EXCEPTIONS FROM GENERAL CHARGE

HC Deb 15 July 1976 vol 915 cc1016-30

Mr. John MacGregor (Norfolk, South)

I beg to move Amendment No. 222, in page 36, line 24, at end insert— '(8) Section 56 does not apply to those benefits received by seafarers in the form of travel concessions to enable their wives to accompany them on voyages or to visit the husband's ship when in port'. In Committee, the Opposition succeeded in making a substantial difference to the clauses on benefits in kind. We removed many of the nonsenses and many of the severe and unfair impositions. It is perhaps true that in some respects the Government gave way to the pressures which mattered to them most or which were exerted with the loudest or most numerous voices. I do not complain about that, because I agree with nearly all those pressures, but it is unfortunate that there are still a few deserving cases which have not been dealt with. The amendment deals with one. I am slightly disappointed, because in withdrawing a similar amendment in Committee I said that I thought that the case was overwhelming and that the Financial Secretary had given a stronger indication than normal that he hoped to do something about it.

The clause gives certain exceptions to the whole chapter dealing with fringe benefits. We seek to extend the exceptions to seafarers and their wives. Unless the amendment is agreed to, many groups will find themselves disadvantageously placed as compared with their previous position. They will find their tax materially increased.

The Bill will not adversely affect a number of people in the Merchant Navy and a number of private shipping companies. In some instances ships—perhaps container ships—go on pre-arranged routes at pre-arranged times. If the officers or others on those ships wish to have their wives accompany them, as so frequently happens now, there is no problem. That is because the wives are able to embark with them when they leave and to disembark when they return at a fixed point. But there are various groups of seafarers to whom that situation does not apply. Some of the tanker companies are the most obvious examples.

I understand that it is the position in some tanker companies—the Financial Secretary did not dispute this in Committee—that those who are employed as officers or others on their ships have to agree to a four and a half month commitment. That is because there is considerable uncertainty as to where the ships will go. They cannot be certain when and where they will disembark, or when and where the ship will eventually end.

Nowadays it is happily the normal practice to allow wives to travel with their husbands to enable them to have a normal marital relationship. It has been the practice of the companies in cases where the wives have not been able to leave originally with the ship, or in cases where a wife has to return early for some domestic reason, to fly them out or to send them out by ship and bring them back in the same way, whichever might be appropriate.

Under the Bill as it stands, it appears that husbands will find that the cost of flying the wives out or getting them back will add to their gross taxable income. In many cases that will make a material difference. I quote an example that is based on last year's experience that would be the reality this year if the same position applied. I refer to a third engineer whose gross annual salary was £4,600 but who would come into the net now as the £5,000 limit applies not merely to gross salary but to all expenses whether taxable or not.

Last year the third engineer had a disposable income, after meeting tax and normal outgoings such as mortgage, gas, electricity and coal, of about £1,600. His company incurred a cost of £1,100 in enabling his wife to join him or leave him on certain occasions during the year. He would pay nearly £400 extra tax for the doubtful privilege of having his wife engage in a normal marital relationship with him. That is a substantial sum. It is about 25 per cent. of his net disposable income. He would have to pay that for no real privilege.

When we consider the position of others, such as masters, who are further up the scale the situation can be even worse. I shall not bother the House with other examples although I have several of a similar character. As the full implications of the Bill are beginning to dawn on many people in the Merchant Navy and in shipping companies, they are becoming extremely alarmed at the consequences on modest take-home pay. I believe that something must be done.

I pressed this matter in Committee and I greatly regret that nothing has yet been done. Unless something is done, the effect on the companies which perform this rôle and the effect on Britain's economic performance in terms of its exports and invisible payments will be quite drastic. There will be an adverse effect on recruitment. It is now quite a normal practice for companies to allow wives to be with their husbands. Many of those concerned will be inclined to serve under the flagships of many other countries that do not have the provisions that the Government propose. Therefore, EEC countries with shipping companies that do not operate such provisions will become an attractive magnet.

The companies are concerned about the real risk of losing many of the people who matter most to them in enabling them to engage in their normal business. In Committee the Financial Secretary expressed considerable sympathy, but unfortunately he does not yet seem to have met it. He explained in Committee that the Inland Revenue was engaged in discussions with the National Maritime Board to try to reach a solution.

9.30 p.m.

I greatly regret that these discussions have not led to a fruitful conclusion to enable us to say that the problem no longer arises. The major problem that arises relates to the length of time a husband is away. I cannot believe that this is an obstacle to finding a reasonable solution. Obviously there could be queries if a company were in the habit of sending wives to Hong Kong for short voyages as frequently as 10 or 20 times a year. That could be regarded as a fringe benefit. But that is certainly not the normal situation. I do not believe that a company would engage in such a practice and incur enormous expense in that way.

I have tried to speak in reasonable terms on this amendment, but it is a matter on which I feel strongly. This must be a case in which the Government did not intend to hit this class of people. The Government have given way in other respects and, since this is a reasonable amendment that affects ordinary working people, I hope that the Financial Secretary will be able to meet their case.

Sir John Hall (Wycombe)

In the discussions upstairs in Committee it became apparent that we were discussing the possible tax plight suffered by seafarers as a result of the provisions of this Bill. The Bill is likely to affect more people than just the seafarers covered by the amendment. Another class of persons, to whom attention was not drawn in Committee or indeed in this debate, is Members of Parliament.

Mr. Speaker

Order. I am sorry to interrupt the hon. Gentleman, but this amendment deals only with seafarers. We cannot go over what happened in Committee upstairs.

Sir J. Hall

I understand the point to which you draw my attention, Mr. Speaker, but in supporting the amendment moved so eloquently by my hon. Friend the Member for Norfolk, South (Mr. MacGregor) I thought it right to point out that the seafarers' case could be strengthened by drawing attention to similar categories of people in other spheres. I was merely taking Members of Parliament as an example, and I shall be brief.

It is known that Members' wives receive a certain number of vouchers in the course of a year—

Mr. Speaker

I am sorry once again to interrupt the hon. Gentleman, but he must confine himself to seafarers, which is the subject of the amendment I selected for debate.

Sir J. Hall

One could talk about seafaring Members of Parliament. However, I am not challenging your ruling, Mr. Speaker and I shall try to restrict my remarks to the problems of seafarers who will be penalised by the Bill's provisions if the Bill is not amended, or if the discussions now taking place between the National Maritime Board and the Inland Revenue do not reach a satisfactory conclusion.

I am sure that when the Government originally drafted the Bill, they did not intend to penalise seafarers. Although seafarers appear to be penalised in tax terms by the Inland Revenue, other persons are able to enjoy the same privileges of having wives join them on various occasions and they escape completely from any penalty. I do not know whether the Government intend anybody to escape these penalties, but if hon. Members are to be among those categories who will escape tax penalties, it will be a grave injustice to seafarers. Therefore, I hope that the Financial Secretary will say that seafarers are being treated in a similar way to other categories—and, if not, why not? Why should one section of the community be absolved from a penalty which is clearly placed on another?

I hope that when he replies to this debate the Minister will not tell me that this is a subject for discussion between the National Maritime Board and the Inland Revenue. I hope that he will be very clear in saying whether other sections of the community in a similar position to seafarers will be caught by this penalty.

Mr. John Nott (St. Ives)

On a point of order, Mr. Speaker. When the Bill was published all sorts of categories of people such as airline employees were included in this section. The Government have amended the Bill to take these categories out but seafarers and their wives have been left in. Surely, with great respect, we must be able to refer to comparable cases when we are debating the position of seafarers and their wives. If we cannot do so we cannot make a serious point.

Mr. Speaker

I do not wish to restrict the debate unduly but I understand that this issue was debated for 35 minutes in Standing Committee. The amendment was withdrawn because certain undertakings about the matter now being discussed were given. On the basis of that undertaking I selected this amendment. Of course hon. Members can make passing references to other categories of people, as the hon. Gentleman has succeeded in doing. However, the main point to be discussed must be the position of seafarers and not that of other people.

Sir J. Hall

On a point of order, Mr. Speaker. An undertaking also was given which would mean that the particular example which I quoted, that of wives of Members of Parliament, would be considered along with those of seafarers.

Mr. Speaker

The hon. Gentleman is unlucky. I have not chosen that amendment. I have chosen this one on the basis of the undertaking that was given to make observations on Report.

Mr. Ridley

I support my hon. Friend the Member for Norfolk, South (Mr. MacGregor) who moved this amendment so eloquently. I think that seafarers come in for rather hard tax treatment, because although they spend most of their lives outside this country they are taxed at the penal rates operating within this country.

There is a link between this amendment and the last one because only the benefits and facilities which seafarers' wives receive, travelling to and fro to join their husbands, are caught by the provisions in this part of the Bill. It was very revealing to see whether seafarers' wives' travelling costs came into the list of malpractices which the Financial Secretary read out on the last amendment. Superficially, these malpractices are impeccably good Socialist targets for attack. One of these targets was yachts. Seafarers do not travel in yachts. They travel in tankers and bulk carriers which are in an entirely different category from yachts, although a man from Mars would find it difficult to distinguish between one sort of boat and another. However, the Labour Party does not have any such difficulty. It identifies yachts as wicked and evil things. Aeroplanes, particularly private aeroplanes, are also by definition, wicked.

The list also includes wines and groceries. That does not mean "plonk" and flour. It means champagne and pâté de foie gras, and I understand that those must be taxed if they are given to directors by their firms.

It is absolutely disgraceful. A fortnight in New Zealand, or a weekend in Paris, all found with wine on the firm, is the most disgraceful, wicked, capitalist, bloated Right-wing perk that can be given to anyone. But it happens that seafarers' wives travelling out to join their husbands for a trip in the Mediterranean or the Pacific would come within the category of free holidays. If the Government had accepted the last amendment these wives would have benefited from that device. But in the jargon of Socialism, in the technology and the white heat of the revolution through which we are living, a free holiday is wicked, especially if it is paid for by the employer and if the employee earns over £5,000 a year or is a director. In those circumstances it is declared illegal, wicked and mischievous and is prevented.

So the wretched man plodding round the Pacific in a Dirty British coaster with a salt-caked smoke stack is to be taxed on the cost of his wife's travel to see him. This is where the prejudice of the Labour Party has got us. It is interesting that Labour Members are unable better to define their prejudice. If only they would take more trouble over that, perhaps having fewer meetings of the National Executive Committee or the Home Affairs Committee, stoking it up in Transport House, and if they would stop having these endless meetings of the Parliamentary Labour Party in Committee Room 10, and instead worked out with more precision what they wanted, these wretched seamen's wives could have been excluded from the Bill.

Doubtless there will be others who will be disadvantaged by this provision who do not come within the scope of Socialist demonology, but since they do not have such able spokesmen as my hon. Friend the Member for Norfolk, South they may not have been identified. But where we have identified these people let us let them off on this occasion. Let the Financial Secretary take his courage in both hands. I have explained to the members of the Tribune Group who are sitting there below the Gangway that these are not people in yachts; they are people in boats. Surely those hon. Members can entirely accept that there is a difference between a boat and a yacht.

It is wicked and bloated and capitalist to go in a yacht, but to go in a boat is fine, especially if one is cruising around the Mediterranean in a tanker. The Labour Members below the Gangway seem quite happy with that. They do not rise now to disagree with me, so I conclude that they are happy to accept the amendment. I commend it therefore to the Financial Secretary, who can dispose of it quickly by rising and saying that he accepts it, too.

Mr. Graham Page

My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) has convinced the Labour side of the Chamber that this is a good amendment. I am sure that Labour Members will support it. I shall certainly support it very warmly. We are not asking for any new concession; we ask only that the tax liability imposed on the Merchant Navy and the families of seafarers should be removed. If it remains in that form, it will deter the provision of this facility for the Merchant Navy husband and wife. There are many Merchant Navy families in my constituency on Merseyside. Young wives who come into my surgery at weekends tell me of the nervous strain they feel because of the separation from their husbands. The same applies to Service men. The position of the young wives of Merchant Navy men has been recognised by the employers by the provision of this facility in the past.

9.45 p.m.

I have often found that the young wives of seafarers suffer from worries and anxieties that are not suffered by others. Sometimes their worries are straightforward. They say that they cannot stand the separation any longer. Sometimes they suffer from anxieties from which they would not suffer if they could share them with their husbands.

The Bill deters employers from providing a facility that allows the wife to spend a certain amount of time with her husband, and it does great damage. The amendment will not open the floodgates to other cases. It is a special case, which has been recognised by the Merchant Navy over the years. This is the first occasion on which these families have suffered the imposition of a tax of this sort. In connection with the Development Land Tax Bill I said recently that the Government had for the first time taxed charitable intentions. On this occasion we might say that for the first time the Government have taxed marital relations.

I understand that discussions are proceeding with the National Maritime Board. If the Report stage had not been rushed as it has been, no doubt those discussions would have come to fruition before we debated this matter. I hope that the results of those discussions will be produced shortly. The Financial Secretary may say that he will not wait for the results of the discussions. The amendment relieves Merchant Navy families of a new tax liability, and I hope that he will accept it. I give it the warmest support, for the sake of the many constituents of mine who are members of Merchant Navy families.

Mr. Jerry Wiggin (Weston-super-Mare)

I do not wish to emulate my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) in his skilful exposition of the political philosophy behind the apparent Government objection to the amendment. I have first-hand experience of the problems associated with the Merchant Marine and those highly-skilled, well-trained young men who go abroad for eight or nine months at a time with no possibility of coming home. They act as skippers or officers of vessels worth more than £20 million.

Before the days of air travel, ships returned to domestic ports. With the availability of fast transport, these exceptionally well-paid men are flown round the world. I am glad to say that they are British, although I am afraid that their crews are not, and frequently the ships are registered abroad for taxation and other reasons.

It is ludicrous not to encourage the technical and leadership capacities of out young men in the Merchant Marine, so that they will continue to lead the world as they have done for the past 100 years.

My hon. Friend the Member for Norfolk, South (Mr. MacGregor) referred to the doubtful privilege of having a wife come across the world to join a man in a far-station. I am not sure that I follow him in his argument. It is a right that this country has recognised substantially with members of the Armed Forces for some time. We spend large amounts of public money ensuring that our Service men see their wives and families.

Mr. MacGregor

It is simply that it seemed to me doubtful to regard this as a privilege.

Mr. Wiggin

I thought that I had misinterpreted my hon. Friend's remarks. My right hon. Friend the Member for Crosby (Mr. Page) described this as a facility. With his usual ability to choose the correct legal terminology, I believe that he has correctly defined it. It is not a privilege, a holiday or a benefit. It would be reasonable to exempt such a provision. After all, as my hon. Friend the Member for St. Ives (Mr. Nott) pointed out, the Government have rightly seen fit to remove from the Bill the provision taking away the free air travel facilities afforded not to the wives of airline employees but to the employees themselves. The same is true of the free travel facilities for railway employees. Such people can continue to enjoy these concessions. But the man who may spend eight or nine months away from these shores, earning good foreign currency and paying taxes to the Government, is to have his wife's conjugal visit taxed. That seems crazy.

I would have thought that Labour Members would look upon our proposal as being fair and reasonable, and would agree that this privilege should not be taxed.

Mr. Farr

I support the amendment. I would like an assurance from the Government in relation to members of the Armed Services. There is a large group of Service men who have the privilege of having their wives and families flown to visit them overseas. It appears that there could be confusion in the minds of Service personnel whether, once the Bill is passed, this privilege could be assessed as part of their personal gross income.

I am sure that it would not be the wish of the Government to leave the situation like that. There are many other categories of persons who are not so well-deserving of the attention of the House at this hour as members of the Armed Forces. In many overseas postings it is right that a man's wife and family should have the chance to visit him. It would be quite wrong if there were any threat of the cost of that travel, which can be substantial, being included as part of his gross personal income.

I ask the Minister to assure us that there is no such intention. It may be that such an assurance would be good enough. It would be better if words to that effect were included in the Bill. My hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) mentioned the number of Service personnel in his constituency who had come to see him. I have a number of Service personnel in my constituency. Only the other day a constituent of mine, a mother with three children, was flown with her children, at the State's expense, to join her husband in BAOR.

I believe it is right that the Government should make it quite clear, preferably by an amendment at a later stage in another place, if not by a forthright addition, that there is no intention to include within the new tax net the cost of bringing a Service man's family to join him, wherever he may be serving his country.

Mr. Robert Sheldon

The amendment moved by the hon. Member for Norfolk, South (Mr. MacGregor) seeks to exempt the benefit of a seafarer's wife accompanying her husband on a voyage. The intention of the other part of the amendment is that payment for the seafarer's wife to visit his ship in a foreign port should also be free from tax as a benefit.

As the hon. Gentleman will know, the withdrawal of subsection (4) of Clause 54, meant that tax liability on the wife accompanying her husband on the voyage is virtually free from being taxed as a benefit receivable. In fact, the only benefit that will be assessed as such is the cost of the food on the voyage. This is so under existing and earlier legislation. It means, therefore, that the position remains as it was.

Perhaps I could clear up one very considerable misunderstanding. It does not surpise me that those who were not present at the Finance Bill debates fell into it. They seem to be under a misunderstanding that there is some change in the position of the wife as a result of the legislation we are considering. There is no change at all. The position of the wife remains unchanged as a result of the Bill.

The discussions we have had and are having with the National Maritime Board are not for the purpose of bringing about changes in the position of these wives, but rather to remedy the position of these wives as it stood before the current legislation. That is what we are talking about, and we have to direct our attention to that.

The hon. Member for Norfolk, South was quite right in his remarks about the change in practice, whereby a number of shipping lines are encouraging wives to join their husbands. This is one of the causes of the present discussions. That more than anything else has brought this matter to the fore. The legislation that we are discussing does not alter the existing situation in any way. We are trying to find a solution here.

Mr. MacGregor

May I ask the hon. Gentleman first why he did not refer to that point at all in the debate? Secondly, why is it that the companies have not been under that impression and have not been doing that in practice?

Mr. Sheldon

These discussions have been in train for some time with the National Maritime Board. There is the problem of the technical aspect as to under which circumstances a person can be held to be working wholly overseas. We are trying to find a satisfactory solution there.

I accept the importance of this. I expressed my views in the Standing Committee. We are considering what changes are called for in the Finance Act 1974, because that is where the difficulty arose—not in the present Bill—concerning United Kingdom employees who are working abroad.

The hon. Gentleman will know that I have received these representations, and I am considering what changes could be made in the tax treatment of seafarers, including their wives, and the benefits they receive. I am looking at it not only from the narrow aspect of the discussions with the National Maritime Board—which I mentioned in the Standing Committee, and which are still continuing—but also in regard to the vexed position of such people generally.

I assure the hon. Gentleman that these matters will be pressed as fast as possible in an attempt to meet the legitimate points made on Report.

10.0 p.m.

Sir John Hall

The Financial Secretary inadvertently has not answered the question which I put to him during the debate. I understood him to say that, under existing legislation, the husband whose wife joins him at the expense of his company, assuming that the husband is earning more than £5,000 a year, is liable for tax on the benefit enjoyed by the cost of that fare for his wife. Presumably that is also the case with other taxpayers who in the past have had incomes of £5,000 or more and whose benefits had to be returned under existing legislation as well as the proposals of this Bill. If that is so, how are Members of Parliament able to enjoy the benefits of vouchers for their wives over a period of time without apparently being surcharged for the benefit thus enjoyed in their tax—

Mr. Speaker

Order. I thought that the hon. Member for Wycombe (Sir J. Hall) was asking a question before the Financial Secretary finally sat down. The hon. Gentleman has addressed the House.

Sir J. Hall

Perhaps I might conclude by asking the Financial Secretary to answer the question which I put to him in the debate.

Mr. Nott

I am sure that the Financial Secretary is right in what he said and that when the wife of a merchant seaman receives the cost of an air fare from her husband's employer and flies abroad to join her husband's oil tanker at, say, Hong Kong, her husband is taxable on the benefit received.

I have had many cases over several years, before the Government's legislation was published, where a tax liability has arisen. I know that in debates on earlier Bills, before publication of this legislation, this matter has been one of some concern to Labour Members as well as to ourselves.

I think that it would meet the point here if the Financial Secretary could find some way of deeming the husband to be working overseas, thereby bringing the wife into the kind of legislation which takes diplomats out of benefits in kind because they are deemed to be working overseas.

However, I am not clear about the position of the wife of an airline employee or railwaymen who might conceivably have concessions by virtue of her husband's job and who travels at a concessionary rate on the airline or on the railways, and whether that would be deemed to be a benefit in kind of the husband.

We are discussing the benefits of employees. The wife is not an employee. She has no direct relationship to her husband's employer. I am not clear why it would not be possible to say that this is not a benefit of the employee but is a gift which the husband's employer makes to the wife—as my right hon. Friend the Member for Crosby (Mr. Page) says, a "facility"—which is not really a benefit of the employee at all.

If my right hon. and hon. Friends are happy to do so, I think that we can leave the matter with the Financial Secretary, because clearly he wishes to help. Nevertheless, the point is a complicated one, and we are interested in whether this does not have repercussions on the employees of airlines, the railways and so on, because clearly we are seeking an outcome which is fair and which applies equally to all.

Mr. Robert Sheldon

The basis of the assessment of the benefit is the cost to the company.

Mr. Farr

Can the Financial Secretary say something about how the Armed Forces are affected?

Mr. Sheldon

There is no change in their position.

Mr. MacGregor

By leave of the House, Mr. Speaker, I will reply. This has been a useful debate and I hope that the Financial Secretary will find some way of dealing with our genuine point, preferably before the next Finance Bill. In view of his sympathetic reply, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.