Sitting of 24 June 1954

Preamble
The House met at Half past Two o'Clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  COVENTRY CORPORATION BILL [Lords] (by Order)
  Second Reading deferred till Wednesday next, at Seven o'Clock.
  DUNOON BURGH ORDER CONFIRMATION BILL
  Read a Second time; to be considered Tomorrow.
ORAL ANSWERS TO QUESTIONS
  NATIONAL FINANCE

    German Shipbuilders (Steel Rebates)
    Mr. Grimondasked the Chancellor of the Exchequer if he will make a further statement on the rebate offered to German shipbuilders on steel, contrary to the agreement reached between the United Kingdom and the German Government.
    Mr. Blenkinsopasked the Chancellor of the Exchequer whether he is in a position to make a further statement regarding rebates on steel to West German shipbuilders.
    The Economic Secretary to the Treasury (Mr. R. Maudling): Preliminary reports which I have seen have confirmed the information given in the Press that a private rebate arrangement is at present under discussion between the German steel producers and shipbuilders. I understand that so far the German Government has not been officially informed of these discussions.
    The joint statement which my right hon. Friend and Professor Erhard have made concerned only Government action. If either Government were asked to
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    facilitate such an arrangement, that Government would naturally be guided by the principles laid down in the joint statement.
    Mr. Grimond: Are we to understand that the agreement reached between the Chancellor and the German Government did not take any account of the possibility of private arrangements being made which might be contrary to the spirit of the agreement?
    Mr. Maudling: Of course, arrangements are constantly going on in private industry between one firm and another about rebates of different kinds, but the agreement between the Governments was naturally confined to the sphere of responsibility and the power of the respective Governments.
    Mr. Blenkinsop: Is the Economic Secretary satisfied that there is no agreement at all between the West German Government and the steel industry which influences this agreement?
    Mr. Maudling: We have been into this with the West German Government, and I can give the hon. Member an assurance that the West German Government have not been consulted in any way in this matter.
    Mr. Gaitskell: Do not the Government propose to take up this matter, however, with the German Government? Is it not really an obvious evasion of the spirit of the agreement reached with the West German Government; and, in view of the fact that the German steel industry is part of the Schuman Plan, would it not be wise to pursue the matter a little further and take the matter up with the West German Government to see if we cannot get it put right?
    Mr. Maudling: I do not think there is any question of evasion here. The Schuman Plan is another and very complicated question. I made it clear in my earlier reply that we have been in touch with the German Government in the matter and, so far as action or influence of any kind by either Government is concerned, we are completely agreed on the action we should take.

    £5 Notes
    Mr. Errollasked the Chancellor of the Exchequer if he will, in conjunction with the Bank of England, now give

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    immediate consideration to the introduction of a smaller £5 note.
    The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter): This is a matter for the Bank of England, which is aware of my hon. Friend's suggestion.
    Mr. Erroll: As the Bank of England is refusing to do anything about the suggestion, will my right hon. Friend nevertheless make representations to it, as a large number of organisations which have to handle considerable quantities of notes, particularly bank staffs and wages clerks who make up pay packets in industrial establishments, require a smaller and more conveniently-shaped £5 note?
    Mr. Boyd-Carpenter: This is a matter within the responsibility of the Bank. I think that my hon. Friend knows that all the points he has just put, and other points, are before the Bank.
    Mr. E. Wakefield: Can the Chancellor also be asked to consider the introduction of a more valuable £5 note?
    Mr. Boyd-Carpenter: That is another question.
    Mr. Langford-Holt: Could my right hon. Friend tell us what is the advantage of a £5 note in its present size and texture, except possibly its distinctive crackle?
    Mr. Boyd-Carpenter: Apart from the crackle, as my hon. Friend will be aware, the design of a currency note of this sort has to take into account the desirability of making it very difficult to forge.

    Washington Discussions (Treasury Representatives)
    Mr. Emrys Hughesasked the Chancellor of the Exchequer how many Treasury representatives are advising the Chief of Staff at the discussions in Washington.
    Mr. Boyd-Carpenter: If the hon. Member is referring to the recent visit of the Chief of the Imperial General Staff to Washington, the answer is "None, Sir."
    Mr. Hughes: But is it not absolutely essential that the Treasury should keep a watchful eye on any policy which might involve expenditure, and have not the Treasury been grossly neglectful? Have they forgotten the pledge of the Chancellor to cut defence expenditure, and
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    does he not think that these gentlemen should do it?
    Mr. Boyd-Carpenter: For an eye to be watchful it does not need to be transported to Washington.

    Bank Credits
    Mr. Wyattasked the Chancellor of the Exchequer why he maintains the overall restrictions on the use of bank credits in addition to the provisions of the Board of Trade Order, Statutory Instrument, No. 121, 1952.
    Mr. Maudling: These restrictions play a useful part in my right hon. Friend's general monetary policy.

    Roumanian and Hungarian Assets (Claims)
    Mr. Teelingasked the Chancellor of the Exchequer how many registered claimants for the distribution of Roumanian and Hungarian assets in this country will receive less than £1,000.
    Mr. Maudling: I regret that it is not possible to give any such estimate.
    Mr. Teeling: Does my hon. Friend realise that there must be many people in that category and that they are very keen to know how soon they are to hear more?
    Mr. Maudling: Yes, I know, but the registers are not complete and an estimate of the kind asked for cannot be made at the present moment.
    Mr. Teelingasked the Chancellor of the Exchequer whether the drafting of the Treasury directions on the distribution of the Roumanian and Hungarian assets is now completed; and whether he can state the date of their publication.
    Mr. Maudling: The drafting of the Treasury direction on the distribution of the Roumanian assets has now been completed. It will be published as a White Paper as soon as possible. The drafting of the directions with regard to Hungarian and Bulgarian assets has not been completed yet, but my right hon. Friend expects to be in a position to publish them in the course of next month.
    Mr. Teeing: Is my hon. Friend able to tell us exactly why the question of the Roumanian assets has taken so long? Further, may I remind him that he said in this House that it would be discussed

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    when it was finally settled, and that as the House will be rising in about five weeks, can we be sure that we shall not have to wait another three months but will be told before the House rises?
    Mr. Maudlin: One of the reasons delaying the drafting of these Roumanian directions has been the necessity to study the Roumanian ordinances which are complicated. So far as the date of publication is concerned, I can assure my hon. Friend that the Roumanian directions will be published before the House rises, and I have every hope that the same applies to the Hungarian and Bulgarian.
    Mr. Snow: Can the Economic Secretary say to what extent these decisions have been regulated in any way by the need to conclude new trade agreements with those countries?
    Mr. Maudling: That is a different matter. This is a question of distribution of assets in the custody of the Custodian in this country. When it comes to trade agreements, it is a question of getting some payment from the countries concerned.

    Cement Works, Strood (Rating)
    Sir R. Aclandasked the Chancellor of the Exchequer when he expects the Inland Revenue Department to give a decision on the rating assessment of cement works in the area of the Strood Rural District Council, about which he has received correspondence.
    Mr. Boyd-Carpenter: The assessment of these works for rating raises difficult questions of valuation which have been the subject of negotiation with representatives of the companies concerned. It is hoped to reach early agreement; failing that the lands tribunal will be asked to adjudicate.
    Sir R. Acland: Will the Financial Secretary agree that this has been a very long delay and that the rural district concerned is put to grave embarrassment by not knowing what the decision will be, and we hope that every step will be taken to expedite the negotiations?
    Mr. Boyd-Carpenter: I appreciate that, but I imagine that the hon. Baronet will also appreciate that it is very much in the interests of the rural district council
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    to secure that the rating law is properly applied to properties of this kind—such questions as deciding whether a rotary drill is rateable are horribly complex.

    Iron and Steel Industry (Realisation of Assets)
    Mr. Swinglerasked the Chancellor of the Exchequer if he will state, for the capital equipment which has so far been sold to private individuals or companies under the Act to denationalise the iron and steel industry, how much compensation was paid therefor at the time of nationalisation, and how much has been paid therefor in the process of denationalisation.
    Mr. Boyd-Carpenter: I doubt whether the comparison requested in this question has much significance as it does not involve comparing like with like. But, including Stewarts and Lloyds, the Iron and Steel Holding and Realisation Agency has received or is about to receive some £68½ million gross in cash or Government securities. It also retains for future disposal holdings in the companies concerned to a figure of £46·8 million, taken at nominal paid-up values. There will also be added in due course certain other credit items rising out of these transactions, and in particular the Agency retain the shares in the Steel Company of Wales formerly held by one of these companies. The value of the Agency's investment in these companies, based on compensation values as properly adjusted and attributable, is calculated at £108·8 million.
    Mr. Swingler: Cutting through all that, is it not perfectly possible, taking into account the changed value of money, to give us the straightforward facts about what they were paid in compensation and what is now being paid, so that, taking into account some of the notorious deals now going on, the public may know what is the loss of money involved in the sale of these assets?
    Mr. Boyd-Carpenter: If I gave the hon. Gentleman merely the figures for the amount of compensation paid, without taking into account either additional capital put into the industries concerned, or other changes that have been taking place, I should be misleading him; and I should be making the comparison less favourable from his point of view

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    because, on that basis, the compensation figure would be £106·3 million instead of £108·8 million which I gave him.
    Mr. Nabarro: Is it not a fact that there has been no loss of public money involved in the transactions which have been completed to date—[HON. MEMBERS: "Oh!"]—and that the Realisation Agency has steered a reasonable course in realising the assets which Parliament placed a duty upon it to do?
    Mr. Boyd-Carpenter: There are many factors which make a straight comparison at this stage difficult but I agree with my hon. Friend that the Realisation Agency has done a good job for the country.

    Income Tax (Republic of Ireland Residence)
    Sir H. Williamsasked the Financial Secretary to the Treasury why, in the instructions on Income Tax forms, it is stated that a person in receipt of United Kingdom income but not resident in the United Kingdom is not liable to Income Tax if he is resident in the Republic of Ireland, but is liable to Income Tax if he is resident in any other part of the world.
    Mr. Boyd-Carpenter: Income arising in the United Kingdom is, in general, subject to United Kingdom Income Tax wherever the recipient resides, but under a reciprocal agreement made in 1926 and given the force of law by Section 23, Finance Act, 1926, a person resident in the Republic of Ireland and not also resident in the United Kingdom is exempt from United Kingdom Income Tax on such income.
    Sir H. Williams: Will my right hon. Friend explain how an Act passed in 1926, when there was no Republic of Ireland, applies to the present time when there is a Republic of Ireland?
    Mr. Boyd-Carpenter: For the simple reason that the rights and liabilities under the then agreement with the then Irish Free State have devolved on the Republic of Ireland.

  CHATSWORTH ART COLLECTION
  Sir T. Mooreasked the Chancellor of the Exchequer what steps he is taking, or contemplating, to ensure that Chatsworth and its contents are preserved for the British nation.
  Mr. Boyd-Carpenter: I would refer my hon. Friend to the answer my right hon. Friend gave to the hon. Member for Nottingham, South (Mr. Norman Smith) on 22nd June.
  Sir T. Moore: Whilst noting the sympathetic reply which the Chancellor gave on that occasion, will my right hon. Friend bear in mind that Chatsworth and its contents are in danger only because of the penal death duties imposed by this and previous Governments, and will he not accept the fact that there is a moral responsibility on the Government to try to retain this unique collection and heritage for the people of Britain?
  Mr. Boyd-Carpenter: My right hon. Friend made our general attitude clear and, while negotiations are continuing, it would be unwise for me to comment further.
  Mr. Noel-Baker: Is the Financial Secretary aware that there is a very strong feeling in the country, and particularly in Derbyshire, that Chatsworth should be preserved, and that there is a general hope that an arrangement will be made which will both preserve it and safeguard the national interest?
  Mr. Boyd-Carpenter: It is because we accept the views put forward by the right hon. Gentleman that we have entered into these discussions.
  Mr. E. Wakefield: Chatsworth being in my constituency, may I ask my right hon. Friend if he is aware of the strong feeling in that locality that it would have been far preferable if Chatsworth had been retained as a home rather than as a museum?
  Mr. Boyd-Carpenter: That raises quite different questions.
  Mr. Gibson: In considering what was said by the hon. Member for Ayr (Sir T. Moore), will the Financial Secretary bear in mind what the same hon. Gentleman had to say about the necessity for giving proper consideration to the expenditure of public money on old-age pensioners?
  Mr. Boyd-Carpenter: I always follow with close attention what my hon. Friend says.

  AGRICULTURE

    Liaison Officers
    Mr. J. Harrisonasked the Minister of Agriculture the duties of a private person when appointed county liaison officer to his Department; and what are the qualifications needed for such an appointment.
    The Minister of Agriculture and Fisheries (Sir Thomas Dugdale): My Department has no county liaison officers. The duties of my personal liaison officers are principally to interpret the Government's policy to the county agricultural executive committees and other organisations in their areas, and to advise me of any special problems or difficulties that are troubling committees and farmers. For these appointments I have selected men who are prominent and highly respected in agricultural circles.
    Mr. Harrison: Would the Minister agree that if he appoints a trader to one of these positions who usually deals in commodities bought by farmers, this trader will have an undue advantage over his competitors in the district?
    Sir T. Dugdale: Oh, no, Sir; certainly not.
    Mr. T. Williams: Do we understand from the right hon. Gentleman that the liaison officer referred to is more of a food salesman than a farmer?
    Sir T. Dugdale: I am not certain to which liaison officer the right hon. Gentleman refers, but my liaison officers are most distinguished people in their own walk of life, and what I have done is to revive the wartime system which was so successful.

    Vibrio Foetus
    Mr. Hollisasked the Minister of Agriculture what steps are being taken to counter vibrio foetus in the dairy herds of this country.
    Sir T. Dugdale: Vibrio foetus infection is a venereal disease of livestock and is very difficult to treat. The best advice that can be given to farmers is to maintain their herds as self-contained breeding units, or to introduce only maiden heifers and bulls which have never served
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    or to adopt artificial insemination. This very greatly reduces the risk of infection. Research into the disease is going on at my Department's Veterinary Laboratory at Weybridge and elsewhere, and information about the disease and methods of control is made available by my Department to farmers and veterinary surgeons.
    Mr. Hollis: Can the Minister give some indication when the results of the research will be published? Further, will it be possible to introduce some system of testing similar to tuberculin testing, to give encouragement to people in A.I. Centres?
    Sir T. Dugdale: So far, the results of research have not on the whole been very satisfactory, but research is being continued. There is no doubt that the real remedy lies in preventing the introduction of the disease into a herd.

    Supplies and Prices
    Sir R. De la Bèreasked the Minister of Agriculture whether he will give an estimate of the effect on agriculture at home of changes in supplies and prices resulting from support measures adopted by other countries.
    Sir T. Dugdale: It would be quite impossible to make any estimate such as my hon. Friend suggests.
    Sir R. De la Bère: Is the Minister aware that legislation in other countries has a very real effect on the whole market here and that, whether he likes it or not, he must study the subject? It is useless for him to get up and give an answer like that. It is just hopeless. In view of the unsatisfactory nature of that reply, I shall raise this matter again. It is an absolute outrage.

    Commissioners of Crown Lands (Annual Report)
    Mr. Bullardasked the Minister of Agriculture why no annual report has been issued by the Commissioners of Crown Lands since June, 1939.
    Sir T. Dugdale: This, in common with other annual reports, was suspended as part of the general drive for economy during the war and has not since been resumed.
    Mr. Bullard: Would not my right hon. Friend agree that this is a very autocratic body? As it administers 370,000 acres of State land, the least it might do is to produce a Report. Apparently the administration is carried out almost entirely by one permanent Commissioner. Will the Minister cause a Report to be issued and let us have in it a list of all the Crown receivers? And may that list not contain the name of Messrs, Sanctuary and Son?
    Sir T. Dugdale: Those supplementaries go far beyond the Question, but I would like to say that the Commissioners of Crown Lands are very anxious to publish a Report. As recently as 1951–52 they prepared an omnibus Report covering the eight years to 31st March, 1950, but after consultations with the Treasury about the printing and publication, it was considered that, in view of the continued need for economy, the Report should not be printed.

    Sugar-Beet Factory (Southern England)
    Mr. Remnantasked the Minister of Agriculture whether a decision has now been reached to build an additional sugar-beet factory in the South.
    Mr. J. Johnsonasked the Minister of Agriculture what action he is taking, following the findings of the inter-Departmental committee set up to review the need for a sugar-beet factory in the South of England.
    Sir T. Dugdale: My right hon. and gallant Friend the Minister of Food and I have this week received the recommendations of the group of officials who have reviewed this problem, and the Government's decision thereon will be announced as soon as possible.
    Dr. King: Is the Minister aware that, in the last few years, Hampshire has stepped-up its sugar-beet production tremendously, and that the provision of a sugar-beet factory in or near Hampshire would be of great importance, not only to that county but to British agriculture generally?
    Mr. G. R. Howard: Can my right hon. Friend give an assurance that, when considering the matter, such places as Taunton, Salisbury and or Chippenham will be kept in mind to serve the South-West?
    Sir T. Dugdale: Yes, all those facts will be taken into consideration.
    Mr. J. Johnson: Is the Minister aware of the congestion occurring at lifting-time in the factories at Kidderminster and Colwich in the Midlands, and that Warwickshire farmers feel that the only solution is to build another factory in the South-West?
    Mr. Nabarro: Is the Minister aware that the Kidderminster sugar factory—the largest in the Midlands—operates smoothly and efficiently and that, in spite of its large intake, there is no congestion of any kind?
    Mr. Hurd: Will the Minister let this House and the public have the facts of the position before the Government reach a decision?
    Sir T. Dugdale: We must first consider the report we have just received.

    Fatstock Marketing Scheme
    Sir W. Smithersasked the Minister of Agriculture (1) under what authority the proposed Fatstock Marketing Scheme was returned to the promoters;
    (2) when he expects to receive a reply from the promoters of the Fatstock Marketing Scheme to his inquiry whether they wish to proceed with the scheme.
    Mr. Hurdasked the Minister of Agriculture if the sponsors of the Fatstock Marketing Scheme have yet informed him whether they propose to proceed at the present time; and what decision he has reached on holding an inquiry into the objections to this scheme which he has received.
    Sir T. Dugdale: The draft Fatstock Marketing Scheme has not been returned to the promoters. As I said in reply to a supplementary question on 17th June, the promoters have been invited to say whether or not, in the light of the objections to it, they wish to proceed with the Scheme. I expect their reply shortly. If they wish to proceed, a public inquiry will need to be held, and it will then be possible to determine when this should be.
    Sir W. Smithers: Will the Minister say what the difference is between the recent Government marketing scheme and the present one? Why have any marketing

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    schemes at all or any controls over sales? Is he aware that there are many reports that the Fatstock Marketing Scheme has been abandoned? Can he confirm or deny those reports?
    Sir T. Dugdale: I think that my hon. Friend does not understand the working of the Marketing Acts. Schemes under those Acts are producer schemes, and it is up to the promoters to submit schemes to the Government.

    Potato Marketing Scheme
    Sir W. Smithersasked the Minister of Agriculture whether he will now have reprinted the Potato Marketing Scheme, 1933.
    Sir T. Dugdale: The Potato Marketing Scheme, 1933, was published in the Potato Marketing Scheme (Approval) Order, 1933, Statutory Rules and Orders, 1933, No. 1186. This is still in print and available.
    Sir W. Smithers: Is the Minister aware that I am informed that people who are interested cannot get copies because it is not in print?
    Sir T. Dugdale: Copies of Statutory Rules and Orders can be obtained from Her Majesty's Stationery Office.

    Drainage Rates
    Mr. Deerasked the Minister of Agriculture if he is aware of the inequalities of drainage rates; and, in view of the representations on the subject, if he will set up an inquiry with a view to the introduction of legislation to remedy this.
    Sir T. Dugdale: Under the Land Drainage Act, 1930, drainage rates are based on the gross annual value for purposes of Schedule A of the Income Tax Acts. The correction of any inequalities in Schedule A assessments must await the re-valuation of these assessments.
    Mr. Deer: Is the Minister aware that, in the present circumstances, the very poorest people are being most hardly hit? I have letters from old-age pensioners and from people living in low-situated houses which are subject to the drainage rate while those living a little higher up are getting away scot-free with nothing being done about it.
    Sir T. Dugdale: I answered the Question on the Order Paper. The trouble is that a revaluation is unlikely to take place on practical grounds before the revaluation for general rating purposes is complete, which will not be before 1956.
    Mr. T. Williams: Can I ask the right hon. Gentleman when it is likely that the Government will do something about the recommendations of the Heneage Committee, which reported about three years ago?
    Sir T. Dugdale: So far as this system is concerned the Heneage Committee—and more recently the Waverley Committee—have advised in favour of present arrangements.
    Mr. Williams: Is the Minister aware that the problem referred to by the hon. Member for Newark (Mr. Deer) will not be dealt with by any recommendation of the Committee to which he himself refers?
    Sir T. Dugdale: I have given my answer, and any more detailed questions on this subject must be answered by my right hon. Friend the Chancellor of the Exchequer.
    Mr. Moody: Is the Minister aware that many thousands of people in Hull are paying the drainage rate to a canal authority, but the responsibility of the drainage upkeep has already been taken over by Hull Corporation? The people regard it as a swindle. Could the Minister do something about it?

    Crichel Down Inquiry
    Captain Kerbyasked the Minister of Agriculture what, under the terms of the agreement dated 6th March, 1951, is the earliest date upon which he can terminate the appointment of Messrs. Sanctuary and Son, estate agents of Bridport, as Crown receivers.
    Sir T. Dugdale: Three months' notice is required to terminate the appointment.
    Captain Kerby: Will my right hon. Friend give this firm three months' notice forthwith?
    Sir T. Dugdale: I have been considering the whole of this subject and have not yet reached a decision. I will deal with the question more fully during the debate.
    Mr. R. Bell: When my right hon. Friend is considering this subject, will he bear in mind that this firm on 25th April, 1953, wrote to the Commissioners of Crown Lands saying:
    "We now think that if the land"—
    that is, Crichel Down—
    "was offered back in lots to the adjoining owners the total price received would be about £21,000. Please do not let the Ministry know this."
    Hon. Members: Answer.
    Sir T. Dugdale: There is no point in anticipating the debate on the subject.
    Mr. Crouchasked the Minister of Agriculture what moneys have been paid to Messrs. Sanctuary and Son. Bridport, as receivers for Crown lands in Somerset and Dorset for each of the years ended March, 1952, 1953, 1954, first, for management and rent collection, secondly,

    Year ended

    Management and Rent Collection

    Travelling, etc. Expenses

    Architectural and Surveying Work

    Other Payments

    Total

    £

    £

    £

    £

    £

    March, 1952

    …

    603

    245

    1,003

    374

    2,225

    March, 1953

    …

    860

    170

    687

    131

    1,848

    March, 1954

    …

    973

    153

    394

    102

    1,622

    Lieut.-Colonel Bromley-Davenportasked the Minister of Agriculture how far, in view of the disclosures in the Crichel Down inquiry, he intends to review the arrangements obtaining under the present system of employing local firms of estate agents and surveyors as Crown receivers on a part-time basis.
    Sir T. Dugdale: The Commissioners propose to arrange for an independent review of the whole system to be undertaken as soon as possible.
    Lieut.-Colonel Bromley-Davenportasked the Minister of Agriculture whether he will publish a summary of the observations and explanations which he has received from those officials criticised in the Crichel Down inquiry which have caused him to take a less unfavourable view of their actions.
    Sir T. Dugdale: The personal observations and explanations from officials criticised in the Report were made at my request so that I could assess the conduct of those for whom I am answerable.
    for travelling and out of pocket expenses, thirdly, for architectural and surveying work and, lastly, in the form of any other moneys.
    Sir T. Dugdale: The firm are Crown receivers only in respect of the Bryanston Estate in Dorset. With permission, I will circulate in the OFFICIAL REPORT details of the amounts paid to them in the last three years.
    Mr. Crouch: Will my right hon. Friend say whether there has been an increasing amount of money paid to this firm during the last three years, and whether it amounts to thousands of pounds a year or hundreds? Could he tell the House that?
    Sir T. Dugdale: The totals are: 1952, £2,225; 1953, £1,848; 1954, £1,622.
    The following are the figures:
    They were confidential to me and there can be no question of publishing them.
    Lieut.-Colonel Bromley-Davenport: Is my right hon. Friend aware that there is a grave suspicion amongst many people in the country that the excuses given by these bureaucrats were extremely idle ones, and would it not be a good thing and fairer to the bureaucrat and the taxpayer who pays him that these excuses should be published, so that we can all judge how idle they are?
    Sir T. Dugdale: I cannot agree with that at all, but I would like to tell the House this. The purpose of the inquiry was to elicit the true facts, and the officials attended to assist this object and not to defend themselves against specific charges. When I received the report criticising the actions of persons for whose conduct I am responsible, I was bound, in fairness to them, to give them an opportunity of commenting before I decided on my assessment of their conduct.
    Mr. Crouchasked the Minister of Agriculture how much of the £34,000 authorised has been spent on equipment on Crichel Down; and whether he will now give instructions for the work to cease and for the whole area to be sold by public auction, subject to the existing tenancy agreement.
    Sir T. Dugdale: Apart from certain preparatory work, no expenditure has yet been incurred and no work is now being done. Any sale of this land would have to be subject to the existing tenancy agreement which contains the obligation to provide fixed equipment. I would, therefore, like more time to consider my hon. Friend's suggestion.
    Mr. Crouch: Is my right hon. Friend aware that I feel that in all quarters of the House his statement that no expenditure has been incurred will be very welcome? May I ask if he is aware that the majority of property, whether it is agricultural, industrial or urban property, which is sold by auction in this country is sold subject to tenancy agreement, and very little property is sold with vacant possession? Hence I do not see his difficulty.
    Sir T. Dugdale: I cannot add to my reply.
    Mr. T. Williams: If this 725 acres of land is to be fully and properly cultivated, and if buildings are necessary to ensure good cultivation of that 725 acres of land, will the right hon. Gentleman put nothing in the way of the Crown Commissioners to provide the requisite buildings?
    Sir T. Dugdale: As I said in answer to the Question, I should like more time to consider my hon. Friend's suggestion.
    Mr. Shinwell: In the course of his reply to a previous Question, the right hon. Gentleman referred to the possibility of a forthcoming debate on this matter. Has an arrangement been made for a debate, and if so, is it to be in Government time?
    Sir T. Dugdale: I gave an undertaking in reply to a Question earlier this month that there would be a debate, but as for the arrangements for the debate, that is the prerogative of my right hon. Friend the Leader of the House.
    Mr. Hurd: May we have it clearly established that the Commissioners of Crown Lands are constantly dealing in land and are, therefore, quite free to buy or sell, and indeed particularly to sell this Crichel Down property by auction with whatever tenancy restrictions there may be on it?
    Mr. T. Williams: Before the right hon. Gentleman replies, may I ask whether it is not also a statutory duty of the Crown Commissioners to invest most of the money at their disposal in the purchase of agricultural land?
    Sir T. Dugdale: The Crown Commissioners are engaged the whole time in the buying and selling of land, both urban and rural. They are really an entirely financial organisation dealing with land. It is perfectly true that they are in a position to sell land. But the tenancy agreement for Crichel Down contains an obligation to provide buildings and other fixed equipment, which may not be broken.
    Mr. Daines: Can the right hon. Gentleman give an assurance that he will await a final conclusion from the 1922 Committee before he arranges the debate?

    Farm Accidents
    Mr. P. Wellsasked the Minister of Agriculture if he is aware of the growing concern at the increasing incidence of accidents on farms; and whether he will take steps to bring the agricultural industry within the accident prevention provisions of the Factories Act.
    Sir T. Dugdale: I am aware of the general concern felt at the number of accidents on farms, and I share it; but I have no information to suggest that the number is increasing. My Department has discussed with the interests concerned certain suggestions for giving effect to the recommendations of the Cowers Committee in relation to agriculture, but I cannot say when it will be possible to introduce legislation.
    Mr. Wells: Could the right hon. Gentleman say when he will be able to reach a decision in this matter?
    Sir T. Dugdale: No, Sir. This is a question of legislation, and I cannot give any indication when it will be possible to introduce it.
    Dr. Stross: Is the right hon. Gentleman aware that in the United States several of the states have statutory safety committees in agriculture? Would it not be worthwhile if we were to imitate all the good things from there?
    Sir T. Dugdale: I will certainly take note of what the hon. Gentleman says.

    Great Chalvedon Hall, Pitsea (Requisitioned Land)
    Mr. Braineasked the Minister of Agriculture if he is now in a position to release land at present requisitioned at Great Chalvedon Hall, Pitsea.
    Sir T. Dugdale: Yes, Sir. The land will be released next Michaelmas when the licence to the present occupier expires.
    Mr. Braine: While thanking my right hon. Friend for that very welcome news, may I ask whether he is aware that I first approached his Department with regard to this land as long ago as August, 1953? Can he say why there has been such a long delay in relinquishing it?
    Sir T. Dugdale: Yes, this land is within the area of the Basildon new town, and it was necessary to consult the new town corporation. We also had to seek the advice of the Agricultural Land Commission.

  HOME-GROWN PITWOOD (COMMITTEE)
  Colonel Clarkeasked the Minister of Agriculture whether, in view of the Forestry Commission having revived the Pitwood Working Party, he will inform the House what recommendations they have made regarding the preparation, distribution and marketing of homegrown pitwood.
  Sir T. Dugdale: The Working Party has not yet reported.
  Colonel Clarke: Would the Minister bear in mind that there is a certain urgency about this matter, since the prices which the Forestry Commission got in the second half of last year were greatly reduced? Further, in their Report, the Commission said that the Report to which I referred in my Question was expected early this year.
  Sir T. Dugdale: The Working Party has had four meetings and an interim report is expected very soon.

  SEA DEFENCE WORKS, CANVEY ISLAND
  Mr. Braineasked the Minister of Agriculture when the work still proposed to be done on the sea defences of Canvey Island will be completed.
  Sir T. Dugdale: The main works for the protection of the Island have already been completed. Certain further improvement works, which have been discussed by the river board with the urban district council are to be carried out this year at an estimated cost of £34,000. Still further improvements to the sea defences in Canvey Island and elsewhere in Essex are under consideration by the river board for their 1955 programme.
  Mr. Braine: Can my right hon. Friend give an assurance that due weight will be given to the views of Canvey Island council by the river board before further work is done? Can he give a further assurance that Canvey Island will be represented on the river board?
  Sir T. Dugdale: I have no doubt that full weight will be given to the views of the urban council by the river board concerned, but I should like to have notice before I answer the second part of the supplementary.

  HOME DEPARTMENT

    Conviction, Stony Stratford (Appeal)
    Mr. Oliverasked the Secretary of State for the Home Department why he has refused to advise Her Majesty to grant a free pardon to Maurice Edwin Ekins, 45, Southville Road, Bedford, in view of the fact that this man was convicted of permitting a person to ride his motor-cycle while uninsured, an offence it was subsequently shown he did not commit and of which the Lord Chief justice said that the court regretted that they could not grant any process because, in the opinion of the court, certiorari did not lie in a case of this sort, but that it was a proper case in which the facts should be submitted to the Secretary of State; and if, in view of these circumstances, he will not reconsider his decision.
    The Secretary of State for the Home Department and Minister for Welsh Affairs (Sir David Maxwell Fyfe): It would be contrary to practice to state the reasons on which a decision with regard to the exercise of the Royal Prerogative of Mercy is based. I can only say that, after making full inquiry and consulting the Lord Chief Justice, I came to the conclusion that the facts were not such as would justify me in recommending the grant of a free pardon, and I can find no reason to modify that decision. In fairness to Mr. Ekins, I am circulating in the OFFICIAL REPORT a copy of a statement made by the Chairman of the Appeal Committee of the Buckinghamshire Quarter Sessions at the meeting of that Committee on 28th December, 1953.
    Mr. Oliver: Does the right hon. and learned Gentleman know that, in dealing with this matter, the Lord Chief Justice said that the court regretted that it could not provide the remedy which this man sought? Having regard to the implications of that statement, and the fact that it is not only a small matter concerning the driving of an uninsured motor cycle but a question whether documents purporting to sell the machine were forged—which is a very serious matter—I hope that the hon. and learned Gentleman will look into this matter.
    Sir D. Maxwell Fyfe: I do not want to depart from what I have said, and the statement which I am circulating in the OFFICIAL REPORT deals with that aspect of the matter. If the hon. and learned Member has any further point to make on it after he has read the statement, I shall be very glad if he will see me about it.
    Following is the statement:
    This appeal was heard by the Committee on 31st August last. It was an appeal by Mr. Ekins against his conviction by the Stony Stratford Justices for having permitted a young man who was uninsured to ride his motor bicycle.
    During the course of the hearing Mr. Ekins produced two documents (a receipt and an I.O.U.) in support of his contention that he had sold the motor bicycle before the other young man rode it. It was suggested in cross-examination that those documents were not genuine, and publicity was given to the suggestion. The Committee decided that, even assuming the documents to be genuine, they did not shake their view that there was no completed sale of the machine before the other young man rode it, and that the appellant's conduct otherwise amounted to "permitting"
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    him to ride it. Accordingly they dismissed the appeal. At the same time they gave directions that the challenged documents should be sent to the Director of Public Prosecutions so that he might have further inquiries made to see whether they were genuine or not.
    I thought I had made it clear at the time that we were not deciding that the documents were fraudulent but that they called for further inquiry. Through some misunderstanding publicity was given to the mistaken view that we had decided that the documents were fraudulent. The further inquiries made at the instance of the Director of Public Prosecutions established that they were not fraudulent, and in justice to Mr. Ekins (the appellant) publicity should now be given to the fact that any suggestion that he had been guilty of any offence in connection with these documents has been shown to be mistaken.
    There is one other matter which ought to be cleared up. The only question submitted to the Director of Public Prosecutions was whether further inquiries about the challenged documents would show them to be genuine or not. Most unfortunately publicity was given to the Director's words that "no criminal offence had been committed" as if they referred to the appeal in the road traffic case. Of course his decision was not referring to the road traffic offence at all, but simply to the question of whether the documents were fraudulent, and on that point, as I have already said, he found that they were not fraudulent.

    Glamorgan Fire Brigade (Dispute)
    Mr. R. Harrisasked the Secretary of State for the Home Department if he will institute an inquiry into the recent unrest, demonstrations and strikes which have taken place among certain firemen in the Glamorgan County Fire Brigade.
    Sir D. Maxwell Fyfe: I understand that the question which gave rise to these troubles is under consideration through the machinery of the National Joint Council for Local Authorities Fire Brigades, and I should prefer to make no comment on this aspect of the matter.
    Mr. Harris: Will the Home Secretary bear in mind that although the dispute in Glamorgan has now been settled, thanks to some very resolute and courageous action by the county council, what has happened there has raised some very serious problems? It has now been definitely established that the Fire Brigades Union, by threats of physical violence, can stop firemen from turning out to fires? Does not he think that this would be very dangerous in a national emergency, and that urgent action is required by him? All this will be repeated in the Lancashire Fire Brigade, and possibly others.
    Sir D. Maxwell Fyfe: I still think that it would be better for me not to make any comment on this matter.
    Mr. Mellish: Is the right hon. and learned Gentleman aware that the hon. Member for Heston and Isleworth (Mr. R. Harris) is the general secretary of a break-away firemen's union?

    Accused Persons (Police Forms)
    Mr. Pageasked the Secretary of State for the Home Department whether he is aware that the Metropolitan Police practice of handing a small printed form to an accused person is an inadequate method of informing that person of his or her right to, and sometimes need of, legal aid; and what steps he will take to ensure that the information is more effectively given.
    Sir D. Maxwell Fyfe: I have no reason to think that the present arrangements are inadequate, but I shall be glad to consider any information which my hon. Friend may care to send me.

    Collecting Charities (Protection of Animals)
    Mr. Championasked the Secretary of State for the Home Department if he will recommend the appointment of a Royal Commission to inquire into the charities which are engaged in raising money from the public for the purpose of protecting animals from cruelty and providing for their treatment when sick, having special regard to the overlapping of these societies and to the amounts of the moneys subscribed which are used for salaries and administrative expenses.
    Sir D. Maxwell Fyfe: No, Sir. The collection of money for this particular charitable purpose does not involve special considerations which would justify a separate inquiry, and the general question of supervising collecting charities was carefully considered and rejected in 1927 by the Committee on the Supervision of Charities, and again in 1952 by the Committee on Charitable Trusts.
    Mr. Champion: Is the Minister aware that the Committee which was set up to consider these organisations reported to his right hon. Friend the Minister of Agriculture in the beginning of 1952 that it would be better, both in the interests
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    of the animals and the better use of the money so generously subscribed by the public, if their activities were combined? Is he further aware that nothing has been done in this regard up to the present time, and that recent events reported in this morning's Press with regard to the R.S.P.C.A. and, a little time ago, to the National Canine Defence League, point to the necessity for some action?
    Sir D. Maxwell Fyfe: The points raised by the hon. Member in his supplementary question are fresh ones. I shall be very glad to look into them.
    Mr. Snow: In this context, can the apparent somnolence of the hon. Member for Ayr (Sir T. Moore) be dealt with?

    Prisoner, Chelmsford (Divorce Proceedings)
    Mr. Wyattasked the Secretary of State for the Home Department why he refuses permission to Patrick Peter George Victor Harlowe, a prisoner in Chelmsford Prison, to start divorce proceedings.
    Sir D. Maxwell Fyfe: Prisoners are not ordinarily allowed to institute legal proceedings. Exceptions to this rule are made only in special circumstances and I can find no grounds for making an exception in this case.
    Mr. Wyatt: Why must the Home Secretary be so harsh in the exercise of his discretionary powers? I have sent him all the details of this case. Is not he aware that he would give this man a much better chance to start life afresh if he allowed him to go ahead with these proceedings?
    Sir D. Maxwell Fyfe: I never like discussing the facts of individual cases in the House, but a similar application made by the same prisoner during an earlier sentence was refused, and he did nothing about divorce proceedings during his two years of liberty before his present sentence.

    Air-Raid Shelters (New Buildings)
    Sir R. Aclandasked the Secretary of State for the Home Department what provisions exist for requiring or encouraging building owners, whether private individuals, limited companies, or

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    public institutions, to incorporate reinforced basements in the buildings which they put up so as to serve as air-raid shelters in the event of hostilities; how many buildings with such reinforced basements have been erected in the last two years for which figures are available; and what provisions are made as to payment of part or all of any additional cost which may be involved in reinforcing the basements of such buildings.
    Sir D. Maxwell Fyfe: There are at present no powers to require the incorporation of reinforced basements in new buildings, and there is no provision for the payment from public funds of any part of the additional cost where such precautions are incorporated voluntarily by a developer.
    Applicants for building licences have in suitable cases been invited by my right hon. Friend the Minister of Works to incorporate such structural precautions, but I am unable to say how many buildings with reinforced basements have been erected in recent years.
    The desirability of having a general requirement to incorporate structural precautions in new buildings has been considered from time to time, both by the late Government and by the present Government, and the matter will be re-examined as part of the general review of Civil Defence plans which is now proceeding.
    Sir R. Acland: Is it to be wondered that ordinary people are not wildly enthusiastic about voluntary Civil Defence duties when the Government make such a very dim answer in connection with such an obvious precaution as this?
    Sir D. Maxwell Fyfe: I do not think so. There is plenty for them to do, apart from this.
    Mr. Noel-Baker: In his review of the matter, will the right hon. and learned Gentleman regard it as a major policy objective to increase the number of such reinforced basements and to make them available in peace-time as parking places for cars?
    Sir D. Maxwell Fyfe: I shall certainly see that that matter is considered.

    Imprisonment of Oscar Wilde (Official Correspondence)
    Lieut.-Colonel Hydeasked the Secretary of State for the Home Department (1) why access to the official correspondence in his Department relating to the imprisonment of Oscar Wilde continues to be restricted; and whether he will now deposit these papers in the Public Record Office;
    (2) why he has refused to allow the hon. and learned Member for Belfast, North to see the papers relating to the imprisonment of Oscar Wilde, which are in his official custody.
    Sir D. Maxwell Fyfe: Papers relating to ex-prisoners are withheld from public inspection until sufficient time has elapsed to diminish the possibility of their disclosure giving pain to living persons. I do not think I would be justified in making an exception to this practice in the case of Oscar Wilde.
    Lieut.-Colonel Hyde: Is my right hon. and learned Friend aware that this correspondence is of considerable interest to students of English penal history and prison conditions in the last century? It concerns a matter which occurred almost 60 years ago, and should it not conform to the declared policy of my right hon. and learned Friend's predecessor in office, that departmental papers down to 1900 should be made available for public inspection?
    Sir D. Maxwell Fyfe: I cannot think that the aspect mentioned by my hon. and gallant Friend in his first sentence would be the primary motive for the disclosure of these documents. With regard to the rest of his supplementary question, I must maintain the position as I have stated it.
    Mr. Shinwell: Does not the right hon. and learned Gentleman realise that the hon. and gallant Member who asked this Question is a prolific writer of articles and books on this subject and is only anxious to augment his own income?
    Sir D. Maxwell Fyfe: I think it goes far beyond the Question to discuss the merits and the interests of my hon. and gallant Friend.
    Lieut.-Colonel Hyde: Is my right hon. and learned Friend aware that my request

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    was made for the purpose of conducting a genuine piece of historical research and, further, that access to such papers much later than the year 1897 has been granted to other applicants? Why should an exception be made in this case?
    Captain Orr: On a point of order. Is not the imputation made by the right hon. Gentleman against my hon. and gallant Friend a thoroughly improper and quite unwarrantable one?
    Mr. Shinwell: Do you appreciate, Mr. Speaker, that I was only anxious to point out that hon. Members are frequently in the position of having to augment their incomes?
    Mr. F. Harris: Am I not right in thinking that it is the desire of hon. Members opposite to augment their incomes at the present time?
    Mr. Wyatt: Is not the Home Secretary aware that he is creating a precedent in refusing his hon. and gallant Friend or anybody else access to the documents in question? In the ordinary way, would they not already have gone to the Public Record Office? Surely, he must give the House some explanation why he is for ever going to deny people research into this very interesting historical event?
    Sir D. Maxwell Fyfe: I gave the House what I think is a perfectly reasonable explanation, namely, that I must consider the possibility of disclosure giving pain to living persons. By that I must stand.
    Mr. Stokes: How does the right hon. and learned Gentleman reconcile the attitude he is now adopting to the attitude taken in connection with another matter, where the persons are living and were caused great inconvenience?
    Sir D. Maxwell Fyfe: That was a different matter. That was concerned with trials that were held in camera for reasons of security. The late Government agreed to relax those conditions when the security requirements disappeared, and I have followed their procedure.
    Lieut.-Colonel Hyde: In view of the unsatisfactory nature of my right hon. and learned Friend's reply, I beg to give notice that I shall raise this matter on the Adjournment.
    Captain Orr: On a point of order. I wonder, Mr. Speaker, if you would give a Ruling on my point of order in view of the imputation?
    Mr. Speaker: It is not proper for an hon. Member to make an imputation against another, or to state that a motive that has not been avowed by a Member has actuated him. It is in order for hon. Members to ask questions about matters in which they are personally interested, and, therefore, I do not think that in this case a point of order arises.
    Mr. Shinwell: You do appreciate, Mr. Speaker, that there was no question of an imputation against the hon. and gallant Member? In such cases as this, is it not the practice to disclose one's interest?
    Mr. Speaker: Not at Question time. I have ruled on this before. I found nothing wrong with putting down the Question, and I found nothing wrong in the remark.

    Pet Shops
    Mr. Peter Freemanasked the Secretary of State for the Home Department what information he has as to what local authorities have received or granted applications from keepers of pet shops under the Pet Animals Act, 1951; and, where licences have been granted, as to which local authorities have authorised their officers or veterinary surgeons or practitioners to inspect premises used as pet shops; and how many prosecutions have been instituted for any offence under the Act.
    Sir D. Maxwell Fyfe: The information referred to in the first two parts of the Question is not available. The number of prosecutions in England and Wales in 1952 and 1953 was nine in all.
    Mr. Freeman: Is the Home Secretary satisfied that the several undesirable factors dealt with during the passage of the Measure are being adequately dealt with? Has he any information as to how animals and birds that remain unsold at pet shops are finally disposed of?
    Sir D. Maxwell Fyfe: I am afraid I cannot answer the latter part of the supplementary question. As far as my information goes the working is satisfactory, but I shall very willingly look into any points the hon. Member sends me.

    Police (Motor-assisted Pedal Cycles)
    Mr. Draysonasked the Secretary of State for the Home Department what consideration has been given to the question of providing miniature motors for members of the police force who have to use bicycles while on duty.
    Sir D. Maxwell Fyfe: Lightweight motor cycles are used for patrolling by a number of forces where from the size of the beat or other considerations they are considered preferable to a pedal cycle. As regards motor-assisted pedal cycles, the Commissioner of Police informs me that, having considered the advantages and disadvantages, he has come to the conclusion that on the whole they are not suitable for police purposes.

    Prisoners (Dietary Punishments)
    Mr. Wyattasked the Secretary of State for the Home Department why the punishment of being placed on a diet of bread and water is given to prisoners with a case history of tuberculosis.
    Sir D. Maxwell Fyfe: No prisoner undergoes dietary punishment unless he has been passed fit for it by the prison medical officer.

    Coroners' Inquests
    Mr. Wadeasked the Secretary of State for the Home Department whether he will introduce legislation to amend or curtail the powers of a coroner to commit a person for trial on the findings of the coroner's jury.
    Sir D. Maxwell Fyfe: I can hold out no prospect of introducing legislation for this purpose.
    Mr. Wade: Without wishing to cast any reflection upon coroners as such, may I ask the right hon. and learned Gentleman if he agrees that there are many strange anomalies in the existing system of coroners' inquests? Would he also agree that there may be very real injustice done to a man named in the verdict of a coroner's jury who may thereby be committed for trial on as serious a charge as murder or manslaughter, and will he have regard to the fact that the ordinary procedure of our courts of law is not followed and the ordinary rules of evidence, which are designed to safeguard an accused person, do not apply at coroners' inquests?
    Sir D. Maxwell Fyfe: I think the hon. Member has a very serious point. Quite obviously, what was stated by the Wright Committee in 1936 has much importance, and I shall consider the matter, but it would not have been right to have held out the prospect of legislation at the moment. I will carefully consider what the hon. Gentleman says.
    Mr. Isaacs: Does not this Question justify looking up and examining again the Report of the Committee of inquiry into inquests of some years ago?
    Sir D. Maxwell Fyfe: I am grateful to the right hon. Gentleman. I referred to it in shorthand terms by the name of its Chairman as the Wright Committee. That is the Committee he has in mind. I said that its Report was well worthy of consideration.

    Car Parking, Islington
    Mr. E. Fletcherasked the Secretary of State for the Home Department if he will instruct the Metropolitan Police not to interfere with residents in Petherton Road, Islington, which is an unusually wide road, parking their cars in the middle of the road there during the night.
    Sir D. Maxwell Fyfe: It is not within my province to instruct the police when to deal with offences and when not. I understand that a number of the residents in this road have complained to the borough council of the indiscriminate parking of vehicles there, and the police have warned a number of persons, both residents and non-residents, for not having the vehicles properly lighted at night.
    Mr. Fletcher: Will the right hon. and learned Gentleman bear in mind that the nearest garage is about a mile and a half away and that it is a great convenience to people in that road to leave their cars in the road, which is very wide and tree lined?
    Sir D. Maxwell Fyfe: I am very tempted to ask the hon. Member to use the wide road for having a meeting of his constituents who take the other view.

    Wandsworth Gaol (Conditions)
    Lieut.-Colonel Liptonasked the Secretary of State for the Home Department whether he will set up an independent committee of inquiry into the present conditions at Wandsworth gaol.
    Sir D. Maxwell Fyfe: No, Sir. I do not think that any useful purpose would be served by such an inquiry.
    Lieut.-Colonel Lipton: Is the Home Secretary aware that the potentially dangerous atmosphere that prevails at Wandsworth is aggravated by just the kind of attitude of which he has given us an example today? Does he not think that an independent inquiry would at least uncover some of the facts and indicate what immediate action can be taken to improve what is easily the most horrible prison in the whole country?
    Sir D. Maxwell Fyfe: I am satisfied that there is available to me through the Prison Commissioners adequate and, indeed, exhaustive information about the conditions at Wandsworth. The prison is now quiet, and it would be a pity to disturb that quiet by an inquiry that would inevitably take place on the spot and could not but produce a considerable ferment.
    Mr. Yates: Is the right hon. and learned Gentleman aware that in the Adjournment debate the answer given by the Joint Under-Secretary in regard to the appalling conditions that were disclosed was totally unsatisfactory? Therefore, will the Home Secretary not seriously consider the suggestion made by the Estimates Committee two years ago that there should be an inquiry into conditions such as are disclosed at the prison?
    Sir D. Maxwell Fyfe: I cannot agree that what my hon. Friend said was unsatisfactory. But I am quite unsatisfied with prison conditions in this country, as every Home Secretary for the last 10 years has been. I am doing my utmost to find improvements in every way possible within the financial limitations.

  WELSH RURAL DISTRICTS (REPORT)
  Mr. G. Robertsasked the Secretary of State for the Home Department (1) if he will make a statement indicating the progress made in implementing the promises held out in Command Paper No. 9014, Rural Wales;
  (2) when legislation providing special assistance towards the improvement of
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  unclassified and unadopted roads as announced in paragraph 33 of Command Paper No. 9014, Rural Wales, will be introduced.
  Sir D. Maxwell Fyfe: The investigations by the Welsh Sub-Commission of the Agricultural Land Commission and the Welsh Agricultural Organisation Society are making good progress and the latter is nearing completion. The National Agricultural Advisory Service are doing much useful work in advising Welsh upland farmers, particularly in the matter of the production and utilisation of grass. A number of proposals for water supply are being examined in the light of the policy announced in the White Paper, and the number of houses completed in Welsh rural districts is increasing. Good progress is being made in electrification in rural Wales. It will not be possible to introduce legislation relating to unclassified and unadopted roads in the present Session.
  Mr. Roberts: Is it not a fact that it is some seven months since this Paper was produced and that the delay in implementing these minor concessions must cause acute distress in Wales?
  Sir D. Maxwell Fyfe: There has been an advance in all the directions I stated, and I shall certainly do everything I can to accelerate the tempo.
  Mr. Callaghan: In view of the fact that a promise was made to introduce legislation this Session to give relief to agricultural Wales in the matter of unclassified roads, will not the right hon. and learned Gentleman tell us why it is not forthcoming?
  Sir D. Maxwell Fyfe: I cannot go further than I have. Legislation is in course of preparation at the present time, and much work has been done on it.
  Mr. Callaghan: It was promised this Session.
  Mr. Watkins: Will the right hon. and learned Gentleman consider publishing in the Government White Paper on action in Wales, which is to be published before long, a statement of what has been done in Wales since the publication of the White Paper, "Rural Wales"? Will he be good enough to listen to my speech on the Adjournment tomorrow night? I am not satisfied with what has been done about electrification in rural Wales.
  Sir D. Maxwell Fyfe: I am terribly sorry about tomorrow night. I have promised to be at a police passing out parade. However, I shall certainly read very carefully in the OFFICIAL REPORT what the hon. Gentleman says.

BUSINESS OF THE HOUSE
Mr. Attlee: May I ask the Lord Privy Seal if he will state the business for next week?
The Lord Privy Seal (Mr. Harry Crookshank): Yes, Sir. The business for next week will be as follows:
MONDAY, 28TH JUNE—Committee stage: Finance Bill.
TUESDAY, 29TH JUNE—It is hoped to conclude the Committee stage of the Finance Bill at a reasonable hour; and afterwards take:
Report and Third Reading: Slaughterhouses Bill [Lords];
Consideration of Lords Amendments: Housing Repairs and Rents Bill;
Motions to approve Draft Fertilisers Schemes.
WEDNESDAY, 30TH JUNE, and THURSDAY, 1ST JULY—Report and Third Reading: Mines and Quarries Bill;
Motions to approve the Draft Wool Textile Industry Orders.
If, however, the Mines and Quarries Bill, Third Reading, is not concluded by Thursday night, we propose to finish it on FRIDAY, 2ND JULY, and then to take the Report and Third Reading of the Baking Industry (Hours of Work) Bill.
Sir W. Smithers: When does my right hon. Friend expect to arrange for a debate on the Crichel Down inquiry?
Mr. Crookshank: I said that it would be as soon as we could conveniently arrange it, but it will not be next week.
Mr. Blenkinsop: Could we be told whether the Food and Drugs Bill is to be postponed until next Session?
Mr. Crookshank: It is not being taken next week.
Sir H. Williams: As two private Bills have been put down for 7 o'clock on Wednesday, and as, I understand, the first of them may run for a considerable time,
594
is it the intention to move to suspend the rule so that both these private Bills can be dealt with on Wednesday evening?
Mr. Crookshank: That point had not been put to me. I shall have to consider it.
Mr. Beswick: Would the right hon. Gentleman not admit that this play-acting about the Food and Drugs Bill is getting just a little strange? Will he tell us whether we are going to have this Bill?
Mr. Crookshank: I am dealing with next week's business and it is not being taken next week. There certainly is not any play-acting. It appears on the Orders of the Day.
Mr. H. Morrison: We are now well into June and are getting near to July and the end of the Session. The Government put these Bills into their intentions. Up to a point, it is quite fair to say, "It is not being taken next week," but is this excuse not getting a little bit thin now? Would the Government not have had time to complete their intended legislative programme if they had not been fooling about with the mischievous and irritable Television Bill?

KING GEORGE VI STATUE
The Minister of Works (Sir David Eccles): With your permission, Mr. Speaker, I desire to make a statement about the memorial statue to His late Majesty King George VI.
As the House knows, it was decided that part of the King George VI National Memorial Fund should be devoted to the erection of a statue in a noble setting in London. A committee of the Memorial Fund under the chairmanship of Sir Leslie Boyce, then Lord Mayor of London, appointed Mr. William McMillan as the sculptor, and Mr. Louis de Soissons as the architect. A site was chosen between Nos. 2 and 3, Carlton Gardens overlooking the Mall, and the Commissioners of Crown Lands are willing to make land available. The plan provides for a staircase leading down from the Gardens to the Mall and for the statue to be sited at the top of the stairs looking out over St. James's Park. Her Majesty the Queen has graciously approved the scheme. The Memorial Fund is hopeful that the statue can be unveiled towards the end of next year.

MEMBERS' EXPENSES (GOVERNMENT DECISION)
The Prime Minister (Sir Winston Churchill): I will, with your permission, Mr. Speaker, make a statement.
On 14th April, I said to the House:
"There is no doubt…that a number of hon. Members are oppressed by serious difficulties because heavy and necessary expenses absorb so much of the Parliamentary salary."—[OFFICIAL REPORT, 14th April, 1954; Vol. 526, c. 1151.]
But I also said that, in the view of Her Majesty's Government, it would not be right in present circumstances to proceed in the particular manner recommended by the Select Committee—namely, to increase the Parliamentary salary to £1,500 a year. That view did not prevail when an all-party Motion was set down in Opposition time to test the opinion of the House on a free vote on 24th May.
By long Parliamentary practice, a Motion which calls for a money charge but which is unsupported by a recommendation from the Crown, can be debated in the House only as an expression of Parliamentary opinion, and cannot effectively impose that charge. The responsibility for recommending a money charge rests inseparably with the Crown acting through the Executive.
While the opinion of the House remains on record, it cannot be said that there is at present that wide measure of agreement in the House which I put forward in my statement of 14th April—with, I think, general acceptance—as being desirable on this particular issue. Her Majesty's Government do not, therefore, feel justified in present circumstances in pressing forward with the steps necessary to put the increase in salary from £1,000 to £1,500 a year into effect.
However, we still adhere to the view that a number of hon. Members are oppressed by serious financial difficulties, and we should be prepared forthwith to discuss with the leaders of the Opposition parties an alternative method of dealing with this particular problem.
The Government are sympathetic to the opinion recorded by the House on 24th May that legislation should be introduced to improve the financial position of Junior Ministers. But there is no
596
opportunity to introduce such legislation before the Summer Recess.
The Select Committee's recommendations about pensions have been referred to the Trustees of the Members' Fund, as resolved by the House on 24th May. The Trustees have already begun their study of the problem and the Government will give full and sympathetic consideration to their report.
Mr. Attlee: We have heard with very great regret the statement of the Prime Minister. While there is the technical point about the need for a Government Resolution on a matter involving finance, it has been the practice to accept the decision of the House of Commons. During the time of the Government of which I was Prime Minister, there were two outstanding occasions. One was the suspension of a Member and the other was the question of capital punishment. In both those cases the House took a view contrary to that held by the Government, but the Government felt in duty bound to accept the opinion of the House of Commons.
This is especially a House of Commons matter, and it seemed to us peculiarly appropriate that it should be decided by the House of Commons, and when there was a substantial majority for a point of view which had, in fact, been recommended by a very responsible Committee of this House, we expected that the Government would accept it.
The Prime Minister has suggested that we should explore alternatives, but the fact is that those alternatives were very fully explored by the Select Committee. They were also raised in debate, and the opinion of the House was against them.
The point is also put forward that the matter of pensions, on which I think many Members in this House feel very acutely, should be further considered by our own Committee. But our own Committee are quite unable to proceed with any practical proposals on this matter until they know what is to be done with regard to the remuneration of Members.
I am, therefore, bound to say that, while I should be perfectly ready to enter into discussions with the Government as to how best to implement the decision of the House of Commons. I could not bind

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my self to discuss any alternatives without a very full discussion with my colleagues on this side of the House.
Mr. Daines: Does not the Prime Minister think that the Government are guilty of misleading the House, in the two debates which we have had, in not making it clear that they were prepared and bound to accept the dictate of the 1922 Committee in arriving at their final decision?
The Prime Minister: No, Sir.
Mr. H. Morrison: May I ask the Prime Minister whether he recalls the circumstances of the Garry Allighan case in which, on the report of the Committee of Privileges, I, as Leader of the House at that time, advised the House not to expel because we did not like the idea of expelling, and the right hon. Gentleman himself took part in the debate? The result of that was that the Government's view was not accepted by the House, and at once, when I was questioned, if I recall rightly. I said that we had given the House a free vote and any Government that gave the House a free vote must abide by the consequences. The same thing happened on capital punishment, when my right hon. Friend the Member for South Shields (Mr. Ede) advised the House against the Amendment, and we had to accept the result, as we did in the right hon. Gentleman's Government in regard to amusements for soldiers at theatres.
May I put it to the Prime Minister, therefore, in view of the fact that he himself said in his Parliamentary statement that this was a House of Commons matter, and that there was a free vote of the House, that there is a clear obligation on the Government to accept the decision of the House of Commons in the matter?
The Prime Minister: I have, of course, not examined in detail the precedents quoted by the right hon. Gentleman, but neither of them touches the financial question, and therefore the constitutional points which I have put did not arise. There is a definite distinction in the character of the questions. Moreover, if my recollection serves me rightly, no further action was required from the executive Government of the day in consequence of the two votes passed by the House in the cases which the right hon.
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Gentleman has mentioned. Events merely rolled upon their course. In this case, definite, responsible, constructive action involving a charge upon the public is called for from the Government.
Mr. Morrison: Further action was required on the Criminal Justice Bill. It is true that nothing came of it, but there was further action. May I put it to the right hon. Gentleman that this is a new doctrine? When a free vote is given to the House and an expression is given by a majority of some substance, two questions arise which call for some answer: why give a free vote at all, and, if it is given, why is it, the vote having been given, that the Government then proceed to accept the view of the minority and not the majority?
The Prime Minister: The Motion which was put down was put down by hon. Members of several parties in Opposition time. We had no power to prevent it. It was the right of Members of all parties to put it down, and personally I was very much in favour of a free vote being given on the subject, but that does not remove the fact that the Government of the day, representing the Crown in the matter, have the constitutional responsibility for any proposal involving a charge upon the public, and an expression of opinion by the House does not relieve them of their responsibility.
Mr. Attlee: The right hon. Gentleman will remember that it was as a matter of courtesy that the Opposition provided a Supply Day for the purpose of discussing the Report by a Committee set up by this House—an important Committee representative of Members on both sides—to deal with this matter, and that there was, therefore, an obligation on the Government to give time to discuss the Report. It was purely a matter of courtesy that we allowed it to be taken in our time.
The Prime Minister: I think that it would be better, in the general interest, that the right hon. Gentleman should carry out the course he proposed and consult his friends upon the issue.
Mr. Daines: The right hon. Gentleman should consult his friends.
The Prime Minister: There may be divided opinions at that meeting, as there

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often are in these discussions, but I think that it would be better that he should discuss the matter with his friends. [HON.MEMBERS: "No."] That is what he said he was going to do, and we shall not settle it by shouting. I think that would be a very great mistake on an issue of this kind. I think that it would be better that he should discuss the matter with his friends, and then give the decision at which he arrives.
Mr. Attlee: We shall consider what is the right course to take in view of the fact that the Government have disregarded the decision of the House of Commons.
Mr. Godfrey Nicholson: Is my right hon. Friend aware that, whatever may be the rights and wrongs of this controversy, the prestige of the House as a whole, and Parliament as a whole, is suffering severely?
Hon. Members: Answer.
The Prime Minister: The prestige of Parliament is a matter about which I feel always very deep concern; but I am quite sure that special restraint and composure should be imposed upon us all during the discussions which take place.
Mr. G. Thomas: In view of the fact that the Government took the unusual step of taking the Whips off for the Division to which the Prime Minister has referred, and in view of the fact that the Treasury Bench had already indicated that they wished to obtain the will of the House upon this subject, does not the Prime Minister think it unfortunate that he is now telling the House and the country that he has come down on the side of the rich men; and is it not unfortunate, and by no means a laughing matter, that hon. Members will not be able to conduct their business as Members of the House in the manner in which they ought to be able to do it?
The Prime Minister: I earnestly hope that if the proposal of the Government should eventually be accepted—[HON. MEMBERS: "What is it?"]—if the alternative proposal that I mentioned in my statement is accepted by the Opposition—some very definite results will accrue, which will meet the undoubted difficulties which are felt on both sides of the House.
Mr. M. Lindsay: In view of the acknowledged financial difficulties of a number of hon. Members, amongst whom I do not include myself, will my right hon. Friend lose no time in producing these alternative proposals so that they can take effect before the House adjourns at the end of this summer?
The Prime Minister: My hon. Friend has no doubt noticed that I inserted the word "forthwith"; I said we were
"prepared forthwith to discuss with the leaders of the Opposition parties an alternative"
for the solution of this problem.
Mr. Lewis: Is it not a fact that a Committee has been sitting and has considered all the alternative proposals, that the Government have put their alternative proposals before the House, that the House has turned down all those proposals by an overwhelming majority, and that a very small group of big company directors, representing the vested interests of this country, are doing their utmost to prevent working men from coming into this assembly?
Mr. Logan: I have been considering this morning the points which might be raised today and I wish to ask your advice, Mr. Speaker. I do so now. I am at a loss to understand how such a position can be reached under the British constitution. The House having voted a £500 increase in Members' salaries, I submit that, according to our constitution, the Government are not entitled to submit an alternative proposition. In my opinion, it is the Government's duty to bring in a Supplementary Estimate to meet the cost. The will of the House has already been decided on a free vote and, therefore, without the consent of Members we can accept no alternative.
Mr. Speaker: It is a point in our constitution which has been adhered to for centuries that the initiative for proposing expenditure must come from the Crown through the Executive. I do not know whether I express the will of the House on this matter, but my own view is that nothing is to be gained by pursuing it now.
Mr. Fernyhough: On a point of order. I wonder what kind of argument can be advanced when legislation to increase the salaries of Parliamentary Secretaries is introduced, when the Prime Minister

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and his 1922 Committee are prepared to deny similar treatment to ordinary Members.
Mr. Speaker: That is not a point of order and it will not arise until the Bill is introduced.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: I must ask the House to pass to the next business.
Mr. Lewis: On a point of order. I beg to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a definite matter of urgent public importance, namely,
"The failure of the Government to acknowledge and implement a decision of the House arrived at after the Government had granted a free vote."
I charge the Government with refusing to follow the acknowledged and constitutional practice of accepting a free vote, with evading the responsibility of their duties to the House and with giving way to a group of big businessmen who have put pressure upon them.
Mr. Speaker: The hon. Member for West Ham, North (Mr. Lewis), has asked me for leave to move the Adjournment of the House on a definite matter of urgent public importance, namely,
"The failure of the Government to acknowledge and implement a decision of the House arrived at after the Government had granted a free vote."
I cannot find this within the Standing Order. It is by no means urgent and could be discussed at any time.

ORDERS OF THE DAY

  FINANCE BILL
  [Progress, 16th June]
  Considered in Committee.
  [Sir CHARLES MACANDREW in the Chair]

  FINANCE BILL

    Clause 17.—(RIGHT TO CARRY BACK LOSS SUSTAINED IN LAST YEAR OF BUSINESS.)
    3.57 p.m.
    Mr. Geoffrey Stevens: I beg to move, in page 15, line 30, after "trade," to insert" profession or vocation."
    The Chairman: I think it would be convenient if we also discussed the next two Amendments in the hon. Gentleman's name—in page 15, line 34, leave out from "investments," to "shall," in line 39, and insert:
    "the rent of property let arising in that year and the annual value of property charged under Schedule A in respect of that year."
    and in page 15, line 41, leave out "the said Case I." and insert "Schedule D."
    Mr. Stevens: This Clause is a small but welcome concession which entitles a business which makes a loss in the last years of its life to carry back that loss, for Income Tax purposes, into the three years preceding the final year of business. It is a small but welcome concession but is somewhat restricted, and I wonder whether my right hon. Friend the Chancellor will look at these three Amendments, in the names of my hon. Friends and myself, which seek to widen the provisions.
    Subsection (1) begins by referring to "a trade, profession or vocation." In subsection (3), where effect is given to the intended relief, the reference in line 30 is only to "a trade." To go a little further, we see that the profits against which the loss may be set are limited to the trading profit, interest or dividends, but only the interest or dividends which would fall to be taken into account as trading receipts.
    So far as the first Amendment is concerned, although a taxpayer may have several sources of income which for administrative purposes are assessed for taxation under different schedules, he has,

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    in fact, only one income. Although this may be derived from different sources, it seems to me illogical, if he makes a loss in a returnable year from one source of income, that he is restricted to claiming relief against the profits of that particular source of income.
    I should be glad if my hon. Friend would look at the matter and see whether it is the Government's intention that relief on losses should be restricted only to the same category of income, and whether he could not consider widening that concession by taking advantage of some of the Amendments which I have placed upon the Order Paper.
    4.0 p.m.
    The Economic Secretary to the Treasury (Mr. R. Maudling): I am not quite sure that I agree with my hon. Friend the Member for Langstone (Mr. Stevens) about subsection (3). I got the impression from him that he thought that the operative part of the Clause was subsection (3) whereas, of course, the subsection is confined to a very limited class of case indeed. The main part of the Clause is in subsection (1). The purpose of this Clause is to carry out a recommendation of the first Millard Tucker Committee, which was to the effect that business losses should not only be capable of being carried forward against non-business income but should be allowed to be carried back for three years against business income.
    Subsection (3) is really a narrow point and it deals only with investment companies. We have in mind the case where the holding of investments is part of the business of a company, and we think that any reasonable business losses in the terminal year should be set off against the investment income in the preceding three years. What my hon. Friend is asking us to do is to extend this to all forms of investment income, and my right hon. Friend does not think he can do that. As my hon. Friend is aware, last year we made a concession on the lines suggested by the Millard Tucker Committee about carrying forward business losses against non-business income for one year.
    Mr. Stevens: I find this Clause very difficult to follow. My hon. Friend says that subsection (3) is limited to investment companies. Will he point to
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    the words in the subsection which are intended to have that effect?
    Mr. Maudling: I should have thought that the wording of subsection (3) as a whole indicates that. Subsection (1), which is the operative part of the Clause, says:
    "Where a trade, profession or vocation is permanently discontinued, and any person then carrying it on, either solely or in partnership, has sustained therein a loss to which this section applies (hereinafter referred to as a 'terminal loss'), then subject to the provisions of this section he may claim that the amount of the terminal loss shall, as far as may be, be deducted from or set off against the amount of profits or gains on which he has been charged…"
    If my hon. Friend studies the subsection, he will find that business losses can be carried back against business profits, and business profits under subsection (3) can be taken to include investment income when the business is an investment company. We have already enabled people to carry business losses forward for one year against non-business income, and now we are carrying out another recommendation of the Millard Tucker Committee which has to do with terminal business losses being considered for setoff against income over the preceding three years. We have gone as far as the Committee recommended, and my right hon. Friend does not feel that he would be justified in going beyond the recommendation of the Committee.
    Amendment negatived.
    Mr. Maudling: I beg to move, in page 16, line 7, after "reduced," to insert:
    "by an amount applied in making any payment other than a payment of dividends."
    The point is again a very narrow one, though I think it is important. In calculating the profits of the preceding years against which terminal losses may be offset, it is clearly right to exclude distributions by way of dividends because the company has not borne the tax but the individual shareholder has done so. Similarly, when computing actual terminal losses, it is clearly right to disregard the amount distributed, because tax has not been paid by the company but by the shareholder who receives the distribution. In both these cases, in the terminal year and in the year against which a loss is being offset, the profit of the company is to be reduced by the amount distributed by way of dividend.

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    It has been represented to my right hon. Friend by certain professional bodies that there is really no reason why distribution made in the intervening years should intervene to prevent terminal losses from being carried back to the preceding year. That is a valid point put forward by the professional bodies, and my right hon. Friend is prepared to accept The purpose of this Amendment is, in fact, to give the effect which I have been describing.
    Mr. Glenvil Hall: I have only one query to put to the Economic Secretary. He did not entirely make clear what other payments the Government have in mind. He made the point about dividends and the fact that the shareholders pay the tax thereon, but what other intervening payments—I think that was the phrase the hon. Gentleman used—has he in mind? I have no doubt whatever that there are such payments, but I wonder whether he could clarify that point before we proceed.
    Mr. Stevens: Before my hon. Friend answers that question, may I put another one to him? I am a little puzzled by the qualifying word in the line immediately following that in which the Amendment is to be made, where it says: "like reduction." "Like" must clearly be the qualifying word. "Like" normally means the same thing, but I am not quite sure what is intended by the word "like" here. I was wondering whether a better word to use would not be "similar" or "corresponding." I rather think that that would be more what my hon. Friend has in mind. I should be glad if he would look at the point.
    Mr. MaudlingI will certainly look at it, but I think the word "like" as a matter of art does have the effect which my hon. Friend has in mind. In reply to the right hon. Gentleman the Member for Colne Valley (Mr. Glenvil Hall), I must confess that offhand I cannot quote to him a payment which would be within the meaning of those words. I do not think there are likely to be many.
    Mr. Glenvil Hall: It is a saving phrase?
    Mr. Maudling: It is a saving phrase.
    Amendment agreed to.
    Mr. Anthony Crosland: I beg to move in page 16, line 22, after "sustained," to insert "or profit earned."
    The Chairman: I think this Amendment should go with the two which follow in lines 26 and 32, also in the name of the hon. Gentleman the Member for Gloucestershire, South (Mr. Crosland) and his friends
    Mr. Crosland: I agree that the three Amendments have the same object, which is concerned with the concessions made by this Clause.
    We on this side of the Committee do not object to the general principle which, as has been pointed out, follows exactly the recommendations of the Millard Tucker Committee. It appears to me to be acceptable that when trading is permanently discontinued the company should be allowed to charge its losses in the last year against the profits of the three previous years. It must be added, however, that it is an entirely new principle for losses to be carried backwards. It has been an accepted principle that losses in one year can be offset against other income in that year, but it is a new principle for those losses to be offset against the previous years' profits
    We have no objection to the principle. The point we raise in these three Amendments relates to the terminal loss. We are disturbed at the manner laid down in the Clause for computing it. From the relevant subsection, (5, a and c), it appears that the terminal loss is defined. ignoring for a moment the capital allowances, as the aggregate of two separate sums, the loss sustained in the period up to 6th April of one year and the loss made in the period after 6th April in that year. We could raise no possible objection if losses were made both in period A and period B, so to speak, but we are disturbed at the position if losses were made in one period and a profit was made in the other. That is not at all unlikely to happen, and we want to be quite clear about it.
    Suppose that in the 10 months of the terminal period that fell before the end of the accounting year a profit of £4,000 were made, and that in the last two months of the period, after the accounting year, there were a loss of £2,000. Taking the year as a whole, there would be a

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    profit of £2,000, but as the Clause is drafted, there would be a loss of £2,000. That seems a curious result. In arriving at the definition of "terminal loss," the profit made in the first period is ignored, although by any common-sense standard one would set the loss in one part of the year against the profit made in the other part of the year. We should be grateful for some clarification of this point.
    There is something to be said for the Clause. We want businesses in low water to be encouraged to take risks so as to diminish the loss, but as the Clause is worded it is unduly vague in its definition of "loss." Our Amendments would define the loss in the last 12 months as gross loss less profits, which might turn what would otherwise he a terminal loss into a terminal profit
    4.15 p.m.
    Mr. Douglas Houghton: I wonder whether the Chancellor has taken the words of the Tucker Committee's Report too literally in carrying out the recommendation in paragraph 81. The last three lines of that paragraph, printed in heavy type, say:
    "…there should be provision under which the owner of a business may carry back a loss incurred in the last year of business and set it against the assessments on that business for the three preceding years."
    Subsection (5) translates that recommendation literally in dealing with a terminal loss in the last year of business, which does not necessarily coincide with the financial year. Where the accounting period and the financial year are pretty well coterminous, no complication arises because the cessation takes place in the end of an accounting period and there is no apportionment to be made.
    If we take the subsection literally. it says that the terminal loss
    "shall for the purposes of this section be determined by taking the amounts, if any, of the following."
    I think that is rather vague wording. It says "taking the amounts," but it does not say what to do with them. I assume that when we "take" them we do something with them, and that what we do is add them up. That is the only sense I can make of the subsection. We take the loss sustained in the year of cessation, and the loss, if any, in that part of the last year of trading which falls
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    into the preceding financial year and the corresponding fraction of the capital allowances for that preceding year. As my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) pointed out, that can lead to curious results. If a loss is incurred in the part of the year of trading falling after 5th April and there was a profit in the part before 5th April, we ignore the profit.
    Some clarification would be helpful on that matter. When I look at the "Taxation Correspondent" in the "Financial Times" I usually find that what he says is extraordinarily clear. On 2nd June he said:
    "As indicated above, you may have made a profit up to April 5, but that does not mean that you have to deduct it from your loss in the last six months. We are concerned with losses and not with profits."
    That certainly reads as if there were something to clear up.
    The Committee should appreciate, in dealing with this recommendation of the Millard Tucker Committee on terminal losses, that the Chancellor is introducing a new principle for dealing with tax liability in the year of cessation. Up to now, the normal basis of assessment is on profits made in the preceding financial year. In the last year of business it is not on the profits of the preceding year but on the profits of the actual year. We became familiar with all this in connection with the transfer of companies to holding companies who were seeking to get advantage from the change in the basis of assessment in the final year of the old business and the first year of the new business. On cessation the basis of assessment has been the actual profits in the last year of assessment from 6th April in that year to the date of cessation of the business.
    But that has been accompanied by another adjustment—the revision of the assessment for the penultimate year. The revision of the preceding year's assessment has taken place in order to put that on the profits of the actual year and not on the profits of the year before that. This is very hard going but, from the nods that I am getting from the Economic Secretary, so far, at least, we are understanding each other. In certain cases where that would produce hardship the taxpayer can ask the Inland Revenue—and I understand that it is almost invariably given as a concession—to revise

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    the assessment for the previous six years in order to ensure that there is no hardship by taking the conventional revision when the business ceases.
    The present proposal is quite different from that. When the business ceases in the ordinary way and there is no terminal loss, the basis of assessment will continue as at present and will be on actual profits of the proportion of the concluding year and revision for the penultimate year. But where there is a terminal loss it is not the Income Tax year that becomes material but the last year of the business.
    One of the deficiencies in dealing with this complicated business in Committee is that we have no blackboard. It is extraordinarily difficult in a legislative Chamber, when dealing with a very complex matter, that one simply cannot illustrate a point intelligently without a computation and showing the figures. Not even the Chancellor, who is usually most helpful in these matters—
    Mr. Eric Fletcher: On a point of order. Surely there is no reason why we should not have a blackboard if we want one.
    The Chairman: We make speeches here. We do not draw.
    Mr. Houghton: I had an idea, somehow, that my hon. Friend the Member for Islington, East (Mr. E. Fletcher) was not going to help me.
    Perhaps, when he is presenting these very difficult Clauses, the Chancellor would circulate a little aide memoire, if that is not a term of disrepute, and give the Committee some assistance in understanding what is proposed, but there might be constitutional difficulties in the way of doing that because, as we well know, the House of Commons may pass legislation but it is not expected to know what it means. It must not presume to say what it means, either. The courts alone are there to tell us what an Act of Parliament means.
    I assure the Committee that there can be considerable doubt as to how the Clause will work out in individual cases. It will certainly produce different results in similar circumstances, according to the interpretation put upon it. The third Amendment which we are discussing in page 16, line 32, perhaps expresses the simple point at issue as clearly as it can
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    be expressed in terms of an Amendment. The Amendment does not propose to alter the basis of the final year of trading. It asks that profits earned in the slice of the final year, either one side of the line or the other, shall be taken into account in reckoning whether there is a terminal loss or not. I hope that my supplement to the remarks of my hon. Friend the Member for Gloucestershire, South puts this point reasonably clearly.
    Mr. Maudling: This is a fiendishly complicated subject and I am grateful to the hon. Member for Gloucestershire, South (Mr. Crosland) and the hon. Member for Sowerby (Mr. Houghton) for putting the points with such clarity. I shall endeavour to explain to the Committee, and to myself as I go along, what the true position is. If the hon. Member for Sowerby cared to meet me somewhere else with a blackboard, no doubt we could spend a happy time together, probably confusing one another in the process. The Clause, following upon the Millard Tucker recommendations, proposes to allow relief where a business in its last stages has suffered losses which it has not been able to recoup against taxation. It is in accordance with the principle of trying to equate tax liability on the business to the profits earned by the business over its life.
    The hon. Member for Sowerby, referring to the interpretation of the recommendation relating to the last three years, asked what was meant by the last year and whether it was the last year of assessment or the last twelve months. I agree that that can be interpreted in one of two ways. We thought it more generous to make it mean over the last twelve months, so that over the last twelve months there should be provision for terminal loss, if it occurs within that twelve months, to be set back against profits of an earlier period. By taking twelve months instead of the last year of assessment, one faces the difficulty which was mentioned by the hon. Member for Gloucestershire, South of period A and period B being respectively before and after the last 6th April within the lifetime of the business.
    It may have escaped the attention of hon. Members opposite that it is made quite clear that the loss which is brought within the provisions of the Clause must

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    be a loss not otherwise relieved. Subsection (5) contains the words in brackets:
    "(in so far as they have not been otherwise taken into account so as to reduce or relieve any charge to tax)"
    That means that to qualify for terminal loss relief any loss must not already have been used to reduce other profits of the business. Taking the periods A and B, if there is a profit in both periods, this question does not arise. If there is a loss in period A and a profit in period B, then, by the operation of the words in brackets which I have quoted, the loss in period A cannot be counted as a terminal loss if it has already been used to reduce the total profits in the last year of assessment.
    If there is a profit in period A and a loss in period B, then period A will be part of the last year but one of assessment and the profits of that full year of assessment would have been charged already to tax in full. That may have been charged on one of two bases, whichever is the higher—either the actual profits for the penultimate year of business or, if higher, the profits for the ante-penultimate year. If the profits of the penultimate year have been charged on an actual basis, then those profits have already been charged to tax in full and there is no case to bring them in to set back against a terminal loss.
    If the charge has been against the profits of the ante-penultimate year there has been a charge to tax on a different basis and one which, normally speaking, is higher. This arrangement can be taken to balance fairly against the fact that in the earlier stages of the life of the company one inevitably has certain periods of profits charged to tax twice. Hon. Members will find that it will work out in reasonable balance over the whole life of the business.
    Now let us suppose that we have a loss in period A and a profit in period B. The loss in period A can only be treated as a terminal loss if it has not been used already to reduce the other profits. Therefore, we have the circumstances in period A of a loss not already recouped by the taxpayer and in period B a profit. If we accepted the group of Amendments put forward it would mean that losses in period A might go unrelieved. They might go unrelieved because in some circumstances there might be losses coming
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    from the ante-penultimate year which would absorb all the profits of the last year and leave nothing against which to set losses in period A unless there were terminal loss provisions made.
    4.30 p.m.
    What is important is that this Clause as it stands, so far as I can see, is calculated to allow the taxpayer suffering a terminal loss to set off that loss against previous profits but not in any circumstances to set off a loss he has already set off against other profits. It will have the effect of adjusting his trading experience over the latter period of the life of the business, but in no circumstances give him greater tax relief than he is entitled to in the period as a whole.
    I hope I have been able to convince hon. Members opposite that in fact this Clause provides against the sort of dangers they have in mind and I would ask them to withdraw the Amendments, if they can accept that, while the Clause may not go the full way in ensuring what they want, it goes in that direction.
    Mr. Hugh Gaitskell: We appreciate the great efforts made by the Economic Secretary to instruct us in this matter. I am only sorry to have to say that, as the debate went on, I found myself becoming more and more confused. I thought I understood it when my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) spoke and I became more instructed as my hon. Friend the Member for Sowerby (Mr. Houghton) proceeded, but I got a little behind when the Economic Secretary was in the middle of his speech. I felt that I should have attempted to ask the hon. Gentleman to produce a number of numerical examples at dictation speed so that, although my hon. Friend the Member for Sowerby had no blackboard, he could take down those examples and think them over while I made a speech saying nothing meanwhile.
    In a matter of this kind it is extremely hard to be sure whether the points we raise are covered or not. I will be frank with the Committee on that. We have some calculations here which I am tempted to read, but I do not think I will do so. Instead, I will make a proposition. If the Economic Secretary will look at some figures, illustrations and examples that we will hand to him between now and the Report stage, consider

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    whether the point is really covered and. if he realises that there is still a point of substance to be met he will be prepared to do something about it, I think that would meet the wishes of this side of the Committee.
    We hope that what the hon. Gentleman said is right and does really meet the point, but quite frankly, so far as I am concerned, I do not think I am sure about it without looking at HANSARD and reading what the hon. Gentleman said. If in the meanwhile he will consider these hypothetical cases which I should like to hand to him in the course of today, perhaps my hon. Friend would he prepared to withdraw the Amendment.
    Mr. Roy Jenkins: I wonder whether I could put a point to the Economic Secretary before we leave this very complicated matter, which I thought he explained with great lucidity. It is a very complicated point, and therefore I have to put it in a rather unusual way. Let us assume that a company were coming into being with a view at some stage to winding itself up and making a terminal loss. That being so, would there be any advantage in a company choosing a particular date on which to end its financial year if that company had a certain seasonal pattern of trade, or is the Clause as at present drafted—I think the Economic Secretary meant to tell us this—such that companies with a particular seasonal pattern of trade and having their year ending on a particular date, would be put in the position in which they ought to be and would be given no particular advantage by virtue of those two accidents?
    Mr. Maudling: I shall be very glad indeed to study the examples which the right hon. Member for Leeds, South (Mr. Gaitskell) has promised to furnish, because these are matters on which it is very difficult to be quite certain. At the same time, I will consider the point raised by the hon. Member for Stechford (Mr. Roy Jenkins). I feel that the answer about the seasonal trade is covered by the form which the Clause takes, but whilst considering the examples to be given by the right hon. Member, I will consider that point also.
    Mr. Houghton: May I ask why it has been thought necessary to modify the existing basis of dealing with cessation cases? This is making life more complicated,
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    even for Inland Revenue officials. The Millard Tucker Committee dealt with the case of a business winding up and making a loss in the final year when it had no way of recouping itself as it had no future profits against which to set off a loss and, as the law was, it was not allowed to set off the loss against previous profits. In many cases the Income Tax assessment over the whole period of the business did not truly reflect the profit yield of the business.
    That was a simple complaint. Would it not have been substantially met if the Chancellor had said, "All right, we will still continue the normal basis of dealing with cessation, but where there is a loss in the final year we will set it off against the previous profits"? I feel that the Chancellor has gone rather further to meet this grievance than was perhaps justified—certainly further than many people expected him to go—in superimposing on the normal cessation arrangements this new basis for dealing with final assessment where losses have been made.
    It may be that full consideration has been given to that question and this was felt to be the better way of dealing with it. As the Economic Secretary said, it is a somewhat more generous way of dealing with it. Probably I have the same set of figures as my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) and when later on they can be studied, probably the Economic Secretary can also tell us whether he is satisfied that the Clause carries out the intentions and whether it is equitable in all circumstances.
    Mr. Douglas Jay: May I ask the Economic Secretary to elucidate a point which was raised by my hon. Friend the Member for Sowerby (Mr. Houghton) in his first remarks? In subsection (5) the Clause says:
    "The question whether a person has sustained any, and if so what, terminal loss…shall…be determined by taking the amounts, if any, of the following …"
    Then we have paragraphs (a), (b), (c) and (d). My hon. Friend said that he assumed the phrase:
    "shall be determined by taking the amounts if any"
    meant in effect that the loss should be treated as being some of the amounts, in (a), (b), (c) and (d). It would introduce a little more clarity into this jungle if the

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    Economic Secretary could confirm that that is so. If it is so might it be possible for the draftsmen between now and the Report stage to set it out a little less ambiguously?
    Mr. Maudling: That was the intention. We will certainly consider whether it can be more clearly expressed.
    Mr. Crosland: I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Mr. Maudling: I beg to move, in page 16, line 38, at the end, to insert:
    "and for the purposes of paragraphs (a) and (c) of that subsection the amount of a loss shall, subject to the provisions of this section, be computed in like manner as profits or gains under the provisions of the Income Tax Acts applicable to Cases I and II of Schedule D."
    This is almost a drafting Amendment. It is to ensure that the terminal loss shall be computed in the same way as a trading profit is computed. This provision will be almost exactly the same as the same provision dealing with the relief on losses to be set against income in subsequent years. This is really a common form insertion in provisions of this kind to ensure that there is no doubt about the method of computation.
    Amendment agreed to.
    Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."
    Mr. F. J. Erroll: I am rather puzzled by subsection (4) of this Clause which strikes me as being not quite right, either in practice or in theory. The Clause as a whole gives the right to a business sustaining a loss in its final year to carry back that loss against profits made in the three preceding years. Subsection (4) says, in effect, that the profits against which that loss may be set are not to include any profits distributed by way of dividends.
    Dividends can only be paid out of profits earned and appropriately taxed. There is no reference here to capital distribution in any shape or form. A company could scarcely distribute original capital by way of dividends without infringing the Companies Acts. It can distribute a capital profit, provided the tax is not deducted. Therefore, it is clear that if a company distributed a
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    capital profit it is a capital dividend which does not enter into the taxation picture at all, and is irrelevant from this consideration. The only relevant distribution is one made out of previous profits put to reserve and taxed in past years.
    I cannot understand why there should be this limitation to the amount of profit against which the loss can be set, namely, the amount of profit retained in the business. This has an important consequence for certain classes of companies when they are about to wind up. Examples which occur to me are companies which exploit mineral deposits of a limited size or companies formed for the purpose of developing an area of land as an housing estate or a trading estate.
    In either case, the company would be well aware that it was nearing the end of its mineral resources or the land available for development. In its last year there will probably be a loss because some expenditure is bound to run on, although the main purpose of the company has already ended. The company may have ample past profits put to reserve and there may be no logical reason why it should not go on distributing a dividend. But if it does so in the last three years the profits against which the loss can be set will be diminished by the amount of the dividend so paid.
    On the other hand, if, with this tax position in view, the company decides to make no distribution, all that happens is that the same amount of money will be distributed on the winding up, and will carry no tax penalty at all. It seems to me, putting it at its lowest, somewhat anomalous that a company which suddenly ceases the payment of a dividend over the last three years prior to winding up should receive a substantial benefit on winding up when the logical thing would be to continue on a reasonable scale the dividend paid during the life of the company; and that this should be allowed to set off the final loss against both retained profits and the dividend paid in the past three years.
    I do not expect the Economic Secretary to give me a full reply now, but if he would indicate that he will look into this matter we might be able to arrive at a clearer understanding of it on Report.
    Mr. Maudling: I will examine with care, as I always do, any point raised by my hon. Friend, but, in principle, this is clear. This provision is to enable companies to obtain relief against taxation which they have paid, and, therefore, it would not be appropriate to give to companies relief in respect of taxation which they themselves have not paid. In the case of distributed profits the taxation upon them falls on the shareholders and not on the company.
    Question put, and agreed to.
    Clause, as amended, ordered to stand part of the Bill.

    Clause 18.—(CARRY FORWARD OF MANAGEMENT EXPENSES BY LIFE ASSURANCE AND OTHER COMPANIES.)
    Motion made, and Question proposed. "That the Clause stand part of the Bill."
    4.45 p.m.
    Mr. Gaitskell: I think we should have a word on this Clause, although I do not anticipate that there will be any disagreement about it. The purpose is, I understand, to enable investment trusts to carry forward management expenses which exceed the amount of the investment income. There must be few such cases, for I should consider it a bad investment if that were not so. But I do not know whether the Economic Secretary has discovered any such cases since the publication of the Millard Tucker Report.
    Mr. Maudling: I will gladly accede to the request of the right hon. Gentleman, especially as he has already explained the purpose of this Clause far more adequately than I can. The purpose of it is to allow investment trusts, and, in particular, insurance companies, to carry forward any excess of management expenses. It is another recommendation of the Millard Tucker Committee. I would not care to give examples, nor would I say that a decline in investment income is always a sign of inefficiency, because there are political and economic considerations which may well affect the income of such companies.
    Question put, and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 19.—(CAPITAL ALLOWANCES (RIGHT TO SET AGAINST GENERAL INCOME).)
    Motion made, and Question proposed. "That the Clause stand part of the Bill."
    Mr. E. Fletcher: The Committee will agree that this Clause is probably one of the most fascinating in the fascinating series of Clauses which we are now discussing, and I hope that before we part with it it will be lucidly explained by the Economic Secretary.
    On Second Reading, the Financial Secretary was studiously careful to pass over this particular part of the Bill on the ground that it was far more fit for explanation from the Treasury Bench during the Committee stage. I would remind hon. Members that this was left in abeyance until the Committee stage in order that we might have it more fully ventilated and analysed in a manner which its importance and complexity so thoroughly deserves.
    My hon. Friend the Member for Sowerby (Mr. Houghton) suggested that we could not consider Clause 17, which no one understood, without the use of a blackboard, but I think that the complexity of Clause 17 fades into insignificance when compared with Clause 19.
    The Solicitor-General (Sir Reginald Manningham-Buller)The Solicitor-General (Sir Reginald Manningham-Buller)indicated dissent—
    Mr. Fletcher: The Solicitor-General shakes his head. I welcome the confidence of the right hon. and learned Gentleman in his ability to explain some of the conundrums in Clause 19 which occurred to me when I read it, and which I hope to put to him as clearly as I can.
    Let us consider the general position. Clause 19 is designed to give effect to a limited and a rather guarded and reserved recommendation of the Millard Tucker Committee. To understand it, one must consider—as I am sure the Solicitor-General will agree—not only paragraph 83 (b) of the Report, but also paragraph 266, because, in some ways, those two paragraphs are inconsistent. The difficulty which always arises in this very specialised field is that the wear and tear allowance and other capital allowances are not treated as expenses which a company can set off against its profits.

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    Unlike all other expenses and disbursements, they are not treated as expenses and disbursements to be taken into account before a company arrives at its net profit. The net profit has to be calculated without regard to these capital allowances for wear and tear, and so forth. However, after the net profit has been ascertained, before there is any assessment or any liability, there is, by this second stage, a deduction in respect of these wear and tear allowances. I am sure that the Solicitor-General will interrupt me if he is not agreeing with what I am saying, but I am trying to keep it fairly right in layman's language.
    That produces this anomaly, that whereas in ordinary Income Tax law losses can be set off against profits, one year as against another, if a company entitled to wear and tear allowances has made what a layman would regard as a loss, but is not technically a loss because those expenses have not been set off against his profits, they are only taken into account after his net profit has been arrived at, and, therefore, all general regulations about setting off losses and profits are put out of gear.
    The Millard Tucker Committee had to consider that situation, which it recognised was an extraordinary one. It said, in paragraph 83 (b):
    "Wear and tear and other capital allowances are not expenses in arriving at profits but a deduction from profits when ascertained. There are various practical reasons for this into which we need not enter here. (They are dealt with in paragraph 266 below.) The result, however, is that, in law, a loss for purposes of Section 34 has to be computed without taking into account any capital allowances."
    Then there is this significant sentence:
    "There is a longstanding administrative concession under which the Board of Inland Revenue in certain circumstances and on certain conditions, permit a capital allowance to create or augment a loss for purposes of Section 34."
    This means that, owing to the complexities of the Income Tax structure, it is not possible to do it in the normal, straightforward way and treat these capital allowances as expenses in arriving at a loss.
    Mr. Houghton: If my hon. Friend will permit me to interrupt, it is not a question of complexity but of equity. That was the only consideration involved.
    Mr. Fletcher: I do not agree with my hon. Friend, and in a moment I shall be interested to hear what he has to say about it. Paragraph 266 deals with the method of giving capital allowances. There the Millard Tucker Committee point out that there are various reasons why capital allowances cannot be dealt with as expenses to be taken into account before the losses of a company are ascertained. The reason why it cannot be done in that way is because of the preceding year basis of assessment.
    Having analysed whether capital allowances can be treated as expenses in the ordinary sense, the Committee, in paragraph 266, came to the conclusion that, on balance, it could not be done and, in principle, ought not to be done. It said:
    "The reason for the distinction does not, however, depend so much on principle as on practical considerations."
    What it says, in effect, is that although, on principle, one ought to treat these capital allowances as expenses, there are practical considerations which provide inconveniences; in other words, Millard Tucker Committee goes on to say that, if a company could treat them as expenses, there would be a number of occasions on which certain companies would suffer grave disadvantages, and there would be other circumstances in which companies would get quite improper benefits and advantages; and that arises because in certain circumstances the earnings of one particular year are treated as the basis of assessment for more than one year of assessment.
    It also arises from the fact that the initial allowances are correspondingly greater in the initial period than in all subsequent years, and there might be cases in which the initial allowances could be treated not only in one year but certainly in two years and perhaps in a third year. There is also the danger that, if we applied the strict principle, there would be taxpayers who would create technical cessations in order to obtain an allowance more than once or to avoid liability for charge.
    Therefore, we are faced with this situation. As the Millard Tucker Committee says, in paragraph 266, one cannot apply strict logic or strict principle

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    to these wear and tear allowances and capital allowances. We cannot call them expenses in arriving at profits. First, we have to arrive at profits and then make a deduction. That being so, it follows that there has in a number of cases been a sense of inequity, a sense of injustice, a state of affairs which has called for a remedy. So what has happened?
    I do not know whether you agree with it, Mr. Thomas, and I am not sure whether I agree with it, but what has happened is that the Millard 'Tucker Committee says in paragraph 83 (b):
    "There is a longstanding administrative concession under which the Board of Inland Revenue in certain circumstances and on certain conditions, permit a capital allowance to create or augment a loss."
    There has been no statutory authority for that, no authority given by this House. I have no doubt that it may be desirable to create the equitable conditions of which my hon. Friend the Member for Sowerby (Mr. Houghton) is such a distinguished apostle, although I do not know what some of my hon. Friends who are constitutional purists in this matter think about it. Yet in the long run, however it may be, I do not like these long-standing administrative concessions; I prefer that the Government should give statutory authority for what the Board of Inland Revenue do.
    Therefore, the question that faces the Committee is to see whether or not, by Clause 19, we are producing the precise equity which we wish to produce, whether we are doing anything more or anything less than giving effect to these longstanding administrative concessions. It is those matters that I venture to think it is our duty this afternoon to examine with some care. Because we have accepted the principle that this is a matter for Parliament—this is essentially a legislative matter and we are essentially a body of legislators—we must now consider whether the provisions of Clause 19, in effect, transform into legislative form this administrative concession.
    On that subject my first observation—which is rather against the principle I have just been enunciating—is this: where one is dealing with a complicated subject, as this is, I can well understand that there are certain advantages in administrative concessions over a legislative formula. I
    622
    can well understand that administrative concessions have a much greater measure of flexibility and elasticity. They enable the Board of Inland Revenue to look at each case in order to produce a kind of rough and ready justice and equity which they think is called for. To some extent, that flexibility disappears if we try to put what has hitherto been a rather loose discretionary administrative arrangement into the watertight confines of a closely defined Section of an Act of Parliament, but, nevertheless, we must attempt it.
    5.0 p.m.
    I do not in any way criticise the Government for having attempted it in Clause 19, but I think we on these benches would be very remiss in our duty if we allowed the Clause to pass without the full statement of its implications that was promised us by the Financial Secretary to the Treasury in moving the Second Reading and in deliberately relegating this Clause for consideration in Committee.
    Therefore, some of the questions which I should like to ask the learned Solicitor-General on Clause 19 are these. First, what precisely were the "certain" and "certain conditions" referred to in paragraph 83 of the Millard Tucker Report which enabled the Board of Inland Revenue, in its discretion on various occasions to depart from the strict law of the land as laid down by a series of enactments? Secondly, is the Solicitor-General quite certain that Clause 19, as now drawn, completely removes any possibility of the dangers of evasion referred to in paragraph 266, which recognises that unscrupulous taxpayers could create technical cessation in order to obtain the benefit of statutory allowances more than once?
    Thirdly, I should like to put this question to the Solicitor-General. He has, no doubt, recognised that, whereas the Millard Tucker Report was presented in April, 1951, and dealt with a state of the affairs which then existed, since that date there have been changes in the law in regard to this matter, and, in particular, as the Solicitor-General will have in mind, Clause 19 expressly makes reference to claims that might now be made by virtue of Section 15 (3)of the Finance Act, 1953, and it also refers in subsection (5) to a state of affairs which can arise under Section 19 of that Act. Both these Sections were brought into force at a

    623
    date subsequent to the issue of the Millard Tucker Report, and, on this point, we are entitled to know from the Solicitor-General what bearing these Sections of the Finance Act, 1953, have on the earlier Report of the Millard Tucker Committee.
    I hope I have said sufficient to indicate that this Clause seems to call for a good deal by way of explanation from the Government before we can accept it. I have not attempted in any way to endorse the comments made on Section 19 of the Finance Act, 1953, but I have no doubt that some of my hon. Friends will have other points to raise. These are matters which are well worth the study of this Committee.
    Mr. Houghton: I do not know whether the fact that the learned Solicitor-General is in charge of this Clause indicates that it is more or less difficult than Clause 17. However, we shall look forward to having an equally lucid explanation from the Solicitor-General as we had from the Economic Secretary to the Treasury. When one sees what we get when an administrative concession is translated into legislative proposals. one feels that there is a good deal to be said for keeping it as an administrative concession, but I quite agree with my right hon. Friend the Member for Islington, East (Mr. E. Fletcher) that the time has come when this difficult question must be tackled and put into the Bill.
    The Millard Tucker Committee found it pretty tough going, because, in paragraph 83 (b) they said that, for various practical reasons, capital allowances were not allowed as expenses, but that they had not gone into that question there. Later, they said that they would deal with it in paragraph 266, but, by the time they got to paragraph 266, they must have felt very depressed indeed. The world was very dark and dismal, because, in paragraph 267, they were dealing with land used for cemeteries and crematoria, which shows how unexciting the whole job was.
    I presume that this Clause does no more or less than give statutory effect to the limited concessions which have been given over a long period. I see that I receive an affirmative answer in a
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    nod from the Solicitor-General. It is true that these concessions have been in operation for a long time. I ask whether there is anything wrong with them, either in principle or because of what the Millard Tucker Committee recommended, by way of some extension, restriction or modification.
    If this Clause does no more than give statutory effect to an administrative concession, I think that this Committee will be well satisfied. I agree that administrative concessions have not got the authority of the law. They are sometimes compromises, in respect of which the Inland Revenue have laid before the House a full list of what are described as extra-statutory concessions so that all taxpayers shall have access to them, which is important on the grounds of equity. These concessions are not something given in selected cases, still less under preferential conditions, and it is right that all taxpayers should have access to them, and that this House is able to raise the matter at any time when they come under criticism.
    I have always thought that the fundamental reason why the capital allowances were treated as concessions over such a long period of years was that of the difficulty of bringing into the computation of profits expenses which are not incurred in the course of trade. The principle of allowing in the computation of profits only expenses which are incurred in the course of trade is one which has to be jealously guarded by the Inland Revenue if we are not to open some doors rather too widely.
    There are, perhaps, some points in these administrative concessions which are of less importance now than they were before we extended them in an earlier Finance Act in the indefinite carrying forward of losses. That removes some of the importance of the choice of income against which allowances should be set off, because they can now be carried forward indefinitely and allowed against the profits of the business.
    The only other point I wish to make is whether the Clause alters in any respect the practice with regard to the order of other income against which the allowances shall be set. My reading of it is that it merely determines the conventional practice with regard to that, and, from what the Solicitor-General has said, I

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    think that the Clause is simply an implementation in statutory form of what for a long time has been generally accepted as an administrative concession.
    Mr. G. R. Mitchison: I do not want to look an administrative concession in the mouth, especially as I happen to have benefited a bit myself from this particular administrative concession. It is one which affects people who do a little farming, and who are just between making a profit or a loss. In those circumstances, it can mean quite a bit, because it may throw the balance over from a small loss to a small profit by reason of the capital allowance or initial allowance given on such things as farming machinery. That is the way that I happen to have come across it.
    However, I rather dislike the idea of these administrative concessions, of which there is quite a number. It is quite true that if one hunts long enough and carefully enough one can find out, more or less, what they are. But I do not think that that is the right way to leave it. One of the troubles about them was illustrated by what my hon. Friend the Member for Sowerby (Mr. Houghton) said just now. He wanted to be assured that this was merely carrying out what had, in practice, been carried out by the administrative concession.
    If one looks at the Millard Tucker Report, one of the things one finds out in connection with these matters is what that Committee calls
    "some diversity of practice on the question whether a loss should be set primarily against earned income…or primarily against unearned income."
    I am not quite clear whether this Clause touches that matter directly, but it serves as a sufficient illustration for what I propose to say.
    It seems to me that in an administrative concession we do not necessarily get that exactitude of practice that there should be in matters of this sort. It becomes very difficult for taxpayers in a small way, who, perhaps, like the farmers whom I mentioned just now, live in the country, to discover what their rights are in the matter. Really, they are not rights at all in principle, but only rights in practice.
    I noticed that when my hon. Friend the Member for Islington, East (Mr. E. Fletcher) said something about constitu-
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    tional purists, he turned round and gave me a nasty look as though he did not know what I was going to say. I hope that I am not being a constitutional purist in any unconstitutional sense. After all, the Income Tax law is complicated enough. It is hard enough to understand, and it is a subject on which all sorts of guides are offered, which may or may not simplify it. But if, on top of the law, we add constitutional practices, which are only accessible with considerable difficulty, the matter is made even more complicated.
    So far as I know, no great effort is made to see that they are made known to the taxpayers. They are not contained in any Government circulars, notes or tax forms, because such documents only purport to state the law. It is a regrettable practice, and so far as this Clause is removing one of those administrative concessions. I welcome it a great deal; but I should like to know that this is the first of many cases in which the Government are going to remove such concessions and to replace them by proper legal enactments with a view to eliminating altogether, at any rate as far as that is possible. the whole of this practice.
    5.15 p.m.
    After those general remarks, there are one or two questions I wish to ask. This is, of course, a rather complicated matter, and one need not exaggerate its complication. It all depends, not on a question of principle, but on the convenience, having regard to the Income Tax machinery, of treating this capital allowance as something which comes in after the computation of profit and loss.
    I quite agree with the Millard Tucker Committee that that is certainly not a question of principle. Indeed, looked at as a matter of principle, it would seem to be nonsense for, after all, we are looking at the profit or the loss. Surely the consequent depreciation or appreciation is something which the ordinary business man would take into account. Therefore, it is a convention which has given rise to the whole difficulty. When, first of all, a preference for administrative convenience is introduced in place of a principle, and is then met by an administrative concession instead of an enactment, one really is getting into the realm of administrative excess.

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    I suggest that these kinds of provisions have another danger as well. Not only are they capable of small local variations, as between one place and another, but, in the end, they constitute a method of setting up something which, wherever else it may be dealt with, can hardly be dealt with in a court of law which takes no account of these matters.
    I notice that paragraph 83 of the Millard Tucker Report contains two recommendations. One is the recommendation which we are now considering, and the other the suggestion that there should be a right of appeal from a decision by the Commissioners to the court in connection with claims under Section 34 of the Income Tax Act.
    I have looked carefully through the Bill, but I cannot find that any effect has been given to that recommendation of the Millard Tucker Committee. I am sure that Committee was quite right in suggesting that there would probably be many cases of the sort, but it quite definitely, and, indeed, rather strongly, recommended it. It seems to me a little odd that, when we replace an administrative concession by a provision in a Bill, we should not give what could not be given in the administrative concession, namely, the right of appeal which was very definitely recommended by the Millard Tucker Committee.
    Therefore, I hope that when the Solicitor-General rises to tell us what all this is about he will at the same time explain why it is that only half the cherry has been bitten off. I hope, also, that he will excuse me for a horrible mixture of metaphor in referring at the end of a speech to a cherry and, at the beginning, to a gift horse.
    The Solicitor-General: I can deal with the last question shortly. I am advised that there is a right of appeal under Section 15 (4) of the Finance Act of last year. Therefore, that point goes by the board.
    The Clause, as the hon. Member for Sowerby (Mr. Houghton) suggested, does no more than put a long-standing administrative concession into a statutory form. It is one that has been in existence for many years. I do not know for how long, but I am under the impression that it first came into existence rather as an accident
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    in the belief that there was statutory provision for it. Then, having acted in that belief, it was discovered that there was no statutory provision for it and it went on as a concession.
    It is true to say that all concessions of this character are published in the annual reports of the Board. I must say that they are not documents which I have ever read, but perhaps it might be worth while studying them in future.
    Mr. Mitchison: Farmers do not always read them.
    The Solicitor-General: They do not always read all that they ought to read. One welcomes the view of the Committee that it is desirable to replace the longstanding concession by a Clause in the Bill. Indeed, that desirability was recognised by the Millard Tucker Report, which recommended that this should be done. The difficulty was that in assessing the profits or losses for the year a capital allowance is not really an item of expense incurred for the purpose of earning gain. It is an allowance made when one is charging the profits to tax.
    The whole of the point of the concession was to enable someone who could not take advantage of the whole of his capital allowances because his profits were too small—the charging amount—to carry the surplus back and take it into account in assessing the profit or loss. I put the point shortly, because I do not think that there is any dispute as to what the object was, I think that the Clause satisfactorily implements what was done administratively, although at first sight the language may be a little complicated.
    The hon. Member for Islington, East (Mr. E. Fletcher) started by comparing Clauses 17 and 19. He expressed the view that this Clause was more complicated than Clause 17. I am inclined to disagree with him. If one has to choose between the two, I would say that Clause 17 is a little more complicated. The hon. Gentleman seemed to think that I was shaking my head expressing the view that the Clause was as clear as crystal. I do not think that it is. It would be most unusual to find a Clause dealing with a complicated matter that was as clear as crystal.
    However, I assure the hon. Gentleman that we have done all we can—all one can do in a Finance Bill—to remove as

    629
    far as possible every danger of evasion. The hon. Gentleman drew attention to the possibility of claiming these allowances more than once. If he studies the Clause I think he will see that that possibility is completely eliminated by subsection (4). Then he drew attention to the reference to Clause 19 of the 1953 Finance Act. That Clause is based on the Millard Tucker Report. Subsection (6), in which I think that reference appears, is specifically put in to deal with the technical cases of partnerships to ensure that excessive relief cannot be claimed in the case of a partnership and on the break up of a partnership.
    I have listened with interest to the speeches which have been made. The Committee will see in the course of time that, even though they may not accept my word for it, the Clause is intended to do no more than to implement the longstanding administrative concession and to put it in the statute. It is intended to do no more than to stop that from now being abused. I hope that the Committee will see as time goes on that it does no more than that, and that what it does it does effectively.
    Mr. Mitchison: I should like to put two simple questions. The right hon. and learned Gentleman will remember that the Millard Tucker Report calls attention to a diversity of practice in the question of setting off as between earned and unearned income. I do not find any-thing about that in the Clause.
    The Solicitor-General: My recollection is that we dealt with it last year.
    Mr. Mitchison: My second question is whether the right hon. and learned Gentleman is sure that he meant subsection (6) and not subsection (5).
    The Solicitor-General: Subsections (5) and (6) both deal with the matter.
    Mr. Jay: I should like to ask the Solicitor-General a few questions, because we have the benefit of his legal guidance. I realise that all Governments have indulged in the so-called extra statutory concessions but, speaking as a layman, I wish to ask the right hon. and learned Gentleman whether it is true that when we legislate we normally impose an obligation on the Inland Revenue to charge certain taxes. We say, "You must levy these taxes in this
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    fashion. We do not say, "You have got power to levy such and such a tax when you feel inclined to and to refrain from doing so when you do not want to."
    My second question is to ask the right hon. and learned Gentleman to explain what the distinction is between something which is extra statutory and something which, in the words of the plain man, is illegal. Finally, can the right hon. and learned Gentleman say whether the Clause means that the Government have now decided as a matter of general policy to put all these extra statutory concessions in future into legal form, or have they simply picked out this one because it was in the Millard Tucker Report or for some other reason?
    The Solicitor-General: As last year we sought to carry out some of the recommendations of the Millard Tucker Report, so, again this year, we are seeking to carry out more. I am sure that attention will be paid to the right hon. Gentleman's remarks about concessions made by the Revenue. I will not venture upon any general observations in that field. I cannot speak of all the concessions. I have not seen the document in which they are published. We take note of the view of the right hon. Gentleman.
    Mr. Glenvil Hall: Surely my right hon. Friend was not expressing a view; he was asking a question. We should like an answer. When does something which to many people is illegal become quite in order when the Inland Revenue do it?
    The Solicitor-General: I do not think that that question arises on the Question, "That the Clause stand part of the Bill." The practice of giving concessions is one of long standing. Views may differ upon its advisability. The view has been expressed by the hon. and learned Member for Kettering (Mr. Mitchison)—which is. one which many lawyers share—that it is desirable that as far as possible these concessions should be embodied in statutory form. That I think is a view held in many quarters. It may be a lengthy process, if it can be done, depending on the nature of the concessions and their extent and whether one Bill or more than one is necessary. The view among lawyers upon that issue is fairly clear.
    5.30 p.m.
    Mr. Fletcher: We cannot possibly leave the matter like this. The Solicitor-General has said that he has not seen the list of extra-statutory concessions to which my hon. Friend the Member for Sowerby (Mr. Houghton) referred. In the Clause we are translating what has hitherto been an administrative extra-statutory concession into a concession under an Act of Parliament. The concession is long-standing, because it has been given over the years. I was surprised to hear the Solicitor-General say that he had not seen it. I must confess that I have not come across it for some time, but I have more excuse than he has.
    A great deal of our debate on the Clause has dwelt on the subject of extra-statutory concessions, and in view of the recent interchange, I ask the Solicitor-General to give us an assurance that the list of extra-statutory concessions on which the Inland Revenue have worked and are working will be brought up to date and published so that we can see not only what concessions no longer—
    The Solicitor-General: I said that a list has been published.
    Mr. Fletcher: Can the right hon. and learned Gentleman say whether, after this year's Finance Bill has been passed, an up-to-date list will be published?
    Mr. Mitchison: Might I ask the Solicitor-General one other question? If there is any statutory sanction for an administrative concession, it would be interesting to know what it is. If there is not, surely this keeps open a very dangerous door which seems to have been open a very long time. One does not want to look gift horses in the mouth, hut, after all, we are supposed to control both the expenditure of public money and its collection, and this provision could easily be misused. Perhaps the right hon. and learned Gentleman would let us have an answer to that question if it is not putting too much upon him.
    Mr. Glenvil Hall: Before the right hon. and learned Gentleman replies, perhaps I might put another point to him. In all parts of the Committee we realise that these extra-statutory concessions have been given over a long period of years. There is a list published—I do not know
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    whether it is completely comprehensive—and, on the whole, the concessions are extremely worth while and acceptable to the vast body of taxpayers. We have begun to make the extra-statutory concessions legal.
    In the Clause we take the matter a step further. I should like to know whether the Government, as a set policy, are clearing up the matter. Obviously, the Government cannot put them all into one Finance Bill, and they are certainly not all in this Bill, but is it the policy of the Treasury gradually over the years to see that the extra-statutory concessions, certainly the more important ones, are brought to an end?
    The Chairman: We are dealing with only one concession at the moment.
    The Solicitor-General: As you say, Sir Charles, we are really dealing with only one concession, but I think I can answer the hon. Member very shortly. I am authorised to say that, as time permits, these concessions will gradually be replaced by statutory provisions. It may, of course take some time to achieve that.
    Mr. Mitchison: Is the right hon. and learned Gentleman unwilling or unable to answer the question which I addressed to him?
    The Solicitor-General: It does not arise at the moment.
    Question put, and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 20.—(TREATMENT OF DEMOLITION COSTS FOR PURPOSES OF CAPITAL ALLOWANCES ETC.)
    Motion made, and Question proposed, "That the Clause stand part of the Bill."
    Mr. Crosland: I hope it will not be considered an impertinence for a layman to intervene briefly in the debate on the Millard Tucker Clauses. Clause 20 cannot be described as the most revolutionary Clause in the Bill, nor one raising very large issues of general principle, but it follows a recommendation made in the Report. I want to put three points to the Government.
    Paragraph 278 of the Millard Tucker Reports states:
    "It was represented to us that the present treatment of costs incurred in demolishing a

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    building or an item of plant is in certain respects inequitable. Under existing law such costs are not an admissible expense in computing profits."
    The Report goes on to explain that in certain circumstances certain allowances are granted for demolition costs, but, in that Committee's view, not adequate ones. I take it that the phrase "net cost" means demolition costs less any earnings from scrap. That is the first point which I wish to put to the Government.
    My second question relates to a matter which, perhaps, ought to be clear to me on reading the Clause. How far does the Clause carry out the recommendations of paragraph 278 of the Report? There were two separate recommendations in that paragraph. The first was that depreciation allowances should be given on commercial buildings. The point of that was that demolition costs could be set off against them. Is that recommendation carried out? I imagine that it is not, because under Clause 15 commercial buildings still do not attract capital allowances. I may be confused about this and should be grateful if the Economic Secretary would make it clear.
    The second recommendation in paragraph 278, and the main one, was:
    "…if the demolition costs exceed the scrap proceeds the excess should be taken into account in computing a balancing allowance or charge on the old asset."
    I take it that, in broad terms, it is that recommendation which the Clause carries out. Again, it is an extremely complicated matter, and I shall be glad to have reassurance.
    Having regard to the paragraphs in the Millard Tucker Report coming under the heading "G. Miscellaneous," why has this recommendation been picked out and why have others been omitted? Perhaps the others have been dealt with in previous years, but it would be interesting to know. However, the recommendation about dredging in paragraph 277 and the recommendation about tropical buildings in paragraph 273 have not been dealt with in earlier years.
    The Chairman: The hon. Gentleman is referring to matters to which the Economic Secretary cannot reply on the Question, "That the Clause stand part of the Bill." We can only deal with things which are in Clause 20. We cannot regret things which are not there.
    Mr. Crosland: I do not want to embarrass the Economic Secretary, but I was curious to know why the paragraph referring to demolition costs had been picked out. If the Economic Secretary cannot answer that and remain in order in this Chamber, perhaps he would be kind enough to have a word with me about it outside. It would be of assistance to us to have a few words in explanation of the Clause.
    Mr. Maudling: The answer to the hon. Member's pertinent questions is that he has accurately interpreted the purpose of the Clause. "Net cost" is, as he supposed, the cost of demolition less the scrap proceeds.
    With regard to commercial buildings, the recommendation of the Millard Tucker Committee was that if the recommendation that depreciation allowances should be given to commercial buildings was adopted, it would close the first gap referred to. The Government have not accepted the recommendation that commercial buildings should be given depreciation allowances.
    The Clause carries out the recommendation at the end of paragraph 278, the purpose of the recommendation being that the excess of demolition costs over scrap proceeds should be allowed as a balancing allowance to the company in the year the demolition took place.
    I cannot answer the fourth point put by the hon. Member while remaining within the rules of order. The reason for the decision to include the provision was that it would be useful and would not be expensive.
    Mr. Jay: The phrase "net costs" also puzzled me. Does "net cost" mean the cost of demolition less any scrap proceeds, and, if so, is that perfectly clear to the taxpayer from the wording of the Act?
    Mr. Maudling: Subsection (7) defines the meaning of "net cost."
    Mr. Jay: In that case why, in subsection (5) does the Clause depart from that phrase and commence:
    "The cost or net cost to a person of the demolition of any property shall not…"?
    Mr. Maudling: It is true that subsection (5) is rather a difficult point. It provides that where any of the foregoing

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    subsections apply, the present practice by which the net demolition cost is treated for the purpose of capital allowances as part of the cost of an asset replacing the demolished asset, shall not apply. This Clause gives immediate relief in respect of demolition costs and it would be quite wrong also to give relief for the cost of the new asset, which is the present practice.
    Question put, and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 21.—(PROVISION FOR CAPITAL ALLOWANCES IN RESPECT OF CERTAIN LAND.)
    Motion made, and Question proposed. "That the Clause stand part of the Bill."
    Mr. E. Fletcher: Like all the others in this group, Clause 21 is designed to give effect to some of the recommendations of the Millard Tucker Committee. While I do not quarrel in principle with the object of the Clause, which is to deal with the special case of cemeteries and to make provision for capital allowances in respect of the land which they acquire, it seemed that the language in which it was drawn was not particularly happily chosen. For that reason I put down an Amendment on the Order Paper. It has not been selected, but I think that the Economic Secretary may wish to elucidate subsection (2, a).
    As I read that subsection it is designed to deal with the capital expenditure which a cemetery company has incurred in erecting buildings, "other than a dwelling-house" in a cemetery. Such buildings, presumably, are churches and chapels and other consecrated buildings. It seemed to me a little unfortunate to say the least, to suggest that those buildings were
    "…likely to be of little or no value when the cemetery is full;"
    I do not think that that can be the real intention of the Government. Although a cemetery may be full one knows perfectly well that the consecrated buildings there still have a very real value. They certainly have a spiritual value, and, I should have thought, a material value as well. If my surmise as to the intention of the Government is correct I would ask the Economic Secretary to look again at the Clause to see whether he cannot improve the language both to clarify the Clause and to
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    remove some of the objections which, for the reasons which I have given, might apply.
    5.45 p.m.
    Mr. Mitchison: What is the position of local authorities with regard to cemeteries? I suppose that a local authority carrying on either a cemetery or a crematorium for profit may be taxed, although to some extent it is its duty to do something of the sort. I do not want to go into details, but I should like to know whether I am correct in my assumption. There are cases in which a local authothority may be taxed for either or both of those activities. If I am wrong in that assumption the other questions which I wish to ask will possibly be much more limited, but I am assuming for the moment that, as I think must be the case, they will be taxable activities, at any rate, in some cases.
    That being so, the real difficulty which has caused the Millard Tucker Committee to call attention to this particular point and has, therefore, led to the introduction of this Clause, is that land in cemeteries becomes incapable of any other use for a very long period. We are only discussing taxation questions at the moment and I do not wish to develop that too far, but I should like to call the attention of the Economic Secretary to the following point.
    A very great deal of financial trouble has arisen from an unnecessary delay in allowing the utilisation of disused cemeteries. It is a complicated matter and I obviously could not go into it all now. Nevertheless, it is a very well-known fact. It has been recognised I think, that the law and procedure relating to the matter are out of date, much too complicated and much too difficult in practice. I believe that the question is to be dealt with from another point of view by the ecclesiastical authorities, some of whom are themselves anxious that it should be simplified.
    Reverting to the case of the local authorities, does this Clause provide that if a local authority carries on a crematorium at a profit, and a cemetery or a number of cemeteries at a loss it can set off one against the other, and what effect will that have on the capital provisions in the Clause? If it does not so provide and if, as appears to be the case, there is still some distinction in the Clause between the trade of carrying on

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    a crematorium and the trade of carrying on a cemetery, steps should soon be taken to enable something to be done.
    A very large number of crematoria are carried on by local authorities. We have a particularly fine one in Kettering. I once heard one of our elderly and distinguished aldermen exhorting the inhabitants of a neighbouring local authority area to come to Kettering to be cremated. We are very proud of our crematorium. It is up there at the top of the hill. It is a magnificient building and I would ask the Economic Secretary to bear in mind—as I shall bear in mind myself—the very great advantages of the Kettering crematorium.
    But, as with other local authorities, there is not the same attraction in Kettering as regards keeping cemeteries. They become a very great burden because of the difficulty of converting them to any other use. If this is not dealt with in this Clause—and I do not think it is—it could perhaps be considered as a matter for fresh legislation. The Government would then have the great and very unusual distinction of going one step further than the Millard Tucker Committee, a thing which they have not yet had the courage to do in matters of this sort.
    Mr. Maudling: I was most interested in the remarks of the hon. and learned Member for Kettering (Mr. Mitchison) about the facilities available in his own constituency, and I would most certainly have accepted his suggestion had it not been for the fact that I have already given an option to my right hon. and learned Friend the Solicitor-General, who tells me that in his constituency there is an even better establishment.
    This Clause is inevitably somewhat incongruous in its wording because we are treating as an economic activity the business of cemeteries and crematoria. Therefore, inevitably the language gives rise to rather unusual phrasing. For example, I have been advised that the purpose of the Clause is to write off the cost over the life of a cemetery, which seems to me a rather strange phrase.
    As for the point made by the hon. Member for Islington, East (Mr. E. Fletcher), when I saw his un-called Amendment on the Paper I was not quite certain what he had in mind. I thought
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    the intention was what he says it is. It is true that by little or no value we mean precisely that—little or no monetary value. Obviously, these buildings have great spiritual value and non-material value. I will consider what the hon. Gentleman has said, although my own impression is that it would be wrong to write into this Clause the words "material value," because it would always be a presupposition that any Act of Parliament of this kind dealing with Income Tax is concerned solely with values assessed for Income Tax.
    I think that the hon. and learned Member for Kettering is right in saying that so far as local authorities make profits out of the operation either of cemeteries or crematoria, they will be liable to tax on those profits, although, on the face of it, I should think it would be unlikely that this is the sort of activity which local authorities would seek to carry on at a profit. I should imagine that they would wish to carry on that sort of activity at neither a profit nor a loss.
    As for offsetting one activity as against another, my impression is that the normal rules of offset apply to the offset of profit on one activity against the loss on another activity. If I am wrong, I will let the hon. and learned Member know afterwards. The reason why cemeteries and crematoria are treated differently is because we are trying to apply to cemeteries and crematoria the normal Income Tax rule that capital that is used up in the course of earning a profit is written off. In the case of a cemetery, obviously the whole of the land involved will be used up in course of time, and when the land has been used up the buildings cease to become usable for making a profit, which is the purpose for which they were originally intended.
    In the case of crematoria, the explanation which was given to me is a little unusual—namely, that there is no such limit to the useful life of a crematorium. In other words, crematoria buildings continue to be used over an almost indefinite period, and their life is not terminated by the exhaustion of land which is attached to a cemetery. Therefore, they are treated on a different basis. As for the activities of local

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    authorities, I can assure the hon. and learned Member that the normal rules of Income Tax with respect to the computation of profits continue to apply and will not be affected.
    Mr. Jay: I do not wish to enter into the constituency competition over crematoria, still less to add to the incongruity of the Economic Secretary's language. I should like to ask him about what I might perhaps not incongruously call the philosophy of this Clause. I think he said that it was a principle of Income Tax which we ought to apply, that where a capital asset was destroyed over its life, if one may use that word in this connection, it should be written off during a period.
    The Millard Tucker Report lays down the principle that, in general, land is not a wasting asset the value may fluctuate, but it cannot depreciate from use. There is, therefore, no case for giving an allowance. The Report then says that there are exceptions, and that the Committee have already dealt with one or two special exceptions to this general rule in the case of mines abroad, and another exception is land used for cemeteries.
    I should like to be told why this particular exception to the rule has been selected for legislation in this Clause. Presumably it is not the only case where, in the course of some economic activity, the value of land is destroyed or, at any rate, heavily diminished. Indeed, the wording of the Millard Tucker Report implies that there are further exceptions over and above that. I wonder if the Economic Secretary can tell us what is the position in the case of a sand and gravel business, or indeed, an iron ore quarry, or other cases where it would appear to the plain man that a similar problem arises of the land losing its value over a period.
    I am not suggesting that the hon. Gentleman should go into a special disquisition about those types of business, but I would like him to explain whether a cemetery is really unique in this matter. If it is not, what is the position of other businesses where land diminishes in this way, and why has this particular example been picked out?
    Mr. Maudling: This example has been picked out because it was a recommenda-
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    tion of the Millard Tucker Committee. In a sense, land used by cemetery companies is different because what they do with the land is to dispose of it. As for other examples, there was mentioned in the Committee land used for dry docks and things of that sort. The Royal Commission is, I understand, considering other examples of this principle, and no doubt in due course we shall hear from them on the subject.
    Question put, and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 22.—(CAPITAL ALLOWANCES ETC. (AMENDMENT AS TO CERTAIN SALES).)
    The Solicitor-General: I beg to move, in page 25, line 10. after "sale," to insert:
    "and the circumstances are not at that time such that an allowance or charge under Part X or XI of that Act falls or might fall to be made to or on that party in consequence of the sale."
    I should like to say a word about Clause 22 in order to make the object of the Amendment clear. The Clause is intended to remedy what now appear to be two defects in the Fourteenth Schedule of the Income Tax Act, 1952, relating to balancing charges and allowances where there is a sale between different concerns. The effect and object of this Amendment is to ensure that in remedying this defect there should be no retrospective effect.
    The Clause applies only to assessments for 1954–55 and later years, so that it would not, at first sight, be possible for it to have any retrospective effect. But a balancing charge for 1954–55 or 1955–56 might arise from a sale which took place before 6th April, and it could be argued that the Clause is consequently open to objection as having a somewhat retrospective effect. It is to avoid any argument upon that score that I move this Amendment.
    Mr. Stevens: I should like to express my thanks to my right hon. and learned Friend the Solicitor-General and. through him, to my right hon. Friend the Chancellor of the Exchequer for accepting, broadly speaking, the terms of the Amendment which I put down, and which was not selected.
    The Clause as drafted undoubtedly can have, as my right hon. and learned Friend says. a retrospective effect, and

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    by the Amendment the Chancellor has demonstrated his horror of retrospective legislation. I only want to say, further, that I sincerely hope that the virus of anti-retroaction will remain with him and his right hon. Friends during the discussion of the remaining Clauses of the Bill.
    6.0 p.m.
    Mr. Houghton: The Solicitor-General has not explained how these two defects in the Fourteenth Schedule of the 1952 Act came to light. The Committee is asked to overrule a decision of the Special Commissioners in the case of paragraph (a) and a decision of the House of Lords in the case of paragraph (b), and we ought to have a little more explanation how the trouble occurred. The Amendment moved by the Solicitor-General prevents retrospective effect being given to paragraph (a). As I understand, the Special Commissioners decided that an election could be made under the Fourteenth Schedule of the 1952 Act when a parent company in this country sold—
    The Solicitor-General: In moving a limiting Amendment to what is already in the Clause I am confined to dealing with the effect of that Amendment I cannot go on to give reasons for the inclusion of the Clause in the Bill. I could indicate quite shortly why paragraphs (a) and (b) have been put in when we come to the Question, "That the Clause stand part of the Bill," but I do not think it right to take up the time of the Committee on a discussion of this limiting Amendment.
    Mr. Houghton: In that case I shall defer my remarks until then.
    Amendment agreed to.
    The Solicitor-General: I beg to move, in page 25, line 22, at the end, to add:
    Provided that paragraph (a) of this section shall not apply in the case of a sale made before the sixth day of April, nineteen hundred and fifty-four, where the property was sold at a price other than that which it would have fetched if sold in the open market.
    I have to admit to the Committee that my last speech was made on the wrong Amendment. I am glad that no one noticed it. The speech which I made on the last Amendment was the one I ought to have made in moving this one. The
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    hon. Member for Sowerby (Mr. Houghton) has been extremely kind to me.
    Mr. Mitchison: Is that what the right hon. and learned Gentleman would call "prospective oration" rather than retrospective legislation?
    The Solicitor-General: I would rather not answer that question. It was a most unfortunate accident, for which I apologise.
    Mr. Houghton: I was not being kind to the right hon. and learned Gentleman. I found his speech hard to follow, but I assumed that he made the speech which obviously had to be made.
    The Solicitor-General: I am sorry. I was hoping that the hon. Member was being kind to me for once. Dealing with the previous Amendment, the point—
    The Temporary Chairman (Mr. George Thomas): Order. I do not want to be difficult, but I think it would be better if that discussion were left until we come to the Question. "That the Clause stand part of the Bill." The Amendment appears to be consequential upon the Secretary-General's last speech.
    Amendment agreed to.
    Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill"
    The Solicitor-General: I hope that I may now say properly what I ought to have said before as to the effect of the Amendment to paragraph (a), since it has been incorporated in the Clause, but before I do so I think it would be convenient to indicate what the Clause is intended to deal with. It seeks to remedy two defects in the Fourteenth Schedule of the 1952 Act. Paragraph 4 of that Schedule gives power to opt to treat. The effect of exercising the option on a sale is to pass on from the vendor to the purchaser the burden of allowances and the liability for balancing charges.
    That works all right when the vendor and the purchaser are in the United Kingdom, and it was meant to be confined to transactions between persons who were subject to United Kingdom tax. There was no difficulty about it in that case, because it did not impose a tax or produce a relief. But where the sale takes

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    place to a company resident outside the United Kingdom the effect of exercising the option can be to relieve the vendor of the liability to a balancing charge, while making it impossible to recover that liability from the purchaser, as it would be recoverable if he were subject to the jurisdiction of this country.
    The effect of the Amendment to paragraph (a) is to eliminate that defect and to prevent the option from being exercisable when the sale takes place to a person resident outside the United Kingdom. The Amendment goes one stage further. A company in this country can sell to another company overseas, which has a branch here, in which case the branch would be liable to tax. There can be no objection to the transfer to the branch in this country because there would be no avoidance of tax in consequence of the exercise of the option. The branch would be liable.
    A second defect which the Clause is intended to remedy emerged as a result of a decision by the House of Lords—in the case of Commissioners of Inland Revenue v. Wilson's (Dunblane) Ltd.—which prevented the adjustment which the Schedule provides should take place in the event of certain sales operating. The House of Lords said that that provision would not operate if the sale had taken place at market price and not at some lower price. It had been thought that the provision to stop evasion would also apply if the sale were at market value, but it has been held to the contrary, and it is only right that an adjustment should be made to ensure that there is no evasion.
    Mr. Stevens: Despite the Amendments which have now been incorporated in the Clause, I am still not quite happy about it. The position of a company incorporated in this country, and therefore normally liable to United Kingdom tax—
    Notice taken that 40 Members were not present;
    Committee counted, and, 40 Members being present—
    Mr. Stevens: There are many instances where companies incorporated in the United Kingdom and subject to United Kingdom Income Tax operate branches in territories overseas, including Empire
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    territories. I raised on Clause 16 the question about the extent of national feeling in a territory dictating a policy to the United Kingdom company of forming a company registered in the territory in which it is operating. A sale, taking place in circumstances of that sort, by the parent company here to the newly-formed company overseas, is legally a sale by the vendor to the purchaser, but it is really an internal transaction.
    As the Clause is drafted at present, very possibly penal balancing charges may lie at the door of the vendor company. I see my right hon. and learned Friend shaking his head negatively, but it still seems to me that that is possible. The price for the transaction as a matter of expedience may not be the open market price but may well be a price substantially higher than the taxation written-down value in this country of the assets transferred.
    I see the object of the Clause. The Chancellor does not want charges by reason of the fact that the purchaser is not subject to United Kingdom taxation. That is very obvious, but it seems to me that if in a transaction of the nature I have indicated, which is virtually a domestic transaction, though it is a sale in law, the plant and machinery and the industrial buildings sold to the new company formed overseas are used by that company for the purpose of the group for a reasonable period of, say, three years after the sale, no such balancing charges should arise, but the taxation written-down values may well be deemed for taxation purposes to be the selling price. I should be very glad if my right hon. and learned Friend would consider that point seriously.
    Question put, and agreed to.
    Clause, as amended, ordered to stand part of the Bill.

    Clause 23.—(CONSULAR OFFICERS AND EMPLOYEES.)
    Motion made, and Question proposed, "That the Cause stand part of the Bill."
    Mr. Hugh Dalton: This is surely a Clause for the consideration of which we should have here a representative of the Foreign Secretary. It concerns matters relating to consular officers whether at home or abroad. Surely one of the very numerous

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    Ministers now attached to the Foreign Office could spare time to come to help the Financial Secretary to explain it? I do not know whether it would be reasonable to have an appropriate interval to enable one of them to arrive. Would you think that would be reasonable, Mr. Thomas? Would you think it reasonable to adjourn the debate for a short period? Should I be in order in proposing that?
    Mr. M. Follick: We should be better off for it.
    Hon. Members: Move it.
    Mr. Dalton: I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
    The Temporary Chairman: The right hon. Gentleman is, of course, within the rules of order, but I hardly think I can accept the Motion at this stage. I am very sorry, but I cannot accept it.
    Mr. E. Fletcher: Before you give a definite Ruling. Mr. Thomas, I would point out that one of the considerations that inevitably arises on this Clause is the very important one of reciprocity, The Committee cannot be expected to grant these concessions for consular officers from overseas and foreign countries unless we are assured that our consular officers overseas receive reciprocal rights. I was very anxious to ask the Foreign Secretary or one of his assistants about the precise position of a number of our consular officers in European countries and in some American countries where, I gather, difficulties have arisen. I hardly think it is fair to the Committee to expect it to go on dealing with the Clause unless we know that there is somebody on the Treasury Bench fully equipped with all the detailed information. I should have thought that the Foreign Secretary or one of his deputies alone could have dealt with this important subject.
    6.15 p.m.
    The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter): I do not think the Committee will find any great difficulty in the discussion of this Clause, which, of course, relates only to the taxation aspect of consular conventions and not to the other very interesting and important aspects with which, naturally, the Foreign Secretary is concerned. The
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    purpose of the Clause is simply to provide a means of giving effect to taxation provisions in existing and future consular conventions. The layout of the Clause is, I think, quite simple, and is, certainly as compared with the Clauses the Committee has just been discussing most agreeably clear.
    The first thing it does, in subsection (1), is to exempt the overseas income of consular officers or of consular employees from Income Tax—
    Mr. Roy Jenkins: On a point of order. I understand that we are debating the Question, "That the Clause stand part of the Bill." I understood that the right hon. Gentleman was merely, at this stage, seeking to advance arguments why he could deal with the matter, and not seeking to deal with the substance of the matter. There are several points I wish to make.
    The Temporary Chairman: The right hon. Gentleman is dealing with the Question that I have proposed, which is, That the Clause stand part of the Bill."
    Mr. Boyd-Carpenter: I think that is quite clear. The Motion to report Progress was not accepted. The Question is, "That the Clause stand part of the Bill," and I was seeking to address my observations to it, and, no doubt, it would be for the convenience of the Committee if I explained the Clause, as I was trying to do.
    It seeks to enable us to exempt the overseas income of those consular officers and employees subject, as hon. Members will see in subsection (1), to their not being citizens of the United Kingdom and Colonies, to their not being engaged in any trade or employment in the United Kingdom, and to their not being ordinarily resident in the United Kingdom immediately before they take up their consular offices. I think the reasons for those three limitations are pretty obvious and do not require labouring. It is, of course, the fact that, apart from this Clause, such income would be liable to United Kingdom tax.
    The other provision of the Clause is much smaller in scope and is embodied in subsection (2). The Committee will, no doubt, recall that by previous legislation now embodied in Section 462 of the Income Tax Act, 1952, which is a consolidating Statute, the official salaries in

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    general of consular officers and employees are exempt from United Kingdom tax, but Section 462, as it stands, does not permit that exemption to be given in the case of any British subject. It therefore goes wider in restricting the exemption than the consular conventions, which, in general. refer to nationals of the receiving State. What is therefore proposed in subsection (2) of the Clause is to say that, while it will not be possible for citizens of the United Kingdom and Colonies to obtain this exemption, other British subjects, and citizens of the Republic of Ireland, shall be permitted this exemption in appropriate cases. That is to say, the category to whom this concession cannot be given is narrowed to that of citizens of the United Kingdom and Colonies.
    Mr. Follick: If a British subject is a consul for another country in this country, as. I believe, the Principality of Monaco has appointed a British subject as its consul in Brighton, how does he stand?
    Mr. Boyd-Carpenter: It depends whether the hon. Member is using the term "British subject" in the precise sense. If the gentleman who has the honour of being appointed to represent the Principality of Monaco is a citizen of the United Kingdom and Colonies, he would not get the exemption. The hon. Member will appreciate the reason for this. There would clearly be possibilities of such a state of affairs being abused.
    What we aim at doing is to bring Section 462 of the Income Tax Act into line with the consular conventions, which lay down that the only category of person to whom this cannot be given is nationals of the receiving State. The equivalent in our law to nationals of the receiving State, is, quite clearly, citizens of the United Kingdom and Colonies.
    An hon. Member opposite asked whether these concessions are, and will be. on a reciprocal basis. The answer is. of course, "Yes." Our intentions in that respect are made particularly clear if hon. Members look at the terms of the Clause and see the machinery provided. The application of the concession will be effected by Order in Council in a particular case. It will be possible for that Order in Council to confer smaller, though not larger, privileges than are
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    provided in the Clause. The object of this is that if in any particular case a foreign Power does not give to our consuls privileges equivalent to the full privileges which can be given by the Clause, we can then, by the terms of the Order in Council, limit the privileges conferred on that country's nationals here in order to maintain reciprocity. The Order in Council has to be laid before Parliament and is subject to the negative procedure. Therefore, it will be possible for hon. Members who have any doubts whether reciprocity is being observed to raise such a question on the Order in Council.
    It is intended, if so requested, to apply Orders in Council under the Clause in the case both of the small number of existing conventions where its application has not yet arisen and to any future conventions which may be concluded.
    I need not waste time by pointing out the importance to this country of the conclusion of consular conventions. The services which consuls can render in particular to trade and traders are more important to this country, perhaps, than to any other country. The increasing complexity of international trade makes consular assistance increasingly important. It is for that reason that we seek as opportunity offers to conclude these consular conventions, in which these tax provisions, although they may play a relatively minor part, are necessary.
    Mr. John Edwards: Can the right hon. Gentleman give any instances of the likely application of the Clause in the near future?
    Mr. Boyd-Carpenter: The simplest thing would be to indicate the States with which we already have consular conventions. I would rather not speculate about the future, because in the event of anything going wrong in a particular case that might give rise to embarrassment. Conventions have been concluded with the United States, Norway, Sweden, France, Mexico and Greece. These conventions are published in Command Papers whose numbers I can give if so desired.
    Mr. Roy Jenkins: A disadvantage of the right hon. Gentleman's dealing with the points at issue in the Clause so early in the debate is that one must necessarily

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    put questions to him after, instead of before, his speech. The point which I want to raise particularly concerns the exact category of people who will be dealt with under subsection (2) of the Clause.
    I think I am right in understanding the right hon. Gentleman to say that Section 462 of the Income Tax Act, 1952, already extends this exemption from United Kingdom taxation on the emoluments of the consular office to all people who are not British subjects. Under the provisions that we are now asked to pass into law, the exemption will be confined to those who are citizens of the United Kingdom and Colonies. Therefore, the category that we are dealing with are persons who are British subjects, but not citizens of the United Kingdom and Colonies, who hold consular appointments in the United Kingdom.
    From a brief perusal of the relevant Sections of the 1952 Act, it appears that High Commissioners and people on their staffs and Agents of the Colonies and of Commonwealth countries are dealt with under Section 461. I am not sure whether they are, therefore, involved, or whether we are dealing with what, I should have thought, was an extremely limited category of persons—that is, persons who are British subjects but not subjects of the United Kingdom and Colonies who are holding consular appointments: that is to say, not appointments relating to the Governments of countries from which they came, but consular appointments on behalf of other Governments in the United Kingdom. If I am correct in my supposition, can the Financial Secretary give any idea of how many of these gentlemen there are?
    Mr. Boyd-Carpenter: The hon. Member is perfectly right in his supposition. We are not here concerned with representatives in this country of other members of the Commonwealth. We are concerned with foreign consular establishments which may see fit to employ British subjects other than citizens of the United Kingdom and Colonies.
    An obvious theoretical example would be if a Norwegian consul employed an Irishman as a consular employee. There must be extraordinarily few of these people. I cannot quote any existing case within the comparatively limited sphere of the existing conventions. The object of this
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    provision, as the hon. Member will appreciate, is to enable us, where necessary, to make the provision which the general wording of consular conventions generally demands of us, as and when the case arises. I do not know of any existing case at the moment that will benefit from this concession.
    Question put, and agreed to.
    Clause ordered to stand pan of the Bill.

    Clause 24.—(FORM OF SCHEDULE A ASSESSMENTS, ETC.)
    Motion made, and Question proposed, "That the Clause stand part of the Bill."
    Mr. Houghton: This is the shortest Clause we have had to consider since Clause 13, and for that we should be truly grateful. It is an inoffensive looking Clause and proposes to omit something from the Income Tax Act, 1952. There is quite a lot about the Income Tax Act, 1952, which could be omitted without anybody missing it, because it contains antique survivals of ancient law.
    The Clause proposes to omit subsections (2) and (3) of Section 34 of the 1952 Act. Those two subsections deal with the mechanics, to some extent, of making assessments under Schedule A. Schedule A is popularly known as property tax, which many people think is something different from Income Tax, but, of course, we all know better. Those two subsections in the 1952 Act say that assessors shall deliver to the Additional Commissioners their certificates of assessment under Schedules A and B and that such assessments, when delivered with the relative papers, shall be progressively numbered.
    In the Acts of years gone by, the details of what assessors and clerks and commissioners should do were specified in the Act. Subsection (2) of Section 34 in the 1952 Act says that
    "such assessments, together with all statements which have been delivered to the assessors, both of annual value and of any deductions claimed to be made therefrom, shall be progressively numbered."
    6.30 p.m.
    This Clause proposes to omit those words. It is not clear whether, in the absence of directions, these assessments have to be numbered at all, or numbered in some way different from progressively. They might be numbered the wrong way round. There is nothing to indicate

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    what is to be done when these assessments have no longer to be progressively numbered.
    Subsection (3) states:
    "The clerks to the respective General Commissioners shall, with all convenient speed, extract the particulars contained in the lists and statements delivered to the Commissioners, so far as they concern assessments under Schedule A, into books provided for the purpose…"
    It is not clear, by omitting these words, whether the clerks to the respective General Commissioners shall do something with all speed, or all convenient speed, or just speed, or no speed at all. It is not clear what the clerks to the Commissioners are expected to do.
    Then what about the books which are provided for the purpose? Does the omission of these words mean that the Inland Revenue is no longer to provide books for this purpose? If so, have these poor, wretched clerks to the Commissioners to buy the books out of their own pockets? What is the idea behind the emission of these particular provisions of the 1952 Act?
    I have an idea that behind this Clause ies a measure of modernisation of the mechanics of making and recording these assessments. Presumably, by passing this Clause, we are authorising the Inland Revenue to modernise the machinery and the office methods of dealing with the Schedule. If the Financial Secretary really wants to assist the Chancellor of the Exchequer to reduce the administrative costs in the public service, he should look at the Schedule A assessment books in the tax offices in the country today. He will see the cumbersome size of them, and the scratching out and inking in of changes of ownership and occupation which have been written into these books year by year since the last valuation 15 years ago. Many of these books have been entirely re-copied because they were quite unusable in their old and tattered form.
    If I understand aright, it is now proposed to give the Inland Revenue permission to get away from the idea of putting the assessments in books at all, and to adopt a card index system, a loose-leaf system, or something more in accordance with modern office methods and management. I am sure the Committee will approve of that step.
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    I do not know what the timing of this new measure is to be, but I am sure that the Committee will be looking to the Radcliffe Commission, in its final report, to say something about the future of Income Tax under Schedule A. There are many different opinions as to whether Schedule A should be abolished, whether income from property should be assessed under the conditions of Schedule D and so on. The point that I am making is that I hope that it is not proposed to go to elaborate lengths to modernise the office machinery if, before very long, the whole thing may come under quite drastic review.
    I acknowledge straight away that, from my information, it is very likely that quite urgent steps will have to be taken, whatever the Radcliffe Commission may say and however relatively short the time may be before this matter can be considered afresh.
    Perhaps the Financial Secretary will say a few words about whether my impression is correct, and assure the Committee, as I am sure he can, that there is nothing in this Clause which alters the basis of assessment or makes any difference whatever to the taxpayer. I understand that it imposes no new charge and gives no new concessions, not even administrative concessions, and that it is purely and simply to relieve the Inland Revenue of the cumbersome requirements of Section 34 of the Act and to give them freedom to arrange their affairs on more up-to-date lines.
    Mr. Boyd-Carpenter: The hon. Gentleman, in his concluding observations, has, I think, summarised very clearly the purpose of this Clause. It does not alter the tax position, liability or assessment of individuals. It is purely and simply, to use his own phrase, a measure of modernisation.
    The relative Sections—Sections 34 and 67 of the Income Tax Act, 1952—describe the recording of Schedule Assessments in books. The hon. Gentleman referred to what he had seen in tax offices, and although my experience is more modest than his, I have gone to the trouble of looking at these books, and I think that he will confirm my impression that some of them are practically disintegrating. The purpose of the Clause is to enable a clearer and simpler method to be used, which will largely consist of

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    loose leaves which will he put in due course in binders.
    We are advised that this more modern method does not comply with the Sections in that these binders are not books, and it is necessary to get rid of the duty of using books. There is also a small provision making it unnecessary to record the name of the occupier in cases where the landlord pays the tax.
    Question put, and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 25.—(REDUCED RATE OF DUTY ON CERTAIN BUSINESS ASSETS.)
    Sir Patrick Spens: I beg to move, in page 26, line 38, to leave out from the beginning, to "shall." in line 39, and to insert:
    "the assets used in or occupied for the purpose of the business."
    The Temporary Chairman: In calling the right hon. and learned Member for Kensington, South (Sir P. Spens), I would point out that there are a large number of Amendments linked with this one which I think might be taken together for the purpose of discussion. They are: In page 26, lines 38 and 39; in page 27, lines 6, 20, 24, 29, 35. 41 and 46; in page 28, line 5; in page 28, leave out lines 11 to 31, and in page 28. line 20.
    The Chancellor of the Exchequer (Mr. R. A. Butler): Is the Amendment in page 28, line 47, also to be taken with this group, since it covers the same point?
    The Temporary Chairman: I am advised that it is not selected, but if it covers the same point possibly it can be discussed.
    Sir P. Spens: I am sure that it would be for the convenience of everybody if all these Amendments could be discussed together.
    This Clause is intended to carry out certain promises made in the Budget Statement and on the Second Reading of this Bill. As it is drafted, however, the benefit of the reduced rate on Estate Duty is confined, so far as premises are concerned, to industrial hereditaments. That is a phrase which was not used either in the Budget Statement or during Second Reading. The phrase used in the Budget Statement by the Chancellor was "industrial premises and plant and
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    machinery." The phrase used by the Financial Secretary on Second Reading was "industrial buildings, plant and machinery." I apprehend that "industrial hereditaments" has a very technical meaning. In subsection (7) there is a reference to the Rating and Valuation (Apportionment) Act, 1928, which is applied, and that contains a definition of industrial hereditaments.
    The Committee must realise that the definition in the Act is a very narrow one. Naturally, it does not include dwelling-houses. It does not include the premises of public supply undertakings. What is more important is that it does not include premises used for storage purposes, premises used for distributive wholesale purposes, or retail shops. In fact, it includes only premises which are used for the purposes of a factory or workshop.
    If that is right, the businesses which will benefit from the Clause are very limited indeed. I do not want to look a gift horse in the mouth. For those businesses which have premises which comprise factories and workshops, we welcome very much the benefit conferred by the Clause, but, if my construction is right about the very narrow meaning of "industrial hereditaments," we feel disappointed that the benefit will be so restricted.
    I am not too certain, having read the Clause—nor do I know whether it was intended—that the plant and machinery have to be on or to belong to the business that has the industrial hereditaments or whether any business of whatever nature that has plant or machinery may, so far as the plant and machinery are concerned, obtain the benefit of the Clause.
    There must be many businesses used for storage or retail purposes which have certain plant and machinery on their premises although the premises are not industrial hereditaments. I do not know, whether or not plant and machinery generally in any sort of business is to be included. I hope it is, but I have a strong feeling that the Clause would be liable to be construed at present as meaning that the only businesses which can take advantage of the relief would he businesses which have industrial hereditaments and have, in connection with those industrial hereditaments, plant and machinery.

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    Therefore, if my reading of the Clause is right, the relief is confined not only to a limited number of businesses but to a very limited portion of the business assets of those businesses. Even where one has a business which is carried on in industrial premises and has plant and machinery, the relief is confined to those assets only and does not extend at all to any of the other assets of the business. For instance, it will not extend to the raw materials which are certain to be there on any death occurring in connection with those industrial hereditaments. It does not extend to the stocks, which are equally certain to be there. Therefore, it means that when Estate Duty comes to be paid on the death of an owner or shareholder of a business—I will not go into the details of the shareholders, for that would make my speech much too long—it would have to be raised either out of the other assets of the business or out of the property of the deceased.
    6.45 p.m.
    If the very limited effect of the Clause is as I think it is, I cannot follow why there was so much discussion on the earlier stages of the Bill and on the Budget Statement about how the Estate Duty was to be borne.
    My Amendment is the broadest of all the Amendments. It asks, frankly, that all assets of a business shall receive this relief, both the real property, the hereditaments and the plant and machinery and all other assets. If the principle underlying the Clause is that there is grave difficulty in raising Estate Duty out of family businesses, I should have thought that, on principle, the relief ought to be given to all the assets. I will not develop the argument—it is a perfectly straightforward point—as to whether this is a limited or extended provision.
    I want to make a small plea on behalf of those who carry on businesses in my constituency. In my part of London there are very few businesses which have industrial hereditaments in the ordinary sense. We have a great many retail businesses which have extraordinarily valuable stocks. For instance, many antique shops are to be found in my division. Those businesses are nearly all small family businesses, and the value of the stocks is enormous. Yet, when the owner
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    of the business dies, Estate Duty has to be faced at the full rate in respect of those valuable stocks in the retail premises. Those businesses will get no relief under the Clause. The difficulties are just as great for businesses of that nature as they are for businesses which happen to have a factory or a workshop.
    I repeat that we thank the Chancellor for having applied the relief which is enjoyed by agriculture to businesses where there are factories, workshops, plant and machinery, but we hope he will find it possible to go rather further. If the object is to save family businesses, the relief should be extended much further.
    Mr. J. Grimond: I want to say a word in support of the Amendment moved by the right hon. and learned Member for Kensington, South (Sir P. Spens). I awaited his speech with interest. I could hardly believe that the Clause really meant what he assured the Committee it meant. I agree with him that, if he is correct, it is a very much narrower Clause than most of us expected when we heard reference to it on Second Reading.
    I agree almost entirely with what the right hon. and learned Gentleman said. It seems to me that if we are to have small businesses of this sort, we should make the help effective and cover at least the great bulk of them. If the construction put on the Clause by the right hon. and learned Member is right—and it appears to me to be right—it is going to be restricted to certain assets of the business and to certain businesses. It will take some time to work out.
    There are, first of all, shops, and as I read this subsection they will be excluded. They are liable to be bought up by multiple stores and very definitely they are many examples of small businesses going out of business and more and more becoming parts of larger undertakings. Then there are things like small printing businesses, which very often have a shop in front and the printing works behind. They possess a large stock of paper and considerable goodwill. None of these things will rank for a reduction in Estate Duty, as I read this subsection.
    In my own constituency there are small weaving businesses with small shops in front and certain weaving machinery at

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    the rear. The machines will count for a reduction in duty but not the shop, the tweed or the yarn. There are also engineering businesses which may carry certain types of assets. Some of them will rank for benefit under this Clause, but some will not.
    It seems to me that the wording of the Amendment sponsored by the right hon. and learned Gentleman is most comprehensive, and to the laymen it looks the simplest of the Amendments. Others deal with livestock and industrial matters. There are cases in which livestock ought to be included, but that might mean widening the Clause further than the Chancellor intended. It seems to me that in principle there may be arguments for land against reducing Estate Duty on small businesses, but I am convinced by the arguments in favour of such a proposal.
    What I find difficult to follow is the argument that part of the benefits shall apply to certain premises and to certain of the plant belonging to a business but not to all the assets. It would seem that that will be difficult to administer, and, if the Chancellor accepts the principle of the Clause, then he ought to extend it to, all the assets of any business.
    Mr. Stevens: Like my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens), I give a qualified welcome to this half-loaf which is better than no bread, but I am not sure that it is even a half-loaf, as the hon. Member for Orkney and Shetlands (Mr. Grimond) has illustrated. We are a merchant nation as well as a manufacturing nation, and there should be relief under this Clause for merchant businesses, for stocks and for shop premises. Despite the fact referred to by the hon. Member for Orkney and Shetland about the growth of multiple shops, we still remain to a very large extent Napoleon's nation of shopkeepers. Yet the shopkeeper gets no relief of any kind under this Clause. I think that is quite clear.
    Business has changed a great deal in the last 40 or 50 years. Large-scale manufacture is much more widespread today than 30 or 40 years ago. I suppose that 30 years ago there were about 60 different manufacturers of motor cars and quite a number of them were small family businesses. Today the motor
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    manufacturer requires a large plant beyond the capacity of the ordinary family. Today, as a result, there are perhaps not more than 20 manufacturers of motor cars, few of which are family businesses.
    The whole trend today is for family businesses to cease to be manufacturing businesses and rather to go in for distribution and personal service. I have in mind not so much the antique dealers, who are of very great importance to this country, but the hotels, boarding-houses, restaurants and cafés in Hayling Island in my constituency. Although they are family businesses, none of them will get any relief under this Bill.
    Hon. Members: Order.
    The Temporary Chairman: I think the hon. Member is wandering a little into the Gangway.
    Mr. Stevens: I beg your pardon, Mr. Thomas. I must mind my step.
    The Chancellor says that he wants to help small family businesses, but by these words "industrial," "plant" and "machinery" he is specifically excluding a very large proportion of a very important section of our industrial and social structure to which it seemed he was referring in his Budget speech and in his Second Reading speech on this Bill. We hope he will look at the Clause again.
    Mr. Austen Albu: The hon. Member for Langstone (Mr. Stevens) and the hon. Member for Orkney and Shetland (Mr. Grimond), in supporting this Amendment, referred to small businesses and the assumption behind their argument was that the whole of the Clause is designed to assist such businesses. Hon. Gentlemen will, of course, recognise that that is not the case. What this Clause does is, of course, to assist inherited businesses whatever their size and. therefore, any arguments directed to the idea of this Clause being designed to assist small businesses falls to the ground unless the right hon. and learned Gentleman the Member for Kensington, South (Sir P. Spens) and his hon. Friends will support the Amendment which my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) will later move to restrict this Clause to small businesses.
    It would be out of order for me to discuss the reasons why my right hon. and

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    hon. Friends are not in favour of the Clause at all. So many of the arguments have been addressed to the suggestion for widening the Clause that we should have to controvert many of them, which we could not do during this discussion, but they could be more appropriately dealt with on the Motion, "That the Clause stand part of the Bill." It is quite obvious from the views expressed on Second Reading, and from what I have just said, that nobody on this side of the Committee will support an extension of the concession.
    The speeches which we have so far heard have assumed that what the Government wish to do is to assist the inheritors of small or family businesses, but that is not what the Government want to do. What the Government are desirous of doing is to deal with the difficult situation arising in manufacturing undertakings from the point of view of the national economy. On a number of previous occasions in Committee the same confusion arose between the Treasury Bench and some Government supporters. When we were discussing investment allowances, the Chancellor had to make it clear to them that the intention of such an allowance was to assist manufacturing industries and was not a taxation concession given in order to assist particular individuals or as a matter of equity.
    As I understand this concession, the same principle applies. The object is to deal with what the Chancellor concedes to be a serious disadvantage from the point of view of the national economy. It is not to give relief to particular individuals or particular classes in the community, because that relief has got to be justified on grounds of equity. Certainly, my right hon. and hon. Friends will later have an opportunity of explaining that we would be strongly opposed purely on the grounds of equity to any extensions of the relief on inheritances. We must consider not only questions of taxation equity and relief, but also questions of the national interest and economy.
    7.0 p.m.
    I quite see the argument about businesses with fixed assets, very often in the form of plant and machinery which
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    would not be saleable, or on which it would be difficult to obtain loans because of its specialised nature and because it is incorporated in a manufacturing business in such a way that it would have little value by itself. There may be difficulties in those cases, and there may be some justification for relief from Estate Duty on such businesses on the death of the owner. I cannot see the argument when applied to retail businesses, particularly those of the nature referred to by the right hon. and learned Member for Kensington, South, who moved this very wide Amendment.
    If his assumption is correct that the Government's intention is to relieve Estate Duty on individuals, his argument may hold, but if my assumption is right, as I believe it is—and I hope that the Financial Secretary will indicate that the Government's intention is to deal with something considered to be harmful to the economy of the country as a whole rather than with the relative pressure of taxation between individuals—the argument advanced by the right hon. and learned Gentleman does not hold.
    I cannot believe that on the type of valuable stocks to which the right hon. and learned Gentleman was referring, or on stocks as a whole of a general saleable nature, it would not be possible for the inheritors to raise a sufficient loan to carry on the business. This position is very different from that of a manufacturing business, and so far no argument has been advanced from the Government side of the Committee that it is impossible to carry on a business of the sort, except that of hardship on the inheritors. The question of hardship is just as relative as the distribution of taxation and income. We are not sympathetic to the idea of reducing the level of Estate Duty by relieving the burden of taxation on inheritance and we cannot support Amendments based on those arguments.
    As to the other arguments about the effect of the present level of inheritance duty on the national economy as a whole. I cannot believe that it is in any way desirable or necessary to extend the Clause from its present application to take in industrial undertakings and partnerships.
    Mr. Gerald Nabarro: I support my right hon. and learned Friend's Amendment, and in doing so I

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    hope that the Chancellor of the Exchequer will not consider that I am in any way ungrateful in what I am about to say. I recognise the great concessions that he has made to the point of view that has been expressed in the Committee for several years past on the need for alleviating death duties on family businesses.
    In the last few years I have been fairly prominently concerned with this matter. The Chancellor will undoubtedly recall that the National Union of Manufacturers employed an economist two years ago to carry out a comprehensive survey of the way in which death duties affected family businesses of all kinds and sizes, and that in response to the plea made by my hon. Friend the Member for St. Marylebone (Sir W. Wakefield) and myself last year the Chancellor gave an undertaking that he would look into the circumstances.
    There are very great difficulties in the interpretation of the Clause. I would refer to the phrase "industrial hereditament," which I find difficult to define within the meaning of the Clause. There are businesses which are not of the manufacturing kind which might be deemed, on a strict interpretation of the Clause, not to be industrial businesses yet are essential to the operation of general industry. I will give one example at random, in response to the observations of the hon. Member for Edmonton (Mr. Albu).
    The whole of British industry is dependent directly or indirectly for its production arrangements upon a steady flow of small tools made to a very wide range of specification. It is not customary for the manufacturers of small tools to supply them direct to the consumers because it would be uneconomic to supply in single units or penny parcels every one of thousands of specifications. A system has, therefore, grown up of having entrepreneurs, or large factoring firms, the names of which I will not mention in this Committee but which are generally well-known. They perform a vital industrial purpose, for example within the engineering industry. Whether or not a family business engaged in that kind of trade would be adjudged an industrial hereditament in spite of its fixed assets, within some narrow connotation under this Clause, is a matter of great doubt.
    Mr. Houghton: I am trying to find the definition of "industrial hereditament." As I understand the matter, it is governed by the valuation for rating. If industrial premises are derated for the purpose of rating and valuation, they are industrial hereditaments for the purposes of the Clause. The one goes with the other, and there is no statutory determination of "industrial 'hereditament" to be made under the Clause.
    Mr. Nabarro: I am grateful to the hon. Gentleman. That is precisely the point on which I was trying to obtain information when the reply is given on this series of Amendments. There is uncertainty about it, in view of the wide variety of family businesses which will come under consideration if the Clause becomes part of the law.
    The second point is that in the speeches made by hon. Gentlemen opposite there seemed to be a good deal of misunderstanding about family businesses as a whole. There seems to be a general view that the family business is a small business and that the small business is a bad business. That is not true, and it would be a very dangerous generalisation to fall into. Again, without mentioning the name of any particular industrial firm, I can readily call to mind a very famous carpet manufacturing firm in Kidderminster which has been established for 200 years, which employs nearly 2,000 people and which has a capital of several millions of pounds, not more than 50 per cent. of which represents fixed assets in the form of buildings, plant, machinery, looms, and so on. The remainder is stock-in-trade.
    I envisage that there are businesses of that kind where the operation of death duties has caused very great difficulty. If the amelioration of death duties were not put into effect under the Clause it would not be possible for businesses of that kind to find the necessary money to pay the heavy duties while retaining control of the business within the family or without cutting down very considerably the level of essential working stocks. That kind of position arose regularly during the great depression in raw materials following the outbreak of the Korean with when, for instance, wool yarn used in the carpet industry rose to 200d. per lb. or

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    three times the level that had existed two years before.
    The assessment of death duties in circumstances of that kind on a large, active manufacturing family business inevitably leads to the erosion of stocks, or otherwise—or in conjunction with it—the realisation of the family's interest in the business. Both of those courses I conceive to be inimical to the national interest. In the particular case I cited the business has been in the hands of one family and a long and continuous tradition has been established ever since carpet manufacturing commenced in Kidderminster which is a matter of 200 years. Without wishing to appear ungrateful to my right hon. Friend for what he has conceded, I give my general support to the Amendment.
    Mr. Arthur Holt: I feel a little less uncertain about my knowledge of the Clause now than I did before I heard some of the speeches on it. I understood the Clause not to refer to family businesses but only to those sections of family businesses which can be assessed for Estate Duty on the death of one person who controls the business, and on an assets basis. If that explanation is something like right, I am reassured.
    If the arguments are good and are accepted by the Committee, that it is desirable to endeavour in some way to stop the erosion of such businesses, that they are efficient and should not be taken over by some combine or sold out on the death of the person who has previously controlled them, I cannot see why the Clause should be confined just to industrial undertakings. I know that in his Budget the Chancellor has not felt that he can give much away. He has been concerned, in investment allowances, with increasing production, but it is not just an increase in production that the nation wants. It wants not even merely an increase in economical production. We are concerned with the whole range of business activities from the raw material to the stage when the article is placed in the hands of the final consumer. It is that whole range of business activity that we wish to see carried out as economically and efficiently as possible.
    If it is argued, therefore, that it is desirable to prevent the passing away
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    into some big amalgamation of some of these industrial businesses which are under the control of one person, it seems to me just as important that we should do the same thing for the wholesaling and retailing businesses and any other business concerned with economic activity. That is a point which must be accepted. Whether one can then go on and widen the whole scope as between the proposals of the right hon. Member for Blackburn West (Mr. Assheton) and the Amendment in the name of the right hon. and learned Member for Kensington. South (Sir P. Spens) is another matter.
    I do not know what it would cost the Chancellor to accept the Amendment in the name of the right hon. and learned Member for Kensington, South. If he could accept it, it would be a good thing. There was very great weight in the right hon. and learned Member's arguments and I accept them, but if the Chancellor cannot accept that Amendment I do not see how he can refuse at least the intention of the proposals in the name of the right hon. Member for Blackburn, West. Whether they are correctly and legally worded I do not profess to know. I hope that we shall have an answer from the Government to the question why other parts of business activity are excluded from the provisions of the Clause.
    7.15 p.m.
    Mr. Aubrey Jones: I should like to draw attention to a wider aspect of this matter which so far has not been discussed. The hon. Member for Edmonton (Mr. Albu) is quite right. These provisions can be compared with those of Clause 15 and the Amendments are exactly the same in principle as the hon. Member's earlier Amendments to Clause 15. In other words, they involve the important principle of selectivity or discrimination in the field of direct taxation.
    I assert that, as a general rule, it is wrong to discriminate by way of direct taxation. That does not mean to say that I necessarily hold it to be wrong to discriminate by other methods. I am led to this belief by the following considerations. The payment of a tax is an obligation. In these days that obligation rests very heavily upon the taxpayer and, therefore, it becomes more important than ever to ensure continued respect for the obligation. Surely, the most certain way to

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    undermine respect for that obligation to pay tax is for the State to come along, disguised though it may be in the benevolent figure of the Chancellor, and say in the case of A. "I will relieve you of a part of your obligation merely because I consider you more important than B." It is not a question of merit but of sheer accident. For economic reasons A is judged to be more important than B and therefore is relieved of part of his obligation. I see nothing more calculated to undermine the whole basis of respect for the system of taxation.
    Even if that is not accepted, what is surely most highly objectionable is to select a relatively small part of the economy and to discriminate within that part. That is what the Clause does. It carves out of the economy the field of family businesses and gives relief predominantly to businesses of an industrial nature as against those of a commercial nature. Here—within this limited field—the discrimination leaps to the eye. Therefore, it seems to me that the Amendments which we are discussing are the inevitable product of the Clause. Discrimination must lead the Chancellor to receive further requests for concessions of the kind embodied in the Amendments.
    I shall be interested to hear on what grounds the Chancellor or the Financial Secretary will resist the Amendment. I cannot imagine that he is going to accept them. I can understand the case for resisting the widest Amendment of all, that in the name of my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens). It can be said in the case of that Amendment that after all, realisable, floating assets can be sold and fixed assets cannot be sold and therefore Estate Duty weighs more heavily upon fixed assets, but I do not see any case in principle for resisting the extension of the concession from industrial premises to commercial premises.
    If I may indulge in prophecy, I think that the Chancellor or the Financial Secretary will probably fall back upon the assertion that productive investment is more important to the economy than non-productive investment. Important though these economic considerations are, however, they should not be lifted to an importance above the considerations of principle which I have suggested. Apart
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    from that, the economic benefit to be obtained from this concession is surely an uncertain one. I would hold that the deterrent to investment in the field of family businesses has far more to do with the general economic circumstances and the general rates of current taxation than with death duty. Be that as it may, the gain is highly uncertain and the breach of principle is surely clear and unmistakable. I would weigh that breach of principle very heavily in the scale.
    Mr. Jay: Do we judge from the hon. Member's interesting speech that he, like us, is opposed to the whole of the Clause?
    Mr. Jones: I trust that the right hon. Gentleman will not strain my discipline too far. I agree that if one is going to give relief at all one should give it all—the way round. All I wish to say is that we are in the position—and I say this in no spirit of criticism or reproach—that my right hon. Friend so far has made relatively little impression on the general weight of taxation.
    Mr. R. A. Butler: Perhaps my hon. Friend will give some estimate of what he thinks the general weight of taxation has been as he makes a generalisation of that sort?
    Mr. Jones: I think my right lion. Friend is really misjudging me; I am saying nothing in a spirit of reproach or criticism. I was drawing attention to the dilemma that, unable as we are to make a great impression on the general burden of taxation, it seems to me that we are driven to a quite different order of things, to a series of devices in an attempt to lighten the burden of taxation here and there. It seems to me that these devices which I see embodied here and which seem to be embodied in later Amendments to Clause 29 are likely in the long run to lead to disrespect for the whole system of taxation and so undermine the obligation which we ought all to be endeavouring to maintain.
    Mr. Roy Jenkins: I think we would all agree that we have listened to an extremely interesting speech from the hon. Member for Hall Green (Mr. Aubrey Jones). I am sorry that he drew upon himself the censure of the Chancellor of the Exchequer, which I thought quite undeserved, and I was sorry that the Chancellor was so intolerant with him. The

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    hon. Member was advancing quite an interesting, almost philosophical, proposition. It was that discrimination of any sort in direct taxation was inherently undesirable. I thought he rather exaggerated the extent to which this Clause broke new ground because we must remember the existing agricultural provisions and there is not so much a production principle to be considered in that way.
    Mr. Aubrey Jones: The hon. Member will recognise that there was a whole series of Amendments on the Order Paper which sprang from what I was referring to.
    Mr. Jenkins: I was coming to that. I was not altogether clear what were the remedies proposed by the hon. Member for this difficulty. When my right hon. Friend the Member for Battersea, North (Mr. Jay) put the point to him, I thought he was a little equivocal in his answer.
    Mr. Jones: If I manage to catch the eye of the Chair, I hope later to indicate what I would do in regard to Estate Duty.
    Mr. Jenkins: Certainly, we look forward with great pleasure to hearing that contribution and I hope that the Chancellor joins in that pleasant anticipation. Dealing with the matter at this stage merely from the point of general principle, what I was doubtful about was the extent to which, on his own showing, one might improve the position by making the discrimination rather wider. If we make a discriminatory advantage wider we do away with discrimination altogether, but that was not suggested even in the widest of the Amendments—that in the name of the right hon. and learned Member for Kensington, South (Sir P. Spens).
    It seems at least an arguable point whether if we are to have a degree of discrimination one cannot make it sufficiently wide that we get anywhere near to doing away with that discrimination altogether, whether on the premises of the hon. Member for Hall Green the thing becomes less objectionable if one makes it wider and bigger or narrower and smaller. I was not clear on which side the hon. Member was arguing on that proposition.
    As my hon. Friend the Member for Edmonton (Mr. Albu) extremely forcefully said—and the point was dealt with
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    by the hon. Member for Kidderminster (Mr. Nabarro) later—it is very important to remember with what we are dealing in this Clause and the issue raised by this Amendment. We do not for a moment assume that small and family businesses are synonymous. We certainly think it perfectly valid to adopt the view we have adopted in the past of putting forward—unsuccessfully, I am sorry to say—Amendments to previous Clauses, designed to help small businesses without giving an indiscriminate advantage to inherited businesses.
    Here we are dealing with inherited businesses. Even if we accepted, as my hon. Friends and I do not accept, a general need for a concession under this Clause by the Chancellor of the Exchequer, it would still be necessary, in order to widen it, not merely to show that there were certain businesses of importance and national character outside the range of the Clause as it stands, but that it was necessary to give the concession to those businesses now outside the Clause so that they may continue to discharge functions of value to the economy.
    The hon. Member for Kidderminster gave his example of businesses selling tools to the engineering industry generally. But it is not enough to describe to the Committee that such businesses exist and to make the fairly obvious point that they are of some importance in the economy. What has to be shown is that it is particularly desirable that those businesses should continue as family businesses if they are to be of value. I do not think the hon. Member advanced that case at all; in fact, he did not even apply his mind to it.
    The hon. Member for Langstone (Mr. Stevens), who is not in his place at the moment, and two hon. Members on the Liberal benches talked a certain amount about very small businesses, and small shops in particular. I was particularly surprised to hear the hon. Member for Bolton, West (Mr. Holt) laying down as a principle that what we should see was not merely that goods should be produced, but that at all stages they should be distributed as economically as possible and that he apparently regarded as an argument that it was at all costs necessary to preserve the small shopkeeper.
    Mr. Holt: I did not advance the argument about the small shopkeeper. The whole argument is misconstrued when we talk about the family business. In this Clause we are endeavouring to prevent businesses, otherwise efficient, being broken up merely because they are under the control of someone with a controlling interest. If that is true of an industry it is also true of wholesale business.
    Mr. Jenkins: The hon. Member made the point about the business being economically efficient and, also, that we must not have theoretical nostrums, but see how it works in practice. I really thought that could not be produced as an argument for saying that it is highly desirable in the retail trade to keep small shops in being in order to prevent the spread of the chain store. I should have thought it very difficult to argue that on the grounds of efficiency. I was also surprised to hear the right hon. and learned Member for Kensington, South, no doubt putting a particular constituency interest on this matter, talking about small antique shops.
    Sir P. Spens: My whole point is that there ought not to be discrimination either between businesses or industries. If it is applied at all everyone should have the advantage.
    Mr. Jenkins: The difficulty, as the hon. Member for Hall Green clearly realised, is that we start on the basis of this Clause and if the right hon. and learned Member feels strongly about this—as I can well understand he may—he should vote against the Clause as a whole.
    Sir P. Spens: This is the second part of a very good move, of which the first part was the benefit given to agriculture. This is now giving the benefit to manufacturing industry and I hope that in due course it will be given to these other classes of industry.
    7.30 p.m.
    Mr. Holt: Would not the hon. Gentleman agree that the present basis of assessing death duty on an assets basis is, in fact, discrimination against a company controlled by one person and to put that previous discrimination back is the purpose of this Clause?
    Mr. Jenkins: The fact is that the position as it has previously existed was
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    a discrimination against a business of that sort. But I have not heard it argued from the Treasury Bench, during our debates on this subject, that this is merely designed to correct that difficulty and to put these businesses where that occurs—where they are controlled by one man or a small number of people—on a valued on assets basis.
    It is merely designed to put them in the same position as businesses which are quoted on the Stock Exchange and assessed in a different way. If that were the sole object of the Chancellor, I think he could have achieved it by a substantially smaller rate of concession than is contained in the Clause. I should have thought, were that his purpose, that he would be inclined to accept one of our Amendments which is designed to reduce somewhat the rate of concession given.
    What I think has been brought out extremely clearly in our discussion on this Amendment is that many hon. Members are approaching the matter in a different way from that which we thought the Chancellor was approaching it. They are approaching this as a taxation concession given to certain individuals, and not as something designed to deal with a specific economic difficulty where businesses of national importance, largely manufacturing businesses, would be broken up: and to protect the family units which hon. Members opposite thought have a certain value which would be lost. I thought that to be the approach of the Government and the Chancellor. But that is very different from getting any concession which may be got by anyone engaged in business at all, which seemed to be the approach of hon. Members opposite. We should know the view of the Government on the subject.
    Mr. Boyd-Carpenter: We have had an interesting debate and a clear line of division between the two sides of the Committee. On the one hand, we have had hon. Members opposite taking the view that they dislike the whole thing and, therefore, would be horrified to see it extended: and, on the other hand, my right hon. and hon. Friends have put down a series of Amendments, which we have discussed with that of my right hon. and learned Friend the Member for Kensington, South (Sir P. Spells), which suggest that we have drawn the line in the wrong place.

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    I do not think I should anticipate what may well be the subject of a later debate by arguing with hon. Gentlemen opposite on the general merits of the Clause and the proposals embodied in it. That, in any case, would probably be out of order, and no doubt we shall have an opportunity for such a discussion at a later stage. I think I should best assist the Committee if I dealt with the question of where the line has been drawn and whether it was drawn in the most sensible place.
    This debate is an example of the fact that when provisions of this kind are made, it is very natural for people to feel that the line should be drawn at a somewhat different point in order to cover a particular concern in which they are interested. That is natural, as I think my hon. Friend the Member for Hall Green (Mr. Aubrey Jones) implied. In a Clause of this sort there can be and will be legitimate differences of opinion as to the right point at which to draw the line.
    The Committee will appreciate that in considering this matter my right hon. Friend gave careful thought to how far it would be legitimate and sensible to make this concession. He had to consider the very limited sums of money at his disposal this year. The Committee will appreciate that it has been possible, generally speaking, in this Finance Bill to make only very limited concessions in terms of cost. My right hon. Friend came to the conclusion that it would be best to concentrate the relief given under this Clause on industrial buildings and on the plant and equipment of industrial and commercial businesses. That is similar to the line of demarcation adopted on the investment allowances to which the Committee gave approval in Clause 15.
    My right hon. Friend felt it right to concentrate this relief in that direction, not because this is necessarily a major matter from the point of view of the economy or stimulating investment, but because in the important part of the economy represented by businesses of this character—and particularly industrial businesses—an atmosphere encouraging to investment would undoubtedly be created if those concerned in the management of such businesses had not to contemplate quite so severe a burden of Estate Duty. That is the background
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    against which my right hon. Friend came to the conclusions embodied in the Clause.
    I wish to apply those considerations both to the Amendment and to the speeches made in support of it and the other Amendments on the Order Paper. As has been pointed out, the Amendment in the name of my right hon. and learned Friend the Member for Kensington, South is much the widest. It goes very far indeed. It would go so far even as to cover not only business assets, but the property investments of property holding and investment holding companies. Were we to do that, it would seem to me that persons of substantial means would hurriedly form one-man companies to hold their investments to obtain the relief.
    The subsequent batch of Amendments which we are discussing, most of which are in the name of my right hon. Friend the Member for Blackburn, West (Mr. Assheton), do not go anything like so far. In substance, they extend relief to commercial buildings as well as to commercial equipment.
    Let me come to the argument of my right hon. and learned Friend as to the scope of the Clause as it stands. I would hesitate to start an argument with him on a point of construction. Indeed, some years ago he occupied an office in which it was not possible to argue with him on points of construction without being brought up with considerable firmness and I would not wish to involve myself in anything like that. But it is clear, I think, if my right hon. and learned Friend would look at the first subsection, that its effect is, as I indicated a few moments ago, to confer this relief in respect, in the first place, of industrial buildings, in the second place, of industrial plant and equipment and, in the third place, in respect of equipment used in other commercial businesses.
    If my right hon. and learned Friend will look at subsection (1) he will see the words:
    "…or in respect of machinery or plant so used…"
    I think that, to some extent at any rate, is the answer to my hon. Friend the Member for Langstone (Mr. Stevens), who said that the retailer got nothing out of this. It is true that the retailer does

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    not get an allowance out of this in respect of his building, but so far as his plant and equipment would be liable for duty—as the hon. Member for Sowerby (Mr. Houghton) knows, plant and machinery is sometimes construed quite widely, going down to such things as office furniture and cash registers—he gets the relief in precisely the same way as an industrialist does on his plant and equipment.
    Mr. Stevens: When my right hon. Friend says that plant and machinery is limited to industrial plant and machinery, he is deliberately excluding the plant and machinery used in agriculture.
    Mr. Boyd-Carpenter: I said it was the precise opposite, and, by their interventions, some of my hon. Friends have confirmed that. I said that, whereas the relief in respect of buildings was limited to industry, the relief in respect of plant and equipment was not restricted to industry. That covers the point mentioned by my hon. Friend about tractors and other equipment used in farming. It also covers plant and equipment used in retail trades.
    I hope I have reassured my hon. Friend, who was under the impression that the retailer got nothing out of this. We can argue as to the extent to which the retailer should be placed on the same basis as the industrialist, but I do not think we shall conduct the debate on a basis of understanding if we are not clear about the fact that the relief extends to the plant and equipment used in the distributive trades. That is one of the grounds of criticism by hon. Members opposite. It would be hard to be criticised by my hon. Friends for the provision not being in the Clause and by the Opposition because it is there.
    There is another aspect relating to my right hon. and learned Friend's Amendment. It would go very wide. It would cover not only the buildings, as the later Amendments would do, but also all the assets of the business, including the stocks, and so on. It would even go to the point—I do not want to stress it, but it illustrates the extreme width of his proposals—of covering property and investment holding companies, and I do not think he contemplated that.
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    My right hon. Friend the Member for Blackburn, West (Mr. Assheton) was not clear about the scope of the provisions in the Clause. He was concerned not so much with the objects covered as with the scope. The field covered is businesses carried on by individual traders, businesses carried on in partnership, and shareholdings and debentures in a company which falls to be valued under Section 55 of the Finance Act, 1940.
    The narrower Amendment in the name of my right hon. Friend the Member for Blackburn, West relates to buildings used in commerce. If adopted, the Amendment would extend the scope of the benefits of the Clause to cover those buildings. To do that would be to carry the relief wider than the relief to which I referred by way of comparison in respect of Clause 15. That is not conclusive, because they are different in their subject matter, but it is an indication of the fact that if one widens the scope of the benefit it is inevitable that further demands will arise to widen the scope further. It seems to me that our existing line of demarcation in the Clause offers a sensible and reasonable solution.
    On the other hand, I can well understand the force of many of the arguments which have been put in the course of the debate. Although there are very real difficulties in going further, my right hon. Friend would like to study what has been said in the debate. Up till now we have not had the advantage of hearing the arguments for the more limited advance adduced in full, with the skill and clarity with which a number of my hon. Friends can adduce arguments.
    Although my right hon. Friend sees great difficuty in leaving the, as it seems to him, logical and coherent line of demarcation of the present Clause, he would nonetheless not wish to exclude from his consideration the possibility of some adjustment. He would like to have the opportunity of studying the speeches which have been made on the point as they will appear in the OFFICIAL REPORT. The arguments which have been delivered—I will not say they were delivered at excessive length—naturally took some time and they call for rather careful consideration and rather fuller consideration than is possible in the course of debate.
    7.45 p.m.
    Mr. John Arbuthnot: Has my right hon. Friend formed an assessment of the cost of accepting the Amendment in the name of my right hon. Friend the Member for Blackburn, West (Mr. Assheton)?
    Mr. Boyd-Carpenter: It is extremely difficult to assess the cost with precision, because the cost in any year depends very much on whether a sufficient number of people concerned on a substantial scale die in the financial year. Therefore, any figure that I can give is, in the nature of things, imprecise, and I should not like to be held to it. I will give the figures in respect of the Amendment in the name of my right hon. and learned Friend the Member for Kensington, South and that in the name of my right hon. Friend the Member for Blackburn, West subject to that qualification.
    So far as we can see, the Amendment moved by my right hon. and learned Friend the Member for Kensington. South would, in a full year, cost about £4½million extra. It would, therefore, cost three times the existing full-year cost of the provisions of the Clause. The more modest proposal by my right hon. Friend the Member for Blackburn, West—though this is particularly difficult to assess—would probably cost about £500,000. That would increase the cost of the concession in a full year by about one-third over its present cost.
    Mr. Roy Jenkins: Can the right hon Gentleman tell us the saving to the Exchequer which would result if the Amendment in my name in page 28, line 47, were accepted?
    Mr. Boyd-Carpenter: I am not quite certain to what the hon. Member is referring. I do not think that his Amendment is being dealt with at the moment.
    Mr. Albu: I understood that that Amendment was being dealt with at the same time.
    The Deputy-Chairman (Sir Rhys Hopkin Morris): I understood that the Amendment in page 28, line 47, in the name of the hon. Member for Stechford (Mr. Roy Jenkins) was to be dealt with the other Amendments.
    Mr. Boyd-Carpenter: I did not want to get into trouble. I can tell the hon.
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    Member that, subject to the same qualification as I mentioned earlier, it would about halve the cost.
    Mr. Dalton: I am glad that the Financial Secretary has resisted these Amendments. As has been said more than once, and as will probably be indicated again, we are against the whole Clause. We think it is a mistake.
    I thought that one of the most penetrating contributions to the debate was that made by the hon. Member for Hall Green (Mr. Aubrey Jones). I thought that the Chancellor himself showed signs of agreement with the judgment which I have just offered. It is, indeed, a case of discrimination. The Clause is a discriminatory one, and the Amendments have sought to widen the discrimination; and I am very glad that they have been resisted.
    I should like to ask the Financial Secretary—and I rise at this stage only to ask a question and make one more comment—about his estimate of the cost to the Revenue of these various rejected Amendments. If I might have the attention of the Financial Secretary, I wonder whether I correctly understood him to say, as one of the arguments against the further extension of the concession, that, if it were made, wealthy people would soon be running off to buy up these one-man companies, which was one of the arguments used against the Amendment of the right hon. and learned Gentleman the Member for Kensington, South (Sir P. Spens).
    Mr. Boyd-Carpenter: Not quite. It was that the strength of that proposal would even cover the investments of property-owning companies, and there would be an obvious inducement to persons of substantial means to set up such companies—not to buy them, but to set them up.
    Mr. Dalton: The question was whether the right hon. Gentleman was not adumbrating the danger even when the Amendments are rejected, but that might be developed on a later occasion. I think it is rather significant that that line of thought was passing through the minds of the representatives of the Treasury. I will not develop that further now, but I wish to say something on the estimate of the loss of revenue which the Financial Secretary gave in answer to a question.

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    The right hon. Gentleman said that, if the Amendment in the name of the right hon. and learned Gentleman the Member for Kensington. South was accepted, it would lead to a further loss of £4½million of revenue, and that, of course, is a very good reason, from the Treasury point of view, for rejecting it. We have often done the same thing when we were in office. If there is any substance in the question previously addressed to the right hon. Gentleman, there may be the danger, even when these Amendments are rejected, that some of these businesses may be bought up by wealthy people.
    I have always been inclined to think, though I have not now the facilities within the Treasury and the Inland Revenue Department for estimating, that Eli million, which I think is the estimated cost of this concession as a whole, is on the low side, and might very likely be found to be considerably below the mark, so that next year's revenue might suffer accordingly. Having that general apprehension in mind, I was very much struck by the extent to which this danger would be increased by accepting the Amendment, in comparison with that in the name of the right hon. and learned Gentleman.
    I will not pursue this point further, because I think it might well be done better at a later stage, but I thought it might be appropriate to ask this question and make this point at this stage.
    Mr. Boyd-Carpenter: I should like to correct the answer which I gave to the hon. Member for Stechford (Mr. Roy Jenkins), who is not now with us. I quite understood that the Amendment in which he was interested was that in page 28. line 47, which stands in his name. I thought that was the one to which he referred. The answer which I gave the hon. Gentleman related to another Amendment, however, and the correct answer to his question is that the saving if his Amendment were adopted is not precisely ascertainable, but it would be very small.
    Mr. Albu: Can the right hon. Gentleman say whether or not, as the Clause is drawn, this Amendment would be necessary, or whether, in fact, as it is at present drafted, the concession would be granted to private road vehicles, or whether they would be excluded?
    Mr. Boyd-Carpenter: The point will arise on another Amendment in the name of my right hon. Friend which covers a considerable part of the ground covered by the hon. Member for Stechford, and perhaps it would be convenient if I dealt with this matter when we discuss that Amendment; otherwise, there may well be some duplication. The Amendment which I have in mind is the one in the name of my right hon. Friend in page 28, line 10.
    Mr. Anthony Hurd: I can state very briefly the object I had in mind in putting down the Amendment in page 26, line 39 in the names of my hon. Friends and myself on the subject of livestock. It is to include livestock with plant and machinery.
    We have been well satisfied with the assurances given by the Financial Secretary just now that agricultural plant and machinery, in the form of tractors, combine harvesters and so on, will qualify for this concession. What is worrying us is that this concession will then operate very unevenly as between different parts of the country. It is well known that a large part of the working capital and equipment of farmers in the eastern half of the country is in the form of tractors, combine harvesters and so on, whereas in the western half of the country, in Wales and Scotland, and, indeed, the Home Counties, a large part of the farmer's working plant and machinery is, in fact, livestock.
    This is particularly true of the hill farms of Scotland, Wales and Northumberland, where, indeed, sheep are tied to the ground and are the working plant and machinery of those particular farms. A farmer who is one of my own constituents pointed this out to me, and said that milking cows were really just as much plant in the production of condensed milk as the actual machinery in a condensing factory. They were plant and machinery right through from the dairy cow to the factory. That is true. The raw materials are the grass or the oilcake which the cows eat, and, so far as production is concerned, they are just plant and machinery.
    I put that point to the Chancellor now, though I am not hopeful, knowing how difficult it must be for him to satisfy all claims and be absolutely fair to everyone, but I hope he will keep the point in

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    mind for another year, because the incidence of this relief, which we much welcome, will be somewhat uneven as between the eastern and western half of the country. Today, when we are looking for an increase in the livestock population, we do not want the small family businesses in the western half of the country to be at a disadvantage compared with the highly mechanised farmers in the other half.
    Mr. R. A. Butler: I hope we may come to a decision now, because we are trying to work towards the objective of keeping the many new Clauses for Monday and Tuesday, and, therefore, we want to make as much progress with the actual Clauses of the Bill as we can tonight, and yet do not want to sit too late.
    May I make an appeal that we should come to some understanding about this matter, following upon the speech of my right hon. Friend the Financial Secretary? Of course, if there is anybody who wishes to put a legitimate point, there is no constitutional method of preventing him, and it is simply a case of giving a warning to hon. and right hon. Gentlemen that we do not want to keep the House too late. We can finish the Clauses tonight, and we shall have very big debates upon the new Clauses on Monday and Tuesday. With a little reticence, we shall not keep the House sitting too late.
    On the point raised by my hon. Friend the Member for Newbury (Mr. Hurd), the short and simple answer is that, if his Amendment were accepted as drafted, it would not only include the technical matter of the cows on the herd basis, which are regarded as fixed capital, but it would, alas, as drafted, include animals in a pet shop and elephants in a circus. As I do not believe that my hon. Friend wants it to be as wide as that, we could not accept the Amendment in the terms in which he submits it.
    I want to say that I recognise that this is a matter of great interest to him and his friends in the agricultural world, but am afraid that, on examination, I find that, if we were to accept the inclusion of livestock as well as premises as proposed by my right hon. and learned Friend the Member for Kensington.
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    South (Sir P. Spens), we should have extended the scope of this concession upon Estate Duty to an extent that would be very hard indeed to hold, and might land us in liabilities even larger than those involved in the Amendment of my right hon. and learned Friend.
    Therefore, I regret very much that I should have the greatest difficulty in accepting this Amendment, even if it were submitted in a way which would restrict it to the fixed capital assets which I believe my hon. Friend has in mind.
    8.0 p.m.
    I only want to say one other word about the speeches that have been made. The speech by the hon. Member for Hall Green (Mr. Aubrey Jones) omitted, I think, a very large slice of the argument. The manner in which I approached this concession was through a very exhaustive review of the assets basis of valuation.
    I wanted to rise in order to pay tribute to the many representations I have received throughout industry and other places on this subject. We have spent the year since the last Finance Bill examining the assets basis of valuation in response to many requests made last year. This has been a very arduous task, and, as a result, I am sorry to tell the Committee that I have decided to adhere to the assets basis of valuation, which is net a popular decision.
    That basis applies particularly hardly to the type of company I am trying to assist in this Clause, and, therefore, I thought, apart from the reasons that I gave in my speech, that this would chime in with the investment allowance. I also thought that it might be some consolation to that type of business upon which the assets basis of valuation weighs particularly heavily
    Therefore, the Committee will see that the decision was reached in a very wide and careful manner. It was the result of a year's examination of this hideously complicated question of the assets basis of valuation, and I think that the hon. Member might have realised that in approaching this concession I did it in a very laborious manner, and not light-heartedly as discriminatory taxation.
    Mr. Jay: Can the right hon. Gentleman give his reasons for deciding to

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    adopt the assets basis of valuation, because it would appear that some of this difficulty would have been got over by departing from it?
    Mr. Butler: To do that would detain the Committee for a very long time, and, as we have not yet finished with the Clause. I have no doubt that an opportunity will arise on the discussion on the Clause.
    Mr. Ralph Assheton: Although a good many of the Amendments under discussion are in my name, I do not propose to add to the debate this evening, in view of what my right hon. Friend has said, and also in view of the assurance which my right hon. Friend the Financial Secretary gave at an earlier stage in the debate. I know that both my right hon. Friends will study very carefully all that has been said during this discussion and we shall no doubt come to it again on the Report stage.
    However, there is one point which I should like to put to my right hon. Friends which has not so far. I think, been suggested for consideration. I wish to ask them whether the definition of "industrial hereditaments" need be the definition for rating rather than the definition of "industrial hereditaments" for Income Tax purposes. I should have thought that the latter would have met quite a number of the difficulties with which we are faced, and I ask that that also should be taken into consideration when the matter comes up for further consideration.
    Mr. Houghton: I rise only to fortify the Chancellor against his hon. Friends, because I do not think that we on this side ought to give any encouragement to the Financial Secretary's conciliatory remarks concerning the possibility of extending the concession beyond the fixed assets mentioned in the Clause.
    The hon. Member for Kidderminster (Mr. Nabarro) and the right hon. Member for Blackburn, West (Mr. Assheton) referred to the difficulty of defining industrial hereditaments. There is, I believe, confusion this evening between industrial premises and hereditaments. I think it is true to say that for Income Tax purposes the Inland Revenue can accept premises as industrial premises which may not have qualified for derating as industrial hereditaments. But it seems to me that one very good reason for restricting the
    682
    classification of industrial hereditaments to those which qualify for derating under the Rating and Valuation Acts was that it would reduce the area of dispute. Moreover, whatever arguments may be put forward as to whether premises are industrial hereditaments or not have in most cases been made and concluded in connection with rating long ago.
    I think there is something to be said for sticking to a definition which does not allow of a lot of contentious argument, and which is clear and well understood by everybody concerned long before the event which may lead to the matter being raised at all. If the Chancellor is going beyond the line of fixed assets, that is to say, industrial premises, plant and machinery used in the business, then the door may be opened very wide indeed.
    For instance, is it suggested in connection with the Amendments that investments held by businesses should be brought within the concession? Is it suggested that cash reserves should be brought within this concession? Even when we look at the question of stocks—essential, of course, as they are to the activities of most businesses—it opens the door to avoidance if stocks are built up to an excessive level in order to get the maximum relief from Estate Duty in the event of the death of the proprietor of the business.
    There is one thing about fixed assets, and that is that people do not indulge in them extravagantly or excessively. They are too expensive, and are not easily disposed of like stocks and other assets. There is, of course, another question—that much of the ploughing back of profits into businesses today is purely nominal. It is not a ploughing back into fixed assets, but into investments and reserves of one kind and another.
    Mr. Assheton: That does not apply only to fixed assets.
    Mr. Houghton: I said that much of the ploughing back of profits into business is purely nominal to the extent that many of the reserves are cash or investments. I think that such a concession would encourage the leaving of profits or reserves in a business which might otherwise be distributed, solely in order to get relief under the provisions of this Clause.

    683
    That is something which would clearly have to be watched. Therefore, I do not know in what direction the right hon. Gentleman can consider extending this discrimination without getting into very deep water indeed.
    As the hon. Member for Hall Green (Mr. Aubrey Jones) said, there may be differences of opinion as to how far discrimination should be used in direct taxation. I am perhaps more orthodox than my hon. Friends in this connection. I think that there are very distinct limits to the use which can properly be made of the fiscal device for economic and social purposes. But the hon. Member for Hall Green will, of course, recall that discrimination was introduced into the Income Tax law very early in its history and not always in order to make sure that the burden of taxation should be adjusted to the ability of the taxpayer to pay.
    Life assurance relief is a very ancient example. It has nothing necessarily to do with the ability of the taxpayer to pay. Moreover, it is quite unfair in its discrimination as between the taxpayer who can be admitted as a good life by an assurance company and thus get relief on the premiums paid on the policy, and the taxpayer who is rejected on health grounds.
    The hon. Member for Hall Green is rather late in the day in his philosophical musings upon the use of discrimination in the field of direct taxation, though I agree with him that there are limits to the manner in which it should be employed. Those of us who are against this Clause altogether cannot offer to the Financial Secretary any encouragement along the line of appeasement which he suggested in the concluding sentences of his reply.
    Amendment negatived.
    Mr. Dalton: I beg to move in page 26, line 42, to leave out "forty-five" and to insert "twenty"
    The Temporary Chairman (Sir Gordon Touche): It would be convenient to the Committee, I think, to discuss, at the same time, the Amendments in lines 9 and 13.
    Mr. Dalton: The Amendment is very simple and I hope that the Government, having had second thoughts over this
    684
    matter since the Budget, and especially since tonight's debate, will feel able to accept it. The proposal is to reduce the proposed reduction from 45 per cent. to 20 per cent. on the ground that that would be a lesser evil than the proposal as it stands.
    In one of our recent debates the Chancellor of the Exchequer said that he regarded all taxation as a necessary evil. I cavil a bit at that. If I were asked to indicate a tax which I thought was an exception to that rule I should say the Estate Duty. I hope that the right hon. Member for Blackburn, West (Mr. Assheton) will stay. I do not want to cut short any consultation on the Front Bench opposite, particularly if it is leading to the acceptance of my Amendment.
    Mr. R. A. Butler: I was asking my right hon. Friend the Financial Secretary to listen most carefully to the right hon. Gentleman.
    Mr. Boyd-Carpenter: Which request was purely unnecessary.
    Mr. Dalton: I am much obliged to all concerned.
    When venturing to criticise the Chancellor's general doctrine I brought in the concept of good expenditure which, when linked with a good tax system, would give good results on the whole. When we consider the Estate Duty I do not even think it necessary to take account of public expenditure. I regard the operation of the Estate Duty in itself as desirable in so far as it diminishes the grotesque inequality in the distribution of private property which disfigures our Motherland.
    With the work begun by Sir William Harcourt in the historic Budget of 1894, Estate Duty took its present general shape and it was continued by a long series of Chancellors of the Exchequer of all party colourings. Nearly all Chancellors, or, at any rate, a large number—I will not recite the names now—of Liberal, Conservative and, more lately, Labour persuasion, have continuously increased the scales and the gradation of the Estate Duty, especially at the upper end of the scale.
    Indeed, I was the only Chancellor who ever helped the poor in this field. While graduating upwards the Estate Duty in

    685
    my Budget of 1946 I did give a relief, far more substantial than anything proposed in this Clause, to the smaller estates. I will not develop the argument; I merely recall a historical incident. Relatively speaking, I gave a tremendous help. I exempted more than 75 per cent. of estates then liable by lifting the bottom level of the exemption from £100 to £2,000. Therefore. I can claim to have done something human, and I hope, helpful, in the field of Estate Duty.
    8.15 p.m.
    The Estate Duty, highly graduated as we have it today, prevents the rich from continually becoming very much richer. When people say that there is not much difference now between the distribution of private wealth as compared with a period between the wars, and even as compared with the period before the First World War, then I say that it is irrefutable that but for the Estate Duty and the continual increases made in it, the concentration of wealth, the large fraction of the national wealth in the hands of a very small fraction of the people, would be even more grotesque and unequal than it is today. The Estate Duty has saved us from that. I believe that the Chancellor, as a civilised and forward-looking man, would agree with me when I say that it would have been a disgrace to Britain had that state of affairs been allowed to develop. The Estate Duty, ever increasing in weight at the higher levels, has saved us from that disgrace.
    It is for that reason that I move the Amendment, so that no part of that advantage should be lost to us. I propose that this relief, to which, indeed, we object, should be a little more than halved. It will apply all up the scale. The Chancellor proposes a reduction of 45 per cent. all up the scale, or all down the scale, in respect of the group of estates affected. I propose the smaller reduction or relief of 20 per cent. instead of 45 per cent. That would also mean that at the top end of the scale the absolute amount of relief, as distinct from the proportionate amount would be reduced. This would be a less disequalising Measure if amended in the way I propose.
    There is a curiosity which I should like to ask about because it has a bearing on the application of the Amendment. It is
    686
    a curiosity of drafting which is not very clear. We begin in subsection (1) by saying that
    "…(except as hereinafter provided)…"
    Estate Duty shall—
    "be charged in accordance with a scale of rates of Duty representing the usual scale for the time being in force with a reduction of forty-five per cent."
    It is that which I propose to reduce to 20 per cent., but the definition is, as it were, postponed, and in subsection (2) there is a reference to the famous Section 55 of the Finance Act, 1940.
    The Chancellor has already touched on the point in what he said on the previous Amendment. This is the Section in which the famous assets basis finds a place. I will not go into the matter in great detail, but it is quite clear, broadly speaking, that the beneficiaries of the reduction—whether the 45 per cent. proposed by the Government or the 20 per cent. proposed in my Amendment—will be those who cannot have their estates valued at the market value of the shares. It is on the other side of the line on which operates the so-called assets basis.
    Putting the matter in simple language and not attempting a technical legal statement, it is limited to businesses of whatever size controlled by one man. I think that that is as good a short statement as can be given. I hope that the Financial Secretary will agree that it is substantially that. It is one-man businesses, however large or small. Broadly, that is it. That is a further reason why we take objection to the Clause in this form, and that will be dealt with in a later Amendment. It is businesses of whatever size conducted in this way. I am not sure whether, even if the purpose were accepted, it would not be possible to draft this a little more clearly. I think I have disentangled it after much mental pain, and substantially its purpose is as I have just summarised it.
    I notice that the Chancellor has now left the Committee; I do not blame him, for he has been here a great deal today. I was about to ask him—although he has already, so to speak, contracted out of the acceptance of my invitation—to say why it would not have been possible to approach this difficulty by changing not the rate of duty but the whole asset basis. However, I will not pursue that now. I will merely say that if we are to have

    687
    anything of this kind—and we do not wish to have anything of the kind—introduced into the Estate Duty scheme, then the less it is the better.
    If the Government had been in serious trouble with a section of their supporters pressing the other Amendment, and if they had really been in danger of defeat, we should have had to consider carefully whether it was not part of our duty to come to their rescue. However, that did not occur. But we are most anxious to diminish the range of this mischievous and undesirable provision, and it is for that reason that I have moved the Amendment.
    Mr. Holt: I am very glad to have had confirmed by the Chancellor, as a result of my interruption of the speech of my hon. Friend the Member for Stechford (Mr. Roy Jenkins), the reason for this Clause, namely, to correct a discrimination against the companies controlled by one man. I am not myself particularly attached to the figure of 45 per cent. and I should like to know whether the Chancellor in the end will alter this Clause to conform to the Amendment of the right hon. Member for Blackburn, West (Mr. Assheton) or the Amendment of the right hon. and learned Member for Kensington, South (Sir P. Spens), on the basis of having a lower percentage than 45 per cent.
    The right hon. Gentleman said that there would be a considerable loss of revenue if he accepted the very wide Amendment moved by the right hon. and learned Member for Kensington, South. I think he said the loss would be about £4½ million. If the figure were not 45 per cent. but on some lower basis, there would be considerably less loss, and, personally, I should have thought that the public interest would be better served by whatever allowance is being given to the whole range of industry, both wholesale and retail, rather than that a high percentage of 45 per cent. should be given just to industrial premises, plant and machinery. If we can be given any figures on that aspect of the matter, I should be much obliged.
    Mr. Boyd-Carpenter: This Amendment poses a direct and simple point. The right hon. Member for Bishop Auckland
    688
    (Mr. Dalton) wants the relief given by this Clause to be at 20 per cent., whereas the suggestion is that it should be at 45 per cent. I know that the right hon. Gentleman will acquit me of any discourtesy if I do not follow him into a general discursion whether taxation in general and Estate Duty in particular is what the authors of "1066 and All That" would call "a good thing." I would only comment that the taxation and, indeed, the Estate Duty with which we are concerned in this Amendment, whatever may be the right hon. Gentleman's views on Estate Duty in the broader sphere, is Estate Duty which falls on the plant and equipment of commerce and industry and upon the buildings of industry.
    I am not certain whether the right hon. Gentleman was quite clear what the scope of this concession is, and, to avoid any misunderstanding, perhaps I might tell him that it covers not only businesses carried on by an individual trader and carried on in partnership—those are covered by subsection (1) to which he made reference—but also shareholdings and debentures in a company which falls to be valued under Section 55 of the Finance Act. 1940.
    The straight issue is whether this should be done at 45 per cent. or at 20 per cent., and I do not think it is necessary for me to detain the Committee at any length on that issue. We have discussed whether this is a good thing to do at all. I think the right hon. Gentleman's real feeling on this Amendment is that this is a bad thing and, therefore, he wants to limit it. Let me put these points to him. In the first place, there is no peculiar or particular sanctity about the rate of 45 per cent. It has the advantage, of course, of being the same as that given for many years in respect of the agricultural value of agricultural land. I think we may take it that hon. Members opposite do not disapprove of that concession in as much as it in fact dates from the Finance Act, 1949.
    Mr. Dalton: Since this point is addressed to me, perhaps I might say that when I was Chancellor I carefully considered whether we should maintain it or not, and I judged that the balance was in favour of maintaining it. It was

    689
    maintained by myself, by the late Sir Stafford Cripps and by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell).
    Mr. Boyd-Carpenter: At 45 per cent.?
    Mr. Dalton: Yes.
    Mr. Boyd-Carpenter: Therefore, if it is a reasonable figure in respect of the agricultural value of agricultural land, it seems to us that if we decide at all to deal with this kind of business assets in this way—and I agree that the right hon. Gentleman thinks we should not—there does not seem to me to be much justification for dealing with these business assets at a different rate from that which we agree is applicable in respect of the agricultural value of agricultural land. The more one considers this, the more force one finds in it.
    As was made clear on the earlier Amendment, this concession does not operate on the whole assets of a business. Estate Duty does operate upon the whole assets of a business. Therefore, looked at over the business as a whole, this concession does not amount to a reduction of 45 per cent. in the total of Estate Duty payable. It will vary with the circumstances. In so far as plant and equipment and industrial buildings are a high proportion of the assets, it will move somewhere towards it.
    Where, on the other hand, stocks and other business assets form a large proportion, the degree of relief over the value of the business as a whole will be very substantially less than 45 per cent. We are not discussing—except in some wholly theoretical way—a proposal to grant a 45 per cent. relief in respect of the whole assets of a business; we are
    concerned with a 45 per cent. relief on assets which are themselves only a part of the assets of a business which attracts Estate Duty when death comes. When one considers that fact, to treat these business assets on a less favourable percentage basis than has been applied with general agreement to the agricultural value of agricultural land—which may constitute a very large proportion of the assets concerned—does seem a trifle illogical.
    8.30 p.m.
    Although I have listened to what the right hon. Gentleman has said with great attention, as I always do, I feel that this proposal springs not from the basis that, accepting that this should be done, there is any real case for a differential rate between industry and agriculture, but rather from the view that the right hon. Gentleman does not think that it should be done at all. That is an issue which we have discussed and may discuss again in the future.
    We are here dealing with the narrow question whether or not, assuming that we do it, we should do it at a conspicuously lower rate than is generally accepted as being applicable to the agricultural value of agricultural land. It seems to me that no case for discrimination has been made out, more especially when one bears in mind the proportion which these assets very often bear to the whole assets of the business. If we are to do this I think we should do it properly and, therefore, at a rate which is equivalent to that in the case of agricultural land.
    Question put, "That 'forty-five' stand part of the Clause."
    The Committee divided: Ayes, 229; Noes, 210.

    Division No. 170.]

    AYES

    [8.p.m

    Aitken, W. T.

    Black, C. W.

    Clarke, Brig. Terence (Portsmouth, W.)

    Alport, C. J. M.

    Bossom, Sir A. C.

    Conant, Maj. Sir Roger

    Amery, Julian (Preston, N.)

    Boyd-Carpenter, Rt. Hon. J. A.

    Cooper, Sqn. Ldr. Albert

    Anstruther-Gray, Major W. J.

    Boyle, Sir Edward

    Cooper-Key, E. M.

    Arbuthnot, John

    Braine, B. R.

    Craddock, Beresford (Spelthorne)

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

    Braithwaite, Sir Albert (Harrow, W.)

    Crosthwaite-Eyre, Col. O E

    Baldock, Lt.-Cmdr. J. M.

    Braithwaite, Sir Gurney

    Crouch, R. F.

    Baldwin, A. E.

    Bromley-Davenport, Lt.-Col. W H.

    Crowder, Sir John (Finchley)

    Barlow, Sir John

    Brooke, Henry (Hampstead)

    Darling, Sir William (Edinburgh, S.)

    Baxter, Sir Beverley

    Buchan-Hepburn, Rt. Hon. P. G. T

    Davidson, Viscountess

    Beach, Maj. Hicks

    Bullus, Wing Commander E. E.

    Deedes, W. F.

    Beamish, Maj. Tufton

    Burden, F. F. A.

    Digby, S. Wingfield

    Bell, Philip (Bolton, E.)

    Butcher, Sir Herbert

    Donaldson, Cmdr. C. E. McA

    Bell, Ronald (Bucks, S.)

    Butler, Rt. Hon. R. A. (Saffron Walden)

    Donner, Sir P. W.

    Bennett, F. M, (Reading, N.)

    Campbell, Sir David

    Douglas-Hamilton, Lord Malcolm

    Bennett, Dr. Reginald (Gosport)

    Cary, Sir Robert

    Drayson, G. B.

    Birch, Nigel

    Channon, H.

    Drewe, Sir C.

    Bishop, F. P.

    Clarke, Col. Ralph (East Grinstead)

    Duncan, Capt. J. A. L

    Duthie, W. S.

    Lindsay, Martin

    Robson-Brown, W.

    Eden, J. B. (Bournemouth, West)

    Linstead, Sir H. N.

    Roper, Sir Harold

    Erroll, F. J.

    Lloyd, Maj. Sir Guy (Renfrew, E.)

    Ropner, Col. Sir Leonard

    Finlay, Graeme

    Lockwood, Lt.-Col. J. C.

    Russell, R. S.

    Fisher, Nigel

    Longden, Gilbert

    Ryder, Capt. R. E. D.

    Fleetwood-Hesketh, R. F

    Lucas, Sir Jocelyn (Portsmouth, S)

    Savory, Prof. Sir Douglas

    Fletcher-Cooke, C.

    Lucas, P. B. (Brentford)

    Schofield, Lt.-Col. W.

    Ford, Mrs. Patricia

    Lucas-Tooth, Sir Hugh

    Scott, R. Donald

    Fort, R.

    McAdden, S. J.

    Scott-Miller, Cmdr. R.

    Fraser, Hon. Hugh (Stone)

    McCorquodale, Rt. Hon. M. S

    Simon, J. E. S. (Middlesbrough, W.)

    Fyfe, Rt. Hon. Sir David Maxwell

    Macdonald, Sir Peter

    Smithers, Peter (Winchester)

    Galbraith, Rt. Hon. T. D. (Pollok)

    McKibbin, A. J.

    Smithers, Sir Waldron (Orpington)

    George, Rt. Hon. Maj. G. Lloyd

    Mackie, J. H. (Galloway)

    Smyth, Brig. J. G. (Norwood)

    Glover, D.

    Maclean, Fitzroy

    Snadden, W, McN.

    Godber, J. B.

    Macmillan, Rt. Hon. Harold (Bromley)

    Spearman, A. C. M.

    Gomme-Duncan, Col. A

    Maitland, Comdr. J. F. W. (Horncastle)

    Speir, R. M.

    Gower, H. R.

    Maitland, Patrick (Lanark)

    Spens, Rt. Hon. Sir P. (Kensington, S.)

    Graham, Sir Fergus

    Manningham-Buller, Rt. Hn. Sir Reginald

    Stanley, Capt. Hon. Richard

    Grimond, J.

    Marlowe, A. A. H.

    Stevens, Geoffrey

    Grimston, Hon. John (St. Albans)

    Marples, A. E.

    Steward, W A. (Woolwich, W.)

    Grimston, Sir Robert (Westbury)

    Marshall, Douglas (Bodmin)

    Stewart, Henderson (Fife, E.)

    Hall, John (Wycombe)

    Maude, Angus

    Stoddart-Scott, Col. M.

    Harris, Frederic (Croydon, N.)

    Maudling, R.

    Storey, S.

    Harris, Reader (Heston)

    Maydon, Lt-Comdr S. L. C

    Strauss, Henry (Norwich, S.)

    Harvey, Ian (Harrow, E.)

    Medlicott, Brig. F.

    Studholme, H. G.

    Harvie-Watt, Sir George

    Mellor, Sir John

    Summers, G. S.

    Hay, John

    Monckton, Rt. Hon. Sir Walter

    Sutcliffe, Sir Harold

    Head, Rt. Hon. A. H.

    Moore, Sir Thomas

    Taylor, Sir Charles (Eastbourne)

    Heald, Rt. Hon. Sir Lionel

    Mott-Radclyffe, C. E

    Taylor, William (Bradford, N.)

    Heath, Edward

    Nabarro, G. D. N.

    Teeling, W.

    Higgs, J. M. C.

    Neave, Airey

    Thomas, Rt. Hon. J. P. L. (Hereford)

    Hinchingbrooke, Viscount

    Nicholson, Godfrey (Farnham)

    Thomas, Leslie (Canterbury)

    Hirst, Geoffrey

    Nicolson, Nigel (Bournemouth, E.)

    Thompson, Kenneth (Walton)

    Holland-Martin, C. J.

    Nield, Basil (Chester)

    Thompson, Lt.-Cdr. R. (Croydon, W.)

    Hollis, M. C.

    Noble, Comdr. A. H. P

    Thornton-Kemsley, Col. C. N.

    Holt, A. F.

    Nugent, G. R. H.

    Tilney, John

    Hopkinson, Rt. Hon. Henry

    Oakshott, H. D

    Vane, W. M. F.

    Hornsby-Smith, Miss M. P.

    Odey, G. W.

    Vaughan-Morgan, J. K.

    Horobin, I. M.

    O'Neill, Hon. Phelim (Co. Antrim, N.)

    Vosper, D. F.

    Horsbrugh, Rt. Hon. Florence

    Orr, Capt. L. P. S.

    Wakefield, Edward (Derbyshire, W.)

    Howard, Gerald (Cambridgeshire)

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

    Walker-Smith, D. C.

    Howard, Hon. Greville (St. Ives)

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

    Wall, Major Patrick

    Hudson, Sir Austin (Lewisham, N.)

    Osborne, C.

    Ward, Hon. George (Worcester)

    Hulbert, Wing Cdr. N. J.

    Page, R. G.

    Ward, Miss I. (Tynemouth)

    Hurd, A. R.

    Perkins, Sir Robert

    Waterhouse, Capt. Rt. Hon. C.

    Hutchison, Sir Ian Clark (E'b'rgh, W.)

    Peto, Brig. C. H. M

    Watkinson, H. A.

    Hylton-Foster, H. B. H.

    Peyton, J. W. W.

    Webbe, Sir H. (London & Westminster)

    Iremonger, T. L.

    Pickthorn, K. W. M.

    Wellwood, W.

    Jenkins, Robert (Dulwich)

    Pitman, I. J.

    Williams, Rt. Hon. Charles (Torquay)

    Johnson, Eric (Blackley)

    Pitt, Miss E. M.

    Williams, Gerald (Tonbridge)

    Jones, A. (Hall Green)

    Price, Henry (Lewisham, W.)

    Williams, Sir Herbert (Croydon, E.)

    Joynson-Hicks, Hon. L. W

    Prior-Palmer, Brig. O. L

    Williams, Paul (Sunderland, S.)

    Kerby, Capt. H. B.

    Profumo, J. D.

    Williams, R. Dudley (Exeter)

    Kerr, H. W.

    Raikes, Sir Victor

    Wills, G.

    Lambert, Hon. G.

    Redmayne, M.

    Wilson, Geoffrey (Truro)

    Lambton, Viscount

    Rees-Davies, W. R

    Wood, Hon. R.

    Leather, E. H. C.

    Remnant, Hon. P.

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

    Renton, D. L. M.

    TELLERS FOR THE AYES:

    Legh, Hon. Peter (Petersfield)

    Ridsdale, J. E.

    Mr. T. G. D. Galbraith and

    Lennox-Boyd, Rt. Hon. A. T.

    Robinson, Sir Roland (Blackpool, S.)

    Mr. Robert Allan.

    NOES

    Acland, Sir Richard

    Brockway, A. F.

    Davies, Ernest (Enfield, E.)

    Adams, Richard

    Brook, Dryden (Halifax)

    Davies, Harold (Leek)

    Albu, A. H.

    Broughton, Dr. A. D. D.

    Davies, Stephen (Merthyr)

    Allen, Arthur (Bosworth)

    Brown, Rt. Hon. George (Belper)

    de Freitas, Geoffrey

    Allen, Scholefield (Crewe)

    Brown, Thomas (Ince)

    Deer, G.

    Anderson, Frank (Whitehaven)

    Burke, W. A.

    Dodds, N. N.

    Attlee, Rt. Hon C. R.

    Burton, Miss F. E.

    Donnelly, D. L.

    Awbery, S. S.

    Butler, Herbert (Hackney, S.)

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

    Bacon, Miss Alice

    Callaghan, L. J.

    Ede, Rt. Hon. J. C.

    Bartley, P.

    Castle, Mrs. B. A

    Edelman, M.

    Benson, G.

    Champion, A. J.

    Edwards, Rt. Hon. John (Brighouse)

    Beswick, F.

    Chetwynd, G R

    Edwards, W. J. (Stepney)

    Bing, G. H. C

    Clunie, J.

    Evans, Albert (Islington, S. W.)

    Blackburn, F.

    Coldrick, W.

    Evans, Edward (Lowestoft)

    Blenkinsop, A.

    Corbet, Mrs. Freda

    Fernyhough, E.

    Blyton, W. R.

    Cove, W. G.

    Fienburgh, W

    Boardman, H,

    Craddock, George (Bradford, S.)

    Finch, H. J.

    Bottomley, Rt. Hon. A. G.

    Crosland, C. A. R.

    Fletcher, Eric (Islington, E.)

    Bowden, H. W.

    Daines, P.

    Follick, M.

    Bowles, F. G.

    Dalton, Rt. Hon. H

    Forman, J. C.

    Braddock, Mrs. Elizabeth

    Darling, George (Hillsborough)

    Fraser, Thomas (Hamilton)

    692

    693

    Freeman, Peter (Newport)

    McNeil, Rt. Hon. H.

    Shinwell, Rt. Hon, E.

    Gaitskell, Rt. Hon. H. T. N.

    Mallalieu, E. L. (Brigg)

    Short, E. W.

    Gibson, C. W.

    Mann, Mrs. Jean

    Shurmer, P. L. E.

    Glanville, James

    Manuel, A. C.

    Silverman, Julius (Erdington)

    Gordon Walker, Rt. Hon. P. C

    Mason, Roy

    Silverman, Sydney (Nelson)

    Greenwood, Anthony

    Mayhew, C. P.

    Simmons, C. J. (Brierley Hill)

    Grenfell, Rt. Hon. D. R.

    Mellish, R. J.

    Skeffington, A. M.

    Grey, C. F.

    Mitchison, G. R.

    Slater, J. (Durham, Sedgefield)

    Griffiths, David (Rother Valley)

    Monslow, W.

    Smith, Ellis (Stoke, S.)

    Hale, Leslie

    Moody, A. S.

    Smith, Norman (Nottingham, S.)

    Hall, Rt. Hon. Glanvil (Colne Valley)

    Morgan, Dr. H. B. W.

    Snow, J. W.

    Hall, John T. (Gateshead, W.)

    Morley, R.

    Sorensen, R. W.

    Hamilton, W. W.

    Morris, Percy (Swansea, W.)

    Soskice, Rt. Hon. Sir Frank

    Hannan, W.

    Mort, D. L.

    Sparks, J. A.

    Hargreaves, A.

    Moyle, A.

    Steele, T.

    Hastings, s.

    Mulley, F. W.

    Stokes, Rt. Hon. R. R.

    Hayman, F. H.

    Neal, Harold (Bolsover)

    Strachey, Rt. Hon. J.

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

    Oldfield, W. H

    Stross, Dr. Barnett

    Herbison, Miss M.

    Oliver, G. H.

    Sylvester, G. O.

    Hewitson, Capt. M

    Orbach, M.

    Taylor, John (West Lothian)

    Hobson, C. R.

    Oswald, T.

    Taylor, Rt. Hon. Robert (Morpeth)

    Holman, P.

    Padley, W. E.

    Thomas, Iorwerth (Rhondda, W.)

    Houghton, Douglas

    Paling, Rt. Hon. W. (Dearne Valley)

    Thomas, Ivor Owen (Wrekin)

    Hudson, James (Ealing, N.)

    Paling, Will T. (Dewsbury)

    Thomson, George (Dundee, E.)

    Hughes, Emrys (S. Ayrshire)

    Palmer, A. M. F.

    Thornton, E.

    Hynd, H (Accrington)

    Pannell, Charles

    Tomney, F.

    Hynd, J. B. (Attercliffe)

    Pargiter, G. A.

    Turner-Samuels, M.

    Irvine, A. J. (Edge Hill)

    Parker, J.

    Ungoed-Thomas, Sir Lynn

    Irving, W. J. (Wood Green)

    Paton, J.

    Usborne, H. C.

    Jay, Rt. Hon. D. P. T.

    Peart, T. F.

    Viant, S. P.

    Jeger, George (Goole)

    Plummer, Sir Leslie

    Warbey, W. N.

    Jeger, Mrs. Lena

    Popplewell, E.

    Watkins, T. E.

    Jenkins, R. H. (Stechford)

    Porter, G.

    Wells, Percy (Faversham)

    Johnson, James (Rugby)

    Price, J. T. (Westhoughton)

    Wheeldon, W. E.

    Jones, David (Hartlepool)

    Price, Philips (Gloucestershire, W)

    White, Mrs. Eirene (E. Flint)

    Jones, Jack (Rotherham)

    Proctor, W. T.

    White, Henry (Derbyshire, N. E.)

    Keenan, W.

    Pryde, D. J.

    Whiteley, Rt. Hon. W.

    Kenyon, C.

    Pursey, Cmdr. H.

    Wigg, George

    Key, Rt. Hon. C. W

    Reeves, J.

    Willey, F. T.

    King, Dr. H. M.

    Reid, Thomas (Swindon)

    Williams, W. R. (Droylsden)

    Kinley, J.

    Reid, William (Camlachie)

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

    Lawson, G. M.

    Robens, Rt. Hon. A.

    Willis, E. G.

    Lee, Frederick (Newton)

    Roberts, Albert (Normanton)

    Winterbottom, Ian (Nottingham, C.)

    Lever, Leslie (Ardwick)

    Roberts, Goronwy (Caernarvon)

    Winterbottom, Richard (Brightside)

    Lindgren, G. S.

    Robinson, Kenneth (St. Pancras, N.)

    Woodburn, Rt. Hon. A.

    Lipton, Lt.-Col. M.

    Rogers, George (Kensington, N.)

    Wyatt, W. L.

    Logan, D. G.

    Ross, William

    Yates, V. F.

    McInnes, J.

    Royle, C.

    McKay, John (Wallsend)

    Shackleton, E. A. A.

    TELLERS FOR THE NOES:

    McLeavy, F.

    Shawcross, Rt. Hon. Sir Hartley

    Mr. Holmes and Mr. Wallace.

    Mr. Boyd-Carpenter: I beg to move, in page 28, line 10, at the end, to insert:
    (6) The relief from estate duty conferred by this section in respect of, or by reference to the value of, machinery or plant used in any business shall, in the case of machinery or plant not used exclusively in that business, be such part only of the relief conferred apart from this subsection as appears to the Commissioners of Inland Revenue to be just and reasonable having regard to all the relevant circumstances of the case and, in particular, to the extent of any other use (whether for business purposes or not).
    This Amendment is designed to meet what I believe to be the point behind the Amendment in the name of the hon. Member for Stechford (Mr. Roy Jenkins), in page 28, line 47, at end, add:
    (10) In this section "machinery or plant" includes office machines and mechanical office equipment, but does not include office furniture or road vehicles unless they are of a type not commonly used as private vehicles and unsuitable to be so used or are provided wholly or mainly for hire to or for the carriage
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    of members of the public in the ordinary course of a business.
    The hon. Member for Edmonton (Mr. Albu), who intervened on the last Amendment but one, will remember that I made some reference to this Amendment.
    The short point that arises and which we can deal with in the Amendment is this. There will be some plant and equipment used partly for business and partly for private purposes. Probably the two most obvious examples are those which the hon. Member for Stechford sought to deal with in his Amendment: that is to say, motor vehicles, on the one hand, and types of office furniture, on the other hand. But theoretically there might be other examples, and this Amendment, unlike that of the hon. Member for Stechford, is general in its scope and would cover all forms of plant and equipment in respect of which these circumstances arose

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    I can best illustrate the effect by giving a specific example. Take the case of the motor car that is used two-thirds for business and one-third for private purposes. The Amendment would provide that the relief would continue to apply in respect of the two-thirds of the value of the vehicle which related to business use but would not apply in respect of the one-third which related to private use.
    It seems to us that the method provided by the Amendment is the most effective way of dealing with this matter. In the majority of cases in which it would arise in practice, the proportions would probably have been established for Income Tax purposes anyhow. The easiest course would be to adopt for purposes of this Estate Duty concession the same proportion as has been accepted for Income Tax purposes.
    Mr. Jay: Does the right hon. Gentleman mean that but for the Amendment the effect of the Bill would have been that a motor car used only one-third for business purposes would nevertheless have got the whole relief for death duties?
    Mr. Boyd-Carpenter: Yes. It is to correct that, in the light of the Amendment by the hon. Member for Stechford and the thought we gave arising from it, that the Amendment is intended.
    As the Committee will appreciate, very little money is involved in this change, but it seems to us that as a matter of principle the private use ought not to attract the relief which is aimed, as the Committee has already heard several times from me, at certain business assets. We feel that this general method is preferable to the method proposed by the hon. Member for Stechford of simply cutting out two particular classes of goods.
    8.45 p.m.
    Mr. Roy Jenkins: I recognise that, as the right hon. Gentleman says, this Amendment, in certain respects, goes further than the Amendment in my name and the names of my hon. Friends; but in one respect it does not go quite so far. Our Amendment was designed to deal with the difficulty, which I think the Government recognise, that the whole question of private motor cars in business is open to abuse.
    It is not easy to come along and say, "Two-thirds of this motor car is used in business and one-third is used privately."
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    When dealing with motor cars in particular, it is very difficult to be sure that the number and type of motor cars is not affected by the private convenience of the individuals concerned, rather than by the direct interests of business.
    It is clear that the Government to some extent recognise that this is so by the fact that they give no investment allowance for motor cars or any vehicles which can be used as private vehicles. I would ask the right hon. Gentleman why, in accepting that principle in the case of the investment allowance, he does not feel that it was also necessary to accept it in the case of this Clause.
    Mr. Boyd-Carpenter: It is only accepted in respect of investment allowance to the extent that the initial allowance remains, but the additional investment allowance is not given. In the case of the hon. Gentleman's Amendment, he would have gone the whole way and deprived the person who owned the motor car of the full benefit.
    It is the fact that, in coming to the business in which we are concerned from the point of view of Estate Duty, the motor car is an important part of the assets, and we feel that it would be wrong to cut it out of the benefit of this concession, in so far as it is used for business purposes. If the Committee accepted this Amendment, it would only be that part of it relating to business purposes which would get the benefit from this concession. We feel that in the circumstances of Estate Duty, it is right to do that, and it would be unfair on certain types of business if we were not to give the concession.
    Amendment agreed to.
    Mr. Boyd-Carpenter: I beg to move, in page 28, line 13, to leave out "so treated," and to insert:
    "treated as an industrial hereditament (or industrial lands and heritages)."
    This is a drafting Amendment. We have used the term "industrial hereditament" because we thought it was applicable to Scottish law. We have to add the words:
    "(or industrial lands and heritages)"
    because we are advised that that is the equivalent in Scottish law.
    Notice taken that 40 Members were not present—
    The Temporary Chairman (Sir Gordon Touche): We had a Division about a quarter of an hour ago when over 400 Members were present.
    Amendment agreed to.
    Mr. Jay: I beg to move, in page 28, line 35, at the end, to insert:
    (a) to a business the net assets of which exceed fifty thousand pounds or to the business of a company where the relevant proportion of the net value of the shares or debentures as defined in subsection (3) of this section exceed fifty thousand pounds.
    This is an Amendment to which we attach some importance on this side of the Committee, and which, I am sure, will prove helpful to the Chancellor, and also, incidentally, be welcomed by the hon. Member for Langstone (Mr. Stevens), who spoke earlier today in favour of small businesses suffering from Estate Duty.
    The purpose of the Amendment is to confine the relief given under this Clause to businesses with approximate net assets of under £50,000, and thereby exclude the concession from all such businesses. We are not entering into the general argument about this concession, which we regard as quite inadmissible and for which, it seems to me, no general case has been made out, for we shall come to that later on the Question, "That the Clause, as amended, stand part of the Bill." We are here assuming that the general concession takes place and we are arguing that it should be limited to businesses of under £50,000.
    As the Bill stands there is no limitation at all to the size of the business to which this concession applies. All the propaganda which we have heard for concessions to family businesses has used the term "family business" in such a way that it has come to mean, in the ordinary man's mind, a small type of business. But this is common ground: this concession is not limited in any sense to a business below a certain size.
    Whether the concession is justified or not in the case of a really small business, surely it is grossly unfair to give such a discriminatory concession to a one-man business worth, perhaps, hundreds of thousands or even millions of pounds. Earlier, the hon. Member for Hall Green (Mr. Aubrey Jones) objected to discrimination in direct taxation. It is hard to imagine a worse case of discrimination
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    than that between two men who die, one worth £1 million in various forms of property which would not attract this concession, and another worth the same amount but all in virtue of one family business, who would get the enormous concession of 45 per cent. off the 80 per cent. rate of Estate Duty. That would be the effect of the Clause.
    The Financial Secretary may perhaps argue that there are very few businesses which are private companies within the rather narrow definition of Section 55 of the Finance Act, 1940, which is relevant for the purposes of this Clause, and which are worth very large sums of money. He would have the hon. Member for Kidderminster (Mr. Nabarro) against him, for the hon. Member earlier argued quite rightly that many private businesses and family businesses in this sense are large. I think most of us could quote examples of such family businesses. On Second Reading I pointed out—and I still think it is relevant—that up to a certain year in the 'thirties, the firm of Morris Motors was a private interest very largely in the control of one man.
    Mr. Charles Pannell: It was 1926.
    Mr. Jay: Shortly before the date when it became a public business, the firm must have been worth some millions, if not £10 million or £20 million. The Financial Secretary rightly points out that the concession refers only to certain assets—roughly, the plant, equipment and buildings of an industrial company—but I should have thought that a very high percentage of the assets of Morris Motors would have been of that kind and therefore would attract the concession under the Clause.
    On Second Reading, the Chancellor suggested that I mentioned Morris Motors only to create general political prejudice about this concession, but that was not my intention. It was merely to illustrate what the Clause does, and I am glad to see that the right hon. and learned Member for Kensington, South (Sir P. Spens) appreciates that that is the purpose of the illustration. When we are asked to approve a concession of this kind on the ground of certain arguments, we ought to be clear about what we are arguing. Surely it is not the intention of

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    the Committee to grant relief to the extent of 45 per cent. of 80 per cent. in death duties in the case of a single individual owning a business which might be worth £5 million or £10 million. That would be discrimination carried to an extraordinary degree.
    I should like to ask the Financial Secretary whether I am right in thinking that a business of the kind of Morris Motors before 1926 would have attracted this relief. I should also like to ask him is it really the Government's intention that relief on that scale and in that extraordinary discriminatory fashion should be given by the Clause. I want to ask him one other question arising out of what he said on this matter in his Second Reading speech. He was inclined to argue that the grievance or hardship was greater in the case of the larger businesses than in the case of the smaller.
    He will remember that our objection to the whole of this concession is largely based on the Report of the Board of Inland Revenue on Estate Duty and Family Businesses, Cmd. 8295, which went into the whole case for the relief of Estate Duty on family businesses and found that the great weight of evidence suggested that there was absolutely no case made out at all. The Financial Secretary, on Second Reading, referred to the fact that the Inland Revenue stated that on businesses worth £1,000 and upwards—this figure I think is agreed—only 1·6 were found to have been involved in an encroachment on the trading assets in order to pay the Estate Duty, and that in the case of all companies other than the 1·6 there were other assets available sufficient to pay the duty.
    The Financial Secretary replied that if that was true for the firms whose assets exceeded £1,000, then it was different in the case of firms with assets of £10,000. These are his words:
    "If, however. we take cases where trade assets exceed £10,000—and. after all, that is not a very large business—the percentage where encroachment takes place rises to 25 per cent."—[OFFICIAL REPORT, 3rd May, 1954; Vol. 527, c. 35.]
    If that be true it would suggest a very special problem for the larger businesses.
    I should like to ask the Financial Secretary from where he gets the 25 per cent. and if he can answer that straightaway I
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    shall be grateful. It will clear up at least one point in the argument. Paragraph 5 of the White Paper to which I have referred points out that 1·6 per cent. was the correct figure for the businesses of over £1,000, and then says:
    "If £20,000 were taken as the starting point for the present investigation on the ground that this in real terms corresponds much more closely to £10,000 in 1922, the percentage would go up to 3·4 per cent."
    On the face of it that figure seems to contradict the Financial Secretary's 25 per cent., for which I can find no authority in this Report whatever. If, in fact, that figure was erroneous or was given by the Financial Secretary by mistake for something else, then I think he was rather seriously misleading the House on Second Reading. I hope he will clear that up before we part with this Amendment tonight.
    9.0 p.m.
    Our main point is, even if a case could be made out—we think it cannot—for this concession over the rest of the field—that there is little or no case against limiting it to firms with assets of £50,000 and under. I hope that the Amendment will commend itself to the Chancellor, who still shows little inclination to accept the advice of this Committee. I hope that the Amendment, which is so much in line with the Chancellor's own arguments and is so reasonable in every way, and particularly as the Financial Secretary got his figures wrong on the Second Reading, will this time be acceptable to the Government.
    Mr. Albu: I support the Amendment. I do not think we have enough figures to indicate the number of companies or businesses of different sizes that would be affected by the Clause. One has therefore to make guesses.
    I think that my right hon. Friend the Member for Battersea, North (Mr. Jay) would agree that the number of companies of the size of Morris Motors in 1926, is rather small and might be considered marginal. Nevertheless, there are companies which reach substantial size. In view of the statement from the Treasury Bench that it is not the intention of the Government to change by this Clause the relative level of taxation but only to deal with what they consider to be an anomaly, those of us who are not anxious to see any radical and regressive

    701
    change in the present incidence of taxation on Estates as a whole must try to understand what the effect of the present proposals might be.
    In the 96th Report of the Commissioners of Inland Revenue, on page 112, Table No. 104, there is a very interesting classification of property passing on death in 1953. It shows that the proportion of estates represented by stocks and shares in private British companies goes up the larger the estate. This is an extremely significant fact. It starts at the low level of 1·83 per cent. for estates between £2,000 and £5,000 and rises to 8·63 per cent. for estates between £40,000 to £50,000. For estates between £200,000 and £300,000 it is 16·18 per cent., for estates between £500,000 and £1 million it is 19 per cent., for estates between £1 million and £2 million it is 26 per cent. and for estates of £2 million and upwards it is more than 30 per cent.
    It is a pretty reasonable assumption, if one understands anything about the nature of private companies, that the shares of the vast majority of these larger estates will be all in one or two private companies associated with each other. It looks as though this concession might be very substantial for a number of very wealthy inheritors. It is not possible to get the figures exactly because the Report does not indicate exactly the size of the companies at different ranges nor does it indicate the proportion of their fixed assets; nor is it possible to know how many of them were valued on a fixed-asset basis. In view of what we know about the gross inequalities of the distribution of wealth, the extraordinary range in the size of estates and the very small number of very large estates which comprise the bulk of the wealth passing on death, there is some significance in these figures.
    When we are discussing the question of family businesses, it is always discussed as a matter of the passing of small businesses, but surely these figures are sufficient to show that this is by no means the case. The intentions of the Government are not the intentions of their back benchers. They are quite different, as the Chancellor and the Financial Secretary have told us quite clearly, but even from the point of view of the Government's intentions, to deal with what may bean anomaly and almost insuperable difficulties, as they seem to think, with regard
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    to businesses with a substantial proportion of fixed assets, it is a question whether these difficulties really apply in cases of this sort.
    Mr. George Odey: From the point of view of principle, what does it matter whether the business is large or small?
    Mr. Albu: I do not think that the hon. Member has been here during the debate.
    Mr. Odey: Yes, indeed, during much of it.
    Mr. Albu: I remember the hon. Member interrupting a speech which I made on a similar subject during our debates on the Finance Bill last year.
    Mr. Gordon Walker: It is the same speech and the same interruption.
    Mr. Albu: Hon. Members really must not think that I am still making the same speech. Much has happened since then. From the point of view of those of us who are not in favour of very large inheritances, and in view of the fact that, because of the progressive nature of Estate Duty, the effect of a concession will be very much greater for large estates than for small estates, there are very substantial reasons why we should make this differentiation. If the hon. Member for Beverley (Mr. Odey) had been present during the whole of the debate he would have known that on a previous Amendment we had a discussion on whether the Government's intention was to relieve or readjust taxation because of inequities, or to deal with an anomaly which had an effect upon the national economy. The Government quite clearly told their own back bench supporters, who had been pleading for the widening of the Clause, that it was not their intention to deal with taxation relief in the Clause but with something which had been brought to their attention, namely, an anomaly in the assessment of estates for Estate Duty which was considered to have an inhibiting effect on industrial expansion. They had no other intention whatsoever. It is on that basis that I am now dealing with this Amendment.
    Mr. Odey: It is very kind of the hon. Member to have informed me but I was present at the time.
    Mr. Albu: Then I am even more surprised at the hon. Member's intervention.
    My point is that in the case of the larger business—and I suppose all of them would be companies—I find it difficult to believe that they would not be able to raise the necessary money to pay the duty. As has been pointed out by my right hon. Friend the Member for Battersea, North (Mr. Jay), only in a negligible number of cases would those concerned lose control of their businesses. There is a substantial difference in this case between the larger and smaller businesses. The small businesses have more difficulties and, among other things, the larger businesses must be more firmly established.
    It seems to me that the large business, or large company, in private hands—except in very rare cases, like the original Morris Motors—can hardly be a business of the first generation. The inheritance and transference can hardly be the first, although it may be the second or the third. From the point of view of hon. Members on this side of the Committee, that greatly strengthens the argument for reducing the concession. Whatever may be the case for assisting the business over the first inheritance, I believe that there is very little case for continuing to give concessions in the third or fourth generation.
    Arguments against that have been deployed in the Committee before and I hope to have something to say on the matter on the Motion, "That the Clause stand part of the Bill," where I think it would be more appropriate because, as you know, Sir Charles, we on this side of the Committee are altogether opposed to the concession in the Clause. If there is any justification for the case of the Government that there is an industrial necessity to maintain these businesses in being and that they cannot be maintained in being because of the present method of assessment and the difficulty in paying the duties placed on them, on that basis alone, although I can see that possibly there may be a case for the smaller company—the business passing for the first time—there surely can be no case whatever for making a very considerable concession to very much larger companies, which apparently form a very high proportion of the total value of estates in the higher ranges.
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    When I read the figures for the first time I was surprised and I am not entirely certain how to interpret them. But I think it is impossible not to draw from them the conclusion that in the larger estates there is a very high proportion of larger businesses remaining and any substantial concession made to them must in the end have a considerable effect on the return from Estate Duty which, even after the number of years it has been in operation—my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) went back into history on the subject—has had an extraordinarily small effect on the distribution of wealth in this country.
    Mr. Grimond: I cannot say that I feel that the arguments of the hon. Member for Edmonton (Mr. Albu) flowed to his conclusions. I felt he had come to certain conclusions about the Amendment and was supporting it by arguments not in all cases really on his side. I do agree that there are strong arguments against the Clause on a whole. It might well be said that there will be individual cases in which one rich man will have to pay a very much higher rate of duty than another simply because one happens to hold shares in a public company and another holds shares in a private company.
    It may well be argued, as has been argued in this Committee, that there will be injustice as a result of this Clause. I feel that all the more because if we must have taxation—and, clearly, we must—I feel that death duties are not the worst form of taxation. In fact, I would much rather see direct forms of taxation like Income Tax reduced instead of death duties reduced.
    What I did not entirely grasp is the particular reason for this Amendment. Earlier, a distinction was drawn between the small and the family business and a very effective defence was put up from this side of the Committee for the small business. The innate chivalry of the hon. Member for Gloucestershire, South (Mr. Crosland), for instance, has been brought out by the thought of these pitiful little businesses struggling against the Chancellor of the Exchequer and there is something very British in his attitude. I like to see that the economic machine, which we know is contained inside the head of the hon. Member for Gloucestershire, South, is slightly mellowed by

    705
    these emotional appeals. I have recommended before to the hon. Member that he should put down an Amendment asking for some consideration for small businesses with more than two women on the board. I think there is a great deal to be said for it.
    9.15 p.m.
    I ask the Chancellor to agree that there are small businesses, and small businesses, Some may be run as sweat shops. Some may be owned by rich men. The purpose of this Clause, in essence, is neither to help the family business, nor the small business, but to prevent businesses from being put out of operation because of the action of the Estate Duty. Rightly or wrongly, the Chancellor takes the view that there may be types of businesses—shops, or industries, or even antique shops—which should not be killed, not because a rival business may be able to do better, but simply from the effect of the Estate Duty.
    If that be so, is it logical to limit the effect of this Clause to businesses which have assets of £50,000 or under? I appreciate that there may be injustices between the family of one testator and another, between a rich man and a man who is not so rich. But if we look at the reason for the Clause I do not see that the difficulty is met by limiting the concession to certain businesses. It may be that an extremely rich man happens to be the sole owner of a business with assets worth only £40,000. He will have the full benefit of the provisions of this Clause while a comparatively poor family with a business worth £60,000 will not.
    I know that the right hon. Gentleman who moved the Amendment is not tied to the particular figure mentioned, but wherever the amount is fixed the same difficulty will arise which, I suggest, is a result of not looking at the reason for the Clause. If it is felt that this is so unfair as between one testator and another the right and logical argument, and the one which I think the Labour Party will pursue, is to vote against the Clause. There is no Amendment which would make it acceptable. Although I see the difficulties I think we must accept them with the Clause.
    Mr. Roy Jenkins: There is a point which should be borne in mind when we are discussing whether it be practicable and desirable to place a limit on
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    this sort of advantage and to the extent to which the concession can be given. It is that the larger the business the more easy it would be to turn it into a public company if the effects of the Estate Duty made that necessary.
    The Government have come forward with this concession on the express ground that they are anxious to preserve businesses which are valuable units in the national economy from being put into difficulties, and perhaps driven out of existence, by the operation of the Estate Duty. I think that is exaggerated, but it is less exaggerated in the case of small businesses because we have chosen the figure of £50,000.
    I agree with the hon. Member for Orkney and Shetland (Mr. Grimond) that one could have chosen another figure and that we could argue as to what it should be. But there is a level at which small businesses shade into bigger businesses, and we chose £50,000 as being a reasonable point. It is obviously the case that as one moves from small to large businesses, so the danger of the business being put out of existence, and broken up as a result of the operation of the present death duty provisons unamended by this Clause, become very much less. That is a point which the hon. Member for Orkney and Shetland did not face.
    If one looks at the activities of E.D.I.T., the finance corporation set up to deal with the troubles of firms which meet difficulties because of Estate Duty, one sees that none of its deals at present involves an investment of more than £60,000 in any one company. What moved it in that direction was the feeling that substantially bigger companies which wanted a great investment could solve their problem more easily by going to the market and turning themselves into public companies. We should hear that important point in mind when determining whether or not the concession should be limited in the way we suggest.
    The hon. Member for Orkney and Shetland invited us to vote against the Clause, suggesting, that that was the only way in which we could satisfactorily express our general disapproval. I did not gather whether he would come with us into the Lobby against the Clause. That certainly is a means of doing it, but, undesirable though the Clause may be, it

    707
    would none the less be possible to reduce its undesirable effects by limiting it to the smaller companies. There is a logical case for doing this on the grounds of the greater ease with which other steps can be taken by the large companies if Estate Duty presents them with the difficulties which the Government have in mind.
    Mr. Crosland: I assure the hon. Member for Orkney and Shetland (Mr. Grimond) that I shall try once again to make a British speech. I should certainly consider it very bad taste to make my speech in Italian, and I imagine that I should be out of order if I did so. I am sorry that he himself is not going to show a more British attitude by expressing his views in the Lobby. I should have liked to follow up his allusion to women on the board, but I missed the point of it and could not follow what was in his mind.
    The hon. Member made a serious point that we ought to consider. He said that a small business is not necessarily a good or desirable thing, because it may be a sweat shop. That is true. It would be foolish for anyone to set out with a complete prejudice in all circumstances in favour of small businesses rather than large businesses, but the reason the Opposition have put down a great number of Amendments to this Finance Bill and to previous Finance Bills specifically designed to lighten the burden of taxation on small businesses is not necessarily because we think that small businesses are better than big businesses, but because we think that the present level of taxation hits small businesses much worse than it hits large businesses. Small businesses find it much harder under the present tax rates to expand and obtain the necessary finance. I assure the hon. Member that it is not because we hold some very romantic view about small businesses.
    An hon. Member opposite raised a very serious point which was extremely relevant to the Amendment when he asked why the Opposition want to differentiate between the small family business and the large family business and why we have tried to confine the Clause in this way. It is not illogical for us to say that we are more concerned to limit the Clause to the smaller family businesses than to
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    apply it to the larger family businesses as well.
    One reason is that, as my hon. Friend the Member for Edmonton (Mr. Albu) pointed out, since the Opposition are bound to look upon Estate Duty purely as a redistributive instrument, the exemption of large family businesses will have a more serious effect on the distribution of our capital wealth than would relief of small family businesses only. That is one reason for confining the Clause to small family businesses.
    The second reason, which I mentioned in another connection some time ago, is that the small family business is much more likely to have financial difficulties than the larger family business, and therefore, is much more deserving of the concession in this respect.
    The third reason—and here I come back to the point with which I began—is that it would be true to say that most of us on this side of the Committee have rather more prejudice in favour of the small family business as such than the large family business as such. I am not at all certain that one could make out for the really large family business quite as strong a case as for the small family business on the kind of social grounds that are frequently put forward from the other side of the Committee.
    We are told—and it is an argument which has much validity—that the family business, though not necessarily, may have rather better relations on account of the personal touch, because all the workers in the business have known the family operating that business, perhaps for several generations, and there is a much more intimate atmosphere and better relations generally. I can see that this argument can very well be true of relatively small family businesses but not of the really very substantial ones. Therefore, for those three reasons, it is true that we think it is acceptable to differentiate between the smaller family business and the larger one.
    At different times we have heard a great deal from hon. Gentlemen opposite about small family businesses, and we had hoped to gain their support when we put down Amendments designed to relieve the smaller business from the present rates of profits taxation both last year and the year before, but we have

    709
    never had very much support from hon. Gentlemen on the other side of the Committee. When they are given an opportunity of doing what they really want and limiting this Clause to the people who need protection, it is rather disappointing that we have had such little support from the other side.
    I see that the hon. and gallant Member for Knutsford (Lieut.-Colonel Bromley-Davenport) is in his place, and he has been sitting there during the whole of this discussion and is clearly interested in the matter. He has not spoken a great deal this year—rather less than usual—and he has been greatly missed. I therefore hope that he will give us some support.
    Lieut.-Colonel W. H. Bromley-Davenport: I welcome the remarks of the hon. Gentleman, but when I listen to the long, boring accounts of the two long-haired intellectuals opposite. I have "had it," and so have many of my hon. Friends.
    Mr. Boyd-Carpenter: I do not think I am called upon to add anything to what has just been said by my hon. and gallant Friend the Member for Knutsford (Lieut.-Colonel Bromley-Davenport), but I should like to say a word or two about the Amendment.
    As I think the right hon. Gentleman the Member for Battersea, North (Mr. Jay) will appreciate, it is somewhat curiously phrased, in that the limit of £50,000 is related to net assets in the case of unincorporated businesses dealt with in subsection (1), whereas subsection (2) relates only to the relative proportion of the net value of the shares, and, therefore, the limit of £50,000 would operate generally even within the sphere of the businesses with which we are concerned. I do not know whether that is intentional, but it certainly would be a rather odd effect, and the hon. Gentleman did not give any indication of any particular reason for so framing it.
    The real point which is raised by this Amendment is the suggestion that, if this relief comes into effect, it should be cut off at a figure of about £50,000. That is the issue, and it is to that issue that I should like to address one or two observations.
    710
    9.30 p.m.
    One consequence of doing what the right hon. Gentleman suggests would be to discourage very severely businesses approaching the £50,000 level from expanding. It would be perfectly clear to any business slightly below that level that to expand a small degree above it would carry a considerable risk of losing its Estate Duty concession, and in so far as these provisions do operate—and I think they do to some extent—on the decisions that business men make as to investment and expansion, the insertion of a rigid limit at the £50,000 figure would undoubtedly discourage what the right hon. Gentleman apparently regards as small businesses from becoming what the right hon. Gentleman apparently regards as large businesses. I am sure that that discouragement of this form of business enterprise would be a very great pity and entirely contrary to the ideas on the subject which were so eloquently expressed by the hon. Member for Gloucestershire, South (Mr. Crosland) in our debates last week.
    Mr. Jay: I recognise that there is a tapering difficulty in this case, but if the right hon. Gentleman is willing to improve our Amendment so as to get over that difficulty, in which he and his advisers would be even more skilful than we would, we should be very glad to support him.
    Mr. Boyd-Carpenter: We would be deliberately giving a less proportionate advantage as the business itself expanded in size and became liable in the ordinary way to higher rates of Estate Duty. The effect of a tapering provision could not eradicate that difficulty, because it is fundamental to the right hon. Gentleman's proposal that he wishes to give some degree of discouragement to these businesses from expanding beyond the £50,000 level. For that reason alone, I would suggest that this Amendment is unacceptable inasmuch as it would work against one of the main purposes of the Clause.
    Let us take this matter a little further. The right hon. Member for Battersea, North seemed very worried by what he described as the enormous concessions which would result from leaving the Clause in its present form. He rather skated over the class of case in

    711
    which he thought an enormous concession would arise. The only specific case was that of a famous public company as it was before 1926. It is our common experience that all the circumstances of the day seem to cause businesses as they expand to anything like the level of the business to which he referred to become public companies. All the tendencies are such, and I should have thought it was in the highest degree improbable, as my right hon. Friend the Chancellor said on Second Reading, that we should really come across cases of that sort of level in present circumstances.
    Be that as it may—and we must deal with this matter if necessary even on a theoretical basis—I think the right hon. Gentleman failed to face the fact that Estate Duty, even as operated upon by the reduction provided in this Clause, is on a graduated scale. All that the Clause does is to reduce by a certain percentage the amount of Estate Duty otherwise payable; but as the assets liable to Estate Duty rise in value, so does the rate of duty applicable rise.
    I do not want to weary the Committee with figures, but when we come, for example. to Estate Duty at the 80 per cent. rate, which is the rate applicable in the sort of circumstances which the right hon. Gentleman was thinking about, even subject to this concession the rate of Estate Duty applicable would be some 44 per cent. When one appreciates that it falls, ex hypothesi, in cases with which we are dealing on the assets of a business, that is a pretty serious matter for a business. I do not think it is really fair to speak, as the right hon. Gentleman did, of enormous concessions resulting from this provision.
    Mr. Jay: Surely, since 45 per cent. of 80 per cent. is a great deal more than 45 per cent. of 10 per cent. or 15 per cent., the discrimination which the right hon. Gentleman is introducing is all the greater in the case of the larger businesses. That is precisely the case for the Amendment.
    Mr. Boyd-Carpenter: I can quote to the right hon. Gentleman the remark of my hon. Friend the Economic Secretary, on just this sort of issue, that it is not really an unduly great concession, if one is knocking someone very hard on the
    712
    head, to knock a little less hard. That remark is just as relevant to this issue as to the one with which my hon. Friend was dealing. Although this concession is at a flat rate, the rate of Estate Duty applicable to the very business assets covered by the Clause rises, and continues to rise, on a graduated scale.
    The right hon. Gentleman referred to certain observations which I made in the Second Reading debate. I think he conceded by implication, if not by expression, that those observations indicated that the danger of encroaching, on the business assets appeared to rise as the amount of the business assets themselves rose. I have no reason to correct the figures which I gave the House during the Second Reading debate, and I should like to repeat them because I regard them as relevant. I said:
    "If, however, we take cases where trade assets exceed £10,000—and, after all, that is not a very large business—the percentage where encroachment takes place rises to 25 per cent."—[OFFICIAL REPORT, 3rd May, 1954; Vol. 527, c. 35.]
    That does appear to indicate that the problem with which we are concerned and with which this Clause seeks to deal certainly does not become less acute as the size of the business concerned rises.
    Mr. E. Fletcher: Will the right hon. Gentleman give us the authority for that statement? It does not seem to be borne out by anything contained in the White Paper.
    Mr. Boyd-Carpenter: It is not in the White Paper; it is the result of inquiries which have been made. I hope that the hon. Member is not suggesting that all truth, for all time, is embodied in the White Paper. It is a very good document, but it is not a kind of Koran.
    Mr. Jay: Not merely is the 25 per cent. not included in the White Paper, but it seems to me it is directly contradicted by paragraph 5 of the White Paper, which says:
    "If £20,000 were taken as the starting point for the present investigation on the ground that this in real terms corresponds much more closely to £10,000 in 1922, the percentage would go up to 3·4 per cent."
    In the White Paper the percentage is shown as 1·6 for the number of cases over £10,000, and 3·4 for the number of cases over £20,000, at present prices. How can it possibly be 25 per cent. on the Financial Secretary's definition?
    Mr. Boyd-Carpenter: I gave those figures to the House in the Second Reading debate as a result of inquiries made in the usual way. These figures are available to those who speak at the Dispatch Box. I have no reason whatever to modify them, and I take the responsibility of repeating them. The right hon. Gentleman himself must agree that they are somewhat damaging to the proposition he has put forward.
    Mr. Jay: I should like to make it clear that I am quite sure that the right hon. Gentleman believes the figure he is giving the Committee to be correct, but I am suggesting that he is possibly mistaken, as what he says is clearly contradicted by the White Paper, and this shows that the Government's case for the Clause is based on a failure to look the facts in the face.
    Mr. Boyd-Carpenter: Naturally the right hon. Gentleman will not expect nor wish me to proceed on the "You are, you aren't" basis. I have told him that, since he raised the matter, I have taken the responsibility of checking through the usual sources that are available to those who speak from this Box the accuracy of these figures, and they were confirmed. It follows, I think, that the right hon. Gentleman must accept the converse of his own argument. He must agree that the figures are somewhat damaging to the proposition put forward in the Amendment. I think he accepts that. Indeed, if he does not so accept it, I cannot understand why he mentioned the matter at all.
    I do not want to proceed solely on that basis. I much prefer to argue the matter, as I think the Committee would wish, as a matter of principle. It seems to me that the desire which we have expressed in this Clause to provide some alleviation of the rates of Estate Duty upon the plant of industry and commerce and upon the buildings of industry is served just as well above the £50,000 level as below it. It is, indeed, arguable that when we get into those levels, levels at which in the normal way Estate Duty operates very severely, the case is, if anything, stronger, because we are very concerned that the rates of Estate Duty do and as a matter of common sense must fall very heavily indeed upon a business of this sort.
    I do not want to weary the Committee by repeating the varying rates of Estate
    714
    Duty, which both sides of the Committee know to be very severe. Hon. and right hon. Gentlemen opposite welcome that, and my hon. Friends deplore it, but the fact is so. When we face that fact, it really does seem to me wholly wrong in principle to abandon the proposals of this Clause when the zone is reached at which Estate Duty bites most severely. I can understand an argument that we should not provide the alleviation at all. That is one point, but once we accept it, I really cannot see a case for limiting it just at the point at which it becomes of very real importance.
    I do not think we want to approach this matter by the fantastic or the extreme case. So far as I know, it does not exist. Indeed, the fact that it is not likely to exist is, I think, borne out, as my right hon. Friend said on Second Reading, by the calculation that we have given of the total cost to the Exchequer. If there were to be reliefs on these very large sums which the right hon. Gentleman seems to contemplate, then, of course, the figure of total cost would be appreciably higher than that which we have given, but we have given that figure also on the basis of considerable thought and considerable advice, and I think that does make it clear that we are not concerned here with the extreme case.
    What we are concerned about, however, is a proposal suggested from the benches opposite to cut off this relief, with the adjustment I mentioned, at or about the £50,000 level. I would suggest to the Committee that not only is it wrong in principle, not only would it defeat the very purpose for which the Clause is in the Bill, but it would have a highly discouraging effect on just the up and coming business which is below the £50,000 level which I should have thought it was the wish of everybody in this Committee to see expanded.
    For these reasons, while we shall naturally be prepared to argue the main case for this concession, it would be quite wrong to mutilate the Clause in this way.
    9.45 p.m.
    Mr. Mitchison: As a matter of principle, I am a trifle shocked to hear the Financial Secretary repudiating his own illegitimate offspring with so much circumlocutory rectitude. On the second

    715
    day's debate on the Budget proposals, it was the Financial Secretary himself who, in one of his inimitable sentences, produced the following:
    "I suggest to the Committee that this is a wise concession, not only in equity to those concerned in small businesses but, what is from the national point of view far more important, as an encouragement to them"—
    that is to say, to those concerned in small businesses—
    "in the same way, but in a smaller degree, is the investment allowance—to modernise and re-equip themselves and enable them to play a proper part in our national economy."
    What I am concerned with is the approaching mutilation of a promising child and the rather naughty way in which the right hon. Gentleman has repudiated it. He went on to say:
    "I believe that this concession will be a very solid advantage."
    I am sure that another excellent sentence was coming, but at that point my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) got up and said:
    "The right hon. Gentleman keeps referring to small businesses."—[OFFICIAL REPORT, 7th April, 1954; Vol. 526, c. 388.]
    My right hon. Friend pointed out that the concession did not seem to be limited to small businesses. Now we are trying to help the right hon. Gentleman to carry out the matter of principle, for reasons which he himself gave, for having any relief of the sort, and then he tells us that as a matter of principle we have got it wrong.
    As a matter of practice, I should be the first to concede to the right hon. Gentleman that there is a little to be said. By all means let us consider whether the concession cannot be tapered. By all means let us examine the figure of £50,000 and see whether it is right. It does not sound to me very far off the mark, but all those are matters of machinery, and we are invited by the right hon. Gentleman to consider this as a matter of principle.
    As a matter of principle, what I would say about it depends on a passage in the White Paper. It illustrates a point which was made a minute or two ago by my hon. Friend the Member for Stechford (Mr. Roy Jenkins). What he pointed out was that the fact that some recourse is necessary to business assets to pay the
    716
    duty does not necessarily mean that the business is broken up on the death of the deceased, and that other alternatives are open—that shares might be issued to the public, that part of the deceased's shareholding might be sold, that the company might raise a loan, and so on.
    The substantial difference from this point of view between the small company and the large company, both of them companies of the special type that we are now considering, is that the small company may find it very much harder to do that sort of thing than the large company would do. Of course, there are many more small companies than large ones, but it is just those small companies which will find it exceedingly difficult to sell off shares, to let the public in, and to turn themselves into a little more of a public company than they were before.
    The next point is whether there is really a moral case for extending this benefit to the large companies, which, we would all agree, are far fewer. In that direction one does to some extent come to the social question of power that is involved. The small companies, by and large, will be businesses probably of a family character. As for the large companies, if the case of Morris Motors is out of date, I suspect that there are others, and I should look at the shipping industry for one or two of them; but there will be some cases, at any rate. Is it really sound so to use taxation as to encourage these largish concerns to remain in the course of time strict family businesses?
    Ought we not, when we are considering this kind of relief, to bear in mind that, if the national objective of which the right hon. Gentleman spoke on Second Reading, is to be achieved—the requipment and modernisation of the companies—and the social objective might be attractive to a party which professes to believe in a property-owning democracy—to encourage these large family businesses to remain purely family businesses is unacceptable? On these grounds, there is reason for treating these businesses, which appeal to the right hon. Gentleman somewhat differently, as between the small business and the large business.
    Of course, we bow every time to the Treasury and to the Government draftsman as to the exact place and the degree of tapering which we should give to it.

    717
    It is a matter of principle which we have been invited to consider, and, as a matter of principle, I believe that the right hon. Gentleman was quite right the first time, and has now, unfortunately, lapsed a little in not accepting this Amendment in principle.
    Mr. E. Fletcher: It seems to me that there is a glaring inconsistency between the figures which the right hon. Gentleman has given and those contained in the White Paper. Since he based nearly the whole of his argument upon these percentages, it seems important that we should clear up this matter.
    The right hon. Gentleman gave the figures on Second Reading and repeated them today. I do not think that it is good enough for him to give us his ipse dixit from the Treasury. The inconsistency is so glaring and obvious that I think the right hon. Gentleman owes it to the Committee either to withdraw or to explain what seems to me to be the vital point of his argument.
    He says that if we take the whole field of the companies about which we are talking, the number of cases in which there is encroachment for the purpose of paying Estate Duty over the non-trade assets is 1·6 per cent. That is precisely the figure given in paragraph 5 of the White Paper. We agree that he has had it in front of him.
    Then he goes on to say if we take the cases where the trade assets exceed £10,000, the percentage where encroachment takes place rises to 25. But what does the White Paper say? The White Paper was published as recently as 1951, and it says that if £20,000 were taken as the starting point—not £10,000, but an even higher starting point than that given by the right hon. Gentleman—the percentage would go up to only 3·4 per cent.
    That has stood the test of time in the last two or three years, and it is supported by the statistical tables. It is not good enough for the right hon. Gentleman to come here and say that it has risen to 25 per cent. I find it impossible to believe that, in the short space of three years since 1951, the figure has risen from 3·4 per cent., as the White Paper says, to the figure of 25 per cent. as the right hon. Gentleman said tonight. It seems to me that the White Paper completely destroys his argument. He has pleaded this difficulty of 25 per cent. without any explanation or justification. That seems to be a real disservice to the Committee, and makes it impossible for us to have any confidence in the explanation which he had given.
    Question put, "That those words be there inserted."
    The Committee divided: Ayes, 214: Noes, 233.

    Division No. 171.]

    AYES

    [9.55 p.m

    Acland, Sir Richard

    Chetwynd, G R.

    Gaitskell, Rt. Hon. H. T. N

    Adams, Richard

    Clunie, J.

    Gibson, C. W.

    Albu, A. H.

    Collick, P H.

    Glanville, James

    Allan, Scholefield (Crewe)

    Corbel, Mrs. Freda

    Gordon Walker, Rt. Hon. P. C

    Anderson, Frank (Whitehaven)

    Cove, W G.

    Greenwood, Anthony

    Attlee, Rt. Hon. C. R.

    Craddock, George (Bradford, S.)

    Grenfell, Rt. Hon. D. R.

    Awbery, S. S.

    Crosland, C. A. R.

    Grey, C. F.

    Bacon, Miss Alice

    Daines, P.

    Griffiths, David (Rother Valley)

    Bartley, P.

    Dalton, Rt. Hon. H.

    Griffiths, William (Exchange)

    Benson, G.

    Darling, George (Hillsborough)

    Hale, Leslie

    Beswick, F.

    Davies, Ernest (Enfield, E.)

    Hall, Rt. Hon. Glenvil (Colne Valley)

    Bing, G. H. C.

    Davies, Harold (Leek)

    Hall, John T. (Gateshead, W.)

    Blackburn, F.

    Davies, Stephen (Merthyr)

    Hamilton, W. W.

    Blenkinsop, A

    de Freitas, Geoffrey

    Hannon, W.

    Blyton, W. R.

    Deer, G.

    Hargreaves, A.

    Boardman, H.

    Dodds, N. N.

    Hastings, S.

    Bottomley, Rt. Hon. A. G.

    Donnelly, D. L.

    Hayman, F. H.

    Bowden, H. W.

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

    Healey, Denis (Leeds, S. E.)

    Bowles. F G.

    Ede, Rt. Hon. J. C.

    Henderson, Rt. Hon. A. (Rowley Reg

    Braddock, Mrs. Elizabeth

    Edelman, M.

    Herbison, Miss M.

    Brockway, A. F

    Edwards, Rt. Hon. John (Brighouse)

    Hewitson, Capt. M

    Brook, Dryden (Halifax)

    Edwards, W. J. (Stepney)

    Hobson, C. R

    Broughton, Dr. A. D. D.

    Evans, Albert (Islington, S. W.)

    Holman, P.

    Brown, Rt. Hon. George (Belper)

    Evans, Edward (Lowestoft)

    Holmes, Horace

    Brown, Thomas (Ince)

    Fernyhough, E.

    Houghton, Douglas

    Burke, W A.

    Fienburgh, W.

    Hudson, James (Ealing, N.)

    Burton, Miss F. E

    Fletcher, Eric (Islington, E.)

    Hughes, Emrys (S. Ayrshire)

    Butler, Herbert (Hackney, S.)

    Follick, M.

    Hughes, Hector (Aberdeen, N.)

    Callaghan, L. J.

    Forman, J. C.

    Hynd, H. (Accrington)

    Castle, Mrs. B. A.

    Fraser, Thomas (Hamilton)

    Hynd, J. B. (Attercliffe)

    Champion, A. J.

    Freeman, Peter (Newport)

    Irvine, A. J. (Edge Hill)

    Irving, W. J. (Wood Green)

    Oliver, G. H.

    Sparks, J, A

    Jay, Rt. Hon. D. P. T.

    Orbach, M.

    Steele, T.

    Jeger, George (Goole)

    Oswald, T.

    Stokes, Rt. Hon. R. R.

    Jeger, Mrs, Lena

    Paling, Rt. Hon. W. (Dearne Valley)

    Strachey, Rt. Hon. J.

    Jenkins, R. H. (Stechford)

    Paling, Will T (Dewsbury)

    Strauss, Rt. Hon. George (Vauxhall)

    Johnson, James (Rugby)

    Palmer, A. M. F.

    Stross, Dr. Barnett

    Jones, David (Hartlepool)

    Pannell, Charles

    Summerskill, Rt. Hon. E.

    Jones, Jack (Rotherham)

    Pargiter, G. A.

    Sylvester, G. O.

    Keenan, W.

    Parker, J.

    Taylor, John (West Lothian)

    Kenyon, G.

    Paton, J.

    Taylor, Rt. Hon. Robert (Morpeth)

    Key, Rt. Hon. C. W

    Peart, T. F.

    Thomas, Iorwerth (Rhondda, W.)

    King, Dr. H. M.

    Plummer, Sir Leslie

    Thomas, Ivor Owen (Wrekin)

    Kinley, J.

    Popplewell, E.

    Thomson, George (Dundee E.)

    Lawson, G. M.

    Porter, G.

    Thornton, E.

    Lee, Frederick (Newton)

    Price, Philips (Gloucestershire, W)

    Tomney, F.

    Lever, Harold (Cheetham)

    Proctor, W. T.

    Turner-Samuels, M.

    Lindgren, G. S.

    Pryde, D. J.

    Ungoed-Thomas, Sir Lynn

    Lipton, Lt.-Col. M.

    Pursey, Cmdr. H.

    Usborne, H. C.

    Logan, D. G.

    Reeves, J.

    Viant, S. P.

    MacColl, J. E.

    Reid, Thomas (Swindon)

    Wallace, H. W

    McInnes, J.

    Reid, William (Camlachie)

    Warbey, W. N.

    McKay, John (Wallsend)

    Roberts, Rt. Hon. A.

    Watkins, T. E.

    McLeavy, F.

    Roberts, Albert (Normanton)

    Wells, Percy (Faversham)

    McNeil, Rt. Hon. H

    Roberts, Goronwy (Caernarvon)

    Welts, William (Walsall)

    Mallalieu, E. L. (Brigg)

    Robinson, Kenneth (St. Pancras, N.)

    Wheeldon, W. E.

    Mann, Mrs. Jean

    Rogers, George (Kensington, N.)

    White, Mrs. Eirene (E. Flint)

    Manuel, A. C.

    Ross, William

    White, Henry (Derbyshire, N. E.)

    Mason, Roy

    Royle, C.

    Whiteley, Rt. Hon. W.

    Mayhew, C. P.

    Shackleton, E. A. A.

    Wigg, George

    Mellish, R. J.

    Shawcross, Rt. Hon. Sir Hartley

    Willey, F. T.

    Mitchison, G. R.

    Shinwell, Rt. Hon. E.

    Williams, W. R. (Droylsden)

    Monslow, W.

    Short, E. W.

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

    Moody, A. S.

    Shurmer, P. L. E.

    Willis, E. G.

    Morgan, Dr. H. B. W.

    Silverman, Sydney (Nelson)

    Winterbottom, Ian (Nottingham, C)

    Morley, R.

    Simmons, C. J. (Brierley Hill)

    Winterbottom, Richard (Brightside)

    Morris, Percy (Swansea, W.)

    Skeffington, A. M.

    Wyatt, W. L.

    Mort, D. L.

    Slater, J. (Durham, Sedgefield)

    Yates, V. F.

    Moyle, A.

    Smith, Ellis (Stoke, S.)

    Mulley, F. W.

    Smith, Norman (Nottingham, S.)

    TELLERS FOR THE AYES:

    Neal, Harold (Bolsover)

    Snow, J. W.

    Mr. J. T. Price and

    Noel-Baker, Rt. Hon. P. J

    Sorensen, R. W.

    Mr. Arthur Allen.

    Old field, W. H.

    Soskice, Rt. Hon. Sir Frank

    NOES

    Aitken, W. T.

    Cooper, Sqn. Ldr. Albert

    Harris, Frederic (Croydon, N.)

    Allan, R. A. (Paddington, S.)

    Cooper-Key, E. M.

    Harris, Reader (Heston)

    Alport, C. J. M.

    Craddock, Beresford (Spelthorne)

    Harvey, Ian (Harrow, E.)

    Amery, Julian (Preston, N.)

    Crosthwaite-Eyre, Col. O. E.

    Harvie-Watt, Sir George

    Anstruther-Gray, Major W. J

    Crouch, R. F.

    Hay, John

    Arbuthnot, John

    Crowder, Sir John (Finchley)

    Head, Rt. Hon. A. H.

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

    Darling, Sir William (Edinburgh, S.)

    Heald, Rt. Hon. Sir Lionel

    Baldock, Lt.-Cmdr. J. M.

    Davidson, Viscountess

    Heath, Edward

    Baldwin, A. E.

    Deedes, W. F.

    Higgs, J. M. C

    Barlow, Sir John

    Digby, S. Wingfield

    Hinchingbrooke, Viscount

    Baxter, Sir Beverley

    Donaldson, Cmdr. C. E. McA.

    Hirst, Geoffrey

    Beach, Maj. Hicks

    Donner, Sir P. W.

    Holland-Martin, C. J.

    Bell Philip (Bolton, E.)

    Douglas-Hamilton, Lord Malcolm

    Hollis, M. C.

    Bell, Ronald (Bucks, S.)

    Drayson, G. B.

    Holt, A. F.

    Bennett, F. M. (Reading, N.)

    Drewe, Sir C.

    Hopkinson, Rt. Hon. Henry

    Bennett, Dr, Reginald (Gosport)

    Duncan, Capt. J. A. L.

    Hornsby-Smith, Miss M. P.

    Birch, Nigel

    Duthie, W. S.

    Horobin, I. M.

    Bishop, F. P.

    Eden, J. B. (Bournemouth, West)

    Horsbrugh, Rt. Hon. Florence

    Black, C. W.

    Erroll, F. J.

    Howard, Gerald (Cambridgeshire)

    Bossom, Sir A. C.

    Finlay, Graeme

    Howard, Hon. Greville (St. Ives)

    Boyd-Carpenter, Rt Hon J. A

    Fisher, Nigel

    Hudson, Sir Austin (Lewisham, N.)

    Boyle, Sir Edward

    Fleetwood-Hesketh, R. F

    Hulbert, Wing Cdr. N. J.

    Braine, B. R.

    Fletcher-Cooke, C.

    Hurd, A. R.

    Braithwaite, Sir Albert (Harrow, W.)

    Ford, Mrs. Patricia

    Hutchison, Sir Ian Clarke (E'b'rgh, W)

    Braithwaite, Sir Gurney

    Fort, R.

    Hylton-Foster, H. B. H.

    Bromley-Davenport, Lt.-Col. W. H

    Fraser, Hon. Hugh (Stone)

    Iremonger, T. L.

    Brooke, Henry (Hampstead)

    Fyfe, Rt. Hon. Sir David Maxwell

    Jenkins, Robert (Dulwich)

    Buchan-Hepburn, Rt. Hon. P. G T

    Galbraith, Rt. Hon. T. D. (Pollok)

    Johnson, Eric (Blackley)

    Bullard, D. G

    Galbraith, T. G. D. (Hillhead)

    Jones, A. (Hall Green)

    Bullus, Wing Commander E E

    George, Rt. Hon. Maj. G. Lloyd

    Joynson-Hicks, Hon. L W

    Burden, F. F. A.

    Glover, D.

    Kerby, Capt. H. B.

    Butcher, Sir Herbert

    Godber, J. B.

    Kerr, H. W.

    Butler, Rt. Hon. R. A. (Saffron Walden)

    Gomme-Duncan, Col A

    Lambert, Hon. G.

    Campbell, Sir David

    Gower, H. R.

    Lambton, Viscount

    Cary, Sir Robert

    Graham, Sir Fergus

    Leather, E. H. C.

    Channon, H.

    Grimond, J.

    Legge-Bourke, Maj. E. A. H

    Clarke, Col. Ralph (East Grinstead)

    Grimston, Hon. John (St. Albans)

    Legh, Hon. Peter (Petersfield)

    Clarke, Brig. Terence (Portsmouth, W.)

    Grimston, Sir Robert (Westbury)

    Lennox-Boyd, Rt. Hon. A. T

    Conant, Maj. Sir Roger

    Hall, John (Wycombe)

    Lindsay, Martin

    720

    721

    Linstead, Sir H. N.

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

    Stevens, Geoffrey

    Lloyd, Maj. Sir Guy (Rendrew, E.)

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

    Steward, W. A. (Woolwich, W)

    Lockwood, Lt.-Col. J. C

    Osborne, C.

    Stewart, Henderson (Fife, E.)

    Longden, Gilbert

    Page, R. G.

    Stoddart-Scott, Col. M.

    Lucas, Sir Jocelyn (Portsmouth, S.)

    Perkins, Sir Robert

    Storey, S.

    Lucas, P. B. (Brentford)

    Peto, Brig. C. H. M

    Strauss, Henry (Norwich, S.)

    Lucas-Tooth, Sir Hugh

    Peyton, J. W. W.

    Summers, G. S.

    McAdden, S. J.

    Pickthorn, K W M

    Sutcliffe, Sir Harold

    McCorquodale, Rt. Hon. M. S

    Pilkington, Capt R A

    Taylor, Sir Charles (Eastbourne)

    Macdonald, Sir Peter

    Pitman, I. J,

    Taylor, William (Bradford, N.)

    McKibbin, A. J.

    Pitt, Miss E. M.

    Teeling, W.

    Mackie, J. H. (Galloway)

    Powell, J. Enoch

    Thomas, Rt. Hon. J P. L. (Hereford)

    Maclay, Rt. Hon. John

    Price, Henry (Lewisham, W)

    Thomas, Leslie (Canterbury)

    Maclean, Fitzroy

    Prior-Palmer, Brig. O L

    Thompson, Kenneth (Walton)

    Macmillan, Rt. Hon. Harold (Bromley)

    Profumo, J. D.

    Thompson, Lt.-Cdr. R. (Croydon, W)

    Maitland, Comdr. J. F. W. (Horncastle)

    Raikes, Sir Victor

    Thornton-Kemsley, Col. C. N.

    Maitland, Patrick (Lanark)

    Redmayne, M.

    Tilney, John

    Manningham-Bulier, Rt. Hn. Sir Reginald

    Rees-Davies, W. R

    Vane, W. M. F

    Marlowe, A. A. H.

    Remnant, Hon. P.

    Vaughan-Morgan, J. K

    Marples, A. E.

    Renton, D. L. M

    Wakefield, Edward (Derbyshire, W)

    Marshall, Douglas (Bodmin)

    Ridsdale, J. E.

    Walker-Smith, D. C

    Maude, Angus

    Robertson, Sir David

    Wall, Major Patrick

    Maudling, R.

    Robinson, Sir Roland (Blackpool, S)

    Ward, Hon. George (Worcester)

    Maydon, Lt.-Comdr S. L C

    Robson-Brown, W.

    Ward, Miss I. (Tynemouth)

    Medlicott, Brig. F

    Roper, Sir Harold

    Waterhouse, Capt. Rt. Hon. C

    Mellor, Sir John

    Ropner, Col. Sir Leonard

    Watkinson, H. A.

    Monckton, Rt. Hon. Sir Walter

    Russell, R. S.

    Webbe, Sir H. (London & Westminster)

    Moore, Sir Thomas

    Ryder, Capt. R. E. D.

    Wellwood, W.

    Mott-Radclyffe, C. E

    Savory, Prof. Sir Douglas

    Williams, Rt. Hon. Charles (Torquay)

    Nabarro, G. D. N.

    Schofield, Lt.-Col. W.

    Williams, Gerald (Tonbridge)

    Neave, Airey

    Scott, R. Donald

    Williams, Sir Herbert (Croydon, E)

    Nicholson, Godfrey (Farnham)

    Scott-Miller, Cmdr. R.

    Williams, Paul (Sunderland, S.)

    Nicolson, Nigel (Bournemouth, E.)

    Simon, J. E. S. (Middlesbrough, W)

    Williams, R. Dudley (Exeter)

    Nield, Basil (Chester)

    Smithers, Peter (Winchester)

    Wills, G.

    Noble, Comdr. A. H. P

    Smithers, Sir Waldron (Orpington)

    Wilson, Geoffrey (Truro)

    Nugent, G. R. H

    Smyth, Brig. J. G. (Norwood)

    Wood, Hon. R.

    Oakshott, H. D.

    Spearman, A. C M

    Odey, G. W.

    Speir, R. M.

    TELLERS FOR THE NOES:

    O'Neill, Hon. Phelim (Co Antrim, N.)

    Spens, Rt. Hon. Sir P. (Kensington, S)

    Mr. Studholme and Mr. Vosper.

    Orr, Capt. L P. S.

    Stanley, Capt Hon. Richard

    Mr. E. Fletcher: I beg to move, in page 28, line 37, after "into," insert:
    "before or is entered into within three years after the death."
    The Chairman: This Amendment can be taken with the next Amendment also in the hon. Gentleman's name and that of his hon. Friends, in page 28, line 45. at end, insert:
    "or in respect of which a resolution for voluntary winding up (save as aforesaid) is made within three years after death."
    Mr. Fletcher: I know that the Chancellor wants to make progress on this Bill, and I hope that I can put the case for this Amendment shortly. The merits are so self-evident that I believe we shall have an indication from the Chancellor, before long, that he is prepared to accept it.
    The object of the Amendment is to carry one stage further the purpose of the Government in giving this relief from Estate Duty, to preserve the small family businesses. In subsection (9) it is conceded that if before a claim for Estate Duties arises there has been a binding contract for the sale of the company the need for relief has disappeared. For precisely the same reason, we say that there
    722
    is no need for the relief to be given it there is a sale within a limited period of years after the death of the owner of the company. Unless there is some exception to cover the case where a business is sold shortly after the death, the object of the Bill will be defeated.
    As things stand, it would be possible for the executors both to claim the benefit of the relief from Estate Duty under Clause 25 and to sell the business, in which case there would be no continuity of the small family business in the same hands which the Clause is aimed at preserving. I hope that the Government will, therefore, agree that there must be provision in the Bill to ensure that the object of the Clause is not defeated by the estate first obtaining this very considerable measure of relief, and the executors then selling the business, which would mean discontinuance of the family connection which it is the whole object of the Clause to preserve.
    The only other point on which one may comment is the period of time selected. My hon. Friends and I thought an appropriate time might be one year, but now we think that is far too short. If the limit were one year, there would be a temptation for executors who were minded to sell

    723
    to postpone the sale until after the year. Three years is a reasonable period of time in all cases for executors to make up their minds whether to pay the Estate Duty and enable the business to carry on under the same family management, or to sell the business. I hope that the Amendment will be acceptable to the Government.
    Mr. Grimond: I, too, have an Amendment down designed in a different way to cover the same point, which is a real one.
    As the Clause is drafted there is nothing to prevent a very rich man from buying up one, two, three or more small companies and thereby gaining considerable relief from his liability to death duty. The Clause only affects certain assets and is limited to that extent. Nevertheless, the relief which he or his heirs would get in certain circumstances would be very considerable. I do not want to rest my case on moral grounds. If a man can reduce his liability to taxation he is entitled to do so within the law, and it may not be right to draw moral distinctions between one case and another. We do not want to create obvious loopholes by which one rich man can considerably reduce his liability as against another.
    But the real and strongest argument, as suggested by the hon. Member for Islington, East (Mr. E. Fletcher) is that, unless an Amendment of the kind which he or I have suggested is written into the Clause, it may defeat the Chancellor's object, which is to prevent small companies being either broken up as a result of death duties or being bought up by a bigger combine. As the Clause stands, it will be open for a rich man to make an attractive offer to the company, obviously something above its market value. He may have no interest in continuing the company and, as soon as his heirs have gained the necessary reduction in duty, they will either break up the company or sell to a large combine. The Amendment will deter them from doing that for three years, but after that period they would be at liberty to do it. The effect would be exactly what the Chancellor wants to avoid.
    It may be said that the rich man can do this already in the case of agricultural land, but from the national point of view the position of agricultural land is very different. It is true that, by buying up farms, rich men may be keeping deserving
    724
    young farmers out of farms, but, on the other hand, they may bring in certain advantages to agriculture in the way of new capital and new ideas, and when they sell they sell the land as a going concern and it probably continues as such. It is difficult to see how comparable advantages would accrue to small businesses made attractive to rich men who want to escape tax liability.
    If these rich men do bring in more capital it is reasonable to ask them to take part in the management, and I should have thought that it would be reasonable that unless a rich man buys a small company some years before his death or takes an active part in the management of it he should not gain the advantages that are conferred by the Clause. I do not want to argue my proposals in detail, because no doubt the Treasury can think of some much better way of doing what I have in mind. I do not know whether those who support the Amendment which is now before the Committee want to rest on their particular form of the Amendment, but I think the Chancellor must agree that this is a genuine difficulty which, unless it is met, may to some extent defeat the very purpose of the Clause. If the right hon. Gentleman does not accept the Amendment I ask him at least to put forward some alternative.
    The Solicitor-General: We are in substantial agreement with a great deal of what has been said by the hon. Member for Islington, East (Mr. E. Fletcher) and the hon. Member for Orkney and Shetland (Mr. Grimond). I agree that one of the main purposes of this new relief is to maintain family businesses in the family's hands and one hopes that the relief will reduce the number of cases in which a sale becomes necessary. That is one of the objects of giving the relief.
    One must realise that within the three-year period after the death there may be perfectly legitimate sales, not for the purpose of exploiting the relief or even for the purpose of raising money to pay the duty. There might be a sale because there is no suitable member of the family left to run the business, or because the surviving member of the family does not consider it suitable for him to run, as for instance might be the case with a teetotaller succeeding to a brewery.

    725
    If we penalise the teetotaller by saying, "If you sell the business within three years you must refund the relief," we shall be putting considerable pressure upon him to carry on for more than the three-year period. It is very unfair to require the payment of a larger sum in duty by excluding relief because no member of the family is there to carry it on or because the new owner's sincere convictions are against carrying it on.
    10.15 p.m.
    There are also two considerable practical difficulties which I will indicate quite shortly. If we accepted the Amendment providing for three years it would mean that the Estate Duty officer would have the duty of supervision of these estates throughout that period. In relation to small estates the Estate Duty problem is settled fairly quickly and the Office has no further concern with the estate until the misfortune of another death occurs. The imposition of this duty would mean a considerable amount of work. It would mean supervision of a large number of small estates over this three-year period and it might well be that after all this work had been done and all this expense, very little grist would come in.
    The second Amendment is limited to the winding up of the company. It does not deal with the transference of the business by the sale of shares. Of course, we could provide that on the sale of a 10 per cent. shareholding it could be withdrawn, but that could be overcome by the sale of 9 per cent. now and 1 per cent, after the three-year period and to make the provision effective we would have to fix some particular percentage. There does not seem any particular basis on which the percentage could be assessed. It is difficult to find an answer to the question of at what point does it seem right to leave the relief with the estate. Unless we can find the proper answer to that question it is pointless to deal with the winding up within three years and not with the sale of the business by shares.
    The hon. Member for Orkney and Shetland (Mr. Grimond) referred to his Amendment, which is also designed to prevent the exploitation of this relief. A difficulty in relation to all three Amendments, is to find a solution which will hit the man who is trying to exploit
    726
    this relief but which will not, at the same time, penalise the perfectly genuine bona fide transaction which has not that end in view. The hon. Member for Orkney and Shetland suggested a time test, but that would not work at all for this reason: the hon. Member said that unless the interest was acquired 10 years before death or unless the deceased was actually engaged in the business at least five years before death the relief should not be given.
    Take the case of an iron founder who has been hard at work for four years, and is killed in an accident at a time when he had every intention of continuing work. It would be very hard and very unjust in that case to withdraw the relief. It is for that reason that the lapse of time test is not an answer to the problem.
    It may be suggested, why not take the test on motive and try to determine on what motive the transaction and sale have been effected? Experience has shown that it is a most difficult matter to try to establish the motives of a man now dead. Such inquiries in the past have very often proved a complete waste of time.
    Mr. Gaitskell: Is not the right hon. and learned Gentleman aware that in the Schedule to Clause 15 very special emphasis is laid on the question of motive in determining whether the person is committing an offence or not?
    The Solicitor-General: In some cases regarding offences when a person is living the motive is of immense importance in establishing the offence, but I am dealing with a person who is dead and can no longer be subjected to cross-examination. We recognise the objective behind these Amendments and the force of the arguments which have been advanced, but at present we cannot see a satisfactory solution to the problem. I can say that the situation will be most carefully watched, and I will issue the warning that if it were found in the future that this relief is being abused the Government will not hesitate to take steps to stop it.
    It may be that the taking of these steps may affect some innocent persons as well as those exploiting the relief. That may prove to be inevitable; but one does not

    727
    wish to take those steps in advance. In my view, it is better to keep a close watch on the position to see whether exploitation does take place, and, if so, to note what devices are used and to stop the use of them. It is better I think—because there is not much difference between us about what we want to stop—to see what are the devices used and to try to stop them, rather than to legislate in advance to meet an abuse which one hopes will not, and which may not, develop at all.
    Mr. E. Fletcher: The Solicitor-General said just now that one reason why he could not accept this Amendment was because it would involve the Estate Duty office in very much more work in watching these estates for three years. Now he says that the Government will keep a close watch on the position to see whether there are any abuses. The two arguments would appear to be inconsistent, because it will cost just as much to keep a close watch on the position.
    Mr. Geoffrey Bing: I think it necessary to intervene so that there does not go out from this Committee the rather unfortunate parallel drawn by the Solicitor-General when he said that one reason against the Amendment was that it was incompatible that a teetotaler should inherit a brewery. As hon. Members may know there is no incompatibility about that. The hon. Member for Wimbledon (Mr. Black) would be able to explain that brewers arc, in fact, among those who contribute more to the temperance movement than many others and that their products have been sold in America during prohibition. I hope, therefore, that the right hon. and learned Gentleman will not persist in that example.
    Mr. Dalton: I consider that the reply of the right hon. and learned Gentleman was most unconvincing. He said that there was nothing much between us, so I hope that he will go a little further and agree to accept this Amendment. At an earlier stage the Financial Secretary said, in reply to an Amendment moved from the other side of the Committee which sought to widen this concession, that he feared that if that were done—I am paraphrasing what he said—there would be
    728
    an ugly rush of rich men to buy one-man businesses. When a little later I asked if there were not more danger of this happening if this further extension of the concession were refused he said, "No."
    But, evidently, the principle of continuity applies here. There is the danger, which is admitted by the right hon. and learned Gentleman, that this will be abused, and so much so that he is to continue a system of inquisition into a large range of transactions. That is what he has said, that he will take care, and keep a close watch. A horde of officials will be employed to keep a close watch on these transactions to see whether anything wrongful is done. Would not it be much better to minimise the risk by accepting this Amendment?
    These time limits are very familiar in law. We have the limitation of time provisions in relation to the Estate Duty which has been helpful in bringing in revenue and preventing last minute transfers in order to avoid duty. Why should we not in this case pursue a similar plan, even if it does not completely stop the kind of transaction of which we should all disapprove? Surely it is to some extent a safeguard. I cannot see why it should be resisted.
    I hope that, in view of the arguments which have been used, the right hon. and learned Gentleman will slightly modify his legal advice to the Chancellor and that we shall get an acceptance of the Amendment. Otherwise, we shall be compelled to divide the Committee. That can easily be avoided by a simple statement that the Amendment will be accepted, and then the right hon. and learned Gentleman can closely watch, with rather fewer officials, how it works. If he finds, as a result of his close watch, that the Amendment is not required, he can modify this provision in a future Finance Bill.
    Mr. Roy Jenkins: There is rather more difference between the Solicitor-General and the Opposition than the right hon. and learned Gentleman indicated in the soothing last sentences of his speech. I was surprised to hear him not only adduce the practical difficulties which he thought might arise if our Amendments were accepted but also say that they might conflict with certain transactions which he thought were legitimate.

    729
    He gave instances. He said that there might be a sale within three years of the death of the owner of a business of the type with which we are dealing because none of his heirs wished to carry on the business or none was capable of carrying on the business. He seemed to regard it as extremely undesirable that the concession should be withdrawn in those cases.
    This is a most extraordinary approach to the Clause, and we need a further statement about it from the Chancellor. We are still dealing with a position in which the Government are bringing forward certain proposals which they consider necessary to safeguard the continuity of family businesses. What sort of continuity will there be if there is no heir capable of carrying on the business or if the family do not wish to carry on the business and desire to sell it? Yet in the view of the Solicitor-General it is highly desirable that where that sort of thing takes place the family should none the less have the benefit of the concession.
    I cannot understand that approach. I do not know whether it commands the support of the Chancellor and the Government as a whole. One can appreciate to some extent some of the practical difficulties which the Solicitor-General said might arise, but it is very difficult for us to feel at all comforted by his statement that he will keep an eye on these practices if he regards as legitimate what the Opposition regard as capable of abuse. Before we accept the Solicitor-General's assurance we ought to know from the Chancellor whether he intends the concession to apply to cases in which there can be no possible continuity because the family decides within three years of the death to sell the business.
    Mr. R. A. Butler: In response to the appeal, I should like to say, first of all, that there was not a sinister motive in introducing the Clause. The fundamental reason was, as mentioned in the Budget Statement, to link up with the investment allowance in helping productive industry which, in a business of this kind, is affected severely by the application of the assets basis. This forms a certain compensation, allied as it is to the productive aspect of the business. Despite the many appeals made in the debate today, it seems to hinge up with the general help of the investment allowance to productive industry.
    730
    The second reason was to try to do what we could to help family businesses, which have throughout been very difficult to define. When we came to examine these Amendments, we found they had a certain point in them. There is no point in trying to help a family business or productive industry if any sort of attempt is made either to buy up such units for the purpose of exploitation or to break the thread of the family business.
    10.30 p.m.
    The result is that, on examining the Amendments and the arguments put forward, we thought that there was a good deal in them. There may be cases where a sale takes place, human affairs being as fallible as we all expect to find them, as indeed we have found in recent experience. There may well be a sale which we cannot foresee. Believing as we do in a free economy, we could not lay down by legislation an absolute prohibition on the sale of a family business or of a business affected by Section 55. Therefore, we found the terms of the wording of the Amendment a bit too stiff.
    Without going into detail, I would say that many of us are concerned by what happens, namely, the purchase by old people of agricultural land with a view to avoiding Estate Duty. There again, there is an example of a possible tax evasion which, in the purity of my office, I do not like to see. Therefore, again, there was a justification for this approach; but seriously, on examining the matter, with the best advice we can get, we do not think that it would be wise to accept the Amendment as drafted.
    We would prefer to watch the action under the Clause and, if there is an abuse, reserve the right to deal with it. If hon. and right hon. Gentlemen opposite regard that as unsatisfactory, the best thing we can do is to come to an immediate decision and vote, but I should like to reassure them that I will look again at the remarks they have made, without giving any undertaking—that is why I say that, if they prefer to vote, they should vote.
    If we can find any way out we will do so, but I think it more likely that we shall adhere to our decision to allow the Clause to operate. Then if there is abuse arising in future years—not necessarily a long

    731
    period of years—we shall deal with it by taking action in the light of experience. If that is not good enough, let us come to a decision, so that we can make further progress with the Bill. I conclude by saying that I thought that the spirit in
    which the Amendment was moved was perfectly sincere.
    Question put, "That those words be there inserted."
    The Committee divided: Ayes, 192: Noes, 221.

    Division No. 172.]

    AYES

    [10.34 p.m.

    Acland, Sir Richard

    Hale, Leslie

    Parker, J.

    Adams, Richard

    Hall, Rt. Hon. Glenvil (Colne Valley)

    Paton, J.

    Albu, A. H.

    Hall, John T. (Gateshead, W.)

    Peart, T. F.

    Allen, Scholefield (Crewe)

    Hamilton, W. W.

    Plummer, Sir Leslie

    Attlee, Rt. Hon. C. R.

    Hannan, W.

    Porter, G.

    Awbery, S. S.

    Hargreaves, A.

    Price, J. T. (Westhoughton)

    Bacon, Miss Alice

    Hastings, S.

    Price, Philips (Gloucestershire, W)

    Bartley, P.

    Hayman, F. H.

    Pryde, D. J.

    Benson, G.

    Healey, Denis (Leeds, S. E.)

    Pursey, Cmdr. H.

    Beswick, F.

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

    Reid, Thomas (Swindon)

    Bing, G. H. C.

    Herbison, Miss M.

    Reid, William (Camlachie)

    Blackburn, F.

    Hewitson, Capt. M.

    Robens, Rt. Hon. A.

    Blenkinsop, A.

    Hobson, C. R.

    Roberts, Albert (Normanton)

    Blyton, W. R.

    Holman, P.

    Robinson, Kenneth (St. Pancras, N.)

    Boardman, H.

    Holmes, Horace

    Ross, William

    Bottomley, Rt. Hon. A. G

    Holt, A. F.

    Royle, C.

    Bowden, H. W.

    Houghton, Douglas

    Shackleton, E. A. A.

    Bowles, F. G.

    Hudson, James (Ealing, N.)

    Shawcross, Rt. Hon. Sir Hartley

    Braddock, Mrs. Elizabeth

    Hughes, Emrys (S. Ayrshire)

    Short, E. W.

    Brockway, A. F.

    Hughes, Hector (Aberdeen, N.)

    Shurmer, P. L. E.

    Brook, Dryden (Halifax)

    Hynd, H. (Accrington)

    Silverman, Sydney (Nelson)

    Broughton, Dr. A. D. D.

    Hynd, J. B. (Attercliffe)

    Simmons, C. J. (Brierley Hill)

    Brown, Rt. Hon. George (Belper)

    Irvine, A. J. (Edge Hill)

    Skeffington, A. M.

    Brown Thomas (Ince)

    Jay, Rt. Hon. D. P. T.

    Smith, Ellis (Stoke, S.)

    Burke, W. A.

    Jeger, George (Goole)

    Snow, J. W.

    Burton, Miss F. E.

    Jeger, Mrs. Lena

    Sorensen, R. W.

    Butler, Herbert (Hackney, S)

    Jenkins, R. H. (Stechford)

    Soskice, Rt. Hon. Sir Frank

    Callaghan, L. J.

    Johnson, James (Rugby)

    Sparks, J. A.

    Castle, Mrs. B. A.

    Jones, David (Hartlepool)

    Stokes, Rt. Hon. R. R.

    Champion, A. J.

    Jones, Jack (Rotherham)

    Strachey, Rt. Hon. J.

    Chetwynd, G. R.

    Keenan, W.

    Strauss, Rt. Hon. George (Vauxhall)

    Collick, P. H.

    Kenyon, C.

    Stress, Dr. Barnett

    Corbet, Mrs. Freda

    King, Dr. H. M.

    Summerskill, Rt. Hon. E

    Cove, W. G.

    Lawson, G. M.

    Sylvester, G. O.

    Craddock George (Bradford S.)

    Lee, Frederick (Newton)

    Taylor, John (West Lothian)

    Crosland, C. A. R.

    Lewis, Arthur

    Taylor, Rt. Hon. Robert (Morpeth)

    Dalton, Rt. Hon. H.

    Lindgren, G. S.

    Thomas, Iorwerth (Rhondda, W.)

    Darling, George (Hillsborough)

    Lipton, Lt.-Col. M

    Thomas, Ivor Owen (Wrekin)

    Davies, Ernest (Enfield, E.)

    Logan, D. G.

    Thomson, George (Dundee, E.)

    Davies, Harold (Leek)

    MacColl, J. E.

    Thornton, E.

    Davies, Stephen (Merthyr)

    McInnes, J.

    Tomney, F.

    Deer, G.

    McLeavy, F.

    Ungoed-Thomas, Sir Lynn

    Dodds, N. N.

    Mallalieu, E. L. (Brigg)

    Usborne, H. C.

    Donnelly, D. L.

    Mann, Mrs. Jean

    Viant, S. P.

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

    Manuel, A. C.

    Wallace, H. W.

    Ede, Rt. Hon. J. C

    Mason, Roy

    Warbey, W. N

    Edelman, M.

    Mayhew, C. P.

    Watkins, T. E.

    Edwards, Rt. Hon. John (Brighouse)

    Mellish, R. J.

    Weitzman, D.

    Evans, Albert (Islington, S. W.)

    Mitchison, G. R.

    Wells, William (Walsall)

    Evans, Edward (Lowestoft)

    Moody, A. S.

    Wheeldon, W. E.

    Fernyhough, E.

    Morgan, Dr. H. B. W

    White, Mrs. Eirene (E. Flint)

    Fienburgh, W.

    Moriey, R.

    White, Henry (Derbyshire, N. E.)

    Fletcher, Eric (Islington, E.)

    Morris, Percy (Swansea. W)

    Whiteley, Rt. Hon. W.

    Forman, J. C.

    Mort, D. L

    Wigg, George

    Freeman, Peter (Newport)

    Moyle, A.

    Willey, F. T.

    Gaitskell, Rt. Hon. H. T. N.

    Mulley, F. W

    Williams, W. R. (Droylsden)

    Gibson, C. W.

    Neal, Harold (Bolsover)

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

    Glanville, James

    Oldfield, W. H.

    Willis, E. G.

    Gordon Walker, Rt. Hon. P. C

    Oliver, G. H.

    Winterbottom, Ian (Nottingham, C.)

    Greenwood, Anthony

    Orbach, M.

    Winterbottom, Richard (Brightside)

    Grenfell, Rt. Hon. D. R.

    Oswald, T.

    Wyatt, W. L.

    Grey, C. F.

    Paling, Will T (Dewsbury)

    Yates, V. F.

    Griffiths, David (Rother Valley)

    Palmer, A. M. F.

    Griffiths, William (Exchange)

    Pannell, Charles

    TELLERS FOR THE AYES:

    Grimond, J.

    Pargiter, G. A

    Mr. Arthur Allen and

    Mr. G. H. R. Rogers.

    NOES

    Aitken, W. T.

    Arbuthnot, John

    Barlow, Sir John

    Allan, R. A. (Paddington, S.)

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

    Baxter, Sir Beverley

    Alport, C. J. M.

    Baldock, Lt.-Cmdr. J. M.

    Beach, Maj. Hicks

    Amery, Julian (Preston, N.)

    Baldwin, A. E.

    Bell, Philip (Bolton, E.)

    Bennett, F. M. (Reading, N.)

    Holland-Martin, C. J.

    Pitman, I. J.

    Bennett, Dr. Reginald (Gosport)

    Hollis, M. C.

    Pitt, Miss E. M.

    Birch, Nigel

    Hopkinson, Rt. Hon. Henry

    Powell, J. Enoch

    Bishop, F. P.

    Hornsby-Smith, Miss M. P.

    Price, Henry (Lewisham, W)

    Black, C. W.

    Horobin, I. M.

    Prior-Palmer, Brig. O. L.

    Bossom, Sir A. C.

    Horsbrugh, Rt. Hon. Florence

    Profumo, J. D.

    Boyd-Carpenter, RI. Hon, J. A.

    Howard, Gerald (Cambridgeshire)

    Raikes, Sir Victor

    Boyle, Sir Edward

    Howard, Hon. Greville (St. Ives)

    Redmayne, M.

    Braine, B. R.

    Hudson, Sir Austin (Lewisham, N.)

    Rees-Davies, W. R.

    Braithwaite, Sir Albert (Harrow, W.)

    Hulbert, Whig Cdr. N. J.

    Remnant, Hon. P.

    Braithwaite, Sir Gurney

    Kurd, A. R.

    Renton, D. L. M.

    Bromley-Davenport, Lt.-Col. W. H

    Hutchison, Sir Ian Clark (E'b'rgh, W.)

    Ridsdale, J. E.

    Brooke, Henry (Hampstead)

    Hylton-Foster, H. B. H.

    Robinson, Sir Roland (Blackpool, S.)

    Buchan-Hepbum Rt. Hon. P. G. T.

    Iremonger, T. L.

    Robson-Brown, W.

    Bullard, D. G.

    Jenkins, Robert (Dulwich)

    Roper, Sir Harold

    Bullus, Wing Commander E. E.

    Johnson, Eric (Blackley)

    Ropner, Col. Sir Leonard

    Burden, F. F. A.

    Jones, A. (Hall Green)

    Russell, R. S.

    Butcher, Sir Herbert

    Joynson-Hicks, Hon. L. VV

    Ryder, Capt. R. E. D.

    Butler, Rt. Hon. R. A. (Saffron Walden)

    Kerby, Capt. H. B.

    Savory, Prof. Sir Douglas

    Campbell, Sir David

    Kerr, H. W.

    Schofield, Lt.-Col. W.

    Cary, Sir Robert

    Lambert, Han. G.

    Scott, R. Donald

    Channon, H.

    Leather, E. H. C.

    Scott-Miller, Cmdr. R.

    Clarke, Col. Ralph (East Grinstead)

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

    Simon, J. E. S. (Middlesbrough, W)

    Clarke, Brig. Terence (Portsmouth, W.)

    Legh, Hon. Peter (Petersfield)

    Smithers, Peter (Winchester)

    Cooper, San. Ldr. Albert

    Lennox-Boyd, Rt. Hon. A. T.

    Smithers, Sir Waldron (Orpington)

    Cooper-Key, E. M.

    Lindsay, Martin

    Smyth, Brig. J. G. (Norwood)

    Craddock, Beresford (Spelthorne)

    Linstead, Sir H. N.

    Spearman, A. C. M.

    Crosthwaite-Eyre, Col. O. E.

    Lockwood, Lt.-Col. J. C.

    Speir, R. M.

    Crouch, R. F.

    Longden, Gilbert

    Spens, Rt. Hon. Sir P. (Kensington, S.)

    Crowder, Sir John (Finchley)

    Lucas, Sir Jocelyn (Portsmouth, S.)

    Stanley, Capt. Hon. Richard

    Crowder, Petre (Ruislip—Northwood)

    Lucas-Tooth, Sir Hugh

    Stevens, Geoffrey

    Darling, Sir William (Edinburgh, S.)

    McAdden, S. J.

    Steward, W. A, (Woolwich, W.)

    Davidson, Viscountess

    McCorquodale, Rt. Hon. M. S

    Stewart, Henderson (Fife, E.)

    Deedes, W. F.

    Macdonald, Sir Peter

    Stoddart-Scott, Col. M.

    Digby, S. Wingfield

    McKibbin, A. J.

    Storey, S.

    Donaldson, Cmdr. C E. McA.

    Mackie, J. H. (Galloway)

    Strauss, Henry (Norwich, S.)

    Donner, Sir P. W.

    Maclay, Rt. Hon. John

    Summers, G. S.

    Douglas-Hamilton, Lord Malcolm

    Maclean, Fitzroy

    Sutcliffe, Sir Harold

    Drayson, G. B.

    Macmillan, Rt. Hon. Harold (Bromley)

    Taylor, Sir Charles (Eastbourne)

    Duthie, W. S.

    Maitland, Comdr. J. F. W. (Horncastle)

    Taylor, William (Bradford, N.)

    Eden, J. B. (Bournemouth, West)

    Maitland, Patrick (Lanark)

    Teeling, W.

    Erroll, F. J.

    Manningham-Buller, Rt. Hon. Sir R.

    Thomas, Rt. Hon. J. P. L. (Hereford)

    Finlay, Graeme

    Marlowe, A. A. H.

    Thomas, Leslie (Canterbury)

    Fisher, Nigel

    Marples, A. E.

    Thompson, Kenneth (Walton)

    Fleetwood Hesketh, R. F

    Marshall, Douglas (Bodmin)

    Thompson, Lt.-Cdr. R. (Croydon, W.)

    Fletcher-Cooke, C.

    Maude, Angus

    Thornton-Kemsley, Col. C. N

    Ford, Mrs. Patricia

    Maudling, R.

    Tilney, John

    Fort, R.

    Maydon, Lt.-Comdr. S. L. C

    Vane, W. M. F.

    Fraser, Hon. Hugh (Stone)

    Medlicott, Brig. F.

    Vaughan-Morgan, J. K.

    Fyfe, Rt. Hon. Sir David Maxwell

    Mellor, Sir John

    Vosper, D. F.

    Galbraith, Rt. Hon. T. D. (Pollok)

    Monckton. Rt. Hon. Sir Walter

    Wakefield, Edward (Derbyshire, W)

    Galbraith, T. G. D. (Hillhead)

    Nabarro, G. D. N.

    Walker-Smith, D. C.

    George, Rt. Hon. Maj. G. Lloyd

    Neave, Airey

    Wall, Major Patrick

    Glover, D.

    Nicholson, Godfrey (Farnham)

    Ward, Hon. George (Worcester)

    Godber, J. B.

    Nicolson, Nigel (Bournemouth, E.)

    Ward, Miss I. (Tynemouth)

    Gower, H. R.

    Nield, Basil (Chester)

    Waterhouse, Capt. Rt. Hon. C.

    Graham, Sir Fergus

    Noble, Comdr. A. H. P

    Watkinson, H. A.

    Grimston, Hon. John (St. Albans)

    Nugent, G. R. H.

    Webbe, Sir H. (London & Westminster)

    Grimston, Sir Robert (Westbury)

    Oakshott, H. D.

    Wellwood, W.

    Hall, John (Wycombe)

    Odey, G. W.

    Williams, Rt. Hon. Charles (Torquay)

    Harris, Frederic (Croydon, N.)

    O'Neill, Hon. Phelim (Co. Antrim, N.)

    Williams, Gerald (Tonbridge)

    Harris, Reader (Heston)

    Orr, Capt. L. P. S.

    Williams, Sir Herbert (Croydon, E)

    Harvey, Ian (Harrow, E.)

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

    Williams, Paul (Sunderland, S.)

    Harvie-Watt, Sir George

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

    Williams, R. Dudley (Exeter)

    Hay, John

    Osborne, C.

    Wills, G.

    Head, Rt. Hon. A. H.

    Page, R. G.

    Wilson, Geoffrey (Truro)

    Heald, Rt. Hon. Sir Lionel

    Perkins, Sir Robert

    Wood, Hon. R.

    Heath, Edward

    Peto, Brig. C. H. M

    Higgs, J. M. C.

    Peyton, J. W. W.

    TELLERS FOR THE NOES:

    Hinichingbrooke, Viscount

    Pickthorn, K. W. M.

    Sir Cedric Drewe and

    Hirst, Geoffrey

    Pilkington, Capt. R. A,

    Mr. Studholme.

    Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."
    Mr. Gaitskell: Of all the Clauses in the Bill this is the one we like least. We think it is bad, and we have tried to to improve it. It would have been substantially better if the Government had
    734
    been disposed to accept the three major Amendments which have been moved and discussed. They decided to reject them, and the Clause remains as bad as ever.
    One of the major weaknesses of the Clause is the inability of the Government to make up their minds what they

    735
    really want to do. They have argued at times that they were concerned with what is called the "assets basis" of valuation for Estate Duty purposes. Is that really what they were worried about? At other times they have spoken as though they were concerned with the much more familiar matter of the small business, raised on many occasions in the past in the House of Commons and outside. The argument is fairly familiar and is that, owing to the necessity to pay Estate Duty, many small businesses are forced out of existence.
    There has been yet another argument, an extraordinarily simple one that, since there is already a concession of 45 per cent. of Estate Duty in relation to agricultural property, why not have it in relation to something else? That is not entirely a convincing argument, and it might embarrass the Chancellor seriously if it were generalised. There are many things done for agriculture which are not done for other industries; we subsidise agriculture quite heavily, but that is not accepted by the Chancellor as a reason for subsidising other industries. Therefore, it is not convincing to us for him to suggest that because agriculture has a special concession of one sort or another, this should be applied in other spheres.
    10.45 p.m.
    If we take the objection to the assets basis for valuation, the question which one wants to put to the Chancellor is, what precisely is the evidence that this basis has been found to be unfair? I am fully aware that one hears complaints about it, but I have seldom seen any particular instance of where it could be shown that this basis for valuation has been excessive and has resulted in a larger payment of Estate Duty than would have been the case before the 1940 Finance Act. What is the objection to the assets basis?
    The second point which arises is, if the Chancellor is satisfied that this is unfair, surely then, it would have been much wiser for him to have modified the assets basis for valuation so as to have had some more satisfactory basis. But we have heard no mention of why nothing else has been suggested. To me, it seems most extraordinary that if he is simply worried about the assets basis,
    736
    he should have found it necessary to have made such a large concession—one of 45 per cent. That really is a very big concession. Does the Chancellor really think that the assets basis is so wrong that the amount of duty to be paid has to be reduced by nearly half in order to make it right?
    Might I, in passing, make reference to something else which the Chancellor has said? He said, somewhat airily, "Well, we are introducing a measure which is supplementary—which is complementary—to the new investment allowances; it is designed to enable businesses to put more into bricks and mortar and into plant and machinery in order to help production." I must say that I cannot see much connection between these two things. The investment allowances represent a substantial tax remission, or subsidy, and are attached to the actual act of investment.
    In the case of the Estate Duty reduction, there is no necessary association with investment at all. All that happens is that the taxpayers in the particular category covered by this Clause do not have to pay so much as before. So I submit that that argument falls to the ground; but, even if one accepts that as the Chancellor's argument, then one must ask him why he did not at least show a more conciliatory attitude to our proposal that the concession should be limited.
    The Financial Secretary gave us a lot of arithmetic which, he tried to say, meant that owing to the fact that the Estate Duty was a progressive tax, the larger the estate, the more duty one paid. That is really what it amounted to. That we followed absolutely. We also followed that, accordingly, the larger the estate the greater the amount of the concession in this case, but I am afraid that I completely fail to understand what was the purpose of that arithmetic.
    The plain fact remains that under the Clause very substantial remissions of taxation are being made to certain companies, irrespective of their size, irrespective of any question of hardship, irrespective of the need of the taxpayer, indeed irrespective of anything except the conditions which, by some fortuitous chance, have been laid down in the Bill. The argument that the Financial

    737
    Secretary put forward against our proposal to place a limit upon the concession amounted to the fact that it would involve an abrupt break and that there would be an incentive to businesses to keep themselves below the £50,000 limit which we have suggested. My right hon. Friend the Member for Battersea, North (Mr. Jay) explained that we were aware of that difficulty and that the way to deal with it was by way of a tapering provision.
    I was astonished by the Financial Secretary's reply, because he must be perfectly well aware that in other fields of taxation tapering provisions are employed and that there is no argument against them on the ground that they do not give quite as much incentive later. Any limit necessarily means that people above that limit do not get the tax concession That was another example of platitude, which we followed equally as well as we followed the arithmetical truism, but it does not seem to us relevant to the issue.
    I take the Financial Secretary once more to an examination of the White Paper. It is extraordinary that the Government should be bringing forward a measure of this kind in complete defiance of the inquiry which was made only three years ago. That inquiry showed overwhelmingly that the argument that small businesses were being broken up by having to pay Estate Duty was utterly without foundation. I ask the Financial Secretary to follow me because I want to emphasise some of the points made in that inquiry. The White Paper takes a sample of nearly 13,000 cases and of these 3,290 were cases where the trade assets exceeded £1,000. The sample inquiry showed that of this total of nearly 13,000 cases only 1·6 per cent. were cases where the payment of the Estate Duty in question could not be made out of the non-trade assets.
    In other words, only in these 1·6 per cent. of cases was there any encroachment, as the phrase goes, on the trade assets. Even that is really an exaggeration, because that 1·6 per cent. included investment companies, and I do not think that many people would wish to say that the Clause is really concerned with investment companies. Certainly, that is not my impression.
    If one takes the number of cases, excluding investment companies, where
    738
    non-trade assets were insufficient to pay the duty it is only 86 out of nearly 13,000, that is 0·7 per cent. The sample inquiry took estates over £10,000—a point of some importance in itself, because we are not concerned here with the very small estates. But, even if we take estates over £20,000 and still include the investment companies, the proportion of cases in which the non-trade assets are insufficient to pay duty only rises to 3·4 per cent.
    If we take the 86 cases of the 13,000 where the non-trading assets are insufficient, and these are the cases where we exclude the investment companies, in 51, that is to say 60 per cent. of them, the proportion of the trading assets actually required to pay duty was less than 25 per cent. Only in 15 cases out of 13,000 would the duty encroach on more than 50 per cent. of the trading assets.
    Mr. George Odey: Would the right hon. Gentleman bear in mind that so far as this inquiry is concerned, they had no means whatever of taking cognisance of the large number of private businesses that had taken evasive action either by being sold, or, turning themselves into public companies?
    Mr. Gaitskell: What is wrong with turning themselves into public companies? I do not want to get drawn into that argument, but perhaps I might return to it later. I am dealing with the White Paper and I think the case is absolutely overwhelming.
    May I mention one other point that seems to be relevant to our discussions this evening? We are concerned in this Clause with manufacturing businesses because the concession that is made here relates only to industrial hereditaments. If we take these 86 cases, the only cases in 13,000 where the non-trading assets were insufficient, no less than 70 were, in fact, not in manufacturing at all. 63 were in distribution and seven in services of various kinds—laundries, hotels, and so on. Therefore, one really cannot argue that this particular White Paper produces a shred of evidence on which the Government can possibly act.
    Now I want to come to the Financial Secretary's remarks on this matter, because he has really behaved in a very odd way. This is what he said during the Second Reading debate referring to

    739
    my right hon. Friend, the right hon. Member for Bishop Auckland (Mr. Dalton):
    "The right hon. Gentleman quoted them over the whole field where entrenchment"—
    I think that should be "encroachment"—
    "takes place as amounting to something between 0·5 per cent. and 1·6 per cent., but the percentages to which he referred are based on all cases in which trade assets exceed £10,000;"—
    that is true—
    "that is to say, they include a large number of very small businesses indeed"—
    well, of course, because the whole argument was about small businesses.
    "If, however, we take cases where trade assets exceed £10,000—and, after all, that is not a very large business—the percentage where the encroachment takes place rises to 25 per cent."
    The Financial Secretary has now explained that the figures he presented were not included in the White Paper. That is really a rather extraordinary thing to say at this stage because, in his Second Reading speech, he went on to say:
    "…if one looks at this very helpful analysis, it becomes clear that this problem is rather more serious than the right hon. Gentleman gave it credit."—[OFFICIAL REPORT, 3rd May, 1954; Vol. 527, c. 35.]
    We have looked at this "very helpful analysis," but nothing in the very helpful analysis bears out what the Financial Secretary says. We would like to ask him in how many cases did the trade assets exceed £10,000? Secondly, what was the encroachment? Thirdly, how many of those cases were manufacturing businesses? Perhaps the right hon. Gentleman would obtain that information. We would be glad to keep the debate going while he gets assistance in the matter so that he can explain the rather extraordinary arguments he used.
    11.0 p.m.
    This is a Clause which we feel the Government have completely failed to justify. All the facts available show that they are here making a concession which cannot possibly be justified. In my view it is another example—there have been several in the course of this Parliament—where they are clearly making a concession, just giving way to particular vested interests very much embedded in their own party.
    740
    It is not only that; there is no doubt whatever that this particular concession is open to the gravest abuse. My right hon. Friends have just spoken on that in connection with our earlier Amendment. I do not think it can be denied that the agricultural concession, which as the Chancellor admitted, is really justified on totally different grounds, undoubtedly has led to abuses of that kind. Here we have a concession which will lead to similar abuses and all the Chancellor can say is, "We cannot do anything about it now because it is almost impossible, but if we discover that there are abuses we will do something about it." I have never heard such an extraordinary argument. For those reasons, unless we hear totally different arguments, I strongly recommend my hon. Friends to vote against the Clause.
    Mr. Crosland: My right hon. Friend has deployed the main arguments against the Clause, and I would like to put three points. I think we should have some indication from the Government on the assets basis for valuation because part of the justification for this Clause is the argument that because the assets basis for valuation normally gives a higher valuation than one based on Stock Exchange prices, therefore, Estate Duty falls particularly heavily on businesses valued in that way.
    That is a quite different attitude from the one we had used on nationalisation Measures because hon. Members opposite used to attack the Labour Government for basing the valuation on Stock Exchange prices. We seem now to have a completely different attitude according to whether we are discussing relief to small businesses or compensation for nationalised industries. The whole basis of the arguments we have heard from hon. Members opposite has been that it is extremely important to take special measures to maintain the family business in British industry because it is of particular social value, it is a more intimate form of business with better social relations and the rest and it is implied therefore that it is a thoroughly bad thing if a private family concern is forced to form itself into a public company.
    That was implicit in speeches of hon. Members opposite, but the argument was carried too far. For one thing it was ignored that the public company may

    741
    find it much easier to raise capital than a private family business and we all want to encourage expansion. The other thing which is ignored is that it is assumed that if a small family business is compelled by the present weight of Estate Duty to form itself into a public company it will somehow lose its characteristics.
    That is not the case. All hon. Members must have had experience of family businesses which have been converted into public companies, but, nevertheless, the members of the family have retained their control and it has made very little difference to the people who occupy the positions of managing director or other directors. It is an illusion to suppose that because a family business is forced to form itself into a public company it therefore loses it characteristics.
    My third point is that I think the new Clause may lead to great difficulties in the future. It is admitted that it is a piece of very considerable discrimination in favour of a particular type of business and the businesses are now discriminated against because of the assets basis of valuation. I imagine that the Financial Secretary may have noticed among the various Press notices on the Clause one of the most interesting which appeared in "The Times Review of Industry" for May. It said:
    "There is, of course, much difference of opinion over the extent to which the concession on estate duties on family businesses can fairly be regarded as discriminatory. It is argued with justice that businesses assessed under Section 55 are already discriminated against by the method of valuation, so that a compensating discrimination in their favour merely leaves them on the same basis as everybody else. This is true enough under present conditions."
    This seems to me significant. It goes on:
    "Of course, shares have not always been valued on stock exchanges at less than the underlying assets of the businesses. Things may change once again, and one of these days it may be found that valuation by shares gives just as high a price as valuation by underlying assets. For that reason the 45 per cent. abatement is potentially discriminatory, and it cannot necessarily be accepted as a permanent part of the fiscal system…"
    I want to ask the Government whether they regard the Clause as justified by the fact that the assets basis of valuation normally gives a much higher figure of valuation than a valuation based upon Stock Exchange prices. In other words, if the disparity between the two methods
    742
    of valuation were to disappear, would the concession which is being given this year be withdrawn? Does the Government agree with the "Times Review of Industry," that this should not form a permanent part of the fiscal system, and that it is merely justified now by the disparity existing between the two bases of valuation?
    Mr. Albu: The Government are putting forward this Clause as a limited concession for the special purpose of dealing with a limited class of business; but it has become increasingly clear that the motives behind the Government's action are mixed, and perhaps are not very plain. As my hon. Friends have pointed out, it is probably largely due to the great interest on the other side of the Committee in family businesses. I doubt if many hon. Members opposite would be able to continue as whole time politicians but for the fact that they are directors of family businesses in which otherwise they play little part. This is a particular interest which is not of general interest to the economy of the country, or is not typical of our general industrial society.
    On this side of the Committee we are against reduction of Estate Duty because of the continuing disparity in the ownership of the wealth of the country, in spite of the existence of Estate Duty at a comparatively high level over a number of years. Since 1926 the effect on the ownership of property has only been such that while in that year 1 per cent. of the population owned 57 per cent. Of the wealth, in 1946 1 per cent. owned 50 per cent. That shows that the effect of the Estate Duty has not been very great with regard to the distribution of wealth.
    Therefore, to be successful the argument in favour of this concession would have to be very great indeed, and the national economic interest would have to be demonstrated beyond doubt. I have previously pointed out that the number of private businesses, and probably of family businesses of a relatively large size, is great. The benefit, as the Government refused to accept an Amendment to restrict the concession to small businesses, is likely to be particularly great to the wealthy inheritor, as it is such people who would normally pay the higher rate of Estate Duty.

    743
    Attention has already been drawn to the report published three years ago in Command Paper 8295 by the Board of Inland Revenue, which controverted the arguments that the family business is being crushed by the burden of Estate Duty. Since that time the National Union of Manufacturers has employed the "Economist" intelligence service to try to produce figures and arguments to show that the original report was wrong. It is interesting that only the hon. Member for Kidderminster (Mr. Nabarro) has bothered to quote this report. It is not surprising, however, because the report makes heavy weather of the case, and in my view does not destroy the argument of the Board of Inland Revenue.
    In a table which they give showing the effect in the case of 36 businesses which had so far taken no action, but which were liable to be affected by Estate Duty within the next few years, they show that it is true that in 12 cases out of 30 control would be lost when the present owner died. But it is interesting that those are cases where the companies are the largest. It shows that out of 11 companies where 30 per cent. of the value of the business would have been sold, nine were worth over £100,000. That would appear to bear out my argument that the concession would be more valuable for the larger companies and not for those which find difficulty in maintaining their existence.
    It is the larger companies which will have the least difficulty in raising the necessary finance to pay the Estate Duty and continue as a going concern. I agree that there may be some difficulty for small businesses to raise the money to pay Estate Duty under present conditions. That difficulty arises largely from the fact that most institutions which could provide the money are willing to do so only in the form of loans or redeemable preference shares, and when the shares have to be repaid Profits Tax has to be paid on them. Surely the answer is not to make an alteration in the Estate Duty structure but to provide some institution willing and able to provide capital, particularly equity capital to enable the businesses to continue.
    I doubt if it is desirable that any capita] should be provided where it is to be provided by passive share-
    744
    holders. The experience of financial institutions is that most family businesses which they have been asked to assist are very inefficient. It is generally beneficial to the institutions to play some part in stimulating the efficiency of the business, to make a contribution towards its production efficiency and general control, if they are to support it with money.
    We all know the long history of nepotism in British industry, particularly in Lancashire, and there is no economic argument for ensuring the continuance of the inheritance of a business from one generation to another. As was pointed out by my hon. Friend the Member for Gloucestershire, South (Mr. Crosland), there is every advantage in a business having its directorships and managerships renewed over the course of years. As he also pointed out, if the inheritors of the business are efficient managers no one who provided the finance to keep the business in being would turn them out. It would seem that the Government have not made out their case, and I commend my hon. Friends to divide against this Clause.
    11.15 p.m.
    Mr. R. A. Butler: I hope we may now come to a decision on this important Clause, which has occupied us during the larger part of today. I do not want to keep the Committee too late, but I want to make progress with the actual Clauses of the Bill, to leave as much time as possible for these important new Clauses on Monday and Tuesday.
    The right hon. Member for Leeds, South (Mr. Gaitskell) made a speech which was fully up to his usual standard of research, and which included a great many figures, not all of which I can answer tonight. I have made some preliminary inquiries, but I cannot give him a detailed answer on the subject of his analysis of the 13,000 and the 86, and the sub-division he made of this, but I will undertake that this subject will be examined in the morning, and if we have any information to send him in regard to his more detailed points we will do so as soon as we can.
    The right hon. Gentleman asked what we really wanted to do with this Clause.
    Mr. Gaitskell: Is the right hon. Gentleman going to be able to answer any of the questions which I have put to

    745
    the Financial Secretary to the Treasury? If so, I would rather wait and hear what he has to say first, but, if not, I must say I really feel that the Financial Secretary, who has deployed his argument with such vigour, has gravely misled the Committee.
    Mr. Butler: It is very difficult to answer unless I can make my speech. I have a great many answers here, all of which relate to various points which hon. Gentlemen raised. I think it is unusual to rise before a Minister replies to ask if he is going to make an answer before one knows what the answer is.
    Mr. Gaitskell: I am talking about the White Paper, and it was the right hon. Gentleman who introduced this at the beginning of his speech by saying lie would not be able to answer same of my questions, especially relating to the figures. I was not quite sure whether he was going on to answer some others. This is an important point.
    Mr. Butler: I will clear it up, but the right hon. Gentleman will see that I was not able to answer before I was able to. Clearly it is reasonable to let a Minister answer a debate without interruption, but I will do my best to take up the right hon. Gentleman's point. His first question was what we really wanted to do, and I was going to answer that first. Is that it?
    Mr. Gaitskell: I have no desire to make the right hon. Gentleman's speech for him—in fact, I should find it quite impossible because he has such a bad case. But he has brought up this question, which is about the White Paper. I understand, since he referred to that to start with, that he wished to take it up separately.
    Mr. Butler: Let the Committee be quite clear. I started by paying the right hon. Gentleman a compliment about the manner in which he had worked out his speech. I have made inquiries through those helping me tonight as to whether I could give a detailed answer, and I was unable to do that straight away. I then proceeded to take the right hon. Gentleman's arguments and try to deal with them. So perhaps we may now proceed in the same spirit and manner in which I was trying to start.
    The position is that the right hon. Gentleman asked what we really wanted
    746
    to do. According to our procedure, these debates can be repeated time after time on the Committee stage, so all I can do is to repeat what I have said twice previously. We had a dual motive in the Clause by bringing in this. First, to give some relief to businesses which, in my opinion, were affected by the assets basis of valuation; and, second, to give some relief to small businesses, so that in the ordinary tradition they could carry on.
    Those were our motives, and they were combined with the economic motive of giving some help to productive industry. As far as I can see from the debates we have had today, we have succeeded in carrying the greater part of the Committee with us in this objective. The right hon. Gentleman says that he objects to this Clause more than to any other. I can see that there is something in the point put by the hon. Member for Hall Green, that whenever one has any discriminatory taxation it is easy to criticise. I accept that. Therefore the contribution by the hon. Member was a valuable one, because it is a point in our tax law which is important to remember.
    Nevertheless, after taking full account of his speech and of the criticisms of the right hon. Gentleman opposite, we think that it is worth while to introduce the Clause and now to proceed to pass it into law. We believe that, for the three reasons I give, it will he valuable. The right hon. Gentleman the Member for Leeds, South asked me about the assets basis. I do not want to detain the Committee with a ponderous description of the assets basis or its merits or demerits.
    The position is that after this review—again I repeat what I have said twice before today—we have decided to maintain the assets basis of valuation. The objections to it have been very strongly put during our debates last year and the year before by hon. Members especially on this side of the Committee. The simple point, without reading out briefs or going into statistics, is that, the assets basis is a more ponderous method than the basis of the market value of the share and it results in many cases in a much bigger sacrifice, a bigger operation, on the part of the company concerned. Therefore, it is very unpopular indeed. The fact that I have made the provision will, I hope, be mitigated by

    747
    the concession which I have tried to make.
    The hon. Member for Gloucestershire, South (Mr. Crosland) more or less agreed that that was a consecutive line of argument, whether he agreed with it or not, when he asked whether we would withdraw the benefit after a certain time. The answer is that our term of office is likely to be so long that we can certainly look ahead more than any other Government. So far as we can see ahead the answer is that we do not propose to withdraw it.
    The right hon. Gentleman the Member for Leeds, South raised a point to which he attached importance, namely the White Paper which was mentioned during the Second Reading and which, of course, we had read and studied before we decided to introduce this reform. He raised several arguments in connection with the White Paper, copies of which I have again studied before the occasion of this debate. He raised a criticism of the Financial Secretary.
    I have ascertained that the statement by my right hon. Friend that encroachment on business assets took place in 25 per cent. of the cases where the business assets—not the estates, and that is an important point to make clear—exceeded £10,000 was made by the "Economist" information unit commenting, about the time of the publication of the White Paper, on the White Paper and the subsequent controversy that arose.
    That is the source of our information. Therefore, I entirely support the evidence given by my right hon. Friend and I see no reason to doubt that the answer was correct or that this proves that the White Paper was in itself rather too general and sweeping and condemnatory a document, and that there are features in the incidence of the burden on business assets by this Estate Duty which were not fully brought out in the White Paper itself. Although the right hon. Gentleman the Member for Leeds, South may like to criticise the White Paper, I do not think that it is conclusive evidence of the case he wishes to make.
    I should have thought that we might now come to a decision upon the Clause. We have got a very good reason for
    748
    bringing it in. I do not accept the view of the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) that the Estate Duty in itself is the best of our taxes.
    Mr. Dalton: Which is the best?
    Mr. Butler: I think that the death duty weighs extremely heavily upon a great deal of the traditional virtues which are handed down from family to family and generation to generation. It is also a form of tax on capital which may well do more harm than good to our nation. I am not here going to go into the question of whether I wish to see great discrepancies between wealth, because I do not. I do not agree with what hon. and right hon. Gentlemen opposite say about the nature of my economic policy being one in which I wish to transfer money from the rich to the poor. That is just nonsense. We wish in our philosophy a reasonable sharing out in a proper way of goods as between one section and another. In many cases death duties, whether on large or small estates, redound to the national disadvantage because they do not allow tradition to be passed on to the national advantage. If in a small way, and for good reasons, we make this concession in this year's Bill I hope it will be accepted in the same spirit of sincerity as it has been put forward.
    Mr. Dalton: I think there must be one word from this side before we divide the Committee, as now we must. I have never heard a less convincing reply than that which the right hon. Gentleman has just given. He has failed to answer almost every question asked him from this side, and made a promise that he would furnish my right hon. Friend with answers on reflection. But of answers statistical and argumentative we have had few. This is the most objectionable Clause in a rather colourless Bill. It is a step backwards, for reasons already developed tonight. It is discrimination of a most objectionable kind. I hope that the hon. Member for Hall Green (Mr. Aubrey Jones), to whom I paid tribute in his absence will accompany us into the Lobbies in support of the powerful and lucid argument he advanced at an earlier stage. We shall welcome him most warmly when the Division takes place.

    749
    As for the White Paper, it is produced by those whom I would rate rather higher than the private enterprise experts, or those associated with Mr. Crowther or any other person who dabbles in these matters. They are serious experts we see before us in the box tonight: they have been associated with successive Chancellors for many years. I would like it to be made clear whether this White Paper is accepted as being true within the limits of what it says.
    The Chancellor may suggest that further statements should be added to give a full picture, but is it repudiated or asserted to be untrue? I will give way if he wishes to answer. Why does not he say yes? I remember it was said of Mr. Lloyd George when he occupied that office that when his highly skilled officials produced some material for a White Paper he said, "I do not like those figures, go away and get me some better ones." For the purpose of this reform the Chancellor could not say he was dissatisfied with the figures three years ago because they were based on earlier studies, so he has asked Mr. Crowther to cook up some others.
    Mr. Butler: The "Economist" commented on the figures before I took office and without my knowledge. The Inland Revenue informed me that they checked them and informed the Economic Information Unit that they were correct.
    11.30 p.m.
    Mr. Dalton: Is there something in this Paper which is not correct?
    Mr. Butler: I have never attempted to say so. I will accept what the right hon. Gentleman has generally said himself is a true picture. I could put a gloss on the Paper and explain some ways in which the Paper does not represent the full picture, but it is not any wish of mine to repudiate a document produced from Somerset House.
    Mr. Dalton: Until evidence to the contrary is produced, we shall continue to believe that the Paper is accurate. If any further arguments of a statistical character are produced, we shall read them with interest.
    After studying this Clause, I should like to ask one final question. This notable White Paper, after discussion of the general problem has run on through paragraphs and through figures—not through many, as this is a terse Paper—in the final paragraph says:
    "Nevertheless the general picture which is presented is clear enough; in this connection it is worth noting that the public discussion has not so far resulted in the production, to either the Chancellor of the Exchequer or, the Board,"—
    that is, the Board of Inland Revenue—
    "of any cases in which a business has in fact been broken up by the operation of the death duties."
    That is a very important statement. I ask the Chancellor whether this is still true, or has there been produced to him since he has been in office any single case in which a business has been broken up by the operation of the duties? Will he be kind enough to answer—[HON. MEMBERS: "Answer."]—whether there has been any single case since the publication of this White Paper, which has been produced by the Board of Inland Revenue, in which a business has been broken up by the Estate Duty? There is no answer. Evidently there has been no case. If there had been, the Chancellor would have told us. This is evidence that this Paper still holds true; and that single declaration at the end of the White Paper is sufficient justification for us to reject the Clause. That I ask my hon. and right hon. Friends now to do, so far as they are able.
    Question put.
    The Committee divided: Ayes, 203; Noes, 148.

    Division No. 173.]

    AYES

    [11.32 p.m.

    Aitken, W. T.

    Bell, Philip (Bolton, E.)

    Brooke, Henry (Hampstead)

    Allan, R. A. (Paddington, S.)

    Bennett, F. M. (Reading, N.)

    Buchan-Hepburn, Rt. Hon. P. G. T.

    Alport, C. J. M.

    Bennett, Dr. Reginald (Gosport)

    Bullard, D. G.

    Amery, Julian (Preston, N.)

    Bishop, F. P.

    Bullus, Wing Commander E, E

    Amory, Rt. Hon. Heathcoat (Tiverton)

    Black, C. W.

    Burden, F. F. A.

    Arbuthnot, John

    Bossom, Sir A. C.

    Butcher, Sir Herbert

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

    Boyd-Carpenter, Rt. Hon. J. A.

    Butler, Rt. Hon. R. A. (Saffron Walden)

    Baldock, Lt.-Cmdr. J. M.

    Boyle, Sir Edward

    Campbell, Sir David

    Baldwin, A. E.

    Braine, B. R.

    Cary, Sir Robert

    Barlow, Sir John

    Braithwaite, Sir Albert (Harrow, W.)

    Channon, H.

    Baxter, Sir Beverley

    Braithwaite, Sir Gurney

    Clarke, Col. Ralph (East Grinstead)

    Beach, Maj. Hicks

    Bromley-Davenport, Lt.-Col. W. H.

    Clarke, Brig. Terence (Portsmouth, W.)

    Cooper-Key, E. M.

    Joynson-Hicks, Hon. L. W

    Profumo, J. D.

    Craddock, Beresford (Spelthorne)

    Kerby, Capt. H. B.

    Raikes, Sir Victor

    Crosthwaite-Eyre, Col. O. E.

    Kerr, H. W.

    Redmayne, M.

    Crouch, R. F.

    Lambert, Hon. G.

    Rees-Davies, W. R.

    Crowder, Petre (Ruislip—Northwood)

    Leather, E. H. C.

    Remnant, Hon. P.

    Darting, Sir William (Edinburgh, S.)

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

    Renton, D. L. M.

    Davidson, Viscountess

    Legh, Hon. Peter (Petersfield)

    Ridsdale, J. E.

    Deedes, W. F.

    Lennox-Boyd, Rt. Hon. A. T.

    Robinson, Sir Roland (Blackpool, S.)

    Digby, S. Wingfield

    Lindsay, Martin

    Robson-Brown, W.

    Donaldson, Cmdr. C. E. McA.

    Linstead, Sir H. N.

    Roper, Sir Harold

    Donner, Sir P. W.

    Lockwood, Lt.-Col. J. C.

    Ropner, Col. Sir Leonard

    Douglas-Hamilton, Lord Malcolm

    Longden, Gilbert

    Russell, R. S.

    Drewe, Sir C.

    Lucas, Sir Jocelyn (Portsmouth, S.)

    Ryder, Capt. R. E. D.

    Duthie, W. S.

    Lucas-Tooth, Sir Hugh

    Scott, R. Donald

    Eden, J. B. (Bournemouth, West)

    McAdden, S. J.

    Scott-Miller, Cmdr. R.

    Erroll, F. J.

    McKibbin, A. J.

    Simon, J. E. S. (Middlesbrough, W.)

    Finlay, Graeme

    Mackie, J. H. (Galloway)

    Smithers, Peter (Winchester)

    Fisher, Nigel

    Maclay, Rt. Hon. John

    Smithers, Sir Waldron (Orpington)

    Fleetwood-Hesketh, R. F.

    Maclean, Fitzroy

    Smyth, Brig. J. G. (Norwood)

    Fletcher-Cooke, C.

    Macmillan, Rt. Hon. Harold (Bromley)

    Spearman, A. C. M.

    Ford, Mrs. Patricia

    Maitland, Comdr. J. F. W. (Horncastle)

    Spens, Rt. Hon. Sir P. (Kensington, S.)

    Fort, R.

    Maitland, Patrick (Lanark)

    Stanley, Capt Hon. Richard

    Fraser, Hon. Hugh (Stone)

    Manningham-Buller, Rt. Hn. Sir Reginald

    Stevens, Geoffrey

    Fyfe, Rt. Hon. Sir David Maxwell

    Marlowe, A. A. H.

    Steward, W. A. (Woolwich, W.)

    Galbraith, Rt. Hon. T. D. (Pollok)

    Marples, A. E.

    Stewart, Henderson (Fife, E.)

    Galbraith, T. G. D. (Hillhead)

    Marshall, Douglas (Bedmin)

    Strauss, Henry (Norwich, S.)

    Glover, D.

    Maude, Angus

    Summers, G. S.

    Godber, J. B.

    Maudling, R.

    Sutcliffe, Sir Harold

    Gower, H. R.

    Maydon, Lt.-Comdr. S. L. C.

    Taylor, Sir Charles (Eastbourne)

    Graham, Sir Fergus

    Medlicott, Brig. F.

    Taylor, William (Bradford, N.)

    Grimond, J.

    Mellor, Sir John

    Teeling, W.

    Grimston, Hon. John (St. Albans)

    Monckton, Rt. Hon. Sir Walter

    Thomas, Rt. Hon. J. P. L. (Hereford)

    Grimston, Sir Robert (Westbury)

    Nabarro, G. D. N.

    Thomas, Leslie (Canterbury)

    Hall, John (Wycombe)

    Neave, Airey

    Thompson, Lt.-Cdr. R. (Croydon, W.)

    Harris, Frederic (Croydon, N.)

    Nicholson, Godfrey (Farnham)

    Thornton-Kemsley, Col. C. N.

    Harris, Reader (Heston)

    Nicolson, Nigel (Bournemouth, E.)

    Tilney, John

    Harvey, Ian (Harrow, E.)

    Nield, Basil (Chester)

    Vane, W. M. F.

    Hay, John

    Noble, Comdr. A. H. P.

    Vaughan-Morgan, J K.

    Heald, Rt. Hon. Sir Lionel

    Nugent, G. R. H.

    Vosper, D. F.

    Heath, Edward

    Oakshott, H. D.

    Wakefield, Edward (Derbyshire, W)

    Higgs, J. M. C.

    Odey, G. W.

    Walker-Smith, D. C.

    Hnohingbrooke, Viscount

    O'Neill, Hon. Phelim (Co. Antrim, N.)

    Wall, Major Patrick

    Holland-Martin, C. J.

    Orr, Capt. L. P. S.

    Ward, Hon. George (Worcester)

    Hollis, M. C.

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

    Waterhouse, Capt. Rt. Hon.

    Holt, A. F.

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

    Watkinson, H. A.

    Hopkinson, Rt. Hon. Henry

    Osborne, C.

    Webbe, Sir H. (London & Westminster)

    Hornsby-Smith, Miss M. P.

    Page, R. G.

    Wellwood, W.

    Horobin, I. M.

    Perkins, Sir Robert

    Williams, Rt. Hon. Charles (Torquay)

    Howard, Hon. Greville (St. Ives)

    Peto, Brig. C. H. M.

    Williams, Gerald (Tonbridge)

    Hudson, Sir Austin (Lewisham, N.)

    Peyton, J. W. W.

    Williams, Sir Herbert (Croydon, E.)

    Hulbert, Wing Cdr. N. J.

    Pickthorn, K. W. M.

    Williams, Paul (Sunderland, S.)

    Hurd, A. R.

    Pilkington, Capt. R. A.

    Williams, R. Dudley (Exeter)

    Hutchison, Sir Ian Clark (E'b'rgh, W.)

    Pitman, I. J.

    Wood, Hon. R.

    Iremonger, T. L.

    Pitt, Miss E. M.

    Jenkins, Robert (Dulwich)

    Powell, J. Enoch

    TELLERS FOR THE AYES:

    Johnson, Eric (Blackley)

    Price, Henry (Lewisham, W.)

    Mr. Studholme and Mr. Wills.

    Jones, A. (Hall Green)

    Prior-Palmer, Brig. O. L.

    NOES

    Acland, Sir Richard

    Champion, A. J.

    Hall, Rt. Hon. Glenvil (Colne Valley)

    Adams, Richard

    Corbet, Mrs. Freda

    Hannan, W.

    Albu, A. H.

    Cove, W. G.

    Hargreaves, A.

    Allen, Arthur (Bosworth)

    Crosland, C. A. R.

    Healy, Denis (Leeds, S. E.)

    Allen, Scholefield (Crewe)

    Dalton, Rt. Hon. H.

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

    Awbery, S. S.

    Darling, George (Hillsborough)

    Herbison, Miss M.

    Bacon, Miss Alice

    Davies, Ernest (Enfield, E.)

    Hewitson, Capt. M.

    Benson, G.

    Davies, Harold (Leek)

    Hobson, C. R.

    Beswick, F.

    Deer, G.

    Holman, P

    Bing, G. H. C.

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

    Houghton, Douglas

    Blackburn, F.

    Ede, Rt. Hon. J. C.

    Hudson, James (Ealing, N.)

    Blenkinsop, A.

    Edelman, M.

    Hughes, Hector (Aberdeen, N.)

    Bottomley, Rt. Hon. A. G

    Edwards, Rt. Hon. John (Brighouse)

    Hynd, H (Accrington)

    Bowden, H. W.

    Evans, Albert (Islington, S. W.)

    Hynd, J. B. (Attercliffe)

    Bowles, F. G.

    Fernyhough, E.

    Irvine, A. J. (Edge Hill)

    Braddock, Mrs. Elizabeth

    Fienburgh, W.

    Jay, Rt. Hon. D. P. T.

    Brockway, A. F.

    Fletcher, Eric (Islington, E.)

    Jeger, George (Goole)

    Brook, Dryden (Halifax)

    Freeman, Peter (Newport)

    Jeger, Mrs. Lena

    Broughton, Dr. A. D. D.

    Gaitskell, Rt. Hon. H. T. N.

    Jenkins, R. H. (Stechford)

    Brown, Rt. Hon. George (Belper)

    Gibson, C. W.

    Johnson, James (Rugby)

    Brown, Thomas (Ince)

    Gordon Walker, Rt. Hon. P. C

    Jones, David (Hartlepool)

    Burke, W. A.

    Grenfell, Rt. Hon. D. R.

    Jones, Jack (Rotherham)

    Burton, Miss F. E.

    Griffiths, David (Rother Valley)

    Keenan, W.

    Butler, Herbert (Hackney, S.)

    Griffiths, William (Exchange)

    Kenyon, C.

    Callaghan. L. J.

    Hale, Leslie

    King, Dr. H. M.

    752

    753

    Lawson, G. M.

    Pargiter, G. A.

    Summerskill, Rt. Hon. E.

    Lee, Frederick (Newton)

    Parker, J.

    Taylor, John (West Lothian)

    Lever, Leslie (Ardwick)

    Peart, T. F.

    Thomas, Iorwerth (Rhondda, W.)

    Lewis, Arthur

    Plummer, Sir Leslie

    Thomas, Ivor Owen (Wrekin)

    Lindgren, G. S.

    Porter, G.

    Thornton, E.

    MacColl, J. E.

    Price, J. T. (Westhoughton)

    Tomney, F.

    McInnes, J.

    Price, Philips (Gloucestershire, W.)

    Ungoed-Thomas, Sir Lynn

    McLeavy, F.

    Pryde, D. J.

    Usborne, H. C.

    Mallalieu, E. L. (Brigg)

    Pursey, Cmdr. H.

    Wallace, H. W.

    Mann, Mrs. Jean

    Robens, Rt. Hon. A.

    Warbey, W. N.

    Mason, Roy

    Robinson, Kenneth (St. Pancras, N.)

    Watkins, T. E.

    Mayhew, C. P.

    Royle, C.

    Weitzman, D.

    Mellish, R. J.

    Shackleton, E. A. A.

    Wheeldon, W. E.

    Mitchison, G. R.

    Silverman, Sydney (Nelson)

    White, Mrs. Eirene (E. Flint)

    Moody, A. S.

    Simmons, C. J. (Brierley Hill)

    White, Henry (Derbyshire, N. E.)

    Morgan, Dr. H. B. W

    Skeffington, A. M.

    Wigg, George

    Morley, R.

    Smith, Ellis (Stoke, S.)

    Williams, W. R. (Droylsden)

    Moyle, A.

    Snow, J. W.

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

    Mulley, F. W.

    Sorenson, R. W.

    Willis, E. G.

    Neal, Harold (Bolsover)

    Soskice, Rt. Hon. Sir Frank

    Winterbottom, Ian (Nottingham, C.)

    Noel-Baker, Rt. Hon. P. J

    Sparks, J, A.

    Winterbottom, Richard (Brightside)

    Oliver, G. H.

    Stokes, Rt. Hon. R. R.

    Wyatt, W. L.

    Orbach, M.

    Strachey, Rt. Hon. J.

    Yates, V. F.

    Oswald, T.

    Strauss, Rt. Hon. George (Vauxhall)

    Palmer, A. M. F

    Stross, Dr. Barnett

    TELLERS FOR THE NOES:

    Mr. Holmes and Mr. Rogers.

    Question put, and agreed to.

    Clause, as amended, ordered to stand part of the Bill.
    Mr. R. A. Butler: I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
    We have now got this major Clause 25 and, while I should have like to get a few more, I think that the Clauses 26 to 29 are not very difficult. We shall want a short debate on Clause 29, and after that we shall get on to the new Clauses. Therefore, I do not think that we shall be far behind if we allow people to try to catch their trains now and not keep them back, it being Thursday night.
    Committee report Progress; to sit again Tomorrow.

PUBLISHERS' ASSOCIATION (TRADE AGREEMENT)
Motion made, and Question proposed, "That this House do now adjourn."—[Mr. T. G. D. Galbraith.]
11.43 p.m.
Mr. John Rodgers: In common with manufacturers of most goods and producers of most services, the publishers of this country, those people who are responsible for the production of books, are finding that their overheads have gone up considerably since the end of the war. Union rates of wages have gone up, the costs of electricity, gas, rent, transport, paper and printing, building and so on have gone up. It would be generally conceded that the conventional published price of most books has not increased in the same proportion as the labour, materials and overheads of British
754
publishers. Indeed, the Publishers' Association maintain that, whereas before the war the ratio of manufacturing costs to published price was 1 to 5, it is now 1 to 3½.
The Publishers' Association maintains, therefore, that the margin is today not sufficient for its members to make general publishing commercially remunerative, thought it is true that that does not apply to those firms which are lucky enough to possess printing or binding plants and the like.
The Publishers' Association, therefore, is faced with the problem of how to remunerate itself to make up for this increase in overheads. Its members have considered various solutions. They have rejected the possible solution of raising the published price of books, the possibility of reducing the retail margin on books, and of reducing royalties. They have come down in favour of a fourth solution which will get them out of their alleged difficulty, namely to take a higher share of the profits which the author, and in particular the new author, receives from the subsidiary rights in his books, that is film, radio and television rights, serial and anthology rights and the like.
It is not for me to say in this Adjournment debate whether or not the case presented by the publishers is correct. It is not for me to say whether or not the publishers are entitled to a part of the author's remuneration in respect of subsidiary rights in books. But I do most strongly protest against the method adopted by the publishers in trying to enforce this and secure this greater remuneration.

755
On 21st January, the Council of the Publishers' Association resolved, in order to maintain the maximum earning power of authors for authors and the financial stability of publishers of works of fiction and general literature, certain steps should be taken. I must say that it is the most ingenious argument I have ever heard, that to increase the earning powers of authors the publishers should take away part of their subsidiary rights.
The publishers passed the following resolution, that they:
"Insist on the under-mentioned minimum percentages when making contracts with new, unknown authors, whether through agents or direct, the publishers share in each case representing the reward to which he is entitled for his part in creating or adding to the value of the named rights."
There followed two other parts of the resolution, which would enable the publisher to demand a minimum share for himself of certain subsidiary rights, whether the author was a new one, or, had an already established reputation.
In other words, the publishers have drawn up a standard contract for all authors which all the leading publishers have indicated their intention of adopting and which should have come into force this year. I say "should have" because, so far as I am informed, this has not come into force because the moment it became public knowledge that the publishers intended to make a standard contract there was an outcry from all authors and the people interested in the future of literature. The response from the public was clear, forthright and immediate.
On 14th April, "The Times" published a letter on behalf of the Society of Authors. Perhaps I should say that I am, in a very humble way, an author myself, but / am not very interested in subsidiary rights—I cannot see any books of mine being filmed—and I am a member of the managing committee of the Society of Authors. But my relationship with my publishers is extremely cordial and extremely friendly. I have nothing against the publishers of this country, and a great many of them are among my friends.
This letter was signed by the Poet Laureate, Somerset Maugham, Sir Osbert Sitwell, Mr. J. B. Priestley, Sir Walter de la Mare and other very distinguished
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people. It called attention to the injustice of confining the new terms to the new author and extracting from him a substantial share of rights, the value of which the publisher does nothing to enhance, and then went on:
"The method adopted by the Publishers' Association for effecting its end strikes at the root of the author's freedom of contracting. Instead of dealing freely with an individual publisher who treats every work individually, the new author is to deal with what will virtually be a publishing cartel which will refuse to publish his work unless he agrees to surrender a share in earnings only remotely derived from book publication and under the terms of a rigid universal contract from which there is to be no appeal to any other publisher. The effect of this would be to end the independence, not only of British authors, but of British publishers. A monopoly of all publishing by the Stationery Office could not much more effectively subject literature and the creators of literature to a single authoritarian control."
The letter went on to admit that there were probably cases in which the authors could rightly take a share of authors' earnings and subsidiary rights, but definitely rejected participation in those rights as a universal right of all publishers.
Since if the Publishers' Association persist in their endeavour to insist on a standard contract for new authors, this move will probably affect the supply of books—which are goods under the Monopolies and Restrictive Practices (Inquiry and Control) Act—it is possible this might justify reference to the Monopolies Commission. Under Section (3) of that Act it is stated that the Act would apply in respect of the supplying any products, in this case new books, if
"at least one-third of all the goods of that description which are supplied in the United Kingdom or any substantial part thereof are supplied by or to any one person, or by or to any two or more persons, being interconnected bodies corporate…"
and in Section 3 (2) it is stated:
"The two or more persons referred to in subsection (1) of this section are any two or more persons who, whether voluntarily or not, and whether by agreement or not, so conduct their respective affairs as in any way to prevent or restrict competition in connection with the production or supply of goods…"
I do not think for one moment that it can be contended that the 35 firms which already signified that they intend to act in accordance with the resolution passed by the Publishers' Association do not control far more than one-third of the

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supply of new books of a general character and, since I believe this attempt to enforce a standard contract will react unfavourably on the production of new books and constitute a grave injustice to struggling new authors who will have a substantial share of their earnings arbitrarily confiscated by the publishers of their books, whether or not the publishers have done anything to contribute to the subsidiary earnings beyond the initial publication of their books, I hope the Publishers' Association will desist in their attempts to impose a standard contract.
If they do not, I hope that the Parliamentary Secretary will say that should they persist he will give earnest consideration to whether or not he should remit the whole question of the production of books to the attention of the Monopolies Commission. Since I have the highest regard for the publishers of this country, and since I am privileged to enjoy the friendship of a good many of them, I hope that this course may not be necessary and that the Publishers' Association will have second thoughts on the matter. I am not saying that the Publishers' Association claims for participation in subsidiary rights is necessarily wrong. What I do say is that the method they have adopted for collective enforcement is unwise and certainly unworthy of the great traditions of the publishers of this country and, moreover, will to my mind undermine one of the bastions of a free society.
11.54 p.m.
Mr. John Strachey: I wish to add one or two words to the speech of the hon. Member for Sevenoaks (Mr. Rodgers) who raised this matter so ably. I also have to disclose an interest as an author and a member of the board of management of the Society of Authors. It is well known from the letters which appeared in "The Times" and which the hon. Member has quoted that the Society of Authors is very openly, publicly and deeply concerned in this matter.
So far as this Society is concerned, I think that there is only one issue which is of interest for us here. That is the one to which the hon. Member referred throughout his speech and which is raised by the words in the resolution of the Council of the Publishers' Association in which that Association ask members of
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the Association—requires members to insist—I emphasise the word "insist":
"on the undermentioned minimum percentages when making contracts with new unknown authors."
It is not for us in this House to say whether it is right or wrong for a publisher to receive 50 per cent., as is suggested here, in the anthology rights of an author. It may well be in a particular case it is perfectly right for the publisher to receive 50 per cent. of anthology rights. That is not something in which this House could possibly interfere. What does become a matter of which this House could take cognizance is when practically the whole of the publishers of this country attempt to lay down a rigid standard below which no author is allowed to contract with his publisher at all.
If this proposal is carried into effect, we submit that the publishers, to all intents and purposes, become a cartel. They become one organisation with which all authors will have to deal in respect of these particular subsidiary rights. The publishers would, therefore, assume many of the aspects of a monopoly. We think, and the House thought when it passed the Monopolies Act, that a private monopoly is a bad thing for industry. The Monopolies Commission has done good work in its reports in that field. I would submit that if monopoly is bad in the production of boots and shoes, of material objects, machinery or electric lamps, it is far worse when applied to the publishing of literature and the production of books.
In this field, above all, there ought to be the utmost flexibility; the utmost possibility for the greatest variation in the terms of contract between authors and publishers. It would be a sorry day for English letters if the publishers of Britain became, in effect, a unified organisation with which the author would have to deal on a standard contract over a larger and larger field. The circumstances of book publication vary enormously from author to author, from book to book, from time to time. What is fair and right in one case is certain to be wrong in another.
Therefore, I would support the submission of the hon. Member for Sevenoaks that the Parliamentary Secretary ought seriously to consider whether the attempt by the Publishers' Association to begin a

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process of making the publishing firms of this country into an all-inclusive cartel is not a matter to which the attention of the Monopolies Commission may properly be drawn. That does not pre-judge the matter. The Commission might report that our fears are groundless, in which case the Publishers' Association would have great support. If, as I believe, this is a step towards monopoly in a particularly sensitive field, the application of the Monopolies Commission procedure to the matter would be of the utmost importance.
I say this in no spirit of hostility to the publishers. They are valuable citizens carrying on an indispensable work, but they have, we believe, taken a false step here. It will do them the greatest possible injury, and no sums of money which they manage to transfer from the authors' pockets to their own will compensate them for the loss of public esteem they will suffer if they go ahead with the proposal.
12 midnight.
Mr. Nigel Nicolson: If what the right hon. Member for Dundee, West (Mr. Strachey) and my hon. Friend the Member for Sevenoaks (Mr. Rodgers) has said were true, I would agree that a case had been made out for the Monopolies Commission to intervene. I speak as a publisher, not one who signed this letter, but one who does not find himself so horrified by its contents as the previous speakers.
Publishing is an industry which is the most competitive in the country. A simple proof of that is that there is a higher bankruptcy rate in the publishing business than in any other. It is the worst risk in the City of London. It is a risky business and the publisher is obliged to try to recoup losses, which he may make with his eyes open upon books which he thinks worthy of publication for their literary or intrinsic merit, upon books which are not so valuable, but which sell in larger quantities to the public.
There is no question at all that these 30 publishers do not represent the only market to which a young author can take his wares. He can take them to some 100 others, and wherever a good author appears with a good manuscript there is
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no question of him failing to find a publisher simply because he refuses to sign this document. One of the most successful of the younger publishers who have emerged since the war stated in a recent book that he lost money on three out of every five books which he published—and he is ranked among the most successful.
The days of literary patronage have gone. The publisher is now the patron of literature. Does the right hon. Member for Dundee, West imagine that the amount of poetry which is published would be published were it not for the fact that publishers are willing to lose their own money on producing what they consider to be a contribution to the literature of this country?
But when a young author comes to them with, for example, a novel which has possibilities of being turned into a film—and only one in 500 have that possibility—surely the publisher is entitled to say to the author, "I will take the risk of publishing your novel on which I am almost certain to lose, except that there is a faint chance that it may be turned into a film or serialised on the B.B.C." Surely the publisher can say. "I am therefore entitled to share with you the profits of these subsidiary rights." That is all. If the author does not like that arrangement he can take his manuscript anywhere else he likes.
Mr. Strachey: Would not the hon. Member agree that the purpose of this is to prevent an author from finding another publisher to whom he can take his manuscript?
Mr. Nicolson: If that were the purpose, which I deny, it would be impossible to implement it, because 30 publishers have signed this document out of at least 170 publishers.
Mr. J. Enoch Powell: My hon. Friend has maintained that no cartel exists unless it is a complete cartel and that no monopoly exists unless it is a complete monopoly. But there are varying degrees of monopoly, as the Monopolies Commission recognises. A condition of monopoly may exist where only one-third of the trade is governed by a particular agreement. There is no question of this agreement embracing the whole of the publishing business. The point is that it embraces part of it.
12.5 a.m.
The Parliamentary Secretary to the Board of Trade (Mr. Henry Strauss): I am grateful to the right hon. Gentleman and to my hon. Friends who have spoken for giving me sufficient time to say a few words on this controversy. I was glad that my hon. Friend the Member for Bournemouth, East and Christchurch (Mr. Nicolson) intervened briefly in order that there should be one representative, at any rate, of the other of the principal parties who recently had so vigorous a controversy in "The Times," starting on 14th April and lasting until 22nd May—which is long, even for "The Times," for a correspondence of this character. I cannot help being reminded by seeing the right hon. Gentleman (Mr. Strachey) opposite, and hearing him tonight, that I knew him as a talented writer before I ever met him as a politician.
I think those who read that correspondence and controversy in "The Times" realise that it was by no means one-sided. I do not ask the House necessarily to agree with "The Times," in what it said in a leader published at the end of the controversy, apart from the Poet Laureate's final letter. "The Times" said:
"Publishers have had to stand up to severe punishment lately from the heavyweights of the writing world, who have been attacking them in these columns. But they have certainly not been knocked out, and the reading public, which owes a debt of gratitude to publishers as well as to authors, may award a victory on points to the former."
At any rate the controversy was by no means one-sided. I have no desire to go into the merits of that controversy tonight. Indeed, those who have spoken have not invited me to do so. By the very suggestion that in certain circumstances the Board of Trade should consider whether this matter should not come in some form or other before the Monopolies Commission, they suggest that I should not now express a view on the merits.
Let me remind the House what it is that we can refer to the Monopolies Commission. The operative words for this purpose are found in Section 2 (1):
"Where it appears to the Board of Trade that it is or may be the fact that conditions to which this Act applies prevail as respects either (a) the supply of goods of any description; or (b) the application of any process to goods of any description; or (c) exports of goods of any description from the United
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Kingdom, either generally or to any particular market, the Board may, if they think fit, refer the matter to the Commission for investigation and report."
The material words for the present purpose are "the supply of goods of any description."
The conditions to which the Act applies are defined in Section 3, which was quoted by the hon. Member for Sevenoaks. What the Board of Trade could refer, if there appeared to be a good case for making such a reference, would be the supply of books. If such a reference were made, what the Commission would then consider would be within the control of the Commission, and not of the Board of Trade. What is clear is that this contract is not a matter which could be referred to the Commission. Whether, if the supply of books were referred, the terms of this contract would then be considered would be a matter for the Commission and not for the Board of Trade. The contract deals with copyright, with the right to publish the work of another person, which, of course, is not a dealing in goods.
I believe that I should be expressing the view not only of a large part of the public but of all hon. Members who have spoken if I expressed the desire that what should emerge from all this discussion is something satisfactory to all parties. After all, there are very able men devoted to the high interest of their calling both among authors and publishers. I expect that we all have friends in each category. I certainly have, and I still hope that an agreed solution may be reached.
Indeed, such friendly relations exist generally between authors and their publishers that perhaps that hope is not unduly optimistic, but I do not think that we should bring agreement nearer if we denied the reality of the problem. That is why I welcome what was said by my hon. Friend the Member for Sevenoaks who stated that there was a real problem to be met.
There is the problem of increased costs. I think that it is in the interests of publishers, of authors and of readers of fiction and general literature that this real problem should be considered by all and that, if at all possible, an agreed solution should be reached.
Adjourned accordingly at Twelve Minutes past Twelve o'Clock.

  PRIVATE HOUSE BUILDING (BANK ADVANCES)
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HOME DEPARTMENT
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Preamble
The House met at three of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers

  PROTECTION OF ANIMALS (AMENDMENT) BILL
  3.5 p.m.
  House in Committee (according to Order): Bill reported without amendment.

INDUSTRIAL AND PROVIDENT SOCIETIES (AMENDMENT) BILL
House in Committee (according to Order): Bill reported without amendment.
JURIES BILL
House in Committee (according to Order): Bill reported without amendment.
TEES CONSERVANCY BILL [H.L.]
Returned from the Commons, agreed to.
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  OBSTACLES TO UNITED STATES IMPORTS