HC Deb 17 May 1976 vol 911 cc1092-115

(Clauses 14, 21, 24, 26, 27, 48, 52 and 64: new clauses relating to capital gains tax)

A vain considered in Committee.

Question again proposed, That the clause be read a Second time.

Mr. Winterton

The letter continues: Scandinavian pilots, too, receive a similar figure". But what about British pilots? After more than 20 years service in British Airways, and its predecessor BEA, my constituent receives what might be regarded as a large salary by some standards of £10,376 a year. My constituent's letter goes on, describing the Chancellor: Now this appalling Healey man wants to tax my concessional travel. It is a pity my union is not as strong as the NUM for example. Can you see the result in the valleys if the coalminers' coal or free houses were to be taxed? This proposal is one more example of government through envy, greed and vindictiveness, and will, if instituted, enlarge the very low morale problem among British Airways pilots. You will appreciate the effect morale can have on flight safety. Remember Papa India and all the 'aggro' which preceded its crash. The next time you fly on a civil British airliner you might consider for a moment the mood of the crew. This is an important debate. The Government are being very selective in the way in which they are hitting people below the belt. The people they are hitting are those who are doing a great deal for this country. My hon. Friend the Member for Hertfordshire, South talked about the Government getting at the bogyman of the Socialist Party—the director. Many directors are providing very good employment for many people.

Surely the Chancellor has stated previously that the middle income group of people require Government consideration and sympathy because this is the group which has borne the brunt of the pay freeze and all the other evils of recent years. Despite the fact that the Government have lifted the tax thresholds marginally this year, that has been more than offset by the rates of inflation. Far from helping the middle income man, the Chancellor has hit him again, and he is the very person this country needs to survive and prosper.

The proposals in this clause are spiteful and vindictive, and I hope that the Government will have second thoughts before the Bill proceeds any further.

Mr. Peter Rees

We are standing on the beaches of an economic Dunkirk. My pretext for this very trite statement is that the inspiration comes from Mr. Jack Jones, and anything from Mr. Jack Jones deserves the deepest consideration from this House. The movement order from our beach, though it may have been written by the Chancellor, has behind it Mr. Jack Jones. Such experience as he has in this field he derives from the Ebro. I say that in no sneering spirit. He fought for his ideals.

Mr. Eric S. Heffer (Liverpool, Walton)

A bit sooner than some of us.

Mr. Rees

I shall be interested to hear how the hon. Member reacts to recruiting mercenaries to fight on the Zambesi. I should like to know whether he supports that. If he does it is good news because so do I, whether it be on the Ebro or the Zambesi.

Mr. Tebbit

Is the pay taxable?

Mr. Rees

That we must discover.

But I doubt whether the experience Mr. Jones gained from the International Brigade is relevant to the situation of this country at the moment. Neither the Chancellor nor Mr. Jones has ever created anything in his life—not a nut, not a screw, not a car or anything. All they are doing is pursuing an obsessive hatred against management—[Interruption.] Perhaps the hon. Member for Liverpool, Walton (Mr. Heffer) would like to intervene. Perhaps he will tell us what he has created.

Mr. Heffer

The hon. and learned Gentleman seems to delight in attacking Mr. Jack Jones. When did the hon. and learned Gentleman ever work on the shop floor? When did he ever create a nut or a bolt or make any real contribution to the wealth of this country?

Mr. Rees

I am delighted to answer that question. I have never been privileged to work on the shop floor—

Mr. Heffer

Then do not attack those who have.

Mr. Rees

—but, because I have not done so, I am suitably diffident about attacking those who are responsible for creating the wealth of this country. The hon. Member might pause and consider whether, however well or badly British management may have performed, if it has not invested sufficiently, it had the prospect of profits before it. Has it had the chance to invest profitably, and has the hon. Member used his considerable weight to make certain that such investment it has made has been put to good use? Has he made certain that machines which have been installed have been run properly and not overmanned? These are the kind of problems we should be focusing upon instead of the entirely irrelevant provisions in the Bill.

In an ideal world all salaries, perquisites and remunerations, whether in cash or kind, should be assessable to tax. The principle is easy to state, but we do not live in an ideal world. Our tax system is shot through with anomalies. Our taxes are too high. Remuneration of management is too low. What justification is there therefore for this further twist of the fiscal screw?

As many of my hon. Friends have pointed out, the clause will operate in a haphazard way. In a fair world why should a professional man who advises himself not be assessed to tax on the benefit of his advice? Why should the painter who paints his wife not be taxed on the value of the portrait? Why should not the coal miner who gets free coal be assessed upon that? Above all, why should not a Minister of the Crown who enjoys considerable perquisites not be assessed to tax on their value?

Mr. Arthur Lewis (Newham, North-West)

Hear, hear.

Mr. Rees

I am glad to have a sympathetic response from at least one hon. Member. I hope he will go even further in his support and follow us into the Division Lobby.

I would never say that a Minister of the Crown was overpaid. I would not claim that even the Financial Secretary pursues his avocation for reward. I know that it is the scent of glory in his nostrils that keeps him on the Front Bench tonight. But is it right that Ministers should enjoy these perquisites and yet be outside the scope of the Bill?

I tabled two Questions recently in order to determine for the purposes of this debate just what perquisites Ministers enjoy. Let me tell the Committee what they enjoy in the way of transport. Seventy-two chauffeur-driven cars are currently available for use by Ministers of the Crown—20 Rover 3.5s, 20 Wolseley 2200s, 31 Wolseley 6s and one Austin 2200. I wonder which Minister is relegated to the Austin? The answer goes on: The current estimated cost of operating these vehicles is £760,000. This sum includes wages, overtime, insurance, superannuation, fuel, repairs and maintenance, depreciation, garaging, rates, security measures, administration, overheads and interest on capital employed. Ministers are not normally authorised to use official cars for private or domestic purposes other than for their own journeys between home or station or airport, and office within a limited area. This is precisely the use of a company car which will constitute a perquisite within the provisions we are now debating. The answer goes on: Exceptionally, wives or husbands of Ministers may also use cars for official or semiofficial purposes associated with their husbands' or wives duties."—[Official Report, 30th April 1976; Vol. 910, c. 197.] What are semi-official purposes?

That is not the finish. I hope I am not boring the Committee but I also asked the Minister: …for which Ministers of the Crown benefits are provided; if he will list the benefits under the following heads: living or other accommodation, entertainment, domestic or other services, the availability of the car for private use by himself or members of his family or household and other benefits and facilities of whatever nature. The Committee may have noticed that I have used the exact phraseology contained in the Bill.

The information is revealing:

Living or other accommodation is traditionally provided as follows:

PRIME MINISTER: No. 10 Downing Street and Chequers.



LORD CHANCELLOR: A flat in the Palace of Westminster.


"I hope the Scottish National Party Members are here— Bute House, Edinburgh. Three flats are provided in Admiralty House for ministerial use, and two are at present occupied by the Secretary of State for Defence and the Secretary of State for Northern Ireland.

That provides material for another question—why the Government should be so profligate as to keep one flat entirely empty.

It goes on: Chequers, Dorneywood and Bute House are administered by trusts. Contributions from public funds are made to the upkeep of Chequers and Bute House. Entertainment Ministers are not personally provided with funds for entertainment, although £5,000 of the Prime Minister's salary is free of tax to meet expenses incurred in that office, including entertainment.

Mr. Heffer

Quite right, too.

Mr. Rees

"Quite right, too," the hon. Gentleman says, but what is sauce for the ministerial goose is also sauce for the managerial gander—[Interruption.] If the hon. Member tries to catch your eye later, Mr. Godman Irvine, no doubt you will look upon him with sympathy.

Mr. Heffer

The chairman of ICI is not the Prime Minister.

Mr. Rees

The chairman of ICI sometimes takes decisions of comparable magnitude.

The answer goes on: The cost of official entertainment expenditure for Ministers is met either by the Government Hospitality Fund or through Departmental Votes. Does it relate to buyers from overseas, I wonder? It will reassure hon. Gentlemen that no domestic service is provided from public funds: No other benefits or personal facilities are provided for Ministers. It is not possible at present to segregate the costs relating to the residential and official uses of the accommodation provided."—[Official Report, 11th May 1976. Vol. 911, c. 132–3.] I would respectfully suggest that the Ministers concerned had better apply their minds to this problem rather quickly. I put them on notice that I, and no doubt some of my hon. Friends, will be putting down an amendment in Committee upstairs to provide that directors for this purpose shall include Ministers of the Crown.

These provisions exhale the rank odour of Socialism. They demonstrate that once again envy and meanness have been elevated into a principle of government.

10.15 p.m.

The Financial Secretary to the Treasury (Mr. Robert Sheldon)

The hon. and learned Member for Dover and Deal (Mr. Rees) ended with a reference to the envy and meanness which he claimed motivated this Government in their proposals for benefits in kind. I noticed a certain amount of envy and meanness in some of his remarks, but I do not propose to dwell on those matters since we shall have the pleasure in Standing Committee of hearing the hon. and learned Member, who will presumably go further into the details. The main debates in these matters will be held in Standing Committee.

I have had put to me a number of questions. Perhaps I might deal with some of those of which I took note. I shall deal with others when we discuss the detailed provisions elsewhere. I can assure the hon. Member for Windsor and Maidenhead (Dr. Glyn) that retired employees will not be taxed on anything except loan waivers and stop-loss protection. I can assure the hon. Member for St. Ives (Mr. Nott) that home loans for amounts less than £25,000 are not affected by this legislation.

Strictly, of course, the hon. Member for St. Ives is right in saying that directors of charities are to be treated as directors, but I shall be giving this matter fuller consideration in those cases where anomalous results might be produced. Perhaps we can take this further on another occasion. On the aggregation point raised by the hon. Member for Chingford (Mr. Tebbit), a husband and wife will each have their own £5,000 limit.

Mr. Tebbit

The Minister will, of course, deal with my other point about aggregation of incomes coming to one person from more than one source.

Mr. Sheldon

I should like to take that further in our detailed discussion in Standing Committee.

Mr. John Peyton (Yeovil)

Why not deal with it now?

Mr. Sheldon

The right hon. Gentleman may not realise it, but this is a debate on Clause 52, which was selected by the Opposition. It does not cover the other six or seven clauses which have been mentioned during this debate and which, if one dealt with them, would detract from much of the further detailed discussion which it is the purpose of this procedure to protect.

Mr. Peyton

It is an extraordinary argument that points made by my hon. Friends, not ruled out of order and sounding perfectly legitimate, should be waved to one side by the Minister on the ground that they will be discussed in Standing Committee. Why in the name of conscience should Ministers not answer points which have been fairly made in the Chamber, particularly those which embarrass them because they deal with intolerable privileges given to Ministers under the Bill?

Mr. Sheldon

I understand the right hon. Gentleman wanting to say something as soon as he arrives in the Chamber, but if we were to behave strictly according to the rules of order, these matters should not even be raised, let alone in the way they have been. [HON. MEMBERS: "Oh."] Hon. Members who understand the Finance Bill provisions know that many of the points raised this evening arise under Clauses 53, 54, 55 and 56 and that it is only right that we should deal here with the broad principle underlying the legislation, to which adequate scrutiny needs to be given. I intend to reply to the many points that were put while the right hon. Member for Yeovil (Mr. Peyton) was not present. Unfortunately, he did not have the opportunity of hearing the wide-ranging debate to which it is my privilege to reply in as much detail as time will permit.

The hon. Member for Chertsey and Walton (Mr. Pattie) said that no one liked fringe benefits. This comment was echoed and re-echoed from the Opposition Benches throughout the debate. The hon. Member for Kingston-upon-Thames (Mr. Lamont) said that ideally all benefits in kind should be taxable, and the hon. Member for Windsor and Maidenhead repeated that sentiment in almost the same words. The hon. Member for St. Ives said that in equity all benefits should be taxed together with income. No one had much of a good word to say for fringe benefits.

The main difference between the Opposition and the Government is that the Opposition dislike fringe benefits and are prepared to do nothing about them because of the obvious problems, but the Government face those problems and have introduced this legislation which it is my job to defend and explain.

Several hon. Gentlemen raised the question of the treatment of cheap airline travel as a benefit in kind, in particular the hon. Members for Uxbridge (Mr. Shersby), Twickenham (Mr. Jessel), Windsor and Maidenhead, Surrey, North-West (Mr. Grylls) and Chingford (Mr. Tebbit).

Mr. Lawson

Does the Minister concede that under the Labour Government the incidence of fringe benefits has increased considerably as a direct result of the taxation and incomes policies followed by the Government?

Mr. Sheldon

Precise information on broad general issues such as that is hard to obtain, but I think the hon. Gentleman's impression is probably the same as mine, that the incidence of fringe benefits has been increasing in Britain over the past 20 years, or perhaps more, and the time has clearly come when fringe benefits need to be taxed in the same way as other emoluments.

Hon. Gentlemen put a number of questions about airline concessionary travel. I was asked about the assessment of the value received by the individual. I fully accept, as the hon. Member for Surrey, North-West said, that the value of the concessionary airline ticket is not the same as the value of a ticket sold to the public because of the limitations placed upon its use. We intend to take account, in assessing the benefit of cheap airline travel, of the fact that employees may be off-loaded or otherwise delayed or inconvenienced, and the benefit at arm's length—plainly less than that of a full fare—will be the subject of negotiation between the airlines and the Inland Revenue. The legislation gives us a fair amount of time—until 1977–78, when it comes into force—for the consultations and discussion I have mentioned.

Mr. Kenneth Lewis

Is the right hon. Gentleman also proposing to discuss with the National Union of Mineworkers and the National Coal Board the assessment of the value of the coal concession to the miners, some of which is sold by the miners?

Mr. Sheldon

I shall come to that in due course.

Several hon. Gentlemen put to me the necessity to treat the private sector and the public sector in the same way, and I fully agree with that.

The hon. Member for Kingston-upon-Thames mentioned living accommodation occupied by Ministers and those in the public service. The hon. Member for St. Ives also dealt with that aspect of the problem and thought that the concept of representative occupation was, to use his words, a fiddle. Since 1948 the statutory provision concerning representative occupation has applied to directors and higher-paid employees. It first applied to those with incomes above £2,000 and more recently to those with incomes of more than £5,000. The provision in relation to employees goes back to cases in the last century when a distinction was drawn between a representative and a beneficial occupation. We shall be dealing with the details in Standing Committee.

A case has recently been decided in the High Court affecting the general position of representative occupation. It concerned a police officer who was held by the Court to be in representative occupation of a police house 20 miles away from where he was serving as a member of the regional crime squad. The judgment was given on 1st April this year, and I have not yet had the pleasure of seeing it. I understand that it has not yet been published, but clearly because of its impact on this legislation I shall consider the matter in more detail when it is published. The case throws up some possibility of a need for changes in the definition of representative occupation.

I shall be setting up an interdepartmental review into the distinction between representative and beneficial occupation. It will cover all the cases mentioned in this debate. It will cover persons with more than £5.000 a year and those with less than that sum; it will cover the public and private sectors as well as the directors of companies and others. Since the provisions of the Finance Bill will not come into effect until 1977–78 there will be time to incorporate any changes aris- ing from this review as from the same date.

I turn to the subject of miners' concessions—a matter which appears to interest some Conservative Members. There are a number of extrastatutory concessions which are published and in which the practice has grown up that tax is not paid. The three extrastatutory concessions that come to mind include miners' coal, luncheon vouchers and directors with less than 5 per cent. shareholdings. We do not intend to change any extra-statutory concessions in so far as they affect benefits in kind.

The hon. Member for St. Ives mentioned National Coal Board employees who in the past occupied their houses as representative occupiers. If they have done so on that basis, they will continue to do so, and if they have previously been treated as beneficial occupiers, they will pay the relevant amount of tax in future as they have in the past.

I turn to the proposals dealing with motor cars. I should also like to deal with ministerial cars and the benefits in that respect. The hon. Member for St. Ives quoted a number of letters from constituents or members of the public who apparently find the present arrangement satisfactory in those cases where benefits are agreed between the taxpayer and the inspector.

With due deference to the hon. Gentleman, I believe that the arrangement between the tax inspector and the taxpayer does not allow for the close investigation of the benefit received. What we know happens in many cases is that the person receiving a benefit will make one claim and the inspector will have a struggle with him, but we also know that there is no adequate basis of assessment as to the amount to be paid.

10.30 p.m.

This is the weakness of the present system, that the inspector is virtually confined to a haggle without information. The hon. Member for St. Ives talked about the arbitrary assessment of the new scheme. I can think of nothing more arbitrary than the way this is done at present. In assessing the proportion of private benefit that is obtained by the taxpayer, the Revenue is hopelessly uninformed as to the basis on which it may finally settle an agreed figure. What we are now to have is a modest charge.

When we think of the amount of benefit we must think not of those people with cars that are owned and provided by their companies, but of the millions of people who out of their own taxed resources, provide their own cars, together with the cost of running them and all the standing charges connected with them. That must be borne in mind in considering the modest proposal that is provided for in the Bill. There is a string feeling among those who provide their own cars, who go to great lengths in sacrificing their other requirements to maintain a car, about the advantages that some others have been able to acquire by means of cars provided by their companies.

Mr. Peter Rees

The Minister has told us that the Inland Revenue is short of information to determine these important points. Could it not be that as a result of the debate we had on the provisions of Schedule 6 the Revenue will soon be armed with provisions which will enable it to get any information it requires on this or any other relevant subject?

Mr. Sheldon

I do not propose to go over that lengthy debate once more. That subject was pretty well exhausted and I noted the contribution of the hon. and learned Gentleman.

I not the concern expressed by a number of hon. Members concerning ministerial cars and the benefits Ministers are supposed to have from the arrangement for pool cars. Pool cars are fundamentally different from other cars provided by companies. I will explain the difference. I have a pool car. [Interruption.] If the hon. Gentleman will allow me I will explain the limitations upon me as a Minister in respect of my pool car. Any Minister has to observe such limitations. The care is not available to him in the same way as a car owned by a company and let to its employee is available.

Mr. Peter Rees

Why not?

Mr. Sheldon

It is not. That is the reality of the situation. The car is not available to a Minister for holidays, weekend pleasure travel and so on. How many Ministers have been in a position to give up their own cars? I and most of the Ministers I have spoken to on this retain their own cars simply because the pool car is not available for so many journeys which they consider essential to their duties.

Some hon. Gentleman have been talking about Ministers having slinky limousines. My pool car is an 1800 Wolseley—hardly a slinky limousine. My private car is not so modest and is more high-powered. I pay in full for its maintenance and upkeep generally. I understand the anger of Opposition Members about the problem as it affects them and their constituents. They are seeking desperately to show that there are areas of privilege for Ministers. if they consider this carefully they can see that our privilege is circumscribed.

Sir Paul Bryan (Howden)

When will the hon. Gentleman come down to earth? Does a lady Minister never use her car to go to the hairdresser?

Mr. Sheldon

On the way to an appointment that is possible, I suppose. [Laughter.] Hon. Members opposite are scratching very hard tonight, they really are, especially when one considers that in a company car people can go on visits to the Continent on holiday travel—indeed, one sees a lot of company cars over there. I am not denying those concerned such private benefits. All I am saying is that such benefits should have some relevance to the tax payable.

Dr. Jeremy Bray (Motherwell and Wishaw)

Surely hon. Members opposite can get the answer about hairdressing appointments from the Leader of the Opposition's use of her official car.

Mr. Sheldon

That is an interesting point but I leave it to the Opposition to take up.

The self-employed are not covered by this provision. We have introduced it to come into effect in 1977–78. We believe that benefits in kind are part of the emoluments of a person. The Opposition and the Government share that view; the difference is that we have decided to do something about it. But we understand the problems.

Mr. Esmond Bulmer (Kidderminster)

What estimate have the Government made of the effect on British Leyland of this proposal? Does the hon. Gentleman realise that 90 per cent. of companies buy British? Under this proposal, it will be up to individuals to buy their cars and there will be a significant shift to foreign cars.

Mr. Sheldon

My right hon. Friend and I will be meeting representatives of the car industry on Wednesday in one of what may be a series of meetings and consultations. The provision does not come into force until 1977–78, so there is plenty of time for consultation. These benefits are part of the emoluments and income of a person and they should be taxed not only in principle, as the Opposition say, but in practice as well. We believe both in the principle and in the practice. We shall listen to representations, but we believe that this is a valuable provision.

Mr. Arthur Lewis

I accept what my hon. Friend says about the fairness of this tax, but can he explain the logic or fairness of the fact that Back Benchers who go home in their own cars will, if they claim any allowance, be taxed on it, quite rightly, whereas a Minister, who has been here doing the same sort of work, gets his transport home tax-free?

Sir John Hall

The Minister has not told us why this provision is aimed entirely at directors and those earning over £5,000 a year.

Mr. Sheldon

The problem with the director is that he has a control over his own emoluments and over parts of the benefits he receives. He has representation on the board that is not open to the employee. That aspect is already covered in legislation.

Mr. Nott


Mr. Sheldon

The hon. Gentleman says "Nonsense", but he will know that this is a matter which has been on our statute book for 28 years. Many of his hon. Friends and himself have had plenty of time to alter this general provision during that period. The provision applying to directors has been part of our legislation through many Governments over all those long years. If the hon. Gentleman is now prepared to disown it, let him say so and seek to repeal it. He did not take that opportunity before, and I do not see why he should take it again.

On the question of ministerial cars, my hon. Friend the Member for Newham, North-West (Mr. Lewis) may not have heard the detailed explanation about pool cars as opposed to company cars.

As to the £5,000, this was an increase on the previous level of £2,000, and these levels are always subject to review at any time.

Mr. Nott

It really is a gross impertinence of the Financial Secretary to excuse himself from answering the majority of questions asked in the debate by saying that much of what was said was outside the terms of the clause.

Clause 52 is the widest clause, headed "General provision charging benefits". If the Financial Secretary had read the clause he would know that every single question posed to him was in order, and he has answered virtually none of them. If he finds his own legislation rather confusing, he has our sympathy, but the Government are bringing forward this Bill to codify and modify benefits in kind, and the Government are therefore under an obligation to answer the questions put by my hon. Friends.

The most authentic note in the debate was probably sounded by the hon. Member for Ealing, Southall (Mr. Bidwell), who is not here at the moment. He intervened earlier and said that the shop stewards at London Airport did not oppose the principle of taxing benefits. They just did not like the way that it affected them. Precisely. I have great sympathy with the shop stewards at London Airport and the people they represent. They are in favour of the principle but do not like the way it affects them.

The Financial Secretary mentioned his own car. The Chancellor of the Exchequer is bringing forward this legislation. He likes it in principle but it does not affect him. The hon. Member for Newham, North-West (Mr. Lewis) made a very valuable point. The fact of the matter is that employees in this country, whatever they earn, cannot claim back from the tax man the cost of their travel to and from work. Why is it that Ministers driving pool cars can travel backwards and forwards to work and that this is not a taxable benefit? The Financial Secretary has not answered that point. That was one of many questions that I asked him. Does not he always use the same driver and the same car?

Mr. Robert Sheldon

It varies. There are occasions when the car goes in for service—[Interruption.] There are occasions when the car—[Interruption.] Before the hon. Gentlemen get so excited, perhaps I can tell them something about the Government car service which they do not know. I get a different car once or twice a week. What I have provided for me is a car.

Mr. Nott

If the Financial Secretary has to change his car occasionally because it breaks down, that is understandable enough, but the Chancellor of the Exchequer and most senior Ministers have the same driver and the same car each time. By no possible stretch of the imagination can those cars be described as pool cars. They are certainly not pool cars in any way in which the layman would understand the term.

Mr. Robert Sheldon

During the years 1970–74, the same position applied to cars as that which applies now. The hon. Gentleman was happy with the arrangement whereby he came from his place of residence to his office and was not taxed, in contrast to other people, and he did nothing about it. The difference now is that we are trying to get it on to a sensible basis.

10.45 p.m.

Mr. Nott

There is no difference at all. The only fundamental change is that the Government themselves are bringing forth this legislation to codify the law. If the Government put legislation in the Bill, they must justify it to the House.

I shall not repeat what I said in opening this debate, but anyone reading Hansard tomorrow will see that I discussed at some length the concept of representative occupation. The Financial Secretary has made some reference to the Conservative administration. I well remember when the then Chancellor of the Exchequer was offered Chevening, in Kent, as a house for the Chancellor. Lord Barber, the then Chancellor, turned it down because he would have been taxed on the occupation of Chevening as a benefit in kind, and he felt that he could not bring forward legislation to exempt himself from tax. For that reason, Chevening is not now occupied by the Chancellor of the Exchequer—

Mr. George Cunningham

Chevening was accepted by the then Government.

Mr. Nott

It was not accepted by Lord Barber, and that is why it is not occupied by the Chancellor. But why the difference between one Government house and another? In Committee upstairs we shall want to go into this in great depth. The Chancellor does not work at No. 11 Downing Street. It is not essential that he lives there for the purpose of carrying out his job. He works in the Treasury.

This difficulty has arisen because of the oppressive tax rates imposed by the Government. None of this could arise if the rates of tax on higher incomes had not been raised to 83 per cent. for earned income by this Government. The problem arises because of the way that taxation has risen to penal levels under this Government. It is no use the Financial Secretary saying that the Government are a bit concerned about this, so they have set up an interdepartmental committee headed by the Inland Revenue to consider the difference between beneficial and representative occupation.

Are we living in a dream world? The Government bring forward legislation to change the basis and codify it. Then, in presenting the legislation, they tell us that an interdepartmental committee has been set up within the Civil Service to consider the principles. Why was not it done before the legislation was brought forward?

My hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont) made the point that private school boarding allowances for diplomats were untaxed. Earlier, when we were discussing the Chancellor being untaxed, the hon. Member for Liverpool, Walton (Mr. Heffer) shouted "Quite right, too." Does he think it quite right that members of the Foreign Office should be allowed to send their children to Eton, Harrow and other distinguished schools and not be taxed on the benefit?

I have a Parliamentary Answer before me. I could not believe that it was correct, and that is why I intervened in the speech of my hon. Friend the Member for Kingston-upon-Thames. I have friends in the Services, and I am quite sure that they pay tax on the benefits which they obtain from sending their children to private schools. But, according to this Parliamentary Answer, Foreign Office officials do not pay. Why? Is it because it is abroad? It was the Government who changed the basis of overseas income, taxation and benefits. It was this Government who brought forward the legislation. Why should diplomats be excluded'? Why should they receive a non-taxable benefit in sending their children to private schools? An employee who contributes to a private health scheme in his firm will be taxed on the benefit. How petty! Yet our ambassador in Paris can send his child to a leading public school and no tax is paid. It is "two nations ". The Financial Secretary will not be able to get away in Committee with that sort of speech he made tonight.

We are not so much concerned with the ambassador in Paris and his perks as with the hundreds of thousands of salesmen who necessarily use their cars for work and who will now pay extra tax. I am talking about people on £90 a week, not rich people or highly paid occupations. These salesmen will pay more in extra tax than the £4 they receive under the Chancellor's prices and incomes policy. What justice is there in that? These are the people the Chancellor said he wanted to help.

Hon. Members will remember the row which was caused when the Inland Revenue published a notice on the taxation of the compensation received by transport drivers when they stayed away overnight. The TG and WU was up in arms about it. Now most transport drivers will be brought in, as will airline staff, to whom a number of my hon. Friends have referred, and commuters, who are one of the most had-pressed sectors of the community. Commuters will be taxed on the miserable little loans which enable them to buy season tickets, and some now have to pay £600 or £700 for a season ticket. Is this higher-paid employment? Not a bit of it. These are people earning between £80 and £100 a week. The highest marginal rate of tax increase will be for those earning just under £100 a week. When the benefits are added, they will go over the top.

The Financial Secretary has said he will make changes in the proposals as they relate to charities, but why did he not realise that people running charities on salaries of £1,000 a year would have to pay tax on the benefit of having a car? It is clear that this would have been the position.

What about railwaymen? I have had hundreds of letters from railwaymen all over the country. I shall pass them to the Chief Secretary. He can count them. I am glad that, with his background, he can count.

I asked earlier how railwaymen would be assessed, but I did not receive an answer. The only answer we received from the Financial Secretary was that the proposal did not apply to home loans up to £25,000. But I never asked about that. I asked what would happen to a loan provided by an employer to an employee. The beneficial element in the interest will be taxed if the employee earns over £5,000. [Interruption.] The Chief Secretary says "No". Perhaps I am wrong.

Division No. 140.] AYES [10.55 p.m
Anderson, Donald Davis, Clinton (Hackney C) Jay, Rt Hon Douglas
Archer, Peter Deakins, Eric Jenkins, Rt Hon Roy (Stechford)
Armstrong, Ernest Dean, Joseph (Leeds West) John, Brynmor
Atkins, Ronald (Preston N) Dempsey, James Johnson, James (Hull West)
Bagier, Gordon A. T Doig, Peter Johnson, Walter (Derby S)
Bain, Mrs Margaret Dormand, J. D Jones, Barry (East Flint)
Barnett, Rt Hon Joel (Heywood) Duffy, A. E. P Judd, Frank
Bates, Alf Eadie, Alex Kilroy-Silk, Robert
Bean, R. E Edge, Geoff Lamond, James
Bennett, Andrew (Stockport N) Edwards, Robert (Wolv SE) Latham, Arthur (Paddington)
Bidwell, Sydney Ellis, Tom (Wrexham) Lewis, Ron (Carlisle)
Bishop, E. S Ennals, David Lipton, Marcus
Blenkinsop, Arthur Evans, Gwynfor (Carmarthen) Loyden, Eddie
Boardman, H Evans, loan (Aberdare) Luard, Evan
Bottomley, Rt Hon Arthur Ewing, Harry (Stirling) McCartney, Hugh
Boyden, James (Bish Auck) Ewing, Mrs Winifred (Moray) MacCormick lain
Bradley, Tom Faulds, Andrew McElhone, Frank
Bray, Dr Jeremy Fernyhough, Rt Hon E Macfarquhar, Roderick
Brown, Hugh D. (Proven) Fletcher, Raymond (Ilkeston) McGuire, Michael (Ince)
Brown, Robert C. (Newcastle W) Fletcher, Ted (Darlington) Mackenzie, Gregor
Brown, Ronald (Hackney S) Foot, Rt Hon Michael Mackintosh, John P
Buchan, Norman Ford, Ben McMillan, Tom (Glasgow C)
Buchanan, Richard Forrester, John McNamara, Kevin
Callaghan, Rt Hon J. (Cardiff SE) George, Bruce Madden, Max
Campbell, Ian Gilbert, Dr John Magee, Bryan
Canavan, Dennis Ginsburg, David Mallalieu, J. P. W
Carmichael, Neil Golding, John Marquand, David
Clemitson, Ivor Gould, Bryan Marshall, Dr Edmund (Goole)
Cocks, Michael (Bristol S) Graham, Ted Maynard, Miss Joan
Cohen, Stanley Grocott, Bruce Mendelson, John
Coleman, Donald Hamilton, James (Bothwell) Miller, Dr M. S. (E Kilbride)
Colquhoun, Ms Maureen Harper, Joseph Miller, Mrs Millie (Ilford N)
Concannon, J. D Harrison. Walter (Wakefield) Mitchell, R. C. (Solon, Itchen)
Conlon, Bernard Hart, Rt Hon Judith Molloy, William
Cox, Thomas (Tooting) Hatton, Frank Morris, Charles R. (Openshaw)
Craigen, J. M. (Maryhill) Henderson, Douglas Moyle, Roland
Crawford, Douglas Horam, John Noble, Mike
Crawshaw, Richard Howell, Rt Hon Denis Ogden, Eric
Cronin, John Huckfleld, Les O'Halloran, Michael
Crosland, Rt Hon Anthony Hughes, Robert (Aberdeen N) O' Halloran, Michael
Cunningham, G. (Islington S) Irvine, Rt Hon Sir A. (Edge Hill) Orbach, Maurice
Davidson, Arthur Irving, Rt Hon S. (Dartford) Ovenden, John
Davies, Bryan (Enfield N) Jackson, Colin (Brighouse) Padley, Walter
Davies, Denzil (Llanelli) Jackson. Miss Margaret (Lincoln) Palmer, Arthur

What about those occupying accommodation in educational establishments —those in the polytechnics and universities? They may be earning £80 or £90 a week. They will come into tax.

We have debated this matter at length. We must bring it to a close. This legislation, unknown to the country, will bring hundreds of thousands of unsuspecting and unknowing citizens into tax for benefits in a way that they do not begin to understand or contemplate. As we debate this legislation we are in the middle of a new prices and incomes negotiation which the Government are trying to get accepted by the trade unions. It is a gross error of political judgment to try to bring forward this sort of codifying legislation at this time. The Government will be made to look foolish. I must advise my right hon. and hon. Friends to vote against the clause.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 195, Noes 166.

Question accordingly agreed to.

Park, George Short, Rt Hon E. (Newcastle C) Walker, Harold (Doncaster)
Parry, Robert Siliars, James Walker, Terry (Kingswood)
Pavitt, Laurie Silverman, Julius Ward, Michael
Pendry, Tom Skinner, Dennis Watkins, David
Phipps, Dr Colin Small, William Weitzman, David
Prentice, Rt Hon Reg Smith, John (N Lanarkshire) White, Frank R. (Bury)
Prescott, John Snape, Peter White, James (Pollok)
Price, William (Rugby) Spearing. Nigel Whitlock, William
Radice, Giles Spriggs, Leslie Wigley, Dafydd
Reid, George Stallard, A. W. Williams, Alan (Swansea W)
Richardson, Miss Jo Stewart, Donald (Western Isles) Williams, Sir Thomas
Roberts, Albert (Normanton) Stott, Roger Wilson, Alexander (Hamilton)
Robertson, John (Paisley) Strang, Gavin Wilson, Rt Hon H. (Huyton)
Robinson, Geoffrey Taylor, Mrs Ann (Bolton W) Wilson, William (Coventry SE)
Roderick, Caerwyn Thomas, Jeffrey (Abertillery) Wise, Mrs Audrey
Rooker, J. W. Thomas, Ron (Bristol NW) Woodall, Alec
Roper, John Thompson, George Woof, Robert
Ross, Rt Hon W. (Kilmarnock) Thorne, Stan (Preston South) Young, David (Bolton E)
Rowlands, Ted Tierney, Sydney
Sandelson, Neville Tinn, James TELLERS FOR THE AYES:
Sedgemore, Brian Torney, Tom Mr. David Stoddart and
Shaw, Arnold (Ilford South) Wainwright, Edwin (Dearne V) Mr. John Ellis
Sheldon, Robert (Ashton-u-Lyne) Walden, Brian (B'ham, L'dyw'd)
Adley, Robert Hayhoe, Barney Page, Rt Hon R. Graham (Crosby)
Aitken, Jonathan Hicks, Robert Pardoe, John
Amery, Rt Hon Julian Higgins, Terence L. Parkinson, Cecil
Arnold, Tom Holland, Philip Penhaligon, David
Atkins, Rt Hon H. (Spelthorne) Hordern, Peter Percival, Ian
Banks, Robert Howell, David (Guildford) Peyton, Rt Hon John
Beith, A. J. Howells, Geraint (Cardigan) Price, David (Eastleigh)
Benyon, W. Hunt, David (Wirral) Prior, Rt Hon James
Berry, Hon Anthony Hunt, John Pym, Rt Hon Francis
Biffen, John Hurt, Douglas Rathbone, Tim
Body, Richard Hutchison, Michael Clark Rees, Peter (Dover & Deal)
Boscawen, Hon Robert Jenkin, Rt Hon P. (Wanst'd & W'df'd) Rees-Davies, W. R.
Brittan, Leon Jessel, Toby Renton, Rt Hon Sir D. (Hunts)
Brown, Sir Edward (Bath) Johnson Smith, G. (E Grinstead) Renton, Tim (Mid-Sussex)
Bryan, Sir Paul Kershaw, Anthony Rhys Williams, Sir Brandon
Budgen, Nick Kilfedder, James Rippon, Rt Hon Geoffrey
Bulmer, Esmond Kimball, Marcus Roberts, Michael (Cardiff NW)
Chalker, Mrs Lynda King, Evelyn (South Dorset) Roberts, Wyn (Conway)
Channon, Paul King, Tom (Bridgwater) Rossi, Hugh (Hornsey)
Churchill, W. S. Kitson, Sir Timothy Sainsbury, Tim
Clark, Alan (Plymouth, Sutton) Knight, Mrs Jill Shelton, William (Streatham)
Clarke, Kenneth (Rushcliffe) Knox, David Shepherd, Colin
Clegg, Walter Lamont, Norman Shersby, Michael
Cockcroft, John Langford-Holt, Sir John Silvester, Fred
Cooke, Robert (Bristol W) Lawson, Nigel Sims, Roger
Cope, John Le Merchant, Spencer Sinclair, Sir George
Davies, Rt Hon J. (Knutsford) Lester, Jim (Beeston) Skeet, T. H. H.
Dean, Paul (N Somerset) Lewis, Kenneth (Rutland) Smith, Dudley (Warwick)
Dodsworth, Geoffrey Lloyd, Ian Speed, Keith
Drayson, Burnaby Loveridge, John Spicer, Michael (S Worcester)
Dykes, Hugh Luce, Richard Stainton, Keith
Eden, Rt Hon Sir John Macfarlane, Neil Stanbrook, Ivor
Edwards, Nicholas (Pembroke) Macmillan, Rt Hon M. (Farnham) Steel, David (Roxburgh)
Elliott, Sir William Marten, Neil Steen, Anthony (Wavertree)
Farr, John Maude, Angus Stradling Thomas, J.
Fell, Anthony Maudling, Rt Hon Reginald Tapsell, Peter
Finsberg, Geoffrey Maxwell-Hyslop, Robin Taylor, R. (Croydon NW)
Fisher, Sir Nigel Mayhew, Patrick Taylor, Teddy (Cathcart)
Fletcher, Alex (Edinburgh N) Meyer, Sir Anthony Temple-Morris, Peter
Fookes, Miss Janet Miller, Hal (Bromsgrove) Thomas, Rt Hon P. (Hendon S)
Forman, Nigel Mills, Peter Tugendhat, Christopher
Fowler, Norman (Sutton C'f'd) Mitchell, David (Basingstoke) Wainwright, Richard (Coins V)
Freud, Clement Moate, Roger Wakeham, John
Gardiner, George (Reigate) Monro, Hector Welder, David (Clitheroe)
Glyn, Dr Alan Moore, John (Croydon C) Walters, Dennis
Gorst, John More, Jasper (Ludlow) Weatherill, Bernard
Gower, Sir Raymond (Barry) Morgan, Geraint Whitelaw, Rt Hon William
Gray, Hamish Morrison, Charles (Devizes) Wiggin, Jerry
Griffiths, Eldon Morrison, Hon Peter (Chester) Winterton, Nicholas
Grimond, RI Hon J. Mudd, David Wood, Rt Hon Richard
Grist, Ian Nelson, Anthony Young, Sir G. (Ealing, Acton)
Grylls, Michael Newton, Tony Younger, Hon George
Hall, Sir John Normanton, Tom
Hall-Davis, A. G. F. Noll, John TELLERS FOR THE NOES:
Hamilton, Michael (Salisbury) Oppenhelm, Mrs Sally Mr. Carol Mather and
Hampson, Dr. Keith Osborn, John Mr. John Corrie.
Harvie Anderson, Rt Hon Miss Page, John (Harrow West)

Clause 52 ordered to stand part of the Bill.

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