§ 2.42 p.m.
§ LORD CROOKMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government whether they will cause investigation to be made as to the prevalence of what is termed in the Stock Market as "bed and breakfast" deals, (viz. where sales of stock take place just before the Stock Exchange closes at night with re-purchase of the same stock immediately the Exchange opens next morning), with a view to establishing a capital gains loss to offset subsequent capital gains and thus reduce liability to tax payments.
§ THE LORD PRIVY SEAL (LORD SHEPHERD)My Lords, this is a matter for my right honourable friend the Chancellor of the Exchequer and I will pass on to him the noble Lord's suggestion. The Government are aware of what is referred to as "bed and breakfast" deals, but their effect is normally a deferment rather than an avoidance of capital gains tax liability.
§ LORD HARVEY OF PRESTBURYMy Lords, will the noble Lord say which stocks—
§ LORD SHEPHERDMy Lords, it is customary that the noble Lord who puts the Question should have the right to ask the first supplementary.
§ LORD CROOKMy Lords, while thanking the noble Lord for his Answer, may I ask him whether he is aware that on the day of the Budget the Stock Exchange registered 14,737 bargains, and that the large number of those were caused by people taking out "bed and breakfast" arrangements simply because they were terrified that the Chancellor of the Exchequer would put a stop to them in his Budget?
§ LORD SHEPHERDMy Lords, the noble Lord has the advantage over me; I was not aware of those figures. As I said in my original Answer, the effect of such deals would be a deferment, as opposed to avoidance, of tax liability.
§ LORD HARVEY OF PRESTBURYMy Lords, will the noble Lord inform the House which stocks have shown a capital gain in recent months?
§ LORD SHEPHERDMy Lords, I have no doubt that in the ensuing months there will be considerable capital gains.
§ LORD DENHAMMy Lords, are Her Majesty's Government aware that if they took action along the lines suggested by the noble Lord, Lord Crook, people would sell without rebuying, and the Stock Exchange would be depressed still further?
§ LORD SHEPHERDMy Lords, perhaps the noble Lord might give further consideration to the question that he put, but the noble Lord himself will be aware that prior to 1971 deals of this kind were not possible because of the provisions on short-term capital gains. It was in 1971, when the previous Administration were in office, that the change which made this kind of deal possible was made.
§ LORD AIREDALEMy Lords, if taxpayers are to be encouraged to respect the capital gains tax, does it not behove Governments to make sure that what is taxed is in fact a real gain?—because in times of inflation many a gain on paper, which is taxed as such, is in real terms no gain whatsoever.
§ LORD SHEPHERDMy Lords, if the noble Lord would care to raise that point in a debate I shall be happy to debate it with him, but I do not think it arises on this particular Question.