Sitting of 19 June 1950

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  LEE CONSERVANCY CATCHMENT BOARD BILL
  Read the Third time, and passed.
MERSEY DOCKS AND HARBOUR BOARD BILL [Lords]
  NORWICH EXTENSION BILL [Lords]

    PRESCELLY WATER BILL [Lords]
    DONCASTER CORPORATION BILL [Lords]
    Read a Second time, and committed.

ORAL ANSWERS TO QUESTIONS
  FOOD SUPPLIES

    Meat Order
    Sir Herbert Williamsasked the Minister of Food why the Food Rationing Meat Order, Statutory Instrument No. 785, was amended on the day on which it was laid before Parliament.
    The Minister of Food (Mr. Maurice Webb): I think the hon. Member is mistaken. This was not amended on the day it was laid before Parliament.
    Sir H. Williams: Did it not vary the meat ration on the day it was made?
    Mr. Webb: This was the ordinary annual Order we had to make to re-impose meat rationing. The Order amending the ration was made a fortnight later.

    Personal Points Order
    Sir H. Williamsasked the Minister of Food why the Food Rationing (Personal Points) Order, Statutory Instrument No. 789 was repealed on the day it was laid before Parliament.
    Mr. Webb: I am afraid that the hon. Member has made another mistake. This Order has not been repealed.
    Sir H. Williams: Is it the case that the annual Points Rationing Order was laid before Parliament on, I think, 19th May, and that on the same day, at a Press conference, the Minister announced that points would be abolished, except, I think, in respect of tea?
    Mr. Webb: The hon. Gentleman has made another mistake. The points Rationing Order is entirely different from the Personal Points Order, which is the one referred to in this Question. Personal points refer to sweets, which are an entirely different thing.

    Fish and Chips Shops
    Lieut.-Colonel Liptonasked the Minister of Food how many applications have been made and granted to open fish and chips shops since local food committees received instructions to grant licences to genuine applicants.
    Mr. Webb: Two hundred and sixteen new applications were received between 10th May and 10th June. Applications made earlier were also reconsidered, and 356 new licences were granted in this period. Another 105 applications are now under consideration.
    Lieut.-Colonel Lipton: Can my right hon. Friend say how these new licences are distributed geographically as between, say, London, provincial towns and rural areas? Do the figures reveal whether there is, in my particular area, a widespread unsatisfied demand for fish and chips shops?
    Mr. Webb: I think they are fairly general but, with notice, I could give a much more detailed answer.
    Mr. Shurmer: Is my right hon. Friend aware that in Birmingham, fish and chips shops are opening close to businesses already being carried on, and that things are going too far in this matter?
    Mr. McGovern: Can the Minister say how many of these apply to Scotland?
    Mr. Webb: Not without notice.

    Chilled and Frozen Meat (Imports)
    Mr. Russellasked the Minister of Food what difficulties are involved overseas in sending shipments of meat to this country partly chilled and partly frozen.
    Mr. Webb: Chilled and frozen meat require quite different equipment and handling at all stages. We need large quantities of frozen meat to maintain a level ration. Although shippers can easily send all beef frozen, as they do at present, they could not ship chilled and frozen beef alternately to suit our varying needs at different times of the year. I fear that this is a problem which must await abundance of supplies before we can get a practical solution.
    Mr. Russell: Is the Minister aware that the Parliamentary Secretary, I think on 22nd May, said there were certain difficulties overseas in shipping both? Will not these difficulties have to be overcome some time before we can resume shipments, and would it not be a good thing to get them out of the way now?
    Mr. Webb: We cannot get them out of the way now, but we will, in time.

    Cream
    Mr. Boyd-Carpenterasked the Minister of Food whether, in view of the fact that he has not authorised the general manufacture of cream in this country, he will reconsider his decision to refuse to allow the importation of cream from Ireland and elsewhere on private account.
    Wing-Commander Bullusasked the Minister of Food if he will now allow the importation by air and the sale in this country of Irish cream.
    Mr. Webb: I see no good reason, at this stage, for revising this decision. In the first place, as I have said, it is more important to get butter than cream from the Irish Republic, and, in the second, I am anxious to get our home cream industry working before allowing overseas exporters to exploit our market. I hope I shall have the support of the hon. Gentlemen in this purpose.
    Mr. Boyd-Carpenter: Is it not a fact that, on 26th April last, the right hon. Gentleman expressed the same hope that he is expressing today as a reason for not permitting the importation of Irish cream? Can he say whether he has any real hopes or intentions of getting the home cream industry generally going this year?
    Mr. Webb: Not this year. It is far too late this year, but next year I am fairly certain that it will be going again.
    Mr. Boyd-Carpenter: If not this year, then why not permit the importation of Irish cream this year?
    Commander Noble: With reference to what the Minister said about re-starting the home industry, could he say whether, except for Devonshire cream, it is possible for permission to be given to sell home-produced cream?
    Mr. Webb: No, not outside the hill farm area in the four counties.
    Mr. Vane: Why is it too late to help the home cream industry this year? Cream is wanted all the year round.
    Mr. Webb: The manufacturers themselves wanted advice about machinery and equipment, and I think they would like more notice.
    Mr. Boyd-Carpenter: On a point of order. As the right hon. Gentleman has avoided the whole point of my question as to why he should not permit the importation of Irish cream until he starts the home industry, I wish to give notice that I shall raise the matter on the Adjournment.
    Mr. Geoffrey Wilsonasked the Minister of Food how many Cornish hill farmers have applied for a licence to make and sell clotted cream; how many of such licences have been issued by the regional supply milk officer since the coming into operation of the arrangements on the 1st June, 1950; and how the number of such applications compares with the number of milk producers in Cornwall.
    Mr. Webb: Up to 14th June, 34 applications had been received and three licences granted. There are about 9,000 milk producers in the county, but it is estimated that not more than 300 of them are hill farmers eligible to take part in the scheme.
    Mr. Wilson: Is the Minister aware that one of the three who has been granted a licence owns one cow, and in view of that will he dispel the popular illusion that Cornish cream can be legally obtained in Cornwall, and thereby protect the retailers?
    Mr. Webb: I do not think that that question will do the Cornish cream industry any good at all. All these applications are being considered on their

    837
    merits, and I am assured that each case approved is able to provide a reasonable supply of cream which can be marketed.

    Chocolate Imports
    Sir H. Williamsasked the Minister of Food how much chocolate has been imported this year from Czechoslovakia.
    Mr. Webb: Nearly 1,400 tons up to 30th April, which is the latest date for which figures are available.
    Sir H. Williams: Why is it possible to import chocolate from Czechoslovakia instead of allowing more to be produced in this country?
    Mr. Webb: For the very simple reason that we have to sell manufactured goods to Czechoslovakia. If they and we are to have a balance of payments we have to buy things from each other.

    Flour Improver
    Dr. Barnett Strossasked the Minister of Food how soon will all flour which is treated by some form of improver be so treated that the agene process can be forbidden; and whether he will estimate the cost in dollars for machinery and chlorine dioxide, which must be imported from the United States of America.
    Mr. Webb: It will take about two years to complete this change. The dollar cost will probably be about 337,000 United States dollars.
    Dr. Stross: Is my right hon. Friend aware that there is a considerable body of medical opinion which believes that peptic ulceration is aggravated by the agene process and that this has been responsible for the increase of duodenal and gastric ulcers within recent years? Will he give us an assurance that as soon as possible we shall be free from this somewhat poisonous improver?
    Mr. Webb: Two years is the period.

    Imported Fish
    Mr. Hector Hughesasked the Minister of Food if he is aware of the decision of the Aberdeen Fish Sales Association to protest against foreign landings of fish by refusing to sell after 27th May any fish landed by foreign fishing vessels or imported by direct consignment and to sell any white fish from any strange British trawler or great liner from the fishing grounds of Faroe, Iceland. Bear Island,
    838
    Norwegian coast, White Sea, Spitzbergen or Newfoundland, and that this will seriously affect the fishing industry and consumers' supplies; and if he will inquire into the matter in order to remove the grievances.
    Mr. Webb: The answer to the first part of the Question is "Yes, Sir." I cannot say exactly how this has affected supplies for consumers because some of the boats are probably going to other ports. I am sorry that the salesmen have taken this action in the middle of our review of the problems of the white fish industry as a whole. It does not help us to get the practical, long-term solution we are seeking.
    Mr. Hughes: Will the Minister see that the grievances indicated in this Question are considered by whatever committee he is setting up to inquire into the whole question of the fishing industry?
    Mr. Webb: We have been considering all these grievances and many others, for some weeks.
    Lady Tweedsmuir: Is the right hon. Gentleman aware that the Aberdeen fleet of 140 trawlers are losing £14,000 a week, and that the consumer can hardly be denied supplies when 388 tons of good quality fish are sold for fishmeal because they cannot get buyers? For that reason will the Minister make a statement on the various decisions which have been taken by the Government as to the industry as a whole?
    Mr. Webb: The situation in Aberdeen is only one of many consequences of this industry's return to private enterprise.

    London Tea Auctions
    Mr. Remnantasked the Minister of Food whether he is now able to make a statement relating to the re-opening of the London tea auctions.
    Mr. Webb: No, Sir, but I hope to be able to make a statement soon.
    Mr. Remnant: In view of the probable shortfall of tenders for the 1950 bulk contract, will the Minister consider making an early announcement that the London tea auctions, if re-opened, will not deal with the 1950 crop, so as to eliminate any tendency to withhold tea from this-country?
    Mr. Webb: I will bear that in mind.

    Imported Cherries
    Mr. Bossomasked the Minister of Food what quantity of cherries was imported from Czechoslovakia last year; what quantity so far this year; and how far this importation is still proceeding.
    Mr. Webb: No fresh cherries, frozen cherries or cherry pulp have been imported from Czechoslovakia during 1949 or so far this year. Imports from that country of crystallised or glace cherries and tinned and bottled cherries in syrup were about 30 tons last year and 20 tons during the first four months of this year. Imports of fresh cherries from Czechoslovakia will be allowed as part of the 6,000 tons which may be imported from all sources during June and July. Quotas for processed fruit during the 12 months beginning on 1st July are now being discussed.
    Mr. Bossom: Does the Minister ever think of the English farmers when he is allowing the import of this sort of fruit?
    Mr. Webb: Constantly. All these arrangements are made in the closest consultation with my right hon. Friend the Minister of Agriculture.
    Mrs. Castle: Can we be told whether the Opposition ever think of the British housewife?

    Sugar
    Brigadier Clarkeasked the Minister of Food what success he has had in his negotiations for extra sugar supplies with the delegates from the West Indies.
    Mr. Webb: The discussions are still going on; we have had three meetings with the delegation so far. But I must make it plain once more that these talks are about long-term price and quantity guarantees from 1953 onwards, not about any extra sugar which may be immediately available, since we are already buying all that is expected from the Colonies.
    Brigadier Clarke: Will the Minister say when he anticipates to be able to stop bulk purchases of sugar?
    Sir Peter Macdonald: How long does the Minister anticipate these negotiations will go on? They have dragged on for months, and it is about time they came to an end.
    Mr. Webb: They are not dragging on, they have been going fairly quickly. I think there will be one more meeting and I think it will be possible for the Secretary of State for the Colonies to make a statement within a week, but not this week.
    Mr. Driberg: In these negotiations, does my right hon. Friend always bear in mind that some of these Colonies are more dependent on this one export than, for instance, countries such as Australia?
    Mr. Webb.
    Mr. Braine: Will the Minister bear in mind the requirements of the British housewife?
    Whig-Commander Bullusasked the Minister of Food if, in view of world supplies of sugar now available, he will increase the sugar ration.
    Mr. Hollisasked the Minister of Food whether, in view of the abundant supply, he will deration sugar.
    Mr. Webb: No, Sir. There will certainly be no glut of sugar this year.
    Wing-Commander Bullus: Is the Minister aware that he was recently reported as having said that in two years' time there would be a world glut of sugar? Is that the length of time which he places on the rationing of sugar?
    Mr. Webb: First of all, I did not say there would be a glut. I said that if the present plans for production go through, we will have to be careful about a possible glut, but two years' time is different from now. The sugar that formed the subject of that speculation is not even grown, and at the moment there is no possibility of increasing the ration unless it were possible for us to spend more dollars on this commodity.
    Sir H. Williams: Why does not the right hon. Gentleman buy from the West Indian delegation the extra 75,000 tons that they are willing to sell, and which is available now?
    Mr. George Thomasasked the Minister of Food whether he will grant a special allocation of sugar to old people who are in receipt of the extra tea ration.
    Mr. Webb: To give everyone over 70 extra sugar would mean a drain on our supplies which, I am afraid, we just cannot afford at present.
    Mr. Peter Smithers: Has the Minister not now investigated the probability that his estimate about a glut is fairly near, within a year or two? Surely he can tide the old people over that period, particularly in view of the fact that some of them may not live to enjoy the glut?
    Mr. Webb: Only at the expense of other consumers, that is all.

    Australian Frozen Rabbits
    Mr. Hurdasked the Minister of Food if he has now disposed of his Department's purchase of frozen rabbits from Australia; and if he will state the loss to public funds which this transaction has involved.
    Mr. Webb: As our stocks have not yet been cleared I cannot give a figure at present.
    Mr. Hurd: Will the Minister dump in the sea all that remains of this poor quality rabbit meat so that the market for our freshly killed English rabbits may be revived?
    Mr. Webb: No, Sir. They are going very rapidly. We shall dispose of them quite quickly at a fairly good price.
    Mr. Somerville Hastings: Is there any evidence at all that fresh meat deteriorates by being frozen for a reasonable time?
    Major Tufton Beamish: Is the Minister aware that if he had taken my advice last autumn the British taxpayers would not have been involved in this wholly unnecessary loss?
    Mr. Webb: I was not in office last autumn, so I could not take the advice, excellent as it was.
    Colonel Clarke: Does the Minister realise that he is losing food supplies at home by importing rabbits? Importation prevents rabbits from being killed in this country and they eat home-produced food?

    Groundnut Scheme
    Mr. Hurdasked the Minister of Food if he will now inform the House of the reports he has received from the Overseas Food Corporation on the yields of the sunflower and groundnut crops harvested in Tanganyika this season.
    Mr. Webb: The Overseas Food Corporation have not yet harvested a large enough acreage to enable them to form a reliable estimate of yields, but they expect to be able to publish a preliminary report within a month.
    Sir George Harvie Wattasked the Minister of Food whether, in view of experience and the heavy losses on the East Africa Groundnut Scheme, the Government will reconsider the decision that the Overseas Food Corporation should clear the remaining 500,000 acres still required to reach the target of 600,000 acres by 1954.
    Mr. Webb: I shall not be able to deal with this question until I have been able to review the scheme as a whole later in the year, in the light of the assessment which the O.F.C. will be making for me on the basis of this season's experience.
    Sir G. Harvie Watt: Will the Minister bear in mind that it would be much better for him to consolidate the present position rather than to expand what is. after all, a very ambitious and speculative proposition?
    Mr. G. B. Craddock: Will the Minister stop any further development of this scheme, because it will never be a success? He would do better to spend the money on other developments in East Africa.
    Mr. Webb: I think the House would be better advised to await the general discussion on the whole matter.
    Mr. Hurdasked the Minister of Food if he is aware that the Overseas Food Corporation is disposing in Dar-es-Salaam of 18,000 bottles of spirits now declared surplus to the requirements of the groundnut scheme; and what measures he is taking to safeguard the welfare of the local Africans by ensuring that these spirits do not fall into the hands of those unaccustomed to strong drink.
    Mr. Webb: The disposal of these stocks is a matter for the Overseas Food Corporation, and I am asking them to let the hon. Member know what arrangements they are making.
    Mr. Hurd: Surely a large sum of public money must have been involved. Has the Minister not seen the list of stocks to be disposed of—5,000 bottles of gin. 6,000 bottles of brandy, 4,000 of rum, and 105,000 bottles of beer? Does not

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    the right hon. Gentleman agree that that is a very large quantity? Is he taking no personal interest in how our money is spent?
    Mr. Boyd-Carpenter: Are not these stocks the last remaining liquid assets of the Corporation?
    Mr. Godfrey Nicholson: Is the House to understand that the Minister of Food is not even unofficially informed before such enormous and disproportionate stocks, which can hardly be called trading stocks, are purchased by the Corporation? Surely there is consultation between the Corporation and the Ministry all along on a matter of that sort?
    Mr. Webb: Not that degree of consultation on matters of that kind. I am only concerned with the general overriding direction, according to the principles of the Statute. I have arranged for a reply in detail to be sent to the hon. Member, and that is my function.
    Mr. Nicholson: If the Minister will look at the Report of the Public Accounts Committee he will see that the Minister is always informed when large contracts are entered into. Is it not likely that this large sum came under that heading?

    Tea Ration
    Mr. Blackasked the Minister of Food whether he will consider granting the increased tea ration, which is available for old people, to members of small households also.
    Mr. Webb: No, Sir. To vary rations according to the size of the household would, I am afraid, be an impossible task.
    Mr. Black: Does not the right hon. Gentleman agree that the tea ration presses with particular severity on small households consisting of one or two people, and could he not consider doing something to help them?
    Mr. Webb: I am conscious of their difficulty, but the problem is, what is a small household? It is a very difficult question to decide.

    Retail Shops (Restrictions)
    Mr. Blackasked the Minister of Food whether he will now remove the restrictions on the opening of butchers', confectioners' and dairymen's retail shops.
    Mr. Webb: I do not think I can do this at present.
    Mr. Black: Is the right hon. Gentleman aware that the programme on which his party fought the last Election states:
    "Subject only to the needs of town planning, any citizen should be able to open a shop"?
    Will the Minister proceed to implement that policy?

    Home-grown Apples (Price)
    Mr. Baker Whiteasked the Minister of Food whether he intends to impose a maximum price order in respect of the 1950 home-grown apple crop.
    Mr. Webb: I am considering this matter, but I cannot announce a decision until we can make a reasonably good estimate of the probable size of the crop.
    Mr. Baker White: Is the Minister aware that lack of decision in this matter is adding to the difficulties of the growers, who already have enough difficulties, and that until a decision is made they cannot go ahead with their marketing plans? Is the estimate of the growers in Kent not a sufficient indication of the sort of crop they are to get?
    Mr. Webb: We cannot go ahead until we know, broadly, what the crop is likely to be. We have to balance the interests of the consumers with those of the growers. I am in consultation with my right hon. Friend the Minister of Agriculture on the matter, and as soon as I know what the crop is likely to be we shall act accordingly.
    Mr. Baldwin: As soon as the right hon. Gentleman has made an estimate of what the harvest will be, and if he decides that the home supply will be sufficient, will he stop buying Italian apples and dumping them on the home market to the detriment of the home producer?

    Imported Boxed Fish
    Mr. Woodasked the Minister of Food how much imported boxed fish has been received in this country each week since decontrol; and what was the corresponding figure for last year.
    Mr. Webb: As the reply contains a table of figures, I will, with permission, circulate it in the OFFICIAL REPORT.
    Mr. Wood: Is the Minister aware that on certain days recently there has been enough imported fish in this country to satisfy the whole of the home demand?
    Mr. Webb: If the hon. Gentleman would look at these figures, perhaps he will put down another Question on that point.
    Following is the statement:
    No official figures are available but the information, which is based largely on trade reports, will be of interest.

    IMPORTS OF BOXED WHITE FISH

    1950

    1949

    Week ending

    Tons

    Week ending

    Tons

    22nd April

    …

    596

    23rd April

    …

    871

    29th April

    …

    712

    30th April

    …

    800

    6th May

    …

    791

    7th May

    …

    934

    13th May

    …

    655

    14th May

    …

    1,067

    20th May

    …

    795

    21st May

    …

    949

    27th May

    …

    504

    28th May

    …

    981

    3rd June

    …

    482

    4th June

    …

    791

    10th June

    …

    508

    11th June

    …

    935

    Total

    …

    5,043

    Total

    …

    7,328

    Canned Ham
    Mrs. Ganleyasked the Minister of Food whether he can promise a supply of ham in shops for home consumption at Christmas.
    Mr. Webb: Small quantities of ration free British canned ham are already in the shops, and imported canned ham should begin to arrive shortly under arrangements which I announced last week. I expect that some will be available at Christmas.
    Mr. Shurmer: Can my right hon. Friend say why ham is going into hotels and restaurants and being sold in sandwiches in big stores, while the housewife cannot get any from the retail shops?

    Farm Workers (Seasonal Allowances)
    Mr. E. Martin Smithasked the Minister of Food if he will now consider an alteration in the present practice whereby farm workers are prevented from drawing their own extra rations.
    Mr. Dodds-Parkerasked the Minister of Food if he will now reconsider
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    his decision and allow agricultural workers to collect their own seasonal food allowance instead of the rations being supplied through the farmer who employs them.
    Mr. Webb: As I have previously explained in the House, these seasonal allowances are not extra rations for farm workers but catering allowances to farms. We already have arrangements whereby a representative of the workers may collect them, if the farmer is unable or unwilling to do so, and I have recently increased the scale of allowances so that they can more easily be shared out; but this is as far as I feel able to go.
    Mr. Smith: Is the Minister aware that this is one of the major bones of contention among the farming community, and that the troubles mentioned are not insuperable? If he will do something about it, he will become quite popular with the farming community.
    Major Beamish: Can the Minister confirm that every fanner in the country has a catering licence?

    Potatoes Consignment (Rejection)
    Sir W. Smithersasked the Minister of Food if he is aware that 450 trucks of potatoes tendered by his Department between December, 1949, and May, 1950, to wholesalers at Smithfield Market, Birmingham, were condemned by his inspectors as unfit for human consumption and subsequently sold for stock feed; what was the loss on these transactions; and if he will take disciplinary action against those responsible.
    Mr. Webb: Four hundred and twenty trucks of Ministry potatoes were rejected by Birmingham wholesalers between December, 1949, and May, 1950. Not all of these consignments were sold for stock-feeding; many contained only small quantities of unsound potatoes and after being re-sorted were sold at a reduced price for human consumption. Claims were raised against the growers responsible, but it will be some time before accounts are complete.
    Sir W. Smithers: When will the right hon. Gentleman stop meddling with business of which he knows nothing and leave it to the experts, thus saving the taxpayers' money?

    Trading Accounts
    Mr. Osborneasked the Minister of Food if he will divide the losses shown by his Department in the Comptroller and Auditor General's report for 1948–49 of £24,000,000 on animal feeding stuffs, £133,000,000 on cereals, £28,000,000 on egg products, £57,000,000 on meat, £44,000,000 on milk £59,000,000 on milk products, £7,000,000 on oils and fats, £11,000,000 on potatoes and carrots, £20,000,000 on sugar and £18,000,000 on tea into the actual subsidy received by the public, and the trading profit or loss for each separate item.
    Mr. Webb: With subsidised foods it is not practicable for us to do this. On some unsubsidised foods, however, we made profits which helped pay our total subsidy bill. With permission, I will publish these figures in the OFFICIAL REPORT.
    Mr. Osborne: Is the Minister not aware that by refusing to give these figures, he leads the public to feel that the losses on trading are much greater than they are, and would it not be better for him to publish the whole story?
    Mr. Webb: It may cause the hon. Gentleman to feel that, but hardly the general public.
    Following are the figures:
    The figures for these unsubsidised foods are as follow:

    profit

    £m.

    Egg products sold to caterers, manufacturers and bakers

    0.5

    Meat—Imported canned meat, rabbits, poultry, etc

    0.5

    Milk products—Milk powder

    0.2

    Oils and fats including sales abroad or for export

    12.7

    Sugar—Raw sugar for export or sold direct abroad

    1.4

    15.3

    Imported Strawberries
    Mr. Bossomasked the Minister of Food if he will stop the import of foreign strawberries until the farmers of Kent have had the opportunity of putting theirs upon the market.
    Mr. Webb: No, Sir. We already have arrangements for imports to stop when the total quantity landed in the course of
    848
    our main season reaches 2,500 tons provided, of course, that we do not need more. I do not think that this limited import will interfere with the marketing of the home crop; it is likely to be no more than about 5 per cent. of total.
    Mr. Bossom: Is the Minister aware that the farmers in the centre of my constituency are of the opinion that they will have to plough in their strawberries this year, because it will not pay them to pick them any more than it did to pick their plums last year? Is he also aware that they have been told by the canners that they do not want any of their pulp this year?
    Mr. Webb: I can only repeat that this matter is one which is constantly discussed between myself, trying to represent the consumer interest, and the Minister of Agriculture, representing, quite properly, the growers. We are trying to arrive at a balance of interest and on the whole, it works well.
    Mr. Deedes: Is the Minister aware that owing to the enormous quantity of strawberry pulp on the market, farmers are finding it impossible to make contracts with the jam manufacturers? If something is not done, and farmers have to plough in their strawberries, housewives will not be able to get any fresh strawberries next year.
    Mr. Snow: Is the Minister aware that such is the mechanism of the market that last Thursday, Essex strawberry growers secured 7d. a lb., of which 2d. had to go on transport and 2d. to the pickers?
    Mr. Webb: That is hardly relevant to this Question.
    Mr. Bossom: Does the Minister think of consulting with members of the National Farmers' Union in Kent on this subject?

    Sugar and Orange Juice (Exports)
    Mr. Crouchasked the Minister of Food what quantity of sugar and concentrated orange juice has been exported to Holland during the last 12 months.
    Mr. Webb: No sugar has been exported to Holland during the last 12 months. Our export figures do not show

    849
    orange juice separately from other fruit juices, and I cannot say whether any went to Holland.

    Storage Charges
    Sir W. Smithersasked the Minister of Food in view of the observations of the Comptroller and Auditor-General in Section 23 of the Trading Accounts and Balance Sheets for 1948–49, what steps he has taken to ensure that the rates for storage paid by his Department are fair and reasonable.
    Mr. Webb: A Rates and Charges Panel set up within my Department in 1946 supervises the rates paid by the Ministry for storage, transport and other similar services. We never pay higher than commercial rates and often, as large-scale users, pay less.
    Sir W. Smithers: Is not this another instance of Government control wasting the taxpayers' money.

    Bacon Rationing Order
    Mr. C. S. Taylorasked the Minister of Food, in view of the recent increase in the bacon ration, why he has not withdrawn S.I. No. 784 of 1950 entitled "The Bacon (Rationing) Order"; and why a new Order has not been made.
    Mr. Webb: The necessary amending Order has, in fact, been made.
    Mr. Taylor: Does not the Minister think it funny that the bacon ration was restored to five ounces directly a Prayer was put on the Order Paper?

  SOAP SUPPLIES
  Mr. Hollisasked the Minister of Food whether, in view of the abundant supply, he will de-ration soap.
  Mr. Webb: I have nothing to add at present to the reply I gave to my hon. Friend the Member for Nottingham, East (Mr. Harrison) on 14th June.
  Mr. Hollis: Is the Minister aware that on that occasion he has said that he was weighing the arguments? How long does the process of weighing take?
  Mr. Webb: It depends on what is being weighed. I expect, in due course, to be able to arrive at a decision.

  KEW GARDENS (SCIENTIFIC STAFF)
  Sir G. Harvie-Wattasked the Prime Minister if his attention has been drawn to the complaints made by members of the scientific staff at the Royal Botanic Gardens at Kew that there is increasing maladministration and lack of interest in their work by the Ministry of Agriculture, which controls the gardens; and whether he will set up a committee to investigate the complaints that have been made and to consider the transfer of the responsibility to the Department of Scientific and Industrial Research or to the appropriate department of the British Museum.
  The Prime Minister (Mr. Attlee): I am informed by my right hon. Friend the Minister of Agriculture and Fisheries that the complaint, as well as the suggestion of transfer referred to in the Question, was made, for the first time, in a memorandum submitted by the Institution of Professional Civil Servants to the Committee that is at present reviewing the organisation of the Ministry of Agriculture and Fisheries. No such complaint had previously been made by the staff or their association through the Departmental Whitley Council or to the Director or to the Ministry direct. I see no reason to set up any further committee.

  OFFICIAL SECRETS ACT
  Miss Irene Wardasked the Prime Minister whether, in view of the wide publicity given to vital secret operations during the war, he has appointed any authority to ensure that no vital information is disclosed and no breach of the Official Secrets Act is committed.
  The Prime Minister: All persons who have held office under the Crown are under an obligation to consult the Government of the day in regard to the publication of information obtained by virtue of their official position and to obtain formal permission in any doubtful case. The procedure which has been established for this purpose was fully explained in a statement made to this House by my right hon. Friend the Lord President of the Council on 1st August, 1946. I am sending the hon. Member a

  851
  copy of this statement, which sets out the authorities from whom permission to publish must be obtained.
  Miss Ward: Is the right hon. Gentleman aware that there is a great deal of disquiet on this subject? Have all the broadcasts that have been made by the B.B.C. been vetted by the appropriate authorities? Will he personally receive representations from anybody who cares to make them?
  The Prime Minister: I am not aware of this disquiet, and I am not aware that there has been very extensive broadcasting by persons in this position. The hon. Lady asks whether all the broadcasts have been vetted. Obviously, if there were some particular instance involving broadcasting by someone who held an official position, then it would be right that leave should be sought.
  Miss Ward: Has the right hon. Gentleman listened to any of the broadcasts called "Now it can be told"?
  The Prime Minister: No, I have not.

  BUILDING WORK, SCOTLAND
  Mr. Mclnnesasked the Prime Minister if he is prepared to consider the feasibility of establishing a Ministry of Building in Scotland who will overtake and co-ordinate the functions at present carried out by the Department of Health and the Ministry of Works so far as housing and all other building work is concerned.
  The Prime Minister: No, Sir.
  Mr. Mclnnes: Why?
  The Prime Minister: A similar Question was put to me on 13th March, and if the hon. Member will look at that reply he will see the reason.
  Mr. McGovern: Is my right hon. Friend aware that the wastage in housing is so great in Glasgow that though 380 houses were completed in a month there was a demand for 440 in respect of houses that had been condemned? Is he aware that there is great dissatisfaction in Labour circles over the housing question in Scotland, and that they feel that
  852
  both a Minister and a Ministry for this one task only are essential for its accomplishment?
  The Prime Minister: I am not myself convinced that the remedy suggested by my hon. Friend would meet the case. I think he knows quite well what are the limiting factors with regard to house building.
  Mr. Emrys Hughes: Is my right hon. Friend aware that local authorities all over Scotland are perturbed about the slow progress of housing owing to the shortage of cement? Does he not think that a co-ordinating Minister would see that the cement is supplied to those who need it so badly?
  The Prime Minister: Perhaps my hon. Friend will put a Question about cement to the Secretary of State for Scotland.
  Lieut.-Colonel Elliot: Would it not be much better if the right hon. Gentleman commended the Secretary of State to adopt the constructive proposals for speeding up house building which have been repeatedly urged by this side of the House and repeatedly voted against by his hon. Friends?
  The Prime Minister: So far as I know, the proposals put forward by right hon. and hon. Gentlemen on the other side of the House have shown a complete lack of appreciation of the conditions. Their remedies seem always to be concentrated on the idea that apparently it all ought to be done by private enterprise. As a matter of fact, private builders are doing the work at the order of the local authorities.
  Lieut.-Colonel Elliot: We understand that the right hon. Gentleman has not time to listen to the broadcasts "Now it can be told." Would he not, however, take time to listen to the Debates in this House? Had he done so he would have heard these positive, constructive proposals, such as the release of a greater amount of material for house building in Scotland, which certainly would speed up housing. Will he make sure that he will, at least, not, first of all, say, "It cannot be done," and then, shortly afterwards, finding it can be done, try to take the credit for it?
  The Prime Minister: If the right hon. and gallant Gentleman will bring to my

  853
  attention any specific case in which he thinks specific materials should be released.

  FESTIVAL OF BRITAIN
  Sir W. Smithersasked the Lord President of the Council how many tons of cement have been or will be used on the site of the Festival of Britain on the South Bank of the Thames.
  The Lord President of the Council (Mr. Herbert Morrison): I would refer the hon. Member to my reply to the hon. and gallant Member for Norfolk, Central (Brigadier Medlicott) on 19th April.
  Sir W. Smithers: Is the right hon. Gentleman aware of the hold up of house building, which the hon. Member for South Ayrshire (Mr. Emrys Hughes) mentioned a moment ago, due to the lack of cement? Can he say how many houses could have been built with the cement wasted on buildings for the Festival of Britain? Is it not more important to provide houses for the people than to satisfy Socialist vanity?
  Mr. Morrison: The proportion of cement used is a very small proportion of the cement output. If the hon. Member is dissatisfied with the output of cement he should complain to the private company concerned.
  Mr. Mellish: Is my right hon. Friend aware that the output of cement is greater than it has been for a considerable time, that the Festival of Britain scheme is definitely not holding up the housing programme in London, and that this has been a Tory stunt which has proved to be false?
  Mr. Morrison: I am much obliged to my hon. Friend. No doubt, in due course those points will sink into the mind of the hon. Member for Chislehurst.
  Sir W. Smithers: I am not the Member for Chislehurst.
  Mr. Gibson: Is it not a fact that, far from the Festival of Britain having been a hinderance to house building, last year there was an all time record of housing output in London?
  Mr. Jannerasked the Lord President of the Council whether he will consider setting up information kiosks,
  854
  manned by officials able to speak at least one foreign language, at suitable points in London during the Festival of Britain so that foreigners can be given full information on matters on which they may require guidance.
  Mr. H. Morrison: I am grateful to my hon. Friend for his suggestion. I understand that the Festival Office are planning to open a main information centre in the West End of London, in addition to that already open at 47, Leicester Square through the courtesy of the British Travel and Holidays Association. Staff at these centres will speak at least one foreign language.
  Mr. Janner: While thanking my right hon. Friend for his reply, may I point out that that was not the purpose of the Question I put down? What I should like to ask him is whether, in view of the fact that a large number of visitors are expected, and that a number of them will probably not be able to speak English, my right hon. Friend will see that other kiosks and centres are put up at various places at which they may be able to obtain the help and information they require?
  Mr. Morrison: I will keep my hon. Friend's suggestion in mind, but I think that, possibly, it is a little out of proportion to the probable need.

  OVERSEAS BROADCASTING
  Major Beamishasked the Secretary of State for Foreign Affairs if he will make a statement describing the decisions reached during the recent conference with Mr. Edward W. Barrett, United States Assistant Secretary of State for Public Affairs, to co-ordinate broadcasting to Communist-governed countries.
  The Under-Secretary of State for Foreign Affairs (Mr. Ernest Davies): Yes, Sir. The hon. and gallant Gentleman will have seen the communique issued at the conclusion of these meetings, in the course of which co-operation over the whole field of overseas information work was discussed. Broadcasting, particularly to Eastern Europe and to other areas which are dominated or threatened by Communism, occupied an important place in the discussions, and the possibilities of co-ordinating activities in this respect were fully considered.

  855
  The desirability of expanding and sharing the technical facilities available to the B.B.C. and the "Voice of America" for broadcasts to certain areas was recognised and a number of specific projects are now under examination. Existing Anglo-American operations to counter the effects of jamming were reviewed, and it was agreed that a study of further measures should be jointly undertaken by technical experts of both countries.
  Major Beamish: Will there now be a permanent liaison between ourselves and the United States, in view of the great importance of co-ordinating our output to the Communist-dominated countries with theirs; and can the hon. Gentleman say anything about the new and extremely powerful station soon to be set up in Western Germany?
  Mr. Davies: In reply to the first part of that supplementary question, permanent liaison has been arranged. As to the second part, we do not feel that we are in a position to disclose details of projects which are still under discussion with the Governments concerned.
  Sir W. Smithers: In making the arrangements will the hon. Gentleman also try to stop pro-Communist propaganda from the B.B.C., which is very rife today?
  Mr. Profumoasked the Secretary of State of Foreign Affairs what advice he proposes to give to the British Broadcasting Corporation in order to enable the Corporation to ensure that its broadcasts to East European countries shall be used for the greatest possible furtherance of His Majesty's Government's policy in respect of the complete co-ordination of the Atlantic Treaty Powers' resolve to counter Soviet propaganda which was recently agreed at the Foreign Ministers' Conference in London.
  Mr. Ernest Davies: I assume that the hon. Member is referring to the agreement reached at the recent meeting of the Foreign Ministers of the North Atlantic Treaty Powers "to promote and co-ordinate public information in furtherance of the objectives of the Treaty, while leaving responsibility for national programmes to each country." This will be the responsibility of the proposed Council of Deputies. The B.B.C. will in due
  856
  course be advised as to the best means of co-ordinating overseas broadcasting in furtherance of the objectives of the Treaty.
  Mr. Profumo: Does the Under-Secretary not realise that this is far too important a problem to leave to mere liaison between the Foreign Office and the B.B.C.; and is it not vital at this moment that his Department should take full responsibility for all broadcasts which are going out to these Iron Curtain countries so that the B.B.C. can be a complete spearhead of the foreign policy of His Majesty's Government?
  Mr. Davies: Relations between the Foreign Office and the British Broadcasting Corporation are laid down in a White Paper which was presented to Parliament, and arrangements must be made in accordance with that agreement.
  Major Beamish: Is the Under-Secretary aware that the Government have wasted four and a half years before doing anything in this important matter; and can he say whether an early decision is likely to be reached?
  Mr. Davies: I certainly would not accept the hon. and gallant Gentleman's statement that four and a half years have been wasted. The B.B.C. have been doing a considerable amount of overseas broadcasting during the last four and a half years, most of which has been of very great value.
  Mr. Anthony Nutting: Can the Under-Secretary say when these instructions are to be given to the B.B.C. by the Foreign Office? From his original answer to the Question it seemed as if there would be some considerable delay; the hon. Gentleman spoke about "in due course," and talked about a meeting of the Council of Deputies. Can he say when these instructions are to be given?
  Mr. Davies: I think there is a little confusion here. There is obviously liaison between the Foreign Office and the B.B.C, as the House is well aware. This is a further development arising out of a recent meeting of the Atlantic Council in London for the purpose of furthering the objects of the Atlantic Council; it is for that purpose that further liaison is to be established.

  ALBANIA (THE HAGUE COURT AWARD)
  Mr. Boyd-Carpenterasked the Secretary of State for Foreign Affairs whether he now has any progress to report in the discussions between representatives of His Majesty's Government and of the Government of Albania with reference to the method of payment to be adopted by the Albanian Government of the damages awarded to this country by The Hague Court in connection with the mining of two of His Majesty's ships in the Corfu Channel; how many meetings have taken place; and when it is expected these discussions will terminate.
  Mr. Ernest Davies: As I have said before, these discussions are of a confidential nature. So far two meetings have taken place, and it is expected that a third will shortly follow. I am unable to predict how long the talks will last.
  Mr. Boyd-Carpenter: In view of the fact that it is a very simple matter, concerned only with the means of payment of the judgment of The Hague Court, can the Under-Secretary say why this is taking so long?
  Mr. Davies: I do not share the hon. Gentleman's view that this is so simple a matter. To Albania this is a considerable sum. There are difficulties about the manner in which payment shall be effected, and it is regarding payment that these discussions are taking place.
  Mr. Pickthorn: While fully understanding the confidential nature of the discussions, may the House be reassured that the subject of the discussion is not a secret; and may the House be told once more that it is the method of payment and nothing but the method of payment which is under discussion?
  Mr. Davies: Yes, Sir, I can give that assurance to the hon. Gentleman.
  Mr. Pickthorn: Does that assurance mean that there will be interest to cover the time spent in the discussion?
  Hon. Members: Answer.
  Mr. Davies: I should want notice of that question.

  FALKLAND ISLANDS (STAMPS)
  Sir John Mellorasked the Secretary of State for Foreign Affairs if he will protest to the Argentine Government that their refusal to accept stamps bearing the words Falkland Islands as prepayment of postage is a breach of the Universal Postal Convention; and if he will further protest against the issue by that Government of postage stamps designed with maps to emphasise Argentine pretensions to the Falkland Islands and Dependencies.
  Mr. Ernest Davies: In a Note of 3rd January, 1947, His Majesty's Ambassador at Buenos Aires once more rejected Argentina's claim to sovereignty over the Falkland Islands, on which is based their action in surcharging correspondence bearing stamps of the Falkland Islands. In the same Note it was also stated that they regarded such action as a breach of the Universal Postal Convention. Subsequently, the Postmaster-General registered a protest with the Director of the International Bureau of the Universal Postal Union.
  As regards the second part of the Question, there is no international convention which forbids the issue of stamps designed to promote territorial claims and, while His Majesty's Government deplore this practice, we do not wish to exaggerate its importance by making a diplomatic protest.
  Sir J. Mellor: Would it not be better for the British Government to retaliate for these insolent pretensions?
  Mr. Davies: No, Sir, I do not think that for such petty gestures as have been made in this case retaliation is called for.

  SOVIET VESSEL (CHARTER)
  Mr. Peter Smithersasked the Secretary of State for Foreign Affairs to what extent his Department was consulted by the Ministry of Food as to the advisability of chartering the Soviet vessel "Dmitry Donskoy" to load sugar in the Dominican Republic for shipment to Liverpool.
  Mr. Ernest Davies: The Foreign Office was not consulted; nor is it usual practice for other Departments to consult them about the chartering of foreign vessels.
  Mr. Smithers: But did not the hon. Gentleman assure me in a recent Debate that his Department is finally responsible for the activities even of other Departments in foreign territories; and does he not agree that where the matter is highly political his Department ought to be consulted so as to avoid undesirable consequences?
  Mr. Davies: Certainly we are responsible for the activities of other Departments overseas in foreign territories, but this is not a question of a foreign territory. This was a question of chartering ships by the Ministry of Food in this country on an ordinary commercial basis, and that is the responsibility of the Ministry of Food.
  Mr. Smithers: Does the Under-Secretary not realise that the Minister of Food himself denies any responsibility for the political consequences in foreign countries of an action of this sort? Surely some Department must have an eye upon our interests in that matter.
  Mr. Davies: This was entirely a question of chartering ships for commercial purposes which the Ministry of Food undertook, and as far as the Foreign Office was concerned there was no reason why we should be consulted in the matter.
  Captain Crookshank: In view of what has happened, will the Under-Secretary now get in touch with the Minister of Food and point out the undesirability of continuing this practice?
  Mr. Chetwynd: Will my right hon. Friend bear in mind that a little earlier this afternoon the hon. Member for Winchester (Mr. Peter Smithers) was pressing the Minister of Food to get as much sugar as he could from any source possible?

  UNDER-DEVELOPED COUNTRIES (ASSISTANCE)
  Mr. Blackburnasked the Secretary of State for Foreign Affairs what arrangements have been made by His Majesty's
  860
  Government to participate in the Fourth Point programme of the United States Government for the development of backward areas.
  Mr. Ernest Davies: The money voted by the United States Congress for the Point Four Programme of Technical Assistance is to be made available to under-developed countries partly through the expanded technical assistance programme of the United Nations and its specialised agencies, which is to be financed entirely by voluntary contributions, and partly through bilateral arrangements between the United States and individual recipient countries. His Majestys Government have promised to contribute to the former rather more than £750,000, which will be the largest contribution after that of the United States.
  Mr. Blackburn: While congratulating my hon. Friend on that answer, may I ask whether he can tell us what form the aid will take? Will it take the form of sending technicians in the way in which the United States are to do from now onwards?
  Mr. Davies: Well, it might be that. There are various ways in which aid might be given. As far as we are concerned, we are making this sum available in non-convertible sterling.

  CHINESE STUDENTS (REPATRIATION)
  Air-Commodore Harveyasked the Secretary of State for Foreign Affairs how many Chinese students who have completed university training in this country are awaiting repatriation to China.
  Mr. Ernest Davies: Twenty, Sir.
  Air - Commodore Harvey: What arrangements are being made for the return of these students to China; is there difficulty regarding transit visas to Hong Kong; and what is the hon. Gentleman doing about it?
  Mr. Davies: Transit visas to Hong Kong are one of the difficulties involved. Steps are being taken to facilitate the return of these Chinese students as opportunity arises.

  AUSTRIAN LOAN (ITALIAN LIABILITY)
  Mr. John Fosterasked the Secretary of State for Foreign Affairs whether any representations have been made or are intended to be made by His Majesty's Government with regard to the default by Italy of her guarantee for the capital repayment of the drawn bonds of the 4½ per cent. Austrian Guaranteed Loan.
  Mr. Ernest Davies: In June of last year His Majesty's Ambassador in Rome informed the Italian Government that in the opinion of His Majesty's Government the Italian Government, under the terms of the guarantee, were under an unqualified obligation to meet payments due in respect of this loan His Majesty's Government will continue to press the Italian Government to meet its obligations.
  Mr. Foster: Is the Under-Secretary aware that there has been a subsequent default?
  Mr. Davies: Yes, Sir.
  Mr. Nicholson: Roughly, what is the sum involved?
  Mr. Davies: I should want notice of that question.
  Mr. Keeling: Does the Italian Government dispute its liability?
  Mr. Davies: Yes, Sir, the Italian Government issued a statement to that effect some time ago.

  GERMAN EX-PRISONERS (CREDIT BALANCES)
  Mr. Baldwinasked the Secretary of State for Foreign Affairs whether a new payments agreement has yet been concluded between this country and Germany whereby ex-prisoners of war may now draw their credit balances in this country where many of them have set up a home.
  Mr. Ernest Davies: No, Sir. Negotiations concerning trade and payments relations with Germany have been taking place in London and have not yet been concluded. I am, therefore, not yet in a position to say what facilities will be available for private transfers of money from Germany to this country from which ex-prisoners-of-war might benefit.
  Mr. Baldwin: Does the Minister consider it fair that these credit balances,
  862
  which are wages due for work done in this country, should not be paid to these men, so that they can spend them in this country?
  Mr. Davies: There was, as the hon. Gentleman is aware, an arrangement during the war whereby payments made to German prisoners-of-war in this country were credited in marks in Germany, and arrangements have been made for prisoners-of-war who remain in this country to receive payments in marks, either when they are visiting their own country or to their relatives in that country. As yet, we have not been able to make an arrangement for payment in sterling. This is a matter for the German Exchange Control, and an arrangement, it is hoped, will ultimately be reached.
  Mr. Driberg: Is my hon. Friend aware that there is considerable hardship in cases in which these men have no surviving relatives in Germany and no homes to go back to, and can he say whether this particular point is being discussed, among others, in the negotiations to which he referred?
  Mr. Davies: Yes, Sir, this is under consideration, because the Government recognise the desirability of some liberalisation of the present arrangement for private transfers, particularly in cases of hardship.
  Mr. Pickthorn: Can the House be told how much would be involved in the whole of this; and, secondly, in view of the fact that never before was there so complete a strategic victory which produced so little peace, and never before did victory mean that one side lost half its country, does His Majesty's Government think it right that those Germans who cannot decently be expected to go back to East Germany should be deprived of these small sums?
  Mr. Davies: The answer to the first part of the supplementary question is, roughly, £250,000. The second part of the supplementary question I do not consider relevant.

  INTERNATIONAL CHILDREN'S EMERGENCY FUND
  Mr. Sorensenasked the Secretary of State for Foreign Affairs what amount we have contributed during each of the past

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  six years to the United Nations International Children's Emergency Fund; what is now the total available funds for the work of the United Nations; and in what British territories service from this fund is being given.
  Mr. Ernest Davies: The United Nations International Children's Emergency Fund has only been functioning since 1947. His Majesty's Government contributed £100,000 in August, 1948. In addition, the Fund has received £1,650,000 from His Majesty's Government's contribution to U.N.R.R.A. and over £350,000 from voluntary subscriptions raised in 1948 by the Lord Mayor's United Nations Appeal for Children. The total available resources of the Fund as at 6th June, 1950, were $5,970,000. Allocations have been made to the following British territories: British Honduras. Brunei, Hong Kong, Malta, Malaya. North Borneo, Sarawak, Singapore.
  Mr. Sorensen: Is my hon. Friend satisfied with our contribution, and can he say whether we are paying a proportionate amount to the central fund, compared with other countries?
  Mr. Davies: Yes, Sir, I think that our share, in view of the amount which was paid over as a result of our contribution to U.N.R.R.A., is a very considerable sum, and we have certainly completed our share.
  Mr. Sorensen: Can my hon. Friend say whether the amount received in our colonial areas is at all equivalent to the amount we have paid?
  Mr. Davies: It is very much less.

  ARAB REFUGEES (RELIEF)
  Mr. Sorensenasked the Secretary of State for Foreign Affairs what is now the position in respect of our contribution for Arab relief; and what contribution we are making to the United Nations for this purpose.
  Mr. Ernest Davies: As I informed the House in my speech in the Debate on the Adjournment on 23rd May, His Majesty's Government is contributing £3,200,000 sterling, inclusive of the £1 million interest-free loan to Jordan.

  BRITISH PRESS CORRESPONDENTS, JAPAN
  Mr. G. Thomasasked the Secretary of State for Foreign Affairs what steps he has taken to ensure the freedom of British Press correspondents in Japan; and if he will make a statement.
  Mr. Ernest Davies: I am unaware that there has been any infringement of the normal freedom accorded to Press correspondents in Japan. No special steps have been taken and none are contemplated.
  Mr. Thomas: Has the attention of my hon. Friend been drawn to the experience of "The Times" correspondent, and would he make a statement?
  Mr. Davies: Yes, Sir, I am aware of the case of Mr. Hawley, and it is true that General MacArthur called the attention of the head of the United Kingdom Liaison Mission to passages in certain of "The Times" correspondent's recent reports to which he took exception. His Majesty's Government drew the attention of "The Times" to this, but we do not propose to take any action in the matter.
  Mr. Emrys Hughes: Does my hon. Friend's reply mean that General MacArthur has interfered with the rights of British correspondents who report home from Tokyo?
  Mr. Davies: No, Sir, but the attention of a number of correspondents has been drawn to what he considered to be inaccuracies in their reports, and that is all the action he took.
  Mr. Driberg: Did my hon. Friend say that His Majesty's Government had drawn the attention of "The Times" newspaper to this matter? Does that mean that we are supporting General MacArthur's protest and advising "The Times" to interfere with their correspondents' freedom of reporting?
  Mr. Davies: Certainly not. We consider that as the information reached us it was our duty to inform "The Times" of this information.
  Mr. G. Thomas: Can my hon. Friend say whether "The Times" rejected the advice of my hon. Friend?
  Mr. Davies: We gave no advice to "The Times" whatsoever, and "The Times" have taken no action in the matter so far as we are aware.

  CZECHOSLOVAKIA (POLITICAL TRIAL)
  Mr. Clement Daviesasked the Secretary of State for Foreign Affairs whether he has any information about the recent political trial in Czechoslovakia at which certain charges were brought against British officials and subjects; and whether His Majesty's Government has made any representations, or proposes to make any representations, to the Government of Czechoslovakia with regard thereto.
  Mr. Ernest Davies: The information I have received from His Majesty's Embassy at Prague generally bears out the accounts of this trial which have appeared in the Press. These trumped-up treason trials have become a sickeningly familiar feature of life behind the Iron Curtain. They are designed to serve the duel purpose of liquidating opponents of the Communist régimes and, at the same time, of discouraging all contacts by the people of the countries concerned with Western diplomatic missions.
  I need hardly assure the House that these charges that present or past members of His Majesty's Embassy at Prague have engaged in activity inconsistent with their diplomatic status are unfounded. His Majesty's Government therefore take a very serious view of a request just received in a Note from the Czechoslovak Government for the withdrawal of a Secretary of His Majesty's Embassy at Prague on the ground of activities against the Czechoslovak State which are alleged to have been proved at the trial. A reply to the Czechoslovak Note is under consideration, but I am not in a position to make any further statement at present.
  Mr. Davies: Does the hon. Gentleman realise that partly as a result of these trumped-up, unfounded and farcical charges men and women of integrity, some of them with an international reputation, have been sentenced to death by these sadistic fiends? Is there nothing that we can do to try to save them?
  Mr. Ernest Davies: I can assure the House and the right hon. and learned Gentleman that His Majesty's Government utterly deplore these political trials, which are directed against people who have loyally served the cause of freedom. We regret very much that circumstances in that country prevent a genuine opposition, and that any attempted opposition is met in this way.
  Mr. Henry Strauss: Was the character of the Czechoslovak Government, which is shown by the examples given in these Questions and Answers, perfectly well-known to His Majesty's Government at the time they supported the candidature of that country for the Security Council?
  Sir Herbert Williams: Will the hon. Gentleman say why the Minister of Food has continued to import food from this disreputable country?

  HOUSE OF COMMONS CATERING (ALL-NIGHT SITTING)
  Dr. Kingasked the honourable Member for Bristol, North-East as Chairman of the Kitchen Committee, whether he will arrange to give the staff on duty in the Cafeteria, Tea Room and Smoke Room, some relief or rest during their duties in an all-night sitting.
  Mr. Coldrick: In replying, I wish to express our full appreciation of the service rendered by the whole of the staff retained on 14th June in very trying circumstances. I am sure the whole House is grateful. The question of staff arrangements is under consideration and the outcome will be determined largely by the attitude of the House of Commons to the Kitchen Committee's Report, which is to come up for consideration. The matter of relief as suggested will receive proper consideration.
  Dr. King: While thanking my hon. Friend for his reply, may I ask if he is aware that on the night of the all-night Sitting, women behind the counter were on duty at four o'clock in the afternoon and had only one slight relief throughout the whole of that time? In view of the likelihood of further all-night Sittings cannot some emergency arrangements be made?
  Mr. Coldrick: We are aware of the problem involved in this matter, but there is a limit to the number of staff that can be actually engaged. If we had kept back sufficient staff to relieve those who were engaged, there would not have been sufficient staff to provide food the following day. While we are conscious of the hardship suffered, as I have indicated, the whole matter will have to be reconsidered so far as the House is concerned.
  Mr. Vane: If these trying circumstances are repeated tonight, or on some other night, will the hon. Member be able to arrange a relief staff, or for some other improvement, so that the service Members can have will be a good deal better?
  Mr. Coldrick: Every effort is being made to meet any contingency which may arise, but I would suggest that it would be advisable for Members themselves to run the House in such a way that we can definitely anticipate the needs.
  Mr. John Cooper: Is not my hon. Friend aware that statutory regulations would be violated if this happened in private enterprise?
  Mr. Coldrick: I am well aware that anyone concerned with private enterprise would not attempt to provide Members with food in the circumstances which prevail in this House.
  Mr. Selwyn Lloyd: May we take it, then, that the hon. Member will suggest to the Leader of the House that we shall have adequate time to discuss the Finance Bill?
  Mr. Coldrick: I am not placing the responsibility on the Government. I presume that it is within the competence of Members to decide what are to be the arrangements so far as the future running of the House is concerned.

  COURT PROCEEDINGS (REFERENCES)
  Sir H. Williams: May I ask for your Ruling, Mr. Speaker? Last Thursday, the Secretary of State for Commonwealth Relations, in answer to a question with reference to some legal proceedings in Ireland, made this remark:
  "The House will not expect me to say more while the matter is sub judice in the Irish courts."—[OFFICIAL REPORT, 15th June, 1950; Vol. 476, c. 521.]
  Whereupon, I asked, on a point of order, whether the Rule in regard to British courts also applies in the case of foreign courts. May I ask for your Ruling, Mr. Speaker, on the matter?
  Mr. Speaker: The hon. Member for Croydon, East (Sir H. Williams), asked me on Thursday if the Rule which prohibits discussion on a matter which is sub judice in British courts applies to matters which are sub judice in courts of law outside Great Britain and Northern Ireland. The answer is "No." As I ruled in the case of the Allied Court at Nuremberg on 22nd November, 1945, the Rule in terms applies only to British courts. Reference to matters sub judice before other courts may be affected by considerations of courtesy or taste, but not by the Rule.

ORDERS OF THE DAY

  WAYS AND MEANS [15TH JUNE]
  Resolutions reported:
  1. TRACTORS, &C. (EXCISE LICENCES)
  That, as from the beginning of nineteen hundred and fifty-one, the Vehicles (Excise) Act, 1949, shall be amended—

  (a) by increasing to two pounds the five shilling rate of duty applicable to vehicles falling within paragraphs (a) to (d) of sub section (2) of section four of that Act;

  (b) by repealing paragraph (e) of that subsection (vehicles chargeable on a scale beginning at twelve pounds) and extending paragraphs (a) and (f) to include vehicles which, but for the repeal, would fall within paragraph (e).

  2. HYDROCARBON OILS (CUSTOMS REBATE ON HEAVY OILS)
  That, as from the beginning of nineteen hundred and fifty-one, section two of the Finance Act, 1935 (which withdraws the customs rebate on heavy oils used for road transport), shall apply to heavy oils used as fuel for tractors, agricultural tractors and agricultural engines not falling within paragraph (a) of subsection (2) of section four of the Vehicles (Excise) Act, 1949, as amended by any Act of the present Session relating to Finance.
  3. HYDROCARBON OILS (EXCISE REBATE ON HEAVY OILS)
  That any Act of the present Session imposing an excise duty on hydrocarbon oils and applying section two of the Finance Act, 1935, in relation to any rebate of that duty, may apply it with any amendments made in it by the Act for the purposes of the customs rebate.
  4. INCOME TAX (DOUBLE TAXATION PROVISIONS)
  That any provisions of any Act of the present Session relating to Finance which amend the law as to the effect for tax purposes of taxation payable under the laws of territories outside the United Kingdom may abolish the relief from income tax given by section twenty-seven of the Finance Act, 1920, and apply, with modifications, Part V of the Finance (No. 2) Act, 1945, and the Ninth Schedule to the Finance Act, 1947, to tax payable under the laws of any such territory notwithstanding that there are no arrangements in force under the said Part V with the Government of that territory providing for the granting of credit in respect of that tax against United Kingdom taxes
  5. PROFITS TAX (DOUBLE TAXATION PROVISIONS)
  That any Act of the present Session relating to Finance may vary the extent and incidence of the profits tax for any chargeable accounting period falling wholly or partly after the end of March, nineteen hundred and fifty, so as to give effect to provisions amending the law as
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  to the effect for tax purposes of taxation payable under the laws of territories outside the United Kingdom.
  Resolutions agreed to.
  Instruction to the Committee on the Finance Bill that they have power to make provision therein pursuant to the said Resolutions.

WAYS AND MEANS
Considered in Committee.
[Major MILNER in the Chair]
Motion made, and Question proposed,

PURCHASE TAX (ROAD VEHICLE CHASSIS AND ROAD VEHICLES).
That any Act of the present Session relating to Finance may amend the purchase tax law as from the first day of July, nineteen hundred and fifty, so as (subject to any power of the Treasury to make orders) to include road vehicle chassis among the classes of goods which are chargeable goods, and among the classes which are relevant to the provisions about chargeable processes, and may in that connection make provision—

(a) for modifying, in the case of road vehicle chassis, the provisions as to the value on which, and the circumstances in which, purchase tax becomes chargeable;

(b) for treating part of a chassis-less vehicle as chassis;

(c) for other incidental matters;

and the Act may also include provision about cases in which contracts may have been affected by a prospective liability thereunder to purchase tax in respect of road vehicles.—[Sir S. Cripps.]
Captain Crookshank: I take it that this is the Committee stage of a Resolution leading up to a new Clause. As the Chancellor knows, we have debated that, and shall debate it again. Therefore, to get on with business, we shall not debate this Resolution now.
The Chancellor of the Exchequer (Sir Stafford Cripps): I am obliged to the right hon. and gallant Gentleman. We thought it much more convenient to debate the question on the Clause rather than on the Resolution.
Question put, and agreed to.
Resolution to be reported Tomorrow.
Committee to sit again Tomorrow.

FINANCE BILL
Considered in Committee [Progress, 15 th June].
[Major MILNER in the Chair]

Clause 20.—(SURTAX TO BE CHARGED ON CONSIDERATION FOR CERTAIN RESTRICTIVE COVENANTS, ETC.)
Amendment proposed [15th June]: In page 12, line 36, to leave out "gives" and insert:
"has after the sixth day of April, nineteen hundred and forty-eight, given".—[Mr. H. Strauss.]
Question again proposed, "That 'gives' stand part of the Clause."
3.38 p.m.
Major Sir David Maxwell Fyfe: I think that every one who was in the Committee before Progress was reported will agree that the Debate maintained a high standard. I think it is right to say that no one took up either of the extreme positions, that retrospective legislation was a good thing, or that there could be no occasion when there could be retrospective legislation.
The Amendment of my hon. and learned Friend the Member for Norwich, South (Mr. H. Strauss) limits the retroactive effect of the Clause in a manner which is of vital importance, and does so very reasonably from the point of view of the Chancellor of the Exchequer. The right hon. and learned Gentleman's warning was given on 6th April, 1948, and dealt with arrangements that people might make after that date. The first Finance Act in which he could have dealt with the problem was that of 1949. Therefore, the Amendment of my hon. and learned Friend the Member for Ilford, North (Mr. G. Hutchinson) is completely logical in fixing the date as April, 1949. We are not concerned with the minor point of which of these dates is correct, but are concerned with the protection of a large number of arrangements which may well have nothing to do with the mischief mentioned in the Clause.
In view of the line the discussion took last Thursday, I wish to say one or two words about the general principle underlying this matter. As I understand it, no one supports, or has sought to support, the imposition of retrospective punishment. Everyone agrees it is wrong
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to attach penal consequences to an innocent act. As was pointed out in the correspondence columns of "The Times" by Lord Winster, who used to be a Minister in the last Socialist administration, it is contrary to the Declaration of Human Rights of the United Nations. I agree with my hon. and learned Friend the Member for Norwich, South, that the aim ought to be to make the law conform with the norm of civilised countries. I think we are all agreed on the question of retrospective punishment; at least, we are so far as I know and I have heard no views to the contrary.
I think the second proposition with which there is general agreement is that no one believes it is generally desirable to attack, by retrospective legislation, completed transactions. The reason, here again, is that it destroys the certainty in and the respect held for the law and it also makes it impossible for individuals to plan ahead. As I see it, therefore, the question on which we have to make up our minds is whether there is a defined principle, not favour or facility of government, which governs the exceptional cases when retrospective legislation may be imposed, and especially in regard to taxation.
I accept, if I may say so, the principles which were set forward by my hon. Friend the Member for Oxford (Mr. Hogg), although I do not draw the same conclusions as to their application as those which he drew in what I hope I may be allowed to say was an admirable speech on Thursday night. My hon. Friend stated what he regarded as a principle which governs the cases on the right side of the line. He said:
"I do not see anything in principle objectionable if people seek to pick a hole in an Act of Parliament deliberately to defy its purposes and deliberately to get round its provisions, to repair the hole retrospectively. I think they must expect Parliament to protect its own policy in that way, at any rate up to a point."
I entirely agree with that statement. I do not want to appear to be making any false points; afterwards my hon. Friend went on to draw conclusions against the present being an occasion for retrospective legislation, but so far I am in entire agreement.
I am also in agreement with him when he sought to define what was the other

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side of the line—what was the wrong use. He said:
"I see a distinction, and a distinction of importance, between cases where the Legislature and the Executive propose to protect their own previously declared policy contained in tax law against ingenious evasions of an illegitimate kind, and cases where they propose to protect a series of subjective standards of their own, which may or may not be laudable, against transactions which were obviously not subject to tax at the time when they were completed."—[OFFICIAL REPORT, 15th June, 1950; Vol. 476, c. 710.]
Again, I think my hon. Friend is right in drawing the distinction between the declared policy expressed in Acts of Parliament and the super-added subjective test which has neither definiteness nor, maybe, logicality. I accept these principles entirely.
I also agree with what my hon. and learned Friend who moved this Amendment said—that there must be present the two requisites: there must be a warning and, secondly, the legislation must be commensurate with the warning. I do not think there would be a great deal of dispute by anyone who has considered the matter seriously over those four principles which I have laid down, having culled them, let me admit at once, from the speeches of my hon. Friends who have contributed to the Debate.
But the importance in the next stage of the argument, and where I differ from my hon. Friend the Member for Oxford, is that I say that these principles which I just endeavoured to ennunciate are the basis of the Amendment of my hon. and learned Friend the Member for Norwich, South, which we are discussing, when it is taken, as I think my hon. and learned Friend will agree, with the next Amendment, which is in my name and to which his name has been added. The way we regard the matter is this: we say that it is the purpose—to use the words of my hon. Friend the Member for Oxford—of the Income Tax Act that people should pay tax on remuneration but not on payment for a capital asset. Again, I do not think anyone would dispute that: that is the principle.
The mischief against which the Chancellor's statement was directed was the future—to use his words—dressing up of remuneration as payment for a capital asset. The essential condition of taxability, in my view, is whether it can be
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proved that there is an abuse of the provisions dealing with capital assets and that, by that abuse, people have set out to defy the provisions that one pays tax on remuneration. That is how I see it and, from that point of view, it fits entirely with the tests which my hon. Friend the Member for Oxford laid down.
I say that we must first look at the Chancellor's statement to see whether the mischief with which it deals is an evasion of an illegitimate kind, to use my hon. Friend's words. If it is, then we must look at the legislative proposal to discover, first whether the alleged abuses came after the statement—because the warning statement is the initial point—and, secondly, whether the alleged remedy does not deal with mischiefs which are outside the statement. That is the importance of this Amendment and of the next.
I should like to say a word to my hon. and learned Friend the Member for Hove (Mr. Marlowe). He very rightly drew attention—and I think it was most important that he should have done so—to the fact that Ministerial statements do not constitute the law of this country and that we are not governed by Ministerial statements. But, equally, it is a well-known principle of law that one can look at Ministerial statements in order to see what is the evil at which legislation is directed. One can look at Ministerial statements, at a newspaper or at anything else which tell one what is the evil at which the legislation is directed, although one cannot use that to state what is the law.
My hon. Friend the Member for Oxford proceeded from that portion of his argument to argue with great force that it is beneath the dignity of Parliament to legislate against individuals. I agree, if the legislation pre-judges the action taken by individuals. I think it is wrong to legislate to say that A. B., or words which can only apply to A. B., has done wrong; but if we are to lay down what we believe is wrong, then there must be an opportunity given to A.B. and to those who say the contrary to establish whether he has done wrong or not. I think we must always remember this aspect of tax litigation, that an individual case often brings into relief a difficulty or an abuse which has gone on in less important cases without requiring attention.

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I feel bound in honesty to face this position with regard to taxation, that we may find a difference of degree arising, which, starting as a difference of degree, becomes so enormous and extensive that it really becomes a difference in kind. If we take that line of Kipling
"'Steal in measure,' quo 'Brigandyne,'in measure are all things made.' "
and if we apply it to taxation, putting the words "dodge in measure" instead of "steal in measure," we come upon a real principle. It is only the end of a slope of degree. It has become a principle of our tax legislation, and indeed very much a principle of our national life, that if we go to such an extent that we are abusing something which, if moderately used, may not be noticeably of a different kind, in a strict sense we have brought about a fresh state of affairs. From my own practical experience of litigation with regard to taxation I feel bound to recognise that point.
Some of my hon. Friends were good enough to mention my own past in the matter. Of course, I would not occupy time with something which is really irrelevant, only I should like to say that my hon. Friends have referred, and were even good enough to give me what one might colloquially call a get-out, to my action in regard to the whisky case during the war. I should like to make it clear that I do not take back a word of what I said in the course of that legislation and that I should do exactly the same again. What was done on that occasion clearly comes, in my view, within the principle which my hon. Friend the Member for Oxford enunciated so clearly on Thursday night. The last thing I want to do is to bore hon. Gentlemen with a discussion of what I did seven years ago. I thank them for listening to that short exposition as patiently as they have done.
Having dealt, as I feel it is only right to deal, with the argument which my hon. Friend put forward with such force and conviction on Thursday, I want the Committee to appreciate the practical effect of the Amendment of my hon. and learned Friend the Member for Norwich, South. After all, the Chancellor of the Exchequer will recognise this point. It is a fair point. The decision of the House of Lords which clarified this matter was in
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1943. Since then, right hon. Gentlemen opposite have been in office for five years and have had the opportunity on five previous occasions to legislate with regard to this matter. They did not do it. Therefore, it must be—I put this point to the Chancellor of the Exchequer who will see that I am not trying to make debating points by this speech but to approach the matter on as serious a line as I can—that the Clause will hit arrangements made at any time, considerably before the Chancellor's statement, and possibly years previously.
As the right hon. and learned Gentleman knows, although the law was clarified in the House of Lords and was so clear that counsel for the taxpayer was not called upon at that time, it was known what was probably the state of the law for some period before We therefore have the position that a number of arrangements have been made, and were made long before the Chancellor's statement came into existence. Some of these arrangements may be within the abuse against which he spoke, that is, the dressing up of remuneration as payment for a restrictive covenant. Some of them may not be. Some may be quite ordinary transactions taking place on the sale of a business, where it is necessary to have a restrictive covenant on somebody's services, or an ordinary case where a restraint has been made on somebody's services for the perfectly proper reason of preventing them going to rivals, or the like. I am postulating this now and I think the Chancellor of the Exchequer would agree that there are proper cases. One can imagine them and I do not want to expatiate on them now.
The difficulty of the proposal before the Committee is that it catches all these arrangements, whether right or wrong and irrespective of the effect that that will have upon an individual's position or the position of the company who employed them. I might take as example where an individual may have been tempted to go overseas to give his services to people who would not fit in with the Chancellor's broad economic policy. The right hon. and learned Gentleman will understand that one does not want to give specific examples, but I am sure that examples will occur to any of us in these circumstances. I do not think that a number

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of people have appreciated that the legislation as drafted will catch these agreements as they come to be enforced after last year, whenever they were made and whatever be the arguments for or against them.
Therefore, what we seek to do by the Amendment of my hon. and learned Friend the Member for Norwich, South, is to make the legislation co-extensive with the statement of the right hon. and learned Gentleman. We are not trying to cut it down in any way, but we are trying to ensure, the statement having been made laying down clearly the mischief at which it is aimed, namely, the dressing up of remuneration as a capital payment in this way, that that should be the matter dealt with by the Clause. Therefore, it is my advice that my hon. Friends should support the Amendment of my hon. and learned Friend the Member for Norwich, South, and that we should in that way secure protection for transactions the vast majority of which are probably utterly unimpeachable on every other ground, and secure also that the statement of the right hon. and learned Gentleman, but nothing more than his statement, should receive legislative form.
4.0 p.m.
The Solicitor-General (Sir Frank Soskice): I think the views to which we have just listened are views to which a number of my hon. Friends on this side of the Committee would assent. Certainly I would. However, before embarking upon an examination of the extent to which we agree I should like to clear up what I think are one or two misapprehensions which have been given voice to in the course of the Debate. It was said by the hon. and learned Member for Hove, (Mr. Marlowe) that we were, as it were, rendering illegal transactions which, when they were entered into, were perfectly legal and within the law. That is entirely mistaken. It is perfectly legal now, and it will be hereafter, to go on entering into those transactions, and those transactions will remain as legal as they have ever been; all we are doing is to say that in the event of their having been entered into certain tax consequences will follow retrospectively and in the future.
He also used the expression "penalty." In discussions on retrospective legislation we constantly hear it said" and I believe that everybody on both sides of the Committee
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would agree, that in general—there may be exceptional circumstances—we ought not retrospectively to impose a penalty. Here we are not imposing a penalty at all in the sense in which that expression is used in these discussions, that is to say, punishing somebody—to take an extreme case, sending them to prison. We are not doing anything of that sort. We are not fining them or imposing any punishment on them. We are simply saying that a tax consequence will follow. That is perfectly accurate, and I am quite sure that any hon. Member who thinks about it will agree that that is so. Of course, none of us like being taxed, but the fact that we have to pay tax does not mean that we are being punished in the sense in which that expression is used in the context of these discussions.
Mr. Marlowe: Will not the right hon. and learned Gentleman agree that if either of these gentlemen refused to pay this sum and it was established that they were capable of paying the sum they would go to prison for contempt of court for their refusal to do so?
The Solicitor-General: That would certainly not be contempt of court, but if they refused to pay they would be in exactly the same position as any other taxpayer hereafter or backwards since tax was imposed. The fact that they have to pay tax does not mean that they are being punished. If they fail to pay the tax, we may consider how we shall punish them.
I accept at once that in general our system of law does not like retrospective legislation, but we have to consider, as the right hon. and learned Member for West Derby (Sir D. Maxwell Fyfe) said, and as the hon. Member for Oxford (Mr. Hogg) said—if my memory does not play me false—that there is a certain type of legislation in respect of which it is impossible to avoid the application of retrospective provisions. We have to consider what we are dealing with. For example, if we are dealing with legislation which confers an indemnity from the very nature of things that must be retrospective. In exactly the same way legislation dealing with tax has for many many years past been recognised both by the context of legislative enactments and by pronouncements

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of Chancellors of the Exchequer and previous Law Officers, including—as he recognised quite frankly at once—the right hon. and learned Member for West Derby, as a type of legislation in respect of which it is impossible to dispense with some retrospective enactments.
The Committee might be interested to look back for a moment to see how far that is borne out by legislative history Let us go back to the Finance Act, 1936, and look at a few Acts after that time, In the Finance Act, 1936, Sections 18 and 19 were retrospective; in the Finance Act, 1937, Section 14 was retrospective. So one goes on through the Finance Acts of 1938, 1939 and 1940 and one gets to the case of the Finance Act, 1943, when the right hon. and learned Gentleman introduced and moved the provision dealing with what are known as the "Whisky cases." Speaking for myself and occupying now the position which the right hon. and learned Gentleman did then, I think he was perfectly justified.
That was a case in which there were transactions which were perfectly legitimate and perfectly within the law before the Finance Act, 1943. They were carried out before the Finance Act, 1943, and they attracted no Excess Profits Tax, but the right hon. and learned Gentleman introduced Section 24 of the Finance Act, 1943, and in introducing it he used these words. One would want to analyse them rather carefully. He said:
"Everyone who goes in for a tax-dodging scheme does so with his eyes open to the possibility that Parliament will take retrospective power. Retrospective powers have been taken in at least four Finance Acts to my knowledge, and it is a perfectly proper way."—[OFFICIAL REPORT. 2nd June, 1943; Vol. 3'90, c. 311.]
In that case—the right hon. and learned Gentleman will correct me if I am wrong—there was no previous warning—
Sir D. Maxwell Fyfe: Yes, there was. There was a warning in November, 1942. by Sir Kingsley Wood.
The Solicitor-General: I do not know whether the right hon. and learned Gentleman can cast his memory back and say whether the transactions had taken place before the warning or not. They had gone back some considerable time. However, there was a warning which
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may or may not have been before the transactions took place. In view of what I have to say in a moment—to some extent I am accepting the basis of the arguments to which we have listened—perhaps that will not be so material. Mr. Neville Chamberlain, when dealing with the Act of 1936, recognised perfectly expressly that there must be retrospective legislation on occasions in this type of legislation. So did Sir John Simon, as he then was, when he was dealing with the Finance Act, 1938.
Therefore, I would suggest that the Committee should accept it as a generally well established proposition that in this type of legislation we cannot dispense on occasions with retrospective legislation. I should like to cite a passage which is well known in the courts, and perhaps might be rather better known outside the courts, from a judgment of the former Master of the Rolls, Lord Greene, who was then a Lord of Appeal in Ordinary and has now resigned. They are words which very graphically describe the situation with which the Revenue authorities have to deal. These are the words:
"For years a battle of manoeuvre has been waged between the Legislature and those who are minded to throw the burden of taxation off their own shoulders on to those of their fellow subjects. In that battle the Legislature has often been worsted by the skill, determination and resourcefulness of its opponents … It would not shock us in the least to find that the Legislature has determined to put an end to the struggle by imposing the severest of penalties. It scarcely lies in the mouth of the taxpayer who plays with fire to complain of burnt fingers."
Those are words used by the then Master of the Rolls sitting in the Court of Appeal in the course of a judgment which he was delivering on a tax evasion case which describe, as he saw it, the situation with which the Revenue authorities have to deal.
Sir Herbert Williams: He called them penalties.
The Solicitor-General: He was dealing with penalties. Here we are simply dealing with the imposition of tax, which is not a penalty in any sense.
Therefore, if we start from the position that we can have, and rightly have, retrospective provisions in this type of legislation, the question then arises whether we have gone far in this Clause. Perhaps I might again supplement what I have

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said by another quotation from the right hon. and learned Gentleman, one which I think I should make in fairness to him because it is one in which he makes it quite clear that the words he used in connection with the whisky legislation should be read as subject to some restriction. He said in the Debate on the Iron and Steel Bill:
"I should be the last to deny that all Governments bring in retroactive legislation at some time and every Law Officer has had to do it in regard to the Finance Acts dealing with tax evasion. However, I put this principle forward as quite unchallengeable, that the justification for retroactive legislation is that a reasonable and definite warning has been given to people likely to practise the matter to be struck at and they have been given the opportunity to avoid that course."—[OFFICIAL REPORT, 28th April, 1949; Vol. 464, c. 499–500.]
The right hon. and learned Gentleman is there saying that there must be warning. Here there was warning as from 6th April, 1948. The Amendment of the hon. and learned Member for Norwich, South (Mr. H. Strauss) says that we should exclude from the scope of the Act all covenants entered into before that warning. Now I hope the Committee will agree, that, if we do that, we have not been offending against the principles laid down by the right hon. and learned Gentleman and the hon. Member for Oxford.
I and my right hon. and learned Friend are prepared to accept the effect of that Amendment though not the Amendment in terms, for this reason, that we are prepared to go even somewhat further than that Amendment. We are prepared to try to meet the spirit of the Amendment in the name of the right hon. and learned Member for West Derby. His Amendment, in effect, says this: not only should you except pre-warning covenants but you should try to except pre-Act payments where you can say that the payment was of an innocent nature. We shall try, if we can, in respect of the retrospective effect of this legislation, to find words between now and the Report stage which will except what I have broadly described as innocent transactions, that is to say transactions which were not entered into with a view to tax evasion.
We have thought of certain words, we are carefully considering them, and we propose to put down an Amendment
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before the Report stage. That Amendment will have the effect of accepting the principle of the Amendment of the hon. and learned Member for Norwich, South, and it will also exclude in respect of the retrospective operation of this Bill transactions which were non-tax evasion transactions. I must, however, make it perfectly clear that any wording we choose will not except transactions of the type entered into by Sir John Black and Mr. Lord. Those transactions, we feel, are entirely outside the scope of any such Amendment, and in this I think there is no difference of opinion on either side of the Committee. I do not want to analyse those transactions, and I certainly do not want to use any kind of viputerative language with regard to individuals, but nobody on either side of the Committee has sought to defend those transactions. Indeed, they are not the only ones in question.
Other cases have come to light in which there were similar transactions, and any words which we put down on Report will leave within the scope of the Bill, and within its retrospective scope, transactions of the type of those entered into by Sir John Black and Mr. Lord. I hope that if we do that the Committee will agree that we have met the general spirit of the arguments raised against us, though not the spirit of the arguments of the hon. and learned Member for Hove because he goes much further. He thinks we should have no retrospective legislation at all and that I think is going too far.
There is one other point I want to make. In accepting the principle of the Amendment in the name of the hon. and learned Member for Norwich, South, I do not want to be taken as accepting that, for all purposes always, we should only legislate retrospectively if we have given an anterior warning. I am not expressing a view one way or another upon that for present purposes, and I think the Committee will agree that if we are accepting the effect of the argument of the hon. and learned Member for Norwich, South, it is not relevant in the course of this discussion to investigate that further matter of principle.
Mr. Selwyn Lloyd: May I ask a question with regard to the last topic which the Solicitor-General was discussing? I appreciate what he has said in

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regard to the extent to which he is endeavouring to meet the spirit of the Amendment of my right hon. and learned Friend but I, and other of my hon. Friends, have down further Amendments dealing with what might be called genuine agreements in respect of restrictive covenants. Did I understand from the right hon. and learned Gentleman that such payments made in the future, if after the Act, will be taxable?
The Solicitor-General: I am sorry to say that, after carefully investigating the position generally, we feel it would be impossible to find words to exclude in the future transactions of that kind without giving rise to large opportunities for tax evasion. What I am saying applies only to the retrospective operation of this Measure. That is as far as we are able to go and I hope, with that undertaking to exclude covenants entered into before the warning—and to try to follow the words used by my right hon. and learned Friend in the course of his warning when he used the words "dressing up"—by introducing further words on the Report stage, the Committee will agree that we have not transgressed any principle we ought to observe in making this Clause retrospective to the extent it will be retrospective.
4.15 p.m.
Sir Hugh Lucas-Tooth: The Solicitor-General referred to the difficulty of finding words to cover future transactions, but my hon. and learned Friend asked about future payments in respect of certain past transactions. Is it not possible to find words to cover future payments where the transactions have already been entered into?
The Solicitor-General: I hope we shall be able to do that. Really three sets of circumstances have to be considered. The first relates to pre-warning covenants and under those there may have been pre-Act and post-Act payments. In the case of all those pre-warning covenants we will exclude both pre-Act and post-Act payments. The second is the case of pre-Act non-tax evasion transactions which we will try to cover. I hope we shall be able not merely to cover payments under such covenants before the Act comes into force, but after. I would rather not bind
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myself specifically with regard to the payments after, but I hope and think we shall be able to exclude them also.
Sir D. Maxwell Fyfe: I am grateful to the right hon. and learned Gentleman for considering the arguments we have advanced and for indicating how he proposes to meet them pro tanto. I myself feel it would not be profitable to go on discussing hypotheses at the moment. I should like to see the Clause put down, and I am sure that the right hon. and learned Gentleman would be the first to agree that one cannot commit oneself to it without seeing the Clause and without careful consideration. None the less I am grateful, and I do not want to appear otherwise, for an attempt being made in the direction we desire. Therefore, as far as that is concerned, my own inclination is to wait for the Report stage and see the Clause.
There is just one point I ought to mention. The right hon. and learned Gentleman has pointed out certain practical difficulties which exist in his mind. Of course we have considered these matters and it might be useful if we found some occasion to indicate the way our minds have been working to meet these practical difficulties.
The Chancellor of the Exchequer (Sir Stafford Cripps): I should be glad if the right hon. and learned Gentleman would take the opportunity of having a word with my right hon. and learned Friend the Solicitor-General on the subject matter he has just mentioned.
Mr. Henry Strauss: I, too, wish to facilitate progress in view of what the right hon. and learned Gentleman has said and the reply of my right hon. and learned Friend. I find myself in the difficulty of not knowing whether my right hon. and learned Friend the Member for West Derby (Sir D. Maxwell Fyfe) meant that he was not going to move the next Amendment. If that is what he meant, then I should have to discuss a few things involved in that Amendment which were dealt with by the Solicitor-General; whereas, if we are to have a short discussion upon it, I could facilitate matters by agreeing to withdraw my present Amendment which, in substance, is being accepted.
Unless there is to be a discussion on the Amendment of my right hon. and

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learned Friend, which I gather is the next one to be called, I should have to answer some of the remarks which the Solicitor-General has made. Do I understand from my right hon. and learned Friend that he proposes to move the Amendment in order to permit a discussion?
Sir D. Maxwell Fyfe: I did not intend to do so. I should prefer to see the new Clause with which the Solicitor-General said he was going to try to meet the spirit of my next Amendment, and then have a discussion, if the Chair takes a favourable view, on the Report stage when we have seen it. I personally hate to discuss hypothetical matters, with the argument moving from side to side according to what hypotheses may be accepted. That is my own feeling and is what I should prefer to do.
Mr. Strauss: I am much obliged to my right hon. and learned Friend for that indication. That only necessitates my saying a few words before I withdraw the Amendment in view of the undertaking of the Solicitor-General that he will meet its objects. The right hon. and learned Gentleman dealt by way of anticipation—I am not saying that this was not very useful—with how he wished to meet, not only my Amendment, but also the subsequent one on the Order Paper.
The Solicitor-General: When I say that I shall endeavour to meet the spirit of the Amendment in the name of the right hon. and learned Gentleman, we do not think it possible to accept a purely subjective motive test. It has been found quite impossible to try to operate that when we tried it in the Excess Profits Tax legislation in Section 35 of the 1941 Act. Therefore, when I say "the spirit of this Amendment," I do not think that we could proceed upon the principles upon which the Amendment is based.
Mr. Strauss: I am much obliged. I do not think that I was misunderstanding the right hon. and learned Gentleman. Like my right hon. and learned Friend, we will wait to see what the Solicitor-General proposes to put down.
I think it desirable, however, to say, on my own behalf and on behalf of a great many of my hon. and right hon. Friends, that there will be certain requirements of the new Clause which is to be put down which must be satisfied if it is to meet the essential minimum that we consider
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necessary. That links up with something which the right hon. and learned Gentleman said in his speech. Among the requirements, he talked about excepting innocent transactions from retrospective action. The meaning which I give to innocent transactions is transactions that fall outside the warning which was given by the Chancellor of the Exchequer on the date mentioned in my Amendment. That is the first point.
The second point is this. The Solicitor-General said that his Amendment would not exclude the two specific cases which have been very much in the minds of the Committee. I, of course, do not expect any words to be set down by the right hon. and learned Gentleman which may not catch those transactions. I regard it as absolutely essential, however, that what is put down in the new words should be a statement of principle, and that the question whether those two transactions do or do not fall within the principle shall be determined by the courts. On those understandings, like my right hon. and learned Friend, I am prepared to await the new Clause. As regards my own Amendment, I gather that although it is not being accepted in the form in which I have moved it, the full effect is being accepted. In those circumstances, I imagine that the convenient course would be to ask the leave of the Committee to withdraw my Amendment.
Mr. Pickthorn: On a point of order and procedure, Major Milner, may I ask you this, as I think it might save time; I, like everyone else this afternoon, am devoted to progress. Suppose that the course indicated by the Solicitor-General were followed and these Amendments were withdrawn, what would be the effect upon the opportunity for debating the Amendment, which we were being allowed to debate—we do not know whether it is to be called—in the name of the hon. and learned Member for Hove (Mr. Marlowe). Whether or not one might desire to vote for that Amendment, one might consider it a thing that ought to be debated, and I should like to know whether, if we do not debate it as a continuation of the Debate now drawing to an end, we shall have a later opportunity or not.
Mr. Marlowe: Further to that point of order. I should like to put the same

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point, Major Milner. It now seems probable that the two other Amendments which we were discussing at the same time as my Amendment are likely to be withdrawn. I should like your Ruling as to the position regarding the selection of my Amendment. I am sure that you will agree, Major Milner, that this new development affects the position considerably. Here is an Amendment, which is supported by a large number of hon. Members, covering an important question The Debate which we have had this afternoon has served the usual purpose of crystallising the difference between the point of my right hon. and learned Friend and that of myself. The real point of important principle upon which we differ is that they are prepared to accept the attitude that when the Great Mogul comes here and says, "I have spoken," that has the effect of law from thenceforth. I am not prepared to accept that principle. I adhere firmly to the view that retrospective legislation is an immoral thing, and therefore I hope that we shall have an opportunity of continuing the Debate.
Mr. Hopkin Morris: Further to that point of order. Major Milner. The harmony which appears to be prevailing here this afternoon between the two sides upon the subject of retrospective legislation, by no means represents the view of the substantial number of Members of the Committee who have no agreement with either side.
The Chairman: I am sorry to interrupt the hon. and learned Member, but we cannot have speeches on the merits. It is clear that the fact that the hon. and learned Member for Norwich, South (Mr. H. Strauss) may be satisfied, is no indication that the hon. and learned Member for Hove (Mr. Marlowe) is' equally so. That being so, the hon. and learned Member for Hove is entitled to ask that the Debate on his Amendment may, without repetition, I hope, of the arguments already adduced, be continued and taken to a Division it he so wishes.
Mr. Pickthorn: Does that mean to say, Major Milner, that under your Ruling anybody who wishes to debate the propriety of subsection (3) must debate it in continuance of the present Debate and not later on the Motion that the Clause stand part or in any other form?
Mr. Strauss: May I submit, on the point of order, that the more convenient course, in view of the difference, on which everybody is agreed, between my Amendment and that of my hon. and learned Friend the Member for Hove, will be to allow me to withdraw my Amendment and for the Amendment of my hon. and learned Friend to be called?
The Chairman: Perhaps I did not make myself clear. If the Committee are agreeable to the Amendment in the name of the hon. and learned Member for Norwich, South (Mr. H. Strauss), being withdrawn, I then propose to select the Amendment in the name of the hon. and learned Member for Hove. Is that agreeable?
Sir H. Williams: Before the Amendment is withdrawn, may I say I am not very clear what it is all about. It seems to me that the Solicitor-General has offered us half a grain of that 9tuff Which is put in tea when one has no sugar and is called a pound of sugar—it does not seem to go very far. All the talk has been about restrospective legislation. But some of us think this thing is very bad in respect of the future because it is going to interfere with a lot of very desirable transactions. There is a certain amount of agreement between the right hon. and learned Gentlemen sitting opposite each other, but other aspects of this matter have to be considered. Some people, especially hon. Members who sit behind me, are keen on co-partnership and this will kill every co-partnership scheme. There are other aspects to be discussed besides those to which reference has been made. I want to safeguard the rights of those who want to discuss other aspects of the matter.
4.30 p.m.
Mr. Strauss: May I point out to my hon. Friend, whose views I appreciate, that none of the discussions he contemplates will be in the least prejudiced by the withdrawing of the Amendment in my name?
Amendment, by leave, withdrawn.
Mr. Marlowe: I beg to move, in page 13, line 27, to leave out subsection (3).
I deployed all the arguments in favour of this Amendment when I spoke on Thursday night, and therefore I shall not try to cover that ground again; but I feel

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that out of this discussion we have had this afternoon some good has come. To this extent and to this extent only, as I said a moment ago, it has crystallised the great danger I prognosticated when I spoke on Thursday night, and, indeed, every event in today's discussion has established the correctness of the principle I was endeavouring to put before the Committee on that occasion.
I thought there was universal agreement on this, that the law of this country is made by the two Houses of Parliament and the Crown, and, as I said when I spoke on this matter previously, I cannot accept the principle that the law of the country is made by the Chancellor of the Exchequer, or by any other Minister coming to the House and making a pronouncement and thereafter creating either an offence or a state of law. That is now the deplorable position to which we have come by accepting the attitude which has been expressed on both Front Benches in this discussion. We are setting up a worse precedent for any Chancellor of the Exchequer to come and say, "I gave warning and therefore this has become the law for the future." That is a principle to which this Committee ought not to subscribe and one on which we should take a firm stand at the moment.
The facts of this case reinforce that argument very strongly. The Solicitor-General does not see any justification for retrospective action in this matter other than the warning given by the Chancellor of the Exchequer. He agrees that retrospection is an undesirable thing, but, he says, it becomes a perfectly proper process of law if the Chancellor of the Exchequer comes here and gives warning. I believe that to be a thoroughly immoral principle and one which is accepted in all the dictator countries of the world. A dictator makes a pronouncement from some soap box or dais at Nuremberg, or wherever he chooses to make his legal processes, and declares the law is to be so and so for the future, without any action being taken by a democratic assembly.
I must take my stand on the principle here that there is no offence created, nor is any tax law created, until it is passed through the proper legal processes of the House. The Solicitor-General sought to distinguish between what he called legislation which carried a penalty and fiscal legislation, but surely in modern circumstances
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fiscal legislation of this kind is in itself penal. This is a penal tax and is intended to be a penal tax, and what the right hon. and learned Gentleman has done, whether he seeks to admit it or not, is that two gentlemen we know have been put in a position where they will be heavily penalised.
The next complaint I have against this arrangement which has been come to between the two Front Benches is this. My hon. Friend the Member for Oxford (Mr. Hogg), in his speech on Thursday night, quite rightly drew attention to one aspect of retrospective legislation when he said—and my right hon. and learned Friend the Member for West Derby (Sir D. Maxwell Fyfe) agreed and indeed endorsed it when speaking this afternoon—that it is undesirable for legislation to be aimed at any particular person, and still less, of course, is it desirable when it is aimed at two persons, retrospectively. Now, what has been done is that that very principle has been affronted and this accord which has taken place, and which I much regret, has had the effect of admitting the principle of retrospective legislation in terms which hit at two particular offenders. The Solicitor-General made it plain that, whatever alterations the Government made, they would see that these two particular gentlemen were hit.
We have got ourselves into an even worse position. I warned the Committee on Thursday that, if we did not stand up for a principle, this was the kind of difficulty in Which we would find ourselves. We have gone from bad to worse; we have accepted the principle that the Chancellor of the Exchequer may make law by a pronouncement, and we have accepted the principle that we can legislate retrospectively to aim at two persons because they offend the party line, although the thing they did was untaxable at the time they did it. I hold firmly to the view that the principle that one shall not be penalised either by taxation or by any other punishment for an act which was within the law at the time it was done, is one of our basic freedoms. It is one of the freedoms which is being abolished in Eastern Europe. For God's sake let us today stand firm here.
Mr. Derek Walker-Smith: The speech of the Solicitor-General has improved this Clause somewhat and it

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now appears as a rather less crude form of retrospective legislation and, therefore, as a less direct challenge to our constitutional usage. But there are some hon. Members who still feel disturbed by the contents of this Clause, not because of any tenderness for particular persons or particular transactions, but because of a tenderness for constitutional principle.
There are two great constitutional principles involved in this matter, the principle of retrospective legislation and the principle of discrimination against persons. When he made his first speech on this matter on Thursday night, my hon. and learned Friend the Member for Hove (Mr. Marlowe) enunciated the principle in these words:
"It is a principle of our law that no one should be penalised for doing a lawful act."—[OFFICIAL REPORT, 15th June, 1950; Vol. 476, c. 703]
So far as it goes, I should have thought that was an admirably concise and acceptable statement of constitutional principle.
One difficulty and a considerable difficulty, has, however, appeared. The point is made by the right hon. and learned Gentleman that this is not a penalising Clause He seeks to draw a distinction between punishment and taxation and, if I understand him aright, he says it is wrong to punish retrospectively but it is right and permissible and constitutional to tax retrospectively So the first point to which I think the Committee should address themselves is whether or not in the circumstances of 1950 that is a valid distinction. Is taxation a penalty? The distinction which the right hon. and learned Gentleman draws is not, in my view, a valid distinction, at any rate in the circumstances of the day, and I would suggest two tests by which that proposition can be judged. First, I would remind the Committee—although I am sure it is not necessary to do so—that in the long series of struggles which have built up the constitutional defences of this country against arbitrary action, no single element has loomed so large as that of taxation. The most casual glance at Magna Carta or the Bill of Rights would surely establish that proposition.
The second test, which I commend to the right hon. and learned Gentleman, is a very simple one, no doubt too simple for the Chancellor of the Exchequer
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because it is based on the authority of Dr. Johnson, an authority who, I can well imagine, is not held in great respect by the present Chancellor of the Exchequer. It will be within the recollection of the Committee that when Dr. Johnson was invited to comment on the theory of Bishop Berkeley, so popular in the 18th century, that things exist only in our imagination, he gave a mighty kick against a large stone and said, "I refute it thus." In other words he appealed to the evidence of the senses. What was good enough for Dr. Johnson should be good enough for this Committee.
It is quite clear that if we take that practical test, that taxation on the scale on which it is levied today is in the nature of a penalty, if vast sums are taken from a person he is surely punished and penalised in any popular sense of the word.
Mr. Sydney Silverman: Supposing only little sums are taken, is that a punishment too?
Mr. Walker-Smith: The hon. Member puts a characteristic point. If little sums are taken from little people, that is certainly a punishment just as much as if great sums are taken from great people.
Mr. Silverman: I should like to know whether the hon. Member is really committing himself to the proposition that Pay-As-You-Earn is penal legislation?
Mr. Walker-Smith: So far as I know there is no suggestion, even under the present Government, that P.A.Y.E. is at any time to be given retrospective effect. If that is the private policy of the hon. Member for Nelson and Colne (Mr. S. Silverman), I am content to wait until he changes place with the present Chancellor to see what happens then. For the moment I hope that the hon. Member will forgive me if I do not pursue his hare but return to the proposition which is before the Committee.
I suggest that it is a proper constitutional maxim that subjects of the Crown cannot be punished or deprived of their possessions except by due course of the law. If the Committee accept, as generations of Englishmen have accepted, that statement of constitutional principle, the difficulty raised by the Solicitor-General

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is done away with, because there can be no doubt that under this Clause people will be deprived of their possessions. In my submission, whether that be a penalty or not, there can equally be no doubt that retrospective legislation is outside the due processes of the law.
So far as the question of precedents is concerned, I should like to refer the Committee to an article which appeared in yesterday's "Sunday Times." It was by Mr. Raymond Needham who, as the Committee knows, is a very great authority indeed on Income Tax law. Mr. Needham wrote:
"Two previous Chancellors had, it is true, indulged in retroactive income tax legislation of a general character, but those examples lacked both the distortion and the 'personal touch' which distinguishes the latest example."
It is, of course, true that in a general sense there are probably no crimes in the calendar which cannot be justified by finding a precedent from some Act of some Government or other in the last 800 years or so, but the precedents quoted by the Solicitor-General are not authorities for the proposition which is now advanced.
4.45 p.m.
I turn to the other constitutional principle involved, the principle that legislation should not discriminate against persons. I could certainly satisfy the itch of the right hon. and learned Gentleman for precedent in this matter. I would commend to him the precedent of King James II, who lost his throne because he sought to vary the operation of the law in favour of particular persons. How much more reprehensible it is to seek to vary the operation of the law against particular persons. That is what in effect this Clause seeks to do, as my hon. Friend the Member for Oxford (Mr. Hogg) made clear on Thursday night.
I believe that this Committee is not concerned with the particular transactions of the particular individuals except in this respect: those transactions may be and no doubt were tactless, they may be and no doubt were socially inconvenient, but the point with which this Committee is concerned is a question of constitutional principle is that they were lawful.
Mr. Pannell: Will the hon. Member state whether those transactions were socially undesirable or desirable?
Mr. Walker-Smith: I have made it quite clear that they were no doubt tactless and socially inconvenient but they were lawful. If transactions which are lawful are to be penalised because they are unpopular, then the rule of law is at an end. That is the constitutional proposition with which this Committee is faced. I cannot and do not accept the principle that the law should be retrospective to the time of the Chancellor's warning. If the ipse dixit of the Chancellor—not only this Chancellor but any Chancellor—should govern the time as to when the law comes into effect, then Parliament is relegated to the menial function of the rubber stamp of the Executive's decision. This House would be going back on centuries of its tradition and its constitutional development; and the question might well be asked: if the Chancellor is to make laws by his pronouncement, why have a Parliament at all?
I urge the Committee in this matter to take the broad view and the long view. Black, Lord and Plummer, and all the party prejudices or passion which might be excited by the canvass of the merits of these transactions on the hustings—these are things of the moment; but the things which are permanent are the traditional hostility to the principle of retrospective legislation and the hostility to the principle of discrimination against persons. These are part of the closely-knit constitutional fabric of this country. I say that it should not be rent assunder in this House of Commons, at least without the voice of protest being heard.
As we all know the twin pillars of our constitutional fabric are the rule of law and the sovereignty of Parliament. Put at its very highest, the action which it is proposed to take would be to emphasise the sovereignty of Parliament at the expense of the rule of law. I believe that is putting it a great deal too favourably. I believe that we jeopardise the sovereignty of Parliament as soon as we try to make Parliament function otherwise than in harmony with the rule of law. I believe that the sovereignty of Parliament as well as the rule of law is automatically debased when constitutional principles are infringed. Therefore, respectfully, I ask hon. Members to rise above the party passions and preoccupations of today. I ask them to remember

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that the House of Commons exercises a continuing function over the generations. I ask them to remember in our deliberations here that we owe a debt to the past, and that we have to have regard to the future. I ask hon. Members to see to it that it cannot be said in the future that this House of Commons lightly abandoned the constitutional principles which our ancestors vindicated at the peril of their lives.
Mr. Douglas Houghton: The two speeches to which we have listened are, I suggest, carrying this argument to a point of exaggeration in relation to constitutional law and the rule of law. I should have thought that the hon. Member for Oxford (Mr. Hogg), in his speech on Thursday evening, demolished the argument that in this Clause lies penal legislation. What was lawful before remains lawful now. Nothing in this Clause makes any difference to the law of restrictive covenants. What the Clause does propose to do is to make a difference to the taxable nature of the payments made under them.
We have heard a great deal about the rule of law, but we have heard very little from the benches opposite about what I would describe as distributive justice. After all, what is the purpose of taxation? It is to see that all citizens bear their proper share of the national expenditure; and if we find that ingenious persons are dressing up payments which are alleged to be of a capital nature in order to escape the taxation which would be levied upon them as income, then surely the legislature is entitled, not only to check those evasions, but to check them retrospectively. I rely for this argument upon the late Mr. Neville Chamberlain who, when speaking on the Finance Bill of 1936, said:
"Do not, however, let us make a fetish of this idea about retrospective legislation."
Mr. Chamberlain then referred to an intervention by the hon. Member for Croydon, East (Sir H. Williams) and said:
"But when my hon. and gallant Friend says you ought not to change the rules in the middle of the match, I think he is carrying the analogy rather beyond the facts of the case."
Mr. Chamberlain went on to say:
"What are the rules and who is observing the rules in this case?"
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He concluded:
"… if it were laid down that, whatever happens, there would never be any retrospective legislation that would really be an invitation to devise further and still more ingenious methods which would be very undesirable."—[OFFICIAL REPORT, 1st July, 1936; Vol. 314, c. 441–442.]
The truth of the matter is that although retrospective legislation has formed part of the Finance Bills since 1936, this is the first occasion upon which the Chancellor of a Labour Government has proposed it in the Finance Bill.
Sir D. Maxwell Fyfe Sir D. Maxwell Fyfe indicated dissent—
Mr. Houghton: I think I am right in saying that. In any event, there are repeated occasions in the past when retroactive legislation has been proposed in the Finance Bill and, what is more, hon. Members on the other side of the Committee have supported the principle of retrospective legislation to check obvious abuses of our fiscal system. I suggest that if hon. and right hon. Gentlemen opposite are going to elevate the rule of constitutional law to the height of their eloquence, they must come prepared also to defend the abuse of our taxation system which these and other methods undoubtedly are.
It seems to me that there is no question of these arrangements being in any way genuine. The hon. and learned Member for Hove (Mr. Marlowe), in his speech on Thursday, said:
"But I hold strongly the view that where a penalty is imposed—in this case upon a person who has acted within the law perfectly innocently—it is utterly wrong to go back and punish the man for something which was lawful at the time he did it."—[OFFICIAL REPORT, 15th June, 1950; Vol. 476, c. 703.]
Do we really believe that these retroactive covenants which Clause 20 seeks to check retrospectively were entered into innocently? Can we really say that those concerned acted in good faith?—[HON. MEMBERS: "Why not?"] Can we really believe that gentlemen of the position of Mr. Lord and Sir John Black were seeking to go elsewhere and sell their services to another undertaking and that their present firms were so anxious to retain them that they offered them these huge sums?
Sir Peter Bennett: Yes, one or other of these gentlemen was going to America.
Mr. Houghton: I suggest that if there is any attempt to compensate these gentlemen for remaining in their present posts, it should be done by an increase in their salaries which is subject to taxation, and not indulge in a bogus capital payment—
Sir H. Williams: Would the hon. Member apply the same principle to the motor cars which Ministers have, free of taxation? Their £5,000 a year would have to be raised to £8,000 at least in order to enable them to pay for the motor cars they get tax-free.
Mr. Houghton: Ministers of the Crown in their official cars are in no different position from other executives and directors. They are being provided with transport in the discharge of their duties.
Sir H. Williams: What about the Prime Minister's £4,000 a year tax-free?
Mr. Houghton: If there are bona fide expenses incurred wholly, necessarily and exclusively in the performance of an office, then it is open to a director, or any other person, to claim allowances for those expenses as a set-off against their Income Tax.
Mr. Walker-Smith: As the hon. Minister is an authority in these matters, could he state any instance other than that of the Prime Minister where a declared sum is comprehensively allowed?
Mr. Houghton: I am not in a position to give details of all cases which the Inland Revenue may deal with on similar lines to those on which the expenses of the Prime Minister are dealt with. I happen to be one of those for whom the Inland Revenue some long time ago agreed on a sum which should be admissible as a set-off for expenses, and I see no difference in principle between that, and what was done for the Prime Minister, and what is done for every person for whom there is an ascertainable level of expenditure in the performance of their duty.
But we return to the issue here. These restrictive covenants are not confined to the two which have received so much publicity. It should not be assumed that this is legislation discriminating against two main persons. It is legislation proposed to check similar kinds of retroactive covenants which other persons are
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finding it very convenient to enter into as a means of avoiding taxation and of getting a large sum of money free of Income Tax and Surtax. That is what this Clause is seeking to check and the concession mentioned by the learned Solicitor-General takes away some of the criticisms made by hon. Members on the other side of the Committee. I do not think that the Committee will support the hon. and learned Member for Hove (Mr. Marlowe) or the hon. Member for Hertford (Mr. Walker-Smith). Their own side, their own previous Chancellors of the Exchequer, and the right hon. and learned Member for West Derby (Sir D. Maxwell Fyfe), are all too far committed on the principle of retroactive legislation in these cases, to make the puritan doctrine of no retroactive legislation in any circumstances acceptable in this Committee.
5.0 p.m.
Mr. Maudling: I have listened with care and interest to the many arguments put from both sides of the Committee on the principle of retrospective legislation. I should like to deal with two arguments in favour of retrospective legislation which seem to me to be most dangerous arguments to employ. The first is the argument from precedent—that because this has been done before if is right to do it again. I do not think that that argument can hold. It may be politically convenient to pin on one's opponents the fact that they did it first. It may be a politically strong argument, but it is not a strong argument in justice or law, and it is dangerous to push it too far. Then there is the further argument—
Mr. Eric Fletcher: If the hon. Gentleman says that precedent is not an argument to establish principle, would he say to what authority he refers for establishing principle?
Mr. Maudling: I thought that it was the authority of the House of Commons which would establish principles of this kind.
The second argument was to the effect that what is called distributive justice, or social justice, should be able to override the real law. I know that argument is advanced with much sincerity by hon. Members on both sides. But, here again,

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it is a most dangerous argument to pursue, because it leads us into the position where we find ourselves arguing about the merits or demerits of the actions of individual taxpayers. The point was made by the hon. Member for Sowerby (Mr. Houghton) that the two gentlemen about whom there has been so much publicity, acted in this matter in a deliberate attempt to avoid taxation. It was argued from this side of the Committee that that was not true. I do not know whether or not it is true. My point is that it is not for this Committee to decide in an individual case.
I thought that the Solicitor-General gave rather too much support to that point of view when he talked about the Government being unable to exclude from their new provisions cases of the type to which publicity has been given. Surely, it is not for us, the Solicitor-General or the Government to decide whether individual cases fall within a class. I gathered from the way the Solicitor-General nodded in response to my hon. and learned Friend the Member for Norwich, South (Mr. H. Strauss), that he would accept that point and would agree that the question whether individual cases fell within a class or not is a matter solely to be determined by the courts and not by the legislature.
Mr. Pannell: Is it not a fact that the statement of the Chancellor was made first as a warning that certain consequences would follow and that these payments were made after that warning? Would not the hon. Gentleman agree that the Chancellor himself had in mind no names at all at that time? If names have come into the matter, it is because the evasions followed the warning. We are not proceeding against individuals. We are proceeding in furtherance of the original warning by the Chancellor.
Mr. Maudling: I am grateful to the hon. Gentleman. He has made my next point. Whether we are proceeding against individuals or not, speeches are being made against them. The implication is being brought in that this Committee should act on the supposition that certain individuals have done a certain thing for particular motives. I come next to the point about the warning. The
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Government have made some concession in this matter to the effect that the Clause shall not extend to arrangements made before April, 1948. Naturally, I welcome that, but I think that it has given rise to a certain amount of confusion.
I do not think that the imposition of retrospective legislation can be justified solely on the ground of a warning. I thought that the Solicitor-General made that point himself when he said that the fact that the Government were accepting that proposition did not mean that they bound themselves in future never to take retrospective action without a warning. If they claim the right to take retrospective action without a warning, surely the corollary must follow that a warning alone is not adequate without other grounds on which to take action. It is most important that we should not accept that a warning by the Chancellor, in itself and by itself, can constitute grounds for legislative action of a retrospective kind.
It is important that the Committee should bear in mind that we are dealing not with tax evasion but with tax avoidance. There is no question whatever of declaring that the actions taken by people who enter into this type of covenant are tax evasion. No question of illegality arises, and no question arises of making unlawful now an act that was lawful at the time it was done. The action of the Government boils down to action against certain forms of tax avoidance. Tax avoidance is the action taken by any taxpayer who wishes, without infringing the law, to minimise the amount of tax he has to pay. After all, we all do that, and it is recognised that it is the right of every citizen so to arrange his affairs as to attract the minimum amount of taxation.
I do not think that principle can be applied without some form of reservation. There are many different degrees of this type of arrangement. For my own part, I accept the principle enunciated by the hon. Member for Oxford (Mr. Hogg) and my right hon. and learned Friend the Member for West Derby, that it is proper for this Committee retrospectively to repair breaches made in legislation by individuals, or by classes of people, who are deliberately trying to thwart the will of Parliament.

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I should have thought that there is evidence to show that in some restrictive covenants a deliberate attempt had been made to evade, or rather to frustrate, the will of Parliament by dressing up as remuneration what is really a capital payment. It is the will of Parliament that income should be taxed. If people dress income up in the form of capital payments, Parliament is entitled to act against them retrospectively, but I do not think that a penalty should be imposed retrospectively.
My last point is that there seems to be some disagreement whether the payment of tax at a very high rate, or involving a very high proportion of one's income, is penal It is unpleasant and perhaps it may loosely be called penal, but it is not penal in the sense of being a punishment. I will give an example. Suppose someone was trying to pass a bottle of brandy through the Customs when on the way back from a holiday, and he was detected by an officer. The person carrying the brandy might be compelled to pay the full rate of duty. That is not a penalty, but if subsequently he is fined for bringing in the brandy, then he has been punished for what he has done.
I should be prepared to accept retrospective action again deliberate tax avoidance if it can be shown that they are cases of tax avoidance, with the condition that there should not be a penalty. This Clause contains a penalty. One must not look only at the position of the recipient, but also at the position of the payer of the sums of money. If we take together the company employing the person and the individual himself, both of whom are parties to the contract, we must look at the effect of this action on the two together. As I understand it, the argument of the Government is that payments of this kind in many cases have been really payments of remuneration, which should have been taxed as remuneration, but, if that is the case, that principle should apply the whole way through, and, if the recipient individual has to pay tax on the money, then the paying company should be able to charge that payment as a legitimate expense. Instead of that, the method has been adopted of grossing up the payment and charging Surtax on it deliberately in order to prevent the company concerned from being able to
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charge this payment as a legitimate expense, which they would have been able to do if it had been remuneration.
I believe that there is no question of tax evasion or of rendering unlawful an Act which was lawful at the time it took place. I believe that Parliament is entitled to repair retrospectively breaches in the taxation law by deliberate actions of individuals if they have sought to defeat the law by fictitious transactions, or if it can be shown clearly that such payments are merely excuses to avoid the sums involved being treated as remuneration.
Mr. Moeran: I suppose that one thing upon which both sides of the Committee would be agreed is that retrospective legislation as a general principle is repugnant to us all, but what this Amendment asks us to do is to dismiss retrospective legislation in any circumstances whatever. It has always been understood by those concerned in the process of law that we do not make our laws rigid in the continental fashion, but that we make them in such a fashion that they may be varied to deal with special circumstances.
The fact that the present legislation is to deal with special and particular circumstances fully justifies these provisions, because of the fact that the particular transactions involved not only substantial payments to certain individuals, which in themselves were contrary to the Government's policy of pegging the cost of living and keeping inflation at bay, but, by reason of the indignation which they have caused amongst the wage earners in the community, threatened the whole structure of voluntary personal income limitation by members of trade unions and others.
In these circumstances, the transaction itself, whatever moralistic merits it may have, was carried out after the clearest possible warning had been given by the Chancellor of the Exchequer, and, because of its effect upon the public conscience, the whole structure of voluntary income limitation was endangered, and, with it, the whole principle of freezing the cost of living and restraining any inflationary tendency. It is in these circumstances that this legislation and this Amendment must be judged, and, in these circumstances, where so much is at stake, it is completely

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in the interests of the public that this proposal should be made.
The hon. and learned Member for Norwich, South (Mr. H. Strauss) suggested that there were two conditions under which retrospective legislation might be tolerated. One was by giving clear warning of the intention, and the second that the resulting legislation should be in accordance with that warning. I suggest that there might well be a third safeguard which should be observed in regard to retrospective legislation, and that is when it is clearly in the public interest that such legislation should be introduced. In the present circumstances, it is clearly in the public interest, because the public conscience was affronted by these transactions, and needs to be satisfied that the penalties for such actions are adequate, in view of the fact of their effect on the whole system of voluntary income limitation.
I should have thought that, when that principle is weighed against the principle enunciated by the hon. and learned Member for Hove (Mr. Marlowe) that retrospective legislation should not be indulged in under any circumstances, that there would have been no great difference in point of view on this question, and I am surprised to learn that a proportion of something like one hon. Member in three on the opposite benches is not in favour of that particular principle. I am surprised that there has been no unanimous welcome for this rather courageous action by the Chancellor of the Exchequer, which has been taken in the interests of the greater need involved, which would be sacrificed if my right hon. and learned Friend had not taken a clear and firm attitude against those persons whom it is the object of this particular proposal to bring within the Income Tax law.
5.15 p.m.
Mr. Pickthorn: I address the Committee with considerable reluctance on this matter, because so far, although I am not quite sure about the hon. Member for Bedfordshire, South (Mr. Moeran), all the speakers have been persons of great professional experience in the matter, either legal or fiscal, and I come out as a mere amateur, in both senses, because I have not had the experience of receiving sums of this sort, nor have I any experience
904
in dealing with the rules about receiving them. Yet I do ask the Committee to bear with me while I offer one or two considerations, which I think have not been put to it yet in the way in which I am trying to put them, and, indeed, some of them have not been put before it at all.
I should like, for instance, to ask the learned Solicitor-General to consider the distinction which he drew between retrospective legislation of a punitive kind and retrospective legislation of a taxative kind. I thank the Solicitor-General for drawing the distinction; I was fully aware of it, and indeed before this Bill was introduced. With great respect, that distinction is not absolute. It is not a line that can be drawn in any rigid or concrete way, and I do not ask the Committee to take that merely upon my dogmatic assertion. I venture to say that a considerable number of the best academic lawyers would subscribe to that, a number of what in other countries would be called jurisconsults.
We really cannot make this distinction with clearness and exactness; there must be some reality in the words that are used—words are the daughters of I have forgotten what, but facts are the sons of God—words must be used which have some relation to actual meaning, and to say that really something is punitive which submits His Majesty's subjects to the risk that a court might fine them 5s., but that it is not punitive when what it does to certain of His Majesty's lieges is to deprive them of the greater part of £100,000, or of more than £100,000, because I understand that one of these two individuals has to pay more than £100,000 for taking this sum—to make that distinction is absurd.
I appeal to the Committee to accept that argument on remembering what was said by an hon. Gentleman for whom I have great respect—the hon. Member for Oxford (Mr. Hogg). He sought to make this distinction, and hon. Members of the Committee will bear me out that, in general, he is as clear in his line of argument and as precise in his use of language as any legal hon. Member of this House; secondly, I think the Committee will bear me out when I say that in particular the hon. Member's speech was much praised by the pundits on both sides of the Committee this afternoon.

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Therefore, I hope the Committee will think it ought to think twice about this distinction, between punitive and taxative, when it reads his speech. If hon. Members will do me that honour they will see that the second paragraph seeks to make this distinction:
"people should not be punished for doing that which is lawful at the time …there is a great distinction between what is lawful and what is taxable and between what is a punishment and what is a tax."—[OFFICIAL REPORT, 15th June, 1950; Vol. 476, c. 708.]
That is the principle he lays down, and the principle upon which he bases the argument of his speech. What did the hon. Member for Oxford do when he came to the conclusion of his speech? He said what is always odious is when the legislature picks out individuals for punishment and contumely—"these provisions are in fact directed as a punishment against two named individuals." The hon. Gentleman having slipped into that confusion in the course of an eleven-minutes speech, anybody here who is not certain of being clearer thinking and more exact in the use of language than the hon. Member for Oxford had better think twice or three times before he accepts this distinction between punitive and taxative. I hope I have made that point clear, and I pass to one or two others.
First, I wish to indicate a comparatively small point, indicated just now by an hon. Gentleman in front of me, that anyway things ought to be the same for the payer as for the payee, for the company making the payment. We ought to have an answer to that. Then I was very grateful to some hon. Gentlemen opposite—I was going to say from the Solicitor-General downwards, but, as this is an egalitarian democracy, I will say from the Solicitor-General physically, geographically, upwards—who pointed out that what was now being questioned has always hitherto been done by non-Socialist, and generally by Tory, Chancellors of the Exchequer. I was extremely grateful to them for that, so I hope nobody will say this is a party line which we are taking or that we have any party prejudice in this matter. This is a line about which every private hon. Member—I will not say ought to have no doubts because it is a difficult question; I am not even sure that I shall vote myself if there is a Division—but
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every private member ought to insist that the case must be clear, and, not have the usual contentment to come down whichever way the Whip points.
I am very anxious not to slip into using Buzfuz language about this, or to blow the thing up as if it were more important than it is. But I am not sure that one can make it out to be of greater importance than it is. I would first like to ask the Solicitor-General and the Chancellor of the Exchequer to listen to this point. I had not known till just now that Mr. Law or Sir John Black received an offer from the United States. I do not fully understand what it is that they have been doing or what the Treasury, if this subsection passes, proposes to do to them. I admit all that. I wonder how many hon. Members do fully understand those things. I believe hardly any. I think there is an onus upon the Treasury Bench to make sure that everybody who endeavours to take part in this Finance Bill, not necessarily by speaking, but by understanding the critical questions, should understand exactly what it is that these people did, and exactly why it is objected to.
That really has not been done yet; and incidentally this stuff about the public conscience is enough to make any man with a conscience, or whoever tries to have a conscience, ashamed ever to take part in any public discussion again. When the right hon. and learned Gentleman made his Budget speech, the one passage in it which was cheered was that about these payments That was the one passage which was really cheered. I challenge any hon. Member opposite who has really reflected, and is sure he is speaking honestly, to deny this. And it was quite obvious from the quality and tone of those cheers what was being cheered. It was not the fact that the Treasury was going to get an extra 150,000 quid and that therefore the rest of us were to pay a farthing less each; what was being cheered was the fact that somebody was not going to have something which he thought he was going to have, that somebody was not going to have oysters who had thought he was—
Mr. Pannell Mr. Pannell rose—
Mr. Pickthorn: No, I am sorry; I am making a difficult speech without a prepared scenario, so I dare not give way.

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I think the Committee will agree that, as a rule, I am very generous in giving way, but not today, if I may be forgiven for once. That argument really will not do.
Mr. Hector Hughes: On a point of order. Is it in order, Sir Charles, for the hon. Gentleman opposite to ask a question and challenge an answer from these benches, and then refuse to give way?
The Deputy-Chairman: That is not a point of order.
Mr. Pickthorn: If that is it, go ahead.
Mr. Pannell: I wish to ask the hon. Gentleman this question—
Mr. Pickthorn: I was told the intention was to answer something, but if the hon. Gentleman merely wishes to ask a question, then no.
What is being attempted here is to get away from the basis of Law, with a capital L, on to a basis of morality. That is an immensely difficult thing to do in a society which quite rightly attempts to give equal rights to persons whatever their moral or political principles, any or none. In any such society that is an immensely difficult thing to do. This which might have been a possible thing to do 100 years ago, is much more difficult to do now, and that is another reason why we ought to think three or four times about it.
A quotation was used on Friday from a letter written by Mr. Hamson which I think might mislead. It is not that I cleverly spotted that it might be misleading, he pointed it out to me. If the impression was given by that passage from his letter that this would certainly be ruled unconstitutional in the supreme court of the United States or that this retrospective provision would certainly be made ineffective by the courts in France—because I think that impression might have been given by Mr. Hamson's letter—I think it fair to say that if anybody was affected by that impression, it is hardly maintainable. But how much we need a norm of law, even more than France or U.S.A., was clearly illustrated today by the hon. Member for Islington, East (Mr. E. Fletcher) how much more profoundly in this country we need a norm of law if we are to preserve any civilisation at all, than do other people,
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because in this country legislation can do anything, even retrospectively, and in matters of taxation by a single House. And parallel to that is the national habit. We all have the habit of mind, the English habit of mind contrasted with the Continental, of not being able to conceive that what is often done may be wrong in principle. The Member for Islington, East, said if principle does not come from precedent, where does it come from? He could not more neatly have illustrated the suicidal nature of the argument from precedent for retrospection, because it is obvious that every time one permits another precedent against an admitted general principle, one endangers the principle.
5.30 p.m.
I think incidentally that the hon. Member for Bedfordshire South (Mr. Moeran) need not have been as depressed as he was. If my hon. and learned Friend is successful and this subsection is deleted the effect will not be that there can never be retrospection again. Parliament cannot bind its successors. That is one of the difficulties we are in. We all should be, surely, profoundly penetrated with the necessity that the House of Commons should not assent to any retroactive taxation unless it is overwhelmingly true that it is absolutely necessary in the public interest, and that the persons against whom it is aimed do morally deserve something which is in fact a penalty. I say these are necessary conditions, as well as the necessary condition of warning.
These conditions have not been shown to have been fulfilled. For all I know to the contrary Lord and Black have behaved more wickedly than any other people in history, for all I know to the contrary the right hon. Gentleman's finances will be hopelessly "bust" unless he gets back this money from Lord and Black. Both propositions may be proved. Those propositions have not been demonstrated; the necessary fraction of them ought to be demonstrated to this House before this House accepts this subsection.
Lastly, we have heard a lot opposite about public interest and distributive justice. I wish to heaven we might have a little plain justice. It was not social justice, it was distributive justice this afternoon. I remind the Committee that the poet said only

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God can enjoy the vision of justice; approximations and no more are the best that men can hope for, and Law is the great approximation. It is intolerable to hear from any Ministers the assumption that they are infallible, that they infallibly perceive what is the public interest, social justice, distributive justice, or such phrases. It is specially intolerable from Ministers many of whom, and more of whose supporters, were not always sure whether it was in the public interest that their country should be victorious in war. Not even the ministers of the Almighty should be permitted such assumptions. Let us remember the prayer of the good Bishop of Sodor and Man in the time of Queen Anne who prayed as follows:
"Lord, so prepare our hearts that no affliction may ever so surprise us as to overbear us. Dispose us at all times to a readiness to suffer what Thy Providence shall order or permit. Grant that we may never murmur at Thy appointments nor be exasperated by the Ministers of Thy Providence."
We should always have that prayer in our mind, and, by heaven, Ministers should. They should never cease to remember that if this House permits itself to be dubious about the necessity of Law, with a capital "L"—I do not mean laws on the Statute Book but natural law, the norm of law, the things human beings take for granted as the permanent rules, and that is certainly against retrospection except in the most extreme cases—if this House permits itself to be anything but respectful of Law with a capital "L" the effect is certainly not going to be Justice with a capital "J", and the risk is going to be that nothing is left between us and chaos but the discretion of the right hon. Gentleman upon the Treasury Bench, and if that begins by being exercised mildly and without scandal, then that is a great deal worse for us, in a very short long run, than if it were brutal and outrageous.
Miss Burton: I am happy to catch your eye, Sir Charles, because, as most of us in this Committee and outside are aware, this Clause has arisen in connection mainly with payments made to two men. One of those men, Sir John Black, lives in my constituency and has also his largest factory there. I have, therefore, had some chance of finding out public opinion on this matter.
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The other point I should like to make in introduction is that those of us who listened to a broadcast on Saturday night, will recall that it was said that during the Debates on the Budget and on the Finance Bill the supporters of the Government Front Bench had to be on the defensive, whereas the Opposition would be on the attack. I do not feel in the least on the defensive about this Clause. Indeed, I wish to speak very strongly against the Amendment and in support of the Clause. In company with many others of this Committee, I sat through very nearly the whole five days of the Debate on the Budget. During those five days, here and in the Press outside, and during Thursday night's Debate and today, I believe that there have been four main groups or sections in the party opposite which object to this Clause.
The hon. and learned Member for Hove (Mr. Marlowe) brought in three of these objections this afternoon- I believe the first objection is that this interferes with freedom. The second, which the hon. and learned Member for Hove did not bring in, but which was just mentioned by the hon. Member for Carlton (Mr. Pickthorn), was the effect upon industry and the moral effect upon this country. The third is legal, and the fourth is political.
If I may go back to the first one—that it is an interference with freedom—I remember that on 9th March the Control of Engagement Order was revoked in this House. I remember, in the years before I became a Member of the House of Commons, the propaganda of the Opposition about this Order and its effect upon the freedom of the individual. I remember how they tried to deride the Minister when the Order was revoked. Older Members opposite should know better; the younger ones are perhaps not old enough to do so. The Control of Engagement Order did offer anybody who came within its scope an average of four jobs before they were directed. [An HON. MEMBER: "What has this to do with it?"] It has something to do with it. I merely wish to point out that, before that many people, perhaps even Members of this Committee, had not the chance of one job—never mind four.
On 9th March hon. Members opposite came here with their story of freedom for

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the individual in relation to this Order. I should now like to ask them their position in connection with these payments to Sir John Black and Mr. Lord. I would refer them to 14th December, 1949, when the Deputy-Chairman of the Austin Motor Company was speaking on this gift to Mr. Lord. I have his exact words here. He said:
"The award was not for services. We are buying the freedom of action of a young man."
So I ask the Opposition if they approve of a Control of Engagement Order which restricts a man to one job for the rest of his life. Apparently, if a payment of £100,000 is involved that is all right. They are not against something like that, but if an Order offers somebody a choice of three or four jobs—
Mr. Marlowe: Does not the hon. Lady appreciate the difference that, in these two cases, Sir John Black and Mr. Lord have entered into this engagement perfectly voluntarily, to curtail their own freedom? They acted freely. Surely, the Control of Engagement Order was imposed on people whether they liked it or not.
Miss Burton: I shall come to that in a minute. [Laughter.] It does not matter; I am going on. I am sorry; I am not a lawyer, but on this matter I do not believe that it is right to buy the freedom of action of anybody, and I am not going to deviate from that.
I should like to come to the question of the deterrent to enterprise, or the moral effect, or the effect on the country. I have said that the Standard Factory is in my constituency. It is a first-class factory with first-class conditions, and it has turned out first-class work. I think that Sir John Black would be one of the first to admit that the reason that the factory has turned out such excellent work is because the workers, the shop stewards, the managers and he himself have done a first-class job. It has been a co-operative effort, and I believe that hon. Members opposite are at times inclined to forget that the first-class production efforts of this country over the past few years have been due to workers as well as to management, and not only to the latter. The effect of giving that money to the man at the top of the firm, however efficient he was—and I am speaking of workers
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who live in my constituency, and whom I know—had a very bad effect on those workers.
I believe that hon. Members opposite are convicted out of the mouths of their own Front Bench on this matter. On 19th April the right hon. Member for Saffron Waldon (Mr. R. A. Butler), speaking of these two gifts, said:
"the Chancellor has a certain amount of right on his side in dealing with this question,"—[OFFICIAL REPORT, 19th April, 1950; Vol. 474, c. 146.]
On 21st April the right hon. Member for Leeds, North (Mr. Peake), whose absence we all regret, said:
"There is one detail of the Budget proposals I should mention, the question of charging Surtax upon those large payments made to business executives under what are known as restrictive covenants. I heartily disapproved of those payments, and, consequently, I approve of the action of the Government in this matter."—[OFFICIAL REPORT, 21st April, 1950; Vol. 474, c. 491.]
On 24th April the right hon. Gentleman the Leader of the Opposition said:
"It is not a case of sympathising with these gentlemen, or with the action of the firms concerned. Indeed, I share the general feeling that such a transaction was unworthy of a time when the trade unions were loyally endeavouring in the national interest to prevent wage increases, justified by the ever-increasing cost of living."—[OFFICIAL REPORT, 24th April, 1950; Vol. 474, c. 619]
Mr. H. Strauss: I would point out to the hon. Lady, who, I know, wishes to be fair, that all the speeches from which she has quoted were made at a time when nobody had seen the Clause which we are now discussing, and, although the speeches may have been relevant to the Budget proposals, they are in no way a justification of many of the things which are being criticised in this Clause.
Miss Burton: I certainly wish to be fair, but I believe that the quotations are a condemnation of the principle which I am discussing.
We now come to the question of the legal angle. During this week-end, when I realised that I would try to catch your eye today, Sir Charles, I read through the speeches made in Thursday's Debate. Although the House is always very lenient, I wondered whether I would dare to speak today. I know, however, that if one realises one's own limitations—and we cannot all be learned Members—it is worth while having a try. As I read

913
those speeches made on Thursday, and listened to today's Debate, including the speech of the hon. and learned Member for Hove, who does not believe in retrospective legislation at all, I formed the opinion that we have some legal Members who believe that if we have retrospective legislation, it should be only in certain exceptional circumstances and if warning has previously been give.
5.45 p.m.
I will not weary the Committee by repeating the warning by the Chancellor of the Exchequer on 6th April, 1948, which was quoted on Thursday night and mentioned again this afternoon. Everybody knows it now, but after that warning I cannot believe that either of the two men or the firms concerned could possibly say they did not know what might happen. I have always been told that in this country ignorance is not accepted as an excuse in a court of law, and I believe that when the Chancellor spoke as he did—if Members read Thursday night's Debate they will see the exact words used—anybody might have suspected what might happen.
I want to come to the political aspect, as raised by the hon. and learned Member for Hove and the hon. Gentleman the Member for Oxford (Mr. Hogg). A lot of political questions have been bandied about. It seems to me very strange that today we have this outburst of indignation from the party opposite over this retrospective legislation, but that there was no such outburst when, on 20th April, 1937, Mr. Neville Chamberlain used these words:
"If people persist in devising these ingenious contrivances for defeating the intentions of the Legislature, they must not expect that they would escape retrospective legislation."—[OFFICIAL REPORT, 20th April, 1937; Vol. 322, c. 1610.]
On 25th April, 1939, Sir John Simon, when he was Chancellor of the Exchequer, said:
"These schemes of tax avoidance are so flagrant and are so deliberately devised to get round the legislation of 1936 and 1937 that I shall have no hesitation in recommending that retrospective effect shall be given to them, as far as necessary, in accordance with the very clear warning I gave last year."—[OFFICIAL REPORT, 25th April, 1939; Vol. 346, c. 993.]
These examples have not been uncovered by my diligence, but I am indebted to my hon. Friend the Member for Islington, East (Mr. E. Fletcher) who, in "The Times" on 22nd May, published
914
an excellent letter. What I want to know without any legal quibbles or anything of that nature because I was not in the House at either of those times, is whether there was any outburst of indignation from the present Opposition. I do not remember any, and I think we can take it that it is correct to say that there were no outbursts.
Sir H. Williams: I remember one hon. Member on the Government side being indignant in 1937.
Miss Burton: And the hon. Member is always indignant.
Sir H. Williams: But always right.
Miss Burton: I will not argue that one.
Before today's Debate I went into the Library and looked through "The Times" of that period. "The Times" is not a Labour paper, and I do not think hon. Gentlemen would ever say it was. "The Times" leader of 19th April, recognises that retrospective legislation for this particular method of tax avoidance was inevitable. The actual words were:
"… which, though legal, was clearly indefensible under present conditions of taxation."
Mr. Marlowe: Is the hon. Lady quoting "The Times" leader of last month?
Miss Burton: Of 19th April, 1950.
Mr. Marlowe: But that leader utterly condemned the whole idea of retrospective legislation.
Miss Burton: Though the hon. and learned Gentleman is "learned" I can read too, and the phrase that I read out comes in this leader. It is a condemnation of these two particular covenants.
The hon. Member for Oxford said he could not see any difference between Lord, Black and Sir Leslie Plummer. I can see a great difference between Lord, Black and Sir Leslie Plummer. [Laughter.] I hope hon. Gentlemen will be as cheerful when I am finished. The sum in question in Sir L. Plummer's case was £8,000. We do not know—hon. Gentlemen opposite claim that they do know—whether that will be subject to taxation or not, but the sum is £8,000. The period of contract was seven years at a salary of £5,000 a year. When the engagement ends, on 30th June, a little more than two years and four months will have elapsed, and the compensation

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has been estimated at £1,714 per annum. I see all the difference in the world between compensation for the determination of a contract at £1,700 a year and an authority to make a tax free gift of £100,000. The Opposition have not got a leg to stand on this afternoon, however hard they look for it. Whether we look at the matter in the interests of the country, or the effect on the country, or whether we look at it politically or legally, I hope that the Committee will reject this Amendment.
Mr. Manningham-Buller: I must congratulate the hon. Member for Coventry, South (Miss Burton) on the wide field she covered on this rather narrow Amendment. She ranged from the Control of Engagements Order into many other spheres until she got on to rather delicate ground when she talked about compensation for loss of office payable to Sir Leslie Plummer. If she had read the warning given by the Chancellor of the Exchequer on 6th April, 1948, she would have seen that two things were mentioned—one was restrictive covenants and the other was compensation for loss of office. The right hon. and learned Gentleman issued a warning, which he repeated quite recently, that he would introduce retrospective legislation with regard to compensation for loss of office.
This is a very narrow Amendment. It is only as to the question whether this Clause should be retrospective or not. We are not discussing the contents of the Clause because it is going to be varied considerably. It is a very narrow issue, but an important one nonetheless. Nearly everything that can be said on both sides of the Committee has been said, but I should like to state quite clearly how I regard this matter.
First, I put this forward, that it is the view of almost everyone that retrospective legislation should, wherever possible, be avoided. I personally do not believe that we could ever tolerate retrospective legislation with regard to our criminal law, and in that sense there is a very clear distinction between retrospective legislation of a penal and criminal character, and retrospective legislation with regard to taxation. With regard to taxation, I feel the position is that it ought in every possible case to be avoided
916
if it can be avoided, and I take the view that the Chancellor of the Exchequer's statements ex cathedra, as a warning, are no substitute for statute law. If at the time the warning is given the law could be changed then it ought to be so changed.
When my hon. and learned Friend the Member for Hove (Mr. Marlowe), for whose views I have great respect, says that in no case whatsoever can retrospective legislation be justified, I must confess I part company with him. I recognise on occasions that it is possible to justify a departure from the principle of no retrospective legislation, and it is for the Chancellor to justify it. The onus is on him pretty heavily. Reference has been made to the question of Whelan against Henning. That was a case decided in 1926, and following it this House put the law back to what hon. Members thought it was. Similarly in this Finance Bill an attempt is being made to reverse the decision in the Fitzwilliam case, in order to put the law into the state which nearly everyone thought it to be in. I should be surprised, indeed, if my hon. and learned Friend did not recognise that that is a legitimate exception to the principle he declared.
Retrospective legislation may be justified where the Chancellor of the Exchequer puts forward a lot of legislative proposals designed with one end in view, and accompanies those proposals with a statement to this effect: "I am erecting these obstacles against tax avoidance, but if someone finds an ingenious method of getting round them I will come back and stop it with retrospective legislation." He may be entitled to do that, but what he is not entitled to do is to give a warning about something not related to the Finance Bill of that particular time. The warning of 6th April, 1948, was tacked on to a chapter in a long speech dealing with expense allowances. It was, therefore, at the end of his legislative proposals directed to alterations of the tax law with regard to other forms of expenses, and in my mind it is closely linked with the proposals made in 1948. In my belief this warning will carry him over on this occasion, but I do not accede to the proposition that warnings could last indefinitely.

917
For those reasons and because the point is a narrow one, I do not agree with my hon. and learned Friend the Member for Hove in the view he has expressed that there should be no retrospective operation, and that this Clause should in no event be retrospective as far back as the Chancellor's warning.
Several Hon. Members Several Hon. Members rose—
The Deputy-Chairman: I had hoped that the Committee would now be prepared to come to a decision on this matter. We have had an hour and a half's discussion on it.
Mr. Grimond: I shall be very brief, but no one has expressed the view of the party to which I belong and it is reasonable in those circumstances that I should say something. I make no moral defence of the agreements under discussion, but it is very proper that it should have been pointed out that this Clause will have important effects on these agreements and will also affect what has been done by the shareholders. The gentlemen who are primarily in question have given up some of their freedom for a consideration which will be greatly altered. The shareholders on their part have taken action which probably they would not have taken had they known that the law would have been altered in the way it is proposed.
I want to support the Amendment of the hon. and learned Gentleman the Member for Hove (Mr. Marlowe) largely on the grounds which he has put forward. The legislation in our view is objectionable, because it is retrospective and also because it is aimed at individuals. It does not make what was done illegal, but, what it does, is entirely to change the relationship between the individual and the State. It changes it in this very important matter of taxation, a matter of great importance today because today the modern state, by its taxation policy, can exercise the uttermost control over all individuals.
Personally I have found it difficult to believe that retrospective legislation aimed at worsening the position of individuals can ever be justified, but if it can be justified, then not only must clear warning have been given, but it must be clearly shown—and the onus is on the Government to show it—that by bringing in this legislation there will be substantial
918
benefit to the country or else the country will avoid some substantial harm.
6.0 p.m.
I do not think that the reasons the Chancellor of the Exchequer has given go anywhere near discharging that onus. So far as I know there have been only four arguments put forward either in or out of this Chamber. The first is that a warning has been given. Yet it has been said again and again—and I entirely agree—that the Government of this country is not carried on yet by warnings, lectures, admonitions or threats. Moreover, it is more than ever necessary that the position of Parliament should be made clear. Just because the State today is so powerful, and interferes so widely—as it must interfere—in our lives, for that very reason it is all the more necessary now that the position of Parliament should be established.
Secondly there is the argument of precedents. I entirely agree with those who have stated that no number of precedents will make something which is bad into something which is good. I would go further and say that in respect of Income Tax, in connection with which so many of the precedents have been drawn, the inevitable effects of retrospection, or of so-called need for retrospective legislation, are one of the drawbacks of the Income Tax system. The question of acts of indemnity is a precedent on quite a different footing, because in those acts we do not worsen the position of the individual vis-à-vis the State, but improve it. The third argument I have read is that while there should be no retrospective criminal legislation it is permissible to have civil retrospective legislation. It seems to me equally important not to create uncertainty in the civil law as it is not to create it in the criminal law, and to my mind that argument must fail.
Lastly we are left with the psychological argument that today, when a wage freeze is being imposed and people are being asked to restrain their spending and not to seek increases in income, it creates a very bad effect if we have people of some wealth and position entering into this sort of agreement. I quite agree that irritation may be caused by reason of these agreements, but I do not think it is a good thing that we should legislate from irritation or that we should encourage feelings

919
of irritation that may be stirred up by foolish acts of individuals.
To underline the consequences of this we have already the case of Sir Leslie Plummer. There was a man who, I believe—I know nothing about him—went out to the groundnut scheme from a very good job in this country. Personally, I have always attacked the groundnut scheme, but the shortcomings of that scheme make his action, to my mind, all the braver; it was all the braver of him to have anything to do with it whatsoever. In due course his contract was terminated. That is a thing which frequently happens. He is to be given a payment. That is quite normal.
It seems to me that the question whether the payment is liable or not to Income Tax should be left between him and the Income Tax Commissioners. I very much deplore that his affairs and those of Sir John Black or any other individual should be perpetually debated here with some party feeling, but that is the situation we inevitably get into if we have legislation of this sort.
It seems to me a serious precedent is being created here, when we have unanimity between both Front Benches in this Chamber on this, that after a warning has been given we may have retrospective legislation. Really, people cannot know where they stand. It may be that people who now sympathise with the Labour Party may one day come to harm as a consequence of this precedent. None of the reasons advanced in defence of the Chancellor's policy comes anywhere near discharging the onus of proving the necessity of this legislation—the necessity which only would justify it. We cannot say that this money is needed. We cannot say that the country is going to gain by this legislation. The country will gain very little from it. By all means make these agreements illegal for the future, but I do not think the Government have come anywhere near discharging the onus which lies upon them to show that it is necessary to make legislation of this sort retrospective in this case.
Mr. E. Fletcher: I shall detain the Committee for only a few minutes, because we have had a long Debate on this subject; but in view of the fact that references have been made to me,
920
perhaps I may be permitted to make one or two observations, which, I think, have not yet been made in the Debate. Having listened to all the speeches made in this Committee, it seems to me impossible for any hon. Member to support the Amendment proposed by the hon. and learned Member for Hove (Mr. Marlowe) unless he is prepared to say that in no circumstances is retrospective legislation justified, and that case, I think, has been given away over and over again by practically every hon. Member who has spoken, because one after another hon. Members, all careful in their choice of language, have all said that in exceptional cases retrospective legislation is justified.
I do not think it is irrelevent to consider what the right hon. and learned Member for West Derby (Sir D. Maxwell Fyfe) said. He said—and I agree with him—that there is a great distinction between retrospective legislation in the criminal sphere and retrospective legislation in the civil sphere. I also agree with what has been said by some hon. Members, that it is a well recognised principle of our law that nobody should be condemned or punished for doing something which was lawful at the time when he did it. We all agree that it is quite repugnant and obnoxious to have retrospective criminal legislation, of the sort that the House of Commons used to pass in the days when acts of attainder were regularly passed.
It seems to me however that we got very near to that at the War Crimes Trials at Nuremberg. Those trials did not involve the passing of any Act by this Parliament. They took place as the result of an act of privilege, an act of State approved by the nation. However, do not let us forget that it did involve, at any rate, a very considerable element of retrospective retribution.
Mr. Hogg: I think it is rather unfortunate that the hon. Gentleman has raised that case. Surely, the point there was that no new rights or obligations were enacted, but only a new tribunal, for the trying of something which had been universally admitted to be a crime against the common law of nations.
Mr. Fletcher: Opinions differ, in this country and elsewhere, as to whether the War Crimes Trials at Nuremberg were justifiable or not, but I think a great

921
many people, including some who supported them, felt that there was an element of retrospective legislation about them. I can only make that point, and say that even in the criminal sphere on the international plane in some circumstances world opinion feels justified in taking unprecedented steps of the kind taken at Nuremberg.
In the civil sphere, with which we are concerned today, Member after Member has accepted the view that, where the public interest justifies it, there are permissible exceptions to the general rule against retrospective legislation. I have never been able to understand the argument which is put forward by some hon. Members opposite that, though there are the numerous precedents, which have been quoted, set by previous and Conservative Chancellors of the Exchequer—Mr. Neville Chamberlain, Lord Simon before he was a peer, and others—they do not justify retrospective legislation for the purpose of correcting tax evasion after due warning has been given. Why not? There is no absolute principle enshrined in any of our jurisprudence that there should never be any retrospective legislation. The hon. Member for Hertford (Mr. Walker-Smith) recognised that. What is a universally recognised principle is the absolute supremacy of Parliament—
Mr. Walker-Smith: And the rule of law.
Mr. Fletcher: And the rule of law. But that is not a limitation on the omnicom-petence of Parliament. What secures our liberties is the absolute sovereignty of Parliament, so that the people, through their elected representatives in Parliament, can in all matters express the public view, and enact any Measure necessary to promote social justice—and, where necessary, by retrospective methods, as in the case of the Indemnity Acts, and as in the case in the last Parliament of the Landlord and Tenant (Rent Restrictions) Act, which was generally accepted as desirable to correct anomalies that had arisen in the law.
What I think is also important to add is this. The reason which makes retrospective legislation generally obnoxious and therefore always requiring specific justification, is that people are entitled to know what the law is and
922
so to arrange their affairs that they are not afterwards taken by surprise in finding the law changed to their disadvantage. That is the principle which makes retrospective legislation generally undesirable and requiring justification. Where a warning is given, as it was given in this and in previous cases, the fact that the warning had been given deprives any citizen of saying that he has been taken by surprise. Because a clear warning was given, Sir John Black and others affected by this Clause cannot say that there was no risk of the law being changed; they knew, because of the warning, of the probability that the law would be changed, and changed retrospectively. Therefore, they are deprived of any complaint.
Mr. Marlowe: I think the hon. Gentleman, has done less than justice to my case when he says that nobody who accepts any degree of retrospective legislation could support my Amendment. That, of course, is not the case. It is perfectly true that I take the view that there should be no retrospective legislation, but it is perfectly open to those who think that retrospective legislation is sometimes justifiable to say that they do not think it is justifiable in this particular case, and therefore to support this Amendment. It is on that ground that I think the hon. Gentleman has not done justice to my argument. I have agreed that there are two kinds of retrospective legislation: that which is an indemnity is always justifiable; that which carries a penalty in my opinion is not.
Mr. Fletcher: I am sorry if I have not done justice to the hon. Gentleman's argument. I will conclude with this observation. I am very glad that the Solicitor-General has accepted the Amendment of the hon. and learned Member for Norwich, South, and has accepted the principle that the Clause should be made to fit in with the terms of the warning given. By accepting that principle the Government have shown that they are fully conscious of the necessity of scrupulously preserving as part of our constitution the strict limitation within which retrospective legislation is justified.
Mr. Oliver Lyttelton: I do not know whether it would be for the convenience of the Committee to end this discussion now and get on, but I

923
should just like to say this. I feel great difficulty myself in making any useful intervention until I have seen the new Clause which the Government propose. You will correct me if I am wrong, Sir Charles, but I do not think that many of the things which are now being said would be out of order on the Report stage of that new Clause. We have a
lot to do and I am sure hon. Members do not want to sit up all night, and if there is to be a new Clause I should be content to wait to see what it looks like.
Question put, "That the words proposed to be left out stand part of the Clause."
The Committee divided: Ayes, 296; Noes, 77.

Division No 30.]

AYES

[6.15 p.m

Acland, Sir Richard

Deer, G.

Hynd, J. B (Attercliffe)

Adams, Richard

Delargy, H J

Irvine, A. J. (Edge Hill)

Albu, A. H.

Diamond, J.

Irving, W. J (Wood Green)

Allen, A. C. (Bosworth)

Dodds, N. N.

Janner, B.

Anderson, F. (Whitehaven)

Donnelly, D.

Jay, D. P. T.

Attl e, Rt. Hon. C. R

Donovan, T. N.

Jeger, G. (Goole)

Awbery, S. S

Driberg, T. E. N.

Jeger, Dr. S. W. (St. Pancras, S.)

Ayles, W. H.

Dugdale, Rt. Hon. J. (W. Bromwich)

Jenkins, R. H.

Bacon,. Miss A

Dye, S.

Johnson, J. (Rugby)

Baird, J.

Ede, Rt. Hon. J. C.

Johnston, Douglas (Paisley)

Balfour, A.

Edelman, M.

Jones, D. T. (Hartlepool)

Barnes, Rt. Hon. A. J

Edwards, John (Brighouse)

Jones, Frederick Elwyn (West Ham, S)

Bartley, P.

Edwards, Rt. Hon. N. (Caerphilly)

Jones, Jack (Rotherham)

Bellengor, Rt. Hon. F. J.

Edwards, W. J. (Stepney)

Keenan, W.

Benson, G.

Evans, Albert (Islington, S. W.)

Kenyon, C.

Beswick, F.

Evans, E. (Lowestoft)

Key, Rt. Hon. C. W

Bevan, Rt. Hon. A. (Ebbw Vale)

Evans, S. N. (Wednesbury)

King, H. M.

Bing, G. H. C.

Ewart, R.

Kinghorn, Sqn.-Ldr. E

Blackburn, A. R.

Fernynough, E.

Kinley, J.

Blenkinsop, A.

Field, Capt. W. J.

Kirkwood, Rt. Hon. D

Blyton, W. R.

Finch, H. J.

Lee, F. (Newton)

Boardman, H.

Fletcher, E. G. M. (Islington, E.)

Lee, Miss J, (Cannock)

Booth, A.

Follick, M.

Lever, L. M. (Ardwick)

Bottomley, A. G.

Foot, M. M.

Lever, N. H. (Cheetham)

Bowden, H. W.

Forman, J. C.

Lewis, A. W. J. (West Ham, N.)

Bowles, F. G. (Nuneaton)

Freeman, J. (Watford)

Lewis. J. (Bolton, W.)

Braddock, Mrs. E. M.

Freeman, Peter (Newport)

Lindgren, G. S.

Brockway, A. Fenner

Gaitskell, Rt. Hon. H. T. N

Lipton, Lt.-Col. M

Brook, D. (Halifax)

Ganley, Mrs. C. S

Logan, D. G

Brooks, T. J. (Normanton)

Gibson, C. W.

Longden, F. (Small Heath)

Broughton, Dr. A. D. 0

Gilzean, A

MacColl, J. E.

Brown, George (Helper)

Glanville, J. E. (Consett)

McGhee, H. G.

Brown, T. J. (lnce)

Gooch, E. G.

Mclnnes, J.

Burke, W. A.

Gordon-Walker, Rt. Hon. P. C.

Mack, J. D.

Burton, Miss E.

Greenwood, A W. J. (Rossendale)

McKay, J. (Wallsend)

Butler, H. W. (Hackney, S.)

Greenwood, Rt Hon. A. (Wakefield)

Mackay, R. W. G. (Reading, N.)

Callaghan, James

Grenfell, D. R.

McLeavy, F.

Carmichael, James

Grey, C. F.

MacMillan, M. K. (Western Isles)

Carson, Hon. E.

Griffiths, D. (Rother Valley)

McNeil, Rt. Hon. H.

Castle, Mrs. B. A.

Griffiths, Rt. Hon. J. (Llanelly)

MacPherson, Malcolm (Stirling)

Champion, A. J.

Griffiths, W. D. (Exchange)

Mainwaring, W. H,

Chetwynd, G. R.

Gunter, R. J.

Mallalieu, E. L. (Brigg)

Clunie, J.

Hale, J. (Rochdale)

Mallalieu, J. P. W. (Huddersfield, E.)

Cocks, F. S

Hale, Leslie (Oldham, W.)

Mann, Mrs. J.

Coldrick, W.

Hall, J. (Gateshead, W.)

Manuel, A. C.

Collick, P.

Hall, Rt. Hon. Glenvil (Colne Valley)

Marquand, Rt. Hon. H. A.

Collindridge, F.

Hamilton, W. W

Mathers, Rt. Hon. George

Cook, T. F.

Hardman, D. R

Mellish, R. J.

Cooper, G. (Middlesbrough, W.)

Hardy, E A.

Messer, F.

Cooper, J. (Deptford)

Hargreaves, A

Middleton, Mrs. L

Corbet, Mrs. F. K. (Peckham)

Harrison, J.

Mikardo, lan

Cove, W. G.

Hastings, Dr. Somerville

Mitchison, G. R

Craddock, George (Bradford, S.)

Hayman, F. H.

Moeran, E. W

Crawley, A.

Henderson, Rt. Hon. A. (Rowley R.)

Monslow, W.

Cripps, Rt. Hon. Sir S.

Herbison, Miss M.

Moody, A. S.

Crosland, C. A. R.

Hewitson, Capt, M

Morgan, Dr. H. B

Crossman, R. H. S.

Hobson, C. R

Morley, R.

Cullen, Mrs. A.

Holman, P.

Morris, P. (Swansea, W.)

Daggar, G.

Holmes, H E. (Hemsworth)

Morrison, Rt. Hon. H. (Lewisham, S.)

Daines, P

Houghton, Douglas

Mort, D. L.

Darling, G. (Hillsboro')

Hoy, J.

Moyle, A.

Davies, A. Edward (Stoke, N.)

Hubbard, T.

Mulley, F. W.

Davies, Ernest (Enfield, E.)

Hudson, J. H. (Ealing, N.)

Murray, J. D

Davies, Harold (Leek)

Hughes, Emrys (S. Ayr)

Nally, W.

Davies, R. J. (Westhoughton)

Hughes, Hector (Aberdeen, N.)

Neal, H.

Davies, S. 0. (Merthyr)

Hughes, R. M. (Islington, N.)

Noel-Baker, Rt. Hon. P. J.

de Freitas, Geoffrey

Hynd, H. (Accrington)

Oldfield, W. H.

Oliver, G. H

Shinwell, Rt. Hon. E

Viant, S. P,

Orbach, M.

Shurmer, P. L. E.

Wallace, H. W

Padley, W. E.

Silverman, J. (Erdington)

Watkins, T. E.

Paling, Rt. Hn. Wilfred (Dearne V'lly)

Silverman, S. S. (Nelson)

Webb, Rt. Hon. M. (Bradford, C.)

Paling, Will T. (Dewsbury)

Simmons, C. J.

Weitzman, D.

Pannell, T. C.

Slater, J.

Wells, P. L. (Faversham)

Pargiter, G. A

Smith, Ellis (Stoke, S.)

Wells, W. T (Walsall)

Parker, J.

Snow, J. W.

West, D. G.

Paton, J.

Sorersen, R. w.

Wheatley, Rt. Hon. John (Edinb'gh, E.)

Pearson, A.

Soskice, Rt. Hon Sir F

White, Mrs. E. (E. Flint)

Peart, T. F.

Sparks, J. A.

White, H. (Derbyshire, N. E.)

Poole, Cecil

Steele, T.

Whiteley, Rt. Hon. W

Popplewell, E

Stewart, Michael (Fulham, E.)

Wigg, George

Porter, G.

Stokes, Rt. Hon. R. R.

Wilkes, L.

Price, M. Philips (Gloucestershire, W.)

Strachey, Rt. Hon. J.

Willey, F. T. (Sunderland)

Proctor, W. T.

Strauss, Rt. Hon G. R. (Vauxhan)

Willey. O G (Cleveland)

Pryde, D. J.

Stross, Dr. B.

Williams, D. J. (Neath)

Pursey, Comdr. H.

Summerskill, Rt. Hon. Edith

Rankin J

Sylvester, G. O.

Williams, Ronald (Wigan)

Rees, Mrs. D.

Taylor, H. B. (Mansfield)

Williams, Rt. Hon. T. (Don Valley)

Reeves, J.

Taylor, R. J. (Morpeth)

Williams, W. T. (Hammersmith, S.)

Reid, T. (Swindon)

Thomas, D. E. (Aberdare)

Wilson, Rt. Hon. J. H. (Huyton)

Reid, W. (Camlachie)

Thomas, l. 0. (Wrekin)

Winterbottom, I. (Nottingham, C.)

Richards, R.

Thomas, I. R. (Rhondda, W.)

Winterbottom, R. E. (Brightside)

Robens, A.

Thomas, T. George (Cardiff)

Wise, Major F. J.

Roberts, Goronwy (Caernarvonshire)

Thorneycroft, Harry (Clayton)

Woodburn, Rt. Hon. A.

Robertson, J. J. (Berwick)

Thurtle, Ernest

Woods, Rev. G. S.

Robinson, Kenneth (St. Pancras, N.)

Timmons, J.

Wyatt, W. L.

Rogers, G. H. R. (Kensington, N.)

Tomlinson, Rt. Hon. G

Yates, V. F.

Ross, William (Kilmarnock)

Tomney, F.

Younger, Hon. Kenneth

Royle, C.

Turner-Samuels, M

Shackleton, E. A. A.

Usborne, Henry

TELLERS FOR THE AYES:

Shawcross, Rt. Hon. Sir H

Vernon, Maj. W F

Mr. Hannan and Mr. Wilkins

NOES

Amory, D Heathcoat (Tiverton)

Hill, Dr. C. (Luton)

Orr, Capt. L. P. S.

Baldwin, A. E

Hirst. Geoffrey

Orr-Ewing, Charles Ian (Hendon, N.)

Bell, R. M.

Hornsby-Smith, Miss P

Perkins, W R. D

Bennett, Sir P. (Edgbaston)

Hyde, H. M.

Peto, Brig. C. H. M

Bossom, A. C.

Jeffreys, General Sir G.

Pickthorn, K.

Bowen, R.

Johnson, H. S. (Kemptown)

Powell, J. Enoch

Bullus, Wing-Commander E. E

Lambert, Hon. G

Raikes, H. V.

Cranborne, Viscount

Legge-Bourke, Maj. E. A. H.

Rayner, Brig. R.

Cundiff, F. W.

Longden, G. J. M. (Herts. S. W.)

Roberts, Emrys (Merioneth)

Cuthbert, W. N.

Lucas, Major Sir J. (Portsmouth, S.)

Savory, Prof. D L.

Darling, Sir W. Y. (Edinburgh, S.)

Macdonald, A. J. F. (Roxburgh)

Smithers, Peter (Winchester)

Davies, Rt. Hn. Clement (M'tgomery)

Maclay, Hon. J. S.

Smithers, Sir W (Orpington)

Deedes, W. F.

MacLeod, I. (Enfield, W.)

Stevens, G. P.

Donner, P. W.

MacLeod, J. (Ross and Cromarty)

Taylor, C. S. (Eastbourne)

Fisher, Nigel

Macpherson, N. (Dumfries)

Wade, D. W.

Fraser, Hon. H. C. P. (Stone)

Marlowe, A. A. H.

Wakefield, E. B (Derbyshire, W.)

Gage, C. H.

Marshall, D. (Bodmin)

Walker-Smith, D. C

Garner-Evans, E. H. (Denbigh)

Marshall, S. H. (Sutton)

Watt, Sir G. S Harvie

Gates, Maj. E. E.

Maude, A. E. U. (Ealing, S.)

Webbe, Sir H. (London)

Glyn, Sir R

Mellor, Sir J.

Williams, C. (Torquay)

Grimond, J.

Moore, Lt.-Col. Sir T.

Williams, Sir H. G. (Croydon, E.)

Grimston, Hon. J. (St. Albans)

Morris, R- Hopkin (Carmarthen)

Wood, Hon. R.

Harden, J. R. E.

Nabarro, G.

York, C.

Harris, F. W. (Croydon, N.)

Nicholls, H.

Harvey, I. (Harrow, E.)

Odey, G. W.

TELLERS FOR THE NOES:

Higgs, J. M. C.

O'Neill, Rt. Hon. Sir H.

Mr. Keeling and

Hill, Mrs. E. (Wythenshawe)

Ormsby-Gore, Hon. W. D

Mr. Michael Astor

Question put, and agreed to

Clause ordered to stand part of the Bill.

Clause 21.—(PAYMENTS FOR WAYLEAVES, ETC., FOR ELECTRIC LINES.)
Mr. Selwyn Lloyd: I beg to move, in page 15, line 8, to leave out subsection (2).
There may be different views about the relative importance of Clause 20 and Clause 21 but they have in common this retrospective element. I move the Amendment in an interrogatory manner in order to find out the exact reason for this Clause being made retrospective.
926
So far as I understand it, it deals with the method of collecting taxes on rents paid in respect of easements and way-leaves with regard to things like electric cables, and the Clause prescribes that the payer shall pay these rents tax-free and be accountable for the tax. That is so far as I understand the meaning of subsection (1). Then there is the proviso abouts rents not exceeding £2 10s. which is the de minimis proviso. Subsection (2) then states:
"This section shall be deemed always to have had effect …"

927
I should like the Solicitor-General to tell the Committee why it is necessary for this Clause to be retrospective. It does not appear to me to come within the other canons which he laid down. I am not certain that the Chancellor of the Exchequer issued a warning on the question of rents in respect of wayleaves.
The Solicitor-General: The reason this Clause is made retrospective is to legalise the practice which has been followed for a great many years past. For many years it was thought that rents paid in respect of these easements and wayleaves should be taxable at source. That was thought to be the case because it was considered that Section 21 of the 1934 Act was applicable to such payment of rent. It was decided recently, as the result of advice, that that practice which had been followed for so many years was of doubtful legality so far as payments to landlords are concerned, and therefore the purpose of Clause 21 is to make it perfectly clear that for the future it shall be lawful to deduct tax at source on payment of these rents and also, inasmuch as this practice has existed for so many years in the past, to legalise that practice in the past.
That was one of the cases of retrospective action which the hon. and learned Member for Hove (Mr. Marlowe) said he thought was permissible; that is to say, to legalise something long thought to be lawful. It does not mean that anyone has to pay any additional tax. It means that tax paid without protest for many years past and the payment of which is now shown to be of doubtful legality is ex post facto lawfully valid. The Committee will agree that this procedure cannot be said to offend against any principles with regard to retrospective legislation.
6.30 p.m.
Mr. Selwyn Lloyd: Am I right in thinking that under this Clause it will be compulsory to deduct tax?
The Solicitor-General: Except in the case of payments under £2 10s., in which case there is an election against tax being deductible at source.
Mr. Selwyn Lloyd: There will be a compulsion in other cases to deduct tax?
The Solicitor-General: Yes, Sir.
Mr. Selwyn Lloyd: In that ease, suppose that someone has not conformed to this practice in the past?
The Solicitor-General: They always have. This refers to payments made by large electric light companies to landowners, and the tax has always been deducted at source. If the tax were not deducted at source, it could be taxed in the hands of the recipient. The answer to the question is that it always has been the practice, and it has been followed for many years past, during which time no question has been raised until quite recently. What we are doing is to assuage doubts that have arisen.
Mr. Selwyn Lloyd: In view of the fact that this tax will not be paid twice, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause ordered to stand part of the Bill.
Clause 22 ordered to stand part of the Bill.

Clause 23.—(CONTRIBUTIONS UNDER SUPERANNUATION ACT (NORTHERN IRELAND) 1949, NOT TO QUALIFY FOR INCOME TAX RELIEF.)
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Mr. Selwyn Lloyd: May I again pursue the right hon. and learned Gentleman on this retrospective point? Once again we appear to have a retrospective provision in subsection (2).
Sir S. Cripps: The reason why the Clause had to be drafted in this form is because the Superannuation Act is a Northern Ireland Act and Northern Ireland has not power to deal with this question of taxation. When we passed our Superannuation Act, which was on exactly the same lines, we were able to deal with this taxation point, and therefore at the same time we made the contributions taxable. That could not be done by the Northern Ireland Act. This is to fill up the gap and date it back to the time when the Northern Ireland Act was put into operation.
Sir Ronald Ross: Do I understand that there have been discussions on this with the Minister of Finance in Northern Ireland?
Sir S. Cripps: Yes, Sir.
Clause ordered to stand part of the Bill.

Clause 24.—(GENERAL RULE AS TO INCOME TAX ON HUSBANDS AND WIVES.)
Mr. Selwyn Lloyd: I beg to move, in page 16, line 16. to leave out "period," and to insert:
"year of assessment or part of a year of assessment."
This is a very small Amendment, but it seems to me that the word "period" is capable of misunderstanding and that the words proposed could be more safely included. By using the word "period," there might be ambiguity between the period of assessment and the period which is the measure of the tax to be paid in the year of assessment.
The Solicitor-General: I am grateful to the hon. and learned Member for Wirral (Mr. Selwyn Lloyd) for having called attention to what is undoubtedly an ambiguity. We are very glad to accept the Amendment.
Amendment agreed to.
Clause, as amended, ordered to stand part of the Bill.
Clause 25 ordered to stand part of the Bill.

Clause 26.—(COLLECTION FROM WIFE OF TAX ASSESSED ON HUSBAND ATTRIBUTABLE TO HER INCOME.)
The Solicitor-General: I beg to move, in page 19, line 6, to leave out "whether before or."
This Amendment has been put down in the name of my right hon. and learned Friend, as well as that of the hon. and learned Member for Northants, South (Mr. Manningham-Buller) and other Members opposite. It is in order to eliminate an element of retrospection. This Clause enables collections of tax to be made from a wife in respect of income which is her income, where a separate assessment was made, or where the assessment was made on the husband before the year after the Act came into force. The Amendment will have the effect that the Clause will be operative only in respect of assessments made on the husband after the Act comes into force.
We are therefore limiting an element of restrospection. We had a good reason for making the Clause retrospective, because in a number of cases it would have been a very great advantage in doing justice as between
930
husband and wife if we could have collected the tax attributable to the wife's income in respect of an assessment made before the Act. In view of the argument adduced in regard to retrospection, and the matter being nicely balanced, whether this extra measure of justice should be meted out to the husband, or whether we should avoid retrospection wherever possible, the Amendment has been put down.
Mr. Manningham-Buller: I wish to thank the right hon. and learned Gentleman for making a short speech in support of this Amendment and for saying all the things I should have said had I been moving it. The effect is, as he has said, to eliminate the retrospective element from the Clause. The Solicitor-General sought to justify the original inclusion of these words which, in my view, might have led to very great hardship. One can think of such cases as where arrangements have been made between husband and wife to discharge their Surtax liabilities, in default of which the Clause gives power, notwithstanding the fact that the wife might have paid the husband her contributions, to enforce liability against her. In the case of matrimonial proceedings, it might have led to great difficulty and to considerable injustice. I am glad that the right hon. and learned Gentleman has moved the Amendment for which we were originally responsible.
Mr. Dodds-Parker: May I also add my thanks to the Chancellor for accepting this Amendment? Our intention in putting down the Amendment was somewhat different from that of the Chancellor, which I think is generally expressed in the new subsection (6). I think there is nothing more to be said except that on this side of the Committee we are glad that the Chancellor has for once seen the light. We thank him for accepting the Amendment.
Amendment agreed to.
The Solicitor-General: I beg to move, in page 19, line 9, to leave out from "for," to the first "on," in line 10, and to insert:
"the year 1950–51 or any subsequent year of assessment."
This limits the wife's income which comes within the purview of the Clause to income which arises to the wife after the Act comes into force. What I said

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about retrospection also applies to this Amendment. Although I frankly accept that the arguments are rather evenly balanced, it would in many cases have been fair—particularly in cases in which a husband is landed with heavy arrears of Income Tax attributable to his wife's income—to have enabled the Revenue to collect the proper proportion of tax both in respect of pre-tax assessment on the husband and also in respect of pre-tax income arising to the wife. In conformity with the purpose and the spirit behind the previous Amendment, which limits the assessments to those made after the Act, we now also seek to limit the amount of the wife's income to income arising to her after the Act comes into force.
Mr. Manningham-Buller: As far as I understand it this Amendment is really to the same effect as the next Amendment, standing in my name, in line 9, to leave out from "assessment," to the first "on," in line 10. If I am right, we on this side of the House do not object to this Amendment, which merely carries out our intentions and our desires.
Amendment agreed to.
Mr. Basil Nield: I beg to move, in page 20, line 29, to leave out "result," and to insert "ratio decidendi."
I have an uncomfortable feeling that hon. Members will view with some misgiving the proposed substituting words, but I hope to satisfy the Committee that the Amendment is a sensible and indeed a necessary one. It is designed to remedy what, in my respectful view is a defect in the drafting of this proviso. The situation under consideration is this. Where a husband appeals against his tax assessment and the appellate commissioners fix the amount of the assessment, then that is the result. They have no other function save to fix the sum. If thereafter the liability is transferred to the wife, then under the provisions of this Clause she too has a right of appeal, but, as I understand it, the purpose behind this proviso is that a wife who is appealing cannot ask the appellate commissioners to decide matters which they have already determined in the husband's appeal on the very same grounds. In other words, it is to avoid duplication of argument in that respect.
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The proviso reads in this way:
"Provided that, where an appeal was brought against the original assessment, no contention inconsistent with the result of that appeal shall be open on any appeal from the notice, either to the appellant or to the Crown."
The effect of that, in our view, is that the wife would be wholly debarred from questioning the other appeal, as she is not allowed to bring the matter forward. We are perfectly in accord with the purpose of this proviso and with the Clause as a whole, but we feel that words other than "result" are necessary to carry out the purpose of the Clause. I would say at once that I am by no means wedded to the Latin words suggested and if the right hon. and learned Gentleman can find better words to carry out the purpose of the Clause, then I will gladly agree to them.
6.45 p.m.
Sir Ian Fraser: I do not think Welsh is allowed in an Act of Parliament, nor Gaelic, and I think, therefore, that anyone who proposes to use Latin words should make out a special reason why they are necessary in place of English words.
The Solicitor-General: I am not sure that it would be possible to make out a sufficiently strong case because, unless I am misinformed, there is an Act of George II which says that we must not use Latin terms in an English Act of Parliament, although I think I am right in saying that the words vice versa have been used.
Mr. Nield: The word sederunt is also used.
The Solicitor-General: There may be other examples. Be that as it may, I recognise, on further consideration of this Clause in the light of the Amendment, that the Clause is too restricted in the matter of appeals. The object of the Clause as originally drafted was to prevent inconsistent decisions being given with regard to the same portion of income. We might have one set of commissioners saying that the income was the wife's and another saying that the same income was the income of the husband, and one might be led into an almost hopeless impasse as a result of that. It was thought necessary, therefore, to put in some restriction with

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regard to the scope of the matters which could be traversed on appeal.
I am not sure that the words ratio decidendi would improve the position very much, even if they were allowed as a matter of drafting. Perhaps the Committee would agree that we should reconsider the matter between now and the Report stage with a view to widening the scope of the appeal. It might be necessary to enact that the appeal should be heard by the same group of commissioners in order to avoid inconsistency in decisions which, as I have said, might lead to quite absurd results in individual cases. I hope, therefore, that the hon. and learned Member will agree to ask the permission of the Committee to withdraw his Amendment on the understanding that the Government will give further consideration to the matter between now and the Report stage in the hope that the Clause may be improved.
Mr. Lyttelton: Like the right hon. and learned Gentleman, I myself thought that the word "result" might lead us to a reductio ad absurdum. I should be inclined to say quod erat demonstrandum and, after what he said, I think we might defer the consideration ad interim.
Mr. Nield: It seems to me quite clear that the right hon. and learned Gentleman has made out a prima facie case for considering the matter further. I am grateful to him for the undertaking he has given, and I therefore, beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
The Solicitor-General: I beg to move, in page 21, line 20, at the end to insert:
(6) Where a woman has died and the Commissioners of Inland Revenue or the Special Commissioners are entitled to serve a notice under subsection (1) of this section on her executors or administrators, the person liable under the original assessment may, by notice in writing served on the Commissioners in question and specifying the names and addresses of the said executors or administrators, require those Commissioners to serve such a notice and they serve such a notice accordingly.
This subsection would have the effect of giving the husband the right to request that a notice should be served upon the wife's executors in a case where the wife has died. Let us suppose that a wife had died and that a large amount of tax was attributable to income of. hers. Unless
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they were under some sort of statutory obligation, the executors having a duty to the beneficiaries of her estate, would naturally hesitate to pay the tax attributable to that income. They would hesitate to pay it unless they could be made statutorily liable to do so. In order to achieve that, we think on further reflection that it would be right—and indeed, this case has been made to us—to give the husband that right; in other words, to enable him in a case in which a notice might be served under Clause 26—that is, on the wife's executors—to insist that it should be so served. This subsection simply gives the husband that right.
Mr. Joynson-Hicks: The proposed words give rise to a line of thought which is brought particularly to our minds by a Clause which we are to discuss later. I ask the guidance of the Solicitor-General upon what would be the effect of the service of this notice upon the wife's executors. We know, particularly in the type of case which this provivision is contemplating where substantial amounts of Income Tax liability may be anticipated, that it not infrequently happens that assessments are very long overdue in being issued. It may be that the assessment of taxation is two or three years in arrear.
The point which struck me as the right hon. and learned Gentleman was speaking was this. What provision are the executors of the deceased wife's estate to make in order to meet the possible contingent liability for tax in respect of notices which may be served upon them by the Commissioners at the request of the husband? A liability seems left open upon the executors which may give rise to a considerable amount of trouble. It is possible that it might hold up the administration of the estate and so affect infants. The matter seems to me to require considerably more thought and detailed working out than has been given to is in these comparatively brief provisions, which will leave the matter standing in the half-way-house position. It will give an advantage to the husband which he most certainly ought to have, and at the same time it will not limit the obligations upon the wife's estate.
Mr. Dodds-Parker: I should like to add to what my hon. Friend has just said by asking the Solicitor-General whether

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the Clause empowers or authorises trustees to take capital funds for the payment of any tax which may be outstanding.
The Solicitor-General: To deal with the point made by the hon. Member for Chichester (Mr. Joynson-Hicks), I suppose that assessment notices under the Clause would stand in the same position in regard to the executors as any other contingent or possible liability in respect of the wife's estate. It takes a little time for estates to be wound up, especially as there are often complications. The executors, in winding up, have to make provision for contingent liabilities. They would stand on the same footing as any other contingent liability. I certainly hope that all endeavours will be made to serve the notice upon them as soon as possible.
From their point of view, they would normally know whether it was possible for such a notice to be served. They would find out by reasonable inquiry whether there was Income Tax of the wife's which might attract this liability. I should have thought that, generally speaking, that was a matter of arrangement which could be soon brought about, and that if a notice was to be served it would be served, and in the meantime such provision as executors would normally make in the case of potential liability would be made. I think that is the position.
The change which this proposal makes is that, in the case where no notice can of necessity be served upon them and they are in the difficulty that they do not know whether they can properly, having regard to their duty to the beneficiaries who desire to share in the proceeds of the estate, make provision for a possible claim in respect of tax, it makes it clear that such a notice can of necessity be served upon them. To that extent it eases their position rather than complicates it. When they proceed to administer the estate, they will do so in the knowledge that the husband can insist upon a notice being served and that it is not such a contingent possibility as it would otherwise be if the husband had not that right.
Mr. Manningham-Buller: Can the Solicitor-General say what limitation there
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is in time upon the service of these notices? I quite see what the Amendment seeks to provide, and I do not see much objection to the object in view, but what worries me a little is the possibility that the husband may not make his request until after a considerable period has elapsed. Then, upon his making the request, a notice has to be served—if I understand the Clause. It may well be that a considerable time elapses after the death of the wife before the notice is served, in which case there will be delay due to that in the distribution of the estate. This is obviously a serious point, and I ask the right hon. and learned Gentleman whether he will not give further consideration to it between now and the Report stage. It is a point which deserves consideration and perhaps the insertion of a provision limiting the time within which such a notice can be served.
The Solicitor-General: I see the point which the hon. and learned Gentleman makes. Of course, once the husband makes the request then the notice must be served as soon as is reasonably possible. That is the effect of the wording used. The question will arise as to when the husband serves the notice. This angle of the matter was considered, but it was thought that in practice there would be very little likelihood of difficulty. If the husband knows that he is being charged to tax, having had an assessment served upon him—and he certainly will know that that tax is attributable to his wife's estate in a case in which it is so atributable—normally, I should have thought, and certainly if they were at arm's length, if they were separated or anything of that sort, he will very soon serve the notice. He will not hesitate about it.
The difficulty about imposing a time limit upon him is that we should have to impose a time limit upon the assessment upon him. As hon. Members know, particularly in tax matters of any complication, although everybody does his best to get the matter cleared up as soon as possible, it is often very difficult to say exactly when it will be finally cleared up. Assessments can be made for a number of years after the taxation. If the time were abbreviated, one would always be in the difficulty that it might not be possible to assess the amount of tax in a shorter space of time.

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I think that the best way to deal with it is that I should advise the Committee to accept the Clause in the form in which it stands and that if, in point of fact, it gives rise to difficulty between now and some later period—it will be watched closely in the meantime—the matter can be reconsidered. I hope that the Committee will agree that it is unlikely that the whole of this matter will give rise to extreme difficulty, any more than those which already exist in the assessment and collection of tax, and that hon. Members will pass the Clause in its present form
Mr. Bell: Would it not be possible for the husband to be asked to serve his notice within a certain time after the assessment is made upon him? Possibly the wife's executors might be enabled to serve a notice on the husband requiring him to serve his notice within a certain time or else to lose the right to do so. If a time limit were made after the assessment was served on the husband, then the question of how long the Income Tax authorities need to make an assessment would not arise.
The Solicitor-General: The difficulty is that when the husband gets the assessment be may appeal and the case may go higher and higher. It is unfortunately the case, as hon. Members know who have to deal with this type of question, that it often takes a long time before the matter can be finally determined, often through nobody's fault. A long time may elapse before the position is reached which finally fixes the husband's liability. Therefore, I ask the Committee to say that, on balance, it would be better not to impose, at this stage at any rate, any limitation such as hon. Gentlemen suggest, so that we can see how the Clause works.
7.0 p.m.
Mr. Manningham-Buller: I hope that the right hon. and learned Gentleman will go a little further than that, because the point is a technical one and we do not want to spend much time this evening in discussing it when we have other more important things with which to deal. I ask him to say that he will give further consideration to this matter between now and the Report stage. I am not very happy about letting this go into the Bill and seeing in a few years' time how it has worked. There may be a real difficulty
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here. I see the matter from the point of view of the husband, but one ought to have regard to the point of view of the executors. If the right hon. and learned Gentleman will say that, we can proceed.
The Solicitor-General: Without any commitment, I accept it as a matter of course that arguments advanced will be given careful consideration between now and the Report stage.
Mr. Joynson-Hicks: Can the right hon. and learned Gentleman say what, if any, will be the effect on the executors of the possible delay in concluding an assessment of tax if the husband does contest it, which was the point I had in mind originally with regard to the keeping open of the estate? What, if any, will be the responsibility of executors who may have notice of this contingent liability, and what will be their duty to retain in the estate a residuary fund sufficient to enable them to meet it, as opposed to their duties as executors to distribute the estate with all possible speed?
Amendment agreed to.
Further Amendment made: In page 21, line 21, leave out "subsection (1) of."—[The Solicitor-General.]
Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."
Mr. Houghton: The Clause removes what has in the past been a source of great domestic difficulty in some households and has constantly been a source of great difficulty in the collection of tax by the Inland Revenue. The Clause now changes the powers of the Inland Revenue to recover tax assessed on the husband in respect of a wife's income. This is a long-overdue change and I congratulate the Inland Revenue on at last having a Chancellor of the Exchequer who is prepared to shift the liability for payment of tax on a wife's income to the wife and not to confine it to the husband.
I have this plea to make, however. While this change now relieves a husband of the liability of paying tax assessed upon him which is attributable to the wife. Section 171 of the Income Tax Act, 1918, is still retained. This section gives power

939
to the Inland Revenue to distrain on the husband for tax which is assessed on the wife. I wonder whether the retention of this provision is either necessary or desirable?
The Temporary Chairman (Mr. Butcher): The hon. Member can only discuss whether this Clause, as amended, shall stand part of the Bill. He cannot deal in that way with a provision in an earlier Act.
Mr. Donovan: I want to draw the Solicitor-General's attention to the proviso, which reads:
"Provided that, where an appeal was brought against the original assessment, no contention inconsistent with the result of that appeal shall be open on any appeal from the notice, either to the appellant or to the Crown."
Does the word "appeal" include subsequent proceedings by way of case stated in the High Court by an appeal from the Commissioners? I ask that because in subsection (4) one reads:
"Where the amount payable under a notice given under subsection (1) of this section is reduced as a result of an appeal or of the stating of a case for the opinion of the High Court."
That may indicate in the mind of the draftsman some distinction between the two, but I do not think that any could have been intended. We might have a case where the Crown won on an appeal before the General or Special Commissioners and lost in the High Court, and therefore they would be raising no contention inconsistent with the result of the appeal in any subsequent proceedings if the word "appeal" were limited merely to the proceedings before the Commissioners.
The Solicitor-General: The word "appeal" in the proviso means an appeal to the Commissioners. As I have said, this proviso is one which we want to consider further with the general object in view which I described earlier, and the point which my hon. and learned Friend raises is one which will be taken into account.
Clause, as amended, ordered to stand part of the Bill.

Clause 27.—(CONSTRUCTION OF REFERENCES TO MARRIED WOMEN LIVING WITH THEIR HUSBANDS, AND SPECIAL PROVISIONS AS TO CERTAIN SPOUSES GEOGRAPHICALLY SEPARATED.)
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Lieut.-Commander Gurney Braithwaite: Clauses 24 to 28 all appear to have a common objective, the clarification and tidying up of the law regarding matrimonial matters in respect of tax purposes. I want to ask the Solicitor-General a question before we part with this Clause. It relates to subsection (1, b) which deals with the question of separation. It seems to me, as a layman, that the wording is somewhat obscure. It reads:
"… such circumstances that the separation is likely to be permanent."
That might be a little difficult of interpretation unless the Solicitor-General can add a few words which would appear on the record as a guide to those who will have to administer the Act in due course.
One reads from time to time of divorced persons re-marrying—rarely, it is true—but one reads and hears far more frequently of separated spouses burying the hatchet, returning under one roof and living happily ever afterwards. Therefore, I want to ask whether the interpretation to be placed upon the subsection is "judicial separation" or whether the marginal note, of which we are supposed to have no cognisance when considering a Bill, gives the answer in referring to geographical circumstances. If the wife went to America or Canada and had not the financial means to return, would that be regarded as circumstances which are covered by the Clause, or is the onus in a different direction and is it the claimant who has to try to satisfy the authorities that no re-union is likely? The present wording seems capable of many interpretations. If the Solicitor-General would add a few words of his own, or, better still, improve the Clause on the Report stage, it would be to the advantage of the Bill.
The Solicitor-General: The hon. and gallant Gentleman has put his finger upon a point of much controversy, and if we have still left the Clause in a state of

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ambiguity, we have singularly failed in our purpose, which was to try to clarify the law as it was left as a result of a decision called "Nugent-Head v. Jacob," which was decided in the House of Lords last year. These provisions in so far as husbands living with wives are concerned, replace the old General Rule 16. When it came to interpret that Rule the House of Lords said that it was so difficult to construe that it was almost impossible to understand it. That is why I say that if we have still left the matter obscure, we have failed very signally in what we wanted to do.
I agree with what the hon. and gallant Gentleman has said. On the other hand, it is extremely difficult to find better words. We have tried to say that the question which must be asked in any particular case, looked at properly, is whether the separation between the spouses is likely to be one which will last for ever. Although we have tried many forms of words—I have no doubt that those who phrased General Rule 16, the words of which have remained for 150 years, tried to do the same thing—it is difficult to produce a better form of wording, having regard to the very different relationships which may lead to separation, temporary or permanent, between husbands and wives.
The test we have adopted therefore—that is to say, the factual likelihood of permanent separation—is one which we hope and think the courts can apply without any great difficulty. We think that the courts should be able to look at the circumstances of any individual matrimonial disruption and answer the question of fact, yea or nay—is this a temporary situation? For instance, has the husband simply gone to Newcastle on business in circumstances in which he will return in a fortnight—in which case obviously they would say it was temporary—or was this one brought about by a judicial separation, when they would say it was permanent.
The words "geographically separated" in the margin are not intended to be the only cases which refer to subsection (2), which says in effect that where you can say of two spouses that they are geographically separated—for example, one is working in the Colonies and the other here—that, for various reasons, is to be treated as permanent separation. It is not
942
generally the case that it will be permanent, but it is thought that it gives the wife certain taxation advantages when the husband is working abroad in the Colonies, when she may have a small income of her own here, to be placed in the same position as she would be if permanently separated from her husband.
I hope that explanation, which I am afraid is not entirely adequate, will satisfy the hon. and gallant Gentleman.
Lieut.-Commander Braithwaite: Thank you.
Mr. Charles Williams: Is it quite clear what happens when they come together again? Is it covered in the Bill?
The Solicitor-General: If they have been separated in circumstances in which a court has mistakenly come to the conclusion that they were permanently separated whereas it transpires they were not, if they come together again as husband and wife in the full sense, then the income of the wife is treated as the income of her husband in the ordinary way.
Mr. Williams: Is it their duty to inform the tax gatherer that they have come together again or ought they to leave it to him to find out?
The Solicitor-General: They are in exactly the same position as any other Income Tax payer who earns an income.
Clause ordered to stand part of the Bill.
Clause 28 ordered to stand part of the Bill.

Clause 29.—(EXTENSION OF CHARITIES RELIEF TO CERTAIN BODIES AS RESPECTS PAST PERIODS.)
Mr. Nield: I beg to move, in page 22, line 35, after "only," to insert:
"or would in the opinion of the said Commissioners have been so treated if it had been formed before the year 1949–50."
I suggest it would be for the convenience of the Committee to take this Amendment and the next three Amendments together; namely, in page 22, line 36, at end, insert:
"or such later date as the Commissioners of Inland Revenue may upon application allow";

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in line 40, after "April," insert:
"or such later date as aforesaid as the case may be";
and in page 23, line 28, at end, add:
"(3) Notwithstanding that a body of persons has not been treated by the Commissioners of Inland Revenue as mentioned in paragraph (a) of subsection (1) of this section, the body of persons shall be deemed to have been so treated if on application to the Special Commissioners it proves to the satisfaction of the last-mentioned Commissioners that in relation to tax for any year of assessment before the year 1950–51 it was a body of persons established for charitable purposes only or would have been such a body but for the inclusion in its memorandum of association or other similar instrument regulating its functions of one or more of the provisions referred to in subsection (1) of this section."
May I begin by seeking to assist the Committee by explaining what I conceive to be the purpose of Clause 29? In my view this Clause has been included in the Bill in order to meet a difficulty with which some voluntary charitable organisations have been confronted since the decision of the Court of Appeal in the case of the Oxford Group v. The Commissioners of Inland Revenue which was reported in 1949, 2 All England Reports, page 537, and was decided in July last year. Further I think it is intended to give effect to an undertaking which the right hon. and learned Gentleman the Chancellor of the Exchequer gave in December last year.
On 1st December the hon. Member for Salford, East (Mr Hardy), in a written question asked the Chancellor whether he had any statement to make in view of the fact that many corporate bodies which had hitherto been recognised by the Inland Revenue as charities and had limited themselves solely to charitable activities were then being told by the Inland Revenue that such recognition must be withdrawn because of the decision of the Court of Appeal in the case of the Oxford Group v. The Commissioners of Inland Revenue.
7.15 p.m.
The Chancellor replied:
"Yes. I am aware of the difficulty that has arisen in the case of bodies, hitherto recognised as charities by the Inland Revenue, which include in the objects set out in their memorandum and articles powers to establish and support or aid in the establishment and support of charitable or benevolent associations and to subscribe or guarantee money for charitable or benevolent purposes or to do such things
944
as the organisation may think conducive to the attainments of its objects. In view of the fact that these powers, in cases such as those to which my hon. Friend refers, have in the past been regarded as merely ancillary to admittedly charitable objects and have accordingly not been called in question by the Inland Revenue, I propose that, subject to certain conditions, an opportunity should be afforded to such bodies to amend their constitution without being deprived of relief from Income Tax in respect of the intervening period."
Then the Chancellor laid down the conditions, saying:
"The conditions are:
(a) that the body concerned has hitherto been recognised by the Inland Revenue as a charity for Income Tax purposes,"—
I ask the Committee to notice in particular that condition, namely, that in former times the particular charity had been so recognised—
"(b) that its status as such is impugned by reason only of the fact that its memorandum and articles include a paragraph or paragraphs in the terms to which I have referred or in terms closely approximating to those terms, and
(c) that before the end of the current Income Tax year 1949–50 (ending 5th April, 1950), it amends its memorandum and articles to conform with the requirements of the law as now declared by the Court of Appeal."
ask hon. Members again to pause there to notice that one of the requirements is that by a certain date, namely, April of this year, the memorandum must have been amended in order that relief may be obtained. Finally, the Chancellor said:
"Where these conditions are satisfied the Inland Revenue will allow relief in advance of legislative provision which I would propose to introduce in a Finance Bill in due course."—[OFFICIAL REPORT. 1st December, 1949; Vol. 470, c. 115–116.]
There was the undertaking of the Chancellor given, in our view quite rightly, in answer to the Question put to him.
I ought further to explain exactly what happened briefly in the Oxford Group case. As hon. Members are aware, by Section 37 of the Income Tax Act, 1918, exemption from Income Tax is granted in respect of rents, and so on, forming part of the income of the body established for charitable purposes only, and another section in the Finance Act, 1921, grants similar facilities. The Oxford Group, which is a company limited by guarantee, applied for exemption under the Sections to which I have referred, claiming that they were formed for charitable purposes

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only. The Court of Appeal upheld the court of first instance in saying that that company was not formed for charitable objects only and, therefore, was not entitled to exemption.
I think the position was that the Court of Appeal decided that the matter fell to be determined by construing the memorandum and articles of association of the company. I need not go into them in detail, but several of the objects and provisions of the articles were objected to. The Court of Appeal said that the company's objects were outside the purely charitable purposes where were, perhaps, their main object.
In the first three of the Amendments, what we seek to do is this. As the Committee will appreciate, under the Clause as it now stands the position is that if a body has been treated as a charity in any year prior to 1950–51, and if it duly amends its memorandum in order to comply with the decision in the case of the Oxford Group by a certain date, then no tax will be paid for past years on the ground that the body was not established for charitable purposes only.
There are two proposals for amending the Clause. The first is to be able to grant a similar relief, if I may so term it, to a charitable body formed in the year 1949–50, which, I think, would be excluded by the conditions which have been laid down. The second is to grant relief to those charities which have, by some omission or oversight, failed to amend their memorandum by the arbitrary date 6th April, 1950. The Committee will appreciate that in our legislative system we have very many times had experience of a Section which said that if a condition is not fulfilled owing to some quite innocent misapprehension or mistake, then there should be a discretion to overcome that mistake and to allow the amending to be done later by statutory provision
The object of the last Amendment is to say that where in years gone by a voluntary organisation had in error not applied for exemption and, therefore, the Commissioners had not granted this exemption, if now it appears that they would have granted the exemption in the exercise of this discretion, those bodies have to come forward to ask for that particular relief.
I hope that the Committee will forgive my taking some little time, but this is a
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matter of considerable importance to a great number of voluntary organisations which are doing good work. Some of us have had the opportunity of advising and seeking to help some of these organisations in this respect. The Committee will readily appreciate that these organisations are extremely anxious to have charitable status so that they may obtain exemption from tax and the benefits of seven-year covenants and other devices for charitable purposes and so forth. I think that my right hon. and hon. Friends feel with me that the Clause in its purpose is wholly admirable but that there are omissions which could, and should, be made good. I hope that the Solicitor General will not think that we are asking merely for a little more—that is not so. Here are omissions which can, and should, be remedied in the interests of these organisations.
The Temporary Chairman: I think that the Committee would wish me to allow the discussion on the four Amendments to be taken together on the understanding that there will be no separate discussion on them later.
The Solicitor-General: The hon. and learned Member for the City of Chester (Mr. Nield) really has asked for three alternative concessions from the Government. After considering the four Amendments, we feel that we are in a position to go a certain way to meeting him, but we cannot go the whole way. The Clause is not designed—as, indeed the hon. and learned Member made perfectly clear when opening his case—to carry out a thorough overhaul of the legislation relating to the exemption of charities. It is designed merely to implement a strictly limited undertaking which was given by my right hon. and learned Friend the Chancellor of the Exchequer. In terms it does, of course, implement that undertaking. What is asked for, however, is that we should go further.
I feel very great difficulty in accepting the first Amendment. It proposes that in the case of charities which were formed in 1949–50 the same relief should be given under certain circumstances. It seems to me that the hon. and learned Member is asking us to go too far in asking for that. After all, those charities were formed after the Oxford Group case was decided. It was decided, I think, in the court of

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first instance in January, 1949, and in the Court of Appeal in July, 1949. All charities which came into being during that year must, I would suggest, be taken to have come into being in the knowledge of the decision in the Oxford Group case.
Those who were framing the provisions of those charities must, or should, have had regard to what the Oxford Group case decided. It was a case which particularly affected charities, and anyone who was concerning himself with drafting the statutes or the memorandum and articles of any particular charity should, or certainly ought to, have taken into account the effect of the Oxford Group decision. I hope, therefore, that the Committee will agree that we ought not to accept the first of the four Amendments.
With regard to the second and third, the position is rather different. All that the hon. and learned Member is asking is that we should not adhere rigidly to the date of 6th April, 1950. This seems to me to be a reasonable request. The hon. and learned Member, asks that the Commissioners should on application have power to approve a later date as the date by which the alteration in the memorandum is to be effected. Therefore, I should be prepared to accept the Amendments to lines 36 and 40 on page 22. The effect of those Amendments would be to enable any charity which had not complied with the requirements of altering its memorandum by 6th April, 1950, to have an extended period on application to the Commissioners.
With regard to the fourth Amendment, I was listening to the argument of the hon. and learned Member to see what specific cases he gave. This Amendment relates to charitable bodies which were in existence before the Oxford Group case and for one reason or another, either because they did not ask for relief or for whatever other reason it might be, did not rank as charities and were not for taxation purposes given the exemption which applies to charitable bodies.
Having heard what the hon. and learned Member said, I should like to consider this matter between now and Report stage. In any case, I do not think that we could accept the Amendment as it stands, because it contains certain words which we would desire to alter, but I hope that the hon. and learned Member and
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the Committee will agree that a reasonable approach to this matter would be, not to accept the first Amendment, but to accept the second and third, and that the hon. and learned Member should ask the permission of the Committee to withdraw the fourth Amendment upon the understanding that the Government will carefully consider its object in the hope—and indeed, I think I may say, in the expectation—that before the Report stage we may be able to put something down which would satisfy the object which the hon. and learned Member has in mind.
Mr. Manningham-Buller: I am sure that my hon. Friends will welcome the line that the right hon. and learned Gentleman has taken with these four Amendments, and it would be ungracious for me to seek to press him any further upon the fourth. I do not wish to do so, nor to press him with any undue severity regarding the first, but I should like him to give a little further consideration to the first, for this reason.
While it may be true that the people who formed these charities in 1949–50 ought to have been aware of the decision in the Oxford Group case and ought to have drafted their memoranda accordingly, instances may occur where that did not happen although it should have happened. It would be wrong in my view that what ought to be charities should be penalised on that account, and the first Amendment merely provides for an opportunity of putting right what ought to have been done ab initio having come to that decision. Control is still in the hands of the Commissioners, and I am at a loss to see what harm the acceptance of the first Amendment would really do. I do not think it could possibly result in bodies being included which were not really charities. I do not press the right hon. and learned Gentleman to give an answer now, but I ask that he will have a look at it again before the Report stage.
7.30 p.m.
Mr. Bell: I wish to make two small points which I ask the right hon. and learned Gentleman to consider. The first is on the first Amendment by way of supplementation of what my hon. and learned Friend the Member for Northants, South (Mr. Manningham-Buller) said, namely, that the Oxford Group case was decided in the Court of Appeal in July, 1949, and

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would be reported in "The Times," in that month and would be seen by many people, but so far as the law reports even the All England Reports, are concerned, it would not be reported until after the long vacation and, it would be a long time before many became aware of the final judgment.
On the fourth Amendment I ask the right hon. and learned Gentleman to bear one matter in consideration when looking into what he can do in regard to it. The effect of this Clause has been that the Commissioners were making wrong decisions for a considerable time on what charities were entitled to relief. We did not know they were making wrong decisions until the decision of the Court of Appeal on the Oxford Group case. It is possible, I do not know whether it has happened or not, that in some cases the Commissioners may have given a right decision and disallowed the charity. I cannot give specific cases, but it is possible that the Commissioners sitting in various places may have given a right decision in some cases. I say this in no feeling of disrespect of the Commissioners; but we know that in general they were giving a wrong decision. If there were any cases where a charity was barred out of relief by the fact that the Commissioners made a right decision, this fourth Amendment would cover the case.
Mr. Joynson-Hicks: I think the practical solution towards which the Solicitor-General has helped us in regard to the second and third Amendments will be exceedingly welcome. May I ask him to consider coupling that with some administrative action? The reason is a purely practical one, as practitioners have found. It is this; as we all know, many of these charitable bodies are not run by executives with a very great business experience. They also have a far different relationship with their inspector of taxes than the majority of commercial bodies. They rely entirely on their inspector of taxes and have the highest regard for his virtue and advice.
It has therefore occurred in a considerable number of cases to my personal knowledge, that the circulated letter of the inspector of taxes to many of these charities saying, quite properly and rightly, that for the time being he was not going to change his view of having hitherto considered them as charities, has been
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accepted by these bodies as giving them official recognition as charities and that it has not been necessary to amend their memorandum or articles of association. Many charitable bodies have not taken the trouble to do so. Would it be possible for the right hon. and learned Gentleman to arrange administratively for a further communication to be addressed to these bodies, who have already received a communication from the inspector of taxes telling them in general terms that it is necessary for them to bring themselves into line in accordance with the undertaking given by the Chancellor of the Exchequer and the provisions of the Clause in the Bill?
The Solicitor-General: Certainly I will consider the administrative suggestion that is made. I am not aware of the circular letter but no doubt the matter will be looked into. I think the hon. and learned Member for the City of Chester (Mr. Nield) is pressing us to go a good deal beyond the undertaking of my right hon. and learned Friend. However, without giving any promise, certainly those who consider these matters will pay attention to his arguments, but I should not like to hold out any hope that we shall be able to go to the length to which he asks us to go.
With regard to the case of Commissioners giving what ultimately turns out to be a right decision with the result that the bodies were treated accordingly, certainly I should think that was the kind of case one had in mind in looking at the fourth Amendment and attention will be paid to what was said by the hon. Member for Buckinghamshire. South (Mr. Bell).
Mr. Nield: In view of what the right hon. and learned Gentleman has said, I beg to ask leave to withdraw the first Amendment, I am grateful to him for accepting the second and third Amendments, and I hope that by Report stage he will produce something satisfactory to us, having in mind that we there seek retrospective benefit, which I think is probably quite in order.
Amendment, by leave, withdrawn.
Amendments made: In page 22, line 36, at end, insert:
"or such later date as the Commissioners of Inland Revenue may upon application allow."

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In line 40, after "April," insert:
"or such later date as aforesaid as the case may be."—[Mr. Nield.]
Clause, as amended, ordered to stand part of the Bill.
Clause 30 ordered to stand part of the Bill.

Clause 31.—(TREATMENT FOR TAXATION PURPOSES OF ENEMY DEBTS, ETC., WRITTEN OFF DURING THE WAR.)
The Solicitor-General: I beg to move, in page 25, line 2, after "greater," to insert, "or less."
Would it be convenient if, in moving this Amendment, I also gave reasons for the Amendments proposed in line 6—to leave out from "deduction," to "and," in line 7, and to insert:
"shall be deemed to have been improper to the extent of the excess or, as the case may be, to have been insufficient to the extent of the deficiency";
and in line 12, to leave out from "if," to "and," in line 13, and to insert:
"no deduction had been made or, as the case may be, if there had been made a deduction smaller by the amount of the said excess or greater by the amount of the said deficiency."?
The Chairman: Yes.
The Solicitor-General: This action was, I think, initiated by the hon. and learned Member for Northants, South (Mr. Manningham-Buller). It is to make a change on the following lines in Clause 31. Clause 31 provides that where a trader during war—broadly speaking, that is the period in question—has written down a debt owed to him by some enemy debtor and subsequently that debt is recovered, the writing down is written up in the light of the recovery which is to hand. It is the case, of course, that a recovery may raise the amount of which is less than the written down value of the debt. In other words, the trader may have written down £1,000 to £500 in 1943 and have allowed that writing down in the preparation of his returns and then, in 1946, he may have recovered £600 in respect of the debt. As the Clause stands, he would have £100 written back to that year, 1943, and be charged tax on that £100.
The series of Amendments, the first of which I now move, is designed to deal with this situation. Instead of getting the recovery in 1946 or £600, he may get a
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recovery in 1946, say, of £200. The sum of £200 will show that the original writing down of the debt from £1,000 to £500 was not enough, and that it should have been written down from £1,000 to £200, and that his tax return in 1943 should have been made on the basis of including only £200 in the computation of his profits.
We seek by these Amendments to say that if he makes a recovery later which is less than the written down value of the debt—supposing he has written down the debt to £500 and he only recovers £200—he shall be entitled to have his 1943 accounts—I take that year purely as an example—further written down, that he shall be entitled to say, "I did not write down that £1,000 sufficiently. I wrote it down to £500 and it transpires that I should have written it down to £200. I claim further relief of £300 in respect of my tax return liability for 1943." These Amendments enable him to do that. The words "or less," which by the first Amendment we propose to insert after "greater," relate to the case where recovery is less than the written down value of the debt. The two further Amendments to which I have referred are so worded as to give him the right to claim a further writing down to which he would have been entitled had he known that his debt was worth only £200. This is a measure of retrospective relief in favour of the taxpayer.
Mr. Manningham-Buller: I must just say "Thank you" to the Solicitor-General for so fully adopting our proposals which appeared on the Order Paper some time ago, and also for his clear exposition of the effect of the Amendments which we proposed. The subsequent Amendments which we are discussing with this one are merely a re-wording of Amendments which we put down. The Solicitor-General has given a most lucid and detailed exposition of the precise effect of the addition of the words "or less" to this Clause, and I would not seek to add anything to his explanation as to exactly what the addition of "or less" does.
Amendment agreed to.
Further Amendments made: In page 25, line 4, leave out "remains unwritten off after," and insert:
"is still not written off after effect has been given to."

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In line 6, leave out from "deduction." to "and," in line 7, and insert:
"shall be deemed to have been improper to the extent of the excess or, as the case may be, to have been insufficient to the extent of the deficiency."
In line 12, leave out from "if," to "and," in line 13, and insert:
"no deduction had been made or, as the case may be, if there had been made a deduction smaller by the amount of the said excess or greater by the amount of the said deficiency."—[The Solicitor-General.]
7.45 p.m.
The Solicitor-General: I beg to move. in page 26, line 5, at the end, to insert:
(3) In ascertaining, under subsection (2) of this section, the amount of any recovery, there may be deducted from the amount or value of what is obtained any expenses incurred in obtaining it, and references in the said subsection to the amount or value of what is obtained shall be construed accordingly:
Provided that, to the extent that any expenses so deducted go to reduce the sum which is to be treated under that subsection as the amount of a recovery in respect of a debt, claim or property wholly or partly written off in the manner specified in subsection (1) of this section—

(a) no deduction shall be allowed for the expenses in computing for excess profits tax or profits tax purposes, the profits or losses arising from any trade or business in any accounting period or in computing, for the purposes of income tax for any year of assessment, the profits or gains or losses of any trade; and

(b) the expenses shall not be included in computing the expenses of management in respect of which relief may be claimed under section thirty-three of the Income Tax Act, 1918;

and the payments and repayments of tax falling to be made under sub-section (1) of this section shall be adjusted accordingly.
The object of this new subsection is to provide that expenses of recovery should be deducted from the amount of the recovery. That proposal was made by an Amendment, in page 25, line 22, at the end, to insert "less the expenses of obtaining it," which stands in the name of the hon. and learned Member for Northants, South (Mr. Manningham-Buller). We seek by this subsection to achieve the purpose which I feel sure the hon. and learned Member had in mind. We had to put down our own new subsection instead of accepting his Amendment because we had to meet the position that supposing expenses incurred in effecting the recovery were allowed as a deduction against the amount of the recovery—in
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other words supposing that in recovering £200 debt a trader had to spend £50 and supposing that was deducted from the £200—the trader should not again get the same deduction of £50 as an expense against his profits. Obviously he cannot have the relief twice. He can have it either as a deduction against the amount of the recovery or as a reduction in the computation of his profits. Our new subsection simply says that the expense shall be deducted from the recovery and that it shall not be deducted again as an expense in the carrying on of his business. That is in order to prevent him getting double relief. With that object in mind, this Amendment carries out what I think the hon. and learned Member had in mind.
Amendment agreed to.
Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."
Mr. John Foster: I felt it was in keeping with the temper of the Committee not to take up any time with the Amendment standing in my name, in page 26, line 2, to leave out from "section," to the end of the subsection. I merely ask the Solicitor-General, who has so far proved so accommodating, to look at the drafting in one or two places in this Clause? I feel sure that he will do so. I would draw his attention to page 24, line 26, where the word "profits" comes twice. That is rather awkward. My second point concerns line 30 which refers to a debt or claim "owed by or on a person…." We can see what it means but it is an offence against the good grammar which I learned at school. One can make the most awful mess of prepositions, such as the example provided by the child who said to his mother "Where did I get the book I am being read to out of from?" Then there is a sentence at the top of page 26, line 3, which says:
"the total amount thereof exceeds or, as the case may be, exceeds that part of …."
What it means is that where the total amount absolutely exceeds or partly exceeds. I am sure that the Solicitor-General will have sympathy with the points I have raised and will see whether the drafting cannot be made a little more attractive.
The Solicitor-General: The words "profits, profits or gains …" were used because we were referring to the Profits Tax, which talks about profits, and also to Income Tax, which talks about profits or gains. Therefore, to be artistically in order we have to use the words "profits, profits or gains …" With regard to the words, "on a person", the hon. and learned Gentleman wanted to have the word "made"; we could not accept the word "made" because that would exclude potential claims. The words "claims made on a person," exclude claims which may be made on people. I am sorry, but we cannot accept the second suggestion. With regard to the third suggestion we mean exactly what we state. We are therefore grateful for the hon. and learned Member for looking into the matter with such minuteness, but after careful consideration of the result of his researches we still prefer that our form of wording should be retained.
Mr. Maudling: There are two small points which I wish to raise. Supposing there was the case of an investment of shall we say, £100,000 which had been written down in 1946 to £25,000. Another £100,000 as invested, and as a result of that the object in which the money is invested is built up and there is a recovery of £150,000. That recovery really springs from the subsequent investment. I understand that 50 per cent. of the recovery would become liable to tax, being treated under lines 34 to 42 as being attributable to the original investment. I hope the Solicitor-General will consider that. The second point is that I believe the main object of departing from the now normal procedure in the valuation of trade debts in this case is to include them for E.P.T.
During the Spanish war certain debts were written down excessively and subsequently recoveries were made, and if this principle were applied to the Spanish war debts those written down debts would retrospectively be increased in value. The standard profit of the companies concerned for the bare years for E.P.T. would be increased and would effect the E.P.T. computations for subsequent years. They are small points but I should be grateful if they could be given a certain amount of consideration.
The Solicitor-General: The changing in the standard of profit of a company
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as it was eased during the Spanish civil war is something entirely outside the-scope of this Clause. I do not think any practical case is likely to arise. With regard to the other case where there is. an investment of £100,000 written down to £25,000 and, as a result of further expenditure, £150,000 is recovered, as the hon. Gentleman says, that will be dealt with in the concluding words of subsection (2). The £150,000 would be apportioned to the original written down investment and the new expenditure embarked upon in order to see what was a fair division and what should be attributed to the old investment.
Mr. Maudling: Do I understand that a proportion of the profit on the investment would have to be determined solely upon the size of the expenditure on the investment, but the investment would be taken into account as well?
The Solicitor-General: It depends on what was meant by the value of the debt. The word "value" would have to be taken into account.
Clause, as amended, ordered to stand part of the Bill.

Clause 32.—(MODIFICATION OF LAST PRECEDING SECTION IN THE CASE OF RECOVERIES BY ASSIGNEES AND IN CERTAIN CASES OF SUBSIDIARY COMPANIES.)
Mr. Manningham-Buller: I beg to move, in page 29, line 6, at the end, to add:
If the Commissioners of Inland Revenue are satisfied that no additional tax would fall to be paid or allowed if this and the preceding section were applied in relation to the recovery, they may notify the appropriate person that this and the preceding section shall not apply to the recovery.
It may be convenient to the Committee to consider this Amendment together with the second Amendment which we have on the Order Paper namely, in page 29, line 6, at end, add:
(6) This and the preceding section shall apply to recoveries made on or before the thirty-first day of March, nineteen hundred and fifty-two.
They both raise points of some importance and I hope that the right hon. and learned Gentleman will be able to meet me with regard to both of them.

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Both Clause 32 and Clause 31 deal with the recovery of debts and in neither case is there a time limit The end of the Excess Profits Tax is five years in the past, and I suggest that there must be some finality about the provisions of the Excess Profits Tax. As the Clauses now stand it means that whatever enemy debts are recovered there will have to be a re-opening of the provisions of the Excess Profits Tax. I suggest that cannot be allowed to go on indefinitely. I understand that the provisions for deferred repairs under the Excess Profits Tax legislation will expire on 31st March, 1952, and I suggest that this is a convenient date to take as a date of finality
With regard to the first Amendment, obviously where the amount recovered of enemy debts is substantial it is well worth while re-opening the Excess Profits Tax computation. But where the amount recovered is small it may well be that it is not worth while doing anything of the sort. The first Amendment is merely to allow for the non re-opening of the Excess Profits Tax provisions where the amount recovered does not warrant the expense of so doing. The wording of the first Amendment is modelled on Section 42 of the Finance Act, 1948, which I think has been interpreted to mean where there is no material amount involved.
The Solicitor-General: I feel that the Committee ought not to accept either of these Amendments. With regard to the first one, it is perfectly true that in Section 42 of the Finance Act, 1948, there is a not dissimilar position which in effect enables the inspectorate to disregard small amounts, but that is not a parallel case because it is dealing with expenses. If there is a disregard of expenses on one side of the column it is because there would be a counter balancing of relief obtainable under rule 9 of Schedule E. In practice I do not think there would be any difficulty in all cases of recovery. There will be a difference made in the re-writing of the accounts. The sum of £100 is bound to make a difference in re-writing of the accounts, and so is £50.
But in practice, supposing the amount was quite negligible, the inspector of taxes would be acting within the discretion invested in him if he disregarded that amount or allowed the trader to treat that amount as a recovery in the actual year in which the recovery was obtained.
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So that for practical purposes de minimis costs can be provided for in the existing discretion and anything other would of arithmetical necessity be bound to make a difference in the re-writing of the war-time accounts of the trader in question. Therefore I hope the Committee will agree that the Amendment ought not to be accepted. I agree it is not a fundamental change but the small cases could be dealt with as de minimis cases now and the amounts allowed to be treated as recoveries in the year actually recovered.
8.0 p.m.
I must confess that we think that the time limit suggested in the second Amendment is premature. It is true that the period for deferred repairs under the Excess Profits Tax legislation will expire in March, 1952, and that is the reason why the hon. and learned Gentleman chose this date. On the other hand, a great many Excess Profits Tax problems are still outstanding. They are bound to be outstanding. This question of claims recoveries is bound to remain open for some time. The Peace Treaties and so on have not been brought into operation. Indeed they have not been made with some ex-enemy territories. Whilst that is the case, the result must be that many claims against ex-enemy debtors cannot be finally disposed of.
Therefore, we think it is premature to try to set a limit. By way of analogy, I remind the Committee that Excess Profits Tax under the legislation in force in the First World War was not brought to a close until 1926, some eight years afterwards. Conditions now are even more difficult than they were then. It is taking longer to settle these outstanding matters now, because so many international treaties are still not negotiated or brought into operation, than it was after the First World War. For these reasons, my answer to the second proposal is that it is premature to try to set a term now for disposing of these matters.
Mr. Manningham-Buller: The Solicitor-General has made a useful and valuable statement. In view of the reasons advanced by him, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Mr. Maudling: I should like to ask two questions. First, is it a fact that if, as a result of the operation of this Clause, the E.P.T. liability for, say, 1940–41 of a company is declared to have been larger than in fact was paid—in other words, it becomes liable retrospectively—does not that mean that the capital employed in the business from that year onwards becomes smaller than it would have been if the full amount of tax had been paid at the time? If the capital employed in the business from 1940 onwards is now deemed, as a result of an increased tax deduction, to be smaller than it was treated as being in tax computations made currently, does not that mean that every subsequent tax computation will have to be done again, because E.P.T. is based on the capital employed in the business? Does not that mean that this matter is more complicated than was suggested?
The Solicitor-General referred to delays in the recovery of money from ex-enemy territories. Has he also in mind the difficulties of people who obtain satisfaction in a foreign currency, or in the bonds of a foreign firm, who find that that currency is not convertible, or the proceeds of those bonds, if they sell them, are not easily transferable to this country?
The Solicitor-General: On the question of the capital employed in a business for Excess Profits Tax computation and the working out of the average, the writing back of a debt subsequently recovered could not possibly affect the amount of capital employed in the business for the purpose of the computation of the relevant fraction, as it is defined in the Act of 1939. The writing back of a debt simply means that an extra profit is deemed to have been made in that particular period for Excess Profits Tax purposes. That extra profit does not of itself affect the amount of capital which is de facto employed in the business, within the meaning of the Excess Profits Tax code.
With regard to the recovery of debts in foreign currencies which may be frozen, the answer is to be found in the definition we have given of the word "recovery." We have defined it as meaning:
"… the obtaining of anything of value."
Before one can be said to have got a recovery, it must be possible to say that one
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has got something of value. Debts are frozen in foreign currencies under a whole variety of circumstances. Sometimes people would say that the frozen debt is worth nothing because a person knows that he will never get it. Sometimes a person knows that the frozen debt is worth almost its full value because he is almost sure to get it next year, or he can get it if he makes an application to be paid. We have tried to adjust the recovery to the actual value of the debt in the foreign frozen currency. We hope that this will work out all right. We have given it a great deal of thought and we think that it should bring about a fair result.
Mr. Maudling: On the first point, is it the Solicitor-General's argument that although a company is deemed to have earned a greater profit in 1941 than has subsequently been found to be the case, they are not deemed to have employed that greater profit which they are supposed to have earned as part of the working capital of the business?
Sir P. Bennett: I should like to emphasise the point which has been made. There is a growing desire on the part of industrialists to get many of the old accounts closed. I hope that the Solicitor-General and the Chancellor will not say that it does not much matter if they have to wait for a year or two. The time which is occupied and the strain and stress placed upon staffs is becoming very great. The accountancy profession is very much overworked and anything we can do to clear up these matters would be of assistance. I hope that we shall take a little risk instead of waiting hoping that something may turn up.
The Solicitor-General: I assure the hon. Gentleman that his desire to see these matters cleared up is cordially shared by the Inland Revenue authorities. They will make every possible endeavour, in co-operation with traders, to see that that result is brought about. A large part of this question of writing down accounts is a matter for mutual arrangement. With regard to Excess Profits Tax, it is possible to conceive a case—indeed, they have been before the courts—in which there is evidence that a written down debt, or a debt almost entirely written off, is in fact used as capital in the business, because credit is obtained against it, or something of that sort. If

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there were evidence of that kind of employment of a debt as capital in the business, the capital employed would be increased, with a consequent alteration of the relevant fraction. It depends upon the details of a particular case.
Clause ordered to stand part of the Bill.

Clause 33.—(PROCEEDINGS FOR PENALTIES, ETC.)
The Solicitor-General: I beg to move, in page 29, line 11, after "England," to insert "Wales."
This Amendment is desirable, artistically and otherwise, although not strictly necessary because, as hon. Members know, there is an Act of Parliament which says that when we use the word "England" we mean Wales as well as England. However, it is right and proper that the word "Wales" should be given a co-equal place in the tax code with the word "England." That is why I move this Amendment.
Mr. Emrys Hughes: Will the Solicitor-General explain why there is no reference to Scotland?
The Solicitor-General: The same problem does not arise in Scotland, as this provision of the Crown Proceedings Act does not apply to Scotland.
Amendment agreed to.
Clause, as amended, ordered to stand part of the Bill.

Clause 34.—(DISPOSITION OR DETERMINATION OF LIFE INTERESTS ETC.)
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Mr. Manningham-Buller: I want to ask the Solicitor-General one or two questions about this Clause. First of all, will he give an assurance that the Clause as it now stands, or rather the position as it is now set out in Part II of the Fourth Schedule, does not affect the general provisions relating to gifts inter vivos made more than five years before the death of the donor? The provisions of the Clause are a little complicated, and I should like to receive a clear assurance from the right hon. and learned Gentleman to the effect which I have indicated.
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The second point which I draw to his attention is this. Lines 31 and 32 on page 29 of the Bill refer to disposition or determination. What exactly is meant by a determination? Views on that question have differed somewhat in the past, and the right hon. and learned Gentleman will find that in 1947 the view then expressed in Green's "Death Duties" of that year was that, where the life tenant has acquired the reversion or an annuitant has acquired a property subject to his annuity, and his life interest merges in the absolute interest, that merger constitutes a determination. That was the opinion expressed in Green's "Death Duties," second edition, but when one goes to the 1949 edition, one finds precisely the opposite view expressed. It is there stated that, where a life tenant acquires the reversion, or an annuitant acquires a property charged with an annuity, the official view is that the merger does not constitute a determination within the meaning of Section 43 of the Finance Act, 1940. The property in question is therefore liable to Estate Duty on the death of the former life tenant only as part of his estate or under some fresh disposition.
Is that the view of the right hon. and learned Gentleman in consequence of the Amendments made by this Clause? Does this Clause, in fact, go further than merely deal with the avoidance devices revealed in the St. Aubyn case? The words which we find in heavy black type in Part II of the Fourth Schedule:
"no disposition of any interest expectant upon or subject to that interest,"
would rather appear to my mind to suggest that, in fact, this Clause does go a little way beyond the mere avoidance devices.
I have put two points to the right hon. and learned Gentleman. The first is the requirement of a clear assurance that the Amendments do not in any way limit or affect the existing rule as to gifts inter vivos, and the second is a request to him to say whether or not this Clause, as amended, would bring the merger of a life tenant's interest with that of the reversion within its scope as constituting a determination.
8.15 p.m.
The Solicitor-General: I think I can give the hon. and learned Gentleman both the assurances for which he asked. The

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new Schedule which is introduced by subsection (1) of Clause 34 does simply stop up the loopholes in Section 43 of the Finance Act, 1940, disclosed by the first of the two St. Aubyn cases. The hon. and learned Gentleman knows that there were two St. Aubyn cases, and this deals with the loopholes disclosed in the first. It does not in any way affect the general provisions governing gifts inter vivos made within five years before the death of the donor. All that the Clause does, is to dispose of a life interest and join together a reservation of a benefit in the case in which, for the purpose of avoiding Estate Duty, they have been artificially put asunder or separated; it simply stops up a possible evasion that can be effected by the separation of the two.
The hon. and learned Gentleman asks in what way we use the word "determination" in Section 43 of the Finance Act, 1940, and points out that there are two different interpretations in Green's "Death Duties." The second of these is to the effect that where a life tenant and the remainder man join their interest together, there is no determination, but a merger. I can tell the hon. and learned Gentleman that that is the view which the Revenue authorities hold quite definitely after very careful consideration by counsel who specialise in these matters, and that their view is that, where the life tenant surrenders his life interest to the remainder man, under Section 43 there is a merger of the life interest, which is enlarged into the remainder man's interest. There is no determination, but simply a merger. That is the case where the life tenant surrenders his interest to the remainder man.
I can say generally that subsection (1) of the Clause does no more than stop up the gap left by the first St. Aubyn Case, and substitutes a statutory definition by reference to Section 59 of the Finance Act, 1940, for the rather indeterminate words which appear in various cases on this subject. That is all it is, and I think these answers which I have given amount to a complete affirmation of the two propositions which the hon. and learned Gentleman made.
Mr. Joynson-Hicks: I think we must congratulate the Solicitor-General on his audacity in being so certain as to his
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interpretation being correct. I would not for one moment dream of suggesting to the Committee that I understand it at all myself. It is miles past my comprehension, but for the right hon. and learned Gentleman to be able to assure the Committee that he understands the meaning of all that sentence of 12 lines which is contained in subsection (2) of the Clause, which itself is then explained by subsection (3), is a bold action on his part. In so far as we may accept that position—and I certainly do—it is eminently satisfactory.
I do not think any of us would object to applying it to the St. Aubyn loophole, but can the Solicitor-General also assure us that it does not in fact touch the question of resettlement? It may be that that was implied in what he said, but it seems to me that there may be a considerable amount of doubt in the minds of members of the legal profession whether or not the Clause does in fact cover resettlement. May we have an assurance from the right hon. and learned Gentleman that this ambiguity will have no effect?
Sir William Darling: You are particularly fortunate, Major Milner, in being at one with the last three speakers in that you have some qualifications in the profession of the law. I represent the large body which is less well informed concerning the operation of Estate Duty under Clause 34. It has already been remarked in this Debate that these Clauses are, in the main, unintelligible to lawyers, and completely unintelligible to other hon. Members. Clause 34 seems to bear out that somewhat challengeable assertion.
We have heard the exchange of compliments between my hon. and learned Friend who spoke for the Opposition, the right hon. and learned Solicitor-General and the hon. Member for Chichester (Mr. Joynson-Hicks), but what I want to know are really much more relevant matters, because they concern the common people who have some interest and curiosity as to how they stand regarding taxation. I want to know whether under Clause 34 more or less Estate Duty will be paid. If more, how much more; if less, how much less? These are very relevant questions, not to lawyers, but to persons who have estates. I understand from the successful welfare State organisations that there is an increasing number of

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persons who have estates, though they are not yet in the scope of what is called Estate Duty.
I want to know whether Clause 34 is going to encourage the accumulation of an estate in the future—not an undesirable thing from the point of view of the common weal—or whether it is going to discourage it. Is it going to stimulate savings or is it going to be a "dis-stimulation" of savings? These are very important questions in which, I understand, the Chancellor has taken the deepest and most profound concern.
I am discouraged by the Solicitor-General when he uses words which are inelegant in regard to this Clause. He talks about "stopping up loopholes." It may be a legalistic phrase, but it is inelegant. One closes loopholes; one does not stop them up. One stops up rat holes. It shows that sometimes right hon. and learned Gentlemen lapse into inelegancies of expression which call for criticism from persons less qualified and perhaps less justified to make such observations. I am quite sure that the Chancellor and his colleagues would want the common people, for whom they have a great regard—as was demonstrated last Saturday when the right hon. and learned Gentleman marched with 50,000 of them, after a very hard week—to understand what Clause 34 means to them. Does it encourage them to save, or does it take more from them. What justification is there in a people's Budget for Clause 34? When the right hon. and learned Gentleman answers the legal questions, we ought also to receive that answer on behalf of the common man.
The Solicitor-General: With regard to the question of resettlement, it depends very much on the circumstances in which a resettlement is executed. Ordinarily speaking, the Clause draws no distinction between a settlement and a resettlement. Both are settlements, and the question is, what is their effect in relation to the matter in the particular case? The question has been put before. We do not think there is any general answer which can be given; it depends upon the particular type of resettlement.
I both sympathise with and accept the rebuke from the hon. Member for Edinburgh, South (Sir W. Darling). He desired me to say what the Clause does. It does not increase anybody's liability at
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all. It does what I may refer to as the first St. Aubyn case showed to be necessary. If a life interest was disposed of in certain circumstances, the matter could be got round by having not one but two dispositions. Clause 34, in effect, says that a person shall. no longer be able to use the device of having two dispositions instead of one That is all it does. I hesitate to be rebuked again; I said "stop up a gap," and it was the hon. Member for Chichester (Mr. Joynson-Hicks) who used the word "loophole."
Mr. Joynson-Hicks: Following the example that had been set.
The Solicitor-General: Whatever the appropriate word may be, I am quite sure the hon. Gentleman knows what I mean. Subsection (2) does a slightly different thing. If one parts with a life interest and reserves a benefit for oneself, the property in which the life interest subsists passes on the death, and Estate Duty is attracted. It has been held in various cases decided on the subject that that does not apply unless—and I now use words used in those cases—the reservation is referable to the parting with the life interest. That is the rather loose wording which was of necessity used in those cases. It was a rather indefinite conception which they were endeavouring to reproduce.
All we are trying to do in subsection (2) is to try to substitute for that indefinite language a statutory definition. We seek to introduce some clarity into the question concerning when a gift is referable to the parting with a life interest. In order to do that, we import into this particular Clause a definition of associated operations which appear in Section 59 of the Finance Act, 1940. We say that when the reservation of the gift is affected by a transaction which is associated, in terms of the statutory definition with the parting with the life interest, then the property in which the life interest consists passes on the death, and Estate Duty is payable. I am afraid that has not made it much clearer, but that is what the Clause does. It does not impose any extra charge on anybody.
Sir W. Darling: The right hon. and learned Gentleman has done his best to make it intelligible to the common man, and the fault is not his if the common man does not understand.
Mr. Selwyn Lloyd: I take it that according to subsection (4) the Clause is to some extent retrospective.
The Solicitor-General: The whole of the tax code which appears in Section 43 onwards of the Finance Act, 1940, is in similar form. It relates not to a death after the Act, but to a parting with the life interest before the Act. We are trying to make a slight Amendment in the operation of that code.
Clause ordered to stand part of the Bill.

Clause 35.—(COLLECTION OF DUTY FROM TRUSTEES AFTER DISPOSITION OR DETERMINATION OF LIFE INTEREST. ETC.)
Motion made, and Question proposed, "That the Clause stand part of the Bill."
8.30 p.m.
Mr. Manningham-Buller: This is a very important and very novel Clause. I think I understand it, but I am sure my hon. Friend the Member for Edinburgh, South (Sir W. Darling) will help me to press the right hon. and learned Gentleman to elucidate it if I have gone wrong. As I understand it, at the present time the position, apart from this Clause, is as follows: that where a tenant for life and remainder men agree to divide the capital of a trust between them no legal liability falls upon the trustees for payment of any Estate Duty should the death of the life tenant occur, within five years after the division.
I think that is the legal position, although I understand that a practice has grown up whereby, as a matter of convenience, in certain cases where this division has taken place trustees have sought to get information from the authorities as to the extent to which liability might arise for Estate Duty in the event of the life tenant dying within five years of the transfer. I emphasise the point that at present there is, as I understand it, no legal liability upon the trustees in those circumstances to pay any of the duty.
The effect of this Clause, as I understand it—the right hon. and learned Gentleman will correct me if I am wrong—is to cast an entirely new, novel and onerous obligation upon trustees, of a settlement. If by agreement between them the life tenant and the remainder
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men agree that the trust should be brought to an end and the capital divided between them—an agreement which might be reached without having to obtain the consent of the trustees; that might depend upon the terms of the settlement—then under this Clause, notwithstanding that agreement and that division, the trustees will be liable, and personally liable, for any Death Duty that may arise if the life tenant dies within five years of the transfer.
The Committee will see that under subsection (1) of this very long Clause, it is said:
"whatever the nature of the property in which the interest subsisted the following persons shall be accountable for any estate duty payable on the death by virtue of that section (in addition to any persons accountable therefor apart from this section) that is to say—

(a) if the settlement under which the interest subsisted is in existence at the death. the trustees for the time being of that settlement; and

(b) if it is not, the persons who were the last trustees of that settlement and the personal representatives of any such person who died before the deceased."

It follows that where the life tenant and the remainder men agree to terminate the trust and the trust is terminated, then under this Clause a personal liability will be, or may be, cast upon the trustees of that settlement when the settlement has ceased, or, if one of those trustees has died, upon his personal representatives, and the liability met from his estate.
That broadly speaking—I hope not too broadly—is, as I understand it, the effect of this Clause, and I think the Committee should consider the question: Why should this additional novel liability be placed upon trustees? If a man has acquired a considerable amount of money and not made it the subject of a settlement, he can hand it over to his son, and if the father dies within five years the son will have to pay Estate Duty on the amount so handed over. In that case there is no liability on any third person such as a trustee. Where there is a settlement and the father hands over to his son his interest in the settlement and dies within five years, the son will be liable, but this Clause makes the trustees liable, too.
Why should the Revenue have this additional security in cases where there is a settlement? Why should they be able to recover from the trustees, even after the trust is determined, when they

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have already got the same security as they would have had had it been a free transfer of free money from a father to a son? I think that a very heavy burden is cast upon the right hon. and learned Gentleman in seeking to justify the inclusion of this Clause in the Bill. I ask him what possible justification is there for making the trustee also personally liable in the case where the money is the subject of the settlement.
Is it his desire to discourage people from creating settlements? The effect, of course, will be to give the Revenue a special hold over property Which may never become subject to duty, and a hold which they never would have had if the trust had not been set up. I must say that if this new Clause is passed, trustees of such settlements will be placed in an extremely onerous and difficult situation.
What it means is this: Although the trust may be terminated, their liability as trustees will not end with the termination of the trust but will continue for a further five years, not because there is any liability for Estate Duty on the part of the trust, not because at the time the trust is terminated there is any sum owing in Estate Duty, but merely because of the possibility that within five years the transferor may die and a liability may arise. The expense of keeping that trust on foot will presumably fall on the beneficiaries, not in their interests but solely for the benefit of the Revenue, and not to meet a liability that has arisen but to meet a liability that may never arise.
I emphasise again that the sole effect is to make the trustee liable. Provision is made in the Clause for the obtaining of a certificate by the trustees of the amount which the Revenue may say will be due should the death occur within five years, but the process of obtaining such a certificate does mean considerable expense, and when a certificate is obtained it does not by any means follow that the amount retained by the trustees to meet the liability shown on the certificate will be sufficient should the death occur. I appreciate that this machinery in regard to the certificate is an effort to gild the pill, but I come back to this point, and I ask the right hon. and learned Gentleman to state quite clearly for what reason he is seeking to place this additional, onerous burden on trustees—a
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burden, of course, which he cannot place on the shoulders of any one other than the donee where the gift is free money and the money is not subject to a trust.
Power is given by subsection (4) to give the trustees a lien on property to meet this possible obligation. That cannot be to the advantage, I should have thought, in many cases, of the beneficiary of the trust, and I must say that I think that the trustees here, if this Clause takes effect, are being placed in a most difficult position because they will have this personal obligation. It may not be so easy to reconcile this personal obligation with the terms and conditions of the trust. It may be very difficult indeed for a trustee to refuse to give effect to the instructions to the person entitled to the proceeds of the trust. It puts him in a very difficult position to refuse that on the ground that he must retain for five years trust property so as to avoid any personal obligation for duty falling upon his shoulders in the event of the life-tenant dying within that period.
I have endeavoured to explain my objections to this long Clause. I think they are valid ones. I shall be interested to hear what the right hon. and learned Gentleman has to say about it. The best thing he can say, which I hope he will say, is that on reconsideration this Clause will not stand part of the Bill.
The Solicitor-General: The object of this Clause is simply and solely to put an end to a state of uncertainty in which trustees find themselves today. It is not to put a fresh and unjustifiable burden on them. What it does is to say exactly where they stand and what their liability is. Under Section 43 of the Finance Act, 1940, there is liability to Estate Duty on any sums advanced out of a settled fund within five years immediately preceding the life tenant's death, whether or not a benefit is reserved to a life tenant, and on any sum outside that five years if there is a benefit for the life tenant. If that is so, there is always doubt whether liability will arise, because it is not known when the life tenant is going to die, whether the five years will lapse, or whether a benefit will be reserved.
It has always been the practice of the Estate Duty Office to agree with the trustees what shall be the sum set aside

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to meet a prospective liability. It was thought that this practice was justified, land it came within the provisions of Section 8 (4) of the Finance Act, 1894. It is not a clearly worded Section, nor are any of the Sections in that Act
Sir W. Darling: Oh.
The Solicitor-General: I am certain that I shall have the agreement of the hon. Member if he sees some of the Sections. It is a very difficult Act to construe. That being the position, it was thought desirable, there being doubt as to whether the position is lawfully justified, to put the matter beyond doubt. We have therefore devised this scheme which, broadly speaking, represents the existing arrangements, although it departs in some respects to allow the trustees to know exactly where they stand in these matters and what is their liability.
We are talking of settled property within the hands of trustees. Therefore, the trustees have it in their power, either by creating the necessary indemnity, or by setting money out of the fund, to see that they are adequately provided to pay any Estate Duty that becomes due in the event of the life tenant dying within five years, or there being a reserved benefit. As I have said, they can do it by asking for an indemnity or by setting aside the necessary sums. Subsection (4) gives them the necessary lien to enable them to do that.
Mr. Manningham-Buller: Does the right hon. and learned Gentleman say that Subsection (1) does not create a new liability?
8.45 p.m.
The Solicitor-General: It is impossible to answer that question without knowing whether the existing arrangements were justified by Section 8 of the Finance Act, 1894, or not. The question whether the existing arrangement is justifiable or not depends upon three words used in that section—"at any time"; and, without looking at it, it is impossible to say to what time that refers. I will say at once that the liability imposed is to some extent enlarged in comparison with what was thought to be their liability under the Act of 1894 but, at the same time, certain specific protection is given. In the first place, they are given the right to claim
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a lien. That is specifically declared in subsection (4).
Secondly, there is this procedure by certificate which, in fact, will be quite simple. After all, these things are done already by arrangement between the Estate Duty office and the trustees and there is no reason why there should be any difficulty at all about obtaining the certificate which will represent, broadly speaking, a continuation of the existing practice. I do not think it should place any extra burden on the trustees. When they obtain the certificate they are excused from any further payment beyond the payment for which the certificate provides.
Subsection (2) deals with a very special category of cases, namely, where the trustee, with the consent of the life tenant, advances money to a minor and it is in consequence, under the existing law, impossible for him to make the necessary provisions. Hon. Members will see that if the amount advanced is no more than one-half the presumptive share of the minor, then the trustee is excused in respect of payment of the Estate Duty in excess. There is, therefore, a slightly enlarged liability for which there is compensation in the protection specifically included in the Clause.
Subsections (5) and (6) deal with special cases of settled land—land settled under the Settled Land Act, under the terms of which, as hon. Members who are concerned with this sort of thing will know, the land is vested in the life tenant and not in the trustee, except in the case of infants who cannot hold land. It is vested in the life tenant himself and, therefore, the trustee has to be given special protection. Subsections (5) and (6) give him special protection enabling him to put, as it were, a kind of stop upon the proceedings where the land is not exactly vested in the trustee himself.
What we are trying to do is to make quite certain where a trustee stands with regard to liability for Estate Duty under Section 43. It is an extremely technical matter and, broadly speaking, I hope that trustees will see that it is to their advantage to know exactly what is the measure of their liability instead of the whole thing being left in doubt, as it is at the moment, dependent upon arrangements which are, shall I say, somewhat loosely made between trustees and the Estate Duty office under the provisions of

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Section 8 of the Act of 1894, there being considerable uncertainty as to whether those provisions do validate arrangements. I hope the Committee will agree that this is a proper Clause
Sir Patrick Spens: I must confess that I do not like this Clause. In the first place, it resolves the doubt as to there being a personal liability of the trustee in the circumstances referred to by the right hon. and learned Gentleman. Once and for all it resolves the doubt and imposes a personal liability for which, as far as my recollection goes, there is as yet no judicial decision. The first thing is, therefore, that the Inland Revenue have, by legislation, decided that doubtful matter in their favour. The second point is to give statutory authority to what has been quite customary in the past—arrangements with regard to giving an agreement as to what property should be held up by trustees in order to protect themselves against any potential claim of personal liability of the Revenue against them.
In subsection (3) the point which worries me is that the certificate is only as to the agreed amount. Having obtained an agreed amount, trustees will retain property of that agreed amount at the time the certificate is given, but it does not follow, if they allow the remainder of the estate to be distributed, that that property will be of the value of that amount when the claim is made against them by the Revenue. They will have a personal liability imposed upon them for making good any deficiency as regards the difference between the value of the property at the time of the certificate and its value when they have to pay the bill to the Revenue.
The third point is that this will hold up the distribution of trustees' estates, which is a very important matter. If the Committee will look at subsection (1, b), they will find that if a settlement is come to under it, it falls upon the personal representative of the last trustee—not on the last surviving trustee but on the trustee who happened to be the last trustee of the settlement. An obligation is imposed upon his estate in respect of this liability.
We are very much inclined in this Committee to discuss settlement questions as if they affected only rich people who
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could afford legal advice, but this proposal will apply to small estates in exactly the same way as to the richest estate in the land. We shall find that the ordinary executor in the small estate may, perfectly innocently and with no knowledge of any liability, allow the life tenant to remain, and when the life tenant dies and Death Duties become collectable, the wretched executor, or the executors of that executor, may be told that the Revenue have a claim against them.
I ask the Solicitor-General to reconsider the Clause. Is it really necessary? Why is it being enacted at all? For years we have gone on without any case going to any court, so far as I know. Arrangements have been made perfectly adequately. Now every case is being decided in favour of the Revenue and against the beneficiaries.
Mr. Boyd-Carpenter: I hope that the Solicitor-General will pay attention to the appeals which have been made to him. As he rightly said, the proposed new Clause puts an end to uncertainty, but I think it does so in the wrong way. It gives legal authority for the bluff which the Estate Duty office have successfully carried on for 50 years. I do not think that it is right to give legal authority to a bluff of that sort and I am certain that this proposal clarifies the matter completely in the wrong way.
I should be grateful if the Solicitor-General would tell us what other cases there are in which trustees who have shown no negligence are held personally liable. He must have precedents. I do not know, but it seems to me that the right hon. and learned Gentleman is introducing not only a new principle into our law but a new terror into the office of trustee. I must confess a personal interest because I happen to have the misfortune, for misfortune it is, to be a trustee of a small trust. It is a serious thing to impose this personal liability. It makes the office of trustee even more disagreeable and unremunerative than it is, and will make it more difficult to find people who are prepared to undertake these duties. It is not a small thing to put this personal liability upon trustees who have conducted their affairs without any negligence of any sort of kind.
There is a real difficulty, which was put to me by my hon. and learned Friend the

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Member for Kensington, South (Sir P. Spens). Let us suppose that a certificate under subsection (3) is obtained and let us suppose property adequate to amount to that value is retained. Suppose the value of the property dropped in the interval; suppose the trustees—here we might say they were being negligent—put the money into the security known as "Daltons" and the value, therefore, fell catastrophically. Where will they be at the end of it? They have retained what appeared at the time to be enough assets to meet the duty as set out in the certificate. At the end they have not enough money to meet it. I assume that under the Clause they are then personally liable.
It seems completely wrong that trustees should be made personally liable. I cannot see the public purpose behind this. After all, the rights against the remainder men, the rights against the persons who have actually got the property, remain, and it is the normal principle of taxation law that where someone has obtained the property he is liable to pay the tax upon it. Why is an exception made in this case? It seems to me that the reason is merely that the Estate Duty office are now trying, as much out of amour propre as anything else, to get legal authority for the attitude which they have adopted during past years; but it is quite a different thing for the Committee to say that this quite new principle should be introduced into our taxation law.
My final point, which is of very great importance, is the inevitable delay imposed in the winding-up of estates. The Solicitor-General knows perfectly well that expense is inevitably connected with the winding-up of estates—the professional fees have to be paid, and so on—and it seems grossly unfair to the beneficiaries that estates should have to be kept in being for no other purpose than to provide an additional security for the Revenue. That is very unfair to beneficiaries who, as has already been pointed out, may be people of quite small means. Yet that is the inevitable consequence of the Clause. I hope that the Solicitor-General will appreciate the weight of feeling that there is in the Committee against this provision and that the conciliatory atmosphere which prevailed in the Committee in the earlier part of the day has not been wholly dissipated by now.
Sir W. Darling: I am determined that the Debate shall not be exclusively made up of contributions by distinguished legal gentlemen, even if it imposes upon the Committee frequent speeches from me. I want to put an actual case to the Solicitor-General. I suggest that the Clause is a Clause for the extinction of trustees. Trustees are humble people who are asked by old folk to help in administering their estates, and it is an obligation which my hon. Friend the Member for Kings-ton-upon-Thames (Mr. Boyd-Carpenter), like myself, has probably undertaken frequently, more out of kindness of heart than because of any possible advantage accruing to him. This provision will place such trustees in a position of extreme difficulty.
I want to state a case which bears relevance to the facts of the situation and ask the Solicitor-General how he would deal with it. There was a man of 75 years of age who had £20,000. He had a niece in Australia and a nephew in Africa, neither of whom he had ever seen. He decided to give £5,000 to his niece and £5,000 to his nephew during his lifetime. He then told his trustees that he had done this. With the remaining £10,000 he went to a very good Scottish insurance company and bought a life annuity which ceased on his death. Can the Solicitor-General tell me what the position of the trustees is when he dies within three years without means because he drew the annuity a month before his decease and spent it by living up to the hilt—a very wise thing to do these days?
The sum of £5,000 is in Kenya with, I regret to say, a nephew who has never seen his uncle and probably does not respect him very highly, and he has told the trustees that he is not prepared—he probably put it more bluntly, for we know what language is like in East Africa—to make any restitution of the £5,000 which his uncle gave him. The niece in Australia foolishly invested the money in a boarding house. Boarding houses are very difficult things out of which to earn a living, and she cannot restore any part of the £5,000.
The trustees are two elderly men whom the deceased met on the golf course. He said, "Will you be trustees of mine?" and they accepted the trusteeship. I shall write to these two gentlemen tonight when

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I hear the remarks of the Solicitor-General and warn them what is the position. Three years ago he died, that is, two years before the expiry of the five years. These two gentlemen, who this afternoon have taken their quiet whiskey at the 19th hole, are not aware of this bombshell which will descend upon them.
9.0 p.m.
I add my support as a practical man, as a common man and as an ordinary man, in the interests of trustees. This means the death of trustees, this means that no one will undertake that kindly, generous act that tens of thousands of persons have done for their fellow citizens without reward in years gone by. Where will the business go? To the banks, the large monopolies to whom hon. and right hon. Gentlemen opposite object. Where will trustee business go to under Clause 35 if it is carried? It will tend to go to those persons who have big money and who can indemnify themselves and stand up to their responsibilities.
This Clause, if passed in its present form, will make trustees, small, decent people, involve themselves not only in kindness but in trouble. It will place business with the Public Trustee and the banks—in which I have an interest—or with insurance companies—in which I have an interest—or with large firms of lawyers who have elaborate staffs to conduct this type of business. Is that democratic procedure? Do hon. Gentlemen behind the Chancellor stand for that? Is that what is to be interpreted out of this people's Budget—this new liability laid upon decent people whose only crime is that they are trying to do a good turn to people not able to look after themselves? That is as I understand the Clause, and my hon. and learned Friend give legal point and direction to my simple views. I ask the Chancellor to reconsider this Clause. As the Solicitor-General told us, we have done without it since 1894 and we can do without it a little longer.
The Solicitor-General: One hon. Member opposite asks, what is the object behind this Clause? It is not to try to bluff as the hon. Member for Kingston-Upon-Thames (Mr. Boyd-Carpenter), I thought rather offensively and quite unnecessarily said—[HON. MEMBERS:
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"No."] There is uncertainty about the present position. Trustees do not know where they stand and are anxious to; know, and the Law Society is also anxious that this matter should be cleared up. We are not trying to make good any bluff. All we are trying to do is to accede to that desire on the part of trustees and the Law Society and to the desire which the Estate Duty office also has to know exactly how everybody stands in this matter.
Mr. Selwyn Lloyd: The right hon. Gentleman is not suggesting, is he, that the Law Society wanted this cleared up in this particular way?
The Solicitor-General: No, I did not say anything of the sort. What I said was that they wanted the matter cleared up. They were anxious that there should be legislation which would make it perfectly clear how trustees stand in this matter. That is all we are doing and there is no sinister scheme to impose some extra burden on trustees, as has been implied. On the contrary, the desire is to make; perfectly clear what is unclear at the; moment. As to the question whether this Clause is on the right lines, we certainly: think that in its broad outline it is. It makes clear that when trustees have settled property to deal with, and when it is desired to take money out of the settlement—with the result that there may be a liability under Section 43 of the Act—they shall in their own interests make the necessary provision, either by obtaining an indemnity or by setting aside funds.
Sir Ian Fraser: If the trustee obtains an indemnity, does that indemnify him and release him from responsibility? If not, what does it mean?
The Solicitor-General: If he obtains an indemnity from the beneficiaries who are entitled to the estate, which enables him to make certain that they get from the beneficiaries the necessary amount to pay any Estate Duty which may—
Sir I. Fraser: Then is the trustee thereafter free?
The Solicitor-General: Of course he is. He obtains under an indemnity the necessary sum which he requires to pay the Estate Duty; then he is obviously free.

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That is what trustees do now and that is what they will continue to do.
The Committee must remember that one is dealing here with settled property, that is to say, property in the hands of the trustees; and it is in their hands to procure for themselves the necessary indemnity and thereby the necessary protection, to enable them to discharge any Estate Duty which may become incident as the result of a death within five years or the reservation of a benefit. They are in the position, therefore, of having the settled funds in their hands, to see to it that the necessary amount of money is available to pay Estate Duty.
The only exception to that position is this. In the first place, if with the consent of the life tenant, or without his consent in the exercise of a power, they advance money to an infant, special protection is given under subsection (2) to the extent of a half presumptive share of the infant, that being, so I am told, the almost invariable form of a power to advance money to an infant. It relates to half his presumptive share. Therefore, that protection is given in that case when, by virtue of the nature of the infant's interests, they cannot keep aside money.
The other case is where one is dealing with settled land which in the case of adults, in cases other than lands that are settled lands of infants, is vested in the life tenant. In that case the trustee also requires some special protection because he has not the land in his own protection as he has in the case of other settled lands. Therefore, subsections (5) and (6) give him the necessary protection in the case of settled land and the position of the trustee is perfectly clear.
Hon. Members opposite have raised various points. More than one hon. Member has referred to the question of the personal representatives of a trustee. We should like to think over that point. Having listened to the argument, we are quite convinced that in general the Clause is on the right lines, but we shall consider what has been said—as, indeed, we always do—particularly with regard to that point. I do not wish to bind myself, however, in any way to make a change. We just want to consider whether we feel, in view of the arguments that have
980
been adduced, whether we ought to make a change.
I am bound to say, having listened to the arguments, that we still think that in general the Clause is on the right lines. It makes the position of trustees clear. It does not really make their position difficult. They have it in their power to protect themselves by setting aside funds and by obtaining indemnities, as they sometimes do now. They have it in their power to do that, and they will continue to have that in their power. They are given protection where they want it. The certificate procedure, in fact, continues and represents the existing practice with regard to agreement with the Estate Duty office of the prospective amount of liability which may fall to be paid under Section 43 of the Act. That is continued and is given statutory effect by the terms of the Clause.
I hope that when hon. Members consider the matter a little more closely they will agree that, bearing in mind that one is dealing with settled property, which is within their hands, the clause does not really put any undue burden upon trustees. On the contrary, it tells them where they stand. Many trustees have felt considerable doubt as to what their powers and liabilities are; they will now have that doubt resolved. I hope that with that explanation the Committee will agree that the Clause is satisfactory as it stands, subject to this: that on consideration of the arguments, and particularly the argument with regard to the liability of personal representatives of the last trustee, we may be able to put down some Amendments, but I give no undertaking with regard to that. I hope that in the light of what I have said, the Committee will feel able to approve the Clause.
Sir D. Maxwell Fyfe: I do not think it will be unfair to take up the right hon. and learned Gentleman from this position: that he is disposed to keep the framework and practically all the teeth of the Clause, but is only prepared to make Amendments in inconsiderable detail. The difficulty that we feel is, first as my hon. Friend the Member for Kingston - upon - Thames (Mr. Boyd-Carpenter), has said, in the origin of the Clause. This applies only where, as the right hon. and learned Gentleman said, one is dealing with settled property; but

981
where the tenant for life and the remainder men, being entitled to the whole beneficial interest, divide between them the amount of capital probably in proportion to their interests in it, then the position is that the tenant for life dies within the five years and in the ordinary way one would expect the remainder man to be responsible for the Death Duties in the same way as if there was not any settlement at all. I have tried to put the position broadly and I hope, to make it comprehensible.
The right hon. and learned Gentleman rather animadverted against my hon. Friend the Member for Kingston-upon-Thames for his remarks as to the origin of the Clause. I do not think it would be wrong to say—and this is as I understand the matter—that the Estate Duty office have certainly fostered the theory that the trustees would be liable for the duties in the circumstances I have mentioned. Again I do not think it would be wrong to say that that view is not shared by, I should say a majority, but, in order to be entirely reasonable, a large proportion, of practitioners in this field. What has happened is that because that view has been fostered the Estate Duty office has suggested that the trustees should keep a portion of the property in hand in order to meet any possible liability, and if that is done, if they keep a proportion of that property in hand, they have said there will not be any oppressive liabilities for the trustees. I think that is a fair presentation of the practice.
There is a very strong point made by my hon. and learned Friend the Member for Kensington, South (Sir P. Spens) that that practice has worked perfectly well and without any trouble for some 55 years. That is the first position, and I do not think that it is really an answer for the right hon. and learned Gentleman to say that certain bodies have been pressing for legislation because, of course, people only press for legislation intending at the same time that it is legislation that they like and one has to discount that matter.
I will summarise in eight points, which I hope will be clear, the objections we have to this Clause. In the first place, we say that there is no reason at all for differentiating between the case of a man who gives free capital to his son and the case of a man who releases his life interest
982
under a settlement in the circumstances which I have described. As I say, in the former case it is quite clear that the son would be liable for the Duty and I cannot see any reason for making the trustees also liable in this case. The second point is that what is sought to be done here is to take advantage of the existence of the trust by giving the Revenue a special hold over property and—this is the point—it is property which may never become liable to the Duty if the five years period runs out. So why should one in this case give the Revenue that special hold?
9.15 p.m.
The third point is that the Clause involves an interference with the right of an individual to deal with his property during his life as he thinks fit on the ground that there may be a possible liability after his death. If once we are to get that principle of interference with personal property where are we going to stop? The fourth point, and this is important, and I am sure that the Chancellor will think it important because he has been telling us of his own great effort to search out and check administrative extravagance in every way, is that whatever else this Clause does it must inevitably involve a great deal of administrative trouble and expense at a time when trouble and expense both in Government Departments and among the public should be cut down.
The fifth point deals with what the right hon. and learned Gentleman has suggested with regard to the amelioration of the position of trustees. But really that is illusory because when the trustees become personally liable for the amount shown by the certificate there is still the possibility of depreciation, the possibility of another Chancellor of the Exchequer coming. The right hon. and learned Gentleman has pledged himself not to do anything more in the nature of a capital levy, but another Chancellor might take that course, and the trustees would be put in a corresponding difficulty. There are also the ordinary difficulties of inflation and fluctuations of that kind to which we are so accustomed. The sixth point is that this Clause imposes upon trustees a greater liability to the Revenue than they have to their own beneficiaries. I do not think it is a proper position to interfere with the duties of the trustees in relation to the

983
fund which relate to what he has to do at the end of a trust period, and which would apart from this provision, have come to an end by the property going home in the ordinary way.
The last and not the least important point was again one made by my hon. and learned Friend the Member for Kensington, South, who has such great experience in these matters, that this will cause hardship not only on large estates but will have those effects and cause trouble in small estates, as he explained. These are serious points and practical ones. The right hon. and learned Gentleman has told us that in principle we can look for no help from him on the main points. Unless we can have a very different reception from that I see no alternative than to advise my hon. Friends to vote against this Clause.
Sir H. Williams: I am not clear about all this. The Solicitor-General indicated
that he might think again. It is always a good idea when learned counsel thinks again. I want to make sure, on the assumption that this Clause will not be defeated in a few minutes, that when we reach the Report stage, unless the necessary Amendments are put down, an Amendment to delete the Clause will be put down. I am a trustee in only one case. I am no clearer now than when we started although I have had the benefit of the best legal advice, free, from both sides. If I had paid for it I do not think I should have been any the wiser; I am certainly no wiser now. It is clear that the Government do not propose to nationalise the land for the time being or they would not have made reference to the Settled Land Act, 1925.
Question put, "That the Clause stand part of the Bill."
The Committee divided: Ayes, 298; Noes, 284.

Division No. 31]

AYES

[9.22 p.m.

Acland, Sir Richard

Cook, T. F.

Freeman, Peter (Newport)

Adams, Richard

Cooper, G (Middlesbrough, W)

Gaitskell, Rt. Hon H T N

Albu, A. H

Cooper, J. (Deptford)

Ganley, Mrs. C. S.

Allen, A. C. (Bosworth)

Corbet, Mrs. F. K. (Peckham)

George, Lady M. Lloyd

Anderson, F. (Whitehaven)

Cove, W. G.

Gibson, C. W.

Attlee, Rt. Hon. C. R.

Craddock, George (Bradford, S.)

Gilzean, A.

Awbery, S. S.

Crawley, A.

Glanville, J. E. (Consett)

Ayles, W. H.

Cripps, Rt. Hon. Sir S

Gooch, E. G.

Bacon, Miss A

Crosland, C. A. R.

Gordon-Walker, Rt. Hon. P. C

Baird, J.

Crossman, R. H. S

Greenwood, A. W. J. (Rossendale)

Balfour, A.

Cullen, Mrs. A.

Greenwood, Rt. Hn. Arthur (Wakefield)

Barnes, Rt. Hon A J

Daggar, G.

Grenfell, D. R.

Bartley, P.

Daines, P.

Grey, C. F.

Bellenger, Rt. Hon F J

Dalton, Rt. Hon. H.

Griffiths, D. (Rother Valley)

Benson, G.

Darling, G. (Hillsboro')

Griffiths, Rt. Hon. J. (Llanelly)

Beswick, F.

Davies, A. Edward (Stoke, N.)

Griffiths, W. D. (Exchange)

Bevan, Rt. Hon. A. (Ebbw Vale)

Davies, Ernest (Enfield, E.)

Gunter, R. J.

Bing, G. H. C.

Davies, Harold (Leek)

Hale, J. (Rochdale)

Blackburn, A. R.

Davies, R. J. (Westhoughton)

Hale, Leslie (Oldham, W.)

Blenkinsop, A.

Davies, S, 0. (Merthyr)

Hall, J. (Gateshead, W.)

Blyton, W. R.

de Freitas, Geoffrey

Hal), Rt. Hn. W. Glenvil (Colne V'll'y)

Boardman, H.

Deer, G.

Hamilton, W. W.

Booth, A.

Delargy, H. J.

Hannan, W.

Bottomley, A. G.

Diamond, J.

Hardman, D. R.

Bowden, H. W.

Dodds, N. N.

Hardy, E A.

Bowles, F. G. (Nuneaton)

Donnelly, D.

Hargreaves, A.

Braddock, Mrs. E. M.

Donovan, T. N.

Harrison, J.

Brockway, A. Fernner

Driberg, T. E. N.

Hastings, Dr. Somerville

Brook, D. (Halifax)

Dugdale, Rt. Hon. J. (W. Bromwich)

Hayman, F. H.

Brooks, T. J. (Normanton)

Dye, S.

Henderson, Rt. Hon. A. (Rowley Regis)

Broughton, Dr. A. D. D.

Ede, Rt. Hon. J. C.

Herbison, Miss M.

Brown, George (Belper)

Edelman, M.

Hewitson, Capt. M

Brown, T. J. (lnce)

Edwards, John (Brighouse)

Hobson, C. R

Burke, W. A.

Edwards, Rt. Hon. N. (Caerphilly)

Holman, P.

Burton, Miss E.

Edwards, W. J. (Stepney)

Holmes, H. E. (Hemsworth)

Butler, H. W. (Hackney, S.)

Evans, Albert (Islington, S. W.)

Houghton, Douglas

Evans, E. (Lowestoft)

Hoy, J.

Callaghan, James

Evans, S. N. (Wednesbury)

Hubbard, T

Carmichael, James

Ewart, R.

Hudson, J. H. (Ealing, N.)

Castle, Mrs. B. A.

Fernyhough, E.

Hughes, Emrys (S. Ayr)

Champion, A. J.

Field, Capt. W. J.

Hughes, Hector (Aberdeen, N.)

Chetwynd, G. R

Finch, H. J.

Hughes, Moelwyn (Islington, N.)

Clunie, J.

Fletcher, E. G. M. (Islington, E.)

Hynd, H. (Accrington)

Cocks, F. S.

Follick, M.

Hynd, J. B. (Attercliffe)

Coldrick, W.

Foot, M. M.

Irvine, A. J. (Edge Hill)

Collick, P

Forman, J. C.

Irving, W. J. (Wood Green)

Collindridge, F.

Freeman, J. (Watford)

Janner, B.

Jay, D. P. T.

Morris, P. (Swansea, W.)

Strachey, Rt. Hon. J,

Jeger, G. (Goole)

Mort, D. L.

Strauss, Rt. Hon. G. R. (Vauxhall)

Jeger, Dr. S. W. (St. Pancras, S.)

Moyle, A.

Stross, Dr. B.

Jenkins, R. H.

Mulley, F. W.

Sylvester, G. 0.

Johnson, James (Rugby)

Murray, J. D.

Taylor, H. B. (Mansfield)

Johnston, Douglas (Paisley)

Nally, W.

Taylor, R. J. (Morpeth)

Jones, D. T. (Hartlepool)

Neal, H.

Thomas, D. E. (Aberdare)

Jones, Frederick Elwyn (West Ham, S.)

Noel-Baker, Rt. Hon. P. J

Thomas, George (Cardiff)

Jones, Jack (Rotherham)

Oldfield, W. H.

Thomas, I. 0. (Wrekin)

Jones, William Elwyn (Conway)

Oliver, G. H

Thomas, I. R. (Rhondda, W.)

Keenan, W

Orbach, M.

Thorneycroft, Harry (Clayton)

Kenyon, C

Padley, W. E.

Thurtle, Ernest

Key, Rt. Hon. 0. W

Paling, Rt. Hon. Wilfred (Dearne V'Hy)

Timmons, J.

King, H. M.

Paling, Will T. (Dewsbury)

Tomlinson, Rt. Hon. G

Kinghorn, Sqn.-Ldr E

Pannell, T. C.

Tomney, F.

Kinley, J.

Pargiter, G. A.

Turner-Samuels, M

Lee, F. (Newton)

Parker, J.

Usborne, Henry

Lee, Miss J. (Cannock)

Paton, J.

Vernon, Maj. W. F

Lever, L. M. (Ardwick)

Pearl, T. F.

Viant, S. P.

Lever, N. H. (Cheetham)

Poole, Cecil

Wade, D. W.

Lewis, A. W. J. (West Ham, N.)

Popplewell, E.

Wallace, H. W

Lewis, J. (Bolton, W.)

Price, M. Philips (Gloucestershire, W.)

Watkins, T. E.

Lindgren, G. S.

Proctor, W. T.

Webb, Rt. Hon. M. (Bradford. C.)

Lipton, Lt.-Col. M.

Pryde, D. J.

Weitzman, D.

Logan, D. G.

Pursey, Comdr. H.

Wells, P. L. (Faversham)

Longden, F. (Small Heath)

Rankin, J.

Wells, W. T. (Walsall)

MacColl, J. E.

Rees, Mrs. D

West, D. G.

McGhee, H. G.

Reeves, J.

Wheatley, Rt. Hn. John (Edinb'gh, E.)

McGovern, J

Reid, T. (Swindon)

White, Mrs. E. (E. Flint)

Mclnnes, J.

Reid, W. (Camlachie)

White, H. (Derbyshire, N. E. I

Mack, J. D

Richards, R

Whiteley, Rt. Hon. W.

McKay, J. (Wallsend)

Robens, A.

Wigg, George

Mackay, R. W. G. (Reading, N.)

Roberts, Emrys (Merioneth)

Wilcock, Group-Capt. C. A. B

McLeavy, F.

Roberts, Goronwy (Caernarvonshire)

Wilkes, L.

MacMillan, M. K. (Western Isles)

Robertson, J. J. (Berwick)

Wilkins, W. A.

McNeil, Rt. Hon. H.

Robinson, Kenneth (St. Pancras, N.)

Willey, F. T (Sunderland)

MacPherson, Malcolm (Stirling)

Rogers, G. H. R. (Kensington, N.)

Willey, O. G'. (Cleveland)

Mainwaring, W. H.

Ross, William (Kilmarnock)

Williams, D. J. (Neath)

Mallalieu, E. L. (Brigg)

Royle, C.

Williams, Ronald (Wigan)

Mallalieu, J. P. W. (Hudderfield E.)

Shackleton, E. A. A.

Williams, Rt. Hon. T, (Don Valley)

Mann, Mrs. J.

Shawcross, Rt. Hon. Sir H

Williams, W. T. (Hammersmith, S.)

Manuel, A. C.

Shinwell, Rt. Hon. E.

Wilson, Rt. Hon. J. H. (Huyton)

Marquand, Rt. Hon. H. A.

Shurmer, P. L. E.

Winterbottom, I. (Nottingham, C.)

Mathers, Rt. Hon. George

Silverman, J. (Erdington)

Winterbottom, R. E. (erightside)

Mellish, R. J.

Silverman, S. S. (Nelson)

Wise, Major F. J.

Messer, F.

Simmons, C J.

Woodburn, Rt. Hon. A

Middleton, Mrs. L.

Slater, J.

Woods, Rev. G S

Mikardo, lan

Smith, Ellis (Stoke, S.)

Wyatt, W L.

Mitchison, G. R.

Snow, J. W.

Yates, V. F.

Moeran, E. W

Sorensen, R. W.

Younger, Hon. Kenneth

Monslow, W.

Soskice, Rt. Hon. Sir F.

Moody, A. S.

Steele, T.

TELLERS FOR THE AYES:

Morgan, Dr. H. B

Stewart, Michael (Fulham, E.)

Mr. Pearson and Mr. Sparke.

Morley, R.

Stokes, Rt. Hon. R R

NOES

Aitken, W. T.

Bracken, Rt. Hon. Brendan

Croslhwaite-Eyre, Col O E

Alport, C. J. M.

Braine, B.

Crouch, R. F.

Amery, J. (Preston, N.)

Braithwaite, Lt.-Comdr. J. G.

Crowder, F. P. (Ruislip-Northwood)

Amory, D. Heathcoat (Tiverton)

Bromley-Davenport, Lt.-Col. W

Crowder, Capt. John F. E. (Finchley).

Arbuthnot, John

Brooke, H. (Hampstead)

Cundiff, F. W.

Ashton, H. (Chelmsford)

Browne, J. N. (Govan)

Cuthbert, W. N.

Assheton, Rt. Hon. R. (Blackburn, W.)

Buchan-Hepburn, P. G. T.

Darling, Sir W. Y. (Edinburgh, S.)

Astor, Hon. M.

Bullock, Capt. M.

Davidson, Viscountess

Baldock, J. M.

Bullus, Wing-Commander E. E.

Davies, Rt. Hn. Clement (Montgomery)

Baldwin, A. £.

Burden, Squadron Leader F. A.

Davies, Nigel (Epping)

Banks, Col. C.

Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)

de Chair, S.

Baxter, A. B.

Carr, L. R. (Mitcham)

Deedes, W F.

Beamish, Maj. T. V. H.

Carson, Hon. E.

Digby, S. Wingfield

Bell, R. M.

Channon, H.

Dodds-Parker, A. D.

Bennett, Sir P. (Edgbaston)

Clarke, Col. R. S. (East Grinstead)

Donner, P. W.

Bennett, R. F. B. (Gosport)

Clarke, Brig. T. H. (Portsmouth, W.)

Douglas-Hamilton, Lord M

Bennett, W. G. (Woodeide)

Clyde, J. L.

Drayson, G. B

Bevins, J. R. (Liverpool, Toxteth)

Colegate, A.

Drewe, C

Birch, Nigel

Conant, Maj. R. J. E.

Dugdale, Maj. Sir T. (Richmond)

Black, C. W.

Cooper, A. E. (Ilford, S.)

Duncan, Capt. J. A. L.

Boles, Lt.-Col. D. C. (Wells)

Cooper-Key, E. M.

Dunglass, Lord

Boothby, R.

Corbett, Lieut.-Col. U. (Ludlow)

Duthie, W. S.

Bossom, A. C.

Craddock, G. B. (Spelthome)

Eccles, D. M.

Bowen, R

Cranborne, Viscount

Eden, Rt. Hon. A.

Bower, N.

Crookshank, Capt. Rt. Hon. H. F. C

Elliot, Lieut.-Col. Rt. Hon. Walter

Boyd-Carpenter, J A

Cross, Rt. Hon. Sir R.

Erroll, F. J

Fisher, Nigel

Lloyd, Maj. Guy (Renfrew, E.)

Robinson, J Roland (Blackpool, S.)

Fletcher, W. (Bury)

Lloyd, Selwyn (Wirral)

Robson-Brown, W. (Ether)

Fort, R.

Lockwood, Lt.-Col. J. C

Rodgers, J. (Sevenoaks)

Foster, J. G.

Longden, G. J. M (Herts S. W.)

Roper, Sir H.

Fraser, Hon. H C. P. (Stone)

Low, A. R. W

Ropner, Col. L.

Fraser, Sir I. (Lonsdale)

Lucas, Major Sir J. (Portsmouth. S.)

Ross, Sir R. D. (Londonderry)

Fyfe, Rt. Hon. Sir D. P. M.

Lucas, P. B. (Brentford)

Russell, R. S.

Gage, C. H

Lucas-Tooth, Sir H

Ryder, Capt. R. E. D

Galbraith, Cmdr T D (Pollok)

Lyttelton, Rt. Hon 0

Sandys, Rt Hon. 0

Gammans, L. D

McAdden, S. J.

Savory, Prof. D L

Garner-Evans, E H (Denbigh)

McAllister, G.

Scott, Donald

Glyn, Sir R.

McCorquodale, Rt. Hon. M. S.

Shepherd, W S. (Cheadle)

Granville, E. (Eye)

Macdonald, A. J. F. (Roxburgh)

Smiles, Lt.-Col. Sir W.

Gridley, Sir A.

Macdonald, Sir P. (I. of Wight)

Smith, E. Martin (Grantham)

Grimston, Hon. J. (St. Albans)

Mackeson, Brig. H. R.

Smithers, Peter H. B. (Winchester)

Grimston, R. V. (Westbury)

McKibbin, A

Smithers, Sir W. (Orpington)

Harden, R. E.

McKie, J. H. (Galloway)

Smyth, Brig. J. G. (Norwood)

Hare, Hon. J. H. (Woodbridge)

Maclay, Hon. J. S

Snadden, W. McN.

Harris, F. W. (Croydon, N.)

Maclean, F H. R.

Soames, Capt. C.

Harris, R. R. (Heston)

MacLeod, lain (Enfield, W.)

Spearman, A. C. M.

Harvey, Air-Codre. A. V. (Macclesfield)

MacLeod, John (Ross and Cromarty)

Spence, H. R. (Aberdeenshire, W.)

Harvey, I. (Harrow, E.)

Macmillan, Rt. Hon. Harold (Bromley)

Spans, Sir P. (Kensington, S.)

Hay, John

Macpherson, N. (Dumfries)

Stanley, Capt. Hon. R, (N. Fylde)

Head, Brig. A. H

Maitland, Comdr. J. W

Stevens, G. P.

Heald, L. F.

Manningham-Buller, R E

Steward, w. A. (woolwich, W)

Heath, Col. E. R.

Marlowe, A. A H.

Stewart, J. Henderson (Fife, E.)

Henderson, John (Catheart)

Marples, A. E.

Stoddart-Scott, Col. M.

Hicks-Beach, Mai. W. W.

Marshall, D. (Bodmin)

storey, S.

Higgs, J. M. C.

Marshall, S. H. (Sutton)

Strauss, Henry (Norwich, S)

Hin, Mrs. E. (Wythenshawe)

Maude, A. E. U (Ealing, S)

Studholme, H. G.

Hill, Dr. C. (Luton)

Maudling, R.

Summers, G. S

Hinchingbrooke, Viscount

Medlicott, Brigadier F

Sutcliffe, H.

Hirst, Geoffrey

Mellor, Sir J

Hogg, Hon. Q.

Molson, A. H. E.

Taylor, c s. (Eastbourne)

Hollis, M. C.

Moore, Lt.-Col. Sir T.

Taylor, W J. (Bradford, N.)

Holmes, Sir J Stanley (Harwich)

Morris, R- Hopkin (Carmarthen)

Teeling, William

Hope, Lord J

Morrison, Maj J. G. (Salisbury)

Thomas, J. P. L. (Hereford)

Hopkinson, H. L. D'A.

Morrison, Rt. Hon. W. S (Cirencester)

Thompson, K. P. (Walton)

Hornsby-Smith, Mitt P

Molt-Radclyffe, C E

Thompson, R. H. M. (Croydon, W)

Horsbrugh, Mils F.

Nabarro, G

Thoraeycroft, G. E. P. (Monmouth)

Howard, G R. (St. Ives)

Nicholls, H.

Thornton-Kemsley, C N

Howard, S. G. (Cambridgeshire)

Nicholson, G

Tilney, John

Hudson, Sir Austin (Lewitham, N.)

Nield, B. (Chester)

Touche, G. C

Hudson, Rt. Hon. R. S. (Southport)

Noble, Comdr A H

Turton, R. H.

Hudson, W. R. A. (Hull, N)

Nugent, G R H

Tweedsmuir, Lady

Hulbert, Wing-Cdr. N. J

Nutting, Anthony

Vane, W. M. F

Hurd, A. R

Oakshott, H. D

Vaughan-Morgan, J K

Hutchinson, Geoffrey (llford, N.)

Odey, G. W.

Vesper, D. F.

Hutchison, Lt.-Com. Clark (E'b'rgh W)

O'Neill, Rt. Hon. Sir H

Wakefield, E. B. (Derbyshire, W.)

Hyde, H. M.

Ormsby-Gore, Hon. W. D

Wakefield, Sir W. W. (St. Marylebone)

Hylton-Foster, H. B.

Orr, Capt. L. P. S.

Walker-Smith, D. C.

Jeffreys, General Sir G

Orr-Ewing, Charles Ian (Hendon, NO

Ward, Hon. G. R. (Worcester)

Jennings, R

Orr-Ewing, Ian L (Weston-super-Mare)

Ward, Miss I. (Tynemouth)

Johnson, Howard S. (Kemptown)

Osborne, C

Waterhouse, Capt C

Jones, A. (Hall Green)

Perkins, W. R. D

Watkinson, H.

Joynson-Hicks, Hon. L W

Peto, Brig. C. H M

Watt, Sir G. S. Harvie

Kaberry, D.

Pickthorn, K

Webbe, Sir H. (London)

Kerr, H. W. (Cambridge)

Pitman, I J

Wheatley, Major M. J. (Poole)

Kingsmill, Lt.-Col. W H

Powell, J Enoch

White, J. Baker (Canterbury)

Lambert, Hon. G

Prescott, Stanley

Williams, C. (Torquay)

Lancaster, Col. C. G

Price, H A. (Lewisham, W)

Williams, Gerald (Tonbridge)

Langford-Holt, J.

Prior-Palmer, Brig. O

Williams, Sir H G. (Croydon, E.)

Law, Rt. Hon. R. K

Profumo, J. D

Wills, G.

Leather, E. H. C.

Raikes, H. V

Wilson, Geoffrey (Truro)

Legge-Bourke, Maj. E. A H

Rayner, Brig. R

Winterton, Rt. Hon. Earl

Lennox-Boyd, A. T

Redmayne, M.

Wood, Hon. R

Lindsay, Martin

Remnant, Hon. P

York, C

Linstead, H N

Renton, D. L. M

Llewellyn, D.

Roberts, P. G. (Heeley)

TELLERS FOR THE NOES:

Lloyd, Rt Hon. G (King's Norton)

Robertson, Sir D (Caithness)

Sir Arthur Young and

Mr. T. G. D. Galbraith.

Question put, and agreed to.

Clause 36.—(DISPOSITIONS IN FAVOUR OF RELATIVES.)
9.30 p.m.
Mr. Joynson-Hicks: I beg to move, in page 32, line 29, at the end, to insert:
"Provided further that nothing herein contained shall alter or repeal the provisions of subsection (2) of Section fifty-nine of the Finance (1909–1910) Act, 1910."
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The object of this Amendment is very largely exploratory. Clause 36 in general deals with gifts inter vivos, and in particular with dispositions in favour of relatives. The object of the Clause is to meet a certain narrow point, but whether or not, in its phraseology and intent, it goes beyond that narrow point is a question

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in which I think the Committee will be interested.
I do not want to lead the Solicitor-General into any terms other than those of art, and certainly not into terms of error, so I will not refer again to a loophole. If, as I understand it, the object and intention of the Clause is simply and solely to deal with the situation which arose as a result of the decision in the Fitzwilliam case, then, in my submission, there is very little objection to the Clause, provided that it does only relate to that particular point. It is in order to test that question that I have moved this Amendment, because it is particularly relevant to that aspect of the matter.
The Solicitor-General in his courtesy has already expressed the view to me that my Amendment is unnecessary, and I appreciate very much the way in which he received my representations, but notwithstanding that I must submit to the Committee that there appears to be considerable doubt whether or not the phraseology of the Clause as a whole goes beyond the Fitzwilliam case so as to do away with the protection which has been granted to relatives under the Section of the 1910 Act to which reference is made in the Amendment.
The situation really is that Clause 36 of this Finance Bill seeks to define what is a gift for the purposes of assessing an estate to Estate Duty. Having defined what is a gift, it then makes those gifts subject to Estate Duty under Section 2 of the Act of 1894, and they are by relation made subject to Estate Duty by the 1894 Act. Section 59 (2) of the 1910 Act, which I am seeking to ensure is not affected by this Clause, deals with these gifts inter vivos, which attract Death Duty under the 1894 Act, by saying that they shall not include gifts made in consideration of marriage.
Superimposed upon that exemption we have this further definition of gifts which does not specifically exclude gifts made in favour of mariage, and re-submits those gifts to the 1894 Act, which imposes Estate Duty. To my mind, therefore, the question is whether or not by this redefinition of gifts—for under the 1910 Act the gifts inter vivos made in consideration of marriage are again defined as gifts—'the whole matter is thrown back to the 1894 Act, and gifts made in consideration
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of marriage are once more caught. In other words, does Clause 36 by implication and interpretation repeal or otherwise affect Section 59 (2) of the 1910 Act? The sole object of this Amendment is to clear up that point.
I know that the right hon. and learned Gentleman is of opinion that the Clause does not affect the 1910 Act one way or the other. My only submission to the Committee is that, much as we respect the right hon. and learned Gentleman's opinion, it is not finally authoritative in these matters. It is a question which may by one cause or another ultimately have to be decided by a court. There are undoubtedly other opinions—I am not suggesting that they are of such high legal authority as the right hon. and learned Gentleman—held by other legal gentlemen which do not coincide with his views. All I am asking the Committee is that as there is doubt, that doubt should be resolved, for it is a matter of very considerable importance that the structure and system of trusts and resettlements throughout the country, which are of very real importance to the whole of our legal structure, should not be undermined by a question of doubt. Therefore, I hope that the right hon. and learned Gentleman will take steps, either by the adoption of this Amendment or in some other way, to ensure that there can be no question of doubt left in this Clause.
The Solicitor-General: The hon. Member for Chichester (Mr. Joynson-Hicks) very kindly gave me notice before this Debate started of the point which troubled him regarding Clause 36. As a result of the letter which he wrote to me, the matter was very carefully considered. I say that in order to make it perfectly clear that the opinion I am about to express, though my own, is also that of others who have given consideration to the matter, particularly in view of what he quite rightly said about the value of my opinion.
I can give a quite unqualified assurance to the hon. Gentleman that his doubt is not well founded. All this Clause does is to say that a disposition by the deceased in favour of a relative, unless it is given for full consideration, is to be a gift for the purpose of the 1894 Act. Then the Clause goes on to say that references to a gift in other enactments relating to Estate Duty shall be

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construed accordingly. That is how the Clause leaves it. The result of the Clause is that a disposition not for full consideration is a gift for purposes of enactments relating to Estate Duty.
If one turns to Section 59 (2) of the Finance (1909–10) Act, 1910, one finds that a thing which is a gift, if given in consideration of marriage, is exempt from duty. Therefore, once it is laid down as a gift, it seems to me to follow as a matter of inexorable necessity that when we look at the 1910 Act and find it says that gifts in consideration are exempt, it follows that these gifts, if in consideration of marriage, are exempted by the express terms of Section 59 (2) of that Act. I therefore feel that I can without any hesitation give the hon. Gentleman the assurance for which he has asked. If he agrees that my reasoning on the Clause is right, I hope he will also feel constrained to come to the same conclusion.
Mr. Joynson-Hicks: In the light of what the right hon. and learned Gentleman has said and the assurance which he has given, not so much to me as to the Committee, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Mr. Donovan: I apologise for speaking for a few minutes on this Motion, but I should like to ask one small question, which is this: Is it really necessary to draft Clauses of Acts, of Parliament on the lines of this Clause? I happen to know what it is intended to deal with—the thing we call m Income Tax jargon the Smythe doctrine which was recently exploded in the Fitzwilliam case. But look at subsection (2). It is full of legislation by reference, and nobody can understand it except a lawyer with all his books at his elbow and a wet towel round his head.
I freely admit that in the long-run this sort of drafting does me no harm, but I am thinking of the common, humble person like the hon. Member for Edinburgh, South (Sir W. Darling), and the hon. Member for Croydon, East (Sir H. Williams). They cannot possibly understand such things, and I would seriously ask whether on the Report stage
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we could have this Clause, with all these references included, inserted in a Schedule to show us, without going into all these researches, exactly what is being done. It is being done with Clause 34. Could it be done with Clause 36?
The Solicitor-General: That suggestion seems to me, if I may say so, to be a very helpful one, and we shall certainly see whether effect can be given to it. The only thing is that if one started putting all Clauses which contain legislation by reference—and necessarily contain it—into Schedules, the Schedules would be extended to an inordinate extent, and complaint would undoubtedly arise on the voluminous nature of the effect produced. However, we shall certainly consider the suggestion of my hon. and learned Friend.
Clause ordered to stand part of the Bill.
Clause 37 ordered to stand part of the Bill.

Clause 38.—(OBJECTS OF NATIONAL, SCIENTIFIC, HISTORIC OR ARTISTIC INTEREST.)
Motion made, and Question proposed, "That the Clause stand part of the Bill."
Mr. Arthur Colegate: A Clause of this kind, including the previous Clause relating to the same question—the preservation of objects of national, scientific, historic or artistic interest—becomes increasingly necessary in view of the heavy Death Duties and heavy taxation which are depriving this country of a very large proportion of artistic works and paintings which cross the Atlantic, and very few of which come back. I was very glad to see this Clause, because I think it only right that the Treasury should lay down what has not been clearly laid down before, namely, the conditions under which the benefits and exemptions referred to may be obtained.
I remember that Hitler said during the war that he was going to carry out a series of Baedeker raids; that is to say, he intended to direct bombing attacks on all the beautiful houses in England which were starred in Baedeker. I happened to say at the time that the Treasury was doing his job for him, rather more slowly but certainly more surely.

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9.45 p.m.
I hope that a circular, or something of that nature, on this subject may be sent to all possible owners such as are contemplated in Section 40 of the 1930 Act. I have on the Order Paper a new Clause, which I must not discuss now, but which I am bound to have in mind when discussing this Clause and the particular point which I wish to raise now. Surely there is a little oversight in subsection (1, c), which states:
"reasonable facilities for examining the objects for the purpose of seeing the steps taken for their preservation, or for purposes of research, will be allowed to any person authorised by the Treasury so to examine them."
I should have thought that the Chancellor of the Exchequer might have gone a little further, and I ask him to consider this matter on the Report stage. Reasonable facilities should be allowed for the public to see particular artistic or historic objects which are exempt from Estate Duty. Most of the owners of such objects whom I know do give reasonable facilities for people to see their pictures and their beautiful homes. I think that it is only right that one of the conditions on which the owners of these objects obtain exemption from Estate Duty should be that they should be requested to give reasonable facilities, not merely for research, but also for the general public, at reasonable times, to see them. Perhaps the Chancellor of the Exchequer will be good enough to consider introducing some form of words to that effect on the Report stage.
Colonel Clarke: Before making a few observations on this Clause, I must state that I have a certain interest, as I am fortunate enough to be the possessor of some of the objects referred to. I think that by and large the provisions of this Clause are very reasonable. In modern jargon, they are fair enough. The object of the Clause and of Section 40 of the Finance Act, 1930, is to ensure that under the conditions of modern taxation private collections are kept together for the advantage of the nation and not dispersed more than is inevitable. While they are kept together there is an opportunity for members of the public to see them, which is frequently given, and it is also possible for them to be loaned to exhibitions. So long as there are not enough public
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galleries in this country, private collections are of definite importance to the nation.
I suggest that there might be added to this Clause something which would enhance the benefits intended by it, particularly in relation to subsection (1, b and c). I should like to relate an experience which occurred to me in this connection. The pictures which I was left were, I think, reasonably well maintained, but naturally, owing to the war and the fact that the house in which they were was requisitioned by the Army for a number of years, many of the pictures had to be stored, and my wife and I thought it right that they should be looked at by an expert.
That was done, and the expert, who might well have been the man referred to in subsection (3), recommended a number of things. In certain cases, where the paintings were on boards, it was found that the boards were cracked, and in other cases, where the paintings were on canvas, they were found to be blistered. Canvases had to be tightened and re-varnishing had to be done. I was recommended in many cases to have them cleaned, which I did, and it made an enormous improvement. We are trying to complete the work recommended, but it cannot all be done at once, because this is a very expensive job.
I feel that the same thing will happen under this Clause. A great many recommendations will be made, and however anxious the owner may be to carry them out, he will be unable to do so since for reasons best known to the Treasury, many owners today are not in a position to find a great deal of ready money at short notice, and they will have to sell some or all of these works of art, thereby defeating the very objects of the Clause. That would be very regrettable, and I am quite certain it was not in the minds of those who drafted the Clause that the result would be that collections would be dispersed instead of being maintained.
I suggest, as a very simple solution, that the money spent in maintaining these pictures should be allowed against Income Tax and Surtax, as is done in the case of certain maintenance schemes. If that suggestion is in any way favourably received, I shall be only too willing to put down an Amendment to that effect on Report stage. If it commends itself

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strongly to the Chancellor, as I hope it may, then I hope that he may put down an Amendment, which I am sure will be better drafted than mine and will be more likely to go through without opposition. I believe that this addition to the Clause will make it of considerably more value in obtaining the object which I know lies behind it, that these collections should be maintained as far as possible and not dispersed, and that in particular they should not be sent to the other side of the Atlantic.
Sir S. Cripps: It is always very tempting when fresh offers are made for remissions of taxation. I am afraid it would not be possible to include such a remission in this Clause. It really has nothing to do with the subject matter. This Clause is devised to try and introduce certain safeguards, as regards the preservation of these works of art and their utilisation for research and study purposes, where there has been a total remission of Death Duties in regard to them.
With regard to access to the public, it will be appreciated that a great many of these things are not suitable for or interesting to the public. For instance, many of the manuscripts, books and scientific collections are not things which will interest the public in the same way as pictures. As regards the whole coverage of this Clause, I do not think it would be appropriate to introduce something in connection with compulsory exhibition to the public. What is essential is that there should be access for people who are studying historical associations—that they should be able to look at the documents, pictures, manuscripts, books and so on. I think we can leave it to the public spirit and the commonsense of those who possess articles which are suitable for exhibition to the public to make them available, as indeed so many people already do.
Clause ordered to stand part of the Bill.

Clause 39.—(PROVISIONS AS TO PERMANENT ANNUAL CHARGE FOR THE NATIONAL DEBT AND AS TO THE OLD SINKING FUND.)
Motion made and Question proposed' "That the Clause stand part of the Bill."
Sir H. Williams: We come to the Clause dealing with the annual Debt charge, and I think we should be given a little more information about this great burden which we have to carry whether we like it or not. Hon. Members who look at this year's Financial Statement will see that the Chancellor has put down £490 million as the sum for the Debt charge. In the earlier part of the document, on page 4, they will see that last year he provided £485 million but that Exchequer issues were £472,206,000 so that there was a shortfall of about £12,800,000. That, of course, is not the total sum provided because there is the following footnote:
"In addition £27,465,000 for Interest of the National Debt was met from receipts under various Acts authorising such application."
Speaking from memory, I think that the bulk of that is in connection with the loan which was raised prior to 1939, when we were engaged in re-armament, and which met a good deal of opposition from hon. Members opposite. I mention that fact in passing because a lot of them have forgotten that. It is just as well to remember that they were mainly pacifists in those days. Thus, the £490 million specified in Clause 39 is not the total. There will be an additional sum which, according to a footnote on page 28 of the Financial Statement is £33 million—a sum
"for Interest of the National Debt will be met from receipts under various Acts authorising such application."
It will be observed that there has been a very substantial increase in the sum which is outside the Debt charge—an increase of about £5½ million—and I think we should be given a little more information about it. It is not the practice on Budget Day to give as much information about the National Debt as we ought to have.
On page 8 of the Financial Statement there is a summary of the whole National Debt under the various headings, and I regret to say that it has now reached the fantastic sum of £25,800 million. Some of it consists of things known as savings certificates, to the amount of £1,712 million. Many hon. Members are possessors of these certificates and they will know that interest is not paid until the certificates are cashed. Interest is added and, therefore, it is not the case that the sum provided for the National Debt charge covers the interest that may

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be accruing on the saving certificates. All that is taken into account is the interest which is paid out when a certificate is cashed and the amount of accrued interest which is not included in the National Debt amounted, on 31st March, to £399 million. That is a very large sum indeed.
Again, as far as I can see the National Debt does not include a very important item, and no provision is made for it. I refer to those things which are known as war credits—things which people under 65 cannot get back. There is no provision for them.
Mr. Follick: Post-war credits.
Sir H. Williams: It all means the same thing. They are very post post-war so long as this Government is in office. There is no provision in the National Debt for these post-war credits which, I think, total about £800 million. So far as I can see, there is nothing in the £490 million to cover that liability or to cover any interest on it. Indeed, there is no need to cover interest because no interest is being paid.
I think it would be useful if the Committee could have a little more information about the National Debt and about the £490 million we are providing this year, apart from the £33 million outside the charge. Hon. Members will be able to get a copy of this document from the Vote Office, and from page 8 they will find that there is a very large external debt owing to the United States, a debt which was increased by nearly 50 per cent. in sterling as a result of devaluation.
The Chairman: That question does not arise under the Clause, which merely says what the permanent annual charge shall be. The hon. Gentleman is not entitled on the Question now before the Committee to go into that matter.
10.0 p.m.
Sir H. Williams: I am trying to find out what the £490 million is to be spent on. This is the only reference to it in the Finance Bill. We know that it will be spent upon contractual obligations, and we are entitled to know what those contractual obligations are. Broadly speaking, there are certain sums which are outside this £490 million. I am asking what our liabilities are, and to what extent we are meeting them. I want to have some
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hint whether our liability next year might not be very much larger. If hon. Members will look at Clause 39 they will see that the permanent annual charge is now £490 million instead of £355 million, and many hon. Members will wonder why £355 million is put in, since it was not £355 million in last year's Finance Act.
This matter goes back to the Finance Act of 1925, when the present Leader of the Opposition was Chancellor of the Exchequer, and thought that £355 million would be enough to wipe out our National Debt within a limited period of time. I do not know why we go on repeating £355 million in every Finance Act. That figure is now completely dead and the Clause might be drafted a little differently in future. There was a time within my lifetime when the sum in the Clause was only £28 million. That was in the bad old days of 1913. It is important from time to time to consider the magnitude of this charge, and this is the only opportunity we have for doing so on the Finance Bill. I agree that we cannot consider all the Acts of Parliament under which the money was raised, but we ought to have a little more information, because there is none in the Financial Statement, as to how this £490 million is to be used for each of the items in the Schedule. It is because I want more information that I have made these brief observations.
Mr. Keenan: I have risen because of the opportunity of saying a word on the National Debt. There has been no attempt to put down Amendments on this matter, but I want to point out to those who have accused us of budgeting too much and have asked us to cut down that this National Debt was not accumulated by this Government. It has been built up from the years before this Government. It has been built up from the years before the Napoleonic wars. The fact is that more than £1 out of every £8 collected in revenue goes to pay the National Debt. I should like those who talk about economy and cutting down the social services to remember that fact. We ought to have a look at these items sometimes, because they are so costly and they have been built up over such a long time.
Sir W. Darling: There should not be heat or impatience on this subject. This

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is the most important Clause in the Finance Bill. We have had very good speeches on many topics, but I should have thought that on this Clause we would have an opportunity of hearing from someone on the Front Bench an exposition of the Clause. This is now a people's Budget. We are all taxpayers, very heavy taxpayers. This is no longer a Budget met by payments of a few people, but by us all. There is a case for some explanation. I am indebted to my hon. Friend the Member for Croydon, East (Sir H. Williams) and to the hon. Member for Liverpool, Kirkdale (Mr. Keenan) for the only information I have about this matter. I am entitled to more information than from those two sources.
I should like to know in some detail how this monstrous figure has reached its astonishing, astronomical height. I am not prepared entirely to accept what was said by the hon. Member for Kirkdale (Mr. Keenan). I am told in a very unreliable print of political character that half the National Debt between the figures of £355 million and £490 million has been accumulated during the last five years—
Sir H. Williams: No, since the Chancellor of the Exchequer has been in Office.
Sir W. Darling: The remark of my hon. Friend shows how much ambiguity there is about this subject. If there is this confusion among well informed business men it will be agreed that this short Clause might well be amplified and further explained. The suggestion that my hon. Friend the Member for Croydon, East and I are among the persons of the lowest intelligence in the Committee is one which cannot be generally substantiated, so I hope that we shall have some explanation of this extraordinary item, the largest finance item, which appears under the heading, "Part V. Miscellaneous."
I shall be finished when I have asked this question. The mandatory verb "shall be" seems to call for some consideration. I will read the context:
"with the thirty-first day of 'March, nineteen hundred and fifty-one, shall be "—
There is no ambiguity about that—
"the sum of four hundred and ninety million pounds instead of the sum of three hundred and fifty-five million pounds."
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These are trifling matters, but they are matters about which many members of the public are profoundly concerned. The payers of Purchase Tax and the persons who have been mulcted weekly by Pay-As-You-Earn and by the Minister of Health and the Minister of National Insurance want to know how these large figures are arrived at. They have become finance conscious and they look to the right hon. and learned Gentleman, their financial adviser and leader, to explain them.
The Financial Secretary to the Treasury (Mr. Douglas Jay): The hon. Member for Croydon, East (Sir H. Williams) asked first of all why the total for post-war credits was not included in the National Debt. Post-war credits do not rank as a debt of the Government; they count as a tax which was paid by the taxpayer and which the Government have undertaken to pay back at some future date. There fore, they do not count as a debt and they are not part of the National Debt. Incidentally, the figure is more like £600 million than the £800 million which the hon. Gentleman mentioned.
Sir H. Williams: Looking at this list, I see an item about a 2¾ per cent. Funding Loan, 1952–57. That is money which the citizens have lent to the State and which the State promises to repay. That is called debt. The post-war credits are sums which the citizens have lent to the State and which the Government have promised to repay. What is the difference morally?
Mr. Jay: They are not sums lent by the citizens to the State; they were sums which were actually paid in taxation. That is the legal status of the post-war credit—
Sir H. Williams: They were a forced loan.
Mr. Jay: I was asked how this charge had risen to the large figure of £490 million compared with the £355 million laid down in the Act of 1928. The answer is that it was due to the very large borrowing during the period of the war which raised the total of the National Debt from something like £8,000 million to £25,000 million, at which it stands today. Indeed, if it were not for the cheap money policy which this Government and the previous Government

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followed, the interest charged today would be several hundred millions higher than the figure at which it now stands.
I was asked how the figure of £490 million was made up. I can give the main constituents of the 1949 figure of £485 million. Much the biggest item is Interest and Management of National Debt which stood in that year at £445,656,000. The second item is the Statutory Sinking Fund of £12,794,000 which represents the difference between the £472 million he mentioned and £485 million.
Sir H. Williams: No, if that were the case there would have been the appropriate footnote. There is no footnote to it to indicate that. The asterisk refers to the £27,465,000 National Debt in respect of other sources, it does not say anything about the Statutory Sinking Fund.
Mr. Jay: I thought I was correct in supposing that that was the £12 million to which the hon. Gentleman referred, but in any case the figure for the statutory Sinking Fund in that year was £12,794,000. The remaining item was Interest on Savings Certificates which totalled £26,550,000. The total of those figures is set against the annual charge laid down by this Clause of the Finance Bill. If there is a surplus available that is devoted to the free Sinking Fund. If, on the other hand, there is a deficit, some of the Budget surplus available under present conditions is used to meet that deficit.
The hon. Member also asked why we should continue this practice of substituting a figure of a permanent annual charge each year for the original figure of £355 million under the 1928 Act. There may be, and perhaps soon will be, a case for abandoning that procedure and putting this part of our Finance Act on a rather more permanent basis. This method has been continued simply because of the unsettled conditions arising out of the war and uncertainty as to the figure at which the charge would finally settle down. I agree with the hon. Member that after a time there may be a case for putting this arrangement on a more permanent basis.
Lieut.-Commander Braithwaite: This has been a useful little Debate and the
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Committee is indebted to the hon. Member for Croydon, East (Sir H. Williams) for initiating it. In view of the excellent progress the Committee has made today with the Bill in general, the time has been usefully spent. One feature of great value has emerged from the discussion on this Clause, namely, the present position of the post-war credits. The hon. Member for Edinburgh, South (Sir W. Darling) referred to it and the Financial Secretary has just done so, but of course he has not had an opportunity of explaining to the Committee what are the intentions of the Government in regard to post-war credits. The hon. Gentleman will have the opportunity of doing that under a new Clause which will be reached shortly and I only want to ask—as he made it clear that they are not included in the National Debt figure but are taxation—is there a separate fund in which this £650 million is being carefully retained for the benefit of taxpayers who have subscribed to it?
Mr. Jay: The answer is, no. When they are repaid they will be repaid out of Revenue.
Sir H. Williams: There is one other point with which the Financial Secretary did not deal. I drew attention to the fact that the Estimate last year was £485 million and this year it is £490 million despite the fact that the Chancellor had a surplus last year. Therefore he should have reduced the burden of National Debt interest, instead of which it has gone up £5 million. Could that be explained?
Mr. Jay: The answer is that the figure of £485 million last year proved insufficient for the purpose by about £5 million and that that amount had to be used out of the surplus.
Sir H. Williams: But instead of it being insufficient it was more than sufficient. I think the Financial Secretary ought to understand the figure of his own Department before he gives me an inadequate explanation.
10.15 p.m.
Mr. Harmar Nicholls: One interesting point appears to emerge from the observations on post-war credits. Are we to understand that if and when the post-war credits are ever repaid, we shall have to—
The Chairman: We cannot go into the details of that, at this stage at any rate.
Clause ordered to stand part of the Bill.

Clause 40.—(SHORT TITLE, CONSTRUCTION, EXTENT AND REPEALS.)
The Minister of State for Economic Affairs (Mr. Gaitskell): I beg to move, in page 36, line 32, at the end, to insert:
Provided that Part I of that Schedule (which contains enactments dealing with licences and oil rebate for agricultural tractors, &c, in

New Clause.—(UNILATERAL RELIEF FOR DOUBLE TAXATION.)

(1) To the extent appearing from the subsequent provisions of this section and the Schedule (Double Taxation Relief) to this Act, relief from income tax and the profits tax shall be given in respect of tax payable under the law of any territory outside the United Kingdom by allowing the last-mentioned tax as a credit against income tax or the profits tax, notwithstanding that there are not for the time being in force any arrangements under Part V of the Finance (No. 2) Act, 1945, providing for such relief.

(2) The said relief (in the subsequent provisions of this section and in the said Schedule to this Act referred to as "unilateral relief ") shall be such relief as would fall to be given under Part I of the Ninth Schedule to the Finance Act, 1947, if arrangements with the Government of the territory in question, containing such provision as appears in so much of Part 1 of the said Schedule to this Act as applies to that territory, were in force by virtue of Part V of the Finance (No. 2) Act, 1945:1

Provided that the total amount of the credit to be allowed by way of unilatera-relief in the case of any income shall not exceed, if the territory is within the Common wealth territories, three-quarters, and, in any other case, one-half, of the sum of the limits specified in paragraph 4 and sub-paragraph (11 of paragraph 5 of Part I of the said Ninth Schedule.

(3) The provisions of Part I of the Ninth Schedule to the Finance Act, 1947, shall as respects unilateral relief, have effect subject to the provisions set out in Part II of the said Schedule to this Act, and any expression occurring in Part 1 of the said Ninth Schedule, or in subsection (5) of section fifty-one or subsection (5) of section fifty-two of the Finance (No. 2) Act, 1945, which imports a reference to relief under arrangements for the time being in force by virtue of Part V of the last-mentioned Act shall be deemed to import also a reference to unilateral relief.

(4) Unilateral relief shall not be given in respect of tax payable under the law of the Republic of Ireland, and section twenty-seven of the Finance Act, 1920, shall, as applied by the agreements set out in the Second Schedule to the Finance Act, 1926, the Fourth Schedule to the Finance Act, 1928, and the Ninth Schedule to the Finance Act, 1948, continue to have effect in relation to the Republic of Ireland.

(5) Subject to the provisions of subsection (4) of this section, section twenty-seven of the Finance Act, 1920, shall cease to have effect.

(6) Where, under the law in force in any territory outside the United Kingdom., provision is made for the allowance, in respect of the payment of United Kingdom income tax, of relief from tax payable under that law, the obligation as to secrecy imposed by the Income Tax Acts upon persons employed in relation to Inland Revenue shall not prevent the disclosure to the authorised officer of the Government of that territory of such facts as may be necessary to enable the proper relief to be given under the law thereof.

(7) References in this section, and in the said Schedule to this Act, to tax payable or tax paid under the law of a territory outside the United Kingdom include only references to taxes which are charged on income or profits and correspond to income tax or the profits tax in the United Kingdom, and, without prejudice to the generality of the preceding words, a tax which is payable under the law of a province, state or other part of a country not being a country within the Commonwealth territories or which is levied by or on behalf of a municipality or other local body, shall not be deemed for the purposes of this subsection to correspond to income tax or the profits tax.

(8) In this section and the said Schedule to this Act, the expression "income," in relation to the profits tax, means profits.

(9) In this section and the said Schedule to this Act, the expression "the Commonwealth territories" means His Majesty's dominions, India, the British protectorates and protected states and any trust territory administered by the Government of any part of His Majesty's dominions.

Great Britain or with oil rebate for agricultural tractors, &c, in Northern Ireland) shall have effect only from the beginning of the year nineteen hundred and fifty-one.
This is an Amendment concerned with the new Clause on Excise licences for tractors, which we shall be coming to shortly. It is clearly necessary that if any change is to be made in the Excise arrangements, it should be made at the end of the calendar year and not in the middle.
Amendment agreed to.
Clause, as amended, ordered to stand part of the Bill.

(10) This section and the said Schedule shall have effect in relation to the Anglo-Egyptian Sudan as they have effect in relation to a part of His Majesty's dominions.

(11) This section applies to income tax for the year 1950–51 and all subsequent years of assessment, and to the profits tax for any chargeable accounting period ending after the end of March, nineteen hundred and fifty, but the transitional provisions contained in Part III of the said Schedule to this Act shall have effect in the cases therein referred to.—[The Solicitor-General.]

Brought up, and read the First time.
10.16 p.m.
The Solicitor-General: I beg to move, "That the Clause be read a Second time."
The Clause provides for a system whereby the British Exchequer gives credit in respect of taxes payable in foreign countries and in Commonwealth Territories on income arising in those territories to United Kingdom residents. As hon. Members know, in the 1945 (No. 2) Finance Act we introduced a system whereby, if reciprocal double taxation agreements were entered into between this country and other countries, they could be made, so far as necessary, part of the law of this country in order to give relief in respect of taxation payable on the income arising in those other countries under their taxation systems.
It was hoped that it would be possible to negotiate agreements with a wide variety of countries providing for such reciprocal relief. Indeed, the position at present is that there are in force a number of such agreements. It has, however, not been possible to progress quite as fast as was hoped, and in order to assist British traders in trading in foreign markets—that is to say, the markets both of foreign countries and of Commonwealth Territories—it has now been decided to introduce a system of unilateral relief in respect of foreign taxation.
I should call the Committee's attention to one or two features of the system which is embodied in the new Clause. The relief extends, in relief of tax payable in foreign countries, up to one-halt of the United Kingdom rate of tax, and in respect of tax payable in Commonwealth countries, to three-quarters of the United Kingdom tax. The rate of United Kingdom tax is ascertained in accordance with a formula which was included in Schedule 9 to the 1947 Finance Act, which provides how the double taxation agreements when they are entered into are to be implemented so far as the actual working out of the rates of tax are concerned.
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The unilateral double taxation relief which we now provide is on these lines. It is given only to United Kingdom residents, with exceptions in the case of the Channel Isles and the Isle of Man. It is given in respect of tax payable in the foreign or Commonwealth territory on income arising in those territories. It is given, as I have said, up to the limits which I have indicated: one-half in the case of foreign countries, and three-quarters in the case of Commonwealth countries. The balance of the foreign or Commonwealth tax which is not allowed under this limit of unilateral relief is, in the ordinary way, allowed as a deduction in the computation of the trader's expenses.
In other words, if the trader resident in the United Kingdom and trading in a foreign country has to pay foreign tax on the income which arises to him in that foreign country, he is entitled to claim relief against United Kingdom tax up to half of the United Kingdom rate in respect of that foreign tax. He finds out what is the foreign tax and is relieved up to half the United Kingdom rate, and if that does not give him complete indemnity in respect of the tax payable in the foreign country, he is entitled under ordinary tax law to draw the balance of the foreign tax he has to pay as a deduction in computing his profits for foreign tax purposes and Income Tax purposes.
The unilateral relief which we give under this Clause relates only to foreign tax analogous to British Profits Tax and British Income Tax. This is a system which, we hope, will be in operation so long as we have not succeeded in negotiating a true double taxation agreement with another country. We hope this will be a system which will afford a very considerable measure of assistance in enabling British traders to gain entry into and expand their exports in foreign markets, and it is with that end in view that we have introduced this system of relief. I think the Committee would like to know what the cost will be to the British Exchequer of this unilateral relief,

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and I am able to say to the Committee that it will cost £9,500,000 in a full year.
I hope that with that explanation the Committee will feel able to agree to the Clause. The Clause is worked out in rather great detail in a new Schedule which goes with it and which I will move in due course, but the general outline of the relief is contained in the Clause itself and is as I have indicated to the Committee.
Mr. Waiter Fletcher: This Clause certainly appears to be an attempt to remedy the great delay there has been to bringing to a successful conclusion negotiations for double taxation agreements with certain countries. I have persistently attempted to get the Chancellor to see that the impression which is gained if one visits France and Belgium that it is this country which is hanging back and that those countries are only too willing to conclude this agreement, is a false one, but one cannot quite escape from that feeling.
The first question I want to ask is whether there is to be a persistent endeavour to bring to a successful conclusion the long-drawn-out negotiations which are taking place with those countries, because it is perfectly true and obvious that those forms of agreement which have been carried to a successful conclusion in a great many countries, particularly within the Commonwealth, in the last year or so are a much greater relief than the present Clause can give, not only to the trader but to the holder of wholly-owned subsidiary companies in many of these territories.
The first thing we would like to be reassured about is that the appearance of this Clause does not mean that the Chancellor is going to stop the negotiations. He recently had a very great opportunity in the soft air of Briançon of bringing these negotiations to a conclusion. The whole of the French Press was filled with a charming picture of the very democratic activities of the Chancellor of the Exchequer doing the washing up after his frugal meal. Surely there was an opportunity to discuss with M. Petsch, in the peculiarly intimate atmosphere that must have been created by that activity, some arrangement which would have been very much better than this Clause. We have
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some grounds for our doubts whether the Government are really pursuing with the utmost vigour bilateral tax relief. Not so long ago many traders and owners of companies in France were to have imposed upon them a tax against which British subjects were really protected by a law nearly 100 years old, but it was not possible to obtain from the Government any move to protect their own subjects.
Many of us have a feeling that the figures having shown that to bring dual taxation relief negotiations to a successful conclusion would cost a good deal more than the present Clause, the Government have chosen to bring in this Clause as their attempt to meet the position. We need a very categorical assurance that real attempts are being made by the Government here—and I am sure there is great willingness on the other side—to bring to a conclusion the negotiations which we have so often heard were on the point of completion.
On the question which the Solicitor-General raised about half the expenses being capable under the ordinary tax laws of being set against expenses, I would ask how that can be done in the case of traders whose form of trading is that they are the sole owners of French subsidiary companies? They have no expenses which they can possibly use for that purpose. The position is quite different if a British firm has a branch under its own name. If it is not a French or Belgian or foreign entity, it is perfectly possible to set the expenses of that organisation up to 50 per cent. against their trading, as the Solicitor-General has said. I do not see how that can be done in the case of wholly-owned or even partially-owned subsidiaries.
The right hon. and learned Gentleman should remember that by force of circumstances of the taxation laws of many of these foreign countries, companies have over a period if years been driven willy-nilly to having wholly-owned or partially-owned subsidiary concerns. That arose in order to avoid the danger that otherwise the foreign Government would assess the profits of the company in that country on the total of the whole group of companies. It is important that we should receive a satisfactory answer to this query. Otherwise the result would be that those who trade in the form of another branch would get a certain advantage and those

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who trade in the form of holding shares in a locally established subsidiary—and that is the great majority of them—would not get it.
It must be borne in mind that very often British firms carrying out the function which they should carry out, and which European payment negotiations and bilateral agreements have as their objectives, of increasing inter-European trade extend also to the Colonial Empires of those countries. There again is a great complication in that the taxation laws in the Colonies and overseas possessions of a good many of those countries are not the same as in the metropolitan country. We should have some sort of assurance that that will be taken into account in calculating what relief is needed.
I believe that this Clause is a short step, and quite a reasonable one, towards loosening European trade, towards making it possible for real joint enterprise in various European countries which has been stopped for some time to be carried out. But it does not go nearly far enough, and at a later stage I hope to have the opportunity of moving an Amendment in order to bring that about in toto instead of partially, as this Clause does.
10.30 p.m.
Sir I. Fraser: I think the right hon. and learned Gentleman said that arrangements for reconciling double taxation were being aimed at as regards foreign countries, the Dominions and the Commonwealth Territories. I want to reinforce the plea made by my hon. Friend the Member for Bury and Radcliffe (Mr. W. Fletcher) that these negotiations go on in order to get fully satisfactory 100 per cent. double taxation agreements with all these overseas countries. There may be difficulties with foreign countries; the difficulties should be less acute in the Dominions; and I submit they should not exist at all in the territories, because if I understand the word "territories" correctly, they are managed from Whitehall and it is only a matter of making an agreement with ourselves, in consultation with Governments which are in the main Whitehall-controlled.
I want to make an observation about the concession, because I do not understand it. One might apparently charge one's taxation by another country as an
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expense against taxation in this country. If I understand that aright, suppose one has no office or machinery in the other country upon which to charge expenses, can one simply charge them on the taxation figure or up to the taxation figure as regards the 50 per cent.?
I will declare an interest, to illustrate the point. Suppose one is a person, as I am, who earns money in South Africa as an individual, not in this instance through a company or a firm, but as a private person who earns fees, and one has no expenses in earning these fees except an odd postage stamp. Can one charge half the taxation which one is compelled to pay in South Africa on those fees as a set-off against tax and surtax here in Britain? Is that what is meant? It seems to me that if it is expected to clear this matter unilaterally, there is every conceivable reason, especially within our own Dominions and territories, for clearing it wholly and not by reference to a half or three-quarters. If I have got this wrong, I hope the Solicitor-General will correct me; but if I have got it right, I hope he will explain how one can charge an expense where there is no expense.
Mr. Maclay: I hope the Chancellor of the Exchequer will be able to give the assurance asked for by my hon. Friend the Member for Bury and Radcliffe (Mr. W. Fletcher)—namely, that the appearance of this new Clause will not mean any lessening of the efforts of the Government to push these bilaterial negotiations in all possible directions. There has been some evidence that with certain countries the running has been made by the British Government, and I think that is encouraging; but in France undoubtedly there is a strong feeling that the United Kingdom has been dragging its feet in this matter. I hope this Debate may give the right hon. and learned Gentleman an opportunity of making clear what is holding up the French negotiations.
However, I think it would be wrong not to express some satisfaction that this new Clause has appeared. It goes a certain distance, and one hopes it may be that the reason it does not go the whole way is that the Chancellor is frightened that it would take away some of the impetus from the negotiations for full bilaterial treaties. I doubt whether that is

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a sustainable argument. Doubtless we shall hear more about that when we come to a later stage, and shall hear the real reason why the Chancellor has not been able to go the whole way in unilateral relief. Speaking for some of those who have done a lot of work in respect of this double taxation—and I am not an expert in it—I feel that we should thank the Chancellor for this start, and hope that it will be carried on to its logical and proper conclusion in this Bill.
Mr. David Eccles: I think the Chancellor of the Exchequer ought to thank us on this side of the House. We have pressed this on him for several years running. Last year the Solicitor-General replied, when I moved a Clause with exactly the same intention—that is to say, to lessen double taxation:
"The case made by the hon. Member for Chippenham (Mr. Eccles) is that, in present-day circumstances, it is urgently necessary to lift from the shoulders of British undertakers operating in foreign markets, so far as we can, the burdens which impinge upon them. It is not as if we had not already made very substantial progress in regard to the conclusion of these bilateral agreements. If it could be said that this had been an extraordinarily slow business, and that we were making very little advance in concluding agreements which included other countries, then there would be more in the argument that we should proceed in this unilateral fashion."—[OFFICIAL REPORT, 28th June, 1949; Vol. 466, c. 1045–6.]
He went on to cite 14 agreements that were in negotiation, and as the Government were in process of fixing them up, the obvious advantage of proceeding by unilateral relief was turned down.
What has happened in the year? Of all the cases which the Solicitor-General said were under negotiation, only that with Sweden has been ratified by both parties and is now in operation. We say that the progress expected has been exceedingly slow and justified our argument. With the exception of France, to which some reference has been made, it is true to say that the countries with whom we have not got double taxation agreements are those with whom it is very difficult indeed to make one. It is no advantage to a country like Venezuela, with whom it would be desirable to have an agreement, to have one, for there is little income being earned here by Venezuelans,
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and there is little property owned by Venezuelans in this country on which a bargain could be made with British interests there.
I should not like to say what difference it has made to our exports, or to British trade, because the Government were so obstinate last year and have changed their minds this year. One case comes to mind. It is that of a £4 million contract for the Colombo Harbour project. Two British firms tendered, but withdrew because double taxation killed the business for them, and it went to the French. That is the kind of business we lost because the Government did not understand the export trade.
The relief to be given, as the Solicitor-General has said, is 50 per cent. in regard to foreign countries and 75 per cent. in regard to Commonwealth countries. That, I think, means that if the income tax is less than 5s. Od. in the £, the British taxpayer has to pay nothing: if the tax is less than 7s. Od. or 7s. 3d. in the Dominions, there is no double taxation. Therefore, under this Clause, in these countries there will not now be any double taxation. In Argentina there will be no double taxation any longer, because the Argentinian income tax is less than 50 per cent. of the United Kingdom Income Tax. In Brazil, I understand, there will only be a small proportion.
What I want to ask the Government is at what point they are not going the whole way as is done in Section 131 of the International Code of the United States? I understand that the argument they will use is that there is some bargaining power left in the hands of our negotiators with which it will be possible to press forward with some more double taxation agreements. I fail to see what that bargaining power is and with which countries it would be appropriate. I hope that the Chancellor or the Solicitor-General will explain what is the advantage, now that we have made up our minds to go some way towards equalising the tax burdens on British firms in foreign markets, as compared, let us say, with Canadian or United States firms. Why have we not gone the whole way?
There is one final question I should like to ask in relation to the Gold Coast. I think my hon. Friend the Member for Morecambe and Lonsdale (Sir I. Fraser) was perhaps a little late. I believe

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there is no Crown Colony in which there is not now some double taxation agreement. But what I do want to know is this. Is not it a fact that the gold mines in the Gold Coast are still, even with this Clause, penalised, as compared with the mines in other quarters? I do not expect an answer this evening, because it is obviously a difficult problem, and I apologise for not having given the Government a warning that I would raise it; but will they look into the position of the tax on gold mines in the Gold Coast? I think they are the last group of British gold mines which have not transferred their head office outside this country.
It is a serious thing when head offices are transferred outside this country because of double taxation. I do not think for one moment that these mines are contemplating transferring their head office to the Gold Coast at this particular moment; but at the same time I think we should get taxation arrangements which do not induce them to do so as soon as they think that possibly the political situation there would justify their doing it. I should be very grateful if at some future time the Government could give an answer to that point.
Sir S. Cripps: We will certainly look into the question of the gold mines and give an answer to the hon. Member for Chippenham (Mr. Eccles), whom we are glad to see back again in these Debates.
A number of hon. Members have asked me whether I can give an assurance that we are going ahead with the double taxation agreements with all the different countries. The hon. Member for Chippenham seemed to think it was not much good going on because they would not be of much value if we got them. We do not take that view. We take the view that they are of great value and that it is very essential that we should get them wherever we can. We have pressed forward with them with the maximum speed possible, and where there have been delays I think we can say that, broadly, we are not responsible for the delay. I do not want to start difficulties as regards agreements by accusing other people of delay. Delays are inevitable in the course of the negotiation of this class of agreement. There are changes of government and all sorts of things happening, and they do not always
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go as quickly as we would like; but we shall certainly continue to press forward with them with all the speed we can.
I was asked by the hon. Member for Chippenham why we did not go the whole way in this Clause. We had to consider, of course, when we decided to introduce the Clause—it was obviously since the Budget that we came to the decision or it would have been in the original Bill—whether, in the light of the position as regards the negotiations with the different countries, if we were to take action unilaterally that would be liable to defeat our object in getting these agreements or not. We came to the conclusion that if we had to introduce a Clause which gave 100 per cent. relief as regards this dual taxation on a unilateral basis, that it would in fact have affected our chances of getting the agreements we all desire. We thought, therefore, that the best thing to do was to make a large beginning towards this form of a solution in the hope that that would give a very welcome relief; and in fact, with the arrangement as regards the charging against profits of the other part of the foreign tax, it gives—
Mr. Lyttelton: In so far as they are traders.
10.45 p.m.
Sir S. Cripps: There are special provisions in paragraphs 3 and 4 of the Schedule which allow it to be set off even against a dividend received from a subsidiary in a foreign country; that has been specially taken care of. The point raised in that regard has been particularly taken care of, and if hon. Members will study those two paragraphs in the Schedule I think they will see they do in fact cover the point raised.
The hon. Member for Morecambe and Lonsdale (Sir I. Fraser) raised the question whether we could not expedite the agreements with our Colonial Territories. As a matter of fact, as the hon. Member for Chippenham said, we have, I think, concluded agreements with practically every Colonial Territory now, although I do not think we could take the view that he expressed, that they should be entered into on the basis that we were merely making agreements with ourselves and that therefore we could do anything. For the purpose of making these agreements we regard such territories as quite

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independent people who must be advised by their own legislatures and by their own advisers, and these are agreements freely entered into with us. We do not think it would be right under these circumstances to use the power of Whitehall over these territories to force them into terms which might not be to their best advantage; so these agreements have been freely negotiated with them, and in practically every case now a satisfactory agreement has been arrived at.
The hon. Gentleman also asked, in the case where there were individual earnings in one of these other territories or in one of the Dominions, whether, where there were no expenses, the tax could be written off against the expenses. I think the answer is that, if it were a question of taxation under Schedule D here it could be written off, but if it were under Schedule E it could not be. I think that is the right answer, though I would not pledge myself too thoroughly upon that because it is a matter which I had not before considered.
I hope, with these explanations, that the general principles of this Clause will be acceptable to the Committee and that they will allow us to have the Clause.
Mr. Lyttelton: Of course, the Clause, which goes a long way towards what we want, is up to a point very agreeable to us, as all concessions on this and other occasions always are. There does not seem to be very much reason why it should not go the whole way, and I find it extremely difficult to follow the Chancellor's argument that the fact that 25 per cent. in one case and 50 per cent. in another is withheld very much strengthens his hand with regard to the neogtiations with those territories with which agreements have not been concluded. I have been searching my mind very much to see what force should be given to that argument and I find it very difficult to understand.
Perhaps the Chancellor would allow me to say one more word on that point. It really does seem to me that by this Clause considerable handicaps to the British export trade have been removed, and to that extent it is to be much welcomed. It is very tardy, but in future these particular disabilities will be to some extent
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removed. Having set his hand upon this riotous course, the Chancellor really ought to have gone the whole hog and saved his bacon in doing so, instead of which he has the feeling that to be entirely forthcoming is slightly immoral and that he had better have a pinch of austerity in a generous action rather than be accused of being spendthrift and prodigal. Perhaps he could enlighten me on this point, because I really cannot follow it.
Sir S. Cripps: I think that the reason a number of those countries are anxious to get the double taxation agreements is because they are anxious that British companies should operate in their territories. They are either accustomed to such operations by British companies, or they desire their help in exploiting the natural resources of their countries. In those circumstances if they felt that the position had been dealt with unilaterally by our legislation, they would put it on one side and say that they were not going to do any more. That would be the end of our chance to try to negotiate bilateral agreements with them; whereas at present the matter is not wholly solved either for them or for us, and so long as it is not wholly solved there is the better chance of agreement.
Mr. Lyttelton: I find these Florentine subtleties a little difficult to follow in Westminster. But it is difficult to look a gift horse in the mouth any further because, judging by previous analogies, the gift horse may be put back into the stable. Therefore, I think I had better say no more for fear of doing irreparable damage in this matter of double taxation.
Clause read a Second time.
Mr. W. Fletcher: I beg to move, as an Amendment to the proposed new Clause, to leave out lines 14 to 18.
I find myself in the same difficulty as the right hon. Member for Aldershot (Mr. Lyttelton). The argument adduced by the Chancellor of the Exchequer really does not appear to me to stand up for a moment. If, as the right hon. and learned Gentleman says—and he did

1017
clearly say so just now—it is the desire of the people of France or of Belgium or Germany that British capital and enterprise should carry out its traditional rôle of development in those countries and in the colonial empires of those countries, a big impulse must be given by granting 100 per cent. relief here. That would be an inducement to the enterprising capitalists of this country.
I am talking with some knowledge, because, through a French subsidiary company, I have to decide not only whether we should go to Saigon but whether, in West Africa, a certain enterprise should be undertaken. Even now the odds, owing to the Chancellor's lack of generosity in not going the whole hog, are still going to be against us, and that is going to clog exactly the form of enterprise which the Chancellor states that he and the countries concerned desire.
I believe, too, that he is at fault in his argument for, looking at it from the point of view of any foreign Government concerned in the matter, they must surely argue along the same lines. Does the right hon. and learned Gentleman really think that if he gave 100 per cent. relief here they would merely lean back and not bother to argue the interests of their nationals—that they would do nothing in the matter? That argument does not stand up to examination for a moment. They will not do anything of the sort. Very much greater pressure will be brought to bear upon them by their own nationals seeking relief than is exerted by those nationals in the present circumstances.
I really think that the Chancellor of the Exchequer should concede the Amendment in the names of my hon. Friends and myself. Every argument in favour of that course has already been deployed and therefore I do not propose to weary the Committee with their repetition; but no one single argument of any substance has been deduced against them. I am not completely reassured when the Chancellor of the Exchequer says that he is continuing, and hopes to have a successful conclusion to, his various negotiations with the countries concerned. We have heard so often that that was going to be the case.
Even so, I am naturally relieved at what is being offered now. But full relief
1018
can come only from one of two courses, either the successful conclusion which the Chancellor of the Exchequer says he hopes for, or else the 100 per cent. relief which we are asking in this Amendment. The right hon. and learned Gentleman must know perfectly well that at this very juncture in European development, when a great number of payments agreements are being negotiated, great difficulty is experienced, and when breaking away from certain blemishes of bilateral trading the fact of not having these double taxation agreements is the one thing standing in the way of a great many forms of agreement which constitute the essential fibre of any international trade arrangement. I beg the Chancellor, when everybody is thinking in terms of international trade, to make it easier for that trade to take place. I ask him not to deal in petty and meagre limitations, but to prevent the one thing which stops the onrush of so many enterprises all over the world.
Sir S. Cripps: I have listened with great attention both to the appeal of the hon. Member and to that made in the earlier discussions; and I can assure the hon. Gentleman and his colleagues that we think we have gone quite a long way to meet this difficulty. After all, this means £10 million to people who have been trading in difficulties; and that must very considerably ease the difficulties under which they have been trading.
I assure the hon. Member that, from his own arguments, my thesis is correct; that, as he says, these other countries must be equally keen to get these double taxation agreements, but if we make a 100 per cent. unilateral solution of the problem in this country, they will not be so keen. They are keen to get our companies operating in their territories, but there is not a large question of their companies operating in our territories. When one comes to India and Pakistan, for instance, one has two very large examples where this double taxation, especially in the course of the last year. has played a very considerable part.
I would remind the Committee, too, that it is very important that we should not abandon the possibility of getting these double taxation agreements. If we find that we cannot get any further in the

1019
course of time, we may have to take other steps; but we have made a very good beginning with the solution of this problem, and I ask hon. Members to let the Clause stand as it is and then to let us next year see what the situation may be, and see whether we have the agreements or not. Upon that information we shall be able to consider whether we ought to go further or not.
Mr. W. Fletcher: Before the right hon. and learned Gentleman sits down, will he deal with the provincial and other taxes which are mentioned in line 44 on the Paper, because that is a considerable question?
11.0 p.m.
The Solicitor-General: In so far as the Commonwealth countries are concerned, we have done this when drafting the Clause; we have followed the precedent of the Dominion income tax relief granted under Section 27 of the Finance Act, 1920. We are doing in that case as we have done previously—treating the South African State taxes, the Canadian provincial taxes, and the agricultural taxes which are levied in certain States of India, as coming within the scope of the relief.
But, when one comes to foreign countries, the situation is rather different. All sorts of different constitutional arrangements have to be considered in the very many countries which will be involved in this system of unilateral relief. It would immensely complicate the administration of unilateral relief, which already will be extremely difficult, if we sought to include the taxes imposed by States and parts of foreign countries in the scope of this relief. It would make the system extremely difficult to work, if not cause it altogether to break down. The relief extends only to the foreign taxes which are analogous to British Profits Tax and British Income Tax. To try to ascertain, with regard to the areas' component territories, in all the foreign countries which will be involved within the scheme, whether the taxes there imposed come fairly within the description of taxes analogous to British Profits Tax and British Income Tax, might often be well-nigh impossible.
Therefore, the justification for our Clause is that, so far as the Commonwealth
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is concerned, we are following the accepted practice under Section 27 of the 1920 Act. From the nature of things it is much easier to obtain any necessary information as to the structure of Commonwealth taxes. In foreign countries, it would be extremely difficult, if possible at all, to try to ascertain in regard to the vast number of taxes which would have to be considered whether they come within the purview of unilateral relief. For that reason, we have excluded constituent provinces of foreign countries.
Mr. Fletcher: In the case of Switzerland, traditionally and for many years cantonal taxes have been probably more important than those of the central Government. It also is likely to arise in the case of Germany, where the Lander taxes may play the same rôle. I suggest that, as Switzerland is certainly a hard currency country and our exports to her are of such importance, the Chancellor of the Exchequer might well go into this point and see whether these taxes which are very old established ones, are not just a matter of solely provincial taxes but are an essential fibre of the whole taxation system.
The Solicitor-General: With regard to Germany, the income tax is administered and collected by the Lander but the tax itself is imposed as a national tax and will come within the scope of the relief provided for in the new Clause. But Switzerland is rather different. Taxes are imposed in the cantons—they are fairly heavy taxes and will be excluded. Income tax imposed by the Swiss Confederation will rank for relief. In the case of Switzerland, too, it is hoped the negotiations for a bilateral agreement will be opened in the very near future, and it is perfectly competent in the course of these negotiations to explore the possibility of including cantonal taxes. The bilateral arrangements which can be brought within the scope of the 1945 Act. because the Act is so framed, embrace taxes other than the taxes strictly within the purview of the present Clause. It is hoped, when the negotiations fructify, that it may be possible to introduce that tax into the scope of bilateral relief.
Mr. Fletcher: In view of the considerable relief which this Clause is bringing and also because of the fairly open-minded way our points on this side of the

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Committee have been dealt with, and the hope that during the current year further agreements may be reached, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause added to the Bill.
Mr. Lyttelton: I beg to move, "That the Chairman do report Progress and ask leave to sit again."
We have made unexpectedly good progress today, and I think this would be a convenient time to adjourn.
Committee report Progress; to sit again Tomorrow.

IRON FOUNDRIES (CONDITIONS)
Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Popplewell.]
11.6 p.m.
Mr. Malcolm MacPherson: In the short time that we have available, I understand that the Parliamentary Secretary to the Ministry of Labour and National Service wishes to make a fairly full reply. I understand also that there are one or two other hon. Members who hope to catch your eye, Mr. Deputy-Speaker, so that I shall have to put my points very briefly indeed.
Iron founding is basic to a great many parts of the engineering industry, but in spite of that it has remarkable disadvantages from the point of view of its working conditions. The workers are continually concerned with the presence of molten metal, there is a good deal of transportation of it, there is much lifting of heavy weights, there are fumes in the atmosphere, and dust which carries a good deal of silica, thus leading to the risk of silicosis; and the general surroundings of the worker have in the past been characterised by a great deal of sheer dismalness.
Because of these features in the industry the Garrett Committee, which was set up in 1945, produced a Report in 1947 which was of very great importance to the industry. The industry in general looks
1022
upon the implementation as far as possible of the recommendations in the Report as a matter of great importance and urgency. These recommendations affect the health of the workers, the attractiveness of the work itself, the attractiveness of the conditions in which they work, and of course also the productive efficiency of the foundries.
Since the Report was issued three years ago, it has become clear that there are certain difficulties in carrying out all the recommendations. There are old customs and prejudices on both sides which always make it difficult to introduce new ideas. I would like to make it clear that the union mainly concerned is doing all it can to break down any apathy or prejudice on the part of the employees which may slow up improvements. There is. sometimes difficulty in achieving cooperation between the two sides of the industry.
Certain managements, for instance, need to be reminded, just as much as some of the employees, that there must be co-operation in putting into effect many of the recommendations. There has been a certain amount of difficulty over capital expenditure, but I think that under the priority given to expenditure of this sort it has largely been removed; and of course, there is the difficulty that a number of the recommendations, depend on a degree of knowledge which can only be achieved by research which does not exist at the moment. In spite of difficulties, there has been considerable progress. A Standing Joint Committee is continually at work and we are all interested in its dealing effectively with the topics brought to its attention.
In the district which I have the honour to represent, it is clear that many of the employers have taken many of the recommendations very much to heart, and in recent years considerable improvements have been made. I know that in the districts represented by my right hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. Woodburn) and my hon. Friend the Member for Stirlingshire, West (Mr. Balfour) and in that represented by my right hon. Friend the Member for West Lothian (Mr. Mathers), who are all interested in this matter, the same can be said—that their is obviously a good deal of improvement in the bigger firms.

1023
In addition, the Department of the Chief Inspector of Factories arranged that all factories should be visited, and I want to pay more than a conventional tribute to that Department, because the whole conception of their treatment of the subject has been broad and imaginative, starting from the idea of Sir Wilfred Garrett himself of examining the industry in this way and continuing with the remarkable visitation of all the foundries—2,000 of them or thereabouts—in 1948. I trust that the follow-through of that Report still further will be carried out with the same degree of imagination.
But in spite of the improvements that have been made, the colleague of my hon. Friend in the Ministry of Supply, addressing the foundry unions, was able to say that conditions in a great many smaller foundries had not merely disappointed but shocked him, and there remain a great many things which must be tackled before the foundry world can feel that its problems have been adequately dealt with. I cannot this evening do more than select a few of the problems that require tackling, and I am sure that my hon. Friend the Parliamentary Secretary realises that the subject is much wider than we can do justice to in this half-hour.
I would like to ask him about the position with regard to accidents in iron foundries. The accident rate has been very high. In the Chief Inspector's Report for 1947, iron founding had the highest accident rate of all the industries listed. There was some improvement in 1948, but even so the rate was very high, and the Deputy Chief Inspector, addressing the foundry workers' conference a year ago, put it in an emphatic and alarming way when he said that one in ten of all foundry workers in the course of a year suffered from an accident during his employment. One is inclined to ask—what about the ordinary precautions? Is there proper stacking of equipment not in use. provision of proper gangways, provision of protective clothing such as goggles and boots? Are all these being adequately brought into effect?
One is inclined to ask also to what extent is the high accident rate general? Are a large number of accidents concentrated in the foundries which have been
1024
slow in carrying out the recommendations of the Garrett Report, and are there some very good and almost accident-free foundries at the other end, or is the rate general throughout all foundries? I would like to draw attention to a remarkable passage in the Report of the Productivity Team that dealt with steel founding, published last July or August. They point out that in a number of American foundries which were visited the index figure for accidents had been brought down in the course of five years from 45 to 27, which is a remarkable decrease. I am not suggesting to my hon. Friend the Parliamentary Secretary that we can achieve that in our own foundries at once, but I do suggest that that sort of report calls for some comment. It is worth thinking over and seeing to what extent we can apply its findings.
I should like to ask one or two things about research. The elimination of obnoxious fumes, dust and silica from the atmosphere depends largely upon adequate research being done. I should like my hon. Friend to give an indication of the extent of research that is understood to be needed. Can he tell us what research is at present taking place, and whether his Department find it possible to ensure that all the research which is required is being carried out? One particular piece of research which, I observed, was being carried out in Loughborough Technical College had to be dropped because, I understand, there was not sufficient financial provision to carry it on. Is the whole of the research which is necessary to suffer in that way, or is there any greater assurance that it will be carried out?
In the Report for 1948 of the Chief Inspector of Factories, there is a quite lengthy description of the results of the full inspection which was made of all foundries, but I wonder whether my hon. Friend could give more specific details than are given in the Report. This publication, although it is very useful, is full of phrases like "most foundries do so and so, or "comparatively few do this, that or the next thing." Very few specific facts are given.
One would like to know the actual number of foundries, or, more important perhaps, the actual number of workers, affected by each of these things. The

1025
Report may be useful to a person who knows the industry continually from the inside, as do the inspectors, but—and I am not making a purely critical point—I myself found it quite difficult, from these passages in the Report, to form a clear picture, whereas if more precise data were given, it would be possible for one to form a fuller picture of the true position. Is there any sign that we are getting down to a hard core of foundries in which there is not likely to be improvement? Are all foundry employers who are likely to make improvements along the lines that have been recommended, already making progress in this direction? Are those that remain, or many of them, likely to be completely unwilling to start to do so?
Finally—and I am closing my speech abruptly because I do not want to take up further time—I should like to ask about new foundries. Have all the new foundries which have been established since the publication of the Report followed its recommendations, or have some ignored them; and are the new foundries all in buildings which are suitable for foundries? I know that in the past my right hon. Friend the Minister has suffered from the difficulty that he has not been able to give as much information as he would like to give in answer to Questions because of the sheer shortage of time. That is one reason why I am addressing these questions to my hon. Friend tonight, in the hope that he can give rather more information.
11.19 p.m.
Mr. William Ross: My hon. Friend the Member for Stirling and Falkirk Burghs (Mr. M. MacPherson) is to be congratulated on his choice of subject tonight, because this is a matter which is considered of the very greatest importance throughout Scotland and England. We hear too little about it in the ordinary Debates in the House.
It is now nearly three years since the Garrett Report was published. It was received by all sides of industry everywhere with acclaim, and people expected progress to be made. It was not doubted that progress would be to a certain extent slow because of the restriction of capital expenditure and shortage of materials, and so on; but I think anyone who has looked at the problem must agree that
1026
progress has been provokingly slow and very uneven. Some employers have taken the recommendations to heart and have gone ahead and transformed their foundries, but in many cases I am afraid the conditions which prompted the inquiry itself still prevail. There are far too many of these foundries which, to say the least, are by no means a credit to British industry and are certainly a menace to health and life. The 1948 Report of His Majesty's Chief Inspector of Factories showed there were nearly 13,000 preventible accidents, causing loss of time, in one year. Today has not been an exception. Nearly 40 accidents have occurred in foundries this very day, and last month two people were killed.
This is one of our basic industries, one which certainly has been pulling its weight. Despite all difficulties, figures of production are very high. I think we should show due regard to the desires and needs of the people working in this industry by going into the recommendations of this Committee which reported so long ago. People are beginning to feel that this Report, praised and now forgotten, is being left to decorate the shelves of the Ministry of Labour.
I want to know exactly how the Minister is going to tackle this subject. My feeling about the matter is that he has the power to tackle this serious question. It is not just a question of accidents, but of actual health. X-ray examinations carried out recently in a steel foundry in Scotland showed that, of 59 dressers X-rayed, 10 were suffering from silicosis. In the iron foundry the figure is not so high, but it is still far too high. The tuberculosis incidence is 40 per cent. higher than the United Kingdom average. These things are entirely due to bad conditions, and something should be done. I know that factory inspectors have been paying more attention to foundries since the publication of the Report, but more yet must be done.
The Minister already has power under the 1937 Act to deal with matters like the condition of floors. One would have thought it a simple matter to use a vacuum plant for cleaning, but we find that most foundries do not use one. Is there any reason why they should not have it? The orderly arrangement and storage of materials and the provision of

1027
gangways are other points. Most accidents are caused by the acceptance of muddle in foundries as inevitable.
It is not good enough that we should accept these things in British industry. An hon. Member who is not a member of my party told me today of the vast difference made in one of his factories by the installation of modern strip lighting. If it has made such a difference in his factory, let us have that kind of progress elsewhere. There is also the question of ventilation. The Minister has power by regulation to deal with all the matters covered by the Report.
Turning for a moment to research, a certain amount of research is being carried out, but not nearly enough, and there is not sufficient co-ordination of that research. On that research will depend our ability to raise the standards in this industry, particularly in the vital matter of the elimination of dust and the control of noxious fumes. I hope the Minister will be able to tell us exactly how urgent he considers the whole thing and what attempts his Department are making to deal with it.
11.25 p.m.
The Parliamentary Secretary to the Ministry of Labour (Mr. Frederick Lee): I agree that in raising this important issue my hon. Friend the Member for Stirling and Falkirk Burghs (Mr. Malcolm MacPherson) has done us a great service. For my part, I am happy to have the opportunity of joining in such a Debate, because I think I can claim to have been born, as it were, in an atmosphere of sand and moleskins in that my own father has been an iron moulder all his life, and although he has now retired he is looking forward to celebrating his 60th year with the union which caters for the iron moulders.
I know that this is not a question into which one can venture with an academic mind: it is a great human problem of men working in a heavy industry, often in poor conditions. Those of us who have worked in and around foundries know that for a long time the iron foundry trade has been considered as the "Cinderella" of the engineering industry and the conditions which have obtained in foundries would not have been tolerated in the turning or fitting shops in the same establishment.
1028
For this reason it was right and proper that the Garrett Committee should investigate the conditions and produce the Report they did in 1947.
In the short time at my disposal I should like to answer a number of questions which have been put to me. In the engineering industry as a whole the shortage of apprentices in foundries has for a long time been causing considerable anxiety. Unfortunately we cannot get accurate figures to show whether there is a big improvement in the entry of boys into the foundry industry. During the last few days I have been trying to get reliable statistical data from various sources but I am assured there are no agreed figures published. The Council of the Iron Foundry Association said that where good amenities were provided recruitment was becoming easier and the position appears to be improving to that extent. Moreover more firms are showing a willingness to work the Association's approved training scheme. Good and average foundries are attracting apprentices, but in many instances the particular factor against recruitment is not whether the foundry itself is good, but the fact that in many districts alternative employment of a clean nature is available for the reduced number of school-leavers.
My hon. Friend the Member for Stirling and Falkirk pointed out that in the course of half-an-hour it is not possible to get as much data as one would wish. I can assure him that there will be a full account of the steps being taken to implement the Garrett Report in the annual report of the Chief Inspector of Factories for 1949. He will give specific information on the progress made in particular directions, and whether the industry is or is not tackling the various recommendations.
Mr. Henderson Stewart: When will that be published?
Mr. Lee: It will be published in the course of the next few months. My hon. Friend also asked me about the accident rate in foundries, and I can give him the latest information. Factory inspectors are pressing firms to set up safety organisations and joint safety committees, and figures during the post-war period tend to indicate that this is having a good effect. In 1946, fatal accidents numbered 31, and non-fatal 13,225; in 1947, there

1029
were 27 fatal and 12,911 non-fatal accidents; in 1948, 29 fatal and 12,482 nonfatal accidents; and in 1949, a pleasing reduction to 20 fatal and 11,003 non-fatal accidents. That is a reduction from the 1948 figure. These figures relate to metal founding generally and not merely to iron foundries, although the latter of course preponderate. During that period the number of employees has not changed materially, and the progressive reduction of accidents, particularly in the 1949 figure as compared with 1948, is most encouraging. Nearly 50 per cent. of the accidents in foundries are due to either the handling of goods and materials or contact with splashing from molten metal. For example, in 1949, 34.8 per cent. of accidents were due to handling and 13.7 per cent. to molten metal. The figures for this industry have fallen progressively during the last four years.
Let me now give the House another indication of the effect of improved working conditions and amenities combined with the wider adoption of safety precautions in the industry as a whole. I think we can see it in the number of sepsis cases in the past three years, which were as follows: 1947, 1,223; 1948, 1,208; 1949, 887. It appears, then, that because of improved safety conditions, and the generally new attitude towards these very vital questions which now obtains in the iron foundry industry, we are getting more satisfactory figures than before, although it would be quite wrong for us to believe that we have reached anything like the low level we want to see in the very near future. Increased mechanisation, which is certainly going ahead in the larger and medium-sized foundries, will undoubtedly help to reduce the number of accidents due to handling of materials and the transport of molten metal.
I have been asked a number of questions, some of which I will endeavour to answer in the limited time available. There are approximately 2,000 iron foundries in the country, employing some 145,790 persons on 7th January this year. Of these 2,000 foundries, approximately 10 per cent. might be classified as "poor," although since the survey was made in 1948 many have improved their conditions. Factory inspectors have inspected every one of these foundries; they started in 1947 and continued in
1030
1948, and since that initial inspection there have been check inspections and very good progress has been made in very many of them. Some 90 per cent. of the foundries can be classified as "good" or "average," or as improving conditions as rapidly as supplies permit.
Mention has been made of the bad condition of the smaller foundries, and here indeed we have a very great difficulty. We are trying, along with the Ministry of Supply, to make available materials—steel, and so on—in order to re-house old dilapidated foundries, but many are so sited in built-up areas that it is not possible to modernise the existing foundries themselves. Their particular job may be to provide castings for a firm in the immediate vicinity, and it is therefore important to try to site them in such a way that they can perform that very necessary function and yet give the increased amenities and facilities which we desire.
My hon. Friend also mentioned our position in contra-distinction to that in America. Although the figures he quoted are excellent, I would remind him that accident rates in America were for many years far higher than in this country, and it was therefore possible to effect a larger ratio of reduction. Several of the Productivity Team have said that while the general standard of safeguarding plant is lower in the United States, personnel are more safety conscious than in this country.
Research has been referred to, and much has been done in research into the provision of better amenities for foundry workers. The provision of baths, showers, and so on, is by no means uncommon now. In fact, a few days ago I was in a foundry in Scotland, which was by no means what one would call a modern foundry, and I was pleased to see that they had installed baths, showers and rooms where the workers could dry off their clothing. That sort of thing is going ahead very well indeed. It is not possible for the Ministry to be able to finance research by the industry itself. That, of course, is a question which only the industry itself can tackle.
I am extremely sorry that because of the time factor I cannot go into more detail. In conclusion, I would just say

1031
this. In Stirling and Falkirk there are 35 foundries comprising small, medium and large ones, grouped as follows: Small-sized foundries employing up to 49 persons, six; medium-sized foundries employing 50 to 249 persons, 15; large-sized foundries employing 250 to 1,200 persons, 14. We are satisfied that good progress is, in fact, being made in improving conditions.
I do not want to give the impression that the Ministry is in any way complacent about the tremendous job of work which still has to be done in the foundries. We recognise that much of the effort which it is desired the country
1032
should get in order to achieve increased production may well depend upon the efforts of the foundry workers. We know how well they have deserved of the country, and we want to do everything in our power to assist them, and we will continue to do everything we can to make sure the Report is implemented at the earliest possible moment.
The Question having been proposed after Ten o'Clock and the Debate having continued for half an hour, Mr. DEPUTY-SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.
Adjourned at Twenty-Four Minutes to Twelve o'Clock.

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