular meaning for the Labour Government is unemployment. The removal of capital and confidence from the land is bound to result in lower employment in the rural areas. It will give a further fillip to depopulation, from which Wales has suffered endlessly and which successive Governments have sought to combat.
      It is for these social and economic reasons that I am critical of the tax. I hold no brief for the land owners—I do not own three acres, let alone a cow—but I am deeply conscious of the disruptive effects of the tax on the rural economy, particularly on the rural economy of Wales. I urge the Government to proceed with the utmost caution, and I echo the call of my hon. Friends for the clause to be withdrawn and reexamined.
      Mr. Ian Gow: There has been some disagreement here on the Opposition benches about whether capital transfer tax was conceived by the Chancellor of the Exchequer as a result of his innocence or his guile. My hon. Friend the Member for Blaby (Mr. Lawson) attributed the introduction of the tax to a mixture of innocence and ignorance. My hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) attributed the introduction of the tax to the guile of the

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      Chancellor. In so far as we have any indication which of these two are the causes of the tax, we may look for it in the words of the Chancellor himself. He said, when introducing his Budget on 12th November:
      "I should have expected the moderation of my proposals … to have brought me gratitude rather than abuse.…"—[Official Report, 12th November 1974 Vol. 881, c. 277.]
      The Chancellor of the Exchequer (Mr. Denis Healey): There is no gratitude in politics.
      Mr. Gow: I hope that the Chancellor has learned one thing as a result of this debate—namely, that there is precious little gratitude in politics and certainly none on this side of the Committee for the right hon. Gentleman.
      The proposed introduction of capital transfer tax cannot be looked at in isolation. It must be looked at in the light of the present and prospective taxes on capital gains and on wealth. I believe it is wrong to proceed with the capital transfer tax, important and crucial though it may be for the future of the country, without the Chancellor having come to any decision at all about the form of the prospective wealth tax, and bearing in mind the fact that he has set up a Select Committee to advise the Government on the form of wealth tax. Therefore, I emphasise that the first reason why Clause 17 should not remain in the Bill is that it is wrong to consider such a provision when the Chancellor has not made up his mind on the form of the wealth tax.
      We hear a great deal from Labour Ministers about the need for fairness. All on the Conservative benches would subscribe to the proposition that the levying of taxation is not just for the raising of revenue but also for the achievement of a just society, but justice and fairness are indivisible and must apply to all sections of the community. I criticise the proposed capital transfer tax because I believe that it is manifestly unfair and unjust. It falls on the holders of capital the income from which is already taxed more heavily than that in any other country in the world. If a man or woman wishes to pass on capital there will be penal rates of taxation on top of the existing stamp duty, existing capital gains tax and the prospective wealth tax, with no prospect at all of indexation.
      1546
      The consequence of the tax will not be the wider distribution of wealth. It will be the concentration of wealth and of power in a small group of increasingly fallible men sitting on the Government Front Bench. The Chancellor has not thought through the consequences of the tax in terms of the farming community or the business community.
      I am not opposed to taxes on capital. I am in favour of taxes on realised capital gains, with proper indexation. I am also a supporter of an inheritance tax falling upon the donee. I disagreed with the Conservative Government when, much too tardily, they introduced capital taxes on gains arising out of the speculation in land. I am, however, strongly opposed to this type of capital transfer tax. Therefore, I hope that the Chancellor, having listened to the debate, at least will make some concession to the Opposition.
      7.15 p.m.
      Dr. Alan Glyn: I shall be brief. I have listened to almost every speech in this debate. I must say that most of the speeches seem to have come from the Conservative benches.
      Last night the right hon. Gentleman the Chancellor of the Exchequer gave certain concessions in respect of timber, the effect on small businesses and charities—
      Mr. Cormack: The Chancellor did not give any concessions. We must not rejoice in a victory yet. We hope that he will give concessions.
      Dr. Glyn: I should be very surprised if any Chancellor, having listened to the arguments presented to him, would not give some concessions. The arguments have been so convincing and powerful that it would be difficult even for this Chancellor to resist. I do not know how far he will go. I am certain that the smile on his face at present shows that he has some intention of meeting the Committee in some respects.
      The point is that this debate is not concerned merely with taking away the wealth of small sections of the community. The country outside the House must realise the consequences of the imposition of capital transfer tax and its effects on the nation. First, the tax is a challenge to the free enterprise society

      1547
      in which we live. It goes further since it challenges the right of individuals to continue to own and pass on property to their descendants.
      The second matter to be considered is the effect of the tax on small businesses. We have to consider not only the effect on the owner of a business, trustee and so on, but the effect on those who work in the businesses, and that is most important. That is the point which people outside the House have not necessarily grasped.
      Thirdly, I should like to mention the situation of agriculture. Who will buy the land once the large estates are broken down, as inevitably they will be? Will it be the tenant farmers? Of course not. They will not be able to afford to borrow money at 15 per cent. or 18 per cent. I hazard a guess that the people who will buy the land will be either the Government who will set out on a further spree of inflation, or people from the Middle East, namely, the oil sheikhs who will invest in our land as a long-term financial exercise.
      If the clause goes through as it is it will alter the whole pattern of our society. It will curb the savings of our citizens. It will ruin small businesses. It will have a long-term adverse effect on agriculture, and many people who do not now realise its consequences will soon appreciate its effect when they see greater unemployment, and businesses going to the wall. They will realise that the tax affects the whole of our society, that it will be the end of a free enterprise society, the end of much of our savings and the end of an era. The Chancellor has put up no alternative to what he is seeking to destroy.
      Mr. Healey: All of us who have sat through this seven-hour debate will agree that it has been exhaustive and, for some of us, perhaps, exhausting, too. In my 22 years' experience of the House few debates in Finance Bill Committees have aroused quite such passion or attracted so large and continuous an attendance, at least on the Opposition benches. I do not think we have had many debates in which the speeches have been so deeply felt. I pay my respects to the sincerity of all those who have criticised me in this debate and I shall comment on some of their contributions as I proceed.
      1548
      Today, we have concentrated a good deal more on the central theme of the new capital transfer tax than we did last night. That, after all, is the central issue in a debate on whether the clause should stand part of the Bill.
      The purpose of the capital transfer tax, as I said yesterday, is to make effective a law which has been on the statute book for 80 years and whose purpose, at least for the last 60 years, has been to prevent vast aggregations of inherited wealth from being passed on undiminished from generation to generation. Yet, as we all know, and as has been admitted on both sides of the Committee, estate duty has been increasingly avoided because rich men put their wealth into trusts or give it away to their children before they die.
      The House and the country should be aware that estate duty affects only a small minority of the population. Roughly speaking, one person out of 1,000 is currently affected in a single year, and over a lifetime of, say, 70 years, it affects roughly one person in 12 of the population. So only a small minority are affected.
      Of that small minority, the great majority have paid this tax without complaint and without trying to avoid it. All of them—the majority of this minority—will be better off under the capital transfer tax. The rates are lower and, with respect to the hon. Member for Blaby (Mr. Lawson), the principle of levying the tax on the gross value is applied just as much under estate duty as it will be under the new tax. There is no difference between the two from that point of view.
      More important—this was welcomed on both sides—there is an exemption for the spouse, which means that thousands of widows who, as I said yesterday, on average outlive their husbands by 18 years, will enjoy substantial advantages over that period which they do not enjoy under the existing estate duty.
      Mr. Peter Rees: I must correct one statement by the Chancellor. On gifts inter vivos at the moment, the donee is accountable and pays tax on the amount given and not on the grossed-up amount. Will the right hon. Gentleman, for the record, correct his entirely misleading statement of the existing law?
      Mr. Healey: With great respect to the hon. and learned Gentleman, I do not think that he was listening to what I said. I said that legacies under estate duty are paid gross with tax in exactly the same way as transfers under the capital transfer tax—[Interruption.] I am not talking about gifts now. The purpose of the capital transfer tax is to plug many loopholes in the estate duty.
      The wealthiest part of the minority of whom I was talking have regularly avoided the tax and it has been almost without effect on the vast aggregations of wealth. It is at those vast aggregations that it has always been essentially aimed. It has become clear in the debate that many Conservative Members—perhaps the majority—do not wish to change that situation. Indeed, the right hon. Member for Farnham (Mr. Macmillan) was quite frank yesterday when he said that it was essential that estate duty should remain a voluntary and avoidable tax, because if it did not, many consequences that he would not wish to see might follow.
      His own belief was clearly implicit in the contributions of many of his hon. Friends. They, too, wish estate duty to remain an avoidable tax. On the other hand, the Labour Party, the Liberal Party and, I think, a large number of Conservative Members who have spoken, have made it clear that they do want to change the situation. However much they may disagree in detail with the capital transfer tax, they regard the avoidance of estate duty as a scandal which should be halted. That is the purpose of this tax.
      Mr. Maurice Macmillan: I hope that the right hon. Gentleman is not intentionally misleading the House. I took considerable trouble to point out that I thought that any form of tax on capital which was penal would be fatal and that this reform, which the right hon. Gentleman claims is a reform of the estate duty, should not be carried out except in the context of a much wider reform of the taxation of capital. I was at some pains to go into the detail of the way in which I thought that that might be done.
      Mr. Healey: I listened to the right hon. Gentleman's speech, as I have listened to every other speech in this debate, with great care. Unfortunately, the Hansard report of his speech is not available to us today because it was made, like many speeches, late at night—
      Mr. Robert Carr: Is it in the Library?
      Mr. Healey: However, I hope that the right hon. Gentleman will agree that he actually used words which expressed the opinion that if estate duty were not an avoidable tax, the type of family business to which he referred could not survive. I do not think that he will deny that. If I am wrong, I shall apologise, but I think that he will find that that is what he said. This was also implicit in the speeches of a number of other Conservative Members.
      Those of us on both sides who wish estate duty to become an effective tax recognise the natural desire of parents to pass on the fruits of their labour to their children. The great majority of our people have this right, absolutely unconfined by the law, and will continue to have it when the capital transfer tax is in operation. That tax will affect only that small minority of the population to whom I have referred, who would be liable to estate duty if they did not avoid it through gifts, transfers or other devices.
      We on the Government side believe that, if there is no limit on the ability of the wealthy minority to pass on the fruits of their labour to their children, we introduce into the class structure of this country a degree of rigidity, indeed, immobility, which is deeply damaging to both its economic efficiency and its social unity—[Interruption.] There is overwhelming agreement on this point in the country. It was strongly endorsed by The Times in a leader in August, which gave an unconditional welcome to the tax in the form in which it was then described and in which it has now been presented to the Committee—[An HON. MEMBER: "What about its leader this morning?"] I read that leader. One of the interesting things about it was the fascinating contrast that it presented with a leader in the same newspaper only a few months ago.
      Mr. Carr: Does the right hon. Gentleman wish to achieve the objectives that he has outlined even if the method that he has chosen causes the destruction of existing private businesses—whether firms, manufacturing businesses, or whatever—and prevents the growth of new ones?
      Mr. Healey: I am coming to that point in a moment, if the right hon. Gentleman will allow me. This is one of a number of specific issues—not a very large number, to be fair—on which many hon. Members have concentrated. In my later remarks in the early hours of this morning, I talked about the conclusions that I had reached, after listening to the debate, on charities, historic houses, woodlands and small firms. As for small businesses, I listened carefully to what was said last night and today by the hon. Members for Gainsborough (Mr. Kimball) and Blaby, and I shall certainly reflect on what they said. If I feel it desirable to introduce changes in the tax to meet those points, I shall do so, but I shall come back to that matter in a moment.
      The hon. Member for Blaby, in his engaging way, however, also suggested that terrible consequences would follow if any of us invited his widowed mother to stay with him. I assure him that, on this as on many matters, the hon. Gentleman is totally mistaken. A man who invites his mother to stay with him is not liable to pay tax on the rent he might otherwise have charged, unless he has found it necessary to enter into a formal arrangement giving her a right of occupation. Even then, he would not be liable unless the rent he charged was considered by the Revenue to be greater than he could pay out of his income. I hope that we shall not have any more of that ridiculous fantasy from the hon. Member or anybody else.
      7.30 p.m.
      I hope that I made it clear, and I hope that I persuaded right hon. and hon. Members, that if reasonable arguments are put—as many were put in the course of this debate—in the later stages of consideration by the House of Commons, in Committee or elsewhere, I shall listen and seek to meet them, but there is here a fundamental issue, on which a real division emerged in the course of the last seven hours' discussions—a division which emerged most clearly in the speech of the right hon. Member for Finchley (Mrs. Thatcher) in opening for the opposition on the clause yesterday.
      We on the Government side listened as intently as did her right hon. and hon. Friends to her speech to discover what slogan might be emblazoned on her
      1552
      campaign banner, because we know that she seeks—this is an honourable ambition—the right to lead her party and the country towards the 21st century. The fact is that she went backwards and not forwards, to one of the oldest slogans in political history.
      Mr. Peter Hordern: On a point of order, Mr. Fitch. Surely we are dealing here with a most important part of the Finance Bill. Cannot we be spared these totally irrelevant considerations?
      The Temporary Chairman: I have not heard anything out of order.
      Mr. Healey: The relevance is this—
      Mr. Gorst: The question of leadership has no relevance at all.
      Mr. Healey: Many of us would say "Amen" to that.
      The right hon. Lady's whole speech was a defiant reassertion of birth and privilege—of the right of inheritance against the whole current of democratic politics in the 20th century. She started unblushingly yesterday by explaining how, under the present tax régime, the wealthy not only can but do order their affairs so as to avoid estate duty, providing that they can afford to hire an experienced tax counsel. She made it clear that success in her Utopia should depend not on one's own ability but on the wealth of one's parents. She asserted that the future of a major part of British industry should lie with men who owe their position to the accident of birth and not to what the right hon. Member for Stafford and Stone (Mr. Fraser), whom we wish well, described as energy, initiative and drive.
      Mr. Nott: On a point of order, Mr. Fitch. I seek your guidance. Is the term "liar" a parliamentary term?
      The Temporary Chairman: I did not hear the term used.
      Mr. Nicholas Ridley: On a point of order, Mr. Fitch. The Chancellor of the Exchequer has now traduced two of my right hon. Friends and put words into their mouths which I did not hear them use when they were making their speeches. Will you ask the Chancellor to return to a discussion of the clause and not to traduce

      1553
      my right hon. Friends, who have made very valuable contributions to the debate?
      The Temporary Chairman: That is not a matter of order. It is a matter of debate.
      Mr. Healey: The hon. Gentleman was not in a position to hear those words spoken because he was not here at the time.
      The hon. Member for Gainsborough, I think it was, described the right hon. Lady as "the blessed St. Margaret". The fact is that she emerged in this debate as La Pasionaria of privilege. She showed that she has decided, as the Daily Express said this morning, to see her party tagged as the party of the rich few. I believe that she and her party will regret it.
      The Temporary Chairman: Mrs. Thatcher.
      Several Hon. Members rose—
      Mr. Cormack: On a point of order, Mr. Fitch. Is it permissible for the Chancellor to treat the Committee with such gross contempt as to suggest that that is a summing up of the most important financial debate the House of Commons has had since the war?—[Interruption.]
      The Temporary Chairman: Order. That is not a point of order.
      Mr. Gow: On a point of order, Mr. Fitch. Are you satisfied that the Chancellor has in fact resumed his seat? He has not answered the debate, which has taken place over a period of seven hours.
      The Temporary Chairman: I am perfectly satisfied that the Chancellor has resumed his seat. I have already called Mrs. Thatcher.
      Mr. Sedgemore: On a point of order, Mr. Fitch. Are you aware that during the debate the hon. and learned Member for Dover and Deal (Mr. Rees) indulged himself in what I can only describe as gutter McCarthyism, and my right hon. Friend's speech made the position clear?
      The Temporary Chairman: I think we should get on with the debate.

      Division No. 68.]

      AYES

      [7.40 p.m.

      Abse, Leo

      Archer, Peter

      Ashton, Joe

      Allaun, Frank

      Armstrong, Ernest

      Atkins, Ronald (Preston N)

      Anderson, Donald

      Ashley, Jack

      Atkinson, Norman

      [Mr. OSCAR MURTON in the Chair]
      Mrs. Margaret Thatcher: I wish I could say that the Chancellor of the Exchequer had done himself less than justice. Unfortunately, I can only say that I believe he has done himself justice. Some Chancellors are macroeconomic. Other Chancellors are fiscal. This one is just plain cheap. When he rose to speak yesterday we on this side were all amazed how one could possibly get to be Chancellor of the Exchequer and speak for his Government knowing so little about existing taxes and so little about the proposals which were coming before Parliament. If this Chancellor can be Chancellor, anyone in the House of Commons could be Chancellor.
      I had hoped that the right hon. Gentleman had learnt a lot from this debate. Clearly he has learnt nothing. Whatever the theory of this tax, which will have a very far-reaching effect upon the country, he might at least address himself to the practical effects, because it will affect not only the one in a thousand to whom he referred but everyone, including people born like I was with no privilege at all. It will affect us as well as the Socialist millionaires.
      Whatever the theory, this tax is fundamentally damaging in two ways. First it damages the economic structure of our society by its effect on private businesses, on farming, on woodlands and on shipping. Secondly it damages the very nature of our society by concentrating power and property in the hands of the State and of those politicians whose only ambition is the pursuit of power for its own sake.
      We believe that the future of freedom is inseparable from a wide distribution of private property among the people, not concentrating it into the hands of politicians.
      We can say little for this tax. We cannot commend it. It is difficult to amend it. It should be withdrawn.
      Question put, That the clause stand part of the Bill:—
      The Committee divided: Ayes 262, Noes 239.

      Barnett, Guy (Greenwich)

      Gilbert, Dr John

      Morris, Charles R. (Openshaw)

      Barnett, Rt Hon Joel

      Golding, John

      Morris, Rt Hon J. (Aberavon)

      Bates, Alf

      Gould, Bryan

      Moyle, Roland

      Bean, R. E.

      Gourlay, Harry

      Noble, Mike

      Benn, Rt Hon Anthony Wedgwood

      Grant, George (Morpeth)

      Oakes, Gordon

      Bennett, Andrew (Stockport N)

      Grant, John (Islington C)

      Ogden, Eric

      Bidwell, Sydney

      Grocott, Bruce

      O'Halloran, Michael

      Bishop, E. S.

      Hamilton, James (Bothwell)

      O'Malley, Rt Hon Brian

      Blenkinsop, Arthur

      Hamilton, W. W. (Central Fife)

      Orbach, Maurice

      Boardman, H.

      Hamling, William

      Ovenden, John

      Booth, Albert

      Hardy, Peter

      Owen, Dr David

      Bottomley, Rt Hon Arthur

      Harrison, Walter (Wakefield)

      Padley, Walter

      Boyden, James (Bish Auck)

      Hattersley, Rt Hon Roy

      Palmer, Arthur

      Bradley, Tom

      Hatton, Frank

      Park, George

      Bray, Dr Jeremy

      Hayman, Mrs Helene

      Parker, John

      Brown, Hugh D. (Provan)

      Healey, Rt Hon Denis

      Parry, Robert

      Buchan, Norman

      Heffer, Eric S.

      Pavitt, Laurie

      Buchanan, Richard

      Hooley, Frank

      Peart, Rt Hon Fred

      Butler, Mrs Joyce (Wood Green)

      Horam, John

      Perry, Ernest

      Callaghan, Jim (Middleton & P)

      Huckfield, Les

      Phipps, Dr Colin

      Campbell, Ian

      Hughes, Rt Hon C. (Anglesey)

      Prentice, Rt Hon Reg

      Canavan, Dennis

      Hughes, Mark (Durham)

      Price, C. (Lewisham W)

      Carmichael, Neil

      Hughes, Robert (Aberdeen N)

      Price, William (Rugby)

      Carter, Ray

      Hughes, Roy (Newport)

      Rees, Rt Hon Merlyn (Leeds S)

      Carter-Jones, Lewis

      Hunter, Adam

      Richardson, Miss Jo

      Cartwright, John

      Irving, Rt Hon S. (Dartford)

      Roberts, Gwilym (Cannock)

      Castle, Rt Hon Barbara

      Jackson, Colin (Brighouse)

      Robertson, John (Paisley)

      Clemitson, Ivor

      Jackson, Miss M. (Lincoln)

      Roderick, Caerwyn

      Cocks, Michael (Bristol S)

      Janner, Greville

      Rodgers, George (Chorley)

      Coleman, Donald

      Jay, Rt Hon Douglas

      Rodgers, William (Stockton)

      Colquhoun, Mrs Maureen

      Jeger, Mrs Lena

      Rooker, J. W.

      Concannon, J. D.

      Jenkins, Hugh (Putney)

      Rose, Paul B.

      Conlan, Bernard

      Jenkins, Rt Hon Roy (Stechford)

      Ross, Rt Hon W. (Kilmarnock)

      Cook, Robin F. (Edin C)

      John, Brynmor

      Rowlands, Ted

      Corbett, Robin

      Johnson, Walter (Derby S)

      Ryman, John

      Cox, Thomas (Tooting)

      Jones, Alec (Rhondda)

      Sandelson, Neville

      Craigen, J. M. (Maryhill)

      Jones, Barry (East Flint)

      Sedgemore, Brian

      Cronin, John

      Judd, Frank

      Selby, Harry

      Crosland, Rt Hon Anthony

      Kaufman, Gerald

      Shaw, Arnold (Ilford South)

      Cryer, Bob

      Kelley, Richard

      Sheldon, Robert (Ashton-u-Lyne)

      Cunningham, G. (Islington S)

      Kilroy-Silk, Robert

      Shore, Rt Hon Peter

      Cunningham, Dr J. (Whiteh)

      Kinnock, Neil

      Short, Rt Hon E. (Newcatle C)

      Dalyell, Tam

      Lambie, David

      Short, Mrs Renée (Wolv NE)

      Davidson, Arthur

      Lamborn, Harry

      Sillars, James

      Davies, Bryan (Enfield N)

      Lamond, James

      Silverman, Julius

      Davies, Denzil (Llanelli)

      Latham, Arthur (Paddington)

      Skinner, Dennis

      Deakins, Eric

      Leadbitter, Ted

      Smith, John (N Lanarkshire)

      Dean, Joseph (Leeds West)

      Lee, John

      Snape, Peter

      de Freitas, Rt Hon Sir Geoffrey

      Lever, Rt Hon Harold

      Spearing, Nigel

      Delargy, Hugh

      Lewis, Ron (Carlisle)

      Spriggs, Leslie

      Dell, Rt Hon Edmund

      Lipton, Marcus

      Stallard, A. W.

      Dempsey, James

      Litterick, Tom

      Stewart, Rt Hn M. (Fulham)

      Doig, Peter

      Lomas, Kenneth

      Stoddart, David

      Dormand, J. D.

      Loyden, Eddie

      Stott, Roger

      Douglas-Mann, Bruce

      Luard, Evan

      Strang, Gavin

      Duffy, A. E. P.

      Lyon, Alexander (York)

      Strauss, Rt Hon G. R.

      Taylor, Mrs Ann (Bolton W)

      Dunn, James A

      Lyons, Edward (Bradford W)

      Thomas, Mike (Newcastle E)

      Dunnett, Jack

      McElhone, Frank

      Thomas, Ron (Bristol NW)

      Dunwoody, Mrs. Gwyneth

      McGuire, Michael (Ince)

      Thorne, Stan (Preston South)

      Eadie, Alex

      Mackenzie, Gregor

      Tierney, Sydney

      Edge, Geoff

      Mackintosh, John P.

      Tinn, James

      Edwards, Robert (Wolv SE)

      Maclennan, Robert

      Tomlinson, John

      Ellis, John (Brigg & Scun)

      McMillan, Tom (Glasgow C)

      Torney, Tom

      Ellis, Tom (Wrexham)

      Madden, Max

      Varley, Rt Hon Eric G.

      English, Michael

      Magee, Bryan

      Wainwright, Edwin (Dearne V)

      Ennals, David

      Mahon, Simon

      Walden, Brian (B'ham, L'dyw'd)

      Evans, Ioan (Aberdare)

      Marks, Kenneth

      Walker, Harold (Doncaster)

      Evans, John (Newton)

      Marquand, David

      Walker, Terry (Kingswood)

      Ewing, Harry (Stirling)

      Marshall, Dr Edmund (Goole)

      Ward, Michael

      Fernyhough, Rt Hon E.

      Marshall, Jim (Leicester S)

      Watkins, David

      Flannery, Martin

      Mason, Rt Hon Roy

      Watkinson, John

      Fletcher, Ted (Darlington)

      Meacher, Michael

      Weetch, Ken

      Foot, Rt Hon Michael

      Mellish, Rt Hon Robert

      Weitzman, David

      Ford, Ben

      Mikardo, Ian

      Wellbeloved, James

      Forrester, John

      Millan, Bruce

      White, Frank R. (Bury)

      Fowler, Gerald (The Wrekin)

      Miller, Dr M. S. (E. Kilbride)

      White, James (Pollock)

      Fraser, John (Lambeth, N'w'd)

      Miller, Mrs Millie (Ilford N)

      Whitehead, Phillip

      Freeson, Reginald

      Mitchell, R. C. (Soton, Itchen)

      Whitlock, William

      Garrett, John (Norwich S)

      Molloy, William

      Willey, Rt Hon Frederick

      Garrett, N. E. (Wallsend)

      Moonman, Eric

      Williams, Alan (Swansea W)

      George, Bruce

      Morris, Alfred (Wythenshawe)

      Williams, Alan Lee (Hornchurch)

      Williams, Rt Hon Shirley (Hertford)

      Woodall, Alec

      Williams, W. T. (Warrington)

      Woof, Robert

      TELLERS FOR THE AYES:

      Wilson, Alexander (Hamilton)

      Wrigglesworth, Ian

      Mr. Joseph Harper and

      Wilson, William (Coventry SE)

      Young, David (Bolton E)

      Miss Betty Boothroyd.

      Wise, Mrs Audrey

      NOES

      Adley, Robert

      Goodhart, Philip

      Miscampbell, Norman

      Aitken, Jonathan

      Goodhew, Victor

      Mitchell, David (Basingstoke)

      Alison, Michael

      Goodlad, Alastair

      Moate, Roger

      Amery, Rt Hon Julian

      Gorst, John

      Monro, Hector

      Arnold, Tom

      Gow, Ian (Eastbourne)

      Moore, John (Croydon C)

      Atkins, Rt Hon H. (Spelthorne)

      Gower, Sir Raymond (Barry)

      More, Jasper (Ludlow)

      Awdry, Daniel

      Grant, Anthony (Harrow C)

      Morgan, Geraint

      Baker, Kenneth

      Gray, Hamish

      Morris, Michael (Northampton S)

      Banks, Robert

      Griffiths, Eldon

      Morrison, Charles (Devizes)

      Beith, A. J.

      Grimond, Rt Hon J.

      Morrison, Peter (Chester)

      Bell, Ronald

      Grist, Ian

      Mudd, David

      Bennett, Dr Reginald (Fareham)

      Grylls, Michael

      Neave, Airey

      Benyon, W.

      Hall, Sir John

      Nelson, Anthony

      Berry, Hon Anthony

      Hall--Davis, A. G. F.

      Neubert, Michael

      Biffen, John

      Hamilton, Michael (Salisbury)

      Newton, Tony

      Biggs-Davison, John

      Hampson, Dr Keith

      Nott, John

      Blaker, Peter

      Hannam, John

      Onslow, Cranley

      Body, Richard

      Harvie, Anderson, Rt Hon Miss

      Oppenheim, Mrs Sally

      Boscawen, Hon Robert

      Hastings, Stephen

      Page, Rt Hon R. Graham (Crosby)

      Bowden, A. (Brighton, Kemptown)

      Havers, Sir Michael

      Pardoe, John

      Boyson, Dr Rhodes (Brent)

      Hawkins, Paul

      Parkinson, Cecil

      Braine, Sir Bernard

      Hayhoe, Barney

      Pattie, Geoffrey

      Brittan, Leon

      Heseltine, Michael

      Penhaligon, David

      Brotherton, Michael

      Hicks, Robert

      Percival, Ian

      Brown, Sir Edward (Bath)

      Higgins, Terence L.

      Peyton, Rt Hon John

      Buchanan-Smith, Alick

      Holland, Philip

      Pink, R. Bonner

      Buck, Antony

      Hooson, Emlyn

      Price, David (Eastleigh)

      Budgen, Nick

      Hordern, Peter

      Prior, Rt Hon James

      Bulmer, Esmond

      Howell, David (Guildford)

      Pym, Rt Hon Francis

      Burden, F. A.

      Howell, Ralph (North Norfolk)

      Raison, Timothy

      Carlisle, Mark

      Howells, Geraint (Cardigan)

      Rathbone, Tim

      Carr, Rt Hon Robert

      Hutchison, Michael Clark

      Rawlinson, Rt Hon Sir Peter

      Carson, John

      Irving, Charles (Cheltenham)

      Rees, Peter (Dover & Deal)

      Chalker, Mrs Lynda

      James, David

      Rees-Davies, W. R.

      Channon, Paul

      Jenkin, Rt Hon P. (Wanst'd & W'df'd)

      Renton, Tim (Mid-Sussex)

      Churchill, W. S.

      Jessel, Toby

      Ridley, Hon Nicholas

      Clark, Alan (Plymouth, Sutton)

      Johnson Smith, G. (E Grinstead)

      Ridsdale, Julian

      Clarke, Kenneth (Rushcliffe)

      Jones, Arthur (Daventry)

      Rifkind, Malcolm

      Cockcroft, John

      Jopling, Michael

      Roberts, Michael (Cardiff NW)

      Cooke, Robert (Bristol W)

      Joseph, Rt Hon Sir Keith

      Roberts, Wyn (Conway)

      Cope, John

      Kellett-Bowman, Mrs Elaine

      Ross, Stephen (Isle of Wight)

      Cormack, Patrick

      Kershaw, Anthony

      Rost, Peter (SE Derbyshire)

      Corrie, John

      Kimball, Marcus

      Royle, Sir Anthony

      Costain, A. P.

      King, Evelyn (South Dorset)

      Sainsbury, Tim

      Crouch, David

      King, Tom (Bridgwater)

      St. John-Stevas, Norman

      Crowder, F. P.

      Kitson, Sir Timothy

      Scott, Nicholas

      Davies, Rt Hon J. (Knutsford)

      Knight, Mrs Jill

      Shaw, Michael (Scarborough)

      Dean, Paul (N Somerset)

      Knox, David

      Shelton, William (Streatham)

      Dodsworth, Geoffrey

      Lamont, Norman

      Shepherd, Colin

      Douglas-Hamilton, Lord James

      Lane, David

      Silvester, Fred

      Drayson, Burnaby

      Langford-Holt, Sir John

      Sims, Roger

      du Cann, Rt Hon Edward

      Latham, Michael (Melton)

      Sinclair, Sir George

      Durant, Tony

      Lawrence, Ivan

      Skeet, T. H. H.

      Eden, Rt Hon Sir John

      Lawson, Nigel

      Smith, Cyril (Rochdale)

      Edwards, Nicholas (Pembroke)

      Le Marchant, Spencer

      Smith, Dudley (Warwick)

      Elliott, Sir William

      Lewis, Kenneth (Rutland)

      Spence, John

      Emery, Peter

      Lloyd, Ian

      Spicer, Jim (W Dorset)

      Eyre, Reginald

      Loveridge, John

      Spicer, Michael (S. Worcester)

      Fairbairn, Nicholas

      Luce, Richard

      Sproat, Iain

      Fairgrieve, Russell

      McCrindle, Robert

      Stainton, Keith

      Fell, Anthony

      Macfarlane, Neil

      Stanbrook, Ivor

      Finsberg, Geoffrey

      MacGregor, John

      Stanley, John

      Fisher, Sir Nigel

      Macmillan, Rt Hon M. (Farnham)

      Steen, Anthony (Wavertree)

      Fletcher, Alex (Edinburgh N)

      McNair-Wilson, M. (Newbury)

      Stewart, Ian (Hitchin)

      Fookes, Miss Janet

      McNair-Wilson, P. (New Forest)

      Taylor, R. (Croydon NW)

      Fowler, Norman (Sutton C'f'd)

      Madel, David

      Taylor, Teddy (Cathcart)

      Fraser, Rt Hon H. (Stafford & St)

      Marten, Neil

      Tebbit, Norman

      Freud, Clement

      Mates, Michael

      Temple-Morris, Peter

      Fry, Peter

      Mather, Carol

      Thatcher, Rt Hon Margaret

      Galbraith, Hon T. G. D.

      Maude, Angus

      Thomas, Rt Hon P. (Hendon S)

      Gardiner, George (Reigate)

      Maudling, Rt Hon Reginald

      Thorpe, Rt Hon Jeremy (N Devon)

      Gardner, Edward (S Fylde)

      Mawby, Ray

      Trotter, Neville

      Gilmour, Rt Hon Ian (Chesham)

      Maxwell-Hyslop, Robin

      Tugendhat, Christopher

      Gilmour, Sir John (East Fife)

      Mayhew, Patrick

      van Straubenzee, W. R.

      Glyn, Dr Alan

      Meyer, Sir Anthony

      Viggers, Peter

      Godber, Rt Hon Joseph

      Mills, Peter

      Wainwright, Richard (Colne V)

      Wakeham, John

      Wells, John

      Younger, Hon George

      Walker, Rt Hon P. (Worcester)

      Whitelaw, Rt Hon William

      Walker-Smith, Rt Hon Sir Derek

      Wiggin, Jerry

      TELLERS FOR THE NOES:

      Walters, Dennis

      Winterton, Nicholas

      Mr. John Stradling Thomas and

      Weatherill, Bernard

      Young, Sir G. (Ealing, Acton)

      Mr. Adam Butler.

      Question accordingly agreed to.
      Clause 17 ordered to stand part of the Bill.

    Clause 33

      RATE OF TAX
      Mr. David Mitchell: I beg to move Amendment No. 44, in page 25, line 36, after 'transferor', insert 'to the same transferee'.
      The Deputy Chairman: With this it will be convenient to discuss also the following amendments:
      No. 61, in page 25, line 36, after 'transferor', insert 'to any one transferee.'
      No. 45, in page 25, line 39, after 'transferor', insert 'to that transferee'.
      No. 46, in page 25, line 42, after 'transferor', insert 'to that transferee'.
      No. 47, in page 26, line 2, after 'transferor', insert 'to that transferee'.
      Mr. Mitchell: The amendment is designed to help the Chancellor, and I hope he will accept it. The Bill wastes the opportunity of replacing estate duty with a modern gifts and inheritance tax.
      The amendment, by taxing according to the amount given to each recipient, would encourage the spreading of wealth. The Labour Party used to stand for uplifting the poor and the redistribution of wealth. Many old-time Labour Members of Parliament saw themselves as modern Robin Hoods, robbing the rich to give to the poor. This tax has the reverse effect. It robs the rich and the not-so-rich to give to the barons of bureaucracy. There is no redistributive effect, no giving to the poor, but simply a grabbing and taking to the State.
      The amendment goes to the central division between the two sides of the Committee. We believe in the philosophical and economic argument which is an essential part of the case for the amendment. By concentrating wealth into the hands of the State, as it does, the Bill creates the situation that with
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      the concentration of wealth there is a concentration of power, and with the concentration of wealth comes the concentration of decision-making. The fact that power, wealth and decision-making are totally in the hands of the State takes us well on the road to a totalitarian State and economy—the dead, outdated dogma of yesterday. The Chancellor is supposed to have renounced his early conversion to the Marxist faith, but it seems to have lived on in the tax he has produced.
      Do we accept the concentration of wealth and decision-making in the hands of the Government, or do we want wealth spread throughout the community as widely as possible? The amendment seeks to achieve the latter, and I believe that this could be described as the philosophical argument.
      I now turn to the economic argument, to which the Chancellor should give urgent consideration. One of the country's problems at the moment is that there is far too little investment in productive industry. In his spring Budget the Chancellor increased corporation tax and then found that he had stripped industry of its necessary working capital. He had to give it back in the autumn Budget. I shall return to this point in a moment.
      The tax will encourage spending, not saving. It impels the movement of capital away from those who can best utilise it, and it is desperately unfair as between one individual and another. The nation needs more investment, and this demands saving and capital. Yesterday I noticed that on occasions Labour Members were laughing when medium-sized sums of money were being discussed. They seemed to think that it was a matter of no consequence that wealthy people would have their businesses plundered of the necessary working capital.
      I have a crucial question. Why are wages in Britain lower than on the Continent? Why do we have to hold wages down? It is not because the British working man is lazy but is because there is less capital behind each worker than

      1561
      there is on the Continent. Too little capital per man means too low earnings per man and too low wages. As the clause stands, it represents the road to economic ruin. It will allow the Government to strip the capital out of the private sector, and that capital is necessary if the country is to grow and prosper. Even primitive man learned not to eat the seed corn but to save it, and the Government are seeking to take from the private sector the essential working capital which it should have.
      The tax will encourage spending. If a man cannot pass his money on to the next generation, he will see no point in keeping it. He will ask why he should save even a brass farthing when he cannot pass his business on to the next generation. Why not eat, drink and be merry?
      Let us take a practical example. If a business is worth £200,000 and the proprietor wants to give it to four people in shares of £50,000, under the Government's proposals he must find £211,870 from outside the business from his own personal wealth, over and above the value of the business, in order to do so and thus enable the four people to continue the business and the employment it provides. Under the amendment, that £200,000 would be divided into four lots of £50,000. The wealth would be spread among four people and the tax liability, though serious, would fall to £84,750. The Bill is an encouragement to expenditure that the country cannot afford. It encourages a man to have a yacht in the South of France and three mistresses. It encourages people to spend now and to say "There is nothing to be gained by saving it, because I cannot pass it on."
      8.0 p.m.
      Thirdly, the Bill impels the money and the capital of this country into the least dynamic and productive hands. Everyone with a business will seek to preserve it for as long as he can and will leave it to his wife. As women live longer than men, the businesses will be increasingly concentrated into the hands of grandma—the matriarchal society. What an epitaph for the Chancellor? How shall we have dynamic management of the economy when the private sector is in the hands of elderly ladies who hold the balance sheet upside down and do not know what it is all about? My right
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      hon. Friend the Member for Finchley (Mrs. Thatcher) looks at me with an air of admonishment, but I said "elderly ladies". The Bill will create an ossified economy since the oldest people in the country will be controlling our businesses.
      Incidentally, it is an interesting Government who prefer bitches to daughters. The Government will allow £50,000 to be given free of tax to the Battersea Dogs Home, but if one gives it to his own daughter he has to pay tax on it. If one's daughter is an invalid or a mongol, it does not matter. If a man is prepared to work his guts out to give the next generation security and protection, it does not matter. The tax will still have to be paid to the point at which, as the Chancellor put it, the pips squeak and the whole purpose for which a man has been building up an estate or business is destroyed.
      Fourthly, the Bill is unfair as between one person and another. If a man left £100,000 in trust for his four children when they reached the age of 26, the first would receive £25,000, less the tax at £1,250; the second would receive it less £6,500; the third would receive it less £9,500; and the fourth would receive it less £11,000. That is totally unfair as between one recipient and another, each of whom is left the same amount. It cannot be justified, and it must be amended in the schedules and clauses considered in Committee upstairs.
      I have looked briefly at the philosophical and economic arguments. There is also the problem of the Common Market. The Government, or part of them, are pledged to seek to negotiate to stay in the Common Market. One aspect of the Common Market is that we must move towards a harmonisation of our taxation systems. Throughout the Common Market there are systems very much like that proposed in the amendment. Luxembourg has tax exemption for direct heirs, but in all other countries except Belgium the tax is payable upon the rate received by the recipient and not as defined in the Bill.
      Let us compare the case of a husband with assets of £100,000 and a wife with assets of £50,000. The father gives his son £20,000 and leaves half his estate to his wife, a quarter to his son and a quarter to his daughter. When the wife dies she leaves half to each of her children. In

      1563
      Holland the tax would be £4,539, in Luxembourg £4,999, in Italy £9,750, in Germany £4,033—a dynamic economy, and there is a relationship between the two; in France £17,785, in Denmark £28,434, in Belgium £13,850, and in the United Kingdom, top of the league, £35,700.
      There is too little capital behind each worker in Britain. As a result of the Bill, our manufacturers, business men, family businesses and small businesses will all suffer a major drain of their essential working capital, which their competitors in Europe will not suffer. As the years go by, if the Bill remains on the statute book our workers will not be able to earn the high wages earned on the Continent, simply because their employers will not be able to put the necessary capital behind them.
      It is for that reason, and the philosophical reason that we on the Conservative benches believe in spreading wealth throughout the community and not concentrating it in the hands of the State, that I move the amendment.
      The Financial Secretary to the Treasury (Dr. John Gilbert): The hon. Member for Basingstoke (Mr. Mitchell), who moved his amendment so eloquently, will not expect me to follow his philosophical arguments. There is a fundamental philosophical difference between the two sides of the Committee on this question, and it cannot be bridged this evening.
      The amendment is designed to change the basis of accumulation under the capital transfer tax, so that it applies not to the totality of an individual taxpayer's gifts over his lifetime but only to those with respect to one transferee. The fundamental objection is the enormous range of avoidance possibilities that that would create. I concede that such a system would not be as complicated to administer as a full donee-type system, but it would be possible, for example, for a group of totally unconnected taxpayers, who were fortunate enough to enjoy the possession of substantial amounts of wealth, to get together and so arrange their affairs as to distribute their transfers among the members of their separate families. The result would
      1564
      be a considerable diminution in the total amount of tax that would be attracted.
      Mr. David Mitchell: As most of the Common Market countries managed to resolve that problem, is it beyond the wit and ability of the British Treasury to do so?
      Dr. Gilbert: I shall be coming to the question of international comparisons. I ask the hon. Gentleman to believe that it would be very difficult to counteract avoidance schemes of that sort, which would be perfectly legal under the amendment. The possibility of similar avoidance schemes was envisaged in the Green Paper published by the previous Government, Cmnd. 4390. I shall not weary the Committee by reading the relevant passage, which is paragraph 61.
      The hon. Gentleman made international comparisons about the structure of a gifts tax or transfer tax in the various Common Market countries. I am sure that the hon. Gentleman will be the first to accept that international comparisons are dangerous, particularly those that isolate one aspect of a tax and subject it to scrutiny without consideration being given to the totality of the tax structure. It is not, of course, beyond the wit of the British Treasury to construct a tax along the lines that the hon. Gentleman suggests. It was a conscious choice that the tax was constructed in its present form.
      It is true that in the cases that the hon. Gentleman outlined the tax systems allow discrimination. On the other hand, there are other régimes of gift tax—for example, in Australia, New Zealand and America—where there is no distinction. In other words, the gifts are accumulated through the lifetime of the donor without any abatement by the class of the recipient. It is a technical matter as between tax systems. I do not believe that there is any fundamental philosophical difference on that point.
      I have to tell the hon. Gentleman that because of the avoidance possibilities that the amendment would permit I must advised my hon. Friends to reject the amendment.
      Mr. Graham Page: The amendment draws attention to the farcical position that the tax is chargeable on the smallest gift if the total given by a donor reaches a certain figure. If the rate

      1565
      depends on the total amount given by the donor rather than the amount received by the donee there is bound to be a certain amount of unfairness and anomaly.
      Perhaps I may explain the position by looking into the crystal ball and seeing what might be a reported case in a year's time. I am indebted to a chartered accountant by the name of Robert Maas, who takes a great interest in these matters. He has put forward an imaginary case.
      Let us suppose that a case is heard in 1976 between the Commissioners of the Inland Revenue, and, for example, little Annie Young. The case turns on the fact that on the evening of 24th-25th December 1974 a certain Mr. St. Claus distributed some £20 million-worth of gifts to the children in this country. Let us suppose that Mr. St. Claus was not domiciled in this country but that he entered the country in December 1974 for the first time since 1st March 1974. The gifts which he distributed were distributed in this country and "transfers for value" under Clause 18(5). That would mean that although he was not domiciled in this country the property was in the United Kingdom and would be covered by Clause 22(2).
      Mr. St. Claus gave little Annie a doll valued at £4. Because he had distributed about £20 million-worth of his assets to other children, little Annie was called upon to pay tax at 75 per cent. of the value of the doll. Little Annie's counsel pleaded that the gift was part of Mr. St. Claus's normal expenditure and that under Schedule 6(4) she should escape the tax. It must be shown, if that exemption is to be made, that the gift is made out of Mr. St. Claus's income; that is under Schedule 6(4)(i)(b). However, there was no evidence that Mr. St. Claus had any income, so, unfortunately, little Annie failed. It was not possible for her to say that she was the first recipient. The burden of proof is upon her to show that—and she could not do so. Little Annie was unable to show in that way that the tax should be distributed amongst all the millions of recipients. The result was that the Inland Revenue succeeded—in the first court.
      But I am glad to inform the Committee that my imaginary case has a happy ending. On appeal, based on Schedule 6(8), which says that a
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      transfer of value made in the carrying on of a trade, profession or vocation is an exempt trasfer,
      the Court of Appeal decided that Christmas had become so commercialised that Mr. St. Claus was carrying on a trade or vocation. The result was that is found in Annie's favour.
      Mr. David Mitchell: Is my right hon. Friend sure that the figures he has given are accurate? If the doll was worth £4 and there was a distribution of substantial sums, the £4 should be grossed up. As it would represent but 40 per cent. of a 60 per cent. rate the tax which the young lady would be liable to pay would be not £4 but £6.
      8.15 p.m.
      Mr. Page: My hon. Friend is introducing what is a doubtful point in the Bill. I am not sure—I do not think any commentators on the Bill are sure—whether the amount would be grossed up. There would be that risk. No doubt we shall consider this problem at a later stage. It is possible that little Annie would have to pay in tax far more than the value of the doll.
      Mr. J. Enoch Powell: I am sure that the Committee is grateful to the right hon. Member for Crosby (Mr. Page) for entertainment and for being able to contemplate the intricacies of this legislation in a lighter mood.
      I venture to suggest that the fallacy of the reasoning behind the amendment is emphasised by one aspect which, rather surprisingly, the right hon. Gentleman overlooked. The gentleman in question—the donor—is a character of undoubted generosity as well as of boundless means. It is therefore improbable that in the exercise of his professional business, as it may be, or his traditional function, he would fail to ensure that little Annie received the goods undiminished. The aggregated tax liability would therefore fall upon the donor.
      It seems profoundly fallacious to treat the liability as falling upon the donee. That renders all aggregation grotesque. The fallacy seems to lie in the assumption and not in the form of the tax.
      Mr. Page: I refer the right hon. Member for Down, South (Mr. Powell) to Clause 23(2)(a) which says that the transferor and the transferee are made specifically liable for the tax. No doubt Mr. St.

      1567
      Claus would make provision for that but it is possible that the Government would sue the donee if Mr. St. Claus was domiciled outside the country and outside the jurisdiction of our courts.
      Mr. Powell: I am well aware of the provision to which the right hon. Gentleman refers. The fact remains that the donor having an intention of transferring a net sum to a particular person would ensure, on his part, that any tax arising on the transfer was satisfied. I suggest that though the narrative was entertaining the analogy was grossly imperfect.
      Mr. Tim Renton: I shall speak briefly in support of the amendment. First, I must correct a point made by the Financial Secretary. In contrasting the custom in Australia with that in the Common Market countries which my hon. Friend the Member for Basingstoke (Mr. Mitchell) quoted, the hon. Gentleman said that in Australia the tax accumulated on the donor throughout his lifetime. He was quoting that as an example, if I understood him aright, in contrast to the EEC countries.
      That is quite incorrect. The custom in Australia is that the aggregate of gifts made by a donor is accumulated for a period of time only. I believe that the period is only three years. After that three-year period the slate is wiped clean, and the donor starts again. There is a purpose behind that. It is to encourage people to make gifts to their children or to pass on shares in their companies throughout their lifetime rather than to do so only in the few years before they die. Indeed, in terms of the gift tax it is a different method of wiping the slate clean that the Financial Secretary could well look at.
      I wanted to speak in the debate on this amendment not only because I support the principle but because last night, when I asked the Chancellor why he could not accept the tax falling on the donee when this was the custom in all EEC countries, he said that the reason was that the tax in the EEC countries was essentially on an inheritance basis. Since he made that remarks I have looked back at the corpus of taxation in Western Europe. I must say that I find nothing which supports the Chancellor's remark. Indeed, if one
      1568
      looks through it one finds that in countries such as Austria, Germany and France in many cases there is a gifts tax and an estate tax, and that the burden falls on the donee and it is all quite clear cut. The rate is usually the same between estate tax and gifts tax. It is preferential for direct descendants. That is the long and the short of it.
      It has been argued, as the Chancellor argued last night and as the Financial Secretary was trying to do in reply to my hon. Friend the Member for Basingstoke, that the corpus of European taxation was in some way different from what is now proposed here, and that the background was different, and that that justified their taxing the donee while we continued to tax the donor. That is an argument for which I can find no substantiation. I can only conclude that the reason why the Treasury—the Financial Secretary and his right hon. Friend—wish the tax to fall on the donor is that receipts from the tax will thus be very much greater.
      We shall come to the question of rates later this evening. I do not want to deal with them now. But if the tax falls on the donor the net result must be that during his lifetime he will not give away money or shares, and thus the purpose of this tax, as a lifetime tax on all gifts, will be negated. The would-be donor is bound to hoard in order to ensure that at his death the whole estate can be treated as one, at one and the same time, and all his descendants will be treated equally. That is the way he is bound to tackle this tax if the liability for paying it remains with the donor.
      One further point I want to make to the Financial Secretary is that there is great confusion in the Bill on the point about tax on the donor, as on many other points. In Clause 25(5) the Bill appears to contemplate that the donor may decline to pay the whole or part of the tax. In that case—if the Financial Secretary can bear to listen to this point—the Revenue may resort to the donee, in which case the tax claimed will be less than if the donor had paid it all, as there would be no grossing up. In Clause 25(5) there is a genuine possibility of the tax falling on the donee in such circumstances, and it has been suggested that in this way the donor could opt out of paying the tax and leave it to the donee

      1569
      to do so, in which case the burden of the tax would be lighter.
      That is one of the many misunderstandings and misapprehensions which need to be cleared up. But I am certain that the principle advanced by my hon. Friend the Member for Basingstoke is the right one—that the burden of the tax should fall on the donee.
      Mr. David Howell: It is a change to get back, even after listening to the few words from the Financial Secretary, from a Chancellor who clearly has very little idea at all of the implications and consequences of the legislation to a Minister who has at least followed the Bill through so far and who addressed himself to some of the issues raised by my hon. Friend the Member for Basingstoke (Mr. Mitchell). That is an improvement, even if not a very magnificent one. I suppose that we should be grateful for half a loaf rather than no loaf at all.
      Many of the arguments covering the amendment were touched upon last night. That has been pointed out by my hon. Friend the Member for Mid-Sussex (Mr. Renton). I do not know whether the Financial Secretary chose Australia in the hope that it was a nice far-away country and that no one would be too certain about the arrangements prevailing there for capital transfers and a gifts tax. If he did he must now be regretting it, because my hon. Friend the Member for Mid-Sussex has shown that, in one way or another the Committee tends to have an acquaintance with and knowledge of distant countries and far-away systems. In this case my hon. Friend has shown the Financial Secretary's brief to be nonsense.
      The arguments behind the amendments are straightforward enough. There is, first, the central point, made time and again by my right hon. and hon. Friends, that in this tax as it is proposed there is no redistribution. That is a fallacy. It is a misuse of words to talk as though the CTT as proposed involves redistribution. It does not do so. These amendments would change that situation radically and would provide a considerable incentive for distribution of wealth from one generation to another.
      Then there is the argument touched on by my hon. Friend the Member for
      1570
      Mid-Sussex and put forward from the Treasury Bench that, because estate duty is established on the principle of the donor paying, it is apparently impossible to graft on to that any system which would involve the donee element, as indicated in our amendment or as implied in a full-blooded inheritance tax. When one considers just what the CCT will be doing and how far it will go in smashing up established procedures, established business methods and established ways in which people can reckon their tax liability, I should have thought that that was the last argument which would be brought forward from the Treasury Bench.
      Then again, there is the argument on fairness. The kind of arrangement suggested in the amendments would be infinitely fairer. We have had the delightful fable from my right hon. Friend the Member for Crosby (Mr. Page) about the marginal umpteenth recipient of a gift from Santa Clause. This brings home what is perfectly obvious to anyone who studies the tax for rather longer than perhaps the Chancellor has bothered to do—that the accumulation principle is riddled with nonsense. It is bound to create severe unfairness as soon as one moves into the taxable range above the £15,000 minimum. It makes nonsense, as we heard last night, of any attempts to give to charities. As long as the accumulator, the aggregation principle, is there, so long are we declaring war on fairness and decreeing that there should be unfair treatment and unfair situations arising in profusion.
      I am not sold on international comparisons. There is something of a neurosis in this country for comparing ourselves, often on the basis of spurious statistics, with every other country and deducing that we are a failure. I do not know whether that is a manifestation of a lack of self-confidence in the country. However, the Financial Secretary must not complain if these points are thrown back at him because he and his colleagues have, from the moment the CTT was thought of, constantly indicated, inside and outside this Chamber, that one of its virtues is that every other country has such a tax. The implication has been made—I do not know whether by the Financal Secretary but certainly by others—that the rates in other countries are

      1571
      heavier or certainly as heavy as anything proposed here.
      We shall be able to show later that in this area as in other areas the Government's propositon about the level of the rates and their comparability with the rates of estate duty and with prevailing rates in almost any other country in the free world is wrong. However, the Financial Secretary cannot simply dismiss international comparisons as a technical matter. They are not a technical matter but a political matter because the Government have made them so by continually referring to other countries, as though the virtue of the tax is drawn from the fact that it emulates what are supposed to be systems in other countries of a similar kind.
      My hon. Friend the Member for Mid-Sussex fired an initial warning shot—the first of many which will come from this side of the Committee—indicating that we do not accept the vague generalities about systems which are supposed to prevail in other countries and to inspire the system proposed by the Government. He fired a warning shot to show that the Financial Secretary, in grasping hopefully for Australia, was grasping for a broken straw because his argument did not stand up.
      8.30 p.m.
      The amendments would make a substantial contribution to giving realty to the call for redistribution of wealth in the genuine, creative sense so that wealth would spread and increase. That is why I shall advise my right hon. and hon. Friends to press the amendments. Even if they do not go as far as we would wish to prevent this tax from reaching the statute book and to replace it with something better, at least they would take it a stage further away from the insanity, unfairness and total lack of redistribution and the concentration in State hands which we find so deeply and utterly objectionable.
      Dr. Gilbert: I do not wish to delay the Committee in resolving its differences in a Division, but I owe it to hon. Members who have raised certain points to try to provide them with factual answers which will satisfy their thirst for knowledge if not their sense of the fitness of things.
      1572
      Let me deal with the delightful anecdote related by the right hon. Member for Crosby (Mr. Page). The generous donor in his example, having £20 million to give away, would presumably have seen fit to provide himself with an efficient tax adviser before starting on his programme of beneficence. However, as I am advised, even if so beneficent a donor were not domiciled in this country, both the exemption out of income and the £1,000 a year exemption would run and the young lady in question could expect to benefit from them.
      The hon. Member for Mid-Sussex (Mr. Renton) asked whether the young lady would pay tax on the value received by her if the total estate had been given away and this was, as I understood it, the last item to go. The answer is that she would. The hon. Member will find the justification for that not so much in Clause 25 but in paragraph 1(2) of Schedule 9. No doubt we shall discuss that in Committee upstairs.
      In answer to the hon. Member for Guildford (Mr. Howell) I do not think that I said that it was impossible to graft a donee element on to this tax. It has not been part of my case that it was impossible. In the fullness of time it might even be possible to add a donee element to a tax of this sort.
      Mr. David Howell: That was not what I said.
      Dr. Gilbert: That may not be what the hon. Gentleman said, but I do not seek to make a play on words.
      Mr. Tim Renton: Does the Financial Secretary envisage the tax falling on the donee and the donor?
      Dr. Gilbert: I was not envisaging anything. The hon. Member for Guildford asked me whether I thought it impossible to graft on a donee element. I was merely repudiating that I had denied the possibility of such a contingency.
      Mr. Howell: The hon. Gentleman is just playing with the Committee, and having fun. He knows perfectly well that what we have suggested, both last night and today, is that a donee element should be introduced in succession to the estate duty arrangements. Last night the Chancellor of the Exchequer claimed

      1573
      that it was impossible to do that because the estate duty arrangements and the traditions surrounding them had been built up around the donor principle. I asked whether it was possible to move to a donee system, not add it to something which exists, which would be absurd, as the Financial Secretary knows perfectly well.
      Dr. Gilbert: I assure the hon. Gentleman that I was not seeking to play with the Committee. That is not my wont. As I heard his words, he said that I had said that it was impossible to graft on a donee element. Perhaps my note is inaccurate. I said that as far as I could see it was not impossible to do that.

      Division No. 69.]

      AYES

      [8.36 p.m.

      Adley, Robert

      Eyre, Reginald

      Joseph, Rt Hon Sir Keith

      Aitken, Jonathan

      Fairbairn, Nicholas

      Kellett-Bowman, Mrs Elaine

      Alison, Michael

      Fairgrieve, Russell

      Kershaw, Anthony

      Amery, Rt Hon Julian

      Finsberg, Geoffrey

      Kimball, Marcus

      Arnold, Tom

      Fisher, Sir Nigel

      King, Evelyn (South Dorset)

      Atkins, Rt Hon H. (Spelthorne)

      Fletcher, Alex (Edinburgh N)

      King, Tom (Bridgwater)

      Awdry, Daniel

      Fookes, Miss Janet

      Kitson, Sir Timothy

      Bain, Mrs Margaret

      Fowler, Norman (Sutton C'f'd)

      Knight, Mrs Jill

      Baker, Kenneth

      Freud, Clement

      Knox, David

      Banks, Robert

      Fry, Peter

      Lamont, Norman

      Beith, A. J.

      Galbraith, Hon T. G. D.

      Lane, David

      Bennett, Dr Reginald (Fareham)

      Gardiner, George (Reigate)

      Latham, Michael (Melton)

      Benyon, W.

      Gardner, Edward (S Fylde)

      Lawrence, Ivan

      Berry, Hon Anthony

      Gilmour, Rt Hon Ian (Chesham)

      Lawson, Nigel

      Biffen, John

      Gilmour, Sir John (East Fife)

      Le Marchant, Spencer

      Biggs-Davison, John

      Glyn, Dr Alan

      Lewis, Kenneth (Rutland)

      Blaker, Peter

      Godber, Rt Hon Joseph

      Lloyd, Ian

      Boscawen, Hon Robert

      Goodhart, Philip

      Loveridge, John

      Bowden, A. (Brighton, Kemptown)

      Goodhew, Victor

      Luce, Richard

      Boyson, Dr Rhodes (Brent)

      Goodlad, Alastair

      MacCormick, Iain

      Braine, Sir Bernard

      Gorst, John

      McCrindle, Robert

      Brittan, Leon

      Gow, Ian (Eastbourne)

      Macfarlane, Neil

      Brotherton, Michael

      Gower, Sir Raymond (Barry)

      MacGregor, John

      Brown, Sir Edward (Bath)

      Grant, Anthony (Harrow C)

      Macmillan, Rt Hon M. (Farnham)

      Buchanan-Smith, Alick

      Gray, Hamish

      McNair-Wilson, M. (Newbury)

      Buck, Antony

      Griffiths, Eldon

      McNair-Wilson, P. (New Forest)

      Budgen, Nick

      Grist, Ian

      Madel, David

      Bulmer, Esmond

      Grylls, Michael

      Marten, Neil

      Burden, F. A.

      Hall, Sir John

      Mates, Michael

      Carlisle, Mark

      Hall-Davis, A. G. F.

      Mather, Carol

      Carr, Rt Hon Robert

      Hamilton, Michael (Salisbury)

      Maude, Angus

      Chalker, Mrs Lynda

      Hampson, Dr Keith

      Maudling, Rt Hon Reginald

      Channon, Paul

      Hannam, John

      Mawby, Ray

      Churchill, W. S.

      Harvie, Anderson, Rt Hon Miss

      Maxwell-Hyslop, Robin

      Clark, Alan (Plymouth, Sutton)

      Hastings, Stephen

      Mayhew, Patrick

      Clarke, Kenneth (Rushcliffe)

      Havers, Sir Michael

      Meyer, Sir Anthony

      Cockcroft, John

      Hawkins, Paul

      Mills, Peter

      Cooke, Robert (Bristol W)

      Hayhoe, Barney

      Miscampbell, Norman

      Cope, John

      Henderson, Douglas

      Mitchell, David (Basingstoke)

      Cormack, Patrick

      Heseltine, Michael

      Moate, Roger

      Corrie, John

      Hicks, Robert

      Monro, Hector

      Costain, A. P.

      Higgins, Terence L.

      Moore, John (Croydon C)

      Crawford, Douglas

      Holland, Philip

      More, Jasper (Ludlow)

      Crouch, David

      Hooson, Emlyn

      Morgan, Geraint

      Crowder, F. P.

      Hordern, Peter

      Morris, Michael (Northampton S)

      Davies, Rt Hon J. (Knutsford)

      Howell, David (Guildford)

      Morrison, Charles (Devizes)

      Dean, Paul (N Somerset)

      Howell, Ralph (North Norfolk)

      Morrison, Peter (Chester)

      Dodsworth, Geoffrey

      Howells, Geraint (Cardigan)

      Mudd, David

      Douglas-Hamilton, Lord James

      Hutchison, Michael Clark

      Neave, Airey

      Drayson, Burnaby

      Irving, Charles (Cheltenham)

      Nelson, Anthony

      du Cann, Rt Hon Edward

      James, David

      Neubert, Michael

      Durant, Tony

      Jenkin, Rt Hon P. (Wanst'd & W'df'd)

      Newton, Tony

      Eden, Rt Hon Sir John

      Jessel, Toby

      Onslow, Cranley

      Edwards, Nicholas (Pembroke)

      Johnson Smith, G. (E Grinstead)

      Oppenheim, Mrs Sally

      Elliott, Sir William

      Jones, Arthur (Daventry)

      Page, Rt Hon R. Graham (Crosby)

      Emery, Peter

      Jopling, Michael

      Pardoe, John

      Mr. David Mitchell: We cannot graft without first cutting the graft to be inserted. That applies in this case, as well.
      Dr. Gilbert: I would never suggest that international comparisons are a technical matter. I agree with the hon. Gentleman that they would not be appropriate in this case.
      I am afraid that I have to advise my hon. and right hon. Friends to resist these amendments.
      Question put, That the Amendment be made:—
      The Committee divided: Ayes 238, Noes 256.

      Parkinson, Cecil

      Shaw, Michael (Scarborough)

      Thompson, George

      Pattie, Geoffrey

      Shelton, William (Streatham)

      Thorpe, Rt Hon Jeremy (N Devon)

      Penhaligon, David

      Shepherd, Colin

      Trotter, Neville

      Percival, Ian

      Silvester, Fred

      Tugendhat, Christopher

      Pink, R. Bonner

      Sims, Roger

      van Straubenzee, W. R.

      Price, David (Eastleigh)

      Sinclair, Sir George

      Viggers, Peter

      Prior, Rt Hon James

      Skeet, T. H. H.

      Wainwright, Richard (Colne V)

      Pym, Rt Hon Francis

      Smith, Cyril (Rochdale)

      Wakeham, John

      Raison, Timothy

      Smith, Dudley (Warwick)

      Walker, Rt Hon P. (Worcester)

      Rathbone, Tim

      Spence, John

      Walker-Smith, Rt Hon Sir Derek

      Rawlinson, Rt Hon Sir Peter

      Spicer, Jim (W Dorset)

      Walters, Dennis

      Rees, Peter (Dover & Deal)

      Spicer, Michael (S. Worcester)

      Watt, Hamish

      Reid, George

      Sproat, Iain

      Weatherill, Bernard

      Renton, Tim (Mid-Sussex)

      Stainton, Keith

      Wells, John

      Ridley, Hon Nicholas

      Stanbrook, Ivor

      Welsh, Andrew

      Ridsdale, Julian

      Stanley, John

      Whitelaw, Rt Hon William

      Rifkind, Malcolm

      Steen, Anthony (Wavertree)

      Wiggin, Jerry

      Roberts, Michael (Cardiff NW)

      Stewart, Donald (Western Isles)

      Winterton, Nicholas

      Roberts, Wyn (Conway)

      Stewart, Ian (Hitchin)

      Young, Sir G. (Ealing, Acton)

      Ross, Stephen (Isle of Wight)

      Taylor, R. (Croydon NW)

      Younger, Hon George

      Rost, Peter (SE Derbyshire)

      Taylor, Teddy (Cathcart)

      Royle, Sir Anthony

      Tebbit, Norman

      TELLERS FOR THE AYES:

      Sainsbury, Tim

      Temple-Morris, Peter

      Mr. John Stradling Thomas and

      St. John-Stevas, Norman

      Thatcher, Rt Hon Margaret

      Mr. Adam Butler.

      Scott, Nicholas

      Thomas, Rt Hon P. (Hendon S)

      NOES

      Abse, Leo

      Davies, Bryan (Enfield N)

      Huckfield, Les

      Allaun, Frank

      Davies, Denzil (Llanelli)

      Hughes, Mark (Durham)

      Anderson, Donald

      Deakins, Eric

      Hughes, Robert (Aberdeen N)

      Archer, Peter

      Dean, Joseph (Leeds West)

      Hughes, Roy (Newport)

      Armstrong, Ernest

      de Freitas, Rt Hon Sir Geoffrey

      Hunter, Adam

      Ashley, Jack

      Delargy, Hugh

      Irving, Rt Hon S. (Dartford)

      Ashton, Joe

      Dell, Rt Hon Edmund

      Jackson, Colin (Brighouse)

      Atkins, Ronald (Preston N)

      Dempsey, James

      Jackson, Miss M. (Lincoln)

      Atkinson, Norman

      Doig, Peter

      Janner, Greville

      Barnett, Guy (Greenwich)

      Dormand, J. D.

      Jay, Rt Hon Douglas

      Barnett, Rt Hon Joel

      Douglas-Mann, Bruce

      Jeger, Mrs Lena

      Bates, Alf

      Duffy, A. E. P.

      Jenkins, Hugh (Putney)

      Bean, R. E.

      Dunn, James A.

      John, Brynmor

      Benn, Rt Hon Anthony Wedgwood

      Dunnett, Jack

      Johnson, Walter (Derby S)

      Bennett, Andrew (Stockport N)

      Dunwoody, Mrs. Gwyneth

      Jones, Alec (Rhondda)

      Bidwell, Sydney

      Eadie, Alex

      Jones, Berry (East Flint)

      Bishop, E. S.

      Edge, Geoff

      Judd, Frank

      Blenkinsop, Arthur

      Edwards, Robert (Wolv SE)

      Kaufman, Gerald

      Boardman, H.

      Ellis, John (Brigg & Scun)

      Kelley, Richard

      Booth, Albert

      Ellis, Tom (Wrexham)

      Kilroy-Silk, Robert

      Boothroyd, Miss Betty

      Ennals, David

      Kinnock, Neil

      Bottomley, Rt Hon Arthur

      Evans, Ioan (Aberdare)

      Lambie, David

      Boyden, James (Bish Auck)

      Evans, John (Newton)

      Lamborn, Harry

      Bradley, Tom

      Ewing, Harry (Stirling)

      Lamond, James

      Bray, Dr Jeremy

      Fernyhough, Rt Hon E.

      Latham, Arthur (Paddington)

      Brown, Hugh D. (Provan)

      Flannery, Martin

      Leadbitter, Ted

      Buchan, Norman

      Fletcher, Ted (Darlington)

      Lee, John

      Buchanan, Richard

      Foot, Rt Hon Michael

      Lever, Rt Hon Harold

      Butler, Mrs Joyce (Wood Green)

      Ford, Ben

      Lewis, Ron (Carlisle)

      Callaghan, Rt Hon J. (Cardiff SE)

      Forrester, John

      Lipton, Marcus

      Callaghan, Jim (Middleton & P)

      Fowler, Gerald (The Wrekin)

      Litterick, Tom

      Campbell, Ian

      Fraser, John (Lambeth N'w'd)

      Lomas, Kenneth

      Canavan, Dennis

      Freeson, Reginald

      Loyden, Eddie

      Carmichael, Neil

      Garrett, John (Norwich S)

      Luard, Evan

      Carter, Ray

      Garrett, W. E. (Wallsend)

      Lyon, Alexander (York)

      Carter-Jones, Lewis

      George, Bruce

      Lyons, Edward (Bradford W)

      Cartwright, John

      Gilbert, Dr John

      McElhone, Frank

      Castle, Rt Hon Barbara

      Golding, John

      McGuire, Michael (Ince)

      Clemitson, Ivor

      Gould, Bryan

      Mackenzie, Gregor

      Cocks, Michael (Bristol S)

      Gourlay, Harry

      Mackintosh, John P.

      Coleman, Donald

      Grant, George (Morpeth)

      Maclennan, Robert

      Colquhoun, Mrs Maureen

      Grant, John (Islington C)

      McMillan, Tom (Glasgow C)

      Concannon, J. D.

      Grocott, Bruce

      Madden, Max

      Conlan, Bernard

      Hamilton, W. W. (Central Fife)

      Magee, Bryan

      Cook, Robin F. (Edin C)

      Hamling, William

      Mahon, Simon

      Corbett, Robin

      Hardy, Peter

      Marks, Kenneth

      Cox, Thomas (Tooting)

      Harper, Joseph

      Marshall, Dr Edmund (Goole)

      Craigen, J. M. (Maryhill)

      Harrison, Walter (Wakefield)

      Marshall, Jim (Leicester S)

      Cronin, John

      Hattersley, Rt Hon Roy

      Mason, Rt Hon Roy

      Crosland, Rt Hon Anthony

      Hatton, Frank

      Meacher, Michael

      Cryer, Bob

      Hayman, Mrs Helene

      Mellish, Rt Hon Robert

      Cunningham, G. (Islington S)

      Healey, Rt Hon Denis

      Mikardo, Ian

      Cunningham, Dr J. (Whiteh)

      Heffer, Eric S.

      Millan, Bruce

      Dalyell, Tam

      Hooley, Frank

      Miller, Dr M. S. (E. Kilbride)

      Davidson, Arthur

      Horam, John

      Miller, Mrs Millie (Ilford N)

      Mitchell, R. C. (Soton, Itchen)

      Rooker, J. W.

      Torney, Tom

      Molloy, William

      Rose, Paul B.

      Varley, Rt Hon Eric G.

      Moonman, Eric

      Ross, Rt Hon W. (Kilmarnock)

      Wainwright, Edwin (Dearne V)

      Morris, Alfred (Wythenshawe)

      Rowlands, Ted

      Walden, Brian (B'ham, L'dyw'd)

      Morris, Charles R. (Openshaw)

      Ryman, John

      Walker, Harold (Doncaster)

      Morris, Rt Hon J. (Aberavon)

      Sandelson, Neville

      Walker, Terry (Kingswood)

      Moyle, Roland

      Sedgemore, Brian

      Ward, Michael

      Noble, Mike

      Selby, Harry

      Watkins, David

      Oakes, Gordon

      Shaw, Arnold (Ilford South)

      Watkinson, John

      Ogden, Eric

      Sheldon, Robert (Ashton-u-Lyne)

      Weetch, Ken

      O'Halloran, Michael

      Shore, Rt Hon Peter

      Weitzman, David

      O'Malley, Rt Hon Brian

      Short, Rt Hon E. (Newcasle C)

      Wellbeloved, James

      Orbach, Maurice

      Short, Mrs Renée (Wolv NE)

      White, Frank R. (Bury)

      Ovenden, John

      Sillars, James

      White, James (Pollock)

      Owen, Dr David

      Silverman, Julius

      Whitehead, Phillip

      Padley, Walter

      Skinner, Dennis

      Whitlock, William

      Palmer, Arthur

      Smith, John (N Lanarkshire)

      Williams, Alan (Swansea W)

      Park, George

      Snape, Peter

      Williams, Alan Lee (Hornchurch)

      Parker, John

      Spearing, Nigel

      Williams, Rt Hon Shirley (Hertford)

      Parry, Robert

      Spriggs, Leslie

      Williams, W. T. (Warrington)

      Peart, Rt Hon Fred

      Stallard, A. W.

      Wilson, Alexander (Hamilton)

      Perry, Ernest

      Stoddart, David

      Wilson, William (Coventry SE)

      Phipps, Dr Colin

      Stott, Roger

      Wise, Mrs Audrey

      Prentice, Rt Hon Reg

      Strang, Gavin

      Woodall, Alec

      Price, C. (Lewisham W)

      Strauss, Rt Hon G. R.

      Woof, Robert

      Price, William (Rugby)

      Taylor, Mrs Ann (Bolton W)

      Wrigglesworth, Ian

      Rees, Rt Hon Merlyn (Leeds S)

      Thomas, Mike (Newcastle E)

      Young, David (Bolton E)

      Richardson, Miss Jo

      Thomas, Ron (Bristol NW)

      Roberts, Gwilym (Cannock)

      Thorne, Stan (Preston South)

      TELLERS FOR THE NOES:

      Roderick, Caerwyn

      Tierney, Sydney

      Mr. James Hamilton and

      Rodgers, George (Chorley)

      Tinn, James

      Mr. Laurie Pavitt.

      Rodgers, William (Stockton)

      Tomlinson, John

      Question accordingly negatived.
      Mr. John Pardoe: I beg to move Amendment No. 65, in page 25, line 36, at end insert:
      'such rate or rates as may be determined annually by Parliament and shall for the period from 26th March 1974 to 5th April 1975 be charged at'.
      This amendment, though it may not be immediately realised, is about the crucial issue of indexation. I hope that the Committee will never again enact a tax without having a discussion on the whole question of indexation of the tax system. There are some later amendments dealing with this subject, Nos. 57 and 86. I congratulate the right hon. Member for Finchley (Mrs. Thatcher) on some remarkable mathematical ingenuity, to say nothing of the algebra, in her spendid amendment No. 57.
      My amendment is somewhat simpler and, I believe, more in keeping with the nature of Britain's constitution. The right hon. Lady will readily accept that there is a difficulty in indexing the tax system without a written constitution. Amendment No. 57 says, almost at the beginning
      "and from every subsequent 6th April".
      That cannot be, because any Parliament can change what any previous Parliament has done. I proposed an amendment similar to that in the Standing Committee
      1578
      which considered last year's Finance Bill. It is possible, by dint of such an amendment, to make things a little more difficult for the Government, because instead of doing nothing they would have to introduce a clause into a future Finance Bill to change something that had already been provided for by Parliament. That is not a very severe brake on the Government's freedom of action.
      If we are to have indexation of the taxation system or of any individual tax we shall have to have an entrenched clause. It should become part of a Bill of Rights. It is not my intention this evening to debate indexation or monetary correction generally. We are debating it in the context of this tax, and inevitably of taxation generally, partly because of what the Chancellor said in his speech yesterday.
      Sir John Hall: I am interested in the hon. Gentleman's comments on Amendment No. 57, but does not he agree that Amendment No. 65 asks a future Government to do what they are theoretically supposed to do anyway?
      Mr. Pardoe: The hon. Gentleman is correct. I am well aware of the difficulties of trying to write indexation into our tax law. It is virtually impossible to do so without an entrenched clause. I agree that the amendment leaves it

      1579
      entirely open and calls upon the Government to do little more than they are supposed to do but do not. We have only to look at the history of estate duty to recognise that Governments all too often leave rates of tax lying idle year after year and do not correct them for inflation.
      I hold strongly that we have reached such a level of inflation, and are likely in the foreseeable future to maintain such a level of inflation, that we should accept the principle of monetary correction. To make a contract or a financial arrangement in money terms at present rates of inflation is a futile action. A contract, whether for wages, borrowing, lending, rents or taxes should be made in real terms rather than in money terms. Only by doing that can we reintroduce some stability into the whole gamut of financial contracts. That means that the wage, the debt, the interest, the rent, the tax or the tax allowance is adjusted in line with the change in the cost of living.
      We have already done that in an ad hoc way. In stage 3 of the Conservative Government's prices and incomes policy thresholds were introduced and have been with us since. Wage thresholds are a way of indexing wages.
      Mr. Ridley: Does not the hon. Gentleman agree that thresholds index the only item of economic statistics which does not need to be indexed, because wages are a powerful group which go up faster even than the cost of living?
      Mr. Pardoe: Events in the last 12 months have shown that to be true. I think even the hon. Gentleman would doubt whether it will always be true, although I agree that it is more likely to be true than otherwise. I agree that the very last thing that should be indexed is wages, because indexing wages without indexing savings undermines the whole basis of our economy and has contributed to the high rate of inflation over the past year or two.
      We have to a limited extent indexed pensions because we review them every few months in the light of the cost of living and other social security and national insurance benefits. The Government have now accepted, to a limited extent, the principle enshrined in the
      1580
      recommendations of the Page report on national savings. However, they must go much further. I shall never again lend money to a British Government who do not guarantee my capital against the ruinous rate of inflation which their own policies go a long way to create.
      It is in the context of taxation that parliamentarians and those who care for the authority and control of Parliament over the executive should most welcome indexation. By pretending that indexation does not exist Governments are able to increase taxes without parliamentary approval. They call this marvellous effect of inflation on the revenue by the splendid euphemism "buoyancy of revenue". That means no more or less than the effect of inflation. By doing nothing and letting the rate of inflation erode tax allowances any Government are able to gather a large number of poor people into the tax collector's net, which Parliament never intended when it voted the taxes. The same process makes middle-income earners into supertax payers up the scale.
      Yesterday the Chancellor of the Exchequer took to task the right hon. Lady the Member for Finchley. I am glad to see that she is a convert to the principle of indexation. On the last Finance Bill I had it almost to myself, although there were some mavericks on the Conservative benches who supported it.
      Mr. Ridley: May I again express my gratitude to the hon. Member for Cornwall, North (Mr. Pardoe) for supporting my amendment which was carried with the whole force of the Opposition, with the hon. Gentleman's help, and which was included in that earlier legislation in Committee? It was the first indexation amendment that had ever been carried.
      Mr. Pardoe: I am not sure whether the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) would regard it as a compliment, but I regard him as a maverick Conservative in the best sense of the word. My support for his amendment on that occasion was given in that light and in light of the interpretation I place on that word.
      The Chancellor said yesterday that it would be totally irresponsible for any Government to index one tax and that it

      1581
      was irresponsible for the Opposition even to talk of such an idea. His view was that some kind of inquiry should be set up to investigate the indexation of the whole taxation system before we went one step further. Very well—let us take the right hon. Gentleman at his word. Let us examine the Government commitment to set up an inquiry into indexation. We have the Sandilands committee on inflation accounting, but we have no committee or Royal Commission investigating the indexation of the tax system. It is time we did. I hope that the Chief Secretary will say something on this point and will give some hope that the Government will set up such an inquiry. There is no need for such an inquiry to take too long for it is not a massively complicated matter. The Chancellor also made the point that it would be wrong to make a start with a capital tax. I do not see why it would be wrong.
      Parliament should never again pass a tax which is not indexed. If the Government are to come forward with new taxes Parliament should not be put in the position of not pursuing a principle in which it believes because there are other taxes which are not indexed. Of course there are others. I should like to index them all. I believe that we should make a start with this one, and that we should do so tonight. Bearing in mind the old slogan of no taxation without representation, we should now adopt the attitude that we must never again approach a debate on a new tax without the cry "No taxation without indexation".
      9.0 p.m.
      Mr. Powell: I am no friend of indexation. I do not believe that indexation in any way assists in the measures which have to be taken if inflation is to be brought under control and eliminated. Nor do I believe that indexation can reduce, let alone banish, the penalties and the inconveniences which must attend upon any reduction of the rate of inflation. Nevertheless, my hon. Friends and I are disposed to support the amendment, but for a much more modest reason.
      It seems quite wrong that Parliament should pass a Finance Bill inaugurating a whole new system of taxation such as that of the capital transfer tax—a system which, for what fairness it may have, for
      1582
      what leniency may be built into it, depends upon the specification of monetary limits—without having in that Bill some means whereby those limits can be readily altered without the necessity of full legislation, because experience teaches that where legislation is necessary for that purpose, it is often resorted to very belatedly, or not at all.
      Mr. Norman Lamont (Kingston-upon-Thames): I do not want to interrupt the flow of my right hon. Friend's argument, but I was interested in what he said about his reasons for being against indexation. I do not think that many hon. Members who have spoken in the debates have supported indexation amendments on the ground that they would help to reduce inflation. They have supported them on the ground simply of equity between one income bracket and another, and because they believe, given that inflation is here and there is no sign that it will desist, that it is a way of equitably adapting to that unfortunate fact.
      Mr. Powell: I am familiar with that view of the merits of indexation also, but I do not share it, because I do not believe that we should live with inflation and devise means for making ourselves comfortable on the assumption that inflation will continue indefinitely at rates which call for this kind of adjustment.
      To return to the point that I was making, the Bill embodies in the code of the capital transfer tax a number of crucial money figures. They apply to the treatment of agriculture and to the scale as a whole, and in many other ways. Certainly the Chief Secretary would not claim that his Bill would be as satisfactory or as fair if it did not include those limits in money terms. But, if so, he must accept the consequence. That is, that if, in the next 12 months, inflation alters by, let us say, 20 per cent. the real meaning of those limitations, the intention of this House, his intention, and the fairness to be claimed for that intention, are to that extent severely damaged. It seems quite wrong that he should propose to place on the statute book, in statutory permanent form, without the machinery for frequent modification, as necessary, money figures upon which the fairness of a whole system of tax depends.

      1583
      The Amendment Paper contains several alternative methods of approaching this problem. One, to which glancing reference was made by the hon. Member for Cornwall, North (Mr. Pardoe), is the attempt of the official Opposition at a full-scale mechanism of indexing. The hon. Member has been much more modest, suggesting in his amendment that the rate should be fixed for one year and that therefore it should be necessary for subsequent Finance Bills, presumably, to fix the rate year by year.
      That is one way of doing it. My hon. Friend the Member for Londonderry (Mr. Ross) will, later in the proceedings elsewhere, I hope, move an amendment which seeks the same result by what I believe may be the most convenient and simple method, namely, giving to the Treasury a power of raising limits and exemptions. This is not a power to tax. This is a power to relieve from taxation and one that therefore may properly be exercised by statutory instrument.
      Whatever may be the method by which the end is attained, I believe that the Committee ought at an early stage to show its sense that it is not right for us to rest in so important a manner upon money figures of which the real meaning we well know will be substantially different within six months, let alone a year.
      I therefore hope that there will be general support for the amendment—support which need not commit any of us to the method which the hon. Gentleman has adopted. I hope that we shall have from the Treasury Bench some indication, at any rate, of sympathy with the object of the amendment.
      Mr. Ridley: I am in substantial agreement with all that the hon. Member for Cornwall, North (Mr. Pardoe) said, except that I would like to hear him one day expound on the difference between a maverick in the best sense of the word and a maverick in the worst sense of the word. The difference was not immediately clear to me from his kind remarks.
      I do not intend to make a speech about indexation. I remind the Chief Secretary of that jolly little episode in Committee on the Finance Bill last summer when, to the horror of the Treasury officials and, I suspect, of himself, an indexation
      1584
      amendment was carried to the figure of £25,000 as the limit for mortgage interest relief.
      The Government were much more amenable and flexible in the days when they did not have much of a majority. I remember how far along the slippery pole the right hon. Gentleman crept out in order to placate the Opposition and to persuade them, if he could, not to put it into the Bill. He went so far as to promise that there would be a very close review of the £25,000 figure and that on every possible occasion the Government would come forward with proposals to upgrade it. His protestations of sincerity, honesty and good intentions so affected the House of Commons when the Bill returned on Report that hon. Members—silly mugs—believed him and did not press for the amendment to stay.
      So I look at the figure of £25,000 of mortgage relief which came in last March, 10 months ago. I looked through the Bill with interest and eagerness when it was published to see whether the figure of £25,000 mortgage relief was to be increased to the £30,000 which is should now be. To my astonishment it is not there. There is no clause about it. It is not even possible to put it within the Long Title.
      Therefore, we cannot rely upon the Treasury's good intentions. Not even the right hon. Gentleman, whom I hold in high esteem, can be trusted. Are we going to be able to succeed in the next Finance Bill, by which time much more than a year will have passed before we see the Bill and know what the new rate can be? So we cannot rely on the Government's good intentions in this matter.
      There must be some device by which the House of Commons can insist upon these figures being reviewed by whatever means is most appropriate. We look to the Chief Secretary tonight to make a statement about what the Government will do about the very serious problem of the value of capital figures dwindling year by year and greatly eroding the fast dwindling reserves of the citizenry.
      But there is a special reason in relation to this tax why we should have a firm reply from the Government tonight. It is not a tax which applies for one year only. It is not a tax on transactions of

      1585
      short duration. It is a tax which accumulates and affects a taxpayer for the whole of his life, and if he is to make sensible disposition of his resources, either by gift or by keeping them until he dies, he must know the rates of tax which he will have to pay at any stage.
      No taxpayer knows what rate of tax on capital transfer will apply beyond this year because by next year the value of money may have changed to such an extent that the tax will bear very much more hard, and 50 years ahead, by which time he may be dead, the value of these slices will be so different that no calculation will be possible.
      Curiously enough, failure by the Government to accept this amendment will lead to an earlier transfer of property than would otherwise have been the case. Plainly, if we are not to have the tax indexed, it will be slightly more advantageous to give early than to give late, because when we come to the point when the £15,000, the exempt slice, is the price of a packet of cigarettes, which may be only 10 years ahead—or 10 months ahead, or perhaps even only 10 days ahead, to judge by the way the Government are conducting their economic policy—the tax will bear much harder. It will bear much harder with each year that goes by, so there is some incentive to make early gifts.
      It is a fundamental defect of the tax as the Government have drawn it that although the rates of tax applicable to any transfer taking place in the near future are determined, the rates of tax to apply to any transfer some time ahead, or when the man dies, are totally unknown because the value of money will affect people to such an extent as to make nonsense of the whole thing, especially among those in the lower brackets who do not have great wealth.
      It is, therefore, incumbent upon the Government to tell us their intentions for uprating the values of the slices in this clause. If they say that they intend to keep them in line with changes in the value of money, that they do not intend to do so, that they intend to have an annual review or a biannual review, or that they intend to pursue some other policy on the matter, at least taxpayers will have some idea of what is likely to happen in the future. For this reason, we want both
      1586
      a general statement from the Government of their policy in this matter and a particular statement in relation to this tax and what they intend to do about the severe erosive effects which inflation will have upon the value of the relief.
      The Chief Secretary to the Treasury (Mr. Joel Barnett): We have had an interesting debate on several indexation questions. The right hon. Member for Down, South (Mr. Powell) told us, not altogether surprisingly, that he did not agree with the idea of indexation but agreed with the amendment, for the perfectly sound reasons which he gave. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley), on the other hand, agreed with the amendment but wanted me to give an assurance that the Treasury would constantly keep the rates in line with inflation, whether yearly, half-yearly or in some other way.
      One accepts that, with the present level of inflation, the thresholds or rates in this tax and in other taxes will need constant review. I give the absolute assurance that we shall keep these thresholds under constant review. The right hon. Gentleman referred specifically to agricultural relief. There I entirely agree with him. It is absolutely crucial that the threshold should be kept under review because it could very much diminish in value depending on what happened to the price of land. I can give him the assurance that we intend to keep it under review. My right hon. Friend has said as much.
      9.15 p.m.
      The hon. Member for Cirencester and Tewkesbury referred to one of the many little incidents which took place in Standing Committee last summer on the question of the £25,000 mortgage interest relief. He seemed to imply, in spite of the high esteem in which he holds me, that I might go back on the undertaking that we would keep these matters under review—
      Mr. Ridley: The Chief Secretary has already gone back on it.
      Mr. Barnett: That is not the case. We have had an autumn Finance Bill and we have yet to come to the spring Finance Bill, which will occur one year after the previous spring Finance Bill. If house prices have declined in the period it may

      1587
      be necessary, as I am sure the hon. Member has recognised, to reduce the relief from £25,000. We may find that it would have to be reduced to £23,000 or £24,000, but out of pure beneficence we might not want to change it. Hon. Members might therefore conclude that we had not reviewed the matter, but that would not be true.
      Mr. Lawson: The Chief Secretary has got hold of the wrong end of the stick on this matter. We are not here concerned with what happens to house prices. The important thing is what happens to the value of money. If the value of money has fallen, as it has, the indexation or adjustment should push the rate up, not down. The rate has nothing to do with the level of house prices.
      Mr. Barnett: I am obliged to the hon. Member for Blaby (Mr. Lawson) for his brief lecture, and I am sure that he will give us longer lectures upstairs in Committee. I look forward to them. I appreciate the hon. Member's position over indexation. The hon. Member for Cornwall, North (Mr. Pardoe), in the absence of the hon. Member for Blaby, claimed credit for having first introduced the whole question of indexation. Another Conservative Member, however, disclaimed the fact that it was the hon. Member for Cornwall, North or his hon. Friends who first raised the matter. The hon. Member for Cornwall, North said that a few mavericks on the Tory benches had raised the matter. I would not call the hon. Member for Blaby a maverick. I might call him many other things, but not that.
      It is, of course, always open to Parliament to review not only the thresholds of capital transfer tax but the rates and thresholds for all taxes every year. We review these rates regularly, and we are doing so at the moment. The amendment of the hon. Member for Cornwall, North is therefore unnecessary. Even if he had accepted that fact I am sure that that would not have prevented his tabling the amendment, because he wanted a brief debate on indexation. I am happy to oblige him briefly, even though I know that other hon. Members may prefer to get on.
      The hon. Gentleman said that without a similar clause in the past estate
      1588
      duty thresholds had not been regularly reviewed and increased in line with inflation. That is not strictly true. Over the past 20 years the initial thresholds on estate duty have not been ungenerous. They have increased at twice the rate of the retail price index, although I concede that that does not apply to the higher thresholds. Certainly, thresholds have been reviewed throughout the period.
      Mr. Lawson: Not every year.
      Mr. Barnett: It was not necessary every year. I am sure that even the hon. Gentleman, with his desire to index everything, agrees that it would not always be necessary to change the thresholds every year. I am sure that his right hon. Friend the Member for Finchley (Mrs. Thatcher), with her newfound love of indexation, would not want to do it every year.
      I know that many hon. Members think that indexation is one of the answers to our problems. It is possible to accept indexation or, as the hon. Gentleman says in the amendment, compulsory redetermination from time to time, in certain areas, such as the inflation stock relief that we have given in Clause 16 and one or two other areas, and any review of rates or the threshold for which the right hon. Member for Down, South has asked might be effectively indexed with inflation. But that is a far cry from general indexation.
      The hon. Gentleman said that we should index not only capital transfer tax but all taxes. One cannot stop there. One must carry it much further, into a general indexation of virtually all the remaining areas.
      I was pleased to note that the last time we debated the matter the former right hon. Member for Wolverhampton, South-West, now the right hon. Member for Down, South, and the present hon. Member for Wolverhampton, South-West (Mr. Budgen) were of the same mind in this matter. It must be something to do with Wolverhampton.
      Mr. Lawson: If it is true that if we index one thing we must index everything, why does Clause 11 introduce one element of indexation for one particular savings bond?
      Mr. Barnett: I said precisely—the hon. Gentleman can read it in Hansard

      1589
      tomorrow—that it is perfectly possible to index certain items, as we have done in Clause 16 with stock relief. But what the hon. Gentleman and many others are seeking is general indexation. They are in danger of somewhat lightly coming to the view that indexation is the answer to all our problems. I do not agree with the arguments adduced by the right hon. Member for Down, South against general indexation. In due time there may prove to be a case for it, but the case has not yet been proved.
      I hope that most hon. Members, other than those who are obsessed with the idea of across-the-board indexation, will recognise that it is at least possible that it could lead to an acceleration rather than a deceleration of inflation. It could stop. I am not saying that it will stop.
      Mr. Norman Lamont: How?
      Mr. Barnett: I thought that the hon. Gentleman would ask me that. Many of those who in the past have benefited from wage indexation would be able to secure further wage increases on top of the indexed threshold increases. We have a free society and we intend to have a non-statutory incomes policy. In that sense at least further increases would be possible. Indeed, that is precisely what the right hon. Gentleman the Leader of the Opposition said recently in the House.
      Mr. Lamont: What is being suggested is the indexation of tax thresholds and not of wages, as such. It may be argued that indexation relieves some of the pressures on wages.
      Mr. Barnett: I wish the hon. Gentleman would do me the courtesy of listening to me. I am sure that it will be found in Hansard that I have said that if we go so far as to index all tax reliefs and all tax thresholds we shall be going very much along the road towards general indexation. Matters become difficult once that stage is reached. I am sure that I carry at least one member of the Liberal Party with me, namely the hon. Member for Cornwall, North (Mr. Pardoe).
      Mr. Cyril Smith: The right hon. Gentleman carries me with him.
      Mr. Barnett: I see that I also carry the hon. Member for Rochdale (Mr. Smith) with me—an hon. Member whom I surround, in a constituency sense. It has not yet been proved that there should be generalised indexation. Nor do I believe it would be right to single out one form of indexation in the form suggested by the amendment. In any event, the amendment is not strictly necessary for the capital transfer tax. I gladly give the assurance that we shall review these matters regularly, particularly in terms of the agricultural reliefs that the Bill provides.
      Mr. Ridley: I asked the right hon. Gentleman a specific question. Is it the Government's intention, by whatever means they think best, to keep the values of the slices, or whatever they are called, of this tax broadly in line with the changes in the value of money? He has said that he will review the position from time to time. Does that mean that he will review it and decide whether he thinks the pips can be made to squeak a bit harder, or will he review it with a view to bringing up the rate to the value that Parliament is now being asked to validate?
      Mr. Barnett: Either the hon. Gentleman is naïve or he is expecting me to be naïve. He is asking me to say that I shall agree to index the rates although I do not want to put that into the Bill. The answer is that we shall review the rates regularly. I am not prepared to give the hon. Gentleman a firm commitment as to how we shall review them. Previous Governments have never been able to do so. That was the position before our predecessors had the idea of indexation. I repeat that the amendment is strictly unnecessary and I hope that it will be withdrawn.
      Sir John Hall: The Chief Secretary referred to the problem of applying indexation to wages. Is it not a fact that the social contract is in itself a form of indexation? Does it not apply rises in wages to the rise in the cost of living? Does he think that the social contract will fail?
      Mr. Barnett: No, Sir.
      Mrs. Thatcher: I have been at the Government Dispatch Box in another capacity and I have replied to various debates and Questions. I know full well

      1591
      that when a Minister has not a clue what to say he will say that he will keep the matter under constant review. It does not mean very much. A Minister will often use that phrase when matters are put before him for the first time which he has not considered. It is a standard, stock reply. "Constant review" often means no review at all.
      This is a modest amendment. It does not seek full indexation. If we do not have indexation and if we continue with the present rate of inflation, or even a lower rate of inflation, we shall find that the effect on property is even more devastating than was envisaged when the tax rate was introduced. The rate at which property will pass into the hands of the State will be more rapid than the Chancellor envisaged, and that is saying something.
      9.30 p.m.
      The figures in the Bill are the figures which were envisaged last March. In real terms they already mean that the tax will grip at a lower figure. I do not think that when we are introducing a new tax, in the circumstances which at present prevail, we can leave that tax without making positive provision for Parliament to look at the rate annually. It is not sufficient to leave the Treasury or Inland Revenue to look at the rates annually. We must look at them. I hope that the hon. Member for Cornwall, North (Mr. Pardoe) will press the amendment. If he does, we shall support him.
      [Mr. BRYANT GODMAN IRVINE in the Chair]
      Mr. Pardoe: I agree with the right hon. Member for Finchley (Mrs. Thatcher) that this is a modest amendment, and it was phrased with that intention. I happen to be in favour of overall indexation, as the Chief Secretary correctly said. When one starts on the road, one probably has to proceed down it. Certainly one has to proceed down it when one has started on the road of taxation.
      The right hon. Member for Down, South (Mr. Powell) said that he supported the amendment but for rather more modest reasons. I am glad to have his support for any reason whatever. He said that he was not a friend to indexation and that we could not tackle inflation that way. All I will say to him is this.
      1592
      Fairness is important, as he said, and equity is important. I happen to believe that indexation would be part of the weaponry with which we could successfully tackle inflation.
      The right hon. Gentleman and I have a unique distinction in the House of Commons. We are the only two Members who claim absolutely and utterly that we know how to solve the problem of inflation. We would not do it in the same way. Nevertheless we each have our totally effective methods. The only thing is that we are not getting any nearer to being able or allowed to put them into practice. That is unfortunate, but there it is.
      However, if we are to conquer inflation—I say this to the right hon. Member for Down, South and to the Chief Secretary—we must make it politically possible to do so. We must, therefore, reduce the painful side effects of ending it, and this can best be done by making financial contracts in real terms rather than in money terms. Indexation, through the tax system or anything else, is not a soft option. It does not seek to take the sting out of inflation but seeks to take the sting out of defeating inflation.
      I say to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley)—as he asked me, he had better know—that the answer to his question "When is a maverick not a maverick?" is that he is a maverick in the best sense when he agrees with me and a maverick in the worst sense when he does not agree with me. He is now a maverick in the best sense, and long may he remain so.
      The Chief Secretary promised us that he would review the tax rates in line with the cost of living. He promised us that this might even happen in the spring Finance Bill. He introduces these Bills like other people eat oysters—when there is an "R" in the month. His promises about reviewing tax thresholds or the rates of tax on capital transfers are not worth very much. He said that the amendment was not strictly necessary. I suppose that in his terms it is not strictly necessary. But in the way in which death duty has been applied over the years—we must go right back to the time of Sir Stafford Cripps, who was no mean Chancellor in extracting every last penny from the wealthy—it has not kept pace with the cost of living. It has not

      1593
      been reviewed in line with the rise in the cost of living.
      Therefore I believe that the Government, without an amendment of this sort applying to every tax, have a vested interest in the perpetuation of inflation. It is that interest which we seek to remove from the Government and we seek to give

      Division No. 70.]

      AYES

      [9.35 p.m.

      Adley, Robert

      Gilmour, Rt Hon Ian (Chesham)

      McNair-Wilson, M. (Newbury)

      Aitken, Jonathan

      Glyn, Dr Alan

      McNair-Wilson, P. (New Forest)

      Alison, Michael

      Godber, Rt Hon Joseph

      Madel, David

      Amery, Rt Hon Julian

      Goodhart, Philip

      Marten, Neil

      Arnold, Tom

      Goodhew, Victor

      Mates, Michael

      Atkins, Rt Hon H. (Spelthorne)

      Goodlad, Alastair

      Mather, Carol

      Awdry, Daniel

      Gorst, John

      Maude, Angus

      Bain, Mrs Margaret

      Gow, Ian (Eastbourne)

      Maudling, Rt Hon Reginald

      Baker, Kenneth

      Gower, Sir Raymond (Barry)

      Mawby, Ray

      Banks, Robert

      Grant, Anthony (Harrow C)

      Maxwell-Hyslop, Robin

      Beith, A. J.

      Gray, Hamish

      Mayhew, Patrick

      Bennett, Dr Reginald (Fareham)

      Griffiths, Eldon

      Meyer, Sir Anthony

      Benyon, W.

      Grimond, Rt Hon J.

      Mills, Peter

      Berry, Hon Anthony

      Grist, Ian

      Miscampbell, Norman

      Biffen, John

      Grylls, Michael

      Mitchell, David (Basingstoke)

      Biggs-Davison, John

      Hall, Sir John

      Moate, Roger

      Blaker, Peter

      Hall--Davis, A. G. F.

      Molyneaux, James

      Boscawen, Hon Robert

      Hamilton, Michael (Salisbury)

      Monro, Hector

      Bowden, A. (Brighton, Kemptown)

      Hampson, Dr Keith

      Moore, John (Croydon C)

      Boyson, Dr Rhodes (Brent)

      Hannam, John

      More, Jasper (Ludlow)

      Braine, Sir Bernard

      Harvie, Anderson, Rt Hon Miss

      Morgan, Geraint

      Brittan, Leon

      Hastings, Stephen

      Morris, Michael (Northampton S)

      Brotherton, Michael

      Havers, Sir Michael

      Morrison, Charles (Devizes)

      Brown, Sir Edward (Bath)

      Hawkins, Paul

      Morrison, Peter (Chester)

      Buchanan-Smith, Alick

      Hayhoe, Barney

      Mudd, David

      Buck, Antony

      Henderson, Douglas

      Neave, Airey

      Budgen, Nick

      Heseltine, Michael

      Nelson, Anthony

      Bulmer, Esmond

      Hicks, Robert

      Neubert, Michael

      Burden, F. A.

      Higgins, Terence L.

      Newton, Tony

      Butler, Adam (Bosworth)

      Holland, Philip

      Onslow, Cranley

      Carlisle, Mark

      Hooson, Emlyn

      Oppenheim, Mrs Sally

      Carr, Rt Hon Robert

      Hordern, Peter

      Page, Rt Hon R. Graham (Crosby)

      Carson, John

      Howell, David (Guildford)

      Parkinson, Cecil

      Chalker, Mrs Lynda

      Howell, Ralph (North Norfolk)

      Pattie, Geoffrey

      Channon, Paul

      Howells, Geraint (Cardigan)

      Penhaligon, David

      Churchill, W. S.

      Hutchison, Michael Clark

      Percival, Ian

      Clark, Alan (Plymouth, Sutton)

      Irving, Charles (Cheltenham)

      Pink, R. Bonner

      Clarke, Kenneth (Rushcliffe)

      James, David

      Powell, Rt Hon J. Enoch

      Cockcroft, John

      Jenkin, Rt Hon P. (Wanst'd & W'df'd)

      Price, David (Eastleigh)

      Cooke, Robert (Bristol W)

      Jessel, Toby

      Prior, Rt Hon James

      Cope, John

      Johnson Smith, G. (E Grinstead)

      Pym, Rt Hon Francis

      Cormack, Patrick

      Jones, Arthur (Daventry)

      Raison, Timothy

      Corrie, John

      Jopling, Michael

      Rathbone, Tim

      Costain, A. P.

      Joseph, Rt Hon Sir Keith

      Rawlinson, Rt Hon Sir Peter

      Crawford, Douglas

      Kaberry, Sir Donald

      Rees, Peter (Dover & Deal)

      Crouch, David

      Kellett-Bowman, Mrs Elaine

      Reid, George

      Crowder, F. P.

      Kershaw, Anthony

      Renton, Rt Hon Sir D. (Hunts)

      Davies, Rt Hon J. (Knutsford)

      Kimball, Marcus

      Renton, Tim (Mid-Sussex)

      Dean, Paul (N Somerset)

      King, Evelyn (South Dorset)

      Ridley, Hon Nicholas

      Dodsworth, Geoffrey

      King, Tom (Bridgwater)

      Ridsdale, Julian

      Douglas-Hamilton, Lord James

      Kitson, Sir Timothy

      Rifkind, Malcolm

      Drayson, Burnaby

      Knight, Mrs Jill

      Roberts, Michael (Cardiff NW)

      Durant, Tony

      Knox, David

      Roberts, Wyn (Conway)

      Eden, Rt Hon Sir John

      Lamont, Norman

      Ross, Stephen (Isle of Wight)

      Edwards, Nicholas (Pembroke)

      Lane, David

      Ross, William (Londonderry)

      Elliott, Sir William

      Langford-Holt, Sir John

      Rost, Peter (SE Derbyshire)

      Eyre, Reginald

      Latham, Michael (Melton)

      Royle, Sir Anthony

      Fairbairn, Nicholas

      Lawrence, Ivan

      Sainsbury, Tim

      Fairgrieve, Russell

      Lawson, Nigel

      St. John-Stevas, Norman

      Finsberg, Geoffrey

      Le Marchant, Spencer

      Scott, Nicholas

      Fisher, Sir Nigel

      Lewis, Kenneth (Rutland)

      Shaw, Michael (Scarborough)

      Fletcher, Alex (Edinburgh N)

      Lloyd, Ian

      Shelton, William (Streatham)

      Fookes, Miss Janet

      Loveridge, John

      Shepherd, Colin

      Fowler, Norman (Sutton C'f'd)

      Luce, Richard

      Silvester, Fred

      Freud, Clement

      McCrindle, Robert

      Sims, Roger

      Fry, Peter

      McCusker, H.

      Sinclair, Sir George

      Galbraith, Hon T. G. D.

      Macfarlane, Neil

      Skeet, T. H. H.

      Gardiner, George (Reigate)

      MacGregor, John

      Smith, Dudley (Warwick)

      Gardner, Edward (S Fylde)

      Macmillan, Rt Hon M. (Farnham)

      Spence, John

      back to Parliament the control which our forefathers fought so hard to establish.
      Question put, That the amendment be made:—
      The Committee divided: Ayes 244, Noes 256.

      Spicer, Jim (W Dorset)

      Thatcher, Rt Hon Margaret

      Watt, Hamish

      Spicer, Michael (S. Worcester)

      Thomas, Rt Hon P. (Hendon S)

      Weatherill, Bernard

      Sproat, Iain

      Thompson, George

      Wells, John

      Stainton, Keith

      Thorpe, Rt Hon Jeremy (N Devon)

      Welsh, Andrew

      Stanbrook, Ivor

      Trotter, Neville

      Whitelaw, Rt Hon William

      Stanley, John

      Tugendhat, Christopher

      Wiggin, Jerry

      Steen, Anthony (Wavertree)

      van Straubenzes, W. R.

      Winterton, Nicholas

      Stewart, Donald (Western Isles)

      Viggers, Peter

      Young, Sir G. (Ealing, Acton)

      Stewart, Ian (Hitchin)

      Wainwright, Richard (Colne V)

      Younger, Hon George

      Stradling Thomas, J.

      Wakeham, John

      Taylor, R. (Croydon NW)

      Walder, David (Clitheroe)

      TELLERS FOR THE AYES:

      Taylor, Teddy (Cathcart)

      Walker, Rt Hon P. (Worcester)

      Mr. John Pardoe and

      Tebbit, Norman

      Walker-Smith, Rt Hon Sir Derek

      Mr. Cyril Smith.

      Temple-Morris, Peter

      Walters, Dennis

      NOES

      Abse, Leo

      Dunnett, Jack

      Latham, Arthur (Paddington)

      Allaun, Frank

      Dunwoody, Mrs. Gwyneth

      Leadbitter, Ted

      Anderson, Donald

      Eadie, Alex

      Lee, John

      Archer, Peter

      Edge, Geoff

      Lever, Rt Hon Harold

      Armstrong, Ernest

      Edwards, Robert (Wolv SE)

      Lewis, Ron (Carlisle)

      Ashley, Jack

      Ellis, John (Brigg & Scun)

      Lipton, Marcus

      Ashton, Joe

      Ellis, Tom (Wrexham)

      Litterick, Tom

      Atkins, Ronald (Preston N)

      Ennals, David

      Lomas, Kenneth

      Atkinson, Norman

      Evans, Ioan (Aberdare)

      Loyden, Eddie

      Barnett, Guy (Greenwich)

      Evans, John (Newton)

      Luard, Evan

      Barnett, Rt Hon Joel

      Ewing, Harry (Stirling)

      Lyon, Alexander (York)

      Bates, Alf

      Fernyhough, Rt Hon E.

      Lyons, Edward (Bradford W)

      Bean, R. E.

      Flannery, Martin

      McElhone, Frank

      Benn, Rt Hon Anthony Wedgwood

      Fletcher, Ted (Darlington)

      McGuire, Michael (Ince)

      Bennett, Andrew (Stockport N)

      Foot, Rt Hon Michael

      Mackenzie, Gregor

      Bidwell, Sydney

      Ford, Ben

      Mackintosh, John P.

      Bishop, E. S.

      Forrester, John

      Maclennan, Robert

      Blenkinsop, Arthur

      Fowler, Gerald (The Wrekin)

      McMillan, Tom (Glasgow C)

      Boardman, H.

      Fraser, John (Lambeth, N'w'd)

      Madden, Max

      Booth, Albert

      Freeson, Reginald

      Magee, Bryan

      Boothroyd, Miss Betty

      Garrett, John (Norwich S)

      Mahon, Simon

      Bottomley, Rt Hon Arthur

      Garrett, W. E. (Wallsend)

      Marks, Kenneth

      Boyden, James (Bish Auck)

      George, Bruce

      Marshall, Dr Edmund (Goole)

      Bradley, Tom

      Gilbert, Dr John

      Marshall, Jim (Leicester S)

      Bray, Dr Jeremy

      Golding, John

      Mason, Rt Hon Roy

      Brown, Hugh D. (Provan)

      Gould, Bryan

      Meacher, Michael

      Buchan, Norman

      Gourlay, Harry

      Mellish, Rt Hon Robert

      Buchanan, Richard

      Grant, George (Morpeth)

      Mikardo, Ian

      Butler, Mrs Joyce (Wood Green)

      Grant, John (Islington C)

      Millan, Bruce

      Callaghan, Rt Hon J. (Cardiff SE)

      Grocott, Bruce

      Miller, Dr M. S. (E. Kilbride)

      Callaghan, Jim (Middleton & P)

      Hamilton, James (Bothwell)

      Miller, Mrs Millie (Ilford N)

      Campbell, Ian

      Hamilton, W. W. (Central Fife)

      Mitchell, R. C. (Soton, Itchen)

      Canavan, Dennis

      Hamling, William

      Molloy, William

      Carmichael, Neil

      Hardy, Peter

      Moonman, Eric

      Carter, Ray

      Harper, Joseph

      Morris, Alfred (Wythenshawe)

      Carter-Jones, Lewis

      Harrison, Walter (Wakefield)

      Morris, Charles R. (Openshaw)

      Cartwright, John

      Hattersley, Rt Hon Roy

      Morris, Rt Hon J. (Aberavon)

      Castle, Rt Hon Barbara

      Hatton, Frank

      Moyle, Roland

      Clemitson, Ivor

      Hayman, Mrs Helene

      Newens, Stanley

      Cocks, Michael (Bristol S)

      Healey, Rt Hon Denis

      Noble, Mike

      Coleman, Donald

      Heffer, Eric S.

      Oakes, Gordon

      Colquhoun, Mrs Maureen

      Hooley, Frank

      Ogden, Eric

      Concannon, J. D.

      Horam, John

      O'Halloran, Michael

      Conlan, Bernard

      Hoyle, Douglas (Nelson)

      O'Malley, Rt Hon Brian

      Cook, Robin F. (Edin C)

      Huckfield, Les

      Orbach, Maurice

      Corbett, Robin

      Hughes, Mark (Durham)

      Ovenden, John

      Cox, Thomas (Tooting)

      Hughes, Robert (Aberdeen N)

      Owen, Dr David

      Craigen, J. M. (Maryhill)

      Hughes, Roy (Newport)

      Padley, Walter

      Cronin, John

      Hunter, Adam

      Palmer, Arthur

      Crosland, Rt Hon Anthony

      Irving, Rt Hon S. (Dartford)

      Park, George

      Cryer, Bob

      Jackson, Colin (Brighouse)

      Parker, John

      Cunningham, G. (Islington S)

      Jackson, Miss M. (Lincoln)

      Parry, Robert

      Cunningham, Dr J. (Whiteh)

      Janner, Greville

      Pavitt, Laurie

      Dalyell, Tam

      Jay, Rt Hon Douglas

      Peart, Rt Hon Fred

      Davidson, Arthur

      Jeger, Mrs Lena

      Perry, Ernest

      Davies, Bryan (Enfield N)

      Jenkins, Hugh (Putney)

      Phipps, Dr Colin

      Davies, Denzil (Llanelli)

      John, Brynmor

      Prentice, Rt Hon Reg

      Deakins, Eric

      Jones, Alec (Rhondda)

      Price, C. (Lewisham W)

      Dean, Joseph (Leeds West)

      Jones, Barry (East Flint)

      Price, William (Rugby)

      de Freitas, Rt Hon Sir Geoffrey

      Judd, Frank

      Rees, Rt Hon Merlyn (Leeds S)

      Delargy, Hugh

      Kaufman, Gerald

      Richardson, Miss Jo

      Dell, Rt Hon Edmund

      Kelley, Richard

      Roberts, Gwilym (Cannock)

      Dempsey, James

      Kilroy-Silk, Robert

      Roderick, Caerwyn

      Doig, Peter

      Kinnock, Neil

      Rodgers, George (Chorley)

      Douglas-Mann, Bruce

      Lambie, David

      Rodgers, William (Stockton)

      Duffy, A. E. P.

      Lamborn, Harry

      Rooker, J. W.

      Dunn, James A.

      Lamond, James

      Rose, Paul B.

      Ross, Rt Hon W. (Kilmarnock)

      Strauss, Rt Hon G. R.

      White, Rank R. (Bury)

      Rowlands, Tad

      Taylor, Mrs Ann (Bolton W)

      White, James (Pollock)

      Ryman, John

      Thomas, Mike (Newcastle E)

      Whitehead, Phillip

      Sandelson, Neville

      Thomas, Ron (Bristol NW)

      Whitlock, William

      Sedgemore, Brian

      Thorne, Stan (Preston South)

      Williams, Alan (Swansea W)

      Selby, Harry

      Tierney, Sydney

      Williams, Alan Lee (Hornchurch)

      Shaw, Arnold (Ilford South)

      Tinn, James

      Williams, Rt Hon Shirley (Hertford)

      Sheldon, Robert (Ashton-u-Lyne)

      Tomlinson, John

      Williams, W. T. (Warrington)

      Shore, Rt Hon Peter

      Torney, Tom

      Wilson, Alexander (Hamilton)

      Sillars, James

      Varley, Rt Hon Eric G.

      Wilson, William (Coventry SE)

      Silverman, Julius

      Wainwright, Edwin (Dearne V)

      Wise, Mrs Audrey

      Skinner, Dennis

      Walden, Brian (B'ham, L'dyw'd)

      Woodall, Alec

      Smith, John (N Lanarkshire)

      Walker, Harold (Doncaster)

      Woof, Robert

      Snape, Peter

      Walker, Terry (Kingswood)

      Wrigglesworth, Ian

      Spearing, Nigel

      Ward, Michael

      Young, David (Bolton E)

      Spriggs, Leslie

      Watkins, David

      Stallard, A. W.

      Watkinson, John

      TELLERS FOR THE NOES:

      Stoddart, David

      Weetch, Ken

      Mr. J. D. Dormand and

      Stott, Roger

      Weitzman, David

      Mr. Walter Johnson.

      Strang, Gavin

      Wellbeloved, James

      Question accordingly negatived.
      9.45 p.m.
      Mr. Anthony Steen: I beg to move Amendment No. 90, in page 26, line 3, at end insert:
      'Provided that no transfers of value for the benefit of charities shall be aggregated for the purposes of this section'.
      The purpose of the amendment is to allow gifts to voluntary charitable organisations up to any amount during the donor's lifetime or on his death and to remove the financial penalty if he chooses to give to voluntary charitable bodies more than the fixed amount prescribed by the Government of his already heavily taxed income.
      To understand the importance of the amendment, which is aimed at sustaining and encouraging a unique characteristic of the British way of life, the clause must be looked at against the backcloth of both the rôle and the function of the voluntary organisation in our rapidly changing society, and of the growing recognition of the inadequacies and the inability of local authorities to carry out the increasing statutory responsibilities placed upon them by Parliament.
      In my own city of Liverpool, there are only 50 qualified social workers out of a total of 212. There is a shortage of staff for residential homes for both young and old, and there are now shortages of occupational therapists. In Coventry, there is a 25 per cent. residential staff shortage and there are vacancies for social workers. In Wolverhampton, only 4 per cent. of all staff in residential homes caring for deprived children are trained. The pattern is repeated throughout the country. For this reason, in the past 10 years charitable organisations have
      1598
      responded to new forces developing new purposes and, consequently, have grown in their significance. At home, child poverty, the homeless, the old and lonely and the plight of the disabled and, overseas, starvation and squalor, have seized the imagination and engaged the emotions of people in this country. Older societies have had to become more efficient and more cost effective.
      Voluntary organisations have opened up a new vocation for many disillusioned and trained professional workers who find little satisfaction in working within the straitjacket imposed by local authority bureaucracy.
      Instead of attempting the impossible by trying, with inadequate resources, to provide stop-gap emergency services for social casualties thrown up by the system, the voluntary charitable organisations provide a wider and more flexible framework without the debilitating effect of ever-increasing case loads. In fact, the voluntary organisations have developed a new kind of social and political force stemming from grass roots participation which the Government clearly do not wish to encourage. The clause is clearly aimed at squashing such initiative.
      If, as Nesta Roberts says in her book "Our Future Selves", voluntary organisations should act as the conscience of society, this would be impossible without the amendment being carried. Voluntary bodies have a special message to give to the country and Parliament, and must be encouraged to use their non-party position to express critical or even controversial views on subjects they know best from practical work in the field. I believe that the restraints imposed on charitable

      1599
      bodies, as a condition of registration for tax exemption, makes them unduly nervous about discussing social needs and policies, and too subservient to government.
      The final coup de grâce is that by the clause the Government clearly wish to punish voluntary bodies by stopping off the fountain head for their funding and wish, at the same time, by restricting local authority expenditure and financing local authority schemes through the urban aid programme in preference to voluntary body schemes, to limit the impact and considerably reduce the effect of voluntary bodies in society—until, perhaps, they wish to bail them out by taking them over.
      As the Director of Social Work in Kent, Nicholas Stacey, said when he wrote in the Sunday Observer:
      "There is a new generation of donor emerging"—
      which no doubt the Government recognise—
      "who sees his charitable contribution as an expression of political conviction, such people want and expect part of their gift to be used to help change priorities and structures in society which give rise to the social problems which the organisations were set up to alleviate."
      Perhaps the current belief is that the formulation of social policy should be kept entirely for political parties, and proposals for a form of improvement should not be provided by the voluntary charitable organisations.
      It is clear from the clause that the Government are unhappy at this unique conglomerate of voluntary organisations. They see it as essentially a middle-class movement under distinguished and often Royal patronage, with no right to any claim to be part of our heritage. They argue that charity is a legacy of wide gaps between rich and poor, and the class distinction of the past, and that community spirit, the basis of modern social action, is best expressed through publicly-provided services.
      Yet Beveridge, Seebohm and others, on the other hand, have elevated voluntary action to be
      "a distinguishing mark of a free society",
      a contribution to democracy.
      1600
      It could be that voluntary action of the future will be no more than the resolve of men and women of imagination, energy and compassion to get things done which they believe should be done, within or outside the scope of the statutory services. Although the Government may not like voluntary effort within the Welfare State it will continue, even if it is limping. It is a form of private enterprise, the distinguishing mark of a free society, in which so-called voluntary principles govern our attitudes towards compulsion and the extension of bureaucracy. It amounts to a double answer to the State's doing it all.
      First, the State cannot do it all, and secondly, the State must not be allowed to do it all. Let the Government concede that the concept of charity—stern, morally selective and reformatory—has gone and that a new concept of social welfare has taken its place and recast the whole social philosophy which the voluntary bodies inherited. Welfare now goes far beyond the relief for material distress. It aims at the enrichment of life for those who, for whatever cause, are missing or losing what it lies in our power to give. We are concerned now with the quality of life.
      Perhaps the Government think that by using the clause they can rid the country of overlapping between voluntary and State provision. In my view social needs will grow faster than they can be dealt with by the combined efforts of voluntary and State action.
      The second reason is that the boundaries between the voluntary and statutory sectors are already blurred.
      On overlapping and filling gaps, the voluntary bodies should not subsidise rates and taxes by permanently providing services which, Parliament has accepted, are a duty of central and local government. I know how much voluntary bodies need money, but they should not be blackmailed into providing essential services which the local authority should provide. The existence, side by side, of voluntary and State services should stimulate mutual criticism and be of mutual benefit. Non-government agencies have flexibility and freedom from tightly-drawn rules and regulations. They can pioneer and experiment.

      1601
      Taken all in all, the contribution made by voluntary societies to the substance, quality and scope of our social life and services is very great. How much is lost from amateurish administration is a matter of guesswork—no more, perhaps, than is already wasted by the local authority. But the proof of the pudding is always in the eating, and so long as the voluntary organisations can supply a shockingly deformed bed-ridden boy with a wheelchair while the health department takes weeks to decide whether it shall be supplied under the National Health Service, voluntary action will win—if not every time, then most of the time.
      Voluntary organisations, like democracy, are part of the price we pay for the preservation of our liberties and the variety of human experience and service. In the last analysis charitable voluntary organisations call for no self-justification. That they exist and flourish unimpeded in their work is enough. If they fold up we can despair, for the tyranny of bureaucracy will be on its way. If we wish to preserve this unique characteristic of our British way of life, we must accept the amendment, which is of the greatest significance since the passing of the Act of 1601, when charitable work was first recognised.
      Mr. Norman Lamont: I should like briefly to support the arguments put forward so eloquently by my hon. Friend the Member for Liverpool, Wavertree (Mr. Steen). All hon. Members are aware of the tremendous strength of feeling about charities. We have all received a large number of letters and circulars, and delegations have been received from religious and leading charitable organisations. I hope that either tonight or later the Chief Secretary will be able to make substantial concessions. I prefer to go along the lines of the amendment which stands in the names of certain Government supporters and deletes the entire reference to charities.
      The Government have taken an extraordinary attitude. The £50,000 is not a large sum of money, particularly when it is considered in relation to the requirements of charities which have large capital programmes. Buildings for charities are often paid for by money donated by rich individuals, and it would be a tremendous tragedy if that were prevented in future.
      1602
      I do not want to develop an ideological argument about voluntary service versus State service, but both sides of the Committee would agree that many of the advances in medical research and various voluntary services have occurred because of private initiatives taken by very wealthy men—
      It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.
      Committee report Progress.

  BUSINESS OF THE HOUSE
  Ordered,
  That the Motion relating to Ways and Means may be proceeded with at this day's sitting, though opposed, until any hour.—[Mr. Harper Ellis.]

  FINANCE BILL
  Again considered in Committee.
  Mr. Lamont: I was saying that both sides of the Committee would agree that many unpredictable and unexpected advances have been backed by wealthy men and that without such finance endeavours of that type would not have happened.
  Sir John Hall: Will my hon. Friend guess how the late Lord Nuffield would have been able to operate under the provisions of the present Bill?
  Mr. Lamont: Lord Nuffield is one of the many names in a long history of generous men who have financed remarkable schemes throughout many years in this country. I agreed with the speech made by the hon. Member for Birmingham, Ladywood (Mr. Walden) and, like him, wondered about the morality of placing an effective limit on the gifts that wealthy men can make for charitable purposes. It appears to be all right if someone gives the money under compulsion for State services, but it is regarded as less worthy if he chooses to do so voluntarily. That is a difference of emphasis which I find difficult to accept.
  In many ways there is a climate of opinion in this country that operates against the wealthy. They appear to be very much disliked and to be subjected

  1603
  to a great deal of criticism. But if they choose to give their money away, should it be made difficult for them to do so? Perhaps we underestimate the generosity of wealthy people. We all can give examples of wealthy people who have set up foundations for medical research, social service and a whole variety of voluntary activities, and perhaps we underestimate the eagerness of some people to donate money in this way.
  For many years we in this country have not been anxious to encourage wealthy people to give their money away—certainly not as anxious as other countries have been to encourage that attitude. In the United States tax deductions are available for wealthy men who give their money to voluntary activities for social purposes. We may reach a meaningless and contradictory situation where on the one hand we criticise the wealthy for not using their money for social ends and yet at the same time we do not create a framework in which they can use their wealth for social purposes.
  Many wealthy people would like to give their money away. One remembers how Andrew Carnegie gave his money away because he regarded the kept dollar as a stinking fish and thought that any man who died rich died disgraced. He made sure that he did not do so by giving away all his money and leaving to his widow and son only a life interest in his money. In our system, income tax as well as capital taxation should be designed to encourage people to contribute to voluntary activity. The Government's proposals will take us back a long way.
  Mr. F. A. Burden: I hope that the Chief Secretary will accept the amendment. I am sure that the Labour Party does not wish our great charities to get into even greater financial difficulties than they are at the moment, when some are even in danger of closing down. I am sure that the Government have had the strongest representations from some of these charities.
  Many wealthy people give generously and anonymously to charities. I am sure that the Labour Party would be happy if much of the wealth of which they wish so many to be stripped was given to charities working on behalf of society
  1604
  generally, and with no impost on the State.
  I have been connected with charities for much of my life and am still closely connected with one of the greatest. Most of them are in great difficulties. Inflation has been eroding their reserves and their costs have not diminished. Their essential expenditure has risen considerably and they have had greater problems in raising money through flag days and other means that were so popular and productive in the past.
  Many of these charities get little money in subscriptions, relying almost entirely on legacies and donations. Without some relaxation in the provision in the Finance Bill for those who subscribe in this way, some charities will not be able to continue. They all face problems of increased inflation in the cost of their staff, most of whom are tied to some public authority wage scale with threshold agreements. Many have undertaken considerable capital expenditure in buildings which must be maintained and staffed.
  Most of us would like these charities to increase their operations. Unless something is done to help them now, there will be no possibility of increasing their activities, even to the extent of replacing staff who become redundant or of repairing buildings, etc.
  I would ask the Minister urgently to go even further than accepting the amendment. This Bill may be the last chance to secure the future financial stability of some of our greatest charities. Not only is it the last chance to ensure their future stability. Unless there is encouragement for people to donate to these charities and the money starts to flow again, two or three years from now will see the end of some of the greatest charities not only in this country but in the whole world.
  Sir Anthony Meyer: The more we examine the detailed implications of the capital transfer tax the more clearly it emerges that the Government have brought it forward without thinking through its consequences.
  Like my right hon. Friend the Member for Farnham (Mr. Macmillan), I believe that capital taxation, properly thought out, has a rôle to play and that some form of transfer tax probably has a part to play within the concept of capital taxation. It is absolutely clear that the

  1605
  tax in this form will do very much more harm than good.
  We have had lengthy debates about the effect of the tax on forestry. I will not add to that other than to say that if the Government persist in the attitude they have taken, for our children and our children's children the landscapes of Constable and Richard Wilson, with their great trees and cattle, will seem as exotic and as alien in 50 years' time as the landscapes of Van Gogh seem to us in England today, because it will be a country without great trees.
  Equally, the effect on small businesses has been graphically illustrated by one after another of my hon. Friends. No reply has been forthcoming from the Government.
  When it comes to charities, I endorse every word that was said by my hon. Friend the Member for Liverpool, Waver-tree (Mr. Steen). What stands out, above all, is the inopportuneness of the Government's proposals. They are proposing to alter fundamentally the tax laws governing charities at the very moment when two major committees are engaged in far-reaching inquiries into the whole future of charities and voluntary organisations.
  There is the Goodman Committee, which is sponsored by the National Council of Social Service and which is looking into the whole of charity law. There is also the Wolfenden Committee, which is examining the rôle of voluntary organisations in the last part of this century.
  It would seem to be only common prudence for the Government to defer any changes in the tax laws governing charities until at the very least these two committees have had a chance to issue their reports.
  The right hon. Gentleman may also know that one of the sub-committees of the Expenditure Committee is likewise looking into the whole question of charities and the financial effect on them of the Government's tax policies. In this small field, too, therefore, we have a clear illustration of the very great damage that the Government are liable to do simply by acting prematurely. I do not go into the rights or wrongs of what the Government are proposing. I say at this stage merely that it is grossly premature and that a policy of attempting to block up
  1606
  loopholes which results in throttling windpipes is thoroughly retrograde.
  Mr. Joel Barnett: I have no wish to throttle windpipes, although I am sometimes tempted. In saying that, I was not looking at the hon. Member for Blaby (Mr. Lawson) although perhaps I should have been.
  I listened with great interest to the hon. Member for Liverpool, Wavertree (Mr. Steen). I hope he will not mind my saying that he spoilt a good case by seeming to imply that only he and not my hon. Friends cared for the voluntary services and charities. I hope he will agree that in that sense at least he was more than a little unfair.
  10.15 p.m.
  As my right hon. Friend the Chancellor made clear, we fully recognise the great strength of feeling on the question of charities. I entirely take the point made by the hon. Member for Gillingham (Mr. Burden). The hon. Member for Kingston-upon-Thames (Mr. Lamont) asked whether we would introduce substantial relief—those were his words—and I am happy to say that I can give that assurance. We have no wish to harm genuine charities. That is not our desire, and it never was. Having listened to this debate and the many other speeches in the debate yesterday, I now give the Committee that assurance.
  I am sure the Committee realises that the amendment now before us does not necessarily give the best way to deal with this matter.
  Mr. Burden: I am grateful to the right hon. Gentleman for what he has said, but will he give some indication of what the Government will do? That would be a great encouragement to charities. He must be able to give some indication, otherwise he would not be able to say that the Treasury intends to go a long way. Please, then, will the right hon. Gentleman come a little cleaner?
  Mr. Barnett: I know the hon. Gentleman very well, and I think that he understands me. I have gone pretty far. We did not finish listening to the debate until about eight o'clock this evening. I have given the Committee my assurance. We are now looking at it to see the best way of giving the relief.
  Mr. Lawson: I am glad to have that assurance. Without saying now the way in which he will implement it, can the right hon. Gentleman assure us that the Government will, in the letter and spirit, adhere to the pledge given in the White Paper?
  Mr. Barnett: As many hon. Members have understandably and reasonably said, the pledge in the White Paper is not altogether clear to everyone. I do not dispute that. I have said that we shall give substantial relief. I do not think that the Committee could expect me to go further than that so soon after the case has been made. I thought that that was what debates in the House of Commons were all about. We have agreed to look at it and to give substantial relief. We propose to look at the best way to do it. In the circumstances, I hope that the hon. Member for Wavertree will withdraw the amendment.
  Mr. Steen: The amendment proposes that a donor should be free to give to
  1608
  charity as much as he likes, without limitation. Will that be honoured? Will the right hon. Gentleman give that undertaking?
  Mr. Barnett: I have been fair with the Committee. I hope that hon. Members will recognise that I have gone pretty far, considering how recently we have discussed the whole matter.
  Mr. Steen: In the circumstances, I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Amendment proposed: No. 53, in page 26, line 3, at end insert:
  '(c) where the transfer is within section 20(1) of this Act, the rate or rates applicable under that table to the aggregate of the value of his estate immediately before his death and excluding the value of any transfers within paragraphs (a) and (b) of this subsection'.—[Mr. David Howell.]
  Amendment negatived.
  Mr. David Howell: I beg to move Amendment No. 52, in page 26, leave out lines 11 to 27 and insert:

  'Lower limit

  Upper limit

  Per cent

  £

  £

  £

  0

  30,000

  Nil

  30,000

  40,000

  10

  40,000

  50,000

  15

  50,000

  60,000

  20

  60,000

  80,000

  25

  80,000

  100,000

  30

  100,000

  120,000

  35

  120,000

  160,000

  40

  160,000

  200,000

  45

  200,000

  240,000

  50

  240,000

  300,000

  55

  300,000

  1,000,000

  60

  1,000,000

  2,000,000

  65

  2,000,000

  4,000,000

  70

  4,000,000

  —

  75'.

  The Temporary Chairman: We shall take at the same time the following amendments:
  No. 93, in page 26, column 3, leave out lines 14 to 27, and insert:

  '7

  10

  13

  17

  20

  24

  27

  30

  33

  37

  40

  43

  47

  50'.

  No. 57, in page 26, line 27, at end add—
  '(3) Each of the indexed figures shall with effect from 6th April 1975 and from every subsequent 6th April be altered in accordance with the formula set out below and the indexed figure as so altered shall apply during the period of 12 months beginning on the said 6th April in lieu of the indexed figure set out in this Part of this Act or, as the case may be, the indexed figure previously applicable:—
  axb/c=d

  "a" is the indexed figure as set out in this Part of this Act;

  "b" is the retain price index for the month of March immediately before the 6th April on which the adjustment is to be made;

  "c" is the retail price index for March 1974;

  "d" is the index figure as altered.

  (4) In this section the expression "the indexed figure" shall mean each of the figures in the first and second columns of the Table set out in subsection (2) above.
  1610
  (5) The tax charged on the value transferred by a chargeable transfer made after the figures in the first and second columns of the Table set out in subsection (2) above have been altered in accordance with subsection (3) above shall instead of being charged in accordance with subsection (1) above be charged as follows, that is to say—

  (a) if the transfer is the first chargeable transfer made by that transferor, at the rate or rates applicable to that value under the Table set out in subsection (2) above as altered in accordance with subsection (3) above;

  (b) subject to subsection 6 below if the transfer is not the first chargeable transfer made by that transferor, at the difference between the tax which would be chargeable at the rate or rates applicable under that 'Table as altered in accordance with subsection (3) above on a transfer of value equal to the aggregate of that value and of the adjusted total of the values previously transferred by that transferor, and the tax which would be chargeable at such rate or rates on the adjusted total of the values previously transferred by that transferor.

  (6) Each chargeable transfer previously made by the transferor shall be adjusted as if it were an indexed figure and as if in the formula "b" were the retain price index for the month of March immediately before the time when the adjusted total of the values previously transferred is being ascertained and "c" were the retail price index for the month of March immediately before the transfer which is being adjusted and the aggregate of the values of charged transfers as so adjusted is in this section called "the adjusted total of the values previously transferred".
  (7) The Treasury shall as soon as practicable after 6th April 1976 and after every subsequent 6th April cause to be published in the Gazette the indexed figures as so altered and applicable during the period ending on the next following 5th April'.
  No. 86, in page 26, line 27, at end insert—
  '(3) If, at any time, the official retail price index shall rise above that obtaining on 25th March 1974 the Treasury shall, by order, specify that, for the purpose of subsections (1) and (2) of this section, "value" shall be taken to mean that value which, on 25th March 1974, had the same purchasing power (calculated by reference to that index) as the value transferred, and the tax charged on any chargeable transfer shall be that amount which has the same purchasing power (similarly calculated) at the time of the transfer as the amount of tax computed according to subsections (1) and (2) above had on 25th March 1974'.
  Mr. Howell: We come now to the set of amendments which go to the heart of the clause and the table set out in it. The figures in the amendment, by widening

  1611
  the tax bands, would substantially reduce the rate at which capital transfer tax would be charged. Throughout our debate so far the Chancellor and the Chief Secretary have maintained two things about the rate and the burden of the new tax. The Chancellor has argued more than once that his aim is to perfect what he believes to have been the aims of estate duty, and that these objectives should now be fully, roundly and perfectly achieved by the capital transfer tax. He has said more than once that the capital transfer tax will operate at a lower rate and that it will be a lesser burden, particularly on the less wealthy and people at the lower end of the scale. We believe that to be incorrect. We are not surprised that the right hon. Gentleman should say it because in his contributions last night and this afternoon he won the championship for getting the maximum number of incorrect statements into a speech. On this occasion he is flatly wrong.
  The right hon. Gentleman is wrong for three substantial reasons, and he cannot escape them merely by waving his hand and saying that the new tax replaces estate duty and tightens it up and that the rates are lower. The trouble is in the lifetime accumulation principle which is built into the tax. The fact that past gifts are taken into account means inevitably that transfers in many cases will be immediately lifted into the bands which would generate a far heavier burden than would have been the case with estate duty where it was paid. The accumulation principle makes straight comparison, rate with rate, absurd.
  Even greater complexity is added by the principle of the tax on the tax. I do not think that even now, certainly not outside the House and perhaps not even inside it, it is appreciated just what an additional burden this is and how the levying of CTT on the amount paid in CTT conceals the true scale of the tax, which is far higher than appears from the table in the clause. A complex set of calculations results.
  In an earlier debate one of my right hon. Friends challenged the Chancellor or anyone else to explain in intelligible and comprehensible terms what the rate of tax would be on any particular gift, on net gift value or on any grossed-up figure. The fractions and complexities are almost
  1612
  incomprehensible. If one tries to trace through the table one finds that on a gift of between £35,000 and £42,000 there would be a tax of £4,750 plus thirty-seventieths or 42·86 per cent. of any cost of the net gift over £35,250. That is one of the simpler examples. The cases get much more complicated after that.
  The additional twist of the tax on the tax means that the scale which appears so blandly in the clause is grossly misleading. Furthermore, I think we heard the Chancellor aright when he claimed that the same principles applied in the calculation and payment of estate duty. I fully support my hon. Friend who said that that, too, was incorrect. The estate duty principle is not the same as that which is proposed here. I do not know whether this was in the Government's mind, but the idea that donors would normally deduct from their chargeable gifts before payment seems to me to belong to cloud-cuckoo land like so much else of the tax. One has only to begin thinking about handing over a house and other things to realise the silliness of this proposition and the absurdities of the situation where part of the house has to be pulled down, or something equally absurd has to be done, in order to pay off part of the tax so that the gift may be made in the first place. It is a nonsense. The rates here are utterly misleading.
  That is the first set of reasons why the rates and the claim that the whole impost is lower than estate duty do not add up. The removal of the exemptions under estate duty for business assets and agriculture is yet another reason why the rates cannot be compared in the way in which the Chancellor tries to compare them.
  The second proposition concerning the rates has come up in a number of Labour speeches, inside and outside the Chamber, to the general effect that it is time we moved on to a capital transfer tax of this type because everyone overseas has one. They say that it is time we moved into the modern world and aligned ourselves with all those other countries with similar taxes. The implication, even if it is not spelt out, is that by doing so we are merely moving alongside them in our level of capital taxation. Comparisons with overseas countries can be

  1613
  misleading, and the whole of the Government's proposition which is based on such a comparison is also misleading. But if that is their ground they must expect to be fought on it. Therefore, it is worth looking at the reality of capital taxes overseas at the beginning of this debate.
  One of the most recent authoritative surveys is one by the Confederation of British Industry on overseas inheritance and gift taxes and estate duty. I shall not delay the Committee by giving the full details of the complexities and tables. To compare like with like is difficult, but the survey comes to some general conclusions which are significant for the debate. First, it points out that above a net gift of £176,250 we are dealing with a 100 per cent. tax—in other words, it is at a confiscatory level—and that the 100 per cent. rate rises considerably further than that. The sum of £176,250 is not considerable when we are concerned with handing on a small business.
  After looking around the world for other levels with which to compare the British rates, the survey's conclusion is that
  "Sri Lanka"—
  in my school geography textbooks that was Ceylon—
  "is generally considered to place the highest tax burden on capital of any non-Communist country in the world. Its maximum rate on gifts is 100 per cent., and it only applies to the taxable slice of gift over £92,500."
  That is, at the level of £176,250, where we have 100 per cent., the average rate in Sri Lanka is 77 per cent.
  The survey continues:
  "In European countries the inheritance and gift tax are considerably lower than those envisaged in the United Kingdom, and the majority of these countries have different scales of rates according to the degrees of consanguinity of the beneficiary with the donor. The maximum rates applicable to beneficiaries other than close relatives average about 62 per cent. The highest rate in Spain is at 84 per cent., which applies to gifts or legacies over £745,000."
  That compares with the proposed 181 per cent. for gifts over £1,710,250 in the United Kingdom.
  The survey also points out that outside the United Kingdom the consanguinity rates are such that
  "where spouses are not exempt from gifts or inheritance taxes the maximum rates applicable to them are predominantly in the range of 15 per
  1614
  cent. to 19.2 per cent. The maximum rates applicable to children vary more widely, but in no major European country"—
  except this country, if the Government persist with this crazy tax—
  "are they in excess of 35 per cent."
  We have already touched on the way in which CTT rates and the principle of the tax strike at the structure and principle of the family. We shall return to the question many times.
  I think I have said enough to demonstrate that the Chancellor's claim that this is no worse a tax and possibly a lighter tax than estate duty is spurious nonsense. The principles built into capital transfer tax mean that it will be a confiscatory and destructive tax. It will be a tax that will automatically lead to the elimination of many small firms, businesses and farms. The comparisons with other countries prove that we have the privilege of rating alongside Sri Lanka—possibly a little ahead of Sri Lanka—in the heaviness of the impost that we place on transfers, gifts and the inheritance of capital.
  [Mr. GEORGE THOMAS in the Chair]
  Mr. Cecil Parkinson: It is probably entirely inappropriate, but the phrase "For many are called, but few chosen" sprang to mind as my name came out of your lips, Mr. Thomas. At that moment I was sitting down minding my own business. I am relieved to be able to say that I want to speak on this group of amendments. I associate myself with the remarks of my hon. Friend the Member for Guildford (Mr. Howell). There is an amendment in my name, Amendment No. 92, which proposes a slightly different scale of rates. The thinking behind that different scale and the reasons for proposing it to the Committee are exactly the same as the reasons that my hon. Friend put forward.
  I must declare my position straight away. I do not feel as strongly as some of my right hon. and hon. Friends about the principle of a capital transfer tax. I have for some time been in favour of a form of capital transfer tax. I know that a number of my hon. Friends feel exactly the same way. We object to the complexity of this tax and the proposed rates.
  It is wrong for the Chancellor to try to portray the Conservative Party as a party that wants to entrench loopholes

  1615
  into our tax system. We oppose Clause 17 because we feel that at this moment this tax in this form will do great damage to the country. The principle of a capital transfer tax and the idea that when a person parts with part of his assets to another generation or to another group of people a tax should be levied is not objectionable. What makes this tax objectionable are the penal rates and the complexities.
  Even if we are in favour of a capital transfer tax, we only have to listen to the Chancellor trying to justify it to have our feeling of support begin to erode and our confidence undermined that there is a case to be made for such a tax. If the right hon. Gentleman believes in a capital transfer tax, he should make a vow never again to speak in favour of it until he understands it. When he speaks in favour of it he should take the malice and envy out of his voice and out of his thinking.
  As I have sat here over the past two days I have tried to reconcile what the Chancellor was saying about entrenching wealth with my experience of 15 years in practice as a chartered accountant. A practising accountant immediately becomes aware—the right hon. Gentleman may be bored with this phrase, but we know that he had a distinguished practice as an accountant—that wealth is not entrenched and that there are wealthy people who are in the process of losing control of their wealth, and people who never had any wealth to inherit who are acquiring wealth.
  It may well be, as the hon. Member for Oldham, West (Mr. Meacher), now Under-Secretary of State for Industry, used to bore us by saying, that a proportion of people had control at any given moment of a proportion of the nation's wealth. But the fundamental fallacy in his thinking was that that proportion was an unchanging group. It is no more offensive to say that there is a reasonably fixed proportion of people capable of controlling, handling and using money than it is to say that there is a fixed proportion of people capable of running a mile in four minutes. There is a fixed proportion, but it is not always the same people.
  The fallacy in the thinking of the hon. Member for Oldham, West and of the
  1616
  Chancellor, judging from the right hon. Gentlemen's remarks over the last two days, is that they keep thinking of entrenched wealth being in the hands of a fixed, unchanging group of people. The whole of my personal experience in the commercial world, and as one who has attempted to build up a group of companies, has been to prove exactly the opposite. It has been that at any given moment there are people who prove to be incapable of handling the assets they have acquired, either by inheritance or by good fortune, and are in the process of losing control of them to people more capable of handling them. The sooner the Chancellor gets out of his mind the idea that only he is capable of promoting redistribution—by which he means confiscation—and the sooner he starts to understand the way our present system works, the better it will be for all of us.
  My principal objection to this tax stems from that. The Chancellor feels that he is promoting redistribution and that this is the instrument which will prevent a fixed group of people controlling a huge slice of the nation's wealth. There is no need for him to trouble about that. The market is constantly taking care to make sure that people incapable of handling money do not keep it for long and that it finds its way into the hands of more capable people. The Opposition believe that society is safer that way and that the power and the ability to control people's lives should be taken away from bureaucrats. We believe that people's ability to stand up to the State and to be independent is preserved by the present system.
  It is very difficult to make a nice, tidy case for a society in which wealth and power are diffused and apparently controlled on a haphazard basis, but the fact is that an economy based on that principle happens to work. The Chancellor, in his misguided way, is setting out to wreak vengeance on the successful. The Chief Secretary shakes his head, but anyone who has listened to the Chancellor in the last two days must have formed the distinct impression that the yield of this tax and the question whether it would be of any use to him were of secondary importance. What he was after was the settling of some old scores with people whom he has hated for a very long time. He does not mind destroying a lot of

  1617
  companies and enterprises in his search for vengeance.
  We as a party say that this tax in its present form is objectionable. Its most objectionable features are the swingeing rates proposed. I have often wondered how the Chief Secretary reconciles the things he has to say at the Dispatch Box with the sort of advice he used to give to the people in the world in which he lived very successfully for a long time. I ask him to go back to Manchester and talk to various people—not people whose fathers left them fortunes but people who have built up their businesses and made a success of their lives. He should ask them how they feel about this tax and what it will mean, and whether their enthusiasm for investing in and enlarging their businesses has been affected. He should ask them what they feel now about the Chancellor's other plea that they should invest and set about creating the machinery which can produce greater wealth for our country, and whether they believe that this tax, on the present basis, will do anything to encourage them.
  The answer from the real world is loud and clear. It is not coming from people who seek to protect vested interests. It is coming from people who have only one interest, which is to see a prosperous and thriving Britain. They say to the Chancellor of the Exchequer "If you do this, especially at the rates which you propose, you will inflict enormous damage on our country."
  In its wisdom the Committee has approved Clause 17, although I doubt whether the motives of Government supporters in voting can be described as wisdom. Most of them have taken care not to be here so as not to hear either the Opposition arguments or those of the Government. But the news that there should be a tax on transfers is not in itself objectionable. Many of us would support a sensible capital transfer tax. We say, however, that at the proposed rates it will be a very damaging instrument and, in the hands of a politically motivated, unattractive Chancellor of the Exchequer like the one we have at present, a particularly damaging instrument.
  Some years ago I read an interesting article by the hon. Member for Birmingham, Ladywood (Mr. Walden) in which he used a phrase which I never
  1618
  understood until tonight. He was describing a Government composed of "knee in the groin" politicians. Until I saw the Chancellor of the Exchequer operating tonight, I had never understood the meaning of the phrase. The right hon. Gentleman has brought to life for me a most distasteful phrase in a most colourful way. Whenever I read the phrase again, I shall have no doubt about who is the quintessence of that very unattractive sounding type of politician.
  Mr. Ridley: But the Chancellor of the Exchequer said that he wanted to "make the pip squeak". I am surprised that my hon. Friend did not understand the meaning earlier.
  Mr. Parkinson: I led a very sheltered life before coming to the House of Commons.
  I have made my point. I believe that this tax, rid of some of the complexities and at a sensible rate—and I regard these proposed rates as nonsensical—could be a not unwelcome addition to the statute book. At the present rates it is totally unacceptable. Even if the Chief Secretary is unwilling to accept these amendments, I hope he will accept an amendment based on the principles that our amendments try to express and that he will recognise that the rates proposed by the Government are damaging.
  Sir John Hall: With this amendment we are discussing Amendment No. 57. This may make for a slightly untidy debate, but we appreciate that this course has been adopted to facilitate our business in the hope that we may finish a little earlier tonight than we did last night.
  Amendment No. 57 is slightly complex but its purpose is clear. It is to ensure that, taking the retail price index at March 1974 as the base, the indexed figures set out in the amendment are adjusted automatically every 12 months in accordance with the retail price index, so that the tax is charged on the real value of capital transfers and not on the inflated value.
  The proposed subsections (5) and (6) may cause concern or puzzlement to those who, like me, have difficulty in understanding even what they have written. They are designed, however, to ensure in real terms that a transferor whose

  1619
  estate has been reduced by gifts over a lifetime should not pay more tax than if no transfers had been made before his death.
  10.45 p.m.
  This is another form of indexation amendment, in rather more positive terms than that moved by the hon. Member for Cornwall, North (Mr. Pardoe) earlier. If the amendment were accepted—and I confess that, having heard the Chief Secretary's response to earlier amendments dealing with indexation, I am not too confident—we would need to apply the same indexation to the figures in Schedules 4, 6 and 8. I cannot do so in this amendment because we are to debate those schedules in Standing Committee and it would be out of order to include them here.
  It has already been said that rapidly-growing inflation is concentrating attention more and more on the subject of indexation. That has been defined in various ways. Perhaps I can define it as relating monetary obligations—that is wages, salaries, pensons, loans, insurance and so on and tax scales—to an index of the rise in price levels or the fall in the value of money. It is by no means a new concept. I think it was first advocated in about 1875. The apostle of it today is the Chicago sage, Mr. Milton Friedman, who has advocated such a system for wages, taxes and financial investment for a long time in the United States.
  I believe that some hon. Members share my view that if we are to have indexation it has to be across the board. I do not think it succeeds if we apply it only to some elements of the economy. This has probably been the mistake when it has been tried in other countries and failed. It must be all-embracing. We have to be content with small beginnings. The opportunities given to the Opposition to move amendments which introduce an all-embracing system of indexation are rather limited. We have, therefore, to start with this.
  It has been said, I think by the Chancellor although it smacks of the Chief Secretary, that if we are to introduce indexation we should not start with the tax scales because they are likely to affect only the most affluent. I remind
  1620
  the Committee that we already have, in various ways, indexation for wages and salaries and social service benefits. As I pointed out in an intervention, the social contract provides a form of indexation.
  If we look at a comparison between wage levels and the rise in prices announced recently it is clear that workers generally have managed to keep ahead, through this social contract form of indexation, of the rise in prices. However, it is not much use providing improved remuneration, in whatever form, if by so doing we merely push individuals into higher tax brackets. If we are thinking of the effect of inflation on tax scales, especially on capital, we have only to consider capital gains tax, which has been with us for a long time. The failure to apply indexation to that tax has meant that over the years it has been a tax on capital. Frequently the gain which becomes a taxable item does not represent a profit at all and is merely an accretion of capital, due entirely to the impact of inflation. If that continued it would lead to the virtual destruction of capital.
  At present there are opportunities for capital gains to be limited. Anyone wishing to dispose of assets in whatever form may find himself involved in a loss rather than a gain. In normal circumstances, under a Conservative Government and in a prosperous economy, people would be making real capital gains.
  The scales of the capital transfer tax are very severe. Even if the amendment were accepted they would still be severe within the structure of the Bill. That is likely to lead to the break-up of businesses, farms and woodlands and will discourage enterprise. It will penalise many individuals, reduce donations to charities and cause serious damage to the economy. High as the scales are, and high as they will be even if the Chief Secretary has the wisdom to accept the amendment, they will become still higher as inflation works its way.
  The rate at which capital is being destroyed will be accelerated by the proposed capital transfer tax. Within a short time thousands of workers who would not normally expect to come within the purview of the tax will find that inflation brings the price of the house they own

  1621
  and their possessions within its ambit. Unless we introduce a form of indexation, for the first time they will have to pay capital transfer tax.
  In the past every Chancellor has enjoyed the benefit of undeclared tax collected for him by inflation. That has been described as buoyant taxation. When inflation was running at between 2½ per cent. and 3½ per cent., one could accept that and adjust oneself to it. It gave an extra bonus to the Chancellor which one did not grudge, but with inflation at its present rate that cannot continue. It makes complete nonsense of taxation when the Chancellor relies on inflation running at the rate of 20 per cent.—plus to yield him ever-increasing revenue, and it destroys capital and savings in private hands.
  Perhaps that is the intention. If it is the intention to use the tax weapon and unindexed scales as a quick means of destroying private capital and savings, the Chancellor should have the courage to say so. If it is not the intention, I can see no logical reason why the Chief Secretary should persist in his determination to resist any amendment which is designed to introduce a proper element of indexation into our tax legislation.
  Although the Chief Secretary gave a dusty answer to the hon. Member for Cornwall, North on the previous amendment, I hope that he will think again. We still have the opportunity on the schedules in Committee to table amendments to draw to his attention the overriding importance of introducing indexation in our fiscal legislation. We should not in future introduce any fiscal legislation in which tax scales are involved without automatically indexing them.
  Mr. Lawson: I should like to assist the Chief Secretary in rethinking his attitude on indexation in general and indexation of the capital transfer tax in particular.
  My Amendment No. 86 has been grouped with this series of amendments. It is not for me to say that it is a better amendment, but it is certainly briefer and easier to understand. The purpose of this amendment is to say that for the purposes of the capital transfer tax all the transfers made and all the various amounts should be expressed in terms of 1974 pounds—a common base date—
  1622
  and be aggregated in 1974 pounds, and that the tax should then be calculated according to the table set out in the Bill, whatever the table is when the Bill is eventually on the statute book. When the tax liability is calculated in 1974 pounds, it would then be adjusted up again in relation to the rise in the cost of living, according to the retail price index and according to the fall in the value of money; and this would be the tax that is then paid.
  It is manifestly the case that if it is held that a particular level of wealth should attract the tax and that a lower level should not, that can make sense only in real terms. Wealth can be defined only in real terms. If mere numbers change, that fact does not make anybody wealthy. Therefore, nobody should come into the bracket simply because numbers change.
  The Chief Secretary has given an assurance that the tax will, of course, be reviewed every year. I am glad that the Chancellor has now come in and I hope that after consultation the Chief Secretary will be able to give a slightly more forthcoming assurance, because a review is never good enough, for the reasons pointed out by the hon. Member for Cornwall, North (Mr. Pardoe). It is also not sufficient assurance for the reasons cogently and tersely expressed by my right hon. Friend the Member for Finchley (Mrs. Thatcher).
  The promise of a review is certainly not good enough, particularly in this case. By what principle would the Treasury adjust the rates, even if in the annual review they were to adjust them? Simply adjusting the rates will not do the trick because if the rates were adjusted according to the increase in prices over a period this would have effects on somebody who had recently died without having given any gifts, with the whole estate taxed at that point. That is totally different from the effect on somebody who has been giving away most of his money in previous periods and when the aggregation covers different dates with the pound at different values.
  Whereas a rough and ready form of justice can be imported into the income tax system by a review, if that leads to regular adjustment, as it is for pension relief, it is a curious fact that in this

  1623
  form of taxation only an indexation formula, and of the kind I suggest in the amendment, would do the trick. That is the only way one can get an adjustment which is fair, just, and equal as between different taxpayers who have made their gifts at different times.
  Justice and constitutionalism lie in the root of the cry which is increasingly heard for indexation.
  It is appropriate that this amendment should be in my name and that of my hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont) because it was an amendment in his name and mine which in Committee on the Floor of the House on the last Finance Bill initiated the first debate in this Chamber on the principle of indexation. It was not a Liberal amendment, as we were erroneously led to suppose. [HON. MEMBERS: "Where are the Liberals?"] They are on their way to Annabel's or wherever Liberals go.
  11.0 p.m.
  We do not say that indexation would cure inflation, although we say that it would not make worse the rate of inflation. We do not say that it would have a direct effect, although it might have an indirect bearing in the sense that it would reduce the incentive to the Government to inflate. There is an incentive to a Government to inflate, because by doing so they can get increased revenue, and a Socialist Government, dedicated to increased taxation and to crippling various sectors of the economy and various groups of people through high income tax, see that inflation plus an unindexed tax system may have the combined effect of achieving Socialist ends more quickly.
  What we do say is that our proposal would be likely to bring justice into the tax system and into the way in which inflation affects different groups of taxpayers. It would, in general, remove some of the more difficult consequences of bringing down the rate of inflation.
  I quote as an example the indexing of the rate of interest on securities. If that rate is very high because the rate of inflation is high, when the rate of inflation comes down the borrower is in a bad way and there will be bankruptcies, failures and more unemployment. If, on the other hand, the borrowing is done in
  1624
  real terms, so that when the rate of inflation falls—we all hope that it will—the borrower is not left with the problems caused by the old high rate, there will be fewer bankruptcies and failures. What we propose would mitigate the undesirable side effects of curbing the rate of inflation.
  It is wholly wrong that the State should be able to increase taxation without getting the sanction of Parliament, but that is what happens with an unindexed tax system. It is also the case that the value of revenue from certain indirect taxes—the so-called specific duties—goes down all the time in real terms with rapid inflation whereas revenue from direct taxation goes up rapidly; thus, without the sanction of Parliament, there is a massive shift from indirect to direct taxation. Perhaps there should be such a shift, but if so it should be debated and agreed by the House of Commons.
  Mr. James Dempsey: On several occasions the hon. Gentleman has lamented the amount of taxation that operates without the sanction of Parliament. Has not this been the practice in the past? Is he saying that taxation operating without the overall approval of Parliament is something new?
  Mr. Lawson: I think it is deplorable that in recent debates the question of indexation has tended to be considered as a party political matter, with Labour Members feeling that they must support the tired old Treasury arguments against indexation without thinking matters out. This is not a party political matter. It has been around as long as inflation has been with us, but it has become much worse because the rate of inflation is very much higher. That is why it is urgent that we should do something about the situation now.
  I should like to make one last point, and I shall make it briefly because we sat so late last night. It was very cheap of the Chancellor of the Exchequer—I am not surprised that he has now slunk out of the Chamber—to accuse us of wanting to index the capital transfer tax and not being interested in indexing personal taxation which affects many more people. Not only did we discuss the question of indexation of personal taxation on Clause 5, as the Chief Secretary will bear out, but

  1625
  CTT was the one new tax which we had an opportunity to amend. We do not have the opportunity to amend personal income tax in the same way.
  I should like to make this offer to show our good faith. If the Chancellor will agree to introduce a new clause to give the Treasury power to index income tax, we shall be very happy to debate that matter whenever he sees fit to give us the opportunity to do so. With that assurance, I very much hope that the Chief Secretary will be able to support the amendment.
  Mr. Norman Lamont: I agree very much with all that my hon. Friend the Member for Blaby (Mr. Lawson) said about indexation, but I hope he will forgive me if I do not join him in debating that matter now since I have tabled a number of amendments on the subject for discussion upstairs in Committee. Therefore, I hope that we can leave the matter until later.
  I want to return to the point raised in Amendment No. 52—namely, the incidence and rates of tax to be levied under the Government's proposals. I accept the principle of a capital transfer tax, but one must look at the rates and the exemptions and make up one's mind whether it is broadly right or wrong. I have no doubt that in this case it is broadly wrong.
  I do not disagree when the Chancellor says that it would be right to block the old loopholes that exist in estate duty, but in the last few days the right hon. Gentleman has not leaned so heavily as he has in the past on his views about the unfair distribution and inequalities of wealth. I often wish that instead of using the word "inequalities" he would use the phrase "differences of wealth". I am sure even the right hon. Gentleman would accept that some people, with different qualifications and responsibilities, would accumulate more wealth in respect of the function they have to perform in society and the responsibilities which they fulfil.
  Much of the discussion about the distribution of wealth has been extremely muddled, as the hon. Member for Birmingham, Ladywood (Mr. Walden) said yesterday. There have been a number of publications by Left-wing academics on this subject. I refer particularly to that written by Professor Atkinson entitled "Unequal Shares".
  1626
  That book contributed significantly and misleadingly to the clouding of opinion on the distribution of wealth. The facts are hard to arrive at with any degree of certainty. It is noticeable that in the Green Paper on the wealth tax the Government could not come to firm conclusions about the distribution of wealth or the trend in that direction. I imagine that that is why the Royal Commission has been set up, to find out some of the facts, although the Chancellor seems to be prepared to leap ahead and make assumptions.
  The Government's Green Paper on the wealth tax made it clear that it is an uncertain area and that the distribution of wealth cannot be established from the figures for estate duty, because they leave out many small and medium estates and, therefore, understate the amount of such wealth—the amount of popular wealth and the number of insurance policies, often issued by the industrial companies and held by a large section of modestly-well-off people.
  Also, the statistics make little allowance for social benefits, for council housing or nationalised industries. The figures which are flung about say nothing about that sector of the economy which is in social ownership, yet in logic they should do so. The argument for nationalisation is that the community reaps the benefit. Therefore, one should ascribe a notional amount for one's ownership of British Rail or the docks. These figures are flung around with little justification.
  One figure often quoted by Labour Members is that 10 per cent. of the population own 70 per cent. of the wealth—a figure which is scarcely to be believed when it is accompanied in the next breath by the statement that 24 million adults have no wealth of any significance at all. That does not appear to be true when one considers the price of housing and the number of insurance policies issued. But even if that figure, which I believe to be untrue, is accepted, one has to make two significant adjustments. First, wealth in many families is usually concentrated in one member of the household, usually the senior male member. Second, older people tend to have much more in savings than young people. Statistics show that people over 75 have about seven times as much wealth as those in the 20–24 age group.

  1627
  Thus the figures are themselves suspect. Even if they were not, in the form in which they are presented they would not show that this country is markedly inegalitarian. A leading article in The Times a couple of years ago pointed out that if those two adjustments which I have mentioned were taken into account and applied to a society in which everybody earned the same amount but saved a proportion of their income through time, we would reach a society in which the distribution of wealth was not far different from what the statistics suggest it is today.
  It is remarkable that capital taxation should be increased before the facts about the distribution of wealth are clearly established. The Chancellor does not seem to be interested in listening to any evidence. He has continually swept aside objections because they have been made only by those who were affected by the tax. That was extraordinary, because in the Green Paper and in his announcement he said that he would be interested to receive representations from those affected by the tax. How are they to make their representations when, if they protest about it, their representations are to be dismissed because they are the people who are affected by the tax?
  11.15 p.m.
  We might ask how much redistribution and change has taken place in wealth in the recent past. Capital values have been eroded by the slump on the Stock Exchange and by inflation. We hear talk about vast agglomerations of wealth, but I wonder whether the wealthy in Britain are wealthy by comparison with those in many other countries and whether the "vast agglomerations of wealth" exist except in the Chancellor's mind. I suspect that there is more than a little truth in the remark of Rebecca West that we shall have a revolution in Britain only when the poor feel as poor as the rich.
  It is said that we wish to move to a society in which there will be a wider distribution of wealth. A wider distribution of wealth is not the same as concentrating that wealth in the hands of the State. Nor should spreading wealth throughout society be inconsistent with encouraging people to accumulate wealth and to save.
  1628
  Labour Members have little understanding of how people can accumulate wealth during their working life. A remarkable story appeared in The Times recently of a man who during his life had never earned more than £1,000 a year but had managed to save a few pounds each week. Eventually he had saved sufficient to buy himself a business. He ended up living in a hotel off the benefit of his business. He paid for his daughter's education. Now he is liable to the wealth tax and the capital transfer tax. One wonders whether those who framed this tax realise what can be achieved sometimes by people on modest and middle-range incomes.
  We on this side are not against the principle of a gifts tax. Inheritance is no more natural than property itself. Inheritance must be justified not by an appeal to natural rights, but by reason of the social utility of private wealth. The facts are that those who save or accumulate do this for the ends of society even though they themselves have narrower ends in view.
  As a result of this tax and as a result of the rates proposed by the Chancellor, the net stocks of savings will be lower. Savings which are well and efficiently managed will be transferred to consumption. We are always being told by hon. Members opposite that Britain does not invest enough. The other side of investment is savings. It is a noticeable fact, connected with our past economic performance, that Britain's savings ratio is very low compared with that of most other advanced countries. After this tax is introduced that ratio will be even lower.
  We believe that private wealth fulfils a social function. It helps to disperse power throughout society and to create different centres of power in opposition to the State. To confiscate wealth is simply to concentrate power in Whitehall. We are seeing in this tax and in the rates proposed nothing less than an envy tax designed to confiscate wealth. We are seeing the Chancellor's motives being revealed. It reminds me of an extract from Eva Peron's diary relating her discovery that there were poor and rich people in the world, but she decided that, on the whole, it was a fact that there were rich people in the world that upset her more than the fact that there were poor.

  1629
  This tax is an envy tax, a tax which will be socially destructive, a tax which will do immense harm to small businesses, to farms and to forests. Hon. Members on the Government side seem to think that all private wealth can exist only because one's great-grandfather was a robber or a pirate or achieved wealth by immoral or illegal means. The truth is that private wealth is the fruit of labour, and it ill becomes the Chancellor to take measures which will be utterly punitive and immensely damaging to our country's economy.
  Mr. John MacGregor: I have hitherto restrained myself in this debate because I knew that I could look forward, if that be the right expression, to long exchanges with the Chief Secretary and the Financial Secretary during the night in the Standing Committee. I restrained myself despite considerable provocation from the Chancellor's inaccuracies and lack of knowledge about his own tax. I hope that I shall be forgiven now if, in view of the right hon. Gentleman's assertion that most of the critics of his tax were in favour of preserving the status quo, I make my own testament of faith before coming to the amendment itself.
  I am, and for a long time have been, in favour of reforms in capital taxation. I am in favour of a greater spread of wealth throughout the community. I wish to see a much better balance between taxes on income, including tax on savings income, and taxes on inherited capital. It follows from that that I want to see given to those without wealth who are trying to create some capital for themselves a much greater opportunity to keep more of their earnings and acquire savings up to a reasonable level, and a chance to pass some of that capital on, at reasonable levels, levels a bit beyond the present taxtion, to their dependants. It follows also that I agree with many of my hon. Friends that it would be right to close the loopholes in the present tax at the higher levels of inherited wealth.
  In that connection I take the point made by the hon. Member for Birmingham, Ladywood (Mr. Walden) last night when he said that in taxation often the lesser objective should be subservient to the greater. In this tax we see the opposite applying.
  1630
  I come now to the amendments, and I shall refer in particular to No. 52. Many of the deleterious effects of the Chancellor's tax would be at least mitigated by Amendment No. 52. If we cannot tear up the tax and start again, at least let us ease the situation by introducing these rates, because in many ways they go to the heart of the matter, since it is the rates as much as the method of the tax which are causing the difficulties.
  My first objection to the tax stems from the principle that no tax should be vicious and penal. The Chancellor made great play of the argument that at the lower levels of tax—I assume that by that he means lower levels of capital, that is, about £100,000 or less—his tax is more favourable than the present estate duty. That is just not true, and it is time we got that on the record once and for all. The right hon. Gentleman said that the tax was aimed at the vast estates, at a tiny minority. If that is the case, why penalise those of modest means?
  In fact, if we ignore the gifts element altogether and take the tax on death alone, where people have been prudent and taken advantage of the perfectly normal methods open to them under the estate duty system—that is, equalising assets between husband and wife and taking advantage of leaving a life interest to the surviving spouse—we see at every level, starting at £15,000, that this tax takes more away than does the estate duty. The Chancellor's argument about the benefits to the spouse is true only for those who have not arranged their affairs prudently.
  Moreover, as my hon. Friend the Member for Kingston-upon-Thames (Mr. Lomont) said, an enormous number of people will be brought into the net more disadvantaged by this tax than they would have been by the previous arrangements—brought in because of the inflation in house prices and the wide spread of life policies from which people are now gaining the benefit when they retire.
  The second reason why the tax is penal and vicious and why I support Amendment No. 57 is that the tax takes no account of the effects of inflation. It is unfair to compare the levels of this tax with the levels of estate duty. The Government should be raising the levels to take account of inflation. The third

  1631
  reason why it is vicious and penal lies in the combined effects of capital gains tax and the gifts tax, and because of the grossing-up. I do not believe that the Chancellor in his arguments last night dealt at all adequately with either of these points. I hope that we shall have some elaboration of what he said when we go into Standing Committee.
  A further objection that I have is that the rates of tax should be seen in the overall context of the rates of other taxes. Direct taxation is now at a very much higher level in Britain than it is in most of our competitors, and this applies to taxes on savings and capital gains tax. Here, surely, indexation is a necessity, because without it the present capital gains tax is a fraud since it is frequently not a tax on a capital gain. We shall have to take into account, too, other capital taxes in train.
  I would prefer to see lower rates of direct taxation, but I do not expect that from the Government. The rates in the amendment would therefore at least help to offset the very high levels of direct taxation generally.
  Finally, the capital transfer tax should be seen in the context of the general economic climate, and never more so than now. This is a time when we must go for expansion of agriculture for balance of payments reasons. More of existing earnings must go into savings, and jobs must be preserved. A lower rate of tax would help in all those respects.
  Much has already been said on savings, but I should like to give an illustration of the problem from something that has happened to me several times in the last few days. I have been visiting stores during their sales to try to acquire some of the things I need, and I have been talking to the sales staff at all types of stores. They have told me that the sales this year have greatly exceeded their expectations. I was told repeatedly that people seemed to be spending not only their income but their savings because they felt that their savings would be no longer worth keeping. This has happened before the capital transfer tax has appeared on the scene. The indications are that when
  1632
  the tax is law things will be very much worse.
  We have dealt with the arguments about agriculture. It is extraordinary that just when we need to expand agriculture for balance of payments reasons the Government are introducing a tax which will lead to a substantial loss of production. I fear that we shall see a decline of investment and of working capital, a fragmentation of the farms and an enormous loss of efficiency. I look forward to these arguments being developed in Standing Committee.
  There is also the question of the small businesses. There is a family firm adjoining my constituency which employed 182 people in a small rural town which is highly dependent on that employment. In the last 10 days the firm has gone into liquidation. I am not arguing that the reason for that is the capital transfer tax. The reason is the general economic situation and various other matters. But the capital transfer tax will cause this sort of thing to happen repeatedly to small firms in rural areas. In these rural areas there is frequently no alternative employment, and public ownership is certainly not the answer.
  For all the reasons I have given, therefore, I believe that it would help to mitigate the worst effects of the tax if the rates were reduced. Speaking as someone who has only recently become acquainted at firsthand with a rural area, I must say that as I listen to these debates unfold the conviction grows upon me that the Chancellor and his colleagues have simply not begun to understand the impact of a tax of this sort on the social and economic life of rural areas.
  This tax will seriously affect agricultural production, it will destroy woodlands and stop new planting, it will encourage the destruction and spending of savings, it will weaken the economy, it will make enterprise not worth while and it will seriously affect the fabric of society. At least if the Government were prepared to concede the amendment they would do something to lessen these effects.
  [Mr. ALAN FITCH in the Chair.]
  11.30 p.m.
  Mr. Tim Renton: I too wish to speak to Amendment 52, but first I declare an

  1633
  interest in the matter. I apologise for not having declared it when I spoke about three hours ago on another amendment.
  Like my hon. Friends who have already spoken, I have no objection to the principle of a gifts tax, cumulative and inter vivos. But there are four points in the capital transfer tax—the double taxation element, the tax accumulated on the donor and not on the donee, the tax rates, and the allied point of grossing-up—that make me believe that the tax will place an intolerable burden on anyone who is endeavouring to save money or to build up a new business.
  Like my hon. Friend the Member for Norfolk, South (Mr. MacGregor), I think that the Chancellor has tried to mislead the Committee in saying that the burden of the tax will be less than that of estate duty on those of modest means and modest savings. He has totally ignored the basic concept of the tax, which is that, unlike estate duty, it will be a lifetime tax and many things will fall into its net that would not fall into the net of estate duty.
  Looking at the Chief Secretary, I am reminded of the words in "Alice's Adventures in Wonderland":
  "How cheerfully he seems to grin,
  How neatly spreads his claws,
  And welcomes little fishes in,
  With gently smiling jaws!"
  I wonder how many little fishes will swim into the jaws of the Treasury as a result of this new tax, and how many of them will be ordinary people who have tried to help their children, for example, by giving them a house on marriage or by paying a deposit towards a house—the sort of people who would never have been caught under estate duty.
  In support of his argument the Chancellor argued last night that the yield on CTT would be only about £380 million in the first year as opposed to £400 million with estate duty. But when Stock Exchange values have fallen by about one-half and property values are down by at least one-third we could normally have expected that the yield from estate duty would have fallen substantially in the period immediately ahead. The fact that the expected yield from CTT is only £20 million less shows just how buoyant a tax it will be and how large its net will be.
  The principle of grossing-up is incomprehensible to most laymen. I believe
  1634
  that it is a principle of taxation that it should be basically simple and easy to understand. This grossing-up is not. For example, in an inset in the Economist and the Investors' Review this week Barclays Bank said that on a gift of £50,000 the cumulative total of tax would be £7,750. A note put round about the CTT by some accountants said that on a gift of that sum the tax would be £12,083. The Times said today that it would be £19,000. On a simple, straight gift of £50,000, assuming no previous gifts, three sources estimate that the yield will be different. No one will be able to make a gift without seeing an accountant to try to calculate what the tax effect will be. Perhaps the Chief Secretary will tell us just what would be the tax on a gift of £50,000.
  Last night my right hon. Friend the Member for Finchley (Mrs. Thatcher) gave the example of someone who has a business worth £200,000 which he passes on to four people and pays a total of £211,000 in tax. I should like to develop that. Let us assume that he is then left only with a house, which he leaves to his daughter on his death, and that she has no other assets. The house is valued at £40,000, but the Revenue will seek to collect from the daughter tax of £61,696. Therefore the daughter, having received the house, will have no option but to sell the house and leave the country before the Inland Revenue can claim from her in tax £21,000 that she does not have. This is the effect of the Chancellor's tax and the combined and surprising effect of cumulative rates when they are matched with grossing-up.
  On the rates of the CTT, my hon. Friend the Member for Guildford (Mr. Howell) rightly said that we should not draw too many comparisons with rates in other countries. We must, of course, stand on our own feet in Great Britain. The fact remains, though, that tax rates on gifts throughout EEC countries are in every case except one substantially lower than the rates the Chancellor is proposing. In France, on gifts inter vivos to the spouse and children they range from 5 to 20 per cent., for example, and in Austria and Germany from 2 to 15 per cent. With the exception of Spain we, with rates at this level, will be far and away the highest in Europe.

  1635
  I speak in support of Amendment No. 52 moved by my hon. Friend, but I believe that the rates we suggest in that amendment for gifts tax are too high. When these are coupled with an extremely high burden of income tax in this country, I believe that for a cumulative gifts tax to work the rate should not be more than a low of 10 per cent. and a peak of perhaps 25 per cent., because it is only at that level that an individual starting his own business will be able to save enough money out of taxed earnings to put aside and to pay the gifts tax when he passes the business on to the next generation. It is essential that he should be able to do this.
  At the rates the Chancellor is suggesting, the tax will have two consequences. One will be massive evasion. I regret this. Internationally we have a very high reputation for paying our tax. A nation takes its stamp, however, finally from the people who govern it, and if we have a Government of evaders we shall turn into a nation of evaders.
  The final result of this tax will be that it will destroy private capital within a generation. If this is the purpose of the Government, if it is their wish to ruin those who go to work early, who have started a business and who have put their all into getting that business going, let them proceed with this tax at these rates but they should remember the cartoon which appeared the other day with the caption
  "Will the last business man leaving Britain kindly switch out the light."
  That will be the effect of this tax on British business men. They will leave. There will be a mass exodus from this country of just those people whom we need most. I sincerely hope that the Government will rethink the question of the rates.
  Mr. A. G. F. Hall-Davis: I know there are many who would like this debate to be brought to a fairly speedy conclusion. I start, therefore, by saying that I believe there is no reason whatever for curtailing discussion of any aspect of this measure. If we organise our business collectively in the House of Commons—this applies to all parties in turn as the change of democracy operates—so that we spend
  1636
  hours discussing minor matters and are then limited for time on matters which the Chancellor himself describes as being one of the most important tax changes since the war, that is no reason for curtailing the discussion, however inconvenient it may be to all concerned.
  Having listened to most of the debate on the capital transfer tax I am convinced, and I hope that every other Member is equally convinced, that never again should we have a major, complicated tax change introduced in legislative form without having a Select Committee to consider it first.
  We are often condemned in the House for being an irrelevant appendage to the life of the country. I am certain that none of the discussion on this measure that has taken place in the Press and which has been entered into by experts in other spheres has cast one fraction of the light cast by our discussion in Committee.
  Having said that, I make a plea to the Chief Secretary, for whose professional competence I have the highest regard, to take the opportunity to clear up the question of grossing-up. Just what is the difference between the tax on death and the tax when there is a gift inter vivos? Would I be right in assuming that the tax to be paid by the donor in any circumstances—I hope that the right hon. Gentleman is listening to me. I am trying to put these points as simply as possible. I suspect that he is not listening.
  Mr. Joel Barnett: I am listening to the hon. Gentleman.
  Mr. Hall-Davis: Will the tax to be paid by the donor on a gift inter vivos correspond to the tax that would be paid by a sole beneficiary if there were a death? Secondly, will the right hon. Gentleman tell us in simple terms what the tax would be on £200,000 if there had been no previous gift? If the donor has no liquid funds of any kind on which he can lay his hands to pay the tax and if the donee pays the tax, will that be a loan to the donor attracting the penalties laid down for loans or will it be a gift to the donor on which tax will be payable and which will start the aggregation on disbursements by the donee?
  Those fairly simple questions show, as we all know, that this is a complicated

  1637
  tax. What worries me is that many people over the past eight or nine months will have committed themselves to a course of action which they probably cannot redress without having understood the consequences.
  I make one specific point on the levels of taxation which we are discussing. Again I feel that I should declare an interest, and to be on the safe side I shall do so. If I do not have an interest I shall be rather sorry. The Chancellor has said, and I accept this entirely, that estate duty was a voluntary tax. But I put to the Chief Secretary that our industrial structure exists in its present form and distribution because we have been operating a voluntary tax. What attempt has been made to assess the impact of the introduction of this tax on a business which does not have a Stock Exchange quotation and which may be family-owned or owned by a limited body of shareholders who are not related to each other?
  In my view the two-year stage will be too late. Maybe this is a tax that can be justified in logic and on the ground of social justice, but it is a tax—I admire the judgment of my right hon. Friend the Member for Finchley (Mrs. Thatcher) but on this point I must disagree with her—that will result in a life of about five years for many unquoted family companies.
  When this imposition—or this tax, if one wants to be non-controversial—is fully comprehended by people who, in order to keep such firms going, have to show great prudence in the handling of the company finances and in many cases substantial self-denial in the ordering of their affairs, find themselves faced with another complication, they will wait for the first opportunity to dispose of the business. I am not saying that that is right or wrong. I am saying that it is what will happen.
  11.45 p.m.
  Has any attempt been made by the Chief Secretary and his colleagues to discover how many businesses of this kind have continued because of gifts inter vivos? Have the Government made any attempt to weigh this particular change in our industrial structure against the advantages of a tax change which is dear to their hearts?
  1638
  Let me carry this one stage further. A host of smaller towns are largely dependent on just this kind of firm, so we are not discussing the one person in a thousand who is materially affected by estate duty or CTT. We are discussing a large number of the 37 per cent. of the working population who are employed by this kind of firm. We all know the process. The purchasers are a large organisation, and the employees are informed that, for good or bad reasons, the company has been sold. The purchasers say to the employees that they want to carry on the tradition of service and local employment and possibly expand it. In 12 months' time or two years' time, the premises are shut, the jobs are no longer there and the industrial and social life of the community is impoverished.
  That is what will happen as a result of this tax. It will happen not in 25 years or 20 years but: in about five years. When we assess the level at which this tax is to be levied, I hope that we do it with our eyes open as a House of Commons. I hope that hon. Members on the Government benches will not complain to their colleagues at the Dispatch Box in the course of the next year or two about rising unemployment in their constituencies, the loss of jobs and the lobbying to which they are being subjected because long-established firms are closing when they themselves have directly contributed to that situation by approval of this tax.
  By all means let anyone who thinks this is a good tax vote for it. But let him do so with full knowledge and comprehension of what the consequences will be for a very large number of firms and employees who are happy in their work and who would be very unhappy if they know the insecurity which lay ahead.
  Mr. Nick Budgen: I never find it difficult to offend the Whips. I shall not offend them tonight by taking very long.
  I associate myself with what my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) said about the general approach towards the tax. I do not object to the broad principle of a capital transfer tax. What I do object to are the confiscatory rates at which this tax is to be levied, the grossing up effect, and the fact that it is to be levied in conjunction with a capital gains tax and in

  1639
  conjunction with a stamp duty. I also object to the fact that it may be levied in conjunction with a wealth tax.
  For all those reasons, I believe that it will have a catastrophic effect, especially upon the industrial West Midlands. It is there that we see the typical small business. It is there that we see the typical risk-taker, the entrepreneur who has built up a great industrial concern from small beginnings. These small concerns are already heavily taxed. Often they are heavily taxed so that they may subsidise failing giants like British Leyland. The only reason why their owners hang on to them is the fond hope that the organisations may outlive their owners and may be passed on to their children. At the proposed rates of tax, that hope has gone for ever, and businesses like this are likely to be disbanded.
  I come now to the subject of indexation, which has been proposed as a fashionable panacea in this Committee on one occasion before. I disagree with my hon. Friend the Member for Wycombe (Sir J. Hall) and others who believe that to mention indexation is to be fashionable and trendy, and to suggest that there is some easy alternative to these harsh measures necessary to stop inflation.
  I do not think it will be possible to have indexation unless it is total indexation. I agree with the right hon. Member for Down, South (Mr. Powell). No Government could introduce total indexation in whole sectors of our economic activity. It would be impossible, for instance, to index all the loans which private individuals made to building societies. Equally, it would be impossible to index all loans made by building societies to people buying houses on mortgages. Even if all transactions surrounding the housing market were indexed, it is difficult to see how that would not affect all transactions in relation to the ownership or occupation of housing. It is difficult to see how it would be possible to avoid indexing contracts earlier to the date of indexation. Again, it is difficult to see how it would be possible to work out the indexing of private contracts. I am sure that some of my sophisticated hon. Friends say that it could be worked out very well. I am sure that it could, and I am sure that many of my hon. Friends who work for
  1640
  merchant bankers could work it out very well. But it is difficult to see how a notional Grannie Smith from Grazely in my constituency who lent her grandson £100 at 5 per cent. would be able to index that loan over a 20-year period. She would have the same difficulty in understanding indexation as some of my right hon. and hon. Friends have had in understanding the grossing-up effects of CTT.
  For all those reasons, I hope that my right hon. and hon. Friends will think long and carefully before jumping on board the indexation band wagon. I am highly sceptical of it, simply by temperament, because I am always sceptical of the fashionable. I believe that we should concentrate instead on becoming not the party of fashionable foibles but, most of all, the party of sound money.
  Sir John Hall: May I remind my hon. Friend that a number of us were talking about indexation and proposing it long before it became fashionable?
  Mr. Budgen: I am sure that is so. I was not suggesting that all those who advocated it did so just because it was fashionable. In my enthusiasm, perhaps I was a little offensive. I withdraw the remark.
  Mr. Ian Stewart: I am aware of the hour, and I shall endeavour not to test the patience of right hon. and hon. Members. Equally, I hope that they will have sympathy for those of us who do not try to speak too often in this Chamber and who, just because we are not fortunate to be called earlier in the proceedings, might feel inhibited from speaking on subjects about which we feel strongly, when we believe that the interests of our constituents are seriously at risk.
  I will not traverse the ground covered at great length last night and this afternoon. I feel that there are points which have not yet been sufficiently forcibly made and which are germane to the question of the rate at which this tax is proposed to be levied. Last night the Chancellor made an effective debating point when he turned and grinned benignly at his hon. Friends behind him and said that it was unfair for us to argue that transactions should not be subject both to capital gains tax and

  1641
  capital transfer tax because it was the same as saying that because someone paid income tax they should not pay duty on a pint of beer. There is a fundamental difference between these two cases.
  It is that before any Chancellor fixes or revises the rates at which taxes on income shall apply, and the rates at which duties are to be levied, he takes careful account of the interaction of the two and of the spending power, after income tax, of those who will be required to pay taxes and imposts in other forms. The point which has emerged in the debate on capital transfer tax is that the rates proposed do not appear in any way to take account of the other weapons in this armament of taxes on capital which are now being slowly revealed.
  I agree with my hon. Friend the Member for St. Ives (Mr. Nott) and others, that it is difficult for us to make any objective estimate of the effects of this sort of taxation if it is revealed piecemeal and if we are still without the independent assessment, which the Chancellor has set in train, of the whole structure of wealth and income and therefore of the suitability of different types of taxation. It is because of the high rates at which the tax is proposed to be levied that its interaction with other taxes on capital becomes so relevant in considering its likely effects.
  Many hon. Members will have found that they are deeply affected, on behalf of their constituents, in the two respects which have been so fully discussed, those of farms and private companies. Perhaps because of the depth and detail of the discussions we have had, the single, central reason for this has been a little obscure. The reason why so much attention has been devoted in these last two days to these subjects is that they are the sort of assets which are largely indivisible for purposes of raising money with which to pay capital taxes. A second reason is that the people who have wealth in that form are also very often the least likely to have other liquid resources or assets out of which they could meet such taxes.
  I represent a constituency only 30 to 40 miles from London. It has four small to medium-size towns in it. Hitchin and Letchworth have many factories run by private companies. In the
  1642
  surrounding area of countryside there are small to medium-size farms. From what my hon. Friends have said I know that I am far from being alone in this. We are anxious because the whole fabric and social pattern of this type of constituency will be seriously undermined by capital transfer tax at these rates.
  12 midnight.
  Last night I went through the Lobby in support of the amendment moved by the hon. Member for Cornwall, North (Mr. Pardoe), partly because the Chancellor's answer was inadequate and partly because much of the danger of the tax to private companies would be mitigated if the tax were to fall on recipients rather than donors.
  But I must return to agriculture, because there is an important issue which remains to be raised. High rates of tax are to be levied on small and medium-sized farms which are held in a discretionary trust. A rate of 30 per cent. of the applicable tax is to be charged every 10 years. The great danger here comes from dealing with assets which are not easily divisible. Let us suppose that a farm of 1,000 acres in the home counties was valued at £1,000 an acre. The farm would represent an asset of £1 million. If the farm were to be transferred a tax of approximately £600,000 would be payable. Thirty per cent. of that would be £180,000.
  How is the farmer to raise that amount of money for the trustees within 10 years? He cannot raise it by selling 180 acres of a 1,000 acre farm because 180 acres are not viable as a farm. A farmer who anticipated the effect of the tax is bound to have concentrated his buildings and investment on that part of the land of which he did not expect to dispose. To pay the tax he will have to sell a larger proportion of the land than is represented by a straight division on a value basis. A farmer who for precautionary and not evasive reasons had put farming land into a discretionary trust within the last four years, and who was now the tenant of the farm, would be virtually forced out of business.
  In my constituency trusts were set up because there was at the time a 45 per cent. concession on estate duty and there is always a political danger that such a

  1643
  concession may be withdrawn. [Interruption.] My argument does not depend on the reasons for the setting up of the trust but on the fact that it has been set up. For agricultural property, land values rose within a very few years from £200 or £300 an acre to £1,000 an acre, and that rapid rise in the market value left people in extremely exposed personal financial positions.
  Had the 45 per cent. concession been under threat of withdrawal and had there been a fall in the market value of agricultural land at the time of a death it might have been completely impossible for the family of the farmer to raise sufficient money to pay the estate duty. Therefore it was a perfectly reasonable precaution to set up such discretionary trusts. I make this point in the sincere hope that the Government may have overlooked it rather than deliberately have excluded it.
  I apologise for raising this at such a late hour, but it is one more point made so serious by the extremely high rates and the grossing-up basis on which the tax is to be levied. The whole tenor of the arrangements for a tax on this scale and at these rates, as my hon. Friends have been saying with great effect, demonstrates that the Labour Party is more offended by wealth than by poverty while we are more offended by poverty than by wealth.
  Mr. Joel Barnett: It will be no surprise to the Committee when I tell them that I shall advise my right hon. and hon. Friends to resist this amendment. My first ground, but by no means my main ground, is on the question of cost. The cost of Amendment No. 52, to reduce the rate, in 1974–75 would be only £7 million. But in 1975–76 it would be £80 million, or nearly 25 per cent. of the estimated yield, and in the long term the cost would be almost 40 per cent. of the yield. That is a reasonable argument for resisting, but not the main argument.
  Hon. Members will forgive me if I am reasonably brief, because much of the debate was covered in the long Second Reading-type debate on the motion that Clause 17 stand part of the Bill. The question of small businesses will be covered in the next amendment but one, whenever we reach it.
  1644
  I shall refer to the speech by the hon. Member for Hertfordshire, South (Mr. Parkinson). I have great respect for him as a fellow accountant and I am happy to learn that he has always led a sheltered life. I am particularly pleased to learn that in common with many who have spoken from the other side of the Committee, he supports the capital transfer tax in principle, but I must say that they had a strange way of telling us how they support the tax in principle when they voted against it in principle when we sought to introduce it in Clause 17.
  At least the tax is not objectionable to them in principle, only on the rates. However, that was no reason why they should not have voted for the tax and sought to amend the rates. It is only because a certain gentleman wrote in a certain Sunday newspaper and the right hon. Lady the Member for Finchley (Mrs. Thatcher) felt it necessary to say what she would do about the tax if she ever had the opportunity—but this is a strange reason if they all support the principle.
  The hon. Member for Kingston-upon-Thames (Mr. Lamont) said at some length that he doubted whether we should have done this before knowing more about the distribution of wealth, about which we are having a Royal Commission. While there may be some doubt about the distribution of wealth, there can be no doubt whatever—and I hope that there is none in the mind of the hon. Member for Kingston-upon-Thames—that substantial sums have been avoided and not paid because of the way estate duty worked.
  Mr. Norman Lamont: I agree.
  Mr. Barnett: The hon. Member agrees, and I am happy that he does. He said that he supports the principle of the tax, so now I come to the rates.
  The hon. Member for Guildford (Mr. Howell), who opened this debate, said, and has said before on a number of occasions, that the rates here were no lower than those of estate duty. Among those who argued the case, he put it differently, saying that it was not true that it would be lower than estate duty where estate duty was paid. But even that is not true because, at death, the rates for estate duty were higher than under the CTT.

  1645
  Of course, there was the major difference that there was no tax in most cases when the transfer was made in a lifetime. That was just one of the ways of avoiding paying estate duty. As far as the rates at death are concerned, there can be no doubt that, under Clause 33, the rates now are lower than they were under estate duty.
  The hon. Gentleman said that it would be difficult to calculate the rate of tax on the gift. The hon. Member for Wolverhampton, South-West (Mr. Budgen) explained how difficult it would be if we were to be so foolish as to accept Amendment No. 57 to index the rate, because the grandmother to whom someone referred would have to calculate by using the formula axb/c=d, as shown in that amendment.
  Some could argue that that would be simpler than under the system we propose, but nevertheless I suggest that it would be quite a way for the average taxpayer to calculate his liability. The hon. Member for Wolverhampton, South-West had strong words about the general question of indexation—it seems that there is indeed something in the air at Wolverhampton. I shall not repeat what I have already said about indexation. I simply say that I cannot accept the argument for indexation of CTT.
  Mr. Norman Lamont: The right hon. Gentleman gave some estimates for the future yield of the tax for two years forward. He also said that the rate would be required to take account of the rate of inflation. Can he now say whether the precise figures he quoted were on the assumption of a change in the tax of that kind?
  Mr. Barnett: When we make an estimate of tax yield, we cannot do it on what the tax might be in years to come. It would be impossible. We can only do it on the basis of present rates. For the reasons I have given previously, and for the excellent reasons given by the hon. Member for Wolverhampton, South-West, I cannot accept indexation in this case.
  I have been asked about grossing up. It is important to get the point clear because a number of hon. Members are not sure about it. The hon. Member for Guildford gave some figures about its
  1646
  being a 100 per cent. tax—he was using the net level—and said that it was much worse than under estate duty. I make it clear that the CTT arrangement follows estate duty.
  I was asked about the figure of £50,000, so I will use it as an example. The leader in The Times today referred to this question, and it seems that the person who wrote it did not write The Times leader on 14th August and does not quite appreciate the problems in relation to grossing up. On a first gift of £50,000, if the tax were paid by the donee as the person receiving the gift he would bear tax of £7,750, so that there would be a gross gift of £50,000 and the net benefit to the recipient would be £42,250. If the tax were paid by the donor he would bear tax of £12,083, because the gross gift would be £62,083 and the net benefit to the donee would be £50,000. That is the way in which estate duty works out at death—in other words, in exactly the same way. I hope that is now clear and that we can leave the question of grossing up.
  12.15 a.m.
  Mr. Tim Renton: Could the Chief Secretary say under what circumstances the capital transfer tax could be paid by the donee in the first example which he quoted?
  Mr. Barnett: The answer is simple. If the donor gives away total assets and has no assets left, it will be paid by the donee.
  A number of other points have been made which have been answered on a number of occasions throughout our many debates. We also have had many representations from people outside the House on the rates proposed in the Bill and their argument has been that the rates are intolerably high. They are lower than they were under estate duty, but the major difference is that they were not paid under estate duty.
  I should like to have heard the right hon. Member for Finchley say that she, too, did not like the idea of having a capital transfer tax which was as readily avoided as estate duty. There was nothing illegal about it, but what we are now doing is to stop that form of avoidance. We shall stop the situation whereby large numbers of people—in the comparative sense wealthy people—were able to avoid paying any tax at all.

  1647
  We on the Government benches believe that there is a considerable difference of opinion on the whole question of the avoidance of estate duty. I know that some Opposition Members have paid lip-service to wanting to stop avoidance, but are opposed to the idea of replacing it with a tax which would stop avoidance. They vote against the principle of a capital transfer tax but—
  Mrs. Thatcher: If the right hon. Gentleman would like to introduce the kind of gifts tax which exists in France, many of us would be willing to support him. It is a totally different tax.
  Mr. Barnett: I am happy with the one we have got, and so are my right hon. and hon. Friends.
  The right hon. Lady and many of her colleagues think that the tax is very penal. The fact is that the yield is similar to that from estate duty. In regard to all the people for whom the right hon. Lady has been pleading who have not previously paid estate duty and who will now pay capital transfer tax, who will pay less? I shall tell her. The people paying less are the small and medium-sized type of wealthy person who did not

  Division No. 71.]

  AYES

  [12.20 a.m.

  Adley, Robert

  Corrie, John

  Griffiths, Eldon

  Aitken, Jonathan

  Costain, A. P.

  Grist, Ian

  Alison, Michael

  Crouch, David

  Grylls, Michael

  Arnold, Tom

  Davies, Rt Hon J. (Knutsford)

  Hall, Sir John

  Atkins, Rt Hon H. (Spelthorne)

  Dean, Paul (N Somerset)

  Hall-Davis, A. G. F.

  Awdry, Daniel

  Dodsworth, Geoffrey

  Hamilton, Michael (Salisbury)

  Baker, Kenneth

  Douglas-Hamilton, Lord James

  Hampson, Dr Keith

  Banks, Robert

  Drayson, Burnaby

  Hannam, John

  Bennett, Dr Reginald (Fareham)

  du Cann, Rt Hon Edward

  Harvie, Anderson, Rt Hon Miss

  Benyon, W.

  Durant, Tony

  Havers, Sir Michael

  Berry, Hon Anthony

  Eden, Rt Hon Sir John

  Hawkins, Paul

  Biffen, John

  Edwards, Nicholas (Pembroke)

  Hayhoe, Barney

  Blaker, Peter

  Elliott, Sir William

  Heath, Rt Hon Edward

  Body, Richard

  Emery, Peter

  Hicks, Robert

  Boscawen, Hon Robert

  Eyre, Reginald

  Higgins, Terence L.

  Bowden, A. (Brighton, Kemptown)

  Fairbairn, Nicholas

  Holland, Philip

  Boyson, Dr Rhodes (Brent)

  Fairgrieve, Russell

  Hooson, Emlyn

  Braine, Sir Bernard

  Finsberg, Geoffrey

  Hordern, Peter

  Brittan, Leon

  Fisher, Sir Nigel

  Howell, David (Guildford)

  Brotherton, Michael

  Fletcher, Alex (Edinburgh N)

  Howell, Ralph (North Norfolk)

  Brown, Sir Edward (Bath)

  Fookes, Miss Janet

  Hutchison, Michael Clark

  Buchanan-Smith, Alick

  Fowler, Norman (Sutton C'f'd)

  Irving, Charles (Cheltenham)

  Buck, Antony

  Fry, Peter

  James, David

  Budgen, Nick

  Galbraith, Hon T. G. D.

  Jenkin, Rt Hon P. (Wanst'd & W'df'd)

  Bulmer, Esmond

  Gardiner, George (Reigate)

  Jessel, Toby

  Burden, F. A.

  Gilmour, Rt Hon Ian (Chesham)

  Johnson Smith, G. (E Grinstead)

  Carlisle, Mark

  Glyn, Dr Alan

  Jopling, Michael

  Carr, Rt Hon Robert

  Godber, Rt Hon Joseph

  Joseph, Rt Hon Sir Keith

  Carson, John

  Goodhart, Philip

  Kellett-Bowman, Mrs Elaine

  Chalker, Mrs Lynda

  Goodhew, Victor

  Kershaw, Anthony

  Channon, Paul

  Goodlad, Alastair

  Kimball, Marcus

  Churchill, W. S.

  Gorst, John

  King, Evelyn (South Dorset)

  Clark, Alan (Plymouth, Sutton)

  Gow, Ian (Eastbourne)

  King, Tom (Bridgwater)

  Cockcroft, John

  Gower, Sir Raymond (Barry)

  Kitson, Sir Timothy

  Cooke, Robert (Bristol W)

  Grant, Anthony (Harrow C)

  Knight, Mrs Jill

  Cope, John

  Gray, Hamish

  Knox, David

  previously avoid paying tax. I refer to wives and husbands who previously paid tax on death. That is what we are doing in this tax, and I do not think anybody on this side of the Committee wants to change that type of tax. We have a good one and we are going to stick to it.
  Mr. David Howell: My hon. Friends have made it clear that tens of thousands of families and work people in smaller businesses will be directly hit by the tax, and that it is so complicated that many will not be able to work out their liability until too late. Whatever the Chief Secretary says, it is utterly misleading to compare it with estate duty and to imply that the effect will not be much different, that it will merely fill a few loopholes. It will do nothing of the kind. It will strike at the livelihood of many tens of thousands of small people, concerned with creating wealth, who can ill afford to pay it. The tax will destroy wealth. We shall vote for the amendment to show our deep disapproval of this type of tax.
  Question put, That the amendment be made:—
  The Committee divided: Ayes 220, Noes 252.

  Lamont, Norman

  Nelson, Anthony

  Silvester, Fred

  Lane, David

  Neubert, Michael

  Sims, Roger

  Latham, Michael (Melton)

  Newton, Tony

  Sinclair, Sir George

  Lawrence, Ivan

  Onslow, Cranley

  Skeet, T. H. H.

  Lawson, Nigel

  Oppenheim, Mrs Sally

  Smith, Cyril (Rochdale)

  Le Marchant, Spencer

  Page, Rt Hon R. Graham (Crosby)

  Smith, Dudley (Warwick)

  Lewis, Kenneth (Rutland)

  Pardoe, John

  Spicer, Jim (W Dorset)

  Lloyd, Ian

  Parkinson, Cecil

  Spicer, Michael (S. Worcester)

  Loveridge, John

  Pattie, Geoffrey

  Sproat, Iain

  Luce, Richard

  Penhaligon, David

  Stainton, Keith

  McCusker, H.

  Percival, Ian

  Stanbrook, Ivor

  Macfarlane, Neil

  Peyton, Rt Hon John

  Stanley, John

  MacGregor, John

  Pink, R. Bonner

  Steen, Anthony (Wavertree)

  Macmillan, Rt Hon M. (Farnham)

  Powell, Rt Hon J. Enoch

  Stewart, Ian (Hitchin)

  McNair-Wilson, M. (Newbury)

  Price, David (Eastleigh)

  Taylor, Teddy (Cathcart)

  McNair-Wilson, P. (New Forest)

  Price, William (Rugby)

  Tebbit, Norman

  Madel, David

  Prior, Rt Hon James

  Temple-Morris, Peter

  Marten, Neil

  Pym, Rt Hon Francis

  Thatcher, Rt Hon Margaret

  Mates, Michael

  Raison, Timothy

  Thomas, Rt Hon P. (Hendon S)

  Mather, Carol

  Rathbone, Tim

  Trotter, Neville

  Maudling, Rt Hon Reginald

  Rawlinson, Rt Hon Sir Peter

  Tugendhat, Christopher

  Mawby, Ray

  Rees, Peter (Dover & Deal)

  van Straubenzee, W. R.

  Maxwell-Hyslop, Robin

  Renton, Rt Hon Sir D. (Hunts)

  Viggers, Peter

  Mayhew, Patrick

  Renton, Tim (Mid-Sussex)

  Wakeham, John

  Meyer, Sir Anthony

  Ridley, Hon Nicholas

  Walder, David (Clitheroe)

  Mills, Peter

  Ridsdale, Julian

  Walker, Rt Hon P. (Worcester)

  Miscampbell, Norman

  Rifkind, Malcolm

  Walters, Dennis

  Mitchell, David (Basingstoke)

  Roberts, Michael (Cardiff NW)

  Weatherill, Bernard

  Moate, Roger

  Roberts, Wyn (Conway)

  Wells, John

  Molyneaux, James

  Ross, Stephen (Isle of Wight)

  Whitelaw, Rt Hon William

  Monro, Hector

  Ross, William (Londonderry)

  Wiggin, Jerry

  Moore, John (Croydon C)

  Rost, Peter (SE Derbyshire)

  Winterton, Nicholas

  More, Jasper (Ludlow)

  Royle, Sir Anthony

  Young, Sir G. (Ealing, Acton)

  Morgan, Geraint

  Sainsbury, Tim

  Younger, Hon George

  Morris, Michael (Northampton S)

  St. John-Stevas, Norman

  Morrison, Charles (Devizes)

  Scott, Nicholas

  TELLERS FOR THE AYES:

  Morrison, Peter (Chester)

  Shaw, Michael (Scarborough)

  Mr. Adam Butler and

  Mudd, David

  Shelton, William (Streatham)

  Mr. John Stradling Thomas.

  Neave, Airey

  Shepherd, Colin

  NOES

  Abse, Leo

  Corbett, Robin

  Garrett, W. E. (Wallsend)

  Allaun, Frank

  Cox, Thomas (Tooting)

  George, Bruce

  Anderson, Donald

  Craigen, J. M. (Maryhill)

  Gilbert, Dr John

  Archer, Peter

  Crawford, Douglas

  Golding, John

  Armstrong, Ernest

  Crosland, Rt Hon Anthony

  Gould, Bryan

  Ashley, Jack

  Cryer, Bob

  Gourlay, Harry

  Ashton, Joe

  Cunningham, G. (Islington S)

  Graham, Ted

  Atkins, Ronald (Preston N)

  Cunningham, Dr J. (Whiteh)

  Grant, George (Morpeth)

  Atkinson, Norman

  Dalyell, Tam

  Grocott, Bruce

  Bain, Mrs Margaret

  Davidson, Arthur

  Hamilton, James (Bothwell)

  Barnett, Guy (Greenwich)

  Davies, Bryan (Enfield N)

  Hamilton, W. W. (Central Fife)

  Barnett, Rt Hon Joel

  Davies, Denzil (Llanelli)

  Hamling, William

  Bates, Alf

  Deakins, Eric

  Hardy, Peter

  Bean, R. E.

  Dean, Joseph (Leeds West)

  Harper, Joseph

  Benn, Rt Hon Anthony Wedgwood

  de Freitas, Rt Hon Sir Geoffrey

  Harrison, Walter (Wakefield)

  Bennett, Andrew (Stockport N)

  Dell, Rt Hon Edmund

  Hattersley, Rt Hon Roy

  Bidwell, Sydney

  Dempsey, James

  Hatton, Frank

  Bishop, E. S.

  Doig, Peter

  Hayman, Mrs Helene

  Boardman, H.

  Dormand, J. D.

  Healey, Rt Hon Denis

  Booth, Albert

  Douglas-Mann, Bruce

  Heffer, Eric S.

  Boothroyd, Miss Betty

  Duffy, A. E. P.

  Henderson, Douglas

  Bottomley, Rt Hon Arthur

  Dunn, James A.

  Hooley, Frank

  Bradley, Tom

  Dunnett, Jack

  Horam, John

  Bray, Dr Jeremy

  Dunwoody, Mrs. Gwyneth

  Hoyle, Douglas (Nelson)

  Brown, Hugh D. (Provan)

  Eadle, Alex

  Huckfield, Les

  Buchan, Norman

  Edge, Geoff

  Hughes, Rt Hon C. (Anglesey)

  Buchanan, Richard

  Ellis, Tom (Wrexham)

  Hughes, Mark (Durham)

  Butler, Mrs Joyce (Wood Green)

  Ennals, David

  Hughes, Robert (Aberdeen N)

  Callaghan, Jim (Middleton & P)

  Evans, Gwynfor (Carmarthen)

  Hughes, Roy (Newport)

  Campbell, Ian

  Evans, Ioan (Aberdare)

  Hunter, Adam

  Canavan, Dennis

  Evans, John (Newton)

  Irving, Rt Hon S. (Dartford)

  Carmichael, Neil

  Ewing, Harry (Stirling)

  Jackson, Colin (Brighouse)

  Carter, Ray

  Fernyhough, Rt Hon E.

  Jackson, Miss M. (Lincoln)

  Carter-Jones, Lewis

  Flannery, Martin

  Jay, Rt Hon Douglas

  Cartwright, John

  Fletcher, Ted (Darlington)

  Jeger, Mrs Lena

  Clemitson, Ivor

  Foot, Rt Hon Michael

  Jenkins, Hugh (Putney)

  Cocks, Michael (Bristol S)

  Ford, Ben

  John, Brynmor

  Coleman, Donald

  Forrester, John

  Jones, Alec (Rhondda)

  Colquhoun, Mrs Maureen

  Fowler, Gerald (The Wrekin)

  Jones, Barry (East Flint)

  Concannon, J. D.

  Fraser, John (Lambeth, N'w'd)

  Judd, Frank

  Conlan, Bernard

  Freeson, Reginald

  Kaufman, Gerald

  Cook, Robin F. (Edin C)

  Garrett, John (Norwich S)

  Kilroy-Silk, Robert

  Kinnock, Neil

  Ogden, Eric

  Stott, Roger

  Lambie, David

  Orbach, Maurice

  Strang, Gavin

  Lamborn, Harry

  Ovenden, John

  Taylor, Mrs Arm (Bolton W)

  Lamond, James

  Owen, Dr David

  Thomas, Mike (Newcastle E)

  Latham, Arthur (Paddington)

  Padley, Walter

  Thomas, Ron (Bristol NW)

  Leadbitter, Ted

  Palmer, Arthur

  Thompson, George

  Lee, John

  Park, George

  Tierney, Sydney

  Lewis, Ron (Carlisle)

  Parker, John

  Tinn, James

  Lipton, Marcus

  Parry, Robert

  Tomlinson, John

  Litterick, Tom

  Pavitt, Laurie

  Torney, Tom

  Loyden, Eddie

  Peart, Rt Hon Fred

  Varley, Rt Hon Eric G.

  Luard, Evan

  Perry, Ernest

  Wainwright, Edwin (Dearne V)

  Lyon, Alexander (York)

  Phipps, Dr Colin

  Walden, Brian (B'ham, L'dyw'd)

  Lyons, Edward (Bradford W)

  Prentice, Rt Hon Reg

  Walker, Harold (Doncaster)

  McElhone, Frank

  Price, C. (Lewisham W)

  Walker, Terry (Kingswood)

  McGuire, Michael (Ince)

  Price, William (Rugby)

  Ward, Michael

  Mackenzie, Gregor

  Rees, Rt Hon Merlyn (Leeds S)

  Watkins, David

  Mackintosh, John P.

  Richardson, Miss Jo

  Watkinson, John

  Maclennan, Robert

  Roberts, Gwilym (Cannock)

  Watt, Hamish

  McMillan, Tom (Glasgow C)

  Roderick, Caerwyn

  Weetch, Ken

  Madden, Max

  Rodgers, George (Chorley)

  Wellbeloved, James

  Magee, Bryan

  Rodgers, William (Stockton)

  Welsh, Andrew

  Mahon, Simon

  Rooker, J. W.

  White, Frank R. (Bury)

  Marks, Kenneth

  Rose, Paul B.

  White, James (Pollock)

  Marshall, Dr Edmund (Goole)

  Ross, Rt Hon W. (Kilmarnock)

  Whitehead, Phillip

  Marshall, Jim (Leicester S)

  Rowlands, Ted

  Whitlock, William

  Mason, Rt Hon Roy

  Ryman, John

  Wigley, Dafydd

  Meacher, Michael

  Sandelson, Neville

  Williams, Alan (Swansea W)

  Mellish, Rt Hon Robert

  Sedgemore, Brian

  Williams, Alan Lee (Hornchurch)

  Mikardo, Ian

  Selby, Harry

  Williams, Rt Hon Shirley (Hertford)

  Millan, Bruce

  Shaw, Arnold (Ilford South)

  Williams, W. T. (Warrington)

  Miller, Dr M. S. (E. Kilbride)

  Sheldon, Robert (Ashton-u-Lyne)

  Wilson, Alexander (Hamilton)

  Miller, Mrs Millie (Ilford N)

  Shore, Rt Hon Peter

  Wilson, Rt Hon H. (Huyton)

  Mitchell, R. C. (Soton, Itchen)

  Silkin, Rt Hon S. C. (Dulwich)

  Wilson, William (Coventry SE)

  Molloy, William

  Sillars, James

  Wise, Mrs Audrey

  Moonman, Eric

  Silverman, Julius

  Woodall, Alec

  Morris, Alfred (Wythenshawe)

  Skinner, Dennis

  Woof, Robert

  Morris, Charles R. (Openshaw)

  Smith, John (N Lanarkshire)

  Wrigglesworth, Ian

  Morris, Rt Hon J. (Aberavon)

  Snape, Peter

  Young, David (Bolton E)

  Moyle, Roland

  Spearing, Nigel

  Mulley, Rt Hon Frederick

  Spriggs, Leslie

  TELLERS FOR THE NOES:

  Newens, Stanley

  Stallard, A. W.

  Mr. John Ellis and

  Noble, Mike

  Stewart, Donald (Western Isles)

  Mr. Walter Johnson.

  Oakes, Gordon

  Stoddart, David

  Question accordingly negatived.
  [Mr. Oscar MURTON in the Chair.]
  12.30 a.m.
  Mr. Jerry Wiggin (Weston-super-Mare): I beg to move Amendment No. 56, in page 26, line 27, at end insert—
  'Provided that in the case of a lifetime transfer the rate of tax shall be the rate shown in the third column of the above Table reduced by the relevant factor set out in a Discount Table based on life expectancy such as the Treasury shall on the coming into force of this Act prescribe and may from time to time vary by order made by statutory instrument'.
  In the interests of time, I have desisted from commenting on Clause 17 or Clause 33 in our debates so far, but as this amendment deals with the amelioration of the rates of capital transfer tax, I wish to say a word about my own approach to this imposition.
  The Chief Secretary made much of the fact that several of my hon. Friends had said that they viewed some form of capital transfer taxation as permissible.
  1652
  I agree that it is, but only if rates of income tax are substantially lower, because it is just not possible to continue to take out of a capitalist system large chunks of its very lifeblood if at the same time the levels of income and corporation tax do not allow a sufficient margin to restore the capital position for the future requirements of industry or business.
  I draw this simile. If from that mythical creature the capitalist swine we take its blood supply at frequent intervals, never allowing a transfusion to make up the deficiency, the animal will die, and it will die a lot sooner than Treasury Ministers would have us believe.
  If we persist with the present rates of income and corporation tax and at the same time have the rate of capital transfer tax which the Government propose, the capitalist system as we know it will inevitably come to an end. I believe that a good many hon. Members on the Government side see that as the objective of the tax. If they achieve it, that system

  1653
  can be replaced only by State intervention on a massive scale, leading ultimately to all the other dangers of true Socialism which have been seen in other so-called democracies east of the German border.
  We have heard a good deal about the effect of the tax on agriculture and forestry. I have just been told that some forestry businesses have already begun to lay off their men. It is no good the Government thinking that this will be a slow process. The attractions of forestry will disappear almost overnight when the tax comes into effect. I appreciate that the Chancellor said that he would bring in measures to ameliorate the effect of the tax on agriculture and forestry, and I shall make it my business to pursue that promise in Standing Committee. I hope that the amelioration will be of a substantial nature.
  The Chancellor's wind-up speech this evening did no good to this House. We frequently wonder why the public regard us with less and less approval. But when the Chancellor chooses to reply in a frivolous and irrelevant fashion to a seven-hour debate in which major points have been deployed with immense skill is it surprising that the public feel that we waste a good deal of our time here? [[Interruption.] I am sorry if hon. Members feel that we are wasting our time now. This is a matter of immense importance. This is a completely new tax and very few Labour Members appear to understand it. Very few of them have taken the trouble to listen to the debate.
  Mr. John Wells: On a point of order, Mr. Murton. The hon. Member below the Gangway, whose constituency I forget if ever I knew it, keeps interrupting in a loud voice which makes it very difficult for me to hear my hon. Friend. When I complained he had the impertinence to say "Shut up." Can you direct the hon. Member to shut up himself?
  The Deputy Chairman: These are matters which must be left to the Chair. I hope that it may now be possible for us to proceed with as few interruptions as possible.
  Mr. Wiggin: Because of the desire of the Treasury that there should be as much tax on a gift as there will ultimately be on a legacy, the tax which will ultimately
  1654
  be paid on a gift inter vivos will be higher than the sum paid on death.
  The amendment would make it possible for anyone wishing to make a gift to get a "discount" because the gift was made in advance. The principle is clear although I accept that the amendment is obscure. It refers to a table which shall be published but which does not appear in the amendment. Life tables are available according to well-established practice in life insurance and producing a table here would not present insuperable difficulties.
  It is clear that if a man of 60 makes a gift and voluntarily pays the CTT he should be better treated than if he were to live to 80 and the Treasury had to wait another 20 years for the money.
  Another crucial problem will arise if the amendment or something similar is not accepted. Small businesses and farms will be run by senile people because there will be no incentive to make provision for the undertakings to be handed on. The situation will arise where a man is considerably older than his wife. He dies at the age of 70 and his wife takes over the business and runs it for 20 or 30 years. By the time her son inherits he will be an old-age pensioner. I cannot conceive that the Government intend that the management of all small businesses should be by octogenarians.
  I do not propose to press the amendment to a vote. I simply want to sound out the Government on how they propose to deal with the problem.
  Mr. Peter Rees: I support the amendment so ably moved by my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin).
  There are two points that I hope the Financial Secretary will take into account. First, whether by accident or design—it is rather difficult to tell with this tax, because sometimes one has the impression that those on the Government Front Bench do not entirely know their own tax—it seems that the impost on transfers during life are likely to be heavier than the impost on death. The amendment would slightly redress that balance.
  Secondly, on the basis that the Government are determined to exact tax on all transfers, whenever and however

  1655
  made, the Government should be encouraging transfers during life, not only for the reasons given by my hon. Friend but because they will be getting their tax that much sooner. It is a well-known commercial principle that if one is getting one's money earlier one should offer a discount.
  For those two brief but important reasons, I hope that the Government will consider the amendment sympathetically and perhaps even imaginatively.
  Dr. Gilbert: I am grateful to the hon. Member for Weston-super-Mare (Mr. Wiggin) for acknowledging that the amendment is a probing amendment, and saying that he does not intend to press it to a Division.
  The hon. Gentleman was also so candid as to say that the amendment is a little obscure. But we grasp the general intent, which is that by operating the table, which was based on an actuarial assessment of life expectancy, a lower rate of CTT will be made available for lifetime gifts. The hon. Gentleman seemed to think that it might be necessary to vary the schedule by order. Life expectancy may change over a period of years, but it hardly changes so dramatically as to necessitate any Government's making adjustments in such a schedule, if it were adopted, by order.
  The hon. Gentleman talked about the interplay between the capital transfer tax and the rates of income tax. He is on to quite a fair point. It would not be correct to say that the Government ignore such questions. While there is nothing specifically related to that matter in the White Paper on the CTT, I draw the hon. Gentleman's attention to the preface to the Green Paper on the wealth tax, where he will find a passage that is relevant to his remarks.
  It is a matter of opinion whether an individual should be encouraged to transfer control over his assets at any given age. The great obscurity in the amendment is that it does not specify whether the encouragement should be given when the taxpayer is 40, 50, 60 or until—in the hon. Gentleman's terminology—he becomes a geriatric. Reasonable people can reasonably disagree as
  1656
  to the desirability of the principle or the date at which it should operate, or the degree of incentive, if they accept both the principle and the age. For these reasons I cannot commend the amendment.
  There is an incentive of a sort to gifts during lifetime, because the earlier a gift is made the more likely it is to fall into the lower band structure, and therefore attract a lower rate of tax. To that extent there could be said to be an incentive with respect to a series of gifts that someone might programme through his life, anticipating gifts at death, scheduling them in a certain order so as to attract the lower rate for certain gifts.
  12.45 a.m.
  Mr. David Mitchell: Surely, if that were true the Government would not be levying capital gains tax on lifetime gifts and not on death gifts, and they would be allowing interest on lifetime gifts for the payment of tax and not on death gifts. The Government's policy is the reverse. Therefore, what my hon. Friend said was accurate and what the hon. Gentleman is saying is bunkum.
  Dr. Gilbert: That is strong language even for the hon. Gentleman. I am certainly not standing here to defend the present structure of the capital gains tax in all its aspects. That is not part of my function tonight.
  Mr. Peter Rees: The hon. Gentleman has made a most important statement. May we therefore expect, if not in this Bill at least in the next, which we are led to expect in March, substantial reform of the whole structure of capital gains tax in the light of what the hon. Gentleman has just said?
  Dr. Gilbert: As my right hon. Friend the Chief Secretary remarks to me, hope springs eternal. I make no forecast about future changes of the tax structure. All I am saying is that I am not defending the structure of capital gains tax tonight any more than I am defending the structure of any other tax except the CTT. That is my purpose tonight.
  I rest on what I said a moment or two ago in response to the hon. Member for Weston-super-Mare that an incentive, albeit a modest one, is built into the tax for people to make gifts during their

  1657
  lifetime in so far as the earlier a gift is made, the lower tranche it will fall into in capital transfer tax terms and, therefore, the lower the rate of tax that will apply. I recognise that this does not meet the hon. Gentlemans' case—and, of course, I did not expect that it would and he would not have expected me to accept his amendment. I have to leave it at that.
  Mr. Wiggin: I am rather disappointed at that reply. The hon. Gentleman has not dealt with the point that, far from being a gifts tax, in the matter of large gifts this is a prevention of gifts tax.
  The philosophy behind the amendment was helpful to the Government since it would produce the revenue earlier; it would encourage those who had gifts to make to do so earlier in their lives. There is no great difficulty about grasping the point. If one is aged 30, one gets a discount; if one is 40 one gets slightly less discount, and so on. At the end of the day the Government would collect on death. By making it easier inter vivos, however, it would be a good business bet for the Government.
  I am sorry that the hon. Gentleman cannot give me further hope that he might deal with the point in Committee upstairs, but I have a feeling that we shall have to return to the basic principle because it is an important one. However, I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Mr. David Mitchell: I beg to move Amendment No. 88, in page 26, line 27, at end add—
  '(3) Where the value transferred by a chargeable transfer is determined by reference to the value of shares in a trading company not quoted on a recognised stock exchange, or by an interest in a partnership or business where the total value of all the shares in the company or companies or all the interests in the partnership or partnerships or business or businesses does not exceed £250,000, then any rate shown in the third column of the Table set out above shall be halved'.
  The amendment provides for small businesses to pay capital transfer tax at half the rate of larger businesses and other goods and chattels up to a value of £250,000 of the assets of the business, not of the assets of the donor.
  The Government say that they are in favour of a healthy private sector.
  1658
  We would all agree that actions speak louder than words. Therefore, in listening to what the Government say tonight we shall be able to judge from the actions they propose just how genuine is their concern for the smaller business sector and how genuine is their assurance that they want a healthy smaller business sector.
  I happen to believe that the Chief Secretary has some understanding of these matters. I hope, therefore, that we shall have from him a thoughtful and serious reply to a very important problem which arises from the capital transfer tax as it is proposed in the Bill. A healthy private sector requires a small business sector. A third of the employment outside the nationalised industries is provided by small firms. Those firms make up approximately 25 per cent. of the gross national product. They are important. The small firms need the capital of the proprietors. The Labour Government of 1969 set up the Bolton Committee to consider the problem of small firms. The committee found that small firms were financed by the capital of the proprietors.
  If the clause is passed unamended without the Government producing some special arrangements, every small business of consequence will be broken up or sold at the present proprietor's death or the death of his widow. I should like the Government to give the Committee some idea of how widely they consulted before putting forward these proposals. Did they consult Smaller Businesses Association Ltd.? That is very active on behalf of small businesses. Have they consulted the CBI council which is concerned with small firms and which has devoted considerable resources to considering their problems? Have they consulted the chamber of commerce? Those are organisations which are much involved with the problems of the small businesses. They have all told me that they believe that if the clause remains as it stands small businesses will be wiped out on the death of the present generation of proprietors.
  Perhaps it is worth explaining just how serious is the impact of this proposed tax on small businesses. If a small business is worth £250,000, for example—there are many small businesses that are worth that or perhaps slightly less—and it provides employment to a number of people

  1659
  whose jobs are dependent upon its continuance, and if the proprietor is to give it intact to the next generation so that it can continue its work and the service it is providing, he will require to have no less than £542,193. Under these provisions the tax liability is greater than the value of the business that I have used in my example—namely, £292,193. From the look of puzzlement on the face of some Labour Members it seems that they too, like the Chancellor, do not realise some of the consequences of the clause.
  The result of these proposals is that someone will have to buy the businesses that become the subject of this proposed taxation. In many cases they will not be bought. They will then be broken up and the remains will continue as broken-backed under-capitalised companies which will be unable to pay decent wages to their employees and which will be unable to make their proper contribution to the national economy. I was going to say that I could see the unhappy face of the Minister responsible for small firms, the Under-Secretary of State for Industry, but I now see him smiling. I do not know what he has to smile about when legislation is passing through the Committee which will wipe out many of the businesses that he is supposed to protect. [Interruption.] Hon. Members who are making their contributions from a sedentary position may not be concerned about those who work for small firms, but the position is that many people are employed by the sort of small firms that will either be wiped out or sold and taken over as a result of the clause as it stands. There will be the broken-backed continuation which I hope the Chief Secretary is as worried about as I am. But let us suppose that someone does buy the business. It will be a larger business—and less efficient, for larger businesses are not as efficient in their use of resources, capital and investment as small businesses. Is that in the national interest?
  What about the regional problem? Scotland, for example, continually finds that when a small business changes hands and is taken over by another company, time after time there is rationalisation, and it is the peripheral regional area which is closed up, and there is a concentration of the business with its new found
  1660
  owners in the South or the industrial Midlands. Time and again it is the regions which suffer from that sort of situation.
  What about the older men who have served such businesses loyally during their lives? Anyone who knows a small business will know of many instances of employees being kept on although they are only marginally effective. They are kept on because they have been with the firm a long time. They have been loyal to the firm and the firm is loyal to them. But once the business is taken over, all that is gone. The new owners do not feel that sort of responsibility. They are concerned simply with the balance sheet and the amalgamation.
  Mr. Kenneth Lewis: Does my hon. Friend realise that if this tax is passed as it is proposed, a very large number of small businesses will go on the market almost immediately? If a lot of them go on the market immediately, who will there be to buy them? There will be so many businesses on the market that there will be no buyers. In that case, they will not be sold at all. They will be broken up and simply liquidated in order to turn the assets into cash.
  Mr. Mitchell: My hon. Friend's interjection reflects his experience and contacts in small businesses.
  There is another point of some consequence here for the Chief Secretary. Perhaps the Minister responsible for small firms may also care to bear it in mind. Once the proprietor of a business reaches the age of about 50, his employees and management team will start to say to themselves "When the boss dies, what happens to me? The business will not be able to continue." In that situation the proprietor will see a constant dribbling away from the business of what would have been and should have been the team which would carry that business on for the next 20 or 30 years as he gets to a greater age.
  The truth of the matter is that so many hon. Members on the Government benches, and the Treasury advisers, have not the faintest comprehension as to what motivates those who operate small or medium-sized businesses. The late lain Macleod said that one must learn to work with the grain of human nature. The

  1661
  difficulty is that the Government seem to have entirely forgotten the need to do that. They do not seem to appreciate that businesses do not just happen and continue automatically, and that they are not machines. Businesses have to have the motivation of those who own them, work in them and invest in them.
  It is not only a matter of money. It is also a matter of building for the future. For no businessman who has a business of £250,000, or something of that size, is really concerned about where tomorrow's bread and butter is to come from. He can sell the business and live off the proceeds for the rest of his life. But what does he do now? He builds up the business to pass to the next generation. However, he will not be able to do that if this tax becomes law. Therefore, why should he not let the business run down and live well as he goes? The expectation of continuity is an essential incentive to building up any business. I hope, therefore, that the Government will look at this and give the Committee a reasoned answer about how they propose to deal with the problem.
  1 a.m.
  The Chief Secretary and I agree that the problem does not arise with a company which is large enough to be quoted on the Stock Exchange, because the proprietors can put their share holding on the Stock Exchange and raise the money that they need to pay the capital transfer tax—at least in part. But where a company is not big enough to be quoted on the Stock Exchange and where there are no other assets, there is not the money available to pay the tax. It is that size of company with which we are dealing in the amendment.
  Even if the Government cannot accept this amendment, I hope that they will recognise that they have to do something. Large companies grow from small ones. Industry is alive. It does not just happen. Older firms contract. New firms are born and grow. We must have a constant growth of new firms coming up and continuing for more than the lifetime of one man. So often the foundations are laid by one generation, the next generation adds another storey and the next another, so that companies which are important employers can be seen to grow over generations.
  1662
  The estate duty system encouraged a father to give his business to his children while they were young enough to make a dynamic contribution to it and to continue its management. These proposals will encourage him to wait until the last minute, when his widow finally comes to be buried, before the business passes to the next generation. As one of my hon. Friends pointed out, sometimes the sons may even be old-age pensioners before they get the management of the business in their hands.
  Reading the Bill as it is drafted, I get the impression that the Government have no comprehension of what makes people work, of what people's motivations are, or of the need to work with the grain of human nature. I ask the Minister to give a serious and considered reply and to tell the Committee what steps he proposes to take to enable these businesses to continue and to make their contribution to the national economy.
  Mr. Joel Barnett: The hon. Member for Basingstoke (Mr. Mitchell) and I have debated the problems of small companies on many occasions over the past 10 years. I know of all the work that he has done in this connection, and I respect it.
  We have given some relief already in the Bill by way of the eight years in which a small firm will have to pay the amount of capital transfer tax levied upon it, although I appreciate that the hon. Gentleman does not think that it is enough. We intend to look at it again. I can give him that assurance, although I cannot enter into any commitment.
  There is an important problem. Even if we had the lower rates which the right hon. Member for Finchley (Mrs. Thatcher) wanted, it would be unfair, all other things being equal, for one taxpayer to pay considerably less than another. That would not be right. However, other things are not always equal and in certain circumstances we are prepared to give some relief. Agriculture has been one such case and small businesses have been granted some relief, although not as much as some would like. I can give the hon. Member the assurance that we are looking at this again. No doubt there will be opportunity to consider the matter further.
  Mr. John Cope: I support the amendment. I have

  1663
  not spoken today on capital transfer tax, so I do not feel inhibited, even at this hour, from making one or two points which I hope the Chief Secretary and his colleagues will take into account as they review the position of small businesses under this tax. I was delighted to hear what the Chancellor said about the Government's mind not being closed. The Chief Secretary repeated this. I am also pleased to see that the Under-Secretary of State for Industry who is responsible for small business is present yet again.
  We have to consider what the effect of this tax will be on small businesses. There is no doubt that it will remove from many such businesses one of the most important motivations, particularly in the latter part of a man's career. It is a totally admirable motivation for a man to want to go on building up his business, to pass it on to his sons and daughters so that they might have a better start in life than he had. The effect of the tax will be to dampen such a motivation considerably.
  I do not pretend that estate duty, with its 45 per cent. relief, was perfect. Here I can pray in aid the report of the Bolton Committee, which drew attention to the adverse effect of the burden of that duty on small firms, in spite of the 45 per cent. relief. It said that the increasing incidence of estate duty had increased the difficulty of passing on the ownership of a business from one generation to another and had weakened this important motivation. It was concerned about the possibility of small businesses being broken up or starved of working capital as a result of estate duty. Such points have been made in connection with this new tax. The Bolton Committee was set up by the previous Labour Government.
  The Chancellor made another point about agriculture duty which applies equally to small businesses. This concerns the so-called artificial, or unreal, increase in the value of agricultural land as a result of the 45 per cent. remission of duty. He gave the impression that agricultural land had risen tremendously in value as a result. The truth is that the relief of duty, even at the highest level on the largest estates, was only worth 34 per cent. so that there would be no point in the price rising anything like as much as that to take account of it. I should
  1664
  be surprised if the price of agricultural land, or of small business assets covered by that relief, rose more than 30 per cent. at the outside, in particular cases. That is not an argument for resisting the amendment, either from the point of view of agriculture or of small businesses.
  Mr. John Loveridge: In view of what the Chief Secretary said, I shall be brief. I should perhaps declare a contingent interest in this subject in the event of my death. What my hon. Friends said carries great weight, and I know that the Chief Secretary is to reconsider the matter.
  For a business of medium size the possible charges to be met under the tax, if implemented as first proposed, might amount to almost as much as the total value of the business. How could such charges be met? Businesses may have reached the reasonable limits of borrowing from the banks to cover past expansion in property factories and stock, and profits will normally need to be applied to bank repayments. Even with eight years to pay, it is difficult to see how a medium-sized family-owned business can find the money to meet the tax bills.
  Solvency would be in danger, and the banks, as they must repay cash on demand when their customers want it, would not often be willing to make such substantial loans, even on the declining balance over eight years. Nor would it always be possible to obtain insurance to cover death, because the charges for insurance might be too high.
  I accept the Chief Secretary's assurance, and I give him the comfort that I hope the Committee will soon release him to go home to bed.
  Mr. Wells: I rise to pursue the complaint I made in the Second Reading debate about the arrogance and impertinence of the Financial Secretary. It would be far better if, instead of muttering to his neighbour, he paid close attention to me, as I shall go on all night unless I am clear in my mind that he is listening to me and drinking in every word I pour forth. I shall go on talking quietly, as he is to his neighbour, until he pays attention to me.
  The Deputy Chairman: Order. I shall be grateful if the hon. Gentleman will address his remarks to the Chair.
  Mr. Wells: Mr. Murton, I am indeed addressing my remarks to the Chair, but though I speak to your ears I can keep my eyes upon the Financial Secretary, and unless that arrogant gentleman will be kind enough at least to address his eyes to me I shall go on. We had exactly this little interlude at 10 o'clock on the Second Reading debate, and we shall have it at 1.15, 1.30 and 2 o'clock and I know not at what hour this morning until I have the attention of the Financial Secretary.
  1.15 a.m.
  I will give the hon. Gentleman the opportunity of listening to me because the Chief Secretary has some manners although his arrogant colleague has not. The subject I was speaking on in the Second Reading debate was the anxiety of certain farmers who operate their businesses as limited companies. My hon. Friend's amendment deals with the smaller limited company, and I want to draw attention to the problems of the farming community who cannot make their farms over—or are unwilling to do so—until they reach a considerable age themselves, and then farming enterprises fall into the hands of aging widows.
  I know that we live in a feminist age and that there are many ladies, including elderly ones who are very good farmers; but, as a sweeping generalisation, the ideal age for farming is middle age and the ideal sex for farming is male. The effects of the Bill without the amendment would be that a continuing number of farms would fall into the hands of elderly ladies. This must be to the detriment of the British farming community. I therefore hope that the Chief Secretary's assurance that he is looking at this again, which was extremely good news, will go along with the Chancellor's assurance some 24 hours ago, that he was going to look again at the farm proposals in general.
  As I understood it, the Chancellor this afternoon somewhat reneged on what he said 24 hours ago, so I hope the Chief Secretary will not renege tomorrow on what he said tonight.
  My second point concerns the enterprise usually displayed by the smaller companies. This is a field of activity where British companies tend to put forward their best feet in new inventions and developments.
  1666
  It may well be that the middle-sized company does not go in for great research programmes, like ICI, but there is a better spirit of enterprise and new effort among the middle-sized limited but unquoted companies. In my constituency there are a number of such enterprises that supply the farming community with equipment and so on. Businesses of this sort have been far too heavily penalised by taxation of all sorts in recent years and will be even more heavily penalised by these measures unless the amendment is accepted or the Chief Secretary comes forward with something very like it.
  In all my experinece in the House of Commons, which is considerably longer than that of the Financial Secretary—[Interruption.]—I am not geriatric yet. In all my experience, which goes back over many years, I have never yet met such a plain, arrogant conceited fellow as that man.
  Mr. David Mitchell: I came here determined to press this amendment to a Division if the Government did not give a satisfactory reply, but I am grateful to the Chief Secretary for the sensible and serious way in which he has looked at the genuine problems which arise for small businesses and which have been mentioned in the debate.
  As the right hon. Gentleman rightly said, over the years he and I have many times debated the problems of small businesses and from time to time have found ourselves in agreement, and not necessarily in line with our respective Front Benches. I am delighted that he is in a position to do something about the problems of small businesses, and I think that the Committee would be well-advised to allow me to withdraw the amendment. I look forward to seeing the right hon. Gentleman's assurance put into legislative form at a later stage.
  I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  The Deputy Chairman: The next amendment to be dealt with is Opposition Amendment No. 54, in page 26, line 27, at end add—
  '(3) In the case of a chargeable transfer which is an absolute gift to an ancestor, lineal descendant of the transferor or spouse of such descendant or a chargeable transfer to trustees of a settlement whose beneficiaries are restricted

  1667
  to such persons, the tax attributable to such a transfer shall be charged as if the rates shown in the third column in the table under subsection (2) of this section were reduced by one-half.'
  Mrs. Thatcher: I understand, Mr. Murton, that if we do not move the amendment now we have a very good chance of moving it on Report and having a very full discussion then. That would be acceptable to us. The arrangements having been made through the usual channels, I hope that they will be fulfilled. I shall not, therefore, move Amendment No. 54.
  The Deputy Chairman: The point raised by the right hon. Lady is for Mr. Speaker to decide.
  Mrs. Thatcher: I have every faith in the decision that Mr. Speaker will make.
  Clause 33 ordered to stand part of the Bill.

  FINANCE BILL
    Clause 49

      LOCAL LOANS
      Mr. Geoffrey Dodsworth: I beg to move Amendment No. 66, in page 35, line 3, leave out '£2,000' and insert '£1,000'.
      The Deputy Chairman: With this amendment, the Committee may discuss Amendment No. 67, in line 8, leave out '£2,000' and insert '£1,000', which also stands in the name of the hon. Member for Hertfordshire, South-West (Mr. Dodsworth).
      Mr. Dodsworth: Clause 49 permits an increase in the borrowing limits of the Public Works Loan Board and is an administrative arrangement. It is in itself a commentary that a clause which increases borrowing limits from £4,000 million to £8,000 million is taken at this late hour after protracted debate on many other matters which, while significant and important in principle, do not reflect the distribution of such large sums of money.
      In its present form, Clause 49 doubles the amount of funds available to the board for lending. The amounts of authorised lending are, of course, fixed by the Chancellor of the Exchequer from time to time. Funds provided
      1668
      under the clause are not for any fixed period. They last just as long as there is money in the kitty—that is, until they run out.
      Under the clause, the tranches of funds are double in amount from £1,000 million to £2,000 million, and the overriding limit is increased to £8,000 million. The original limit, specified in Section 132 of the Finance Act 1972, was £4,000 million. The last increase approved by the House was £1,000 million, on 8th November 1974, at that time bringing the total to £4,000 million. This clause therefore has the effect of doubling that permitted level.
      I understand from the Second Reading debate—I am grateful to the Financial Secretary for his assistance and explanation—that the reason for the clause is primarily to account for and reflect inflation and so reduce the number of occasions on which the board has to apply to Parliament for more funds.
      The board is, of course, purely a lending agency and its rôle does not include the control of the spending of funds. Any local authority which receives a loan from the board for a specific project is accountable to the Government Department concerned. For example, if the loan is to be used for a school building, the local authority is accountable to the Department of Education and Science for the way in which the money is spent.
      That is fine as far as it goes, and it would be easy to say, as I believe the Financial Secretary did on Second Reading, that a change in these borrowing limits does not reflect any increase in local authority capital expenditure. However, discipline is good for the soul—that is, if the Treasury has one—and I see no reason why the Committee should do anything to make it easier for larger sums of money to be made available for approval for local authority capital programmes.
      If there is one way to ensure that the loan quotas are reduced, it is to ensure that additional funds are not provided by Parliament. In that connection I wish to refer to Circular No. 37 of the Public Works Loan Board dated 21st March 1974, the first sentence of which says:
      "I am directed by the Public Works Loan Commissioners to inform you that after consultation with the Treasury it has been decided that, subject to the provisions of funds by Parliament, the arrangements for the raising of

      1669
      financial year 1974–75 shall be as detailed below."
      That circular contains hard evidence that approval of these new limits incites approval of increased quotas, and of course the approval of local authority programmes is subject to the scrutiny of the Treasury and of individual Government Departments.
      But how successful have they been? In July 1974 the Secretary of State for the Environment said that there had to be a levelling off in the rate of growth in local authority expenditure. He said that the rate of public spending must be related to the national economic situation, and I agree with him. He went on to say that local government expenditure had been increasing at about twice the rate of public expenditure overall and three times the rate of growth of the gross national product.
      That is evidence from the Government that the expenditure programme must be controlled. But the demand for funds is accelerating at an incredible rate. All the evidence that we have is that local authorities throughout the country are struggling to contain their rate demands. One of the most effective means of doing so is by a restriction of capital expenditure with often very substantial revenue costs and consequences. That is one way to help the local authorities. When we have a net borrowing requirement of £6·3 billion, surely the time has come to say that we must state some order of priorities.
      As recently as the day before Christmas Eve—what an immaculate piece of timing—there was a joint circular from the Department of the Environment, the Home Office, the Department of Health and Social Security, the Department of Prices and Consumer Protection, the Department of Education and Science, the Department of Employment and the Welsh Office explaining that expenditure must be contained to meet only inescapable commitments.
      The nation as a whole has a need for prudent housekeeping. The Chancellor of the Exchequer may have been abroad to renegotiate our borrowing position, but unless we curtail our national and local government expenditure we shall lose any remaining credibility abroad and the collapse of confidence involved would ensure national disaster and distress.
      1670
      These amendments seek to set a standard and a target for the Government. It is important that if the Government wish to increase their borrowing limits, they should come back to Parliament. The next circular fixing quotas controlling local authority expenditure will be issued, I understand, in March. That is the time for the Chancellor to come to the House to report his success in controlling local authority expenditure. We can then consider whether the increased borrowing level should be approved, and that is the time to do so. Until then the matter must be kept under review. For that reason, I ask the Committee to support what at first may seem to be matters of only administrative significance. They are not. The strike at the heart of parliamentary control over Government affairs.
      1.30 a.m.
      Mr. MacGregor: I am grateful to my hon. Friend because the amendment raises an important point. On the last occasions when these authorisations have been required in Finance Bills, these tranches have been in £1,000 million groups. There has been an enormous increase in the last two or three years in the rate at which they have come before the House. There was one in May and another in November 1974. On the latter occasion, the Minister of State, Treasury, said:
      "It is not possible to forecast with precision the timing of local authority borrowing from the commissioners, and in the last few months they have been taking up their entitlement more quickly than had been expected. The House, is therefore, asked to approve this order so that the flow of essential capital funds during the current period may be maintained."—[Official Report, 4th November 1974; Vo1 880, c. 831.]
      We see in that one worrying problem about the rate of local authority expenditure and perhaps one reason for this present increase.
      I understand that on 31st March 1974, the general level of borrowing from the Public Works Loan Board was about £9,000 million; now, it is about £10,000 million. This all shows the speed at which local authority expenditure has been gobbling up the tranches from the board. It has been going ahead much faster than any other form of public expenditure.

      1671
      We know from the debates on the rate support grant that local authority expenditure has been increasing at roughly 8 per cent. in real terms per year over the last three or four years. I recognise that part of this was in the period before the present Government took office, but the oil crisis and the developing economic situation since then has made it clear that we must put real question marks over this rate of growth. Many Ministers have been saying as much recently. Our other economic objectives make this necessary, and the Government must justify this increase in the tranche. Part of it is no doubt the result of inflation, but that cannot be the only answer. What else is there?
      This increase makes one wonder whether the Government are firm in their decision to control public expenditure. I certainly agree with my hon. Friend about the Government borowing requirement. If the tranche had been kept at £1,000 million, there would at least have been some sort of discipline in the Government having to come back to the House to ask for more. So I should like to hear their justification.
      Second, to what extent is this provision necessary to refinance maturing debt and to what extent is it concentrated entirely on new expenditure? I understand that it does not take account of maturing debt in normal situations. I believe that the amount quoted in authorisations is usually the gross amount and I understand that a great deal of debt is maturing which must be refinanced, but, if that does not come into this area, it emphasises the need for restraint and for not increasing the tranches.
      May we be reassured that the Government do not intend to allow an increase of more than the strict 4 per cent. in real terms to which the Secretary of State for the Environment has referred, and that indeed they intend to diminish that until the economic situation improves?
      Third, the Public Works Loan Board circular says:
      "The Commissioners will be prepared to make loans in excess of the quota"—
      for local authority expenditure, which is normally 30 per cent., but 40 per cent. for authorities in development areas—
      1672
      "only if they are satisfied that an authority cannot raise money elsewhere either from local sources or in the money market."
      Again, the Government should exercise the strictest control over the way in which that discretion is exercised by the board.
      Finally, I seek an assurance that none of the extra tranche we are authorising tonight will be provided for the nationalisation of development land. This is a costly exercise which neither the nation nor the ratepayer can afford and which the Public Works Loan Board should not be authorised to under-write and finance through this extra tranche.
      In short, we seek assurances that, although in theory this is a technical matter, in practice the Government will exercise the strictest control over the way in which these extra tranches are used, and we want to know why it is necessary in these circumstances that the House of Commons should be asked to approve a doubling of the normal authorisation.
      Dr. Gilbert: The Commitee is indebted to the hon. Members for Hertfordshire, South-West (Mr. Dodsworth) and for Norfolk, South (Mr. MacGregor) for speaking so lucidly and so fairly on this inevitably complex and possibly misleading subject.
      It is right that from the beginning I should make it clear, as both hon. Gentlemen recognised, that this increase in the tranche and the increase in the ability of the Public Works Loan Board to raise money in no way derogates from parliamentary control over funds voted to local authorities, nor does it in any way imply any diminution in the present Government's intention to restrict the rate of local authority expenditure in real terms.
      The hon. Member for Norfolk, South referred to the 8 per cent. real rate of increase in local authority expenditure. The two sides of the Committee are at one that such a continuing rate of increase in real terms is not acceptable and is not possible for the country to sustain. I am happy to endorse what my right hon. Friend the Secretary of State for the Environment said.
      Once we have got those two firm assurances in perspective, most of the other points raised by the hon. Members fall into place reasonably easily. This is the first increase that has been requested

      1673
      in the size of the tranche since 1968, which is the real reference point. In other words, it is very nearly seven years. The powers voted in the National Loans Act 1968 lasted for about four and a half years, and the powers that were voted in the Finance Act 1972 lasted for just under three years.
      Our estimate is that if there were to be a re-enactment now of the 1972-type powers—in other words, without an increase in the sums available to the Public Works Loan Board—those powers would last for only about two years. Even with the increase that we are proposing now, we estimate that they should continue to allow at least one parliamentry debate each year on the subject of these drawings by the Public Works Loan Board. I hope that hon. Members will agree that that will be an adequate frequency for these matters to be ventilated, as they should be ventilated by hon. Members.
      When these matters were discussed in 1968, I believe that my then predecessor as Financial Secretary to the Treasury suggested that once about every 18 months would be an appropriate interval for these matters to be debated. I do not believe that there was any great dissent at that time from that proposition. Our estimate is that at the present rate these matters should fall to be debated at least once every year with the enhanced powers we are proposing to legislate in the clause.
      I come now to two specific questions put to me by the hon. Member for Norfolk, South. He asked to what extent the funds were necessary to refinance a mature debt. I regret that I cannot answer that now. I am advised that the formula setting a local authority's entitlement takes account both of its needs for capital expenditure and for debt financing. I cannot help the hon. Gentleman further, I am afraid.
      The loans which come from the Public Works Loan Board are available to meet all requirements for capital expenditure of local authorities, including such expenditure on land acquisition as is approved. I emphasise again "as is approved", which is the essence of the matter, as hon. Members are aware.
      This debate, which very properly should take place to draw attention to the real matters of concern which hon. Members
      1674
      have raised, is not the occasion, I submit, on which we should seek to consider special or individual items of local authority expenditure, which fall to be discussed at a different time in our procedures.
      I hope that I have managed to set at rest the concern which hon. Members have expressed. I recognise their concern, and I share it, as do my right hon. Friends. Our determination to reduce the rate of growth in real terms of local authority expenditure is in no sense diminished or affected by these proposals. In the light of those assurances, perhaps the hon. Gentleman will wish to withdraw his amendment.
      Mr. Dodsworth: I am greatly obliged to the Financial Secretary for his kind, helpful and thoughtful reply, although I have to tell him that it gives me no satisfaction whatever. It is not my view that the tranches of £2,000 million make no difference to parliamentary control. They halve parliamentary control. Twice as much money is available at each slice. That is a fact. It may be convenient for the Minister that we do not have to come to Parliament more than once a year. In the present state of the economy, I should prefer that we came every six months. We should have our debate at a different time of day, with a much fuller Chamber, so that we could fully examine what was happening to the resources which are made available. For that reason, I am not satisfied, although I am grateful for the thoughtful nature of the hon. Gentleman's reply.
      Perhaps I can assist the Financial Secretary to reply to one question put to him by my hon. Friend the Member for Norfolk, South (Mr. MacGregor). I refer here to Cmnd. 5580, Loans from the National Loans Fund, where the estimate for 1974–75 for new loan advances is £1,625 million. If one adjusts that for the new formula, one finds, in effect, after making the adjustments for maturities and the new form of advances, that that is an increase of 14·3 per cent. I think that that information might be helpful.
      Mrs. Thatcher: I think that my hon. Friend the Member for Hertfordshire, South-West (Mr. Dodsworth), since he has plainly done so much work on this matter, should cross the Floor for a few minutes and answer from the Government Dispatch Box.

      1675
      We are under a certain handicap here in that the public expenditure White Paper is not published, so that we do not know what the increased money is being spent on. In fact, there should not be such a large increase as this in view of the substantial capital expenditure cuts of 17th December 1973, which should now be working through into the figures—unless they somehow did not turn out to be cuts at all.
      The Financial Secretary spoke of the control over local authority expenditure. It is still very lax. We have only the rate support grant settlements coming before us here. My recollection—I am sure that the right hon. Member for Down, South (Mr. Powell) will know this better than I do—is that capital expenditure has to be sanctioned by loan sanction through the Department of the Environment, but we have no direct control over it apart from the large slices of expenditure. Our complaint now is that it is being used up rather fast on we know not what. By the time we come to Report, the Chief Secretary will, no doubt, have got out his public expenditure White Paper, and, if need be, we can re-examine the matter further.
      Amendment negatived.
      Clause 49 ordered to stand part of the Bill.
      Bill (Clauses 5, 14, 16, 17, 33 and 49) reported, without amendment; to lie upon the Table.

  WAYS AND MEANS

    BORROWING IN FOREIGN CURRENCY BY STATUTORY CORPORATIONS (INCOME TAX)
    Resolved,
    That provision may be made about borrowing in foreign currency by statutory corporations.—[Dr. Gilbert.]

    ADJOURNMENT
    Motion made, and Question proposed, That this House do now adjourn.—[Miss Boothroyd.]

  MOTOR CARS (TRADE WITH JAPAN)
  1.47 a.m.
  Mr. Ray Carter: The subject which I wish to raise is one that I have mentioned frequently over the last two years or so under successive Governments. It concerns the imbalance in trade between this country and Japan in motor car exports and imports. I wish to make clear from the outset that my call tonight is not for a ban on the importation of Japanese cars, but for the British industry to obtain a basis of fair trading in which British manufacturers can export to Japan in the same free and unhindered manner that Japanese manufacturers can export to Britain.
  Perhaps I should give figures in order to put the House completely in the picture. In 1973, the last complete year for which we have figures, Japan exported to the rest of the world more than 2 million vehicles. Imports of vehicles into Japan amounted to just 37,000. That in itself is a startling comparison. I will not go into details of individual countries except for Britain since the statistics are important for the purposes of the debate.
  In 1973, the last year for which we have complete figures, the United Kingdom managed to export to Japan 1,266 vehicles. We imported from Japan 81,841. In January last year the penetration of the Japanese industry into the British domestic market was4·65 per cent. This rose to an admittedly abnormal level of 12·69 per cent. in November. Over the year penetration rose from 5·7 per cent. to6·6 per cent. at a time when the car market in Britain was in fairly rapid decline. That did not hold up Japanese exports. They were able to take advantage of the situation and increase their degree of penetration. Anything I say in the debate has the backing of not only all the trade unions involved but every section of the industry, including the manufacturers in every area.
  Why should we be concerned? First, there is the obvious point that we are losing some of our domestic market to overseas competition. That in itself is not unreasonable, but it is unreasonable when we are losing it to people who are deliberately hindering the ability of this country

  1677
  to match, car for car, the import penetration that their country can make into our market. This is done by a process of totally unfair practices. The Japanese Government have been supported by our Government in saying that there are no import restrictions, but the investigations to which I have referred have revealed the following eight areas of restriction of the ability of the British car industry to export to Japan.
  The first is the extreme difficulty the British car manufacturers come up against in the matter of type approval and the interpretations of the drafts of those type approvals—that is, the various standards that a car and its components must meet according to the standards of the country concerned.
  The second area of difficulty is the delays in getting design approvals for foreign vehicles. Anyone who wants to export a car to this country must receive approval of design specification from the various standards bodies here. The same goes for any British manufacturer wanting to get into Japan, but there are extreme delays.
  Thirdly, any slight change in the design of a British car or any part has taken a long time to be examined and to receive ultimate approval.
  Fourthly, the Japanese authorities show an inadequacy in notification of changes in Japanese design requirements. That makes it difficult for British manufacturers to retool or to redesign the cars they hope to export to Japan.
  Fifthly, Japanese emission requirements are found by British manufacturers to be over-stringent. They demand a far more complex standard than is demanded anywhere else in the world.
  Sixthly, and probably one of the most critical areas, British manufacturers have found extreme difficulty in making necessary financial arrangements within Japan to sell cars.
  Seventhly, in comparison with Britain and other parts of the world, there are close links between the domestic manufacturers and the dealers. I am assured by people who are in a position to know that it is almost impossible for foreign manufacturers to break into that spiral and obtain outlets for their products.
  Lastly, even if a manufacturer can get a foreign car into the Japanese market
  1678
  there is a high mark-up, which makes it prohibitive from a sales point of view.
  Quite apart from all those factors, there are a number of others concerning the import level at this end. Japanese manufacturers and dealers have been prepared to cut corners to gain the depth of penetration they now have into the British market and are currently offering cars at rates of interest on hire-purchase agreement of 8½ per cent., which is approximately one-third of what would have to be paid to buy a Britisht car. That is felt by British manufacturers to be an unfair trading practice.
  But if the past has been bad enough, the future looks equally bleak. The Japanese Government agency concerned, the Japanese Ministry of International Trade and Industry states that a very careful analysis which it has made of the way the Japanese domestic car market will go in the coming years suggests that by 1980 they will have a domestic vehicle market of 5,490,000. They project that imports will number only 150,000, or 2½73 per cent. of the market. Their estimate is that by 1985 their vehicle market will have increased to 6,080,000 but that imports will be only at a level of 300,000 or 4½93 per cent. of the market.
  In my opinion it is sheer madness for us to tolerate such blatant, unfair trading practices as that and to raise no objection. It is not good enough for the Secretary of State for Trade, who sent me a letter today on this very subject, to say, as he says in the final paragraph of his letter, that
  "to impose discriminatory import restrictions against a country which supplies only a fifth of our car imports and whose car exports to us have declined by 13 per cent. over the past year would do little to solve these problems. Instead we should invite retaliation by the Japanese against our own exports".
  That is a misuse of statistics. Although it is true to say that Japanese imports into Britain have declined, the total market has declined. As I have pointed out, the Japanese penetration as a percentage of the total market has increased.
  If we examine the whole field carefully, we find that we are playing with someone who has quite openly and, it seems to me, consciously said that as far as Japan is concerned it is self first, self last and, if there is anything left, self again. The joke has gone on long

  1679
  enough. We have been prepared to play a game which the Japanese have never been prepared to play by the same rules with us.
  I urge my hon. Friend the Under-Secretary, although I recognise that it may be impossible for him to say so now, to give serious consideration to the possibility of opening up immediate negotiations with the Japanese Government in the same way as we negotiated two or three years ago on television sets and say that we are totally dissatisfied with the current trading position and that if some kind of reciprocity cannot be arrived at within 12 months we must take unilateral action and apply some kind of ban on Japanese imports into this country. Failure could lead to the kind of disaster that we have seen in other areas of the British economy, and especially electronics, where Japanese imports have completely undermined our ability to sustain our domestic electronics potential.
  The country is now fighting on the broadest front for its economic life. The car manufacturing industry is at the heart of our whole industrial activity. In the West Midlands, where Chryslers have gone onto a two-day week and Jaguars onto a four-day week, these matters are taken with perhaps rather more seriousness than in the rarified atmosphere of the southern areas of England.
  We must at the earliest opportunity seek to get some redress. I hope that we can get a satisfactory answer from the Minister. I assure him that if we do not get such an answer there will be a uniting of all sections of the British car industry, from the shop floor right through to the upper levels of management, to ensure that the industry, far from imposing any kind of ban on the importation of Japanese cars, at least gets a fair crack at the Japanese market. In doing that we shall be doing a service not only for ourselves but for the rest of the world.
  I must repeat that in 1973 the Japanese car industry managed to export to the rest of the world 2,300,000 vehicles. In the same year it imported only 37,000 cars Incidentally, half of those vehicles were from Germany. There is a serious problem. It is a critical situation from the point of view of the British car industry.
  1680
  I hope that the Minister can give us a satisfactory reply.
  2.3 a.m.
  Mr. Tom Litterick: My hon. Friend the Member for Birmingham, Northfield (Mr. Carter) has made a virtually unanswerable case in the economic interests of his constituency and also of my adjacent constituency.
  I shall briefly emphasise the plea that my hon. Friend is making to the Government. As a Government and as a trading nation we are committed to the principle of freeing international trade. In general terms that makes good sense. However, I suggest that Japan is a special case. Japan does not subscribe to the general basic principle of seeking to free world trade. It pursues in a rigorous and self-seeking way the expansion of its own trade at the expense of the trading activities of other manufacturing nations. That can lead only to Japan hurting the trading activities of other nations and to the outbreak of a trade war.
  The Japanese economy is powerful, and in the present economic circumstances of a world recession it is natural that each nation State should be anxious to protect its own interests. There is the danger of panic setting in and of each nation seeking to find its own salvation in unilateral measures which we all know from economic history are self-defeating and mutually destructive. That is the situation in which we find ourselves.
  It is important not only for the economy of the West Midlands but for the British economy in general that we should forcefully inform the Japanese Government that we see their trading activities as a special case. I believe that other industrialised Western nations are coming to that view. The apparent failure of the British motor car industry in the Japanese economy is, as has been vividly demonstrated in my hon. Friend's speech, a defeat by a nation State which is pursuing self-interest in a rigorous way. That apparent failure fuels certain myths, legends or half-truths about the British motor car industry. In fact, it is one of the most successful exporting industries in the British economy when it is able to compete on

  1681
  equal terms with other motor car industries. It has weaknesses, of course. Some of them are exposed by the strategies of multi-national companies. But the case of Japan stands out very clearly and vividly.
  The danger, however, is that people will reach conclusions about the British motor car industry which misrepresent that industry—for instance, that the industry is failing because its work force is not delivering the goods. We hear that repeated so often in different contexts. From the speech we have just heard, we know that it is far from the truth. The British industry produces cars of a quality which will match any, and could succeed if it was allowed to succeed. The obstacles which are placed in the way are placed there deliberately to produce this disastrous effect.
  To suggest that if we acted against Japan, Japan would act against us is ludicrous as our effective export trade with Japan is marginal and any retaliation that the Japanese Government might mount would have a very peripheral effect on our already modest performance, and therefore a very marginal effect on the total performance of the British economy.
  Finally, I reiterate the demand—and it is a demand—made by my hon. Friend that the British Government should act and act now, and be seen to be acting with determination. Because Japan is a special case. Japan is not playing the game. If Japan insists in acting in this way, she should expect that we, in our own way, would retaliate in self-defence and in our own interest.
  2.6 a.m.
  The Under-Secretary of State for Trade (Mr. Eric Deakins): My hon. Friend the Member for Birmingham, Northfield (Mr. Carter) and my hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick) have raised a subject for debate tonight which has given cause for concern to many people in the British motor industry in recent months. I must apologise now for the fact that I am left with slightly under 10 minutes in which to reply to the debate, there being only half an hour available for the Adjournment debate. If I cannot complete my remarks, I apologise.
  It is perhaps natural, at a time when the industry and its employees are facing
  1682
  great difficulties, which I readily acknowledge, that there should be calls for restrictions on imports. I can understand why these calls have been directed against imports from a country with which we have an undeniably large imbalance of trade in motor cars. I sympathise with the fears which prompt such demands; but I do not think that it would be right for the Government to accept the logic which seeks to justify them.
  Imports of motor cars from Japan have grown rapidly in recent years. The main cause was the expansion of domestic demand in 1972 and 1973. In many fields British industry was unable to meet this demand. Imports poured in and in a number of cases secured for the first time a significant foothold in our market. Imports of cars alone doubled in this period. By this time last year import penetration had increased to 30 per cent. of the home market—an unprecedented state of affairs. If blame is to be attributed, it lies partly with a Government who created such favourable conditions for our foreign competitors, partly with management, which failed to invest sufficiently to satisfy this demand, and partly with a work force which sometimes engaged in unnecessary strikes, which in turn led to the under-utilisation of existing capacity. Certainly one can scarcely blame the foreign motor manufacturer, whether in Japan or elsewhere, for filling a gap which our own industry could not meet.
  Nevertheless, as soon as domestic demand began to fall at the beginning of 1974, we also saw a fall in imports. In the first 11 months of 1974 total imports of motor cars fell by 27 per cent., and those from Japan by 13 per cent. The recent modest increase in the Japanese share of the market has largely been at the expense of other imports: as I have said, the absolute volume of their sales was 13 per cent. less in 1974 than in 1973.
  At the same time—and my hon. Friend should take encouragement from this—the decline in the British share of the market has been reversed. In the first 11 months of 1974, imports accounted for 28·6 per cent. of the market, compared with 30·9 per cent. in 1973. For the first time for many years, our motor industry is able to meet demand for the

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  great majority of its products. Of course, the industry is at present experiencing serious difficulties. But these difficulties are not directly the result of imports but rather of such factors as inflation, higher petrol prices and depressed consumer demand in OECD countries. Import restrictions directed against one supplier would do little to solve the problem.
  My hon. Friend has drawn attention to the very large imbalance in our motor trade with Japan. We have had larger deficits in trade in motor cars with such countries as France and Germany. But only in the case of the Japanese is it suggested that obstacles in the way of our exports justify retaliatory action against their sales here.
  There are many reasons for the relatively low level of import penetration in Japan. It is an unfamiliar and distant market for many of our exporters. They know that until the mid-1960s it was highly protected, and that they were not permitted to invest in the transport, distribution and servicing which is required for a market of that size. Unfortunately, it is all too often not realised how extensively the market has now been liberalised.
  There are no longer restrictions on imports of cars in Japan. They were removed in 1965. The import duty has been steadily reduced, and now stands at 6·4 per cent. as against our own tariff of 11 per cent. Safety and anti-pollution regulations apply equally to both imported and domestic manufacturers.
  As a result, Japanese imports have been increasing sharply in recent years and now account for about half the Japanese market for vehicles of 2,000 cc and above, but still a minute 2·1 per cent. of the total market. Nevertheless, it is reasonable to assume that Japan will become a large and growing market for imported cars. Many foreign manufacturers have already begun to increase their sales efforts in Japan.
  Let me give the House some examples. German manufacturers have seen their exports grow by more than three times in the last three years. Volkswagen alone already sells more cars in Japan than the whole of the British industry sells in France or Germany. All the major American companies have rapidly ex
  1684
  panded their sales in Japan. They have established marketing arrangements with Japanese firms which are planned to lead to substantially greater penetration in the next few years. Even smaller manufacturing countries like Sweden have increased their interest in the market. Volvo has recently formed a joint venture sales company in Japan aimed at selling 10,000 cars by 1978 or about six times present British car exports to Japan.
  Clearly, firms of this size would not waste their time if Japan was really surrounded by impenetrable barriers. There are undoubtedly difficulties in selling, but these have been exaggerated. Where they exist, the sad fact is that, while our competitors have been increasing their efforts in Japan, British industry has seen its share of the market fall from 18·8 per cent. of all imports in 1965 to 3·4 per cent. in 1973. We now sell half as many cars in Japan as we did a decade ago when the barriers to imports were much greater than today. This suggests that the obstacles to selling to Japan—in my hon. Friend's words, of getting a fair crack of the Japanese market—may be more of our own making than of the Japanese.
  The fact is that there are excellent prospects for many of our high performance cars in Japan. Consumers there as anywhere else appreciate the quality of our vehicles. But, until recently, we have been unable to meet the demand in our existing markets at home and overseas, let alone to service a new and distant market on the other side of the world. I understand that it is the practice of Ford, Chrysler and General Motors to supply Japan primarily from their German and American plants. At the same time, British Leyland has been unable to expand very rapidly its sales of expensive saloons and sports cars when these were precisely the models in greatest demand elsewhere.
  In considering any case for import restrictions, the British Government must have regard to their international obligations. It is not in the interests of a country which exports twice as much per head of the population as, say, Japan, to flout these rules. This would only encourage others to do the same.
  Restrictions against Japanese cars would be in breach of our obligations

  1685
  under the GATT. The criteria for imposing import restrictions are clearly set out in the agreement. Moreover, the agreement insists on the non-discriminatory application of import restrictions. We cannot impose them on Japan alone.
  Even if there were not serious legal objections, there are practical considerations which must influence any British Government. Many items in our growing trade with Japan show a very substantial balance in our favour. To introduce restrictions on imports would lead to retaliation against these British exports with a consequent loss of employment in the industries concerned.
  To return to these policies of the 1930s would lead to a rapid deflation of international commerce to the disadvantage of the United Kingdom. We should be even more cautious about establishing such a dangerous precedent at a time when the balance of world trade is so precarious, and in an industrial sector, namely motor cars, where the United Kingdom is itself a substantial net exporter.
  The present imbalance in our motor vehicle trade with Japan has one common root—the inability of the British industry in recent years to meet demand, either at home or in Japan. As this situation is remedied so I hope we shall see an improvement in the trading situation.
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  This Government will give every assistance to the industry in this respect. We are always ready to consider and, if justified, make representations about, any allegations of unfair trading practices in Japan. More positively, we have already opened informal discussions with the Japanese authorities on ways of improving the present arrangements for testing the motor vehicles which our industry exports to Japan.
  In the Exports to Japan Unit of my Department and in the very strong commercial section of our embassy we have a professional expertise which is not matched by the official services of any other country. This specialist knowledge of the Japanese market and of Japanese conditions is fully at the disposal of the British motor industry. I can promise the House and the industry that we will provide all the help we can. Nothing would give me and my Department greater satisfaction than to see a rapid expansion of car sales to Japan.
  That is the best way to maintain production and investment, assist the balance of trade and safeguard employment.
  Question put and agreed to.
  Adjourned accordingly at sixteen minutes past Two o'clock.

  Second Reading Committee
  Wednesday 22nd January 1975

  The Committee consisted of the following Members:

  Mr. R. Bonner Pink (Chairman)

  Atkins, Mr. Ronald (Preston, North)

  Kilroy-Silk, Mr. Robert (Ormskirk)

  Benyon, Mr. W. (Buckingham)

  McGuire, Mr. Michael (Ince)

  Berry, Mr. Anthony (Southgate)

  Marshall, Mr. Michael (Arundel)

  Dunn, Mr. James A. (Liverpool, Kirkdale)

  Morgan, Mr. Geraint (Denbigh)

  Renton, Sir David (Huntingdonshire)

  Eyre, Mr. Reginald (Birmingham, Hall Green)

  Spearing, Mr. Nigel (Newham South)

  Thomas, Mr. D. E. (Merioneth)

  Hamilton, Mr. Michael (Salisbury)

  Thorne, Mr. Stan (Preston South)

  Howell, Mr. Denis (Minister of State, Department of the Environment)

  Weetch, Mr. Ken (Ipswich)

  Wise, Mrs. Audrey (Coventry South West)

  RESERVOIRS BILL [Lords]
  10.30 a.m.
  The Minister of State, Department of the Environment (Mr. Denis Howell): I beg to move:
  That the Chairman do now report to the House that the Committee recommend that the Reservoirs Bill [Lords] ought to be read a Second time.
  I hope that this important safety measure will be received with the general approval of both sides of the Committee. The information I have from my colleagues is that it is recognised on all sides that we need to protect the public safety, particularly in respect of reservoirs holding large amounts of water. Because of that, and I hope with the agreement of the Committee, I shall restrict my opening remarks to a general view of the case for the Bill.
  Of course, I am anxious to give the Committee as much information as it
  1688
  might require on the detail, though I think that Committee points are better left to later stages. I say that in order that hon. Members will not think it discourteous if I do not go through the Bill clause by clause, but confine myself to replying to any points of interest that hon. Members may raise. Also, I am encouraged by the fact that the Bill comes to us from another place, where it received unanimous all-party support.
  This is not a measure that has been hastily put together, Under successive administrations the Department has considered it over a period of time. The existing legislation on reservoir safety is contained in the Reservoirs (Safety Provisions) Act 1930. That Act was the result of two unfortunate experiences in 1925, which resulted in serious loss of life, one being in Scotland and one in Wales. In Scotland, five people were

  1689
  drowned near Skelmorlie, when a reservoir overflowed during a storm and destroyed the dam. The cause of that accident was found to be faulty design. In the Welsh disaster, 16 people lost their lives when the dam collapsed as a result of poor construction.
  Therefore, Parliament at that time decided that measures were needed, and the 1930 Act was introduced. We have relied on that Act since that time, and it has served us reasonably well for 45 years. But it is clear, as a result of the growing demand for water, and because there are now larger and larger manmade lakes and reservoirs to contain the water, and particularly as a result of experience abroad, that we need to strengthen further the safety provisions governing reservoirs.
  I can best illustrate the need to do this by giving the world picture. We estimate that there are 10,000 dams in the world over 45 ft high. I am appalled to find that on average, during the past 40 years one such dam has failed every 15 months, claiming an average of 50 victims each. That is the measure of the concern which the House is called upon to express and the reason for this measure. In the face of those figures we would be accused of great complacency if we did not from time to time review our existing legislation and strengthen it where necessary.
  The worst of these cases occurred in 1963 at Vajont, Italy, where a landslide into the reservoir caused 40 million cubic metres of water to splash over the dam and nearly 3,000 people lost their lives. That shows the tremendous, destructive force of water and the need for maximum safety measures. That tragedy, together with the others I have mentioned in the early 1950s and 1960s, led to our own Institution of Civil Engineers to consider the matter in great detail. The Institution produced its report on reservoir safety in 1966, which proposed revisions for the 1930 Act. It is that set of circumstances which brings us here today, to consider those proposals and the conclusions of the Government arising from them.
  The 1930 Act applies to reservoirs that are designed to hold, or are capable of holding, more than five million gallons of water above the level of the adjoining
  1690
  land. The fundamental principle of that Act is that only a qualified civil engineer can provide the professional expertise required to ensure the safety of the reservoir structure. A qualified civil engineer within the terms of the Act is an engineer who has been appointed by the Secretary of State, on the advice of a special committee of the Institution, to a panel specially constituted for the purposes of the Act.
  Anyone wishing to construct or enlarge a reservoir of more than five million gallons is required to engage an engineer from that panel and to have the installation inspected at least every 10 years by such a qualified engineer. The water undertaker must also carry out any recommendations made by the engineer, subject to the right of appeal to a referee.
  The 1930 Act has proved to be workable and desirable. But one serious weakness is that there is no adequate provision to ensure that the Act is complied with. Although standards are laid down, there is no force of law to compel an authority to have installations inspected for safety every 10 years, and so on. All that the 1930 Act provides is that a local authority whose area may be affected by an escape of water, or a private person resident nearby, can bring an action in the courts against an undertaker who has failed in his responsibilities under the Act.
  The Government agree with the Institution that that is not a satisfactory situation. The law should be tightened to provide an absolute obligation on anyone holding a reservoir or lake, or any undertaker, to ensure the safety of the reservoir at all times.
  In practice most of the public authorities—previously local atuhorities, now the new water authorities—have always been keen to apply the maximum safety requirements. In fairness, so have most other people. But the Committee will understand the extent of the problem—only one failure can cause fatal accidents—when I explain that the proposals not only cover all the major water undertakers of the country but include old mill dams, fishing lochs and lakes, ornamental lakes, and so on. Over 230 such lakes and lochs and amenity recreation lakes in this country would come within the ambit of the legislation now proposed. It is, therefore, a major undertaking.

  1691
  Therefore we intend, with this Bill, to rectify that weakness. We are placing upon the local authority the obligation to ensure that this Bill is complied with, namely, that suitable civil engineers from the panel I have described are used. We think the local authority is the appropriate body to undertake this function since it is concerned with people resident in the immediate vicinity of the lake to be created by the dam. This should ensure, as best as Parliament and the local authority can, that no dangerous situation arises.
  In preparing this Bill, we have accepted that the 1930 Act has proved satisfactory in practice. We wish now to build upon it and lay obligations upon local authorities to see that the proposals are complied with.
  Turning specifically to this Bill, apart from strengthening existing legislation, I shall content myself with replying to detailed applications of the clauses as they affect hon. Members' interests.
  In conclusion, reservoir construction and supervision is a highly technical subject and this Bill is not concerned with the details of civil engineering. It provides the legislative framework in which those best fitted to decide on technical matters—the qualified engineers—may operate. This is a formula whose effectiveness has been proved by the 1930 Act, and the new Bill seeks to deal with those contingencies which the passage of time has revealed need to be taken account of by Parliament, as a result of its own experience in this country and more disastrous experiences throughout the world.
  10.42 a.m.
  Mr. Anthony Berry: I must confess that this is the first time I have actually found myself on a Second Reading Committee. I was not even quite sure what the procedure was, and I would not have minded spending the rest of my parliamentary career without discovering it.
  As the Minister has said, it is an important Bill, and we on the Opposition side of the Committee are grateful to him for the way he has explained its important contents. I am sure that he was right not to go into too much detail. I remember a previous occasion during the last Labour Government when he
  1692
  was speaking on a Friday and I was waiting for Private Members' Bills. He was under instruction that day, and he spoke for so long that I suggested that he was on injury time. But on this occasion I make no such complaint.
  Mr. Denis Howell: I always take the advice of my Whips on those matters.
  Mr. Berry: We all have to do that.
  I am particularly glad that this is a Bill from the Department of the Environment with which, as the Minister knows, I had close connections for the first two years of its existence. On occasions it produces Bills that arouse certain controversies, depending on who is in charge. But it has a good reputation for having introduced many important and non-controversial Bills dealing with safety, air pollution, dumping and so on, and this Bill certainly comes within that category. I am strengthened by the presence of my hon. Friend the Member for Birmingham, Hall Green (Mr. Eyre), who was a Minister in that Department and who did such good work there.
  This is a good Bill. We have the advantage of being able to read the debates in another place. They were not long and the cast—if I may call them that—made up in quality what they lacked in quantity. The noble Minister Baroness Birk and my noble Friend Baroness Young, and Lord Stow Hill, who intervened from time to time, raised some very important issues and it is to our benefit that they did so.
  As the Minister has said, the Bill is well-timed, having been brought in after considerable deliberation. So often in such cases—this applied to the 1930 Act—Bills have to be introduced quickly because of some disaster. Happily, on this occasion there have been no disasters in this country since the passing of the 1930 Act, and the Minister has had plenty of time to adapt the 1930 Act to present-day circumstances.
  But conditions elsewhere in the world are very different. The figures given in the House of Lords debate about the Italian disaster and about disasters occurring every 15 months in other parts of the world are terrifying. One wonders just what precautions these other countries take, and what notice is taken of them. Without wishing to seem controversial, I

  1693
  wonder whether we could use our position as a member of the European Community to pass on to other countries information about what we do here, or perhaps on a suitable occasion to have an international conference so that other countries may benefit and not suffer these terrible disasters at, unhappily, such frequent intervals.
  This report was begun by the Institution of Civil Engineers in 1964 and it has rightly pointed to certain weaknesses in the 1930 Act and the Minister has drawn attention to them. As he said, there was no adequate provision for ensuring that the Act was complied with, and where there were legal powers, it was possible that they could have been used too late, perhaps after some disaster. But again, happily, that did not arise. There was also the possible 10-year gap between inspections.
  Would the Minister help me on one or two brief issues on the Bill itself? The important local authorities are the new county councils. I am not quite clear who will actually do the work. Considerable expertise will be needed to make sure that these reservoirs are properly constructed and maintained. Will extra staff be required for this important work, what will be the cost, and who will pay? Staff will also be needed for that. Areas in the United Kingdom such as Strathclyde, which has more than 100 reservoirs, and South Yorkshire, which has about 50, will have to pay more for this work, presumably, than other parts of the country.
  We seem to have moved from gallons to cubic metres. Now 25,000 cubic metres is equivalent to 5 million gallons, but paragraph 11 of the report—Reservoir Safety, published by the Institution of Civil Engineers in 1966—to which the Minister referred, says:
  "At present all reservoirs of capacity greater than 5 million gallons must comply with the Act."
  Then it states that maybe that figure is too low. Paragraph 12 states:
  "The Committee therefore recommends that the Act should only apply to reservoirs designed to hold, or capable of holding (measured to top water level), more than 10 million gallons
  1694
  above the natural level of any part of the land adjoining the reservoir."
  There is also the question of whether volume should be the sole criterion. Should the height of the dam be considered, or the nature of the area—whether it is an area liable to flooding, and what there is around it; for example, whether houses are in the path of a possible escape of water?
  I appreciate that that may be a new approach and complicated, but it would be helpful to know why we could not have a series of categories—not too wide, but a series—rather than just one basis. Obviously, that would cost more, but as we are talking about safety, that is what matters most.
  Is the Minister entirely happy about the frequency of the reviews? Certainly in the civil engineers' report the experts seem satisfied about the 10-year period, but the occasion of a new Bill is surely the moment to check whether every 10 years is the right frequency. This report itself was written 10 years ago, and perhaps things have changed since then, so a shorter period between inspections might be recommended.
  One of the advantages of the debate in another place has been that a number of queries that I might have raised at this stage have been answered. The definition of a reservoir has been cleared up. We know that quarries do not come into it. We know that canals do not come into it, but that artificial lakes do.
  I presume that the 25,000 cubic metres figure includes all ornamental lakes. Many were formed by damming the lower ends of valleys. They qualify because they are above the neighbouring ground. Nevertheless, many have been there for centuries; I am thinking in particular of those formed by the famous gardeners of the eighteenth century. I wonder whether there could not be some exemption for them.
  I am sure that the Minister will agree that it is vital that when the Bill is enacted there should be the maximum amount of publicity in the interests of the owners who have nine months to declare their ownership of reservoirs which come within the Act and for the safety provisions to be made available.

  1695
  There is a matter on which I should like the Minister to comment. Clause 24(4) says:
  "Every local authority shall during the three months after the date of the commencement of the Act take such steps as they think are reasonably required to inform undertakers of the requirements of subsections (1) to (3) above."
  Could the Minister say what form those steps will take and whether it might be better to lay down in a little more detail what should be done to ensure that publicity?
  In the debate in the House of Lords on Clause 12 Baroness Birk said:
  "It is true that there will be a new panel of supervising engineers to carry out this function. I would point out that the qualifications for appointment to this panel have yet to be decided."—[Official Report, House of Lords, 3rd December 1974; Vol. 355, c. 158.]
  Have the Government got any further with that decision? It is an important matter and should be decided at an early date.
  I see now that I have the awesome support of my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) who knows far more about reservoirs than I do. I am glad to see that he is with us.
  This is a good Bill. It deals with safety and therefore its passage through the House should be expedited. It was lost in one General Election; I should hate to think it might be lost in another. Therefore we wish it well and will do everything possible to speed its passage.
  10.54 a.m.
  Sir David Renton: I join in the support given by my hon. Friend the Member for Southgate (Mr. Berry) to the Bill. May I say how delighted I am to find that the Minister of State is the Minister in charge of the Bill. Not only is he a personal friend and an opponent whom I respect, but I know that he knows something—perhaps not quite as much as I do—about dams.
  I have the largest artificial lake in my constituency, which the hon. Gentleman has visited, at Grafham Water. It has an enormous dam, which I believe is perfectly safe. Fortunately, although it, alas, covers a large area of farm land which had to be flooded, it is not a dam which has a tremendous drop on the
  1696
  downfall side. That enabled it to be built of earth, now grassed over with a road running along the top. I believe that even an act of God, so called, would be unlikely to disturb its stability.
  I mention this because I believe that in choosing sites for reservoirs in future those experts advising the Government, and the Ministers who have to take the final decision, would be wise to choose those sites which do not involve a tremendous drop on the downfall side.
  There is a dilemma, as the easiest way to build a dam is to flood farmland, because generally it is in relatively level country and, therefore, the problem of the downfall drop is not so great. But we simply cannot afford to go on flooding farmland. Therefore, I hope that in future reservoirs will be built in hill country where it will not be necessary to take any more arable land, or indeed good permanent grassland or temporary leys, both of which are scarce.
  The Minister of Agriculture said in answer to a question the other day that no fewer than 62,000 acres a year are now being taken away from arable, permanent and good grassland. He cannot afford to go on losing it in that way.
  In my constituency we have already made a fair contribution to the solution of the problem by the flooding of 3,000 acres of quite good farmland and the taking of another 300 acres, rather over-luxurious, for the administrative and other buildings and works which go with it. We are still theoretically threatened with the flooding of land at Abbotsley for a reservoir there, but I hope that that idea has been dropped.
  I mention this—I think I am in order to do so—because the Bill talks of registration of reservoirs, a very wise provision. I should like to ask the Minister how many reservoirs with the qualifying capacity of five million gallons are already registered and how many the Minister contemplates will be registered within the foreseeable future, let us say within the next 10 years. In order that we may get the measure of the problem and know what we are legislating about, I think we are entitled to those simple facts and would be grateful to the hon. Gentleman—or is it the right hon. Gentleman?
  Mr. Denis Howell: Alas, no.
  Sir D. Renton: It is only a matter of time—time and merit—
  Mr. Howell: I hope the one does not qualify the other.
  Sir D. Renton: It does not always. I hope the hon. Gentleman will bear those facts in mind and let us have as much information as he can. He happens also to be Minister responsible for sport, and, of course, the building of a reservoir provides greatly added facilities for the enjoyment of a variety of sport. Grafham Water is, I believe, a model to the nation in this respect. The Bill, perhaps understandably because it is a safety Bill, does not specifically mention the opportunities for recreation, so far as I know, but the need for using reservoirs for recreation enhances the need for safety and that, I trust, brings me in order in saying that I think the Government should be encouraged when building reservoirs, or having them listed under the Bill, to ensure that the opportunities for sport are not missed.
  I wish next to speak about liability for damage caused either in the construction of a dam or, alas, after it has been constructed if the worst should happen and, because of some act of God, the dam breaks. The construction of dams is accompanied by a lot of blasting—I hope I shall not be accused of making puns when talking about damage and blasting and dams—and this in itself can be a source of very great danger to the men working on the job and to other people. If there should be very heavy rainfall during the operation, there could be danger to people living, for example, in a valley below. This is a matter which we should bear particularly in mind when considering what effect, if any, the Bill would have upon civil liability.
  My reading of the Bill is that it has no such effect. In order to overcome the provisions of common law or of existing statute law, express words have to be used in a statute in order to alter the liability or, indeed, to change the law. I do not find any such express words with regard to civil liability.
  In Clause 22 there are provisions relating to
  "Criminal liability of undertakers and their employees."
  It is as well that that clause has not included, although if it had not been,
  1698
  there would, under the general criminal law relating to manslaughter and injury wantonly caused, have been some liability. It is as well that this should have been dealt with, even though it meant adding to the criminal calendar.
  However, I regret that fining limits have been included in the Bill. I should have thought that, bearing in mind the terrible destruction that could be caused by a bit of negligence or wilful default—the deaths, injuries and human sadness that could result—it was wrong to impose fining limits of this character. They are not great limits, bearing in mind the suffering that could ensue. Bearing in mind, also, 20 per cent. inflation a year, those limits would not be very deterrent within a year or two. I would rather see the fining limits cut out altogether.
  I am sure that we ought to use some foresight in this matter. After all, we do not want to have to come back with a trifling amending Bill just to change the fining limits. I see that there is a fining limit of £400 on summary conviction under Clause 22(1), only £100 under subsections (2) and (3), and £400 again under subsection (4).
  It may be said that when one appears before a higher court on indictment there may be no fining, but so many of these cases could be dealt with more satisfactorily summarily. The courts of summary jurisdiction have, in recent years, assumed a degree of responsibility of near professionalism, which 20 years ago they did not possess. In general—I confess that I am now applying a general argument which does not confine itself to the Bill—the courts of summary jurisdiction could be given powers of awarding greater fines, bearing in mind that there is always the right of appeal to the higher court if it is felt that there is any injustice.
  My last comment is purely technical. I happen to be the chairman of a committee which, in due course, will advise Parliament, through the Government, on ways of improving the drafting of our legislation—a very difficult matter. We had a look at this Bill and found that it had certain merits which other Bills do not possess. One merit is Schedule 1, for which I know of no precedent, although I do not say that it does not exist. It is a very useful aid to those who have to

  1699
  apply the law, study the law and advise upon the law. The draftsman was wise to include an index of definitions. I hope that this precedent will be followed on other occasions by all his colleagues.
  One could go on picking up points of detail, but they may be better left to the Committee stage. I am happy to join my hon. Friend in welcoming the Bill.
  11.7 a.m.
  Mr. Nigel Spearing: The right hon. and learned Member for Huntingdonshire (Sir D. Renton) raised an important subject when he spoke about limits for fines. After all, the undertakers who assume responsibility for existing and new reservoirs and the contractors whom they employ are not jobbing builders. If there is an opportunity to do so, we should look at this matter.
  Inevitably, when constructional risks have to be taken, there is always a balance of cost as against safety, and a design engineer has to take that balance into consideration. Perhaps it has to be considered even in the method of construction. If it is considered, the risk in terms of fine will be part of the consideration. Thus, there is merit in what the right hon. and learned Gentleman said.
  Earlier he referred to the height of the dams banks, and remarked that the lower the dam, the greater the area of land that had to be flooded in order to provide an equivalent volume of water. He suggested that with better safety provisions we lose land. As we have heard in previous discussions, at which my right hon. Friend was present, there has been great concern in the country about the flooding of farmland for dam construction.
  The future storage and distribution of water may be somewhat different from what it has been. The right hon. and learned Gentleman would be reassured if he were to read some of the latest recommendations of the Water Resources Board about transfer of water from head waters of rivers, where the sort of narrow and high dams which he said might be more suitable would be the practice and where the amount of farmland in lowland areas to be flooded by the construction of reservoirs might be minimised.
  Sir D. Renton: I have eagerly studied all the reports of the Water Resources
  1700
  Board and its predecessors. I confess that I was trying to draw the Minister. Having read those reports, I wanted the Minister to come clean—he has never done so; nor have any Government—and say whether farmland should continue to be flooded or whether flooding could be avoided. I hope to have the hon. Gentleman's support in trying to draw the Minister.
  Mr. Spearing: I am grateful for the right hon. and learned Gentleman's information. One of the difficulties 13 that the Water Resources Board no longer exists because the right hon. and learned Gentleman's colleagues when in office decided to restructure water responsibilities and the new structure does not make central water planning so public or so accountable, at least to the consumers, as previously. That responsibility has disappeared into the maw of the many sided face of the Department of the 'Environment. That was one of the features that we deplored during the Committee stage of the Water Bill.
  However, the final report of the Water Resources Board moved in the direction I have indicated. Perhaps later this morning we shall know whether the Minister accepted those proposals.
  I suggest that even in the high reservoirs or dams, say, in the hills of Wales, there will almost inevitably be some agricultural loss. Any such valley which is suitable will almost certainly have alluvium at the bottom and be farmland even if the sides of the valley are rough pasture and grazing. Therefore, although there may be some advantages, there will clearly be some loss.
  The right hon. and learned Gentleman also mentioned amenity and recreation. Knowing my hon. Friend's interest in that subject, I hope that he will refer to what may be something of a difficulty in the application of the Bill. In the canal network there are many reservoirs that are filling the top pounds of the canals, which were built between 100 and 200 years ago. Although they were no doubt satisfactory then, and may still be, if there is any doubt about matters of safety, it would be those dams that might need some attention.
  The public must be protected, but in these and other amenity reservoirs, perhaps those set out by private owners in

  1701
  parks or by local authorities, there may be some obligation for safety measures to be undertaken, which almost inevitably will be expensive. My hon. Friend will be aware of the difficulties that this sort of situation has caused in the provisions of the safety at stadiums and football grounds legislation, where, quite properly, it was decided that there should be tightened regulations. But there must be some financial onus on the existing owner or operator.
  The revenue from the amenities, generally canals or lakes, is not great at the best of times. Some mechanism may have to be introduced, either by grants in aid or some respect in which the Minister will have some option, to maintain the amenities and at the same time to keep to the required standards of public safety.
  I hope that the Minister can indicate that he will look favourably on such discretion and, if it is not given to him in the Bill, that public expenditure may be used in some other way, because there is a public expenditure clause that would presumably prevent his making grants. Perhaps we can consider that at a later stage.
  I understand that the Bill replaces the Reservoirs (Safety Provisions) Act 1930. The first part of the Explanatory Memorandum is not, of course, part of the Bill, but it needs a little adjustment in that the Bill does not just strengthen that Act, but replaces it with strengthened provisions. That is a technical point.
  The Bill is useful because those who are interested will need to look at only one Act rather than two, and I welcome the opportunity that has been taken to codify the provisions into one Act. I wish that this were done more frequently to avoid a lot of crossings out and to enable our statutes to be in a form more easily understood by those who must refer to them from time to time.
  11.15 a.m.
  Mr. Dafydd Thomas: As the Minister and hon. Members will know, I represent an area where reservoirs and issues of water conservation have generated a lot of steam. I remember 10 years ago attending in an unofficial capacity the official opening of a reservoir in the constituency that I now represent. That reservoir was constructed by Liverpool Corporation and
  1702
  caused not merely the disruption of farmland, but also the disruption of communities. For the people in mid-Wales whom I represent, the construction of reservoirs, both for water conservation and for electricity generation, has been a live issue, and the safety issue with which we are concerned today is naturally a matter that immensely concerns the mid-Wales community.
  I should like clarification of the situation as respects, not only regulating reservoirs, which are the responsibility of the water authorities, but reservoirs for electricity generation. There may be specific problems concerning such reservoirs. I am thinking particularly of the fact that the regular alteration in the level of these reservoirs may create additional safety problems. I should like to hear the Minister's comments on these matters and to know whether there are specific provisions within the Bill covering any specific engineering problems which may follow the construction of electricity generating reservoirs.
  I happen to represent two of these—the hydro-electric scheme at Tanygrisiau. A new reservoir is about to be constructed in Llanberis by the Central Electricity Generating Board. I should like to know to what extent the Bill covers the peculiar problems of reservoirs concerned with electricity generation.
  I am also concerned in this context about the frequency of reviews. Members of the Committee will no doubt recall that one of the worst disasters concerning a reservoir for electricity generation occurred in North Wales 40 years ago in the valley where I was brought up. The frequency of reviews and inspections is a subject about which we are naturally concerned. I appreciate that the original report that pioneered the Bill was satisfied with a 10-year period. However, I should like to feel that the reservoirs used for electricity generation were inspected more regularly than every 10 years.
  Another aspect of the safety factor concerns the enlargement of reservoirs. Discussions are already taking place, as hon. Members will know, between the imperialist water authority—the Severn-Trent Water Authority—and the so-called Welsh National Water Development Authority which, as we know, does not include the most important of Wales for

  1703
  the purpose of water conservation. These discussions have centred upon the possible enlargement of the Elan Valley complex. I will not comment, lest you call me to order Mr. Pink, on the merits or demerits of the project to expand the Elan Valley complex. My views on that would be coloured by the amount of revenue that could be got from the Severn-Trent Water Authority as a result.
  The basic issue of the Bill relates to safety aspects. I should like to ensure that my understanding of Clause 6 is that enlargement of existing reservoirs will be covered by the same safety principles and codes of practice as the construction of a new reservoir. That is extremely important if there are to be developments such as the expansion of the Elan Valley complex undertaken by the Welsh authority, or by the Severn-Trent authority.
  Finally, I have some queries about the impact of the Bill on local authorities in areas where they will become the authorities for enforcing it. As the Committee will be aware, the Powys County Council has one of the highest levels of rate-borne expenditure per head in the United Kingdom. Gwynedd, the other authority in North-West Wales, is not far behind. I should like an assurance that the expertise necessary can be provided by the local authority on behalf of Parliament to enforce the Bill, without requiring a massive increase in staffing and public expenditure.
  I am aware that the Bill provides for the rate support grant to cover any additional expenditure. However, we have had bitter experience in some facets of local government of the way in which the rate support grant formula operates. It is not always equitable to areas of low population density. No doubt we shall have our disputes about this matter outside this Committee. But I am concerned that we can reach the safety standards necessary in areas such as Powys and Gwyedd without imposing a crippling burden on local authorities.
  Those are the general comments that I wished to make. I welcome the Bill and I am sure that people living near reservoirs in North Wales welcome it. While we must have expansion of water conservation and reservoirs, it is
  1704
  essential that they should not take up arable land. It is also important that they should not take up, often unnecessarily and excessively, land in the uplands that could be used for alternative purposes.
  We are still awaiting a major breakthrough in conservation technology that will enable us to look for estuarial barrages and so on. But while we have reservoirs with their attendant safety and community problems, the Bill is clearly a welcome improvement on present legislation.
  11.22 a.m.
  Mrs. Audrey Wise: I have one or two brief remarks to make entirely about Clause 22. First, I should like to reinforce the anxieties expressed by my hon. Friend the Member for Newham South (Mr. Spearing) and the right hon. and learned Member for Huntingdonshire (Sir D. Renton) about the fine limits. If we are to include specific limits, the figures of £400 and £100 must be revised. In view of the potentially serious situation disclosed by the Minister's opening statement about reservoirs world wide, these figures partly invalidate the Bill and its intentions.
  I am also concerned and puzzled by Clause 22(1) which states:
  "If—
  (a) "by the wilful default of the undertakers"
  any of the various provisions are not complied with
  "then unless there is reasonable excuse for the default … the undertakers shall be guilty of an offence".
  I am puzzled to read that there can be a reasonable excuse for wilful default.
  This drafting seems to have been an error on someone's part, and the Bill will not be satisfactorily operated in the courts if this provision remains. I strongly urge the Committee to take the necessary steps to ensure that we are not implying that there can be any excuse for a wilful default.
  I would treat a "reasonable excuse" on safety matters with reserve in any case. We accept that there could be oversights, and reasonable excuses for certain kinds of failure, but not for wilful default. Therefore I ask the Minister to look at this matter.
  Sir D. Renton: I do not know whether the hon. Lady realises that it is an essential part of our criminal law, except for purely technical and fairly minor administrative defaults, that there shall be a degree of criminal intent or criminal failure, quite apart from there being a criminal act.
  Mr. Denis Howell: Or neglect.
  Sir D. Renton: Or criminal neglect. This is a fairly common form way of both enabling the prosecution to establish that in a particular statutory offence there is some kind of criminal intent or neglect and to give the defence the opportunity, which on many occasions it needs if there has been a genuine error, of rebutting the suggestion of criminal intent or neglect. Mens rea is an expression familiar to lawyers. I know that people do not like the use of Latin, but that phrase implies a lot to lawyers who have studied these things.
  I appreciate the hon. Lady's motive in her suggestion, but the drafting carries greater implications than she may have realised.
  Mrs. Wise: I am not prepared to accept that. I would be prepared to accept the statement that this drafting is not unique to the Bill. In that case, I suggest that that is one of the reasons why people often find the law extremely difficult to follow. By inserting the word "wilful" we are saying that there is an intent to break the provisions of the Bill. If there is no intent to break them, the action is not wilful.
  If this drafting has been the practice in the past, it ought not to continue to be the practice to say on the one hand that to default is wilful and, on the other, that there may be reasonable excuse. There can be no reasonable excuse for a wilful default of a safety regulation.
  I strongly urge the Minister to look further into this and to take legal advice, of course. It is very important, particularly when relating to safety regulations. I am not making this simply a general statement on the use of English. We are dealing with this wording in the context of safety. We should not allow the Act to imply that there could be any reasonable excuse for such wilful default in safety regulations.
  11.27 a.m.
  Mr. Denis Howell: With the leave of the Committee, I should like to commence my reply to the fascinating short debate that we have had and the very interesting points that have been raised, by expressing my appreciation to all Members who have taken part for their constructive approach towards this measure and their general sympathy with it.
  I will do my best to deal with as many of the detailed points that I can, but I shall be very happy to send fuller information to Members on certain matters which I shall indicate and, assuming that most Members here will find their way subsequently onto Committee, if they would like further explanation, I will do my best to provide the information on which the Committee can make intelligent assumptions about the Bill.
  I am particularly grateful to the hon. Member for Southgate (Mr. Berry) for his general blessing to the Bill. He is quite right in saying that this Bill has been considered by the Department for some time. One might call it a consensus Bill so far as respective administrations are considered. I am sure we are all glad about that.
  First, the points on local authorities. They have two areas of responsibility under the Bill—first, to enforce the requirements of the Bill, and secondly, to take action where necessary in the case of emergencies. The hon. Gentleman asked about staffing and the cost to local ratepayers. I strongly take the view that this Bill should be a local authority responsibility and this responsibility ought not to be put elsewhere, but I would point out that the functions of the local authority are purely administrative. The Bill places the technical responsibility for the construction, inspection and supervision of reservoirs upon qualified civil engineers, and it is the water undertakers who are required by this legislation to employ such engineers, which involves a very heavy cost.
  We are saying here, as between the engineers and the undertakers, that we need a third party to protect the public interest, to ensure that a qualified undertaker has been engaged and that his reports are being acted upon and the public interest is fully protected. That

  1707
  is the function of the authority and it will consist mainly of recording information and checking that the Act has been appropriately applied. There will, therefore, be no need for the enforcement authority to take on any technically qualified staff. They will merely be recording and satisfying themselves, as the efficient custodians of public safety, that the provisions of the Act are being complied with. I hope, therefore, that ratepayers will rest content that Parliament is not intending to impose considerable additional burdens upon them.
  The hon. Gentleman also asked why we had chosen volume as the consideration which applies in respect of the Bill. We took the view that it is the volume of water contained in a lake or reservoir, and not necessarily the height of dams and so on, which must be the factor determining the risk to surrounding population.
  We also took the view—which I hold very strongly—that in setting down criteria in the Bill it should be as simple as possible so that everybody can clearly understand. The simplest criterion one could arrive at, whether in respect of an ornamental lake or loch, or any other water installation that came within the terms of the Bill, was to define it in terms of volume, so that there could then be no confusion or doubt about the situation.
  I assure the Committee that in determining these matters we have had the widest possible consultation with all the appropriate professional organisations and institutes. We have consulted the National Water Council, which also represents the regional water authorities; local authorities; the Confederation of British Industries; the National Farmers Union, and the Country Land Owners' Association. I mention that specifically for the benefit of the right hon. and learned Member for Huntingdonshire. I thought its membership would be rather thicker on the ground possibly than that of the Trades Union Congress. Nevertheless, we have done our best, and I am happy to say that all these organisations have told us specifically that they have no objection to any of the principles and the way in which we intend to operate them.
  The right hon. and learned Gentleman asked why we had chosen the figure of five million gallons and not 10 million
  1708
  gallons. The answer is that the 1930 Act itself relies on five million gallons. That has worked successfully and, therefore, in the light of experience, particularly abroad, I could not advise hon. Members to depart from something which has proved to be successful. I am sure that is the right decision, although I understand the Institution's carefully thought out arguments for the volume of 10 million gallons. Where there is any doubt at all, Parliament must err on the side of public safety and, therefore, it is better for us to accept five million gallons as the volume at which the Act would apply.
  The question of the 10-yearly inspection was raised. I understand the point here. The 1930 Act was based on a 10-yearly inspection; we have consulted the Institution of Civil Engineers, and the Institution is happy with it. I am advised that the critical period in respect of large reservoirs is immediately they are put into operation, when they are first filled and the full strain comes to be assessed. I am assured that that is the critical period. During that period, of course, the dams are under constant inspection by the manufacturers and the civil engineers concerned. Nevertheless, as some doubt has been expressed about whether 10 years is an adequate frequency, I shall give the matter further thought. No doubt, in Committee we can return to the matter after I have taken further professional advice.
  I assure the hon. Gentleman that the Government have every intention of looking at publicity. We intend to take steps centrally, through the publication of guidance on the application of the Bill when it is enacted, and we shall write to all local authorities telling them their obligations under this measure to the undertakers and to any other interested person. We shall do our best to ensure the maximum publicity both to interested authorities and to the public.
  Sir D. Renton: In this connection, will the Minister of State try to gain some inspiration from the 1957 Renton Report on the electricity industry?
  Mr. Howell: I am always happy to gain inspiration from the right hon. and learned Gentleman. Indeed, we have done so this morning. I was much touched by the right hon. and learned Gentleman's modest claim that he knew more

  1709
  about these matters than I. It may be self-evident to everyone, but it is difficult to swallow! I shall bear in mind this further matter to which he has drawn attention.
  The right hon. and learned Gentleman asked how many reservoirs would be subject to the Bill. In this country there will be about 2,000. That should enable the Committee to understand the size and importance of the problem. He also asked how many would be built in future. That depends on many factors. One will be the increasing demand for water, to which I shall come in a moment, possibly when I reply to my hon. Friend the Member for Newham, South (Mr. Spearing). He and I spent many happy hours—in this very room, I think—on the Water Bill. The Water Act, as it now is, was designed possibly to reduce the number of manmade lakes and reservoirs that would be needed to be constructed in future, yet at the same time taking account of the growing need for more water, doing that by various means, including the recycling of water, using water two or three times over, rather than building reservoirs, using water once and then putting it back into the river system. But I shall come back to that shortly.
  On the matter of civil liability, I am advised that it is totally unchanged by the Bill. But I shall write to the right hon. and learned Gentleman in order to be quite sure that what I am now saying off the cuff is quite correct and to confirm it before the next stage of the Bill.
  The right hon. and learned Gentleman also referred to Grafham Water in his constituency, which I know very well. He mentioned the sporting opportunities. This Bill is not concerned with enlarging sporting and recreational opportunities, but I take this opportunity to say that I made it perfectly and firmly clear to the water authorities that I expect reservoirs constructed at great public expense to be amply open to the public at all times, consistent, of course, with the safety and purity of the water. I am glad to say that that policy is fully accepted by the new regional water authorities and the National Water Council. I shall see that it is followed up.
  Regarding safety in construction, though I do not think that the right hon.
  1710
  and learned Gentleman specifically referred to nuisances by noise and other aspects of construction, which are of great concern to us, that side of the matter is covered by the Control of Pollution Act which was enacted in about July of last year.
  Sir D. Renton: Talking of control of pollution, would the hon. Gentleman like to turn round and look at the dark smoke visible through the window?
  Mr. Howell: Yes, I am very glad to say that that is the responsibility of the appropriate local authority. No doubt, the right hon. and learned Gentleman will draw the authority's attention to it.
  I have been to Canada to talk to Ministers there about environmental matters. I concluded my talks with them—we have a close Canadian-British association in international matters, especially environmental matters—and I invited them to come to my office on the eighteenth floor of the Department of the Environment so that they could look at the clean buildings of London to see how we have cleaned up this city with the help of our atmospheric pollution Acts. I am sad to see that slight departure today.
  I should like to accept, on behalf of the draftsmen, the right hon. and learned Gentleman's appreciation of Schedule 1. He is quite right. I do not think that in 20 years I have seen a similar schedule. Like the right hon. and learned Gentleman, I hope that the committee reviewing the matter will draw attention to the advantages of such a Schedule.
  My hon. Friend the Member for Coventry, South-West (Mrs. Wise) seemed to find a considerable contradiction in Clause 22. I shall confirm this, but I accept what she said about the need for that drafting to be looked at, and I undertake to ensure that it is. Not being a lawyer, I do not see how it can be possible that there can be a reasonable excuse for a wilful default. But I am not quite sure that her point is good, because at the end of Clause 22(1)(a) there is the word "or", which then refers to subsection (1)(b)
  "or … the undertakers fail to comply with a notice".

  1711
  The clause says:
  "unless there is reasonable excuse for the default or failure"
  to comply with a notice. I am not sure, therefore, that the "reasonable excuse" applies to paragraph (a) as much as it applies to paragraph (b).
  The point needs to be clarified and I shall undertake to clear it up in the course of the next few days. I shall write to my hon. Friend about it as well as giving a further and fuller explanation to the Committee when next we deal with the matter.
  My hon. Friend the Member for Newham, South (Mr. Spearing) and I have served many times on local government and water legislation Committees and I am glad to say that we share a history and a common approach to these matters. He asked about amenity and recreational owners and the cost to them. The cost would be entirely dependent upon the circumstances of each specific case. It is therefore difficult to say much about that.
  He also asked whether the 1930 Act would be continued. The Bill would repeal and replace the 1930 Act.
  As did the right hon. and learned Gentleman and my hon. Friend the Member for Coventry, South-West, my hon. Friend talked about penalties. I should like to tell the Committee that the penalties were stipulated after consultation with the Home Office. The right hon. and learned Gentleman had a distinguished career in the Home Office as a senior Minister. As consultations about the Bill continued through many administrations before its publication. I am not sure whether he was involved in advising what the penalties should be.
  Sir D. Renton: Not as long ago as that.
  Mr. Howell: But I accept that on the surface, and having regard to inflation and—more important than inflation—the dangers involved, we ought to look at this subject in Committee. No doubt hon. Members will ensure that we do so. I shall ensure that we have a more detailed reply to offer and will either accept or improve—if that is the right word—or strengthen the powers. At least I hope to be able to give a more
  1712
  adequate explanation about the existing situation.
  There was an interesting exchange between the right hon. and learned Gentleman and my hon. Friend on the powers of the Water Resources Board, which is not specifically involved in this legislation. My hon. Friend is absolutely right to say that the previous administration, unfortunately, failed to accept our views about the abolition of the Water Resources Board and relied on the precept that it would have a weaker National Water Council and stronger regional water authorities.
  Since I came to this Department I have been informed that the previous Conservative Government created nine nationalised water undertakings. If one is to nationalise anything, the job should be done properly and a strong central approach should be adopted.
  My right hon. Friend the Secretary of State has made it clear that we shall review the situation in these areas in about two years' time. We cannot consider water reorganisation in isolation from local government reorganisation. I will content myself with saying that I suppose that I go around the country as much as any other Minister, visiting local authorities in connection particularly with sport and recreation. Everywhere I go I find, irrespective of the political colour of the local authority, growing and continuing concern about the effects of the previous Government's local government reorganisation and water reorganisation and the costs. I say that to assure hon. Members that the Government are well aware of the situation. It is exactly as my hon. Friend and I and others predicted when we were discussing these subjects.
  It is also true to say that we are certainly not happy with a situation in which existing private water undertakers are allowed to remain outside the public system. Obviously, when we come to review the situation that is a matter that we shall have to study.
  Sir D. Renton: It will not provide a drop more.
  Mr. Howell: The Good Lord in his wisdom provides the rainfall. Being a theological student of some merit I cannot follow the right hon. and learned

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  Gentleman's modest approach to these matters. But I do not think that the Good Lord intended his water to be divided between private and public authorities. That is my approach to these matters, and I am sure that it will commend itself to my hon. Friends.
  I am grateful to the hon. Member for Merioneth (Mr. Thomas) for most of his observations and I am particularly grateful for his refreshing honesty. His concern seemed to be about revenue for his constituency. One can understand that. Since the revenue comes as a result of the capital investment made by my constituency in Birmingham, I trust that when he considers what charges he should be making for the water that Wales will supply to us, he will specifically have regard to the fact that very large capital investments have been made by the inititive of the citizens of Birmingham and surrounding areas over many years. I am sure that he would not wish to confiscate the whole of those capital resources without having regard to the rateable value and the employment opportunities that Birmingham's investment has provided in his constituency for many years.
  I have been connected with the problems of water supply in Birmingham for many years—I know this applies to Liverpool, too—and I know that there has always been the happiest and closest relationships between the responsible authorities. We understand their problems and desire to meet them wherever possible to ensure that they have a fair return from these resources, but we must keep a sense of responsible proportion.
  There is no specific provision in the Bill for electricity generating reservoirs. However, as the construction must be supervised by a qualified civil engineer,

  THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:

  Pink, Mr. R. Bonner (Chairman)

  McGuire, Mr. Michael

  Benyon, Mr.

  Renton, Sir David

  Berry, Mr.

  Spearing, Mr.

  Dunn, Mr.

  Thomas, Mr. D. E.

  Eyre, Mr.

  Weetch, Mr.

  Howell, Mr. Denis

  Wise, Mrs.

  Kilroy-Silk, Mr.

  who must issue a certificate, the fact that he issues a certificate must have regard to the specific need of each of the reservoirs that he inspects. Therefore, if there are constant drops in the water levels in electricity reservoirs, presumably the professionally qualified engineer in charge would have full regard to those circumstances in the issuing of a certificate.
  The enlargement of reservoirs, for example, the Craig Goch reservoir, is covered by the Bill.
  I hope that I have now covered almost all the comments that hon. Members have made. There remains the question of our international collaboration and whether we are having discussions with other governments. I am glad to advise hon. Members that this is a matter in which UNESCO is very much involved. UNESCO has recently held a conference specifically on this matter, no doubt because of the international situation that I revealed to the Committee in my opening remarks, and I can assure the Committee that we are playing our full part. UNESCO will therefore provide the opportunity for the wide exchange of information between the countries that we all desire.
  I hope that these explanations have been to the Committee's satisfaction and will enable us to report that we are prepared to give the Bill a Second Reading.
  Question put and agreed to.
  Ordered,
  That the Chairman do now report to the House that the Committee recommend that the Reservoirs Bill [Lords] ought to be read a Second time.
  The Committee rose at eight minutes to Twelve o'clock.