§ Mr. Terry DavisI beg to move amendment No. 61, in page 135, leave out line 24.
The ChairmanWith this, it will be convenient to consider the following amendments: No. 62, in page 135, leave out lines 25 and 26.
No. 63, in page 135, leave out lines 27 and 28.
§ Mr. DavisThe purpose of these probing amendments is to discover why the Government selected certain savings institutions. Amendment No. 61 proposes to remove from the schedule the reference to the Post Office. I understand that the only Post Office savings medium covered by the schedule is the Girobank. How did the Government decide to include the Girobank in their list of savings institutions on which the composite rate of tax on interest would be levied? They have decided to levy that rate on accounts with the Girobank but not those with the National Savings bank. What is the reason for that?
This matter was raised by some Conservative Members in a previous debate. A philosophical argument seemed to rage on the Conservative Benches about the encouragement given by the Bill to the publicly owned National Savings bank. Conservative Members argued that this was discrimination in favour of publicly owned savings institutions and against privately owned savings institutions. The Girobank is publicly owned also and is included in the list of savings institutions.
612 The Economic Secretary said that the National Savings bank differed from the other institutions because it did not lend as well as take deposits. I may be mistaken—if I am wrong, I am sure that the Economic Secretary will tell me in his reply—but I do not believe that the Girobank lends to people. It was pointed out that the National Savings bank is in the business of lending to the Government. The amendment refers specifically to the Girobank. We should like to know the basis of the Government's choice of institutions.
Amendment No. 62 involves the Trustee Savings bank. We should like the Government to justify the inclusion of that bank in the list. The Trustee Savings bank is important because many people graduate from using National Savings bank current or ordinary accounts to Trustee Savings bank accounts. Many children progress in that way as they grow up, eventually opening current accounts with the clearing banks. The Trustee Savings bank plays an important role in the economic life of the country and the education of our children.
Amendment No. 63 deals with banks under the Savings Bank (Scotland) Act 1819. As I understand it, those banks are regarded as trustee savings banks in Scotland. It is instructive to look at the long title of that Act. Its words shed light on the Government's intentions in putting a tax on the interest paid on the small accounts in the trustee savings banks and Scottish banks. The Act explains that it was introduced
for the safe custody and increase of small savings, belonging to the industrious classes of His Majesty's subjects.That may be old-fashioned language, but we all understand the intent.9.30 pm
We are discussing accounts that comprise the small savings of those who do not have a great deal of money. They are not investors; they are savers—people who have put a little by each week from their wages. People have been doing that for almost 200 years. For the first time the Government will tax the small amount of interest paid on their savings. The Government must justify the inclusion of the Scottish equivalent of the trustee savings banks.
It is not clear from paragraph 2(1)(F)) whether retail co-operative societies are included in the category of licensed deposit takers or whether their share capital constitutes relevant deposits. I should be grateful if the Economic Secretary would clarify that point. I hope that he will assure us that Co-operative Society share capital will not be affected by the schedule.
I declare an interest as a member of the Co-operative Society. That is not exceptional as it has 9 million members throughout the country. On the latest available statistics, its members contributed about £180 million to the shares of their societies, an average of £20 per member. While societies draw their membership from the whole of the community, most of it is of a working-class character, often housewives of families on low incomes, skilled or unskilled manual workers and senior citizens. Many of its members are unemployed and pay little or no tax. Many of them are in the evening of their lives and the small amounts of savings in their local societies have been built up laboriously over a lifetime and used either to supplement their living standards or to provide a reserve against the cost of their funerals.
It would be intolerable if a proposal that is of doubtful wisdom in the broadest sense were to be applied against 613 the interests of those on low incomes with a negligible tax liability. I trust that the Economic Secretary will make a clear and specific statement that co-operative society capital will not be affected by the proposed composite arrangements.
§ Mr. Ian StewartThe co-operatives would not be deposit takers and, therefore, would not be covered by the proposals.
The hon. Gentleman asked me to explain the basis for including the bodies mentioned in the amendments within the proposed arrangements. The 1819 Act savings banks are treated as savings banks for many purposes and are being included generally within the concept of savings banks. The proposals are not directed specifically at them. If those banks were set up for the industrious, and the industrious are those who work hard, presumably the banks would include many taxpayers among their savers.
The hon. Gentleman was right to say that the Post Office is included because of the Girobank. That bank does make commercial loans and it is included for that reason. National Savings banks are deposit takers, but do not compete in the lending markets with banks and building societies. The Girobank competes in only a limited way at present, but that practice is steadily increasing. Both the Girobank and the Trustee Savings banks are developing their commercial business and seeking in many ways — and it is a welcome development—to become more like other banks and licensed deposit takers in their lending activities. Therefore, it is right that they should all be treated in the same way.
§ Mr. Terry DavisI beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Question proposed, That the schedule be the eighth schedule to the Bill.
§ Mr. Terry DavisI am disappointed that the hon. Member for Croydon, South (Sir. W. Clark) has not moved amendment No. 48, which would have provided some relief for children. As I understand the amendment, it would have allowed children to open small savings accounts not liable to income tax. I should not want to associate myself with any loopholes that would enable the children of wealthy families to avoid paying tax on their savings and investments. The amendment would have meant that such children paid income tax in the same way as they do now, because they would be liable to higher rates, and even to the standard rate of income tax. Unfortunately, however, we cannot debate that as the hon. Gentleman has not moved his amendment.
The Opposition object to the new tax that will be levied on the interest received by small savers, many of whom are not at present liable to pay tax. We are told that the banks have calculated that 3 million people who do not pay income tax at present will become liable to pay it because of the Government's measure.
Throughout this evening's debate it has been clear that the Government are anxious to put banks, Trustee Savings banks and the Girobank on the same basis as building societies. Leaving aside the point that they could have done it in a different way, by scrapping the composite rate of tax on building societies—I accept that that rate of 614 tax has existed for many years under Labour and Conservative Governments—I emphasise that if the Government's aim is fiscal neutrality and to put building societies and other institutions on the same basis, they could have done so by scrapping the composite rate of tax. In that way, those who are not liable to income tax would have been able to invest in building societies without their money being taxed willy-nilly by the Chancellor.
The Government, however, have turned their face against that option and have introduced clause 27 and schedule 8 to put their fiscal policy into effect. The schedule lists many savings institutions in which people have placed small savings without having them raided by the Chancellor. The policy of taxing the small amount of interest received by those who are so poor that they are not liable to income tax is totally abhorrent to the Opposition. We shall, therefore, vote against the schedule, as we voted against the clause.
§ Question put, That this schedule be the eighth schedule to the Bill:—
§ The Committee divided: Ayes 121, Noes 17.
615| Division No. 280] | [9.38 pm |
| AYES | |
| Alison, Rt Hon Michael | Hayes, J. |
| Amess, David | Hayward, Robert |
| Ashby, David | Heathcoat-Amory, David |
| Baker, Nicholas (N Dorset) | Heddle, John |
| Baldry, Anthony | Hickmet, Richard |
| Bellingham, Henry | Holt, Richard |
| Biggs-Davison, Sir John | Hooson, Tom |
| Boscawen, Hon Robert | Howard, Michael |
| Bowden, Gerald (Dulwich) | Howarth, Alan (Stratf'd-on-A) |
| Bright, Graham | Howell, Ralph (N Norfolk) |
| Brinton, Tim | Hunt, David (Wirral) |
| Brown, M. (Brigg & Cl'thpes) | Hunter, Andrew |
| Buck, Sir Antony | Jackson, Robert |
| Butterfill, John | Jessel, Toby |
| Carlisle, Kenneth (Lincoln) | Jones, Gwilym (Cardiff N) |
| Chapman, Sydney | Jones, Robert (W Herts) |
| Chope, Christopher | Key, Robert |
| Clarke, Rt Hon K. (Rushcliffe) | Kilfedder, James A. |
| Clegg, Sir Walter | Knight, Gregory (Derby N) |
| Conway, Derek | Latham, Michael |
| Coombs, Simon | Lawler, Geoffrey |
| Cope, John | Lennox-Boyd, Hon Mark |
| Couchman, James | Lester, Jim |
| Cranborne, Viscount | Lyell, Nicholas |
| Currie, Mrs Edwina | Macfarlane, Neil |
| Dunn, Robert | MacKay, Andrew (Berkshire) |
| Durant, Tony | Major, John |
| Eggar, Tim | Mather, Carol |
| Evennett, David | Miller, Hal (B'grove) |
| Fallon, Michael | Mills, Sir Peter (West Devon) |
| Farr, John | Molyneaux, Rt Hon James |
| Finsberg, Sir Geoffrey | Moore, John |
| Forman, Nigel | Murphy, Christopher |
| Forth, Eric | Neubert, Michael |
| Fraser, Peter (Angus East) | Newton, Tony |
| Freeman, Roger | Powell, William (Corby) |
| Galley, Roy | Rathbone, Tim |
| Goodhart, Sir Philip | Rees, Rt Hon Peter (Dover) |
| Goodlad, Alastair | Renton, Tim |
| Gow, Ian | Rhodes James, Robert |
| Gower, Sir Raymond | Roe, Mrs Marion |
| Greenway, Harry | Ryder, Richard |
| Gregory, Conal | Sackville, Hon Thomas |
| Griffiths, Peter (Portsm'th N) | Sainsbury, Hon Timothy |
| Grist, Ian | Shelton, William (Streatham) |
| Ground, Patrick | Sims, Roger |
| Gummer, John Selwyn | Smith, Tim (Beaconsfield) |
| Hamilton, Hon A. (Epsom) | Soames, Hon Nicholas |
| Hamilton, Neil (Tatton) | Spencer, Derek |
| Harris, David | Spicer, Jim (W Dorset) |
| Hawkins, Sir Paul (SW N'folk) | Squire, Robin |
| Stanbrook, Ivor | Viggers, Peter |
| Stevens, Martin (Fulham) | Waddington, David |
| Stewart, Ian (N Hertf'dshire) | Walden, George |
| Stradling Thomas, J. | Wardle, C. (Bexhill) |
| Sumberg, David | Whitfield, John |
| Thatcher, Rt Hon Mrs M. | Whitney, Raymond |
| Thomas, Rt Hon Peter | Wiggin, Jerry |
| Thompson, Donald (Calder V) | Wolfson, Mark |
| Thompson, Patrick (N'ich N) | |
| Tracey, Richard | Tellers for the Ayes: |
| Twinn, Dr Ian | Mr. Douglas Hogg and |
| van Straubenzee, Sir W. | Mr. Ian Lang. |
| NOES | |
| Banks, Tony (Newham NW) | Haynes, Frank |
| Bell, Stuart | Howells, Geraint |
| Bermingham, Gerald | Hughes, Simon (Southwark) |
| Campbell-Savours, Dale | Kirkwood, Archibald |
| Cocks, Rt Hon M. (Bristol S.) | McDonald, Dr Oonagh |
| Cohen, Harry | Skinner, Dennis |
| Cook, Frank (Stockton North) | Davis, Terry (B'ham, H'ge H'l) |
| Tellers for the Noes: | |
| Fisher, Mark | Mr. Austin Mitchell and |
| Gould, Bryan | Mr. John McWilliam. |
| Hamilton, W. W. (Central Fife) |
§ Question accordingly agreed to.
§ Schedule 8 agreed to.