§ LORD GRANTCHESTERMy Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
§ [The Question was as follows:
§ To ask Her Majesty's Government whether the loss on the value of savings from the debasement of the value of sterling will be allowable against any liability to capital gains tax.]
§ LORD BESWICKMy Lords, it would be neither right nor practicable to single 523 out for special treatment a fall in the value of money due to devaluation as distinct from falls attributable to other factors. All tax liabilities are calculated in sterling, and a loss is allowed for capital gains tax purposes only if the cost in terms of sterling of the asset and of the expenses incidental to its acquisition and disposal exceeds the disposal price in terms of sterling.
§ LORD GRANTCHESTERMy Lords, are we to understand that in respect of the International Monetary Fund Her Majesty's Government accept the view that compensation is payable to make good any loss due to devaluation?—because Governments have agreed upon this code of conduct, which seems to me to be elementary honesty. Will they now work out a system which does not discriminate against British citizens who lend their savings to the Government and in favour of foreign lenders? And, in view of what the Minister has said about the capital gains tax, has not devaluation made the capital gains tax unfair and unworkable? So NA/ill Her Majesty's Government take a new look at this tax in the light of what has happened?
§ LORD BESWICKMy Lords, the difference between our liability to the I.M.F. and our transactions in this country is that in the one case we are borrowing foreign currency and in the second case the transaction is entirely in terms of sterling. So far as discrimination is concerned, I am sure the noble Lord, whom I know to be a fair-minded person, would not wish to discriminate in favour of the capital gains taxpayer as against, say, the individual who puts his money in the Post Office Savings Bank.
LORD SALTOUNMy Lords, seeing that capital gains tax is charged on all properties, and that in the end properties all come to what one might call international prices, is it not possible, and possibly the Government's view, that by judicious devaluation from time to time they will ultimately get all the property in the country into their hands through the operation of capital gains tax? I asked them that question at the beginning, I think, and they said they would never do a wicked thing like that. Would 524 the noble Lord give me the Government's view on that point?
§ LORD BESWICKI think the noble Lord, Lord Saltoun, is crediting the Government with more far-sightedness than he himself possesses.
§ LORD CONESFORDMy Lords, does the noble Lord appreciate that the present operation of the capital gains tax is simply this: that a loss shall be deemed to be a gain?
§ LORD BESWICKMy Lords, the capital gains tax is a tax levied upon one form of income, and I am sure the noble Lord will agree that, even if it were practicable, it would be wrong to enable the capital gains taxpayer to hedge, in this case, against inflation when the hedge is not available to the individual who, for instance, puts his money in the Post Office Savings Bank; or, indeed, to the wage-earner, who has only his wages to depend upon.
§ LORD CONESFORDMy Lords, is the noble Lord aware that I agree with him about not discriminating between various forms of investment, but that I entirely disagree with him—as will, indeed, his colleague the Chancellor of the Exchequer—when he says that this has something to do with income? It is not a tax on income. It has nothing to do with income. What I am putting to the noble Lord is that if property maintains its real value, or even does not quite maintain it, but has a greater value in sterling as now defined, the owner of that property will have suffered a loss; but under existing legislation he will be deemed to have made a gain.
§ LORD BESWICKMy Lords, first of all, I am afraid that the noble Lord is wrong if he assumes that the former Chancellor of the Exchequer, at least, who levied this capital gains tax does not believe that gains made through capital transactions are income. He justified the capital gains tax on the basis that they were. Indeed, if the noble Lord looks at the Finance Act under which this tax is charged, he will see that the rate of capital gains tax for individuals is 30 per cent.; but that under the "alternative basis of charge" they can have half the gains in any year up to £5,000 charged under the same rate as their ordinary income tax liability.
§ LORD PARGITERWould my noble friend say precisely why property should be sacrosanct in any tax system?
§ LORD BESWICKMy Lords, I endeavoured to point out that there is no basis in equity, or, indeed, in practice, for differentiating between the gains made through dealings in property and the gains made by putting in a hard week's work.
§ LORD STRANGEMy Lords, could the noble Lord tell me whether a Monet, a Renoir or a Gauguin is included in capital gains?
§ LORD BESWICKI think the noble Lord will remember the rule about commenting upon individual incomes.
§ LORD GRANTCHESTERMy Lords, may I press this matter? I was asking only that the Government should consider a scheme under which those who put their money in the Post Office, or in any other form of Government savings, should be looked after as well as the International Monetary Fund look after foreign lenders to Her Majesty's Government.
§ LORD BESWICKMy Lords, I am sure the whole House would agree that the best method of looking after the interests of those who put their money in the Post Office Savings Bank, or any other form of investment, is to make, as nearly as possible, a stable currency. It is hoped that the recent step of devaluation will give us the opportunity to get back to a system of stable currency.
§ LORD FERRIERMy Lords, is the noble Lord aware that investments come in the same category as property and that, and irrespective of who started it, so long as devaluation is taken into account in calculating capital gains then the tax is one on devaluation and not on capital gains?
§ LORD BESWICKMy Lords, I can only say that I disagree with the noble Lord. It is quite impracticable to differentiate between—to use the phrase of a noble Lord—a debasement of the currency through devaluation and a debasement which takes places for other reasons.
§ LORD BROCKWAYMy Lords, may I ask my noble friend whether he thinks that the best way to stop inflation and to prevent wage advances is for noble Lords 526 on the other side of the House to complain of the taxation of capital gains and property?