Sitting of 12 June 1956

Preamble
The House met at half-past Two o'clocks
PRAYERS
[Mr.SPEAKER in the Chair]
PRIVATE BUSINESS
  WALTHAMSTOW CORPORATION BILL [Lords] (By Order)
  Second Reading deferred till Thursday.
ORAL ANSWERS TO QUESTIONS
  TRADE AND COMMERCE

    Copper
    Mr. E. Johnsonasked the President of the Board of Trade what quantity of copper has been sold by his Department since 1st January, 1954; what profit or loss was made on these transactions; and what proportion was exported.
    The President of the Board of Trade (Mr. Peter Thorneycroft): Approximately 114,000 tons. This includes sales by the Ministry of Materials. Information about the profits and losses arising from Government trading operations in copper generally is published in the annual Trading Accounts for each financial year but figures for other periods and for particular transactions are not available. My Department has no information about the proportion of the metal exported.
    Mr. Johnson: May I take it from that Answer that no copper has been sold to be sent abroad by my right hon. Friend's Department since he has been in office?
    Mr. Thorneycroft: I cannot answer that question, as I cannot tell what happens to the copper after it is sold.
    Mr. E. Johnsonasked the President of the Board of Trade what stocks of copper are now held by his Department; and at what price it was bought.
    Mr. P. Thorneycroft: All the copper stocks held by my Department, apart from a small trading residue of 1,700 tons are held in the strategic reserve, and it would be contrary to well established practice to give any information about the size of this stock. The copper was purchased over a period of years at prices based on those ruling at the time of purchase.

    Commonwealth Mineral Resources (Development)
    Mr. E. Johnsonasked the President of the Board of Trade what consultations he has had with other Commonwealth Governments regarding the development of the mineral resources of the Commonwealth; and if he will make a statement.
    Mr. Cooperasked the President of the Board of Trade the policy of Her Majesty's Government for the development and exploitation of the mineral resources of the British Commonwealth and Dependencies.
    Mr. P. Thorneycroft: We are anxious that important mineral resources of the Commonwealth and the Dependencies should be developed as far and as fast as is economically feasible. Mineral development was one of the subjects considered at the Commonwealth Economic Conference of 1952. Since then the Commonwealth Economic Committee has made a study of raw materials and expects to report to Governments within a few months.
    Mr. Johnson: Will my right hon. Friend press on with these studies as far as possible because it seems to be tremendously important for Commonwealth Governments to give a helping hand to enterprise of this kind? Would that not avoid uneconomic development of our resources, and ensure that the greatest possible use is made of them, where it is economic to do so?
    Mr. Thorneycroft: I think that the report will serve a useful purpose.
    Mr. Bottomley: Can the right hon. Gentleman say whether an interim report will be presented to the forthcoming meeting of Commonwealth Prime Ministers?
    Mr. Thorneycroft: Not by that Committee; it will be separate.

    Cotton Yarn and Cloth (Imports and Exports)
    Mr. Haleasked the President of the Board of Trade to what extent the recent agreement on tariffs and trade will affect imports and exports of cotton yarn and cloth.
    Mr. P. Thorneycroft: We have not for our part undertaken any reductions in the United Kingdom tariff on cotton yarn and cloth. I am circulating in the OFFICIAL REPORT particulars of the concessions made by other countries affecting our exports.
    Mr. Hale: Does that mean that the matter does not affect the vital problems

    Tariff Item No.

    Description

    Currently applied rate

    Previous G.A.T.T. maximum rate

    New G.A.T.T. maximum rate

    GERMAN FEDERAL REPUBLIC

    5504

    Cotton yarn, not put up for retail sale:

    A. Single (not multiple cabled or corded) whether or not double spun:

    14 per cent. except for imports within the limits of the duty quota for pure cotton yarns for which the rate is 8 per cent.

    14 per cent.

    12 per cent.

    ex 1 Unbleached, not less than 99 but under 173 metric count. 2 not less than 173 metric count.

    6 per cent.

    9 per cent.

    6 per cent.

    NORWAY

    51

    Cotton fabrics, including duck, undyed and un-bleached, minimum weight 180 grammes per quarter square metre.

    10 per cent.

    10 per cent. but not less than kr. 0·30 per kilo.

    8½ per cent.

    ex65b

    Bed ticking, entirely of one colour or bleached, except waxed cambric weighing more than 135 grammes per square metre.

    kr. 1·20 per kilo

    Not bound

    16 per cent. But not less than kr. 1·20 per kilo.

    ex 70

    Bed ticking, unbleached except waxed cambric weighing more than 135 grammes per square metre.

    kr. 0·70 per kilo.

    18 per cent. but not less than kr. 0· per kilo.

    16 per cent. but not less than kr. 0· per kilo.

    SWEDEN

    ex 503

    Gauze bandage cloth, bleached or dyed in one colour, weighing less than 75 grammes per square metre.

    12 per cent.

    18 per cent.

    16 per cent.

    Cotton fabrics uniformly woven weighing less than 100 grammes per square metre with more than 60 warp and weft threads per square centimetre.

    ex 505

    unbleached and undyed weighing less than 75 grammes per square metre.

    12 per cent.

    18 per cent.

    16 per cent.

    ex 506

    bleached or dyed in one colour, weighing less than 75 grammes per square metre.

    12 per cent.

    18 per cent.

    16 per cent.

    which Lancashire has had for a long time, and that there will be no diminution in our imports of Indian cloth?
    Mr. Thorneycroft: What it means is that we have not reduced our tariff on cotton cloth.
    Mr. Bottomley: Can the right hon. Gentleman say whether we are likely to have a debate on the recent negotiations at Geneva on G.A.T.T.?
    Mr. Thorneycroft: No doubt that matter will be pursued through the usual channels.
    Following are the particulars:

    Tariff Item No.

    Description

    Currently applied rate

    Previous G.A.T.T. maximum rate

    New G.A.T.T. maximum rate

    SWEDEN—cont.

    511

    Non-uniformly woven fabrics weighing less than 100 grammes per square metre:

    unbleached and undyed

    12 per cent.

    Not bound

    16 per cent.

    UNITED STATES OF AMERICA

    901(a)

    Cotton yarn including warps, in any form, not bleached, dyed, coloured, combed, or plied:

    of numbers not over 60

    5 per cent. and, in addition thereto, for each number 0·25 per cent. 20 per cent.

    Currently applied rate

    4½ per cent. and, in addition thereto, for each number 0.225 per cent.

    of numbers above 60

    20 per cent.

    Currently applied rate.

    18 per cent.

    901(b)

    Cotton yarn including warps, in any form, bleached, dyed, coloured, combed or plied:

    of numbers not over 60

    10 per cent. and, in addition thereto for each number 0·25 per cent.

    Currently applied

    9 per cent. and, in addition thereto, for each number 0.·225 per cent.

    of numbers not over 60

    25 per cent.

    Currently applied

    22½ per cent.

    NOTES

    GERMANY:

    Cotton yarns, for German customs purposes, consist only of yarns containing more than 50 per cent. cotton.

    UNITED STATES:

    The reductions in United States duties will be effected by two equal annual instalments.

    Hire-Purchase and Hiring Agreements
    Mr. Haleasked the President of the Board of Trade whether he is aware that firms in the north of England are selling wireless and television sets on a hire-purchase agreement which provides that when the whole of the purchase money and interest is paid the property in the set shall remain in the retailers; and whether he will amend his hire-purchase Regulations to prevent this evasion of the spirit of the present Regulations.
    Mr. P. Thorneycroft: The hon. Member would appear to be referring to hiring agreements. A control over hiring was introduced in February this year to supplement the restrictions on hire purchase.
    Mr. Hale: Is the right hon. Gentleman aware that I am not referring to a hiring agreement? I am referring to an ordinary hire-purchase agreement, where a man paid the whole of the purchase price in eighteen monthly instalments and then found that there was a small clause at the end which retained the ownership in the firm, namely, Lloyds of Manchester, to whom I have sent the relevant correspondence, and who admit that this was the practice they were carrying out? Will the Minister do something about it?
    Mr. Thorneycroft: I think that we are at cross-purposes. I am anxious to give a fair answer to the hon. Gentleman's Question. I will have a word with him, and perhaps he will explain the exact point that he has in mind.

    Brazilian Exchange Rates
    Mr. Leatherasked the President of the Board of Trade if he is aware that a recent change in Brazilian currency exchange rates has nullified the tariff preference negotiated for Commonwealth bananas; and what steps be proposes to restore the position.
    Mr. P. Thorneycroft: I would refer my hon. Friend to the Answer given on 5th June to a Question on this subject by my hon. Friend the Member for Wembley, South (Mr. Russell).
    Mr. Leather: Why does my right hon. Friend want to wait and see? This is a simple matter of arithmetic. The juggling in the exchange rate precisely equals the preference negotiated. Surely we are not
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    going to wait until irreparable damage has been done to this year's sale of the West Indies banana crop before we take action?
    Mr. Thorneycroft: This is a matter of arithmetic but not a simple matter of arithmetic. I would prefer to wait and see how these matters work out before giving any final answer.
    Mr. Bottomley: This matter was raised last week, when we impressed on the Minister that it was one of urgency. Surely some action has been taken about it, and the Minister should be in a position to tell us what it is?
    Mr. Thorneyeroft: Brazil did consult the International Monetary Fund before making this alteration.
    Mr. Leather: Is my right hon. Friend aware that this banana crop will be coming on the market within a very few months, and if we wait until then it will be too late and the whole crop will be ruined, and our good faith will be very greatly prejudiced in the eyes of the West Indies Government?
    Mr. Thorneycroft: I have these matters in mind.
    Mr. Bottomley: It is no use the Minister saying that Brazil consulted the International Monetary Fund. This House gave approval to a Resolution which gave concessions to Brazil provided that she did not do anything of this kind, but, surely, now that Brazil has done it, we ought to take action against her?
    Mr. Thorneycroft: I am bearing these matters in mind. I am aware of the effect that this step has on the preferential position, and I will take into account the observations made.

    Sherman Tank Spares (Export)
    Mr. Doddsasked the President of the Board of Trade the total value of new and second-hand Sherman tank spares authorised for export by his Department under Licence No. 17B/6431/55; to whom it was issued; on what date the first consignment under this licence left this country; when the order will be copleted; and the country of destination.
    Mr. P. Thorneycroft: I do not think that it would be proper to disclose details about transactions authorised under particular export licences.
    Mr. Dodds: Can the right hon. Gentleman deny that the licence was issued for nearly £400,000 worth of new and second-hand Sherman tank parts, and that these have gone to Egypt? If the right hon. Gentleman cannot deny that, will he say why we are being so helpful to a country which is so hostile to us on every occasion? Will he also explain why the Government did not sell the parts themselves at proper prices rather than sell them to a dealer at give-away prices?
    Mr. Thorneycroft: This licence was issued in the ordinary way and under Government supervision.
    Viscount Hinchingbrooke: Is my right hon. Friend aware that it is better to have British rather than Russian tanks in Egypt?
    Hon. Members: Why?

    Economic Survey (U.S.A.)
    Mr. Ellis Smithasked the President of the Board of Trade (1) if he has given consideration to the report entitled "Overseas Economic Surveys, United States of America "; and what action he has taken or proposes to take;
    (2) what specific action he proposes to take on the suggestions contained in pages 148, 149 and 150, in the Report entitled "Overseas Economic Surveys, United States of America."
    Mr. P. Thorneycroft: Yes, Sir. This survey was published by the Board of Trade and given full publicity, and I am glad to see that it received a good report in the Press. My Department constantly advertises the Government services available to exporters to the United States and the export opportunities which exist there.
    Mr. Ellis Smith: Does the President not admit that this is an excellent document, and do we not owe it to those who compiled it to take more resolute action than we appear to have done up to now? Is the right hon. Gentleman further aware that large-scale industry takes advantage of the excellent Government service provided through the export credit scheme, but that smaller-scale industry has no means of taking advantage of it? Is it not up to his Department to see that the service is given freely to all?
    Mr. Thorneycroft: I am very grateful to the hon. Gentleman for the compli-
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    ment that he pays to the Board of Trade on the provision and advertising of documents of this kind. I think that they serve a useful service.
    Mr. Ellis Smith: But what resolute action is the President going to take in order to see that the advice in the document is carried out?
    Mr. Thorneycroft: We produced the document and we circulate and advertise it widely, but, of course, we cannot undertake those rigorous forms of control which the hon. Gentleman has in mind. We are limited to advice.
    Mr. Ellis Smithasked the President of the Board of Trade what specific action he proposes to take in regard to the suggestions made in page 146 of the Report entitled "Overseas Economic Surveys, United States of America," about china and earthenware in regard to the demand for simple patterns and shapes.
    Mr. P. Thorneycroft: The British Pottery Manufacturers Federation is aware of the suggestion referred to by the hon. Member. Action in regard to it is a matter for the commercial judgment of the firms concerned.
    Mr. Ellis Smith: In view of the serious economic position of this country, has not the time arrived when it should be Government responsibility to stimulate a drive in industry, and are not the proposals contained in this report complete confirmation of those of us who have been advocating this suggestion for a long time? Will the right hon. Gentleman now give an undertaking that he is going to put some drive behind proposals of this kind?
    Mr. Thorneycroft: The suggestion referred to was that there was a new demand for simpler patterns and shapes and that it is here that the possibility of expanding the United Kingdom market may lie. That is probably true, but this is a matter for the pottery manufacturers to pay attention to rather than for the hon. Gentleman or myself.

    Development Areas (Government-Financed Factories)
    Mr. Jayasked the President of the Board of Trade at what date the Government decided to defer consideration of all

    219
    proposals for the provision of new Government-financed factories in Development Areas.
    Mr. P. Thorneycroft: No decision to defer all these cases has been made. As indicated, however, by my hon. and learned Friend the Parliamentary Secretary in a reply to the right hon. Member for Huyton (Mr. H. Wilson) on 5th June, the Government have over the past few months been considering their policy with regard to the rate of expenditure on factory building under the Distribution of Industry Act and have arrived at the conclusions which my hon. and learned Friend stated.
    Mr. Jay: Can the President tell us when they arrived at that conclusion, and why they did not announce it to the House? Can he really assure us that in the case of important new schemes for public investment in new factories in areas which really require new industries he is not going to veto it just to show a financial saving?
    Mr. Thorneycroft: The Government announced their policy properly through my hon. and learned Friend the Parliamentary Secretary on 5th June. If economies are to be made, as I believe they must be, then that means some adaptation in policy in order to achieve those economies.
    Mr. Jay: Does the right hon. Gentleman really say that it is an economy to refrain from building a new factory for some important industry in an area that needs it?
    Mr. Thorneycroft: In the Board of Trade the principal expenditure is in the form of materials for all types of building. If economies are to be made, alterations or adaptations of policy must also be made, and I make no apology for economising in Board of Trade expenditure.

    Herrings (Exports to Czechoslovakia)
    Mr. M. Lindsayasked the President of the Board of Trade what quantity of herrings were to be sent to Czechoslovakia under the 1955 barter agreement; and what proportion has actually been sent.
    Mr. P. Thorneycroft: Six thousand barrels of cured herrings and 1,000 tons
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    of klondiked herrings. Two thousand three hundred barrels and 100 tons, respectively, have so far been exported. The balance will be made up from the 1956 catch.

    Works of Art (Export)
    Mr. Vaneasked the President of the Board of Trade why he has amended the open general licence affecting the export of works of art.
    Mr. P. Thorneycroft: The licence was amended in order to raise from £100 to £500 the value at which works of art may be exported to non-sterling destinations. The value limit is now the same for the non-sterling area as for the sterling area.
    Mr. Vane: May I ask my right hon. Friend what particular reason he has for doing this because, surely, he does not want to encourage the export of works of art?
    Mr. Thorneycroft: In principle, I think the same level should apply to both the sterling and the non-sterling area, and this change merely brings them into line. The difference was originally used for some exchange control purpose.

    Apple Imports
    Major Legge-Bourkeasked the President of the Board of Trade what steps he is taking to ensure that imports of apples in the coming season, especially those from Italy, do not prevent home growers from disposing, at fair prices, of their crops which are expected to be unusually large.
    Mr. P. Thorneycroft: The purpose of the restrictions on imports of apples from non-sterling sources is not to keep up prices but, as I have explained on previous occasions, to limit expenditure of foreign exchange.
    Major Legge-Bourke: Would my right hon. Friend bear in mind that this year, next year, and probably the year after that, more and more new apple trees will be coming into production as the result of growers having answered the appeal of previous Governments to increase their output, and will he make sure that, as a result of the growers having answered the appeals of other Governments, they will not be let down by this Government?
    Mr. Thorneycroft: So far as quota restrictions are concerned, I am, of course, limited to quotas for balance-of-payments reasons.

    Burma
    Mr. Sorensenasked the President of the Board of Trade, in view of the substantial increase of imports into Burma from Communist countries during the past twelve months, to what extent these have replaced Burmese imports of British goods; and if he is satisfied that everything possible is being done to ensure maximum trade between the United Kingdom and Burma.
    Mr. P. Thorneycroft: Burma has substantially increased her purchases from Communist countries as a result of her barter arrangements with them. Some part of these purchases would not otherwise have been made at all from any country, but as regards the rest the purchases do affect Burma's imports from us and from other countries outside the Communist bloc. As the greater part of Burma's rice sales are still made for cash to the free world, we have recently made representations to the Government of Burma pressing them to permit the import under non-discriminatory trading conditions of at least a fair proportion of Burma's requirements of all classes of goods.
    Mr. Sorensen: Can the Minister state whether, in fact, those representations have had any effect and, if so, what is likely to be the result in the coming twelve months?
    Mr. Thorneycroft: I hope that they will have an effect.

    Czechoslovakia (Aircraft Engines)
    Mr. Parkinasked the President of the Board of Trade whether, in view of the fact that aircraft engines of Czechoslovak manufacture are now being imported into this country, he will remove the embargo on export to Czechoslovakia of modern machines for the manufacture and testing of aircraft engines.
    Mr. P. Thorneycroft: Two small piston engines have been imported from Czechoslovakia. The export control covers machines for the manufacture and testing of jet engines. These items are not really relevant to one another.
    Mr. Parkin: Is the Minister not aware that these imported Czech engines appear to be very attractive to manufacturers of small aircraft in this country? That seems to be an indication that the aircraft industry in Czechoslovakia is in a fairly good state. While recognising that the right hon. Gentleman personally is not responsible for all the nonsense of these Regulations, will he not at least express a hope that they will soon be made a little more rational than they are now?
    Mr. Thorneycroft: Without going into the bigger issues involved, I would say that I do not think the fact that we have imported two small piston engines is really relevant to the question whether we put a strategic control on machines for testing modern jet engines.

    Exports to China (Agricultural Tractors)
    Sir R. Boothbyasked the President of the Board of Trade what restrictions are now imposed upon the export of agricultural tractors to China.
    Mr. P. Thorneycroft: Agricultural tractors are on the China embargo list, but licences will be granted in appropriate cases under the exceptions procedure.
    Mr. Hector Hughes: Is the President aware that there are indirect restrictions, due to the bad allocation of steel, which are doing a great deal of harm to our export trade, and will he look into that aspect of this problem?
    Mr. Thorneycroft: There is no allocacation of steel by Her Majesty's Government.

    Radio Cabinets (Imports from Western Germany)
    Mr. Sorensenasked the President of the Board of Trade what was the increase in the importation of radio, radiogram, and television cabinets from Western Germany in 1955, compared with 1954; and whether the quantity has further increased this year.
    Mr. P. Thorneycroft: These cabinets are not specified in the Trade Returns.
    Mr. Sorensen: Is it not a fact that a certain number of these articles or commodities are coming into this country? Would the President say why they are

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    able to compete with production of the same kind of goods in this country, even though there is this 25 per cent. tariff upon them?
    Mr. Thorneycroft: I am sure that there are some coming in; but there is, I think, a 20 per cent. ad valorem tariff, which seems an adequate protection for the British manufacturer.

  NATIONAL FINANCE

    Czechoslovakia (Gold and Debt)
    Mr. Pargiterasked the Chancellor of the Exchequer the value of the gold deposited in this country by the Czech Government and subsequently handed over to the Hitler Government of Germany; what restitution is now being made to Czechoslovakia; and what repayment is being demanded from the present German Government.
    The Chancellor of the Exchequer (Mr. Harold Macmillan): I assume that the hon. Member is referring to gold which was held by the Bank of England to the order of the Bank for International Settlements, and dealt with in 1939 in accordance with the latter's instructions. After the war, the Czechoslovak Government claimed that as a result of this transaction about 23,000 kilograms of Czechoslovak monetary gold—worth about £6 million at 1939 values—came into the possession of the Reichsbank. As a signatory of the Paris Reparation Agreement of January, 1946, Czechoslovakia accepted the method of restitution of monetary gold laid down in Part III of the Agreement, and has since presented claims on this basis to the Tripartite Gold Commission. The last part of the Question does not therefore arise.
    Mr. Pargiter: Surely, having regard to our responsibility in this matter originally, whatever the expediency at the time, does not the Chancellor think that some restitution ought to be made somehow to the Czech people?
    Mr. Macmillan: Since that time, there has been an agreement, made in 1946. Negotiations are now going on as a result of that agreement, and I think I would prefer, in accordance with practice, not to make a statement while the negotiations are going on.
    Mr. Pargiterasked the Chancellor of the Exchequer the amount of the debt incurred by Czechoslovakia to this country for the maintenance and equipment of Czech forces who fought with us; and whether, in view of our failure to enforce reparations on our former enemies, he will now forgive this debt.
    Mr. H. Macmillan: Nearly £201 million, of which £6½ million was written off as mutual aid. In September, 1949, as part of a comprehensive settlement covering outstanding claims between the two Governments, the Czechoslovak Government undertook to repay the balance of about £14 million over the period 1949 to 1965. I see no reason why the obligation to pay this sum should be waived.
    Mr. Pargiter: Having regard to the fact that, generally speaking, we have been, shall we say, fairly generous to our former enemies, should we not be a little more generous to these people, who were fighting with us, in connection with debts which they incurred in this country due to the fact that we were equipping forces which were fighting with us?
    Mr. Macmillan: Of course, we try to be generous, but this agreement was freely made in 1949, four years after the war. There is a period of sixteen years for payment, and I think it would be reasonable to expect that this obligation should be continued.
    Mr. Pargiter: It is scarcely a question of the period, but rather one of principle.
    Mr. Macmillan: The question of principle is that the Czechoslovak Government agreed to pay, and I have no doubt that they will carry out their promise.

    Dawes and Young Loans
    Pargiterasked the Chancellor of the Exchequer the amount of the original Dawes and Young loans subscribed by this country to Germany; how much has been repaid; and whether any repayments are now being made.
    Mr. H. Macmillan: The amount subscribed by this country was £12 million in each case. Dawes and Young bonds to a face value of £2,841,400 and £825,700 respectively have been repaid. No repayments of capital are at present being made, but current interest is being paid. Sinking funds for the redemption of the loans are to be set up in 1958.
    Mr. Pargiter: Is it the intention that Germany should repay these loans, or that she should continue to evade her responsibilities?
    Mr. Macmillan: No; the Germans are paying interest, and I have no reason to suppose that they will not carry out their obligation to set up the sinking funds, as agreed, in 1958.

    One-man Companies (Tax)
    Mr. Marquandasked the Chancellor of the Exchequer what change of practice there has been in the treatment of one-man companies with regard to Surtax direction since the statement of practice made by the then Chancellor of the Exchequer on 22nd July, 1948.
    Mr. H. Macmillan: There have been no changes in the general practice to which the right hon. Gentleman refers.
    Mr. Marquand: Does the Chancellor not think that, after all these years have elapsed, it would be a good thing to review this practice, especially the exemption from direction for Surtax of those companies which made no dividend distribution before 1947?
    Mr. Macmillan: Of course, all these matters are kept in review, but the practice has, so far as I know, worked satisfactorily since it was first laid down by the Chancellor in that year, 1948.
    Mr. Marquand: While it has no doubt worked satisfactorily and no wrong practices have been taking place, is it not very surprising that no payment whatsoever of dividend should be regarded as a reasonable practice, after all this length of time?
    Mr. Macmillan: There are very varied considerations in that. The practice is carried out by the Special Commissioners in accordance with that arrangement which was made. So far as I know, there has been no accusation that there has been any malpractice under it.
    Mr. Marquandasked the Chancellor of the Exchequer whether one-man companies formed or registered after 22nd July, 1948, are treated in the same way as similar companies existing before that date, when the provisions of Section 21 of the Finance Act, 1922, or Section 245 of the Income Tax Act, 1952, are applied.
    Mr. H. Macmillan: I would refer the right hon. Gentleman to the reply which I gave to my hon. Friend the Member for the Cities of London and Westminster (Sir H. Webbe) on 25th April last, of which I am sending him a copy.
    Mr. Marquand: While thanking the right hon. Gentleman for sending me a copy of that reply, which I have not seen, may I ask whether he appreciates that there is a feeling among small businessmen who are trying to plough back their profits for the expansion of their businesses that there is some discrimination against companies formed since 1947, and that those formed before 1947 do, after all these years, have an unfair advantage?
    Mr. Macmillan: This is a highly complicated question of tax procedure. If the right hon. Gentleman would be good enough to have a talk with me about it, I should be very happy to hear his views.

    Industrial Production (Increase)
    Mr. Roy Jenkinsasked the Chancellor of the Exchequer whether he is satisfied with the rate of increase of industrial production over the past twelve months; and whether he will make a statement.
    Mr. H. Macmillan: The rate of increase in industrial production has slowed down in the past twelve months because we have made it harder to sell at home in order to stimulate greater efforts to sell abroad. We need changes in the pattern of production and employment, and production is bound to slow down in some industries while these adjustments take place.
    Mr. Jenkins: Will the Chancellor not agree that the policies of his predecessor and of himself have brought us to a more easily recognisable plateau in this respect than in regard to the index of prices? Will he further tell us whether this stagnation is a sign that the Government's policy is working or a sign that something is wrong and that something new has to be done?
    Mr. Macmillan: I do not think that the hon. Gentleman has any right to regard this as stagnation. There are adjustments to be made. If we are to switch, by whatever method, be it one form of

    227
    control or another, from production for home to production for export, there must be these adjustments.
    Mr. H. Wilson: Does the Chancellor still stand by the views expressed by the Economic Secretary when I questioned him about this matter at Budget time, that he still expects this year to show a net increase in industrial production in this country?
    Mr. Macmillan: I do not remember, perhaps because I was not present, what the Economic Secretary said; but I am sure that everything he said is very wise and is very likely.

    Sterling (Exchange Rate)
    Mr. Roy Jenkinsasked the Chancellor of the Exchequer to what factors he attributes the recent weakness in the exchange rate for sterling.
    Mr. H. Macmillan: Quotations of the official rate for sterling since I took office have been as follows:

    30th December, 1955

    2·80 5/16

    11th May

    2·80⅞

    25th May

    2·80 11/16

    5th June

    2·80⅛

    6th June

    2·80¼

    7th June

    2·80⅜

    8th June

    2·80 7/16

    The rate yesterday was 2·80 7/16.
    These minor fluctuations are due to a number of factors, which I would find it an unprofitable exercise to try to anaylse.
    Mr. Jenkins: Will the Chancellor not agree that the figures which he has just given to the House are highly confusing, and will he not further agree that there was, a week or so ago, a weakness, widely commented upon, both in the official rate and in the transferable rate? Does he attribute that primarily to short-term factors, such as his own Newcastle speech, or to more worrying underlying factors?
    Mr. Macmillan: I am accused first of putting down the rates by my speeches, and then of putting them up again. I wish it were as easy as that.
    Mr. H. Wilson: While we all welcome the improvement in the rate of sterling since this Question was, in fact, put down—I do not attribute any causality to that—is the right hon. Gentleman not aware that it has been widely said during the
    228
    last week, among Conservative newspapers as well as in other quarters, that some of these very expensive speeches we have had to suffer recently in this country have been responsible for a feeling here and abroad that the Government are abdicating all sense of economic responsibility?
    Mr. Macmillan: I am sorry for anything which may happen between the time a Question is put down and when it is answered. Those are, of course, inconveniences to which we are all subjected. If the right hon. Gentleman can bear a little good news—I have to be careful, because I have to keep a balance between being too optimistic and too defeatist—I would tell him that reserves have risen during this period I referred to—since December—by £89 million. If he can bear a little more good news, I will tell him that if he would read the tape today he would see the best trade figures which have been announced for a very long time.

    Covent Garden Opera House(Grant)
    Mr. G. Jegerasked the Chancellor of the Exchequer whether he is aware of the financial loss last year at the Covent Garden Opera House; and whether he will make an addition to the grant to the Arts Council for the specific purpose of increasing the subsidy to the Opera House.
    Sir R. Boothbyasked the Chancellor of the Exchequer whether he will increase the subsidy to the Royal Opera, Covent Garden, from £250,000 to £350,000.
    Mr. Jannerasked the Chancellor of the Exchequer whether his attention has been called to the report of the Royal Opera House, Covent Garden, which indicates that this undertaking needs £100,000 a year more as a grant-in-aid from the Government if it wishes to continue to function at the present standard; and what action he proposes to take in the matter.
    Mr. H. Macmillan: Covent Garden Opera House has made losses every year since it reopened after the war. Towards covering these losses £1,778,000 has been provided from public funds, and a smaller sum has been borrowed on overdraft.

    229
    The grant-in-aid which I propose for the Arts Council this year is the amount shown in the Estimates, £885,000. It is for the Arts Council to divide this sum as it thinks best between Covent Garden and the many other organisations which it supports. I understand that the Arts Council has decided, in the fullest knowledge of Covent Garden's financial position, that its grant to Covent Garden this year should be £270,000, which is £20,000 more than was given last year.
    Mr. Jeger: But does the right hon. Gentleman not appreciate that we treat the arts in this country in much more beggarly fashion than do many other countries whose budgets are smaller than ours and who have less pretensions to culture than we have? Will not the right hon. Gentleman increase the grant to the Arts Council this year with the definite proviso that it should go towards the upkeep of Covent Garden?
    Mr. Macmillan: No, Sir. I think that this system of using the Arts Council as the governing machinery is one which has worked since the war, and on the whole is the best one. The amount that can be given in any one year has always to be a matter of discussion, but I am happy to feel that this increase is coming to Covent Garden from the Arts Council.
    Mr. K. Thompson: Is my right hon. Friend aware that in the Provinces there is a very firm feeling that far too large a proportion of Arts Council money is gobbled up in London? Will he give the Arts Council advice to ensure that these resources are properly distributed over the whole country?
    Mr. Macmillan: That shows how wise is was for me and my predecessors to use the Arts Council to distribute this money.
    Mr. Snow: Further to the point about provincial interests, is it not a fact that English art has a right to be encouraged?
    Mr. Macmillan: Yes, Sir, and it is, to the extent that £885,000 can encourage art.
    Mr. Snow: Mostly to bring German artistes to Covent Garden.
    Sir B. Baxter: Whilst agreeing that Covent Garden must inevitably run at a loss, may I suggest that some inquiry should be made into the artistic direction of Covent Garden? Is my right hon.
    230
    Friend aware that there are many who believe that it is not being directed as well and as shrewdly as it should be?
    Mr. Macmillan: Yes, Sir, but I still rather wonder whether the Treasury is the right body to conduct that inquiry.
    Mr. Isaacs: I do not want to strike any jarring note, but if people do not want to pay to go to see these things, why should the country give money away to support them?

    Building Licensing and Import Control
    Mr. H. Wilsonasked the Chancellor of the Exchequer (1) whether, in view of the continued strain to which the economic system is subject, he will now introduce legislation to enable Her Majesty's Government to control less essential building developments;
    (2) whether he will now reinforce his existing policies for the support of sterling by introducing control over less essential imports.
    Mr. Hunterasked the Chancellor of the Exchequer whether, with a view to strengthening the Government's financial and economic policy, he will now reintroduce building licences.
    Sir R. Boothbyasked the Chancellor of the Exchequer whether he will introduce legislation to enable him to bring private building under control.
    Mr. H. Macmillan: I made my position clear in the debate on the economic situation on 20th February. In my view these matters should be decided on practical and not on doctrinal grounds. This is the principle of the Middle Way, from which I have never swerved.
    Mr. Wilson: But is the right hon. Gentleman aware, in respect of building licensing, that despite the harsh measures which he has introduced, in many directions, of monetary control, there is still an overload on the national economy, caused partly by inessential building? If he were to apply practical considerations to the matter, would he not apply control to that rather than to essential building which he has stopped?
    Mr. Macmillan: There are practical considerations, and those are the ones that I have tried to apply. There is a balanced

    231
    argument here. I have heard a great deal about the expenditure on petrol pumps, for example, but the actual expenditure in the last year of control was £4 million and last year was £7 million. When it is remembered that there are twice the number of cars that there were in 1939, there is a certain argument there. The total of private and miscellaneous building amounts to about 8 per cent. of the whole, but I am not denying that it might be convenient to have this weapon in our internal armoury under certain conditions. All I say is that I try to judge these matters on a practical and not a dogmatic basis.
    Sir R. Boothby: Would the right hon. Gentleman not agree that in our present rather difficult economic situation it is not justifiable to continue to build such things as offices, dwelling-houses and petrol pumps without any limit whatsoever? Would it not really be desirable to take powers, even if they were very moderately exercised, to prevent completely wasteful expenditure?
    Mr. Macmillan: Yes, Sir, but as my hon. Friend knows, and as I have said, while I do not deny that it might be useful to have this weapon in our armoury, it would require legislation and, so far as I can see, we have quite a lot of legislation to get through.
    Mr. Hunter: Is the right hon. Gentleman aware that some newspapers which support the Government have reported that he is considering reintroducing building licences as an aid to his economic and financial policy? Are we to take it that the right hon. Gentleman's replies are a denial of those newspaper reports?
    Mr. Macmillan: I have referred to what I said in the debate on 20th February, and I stick to it. I said then:
    "I do not think that either side of the House was very much enamoured of the building control. But I have not ruled it out of my thoughts."—[OFFICIAL REPORT. 20th February, 1956; Vol. 549, c. 46.]
    Mr. Wilson: Import licensing was the subject of a separate Question on the Order Paper, answered, I think, by the President of the Board of Trade; but is the Chancellor aware that, although there has been a small improvement in our gold and dollar reserves, that improvement has taken place during an extremely favourable time in world markets in which other
    232
    countries have been increasing their reserves very much faster? Would the right hon. Gentleman not think it right in these conditions, facing difficulties perhaps later in the year, to introduce at any rate a small measure of import control in addition to what he already has in operation?
    Mr. Macmillan: One has to remember that about one-fifth of our imports are today subject to licensing restriction. When I am told that this is a kind of contest between laisser-faire and dirigisme, it is worth while remembering that one-fifth of our imports are controlled, that one cannot borrow £10,000 in the market without Treasury permission and that hire purchase is controlled. We have a large measure of control, as a modern Government must have, over parts of the economy. We must remember also that internal controls are one thing, but when we consider the question of plunging in, regardless of all that has been done in the last ten years to free trade and to liberalise trade throughout the world, I think that it is a very big question as to whether we should rashly jump into import rationing on a wide scale.
    Mr. Wilson: Whilst welcoming at any rate this change of tone on the part of the Chancellor, if not a change of heart, may I ask whether he will recall that, when this point has been raised before, his colleagues have always replied that any amount of import licensing would involve rationing, even when we have proposed controls over the most inessential dollar imports? Since the right hon. Gentleman now maintains, as he admits, this panoply of control over imports, without rationing, will he not consider the directions in which he could profitably expand it?
    Mr. Macmillan: My position is exactly as I said on 20th February, when we debated this matter at great length. If I had the slightest temptation to take a more optimistic view because of the rise in reserves and the benefits of the trade situation, I should be corrected by he eternal pessimism of the right hon. Gentleman.

    Government Expenditure (Economies)
    Mr. Lewisasked the Chancellor of the Exchequer if he is now in a position to give details of the manner in which the

    233
    Government intend to save £100 million in the current financial year.
    Mr. H. Macmillan: No, Sir; but I hope to make a statement shortly.
    Mr. Lewis: When he makes that statement will the right hon. Gentleman see to it that there is no cut in the National Health Service, such as is being rumoured or suggested, particularly in view of the fact that we have had an independent Report which stated that the Health Service should not be cut but that there should be some extension of financial support to it? Is the right hon. Gentleman aware that the depreciation in the value of the £ is affecting the Health Service just as it is affecting everyone? In view of that fact, should there not be increased financial support for the Health Service?
    Mr. Macmillan: Of course I shall take carefully into account all that the hon. Gentleman has said.

    Driving and Traffic Examiner Candidates (Interviews)
    Sir D. Robertsonasked the Chancellor of the Exchequer why it was necessary to bring 800 candidates for driving and traffic examiners appointments in the Ministry of Transport and Civil Aviation to London for interview by the Civil Service Commission between 28th September, 1955, and 12th April, 1956, including Scottish candidates who had already passed their driving tests in Edinburgh.
    Mr. H. Macmillan: Interviews in Edinburgh and London were considered to be the most efficient and economical method of selection for a large number of candidates scattered all over the country. Between the dates mentioned 661 candidates were interviewed after taking their driving tests. Thirty-eight of these were candidates in Scotland, thirty-three of whom were interviewed in Edinburgh. Five candidates, whose driving tests in Edinburgh could not be held before the interview board there had finished its sittings, were seen in London.
    Sir D. Robertson: Does not this Question reveal a wastage which is rather typical of the times in which we live? Would my right hon. Friend not take another look at the matter, and realise that great cities such as Birmingham, Cardiff, Edinburgh and Glasgow are
    234
    quite capable of interviewing candidates for jobs of this nature?
    Mr. Macmillan: I will certainly look into it.

    Trinidad Oil Company
    Mr. Cooperasked the Chancellor of the Exchequer, in view of the loss in sterling which will accrue to the sterling area on the take-over by the Texas Oil Company of the Trinidad Oil Company, what action he proposes to take.
    Mr. H. Wilsonasked the Chancellor of the Exchequer if he is yet in a position to make a statement about the policy of Her Majesty's Government towards the proposed acquisition by a United States company of the assets of a British oil concern.
    Mr. Gresham Cookeasked the Chancellor of the Exchequer (1) if he would arrange to acquire a majority holding in Trinidad Oil Company Limited, along the lines of the holding in British Petroleum;
    (2) if he will use part of the resources which the Government have in British Petroleum Company Limited to finance a British group or consortium to take a majority holding in Trinidad Oil Company Limited.
    Mr. Emrys Hughesasked the Chancellor of the Exchequer what action he has taken to prevent the sale of the shares of the Trinidad Oil Company to United States interests.
    Mr. H. Macmillan: The matter is still under consideration, but I hope to make a statement shortly.
    Mr. Cooper: Will my right hon. Friend bear in mind that the estimated loss to the sterling area, if this transaction is allowed to go through, is from £2 million to £3 million a year, and will he consider this matter with the utmost care before permitting any scheme to be carried through which seeks to nibble away at our already slender reserves?
    Mr. Macmillan: All these questions, of course, must be most carefully considered, and they are being considered, with a lot of rather complicated issues which surround this whole problem.
    Mr. Hughes: Could the right hon. Gentleman tell us whether he has offered to lease the plateau of stability to the Texas Oil Company?
    Mr. Macmillan: No, I think that will be so fruitful that I prefer to keep it in Britain.
    Mr. Wilson: Now that the Chancellor has had more time to look more carefully into this matter, is he satisfied that he has the powers to veto this deal if he decides that it is in the national interest to veto it? While he is considering all the possibilities—and we hope that he will come to a decision very quickly indeed—will he bear in mind the feasibility of making it possible for the company to pass into the control of the Government of Trinidad, or, if there is to be a take-over bid, into the hands of the British Petroleum Co.?
    Mr. Macmillan: These matters are being considered.
    Mr. S. N. Evans: Would it not be a good thing to debate this matter before a decision is taken? Is the Chancellor aware that, for example, the Texas company is the most volatile partner in Aramco, without whose money anti-British propaganda in the Middle East, in the Persian Gulf, would not be financed? Should not that be taken into account during the negotiations?
    Mr. Macmillan: All these matters, of course, are being considered, but I do not think we should gain by a debate before the Government are able to set out their decision.
    Mr. Nicholson: Has my right hon. Friend any information whether other Trinidad oil companies are in the same predicament?
    Mr. Macmillan: I do not quite know what the word "predicament" covers, but all these relevant factors have to be taken into account with the Government of Trinidad and with other Governments concerned, and that explains why it is not unreasonable that it should take several days, at any rate, before the Government reach a conclusion on so large an issue.
    Mr. Wilson: Would the Chancellor answer the question which I put to him? Is he satisfied that he has the powers, if necessary, to veto this deal, and if so, do the powers belong to the Government in respect of the articles of association and the lease or in respect of the 1947 and 1952 Acts?
    Mr. Macmillan: There are various powers governing different parts of the deal, which are of a very complicated character. Those powers I shall set out quite precisely when I make my statement.

    Customs Duties (Revenue)
    Sorensenasked the Chancellor of the Exchequer the total amount of revenue derived from Customs duties on articles declared and undeclared, respectively, by passengers into this country during the last available year; to what extent evasion of payment has risen or fallen; whether he is satisfied that large-scale smuggling has declined in recent years; and the general policy pursued by Customs officers in respect of small objects of small intrinsic value brought to this country by passengers from other countries.
    Mr. H. Macmillan: The Customs duties collected on articles declared by passengers and crews arriving in this country during the year ended 31st March, 1956, amounted to about £830,000. Separate figures are not available for undeclared articles seized from passengers.
    Although in the nature of things the extent cannot be determined, there are indications that preventive action has contributed to a reduction of large-scale commercial smuggling in recent years.
    Customs officers have discretion to pass duty-free small souvenirs and other articles of little value imported by passengers.
    Mr. Sorensen: In view of the last part of his Answer, can the right hon. Gentleman indicate whether some kind of criterion exists in determining what should be the approximate value of those commodities, in order to avoid in future any embarrassment on the part of passengers who bring such objects into this country?
    Mr. Macmillan: I think that that would be difficult to do. I think it is the experience of hon. Members that on the whole the Customs officers carry out their duties with great courtesy and great success.

    Canadian Oil Resources (British Investment)
    Mr. Braineasked the Chancellor of the Exchequer how much British capital is invested in the development of Canadian oil resources; and what proportion of this figure is represented by the holdings of the Trinidad Oil Company.
    Mr. H. Macmillan: I regret that I cannot make available information obtained in confidence about a particular company, but the total approved investment in the development of Canadian oil resources was of the order of 110 million dollars from 1950 to 1956.
    Mr. Braine: While, in view of what my right hon. Friend said a moment ago. I do not wish unduly to press him at this stage, may I ask whether he is aware that, while it is obviously desirable to encourage American investment in the Commonwealth, there are many of us who feel that that should not be at the expense of existing British investment, particularly in countries like Canada? Is he further aware that, while the total United States investment in Canada is about four times the British investment, in oil it is about a hundred times greater? Is my right hon. Friend further aware that, in view of that, agreement to a proposed transfer of this kind may be likened to killing the goose which lays the golden eggs, and saying, "It does not matter, for we have a goose dinner"?
    Mr. Macmillan: While I had to answer the Question in the form which I did, because it is the established practice to refuse to make available information obtained by reason of the need to secure approval under the Exchange Control—I think the House realises that it would be very inconvenient if special requests were made available—I can say, without breach of that, that out of this total of 110 million dollars, the amount of capital invested by the company in question in Canada is a very small percentage of the whole.

    £ Sterling
    Mr. Jayasked the Chancellor of the Exchequer what additional steps he is taking to strengthen the defences of the £ sterling.
    Mr. H. Macmillan: I have nothing to add to my Budget speech of the 17th April. There are some indications that our general policies are beginning to succeed. The important thing is that they should be allowed to operate freely, and that we should not relax our efforts. Voluntary restraint of incomes will serve us better than compulsory restraint of imports.
    Mr. Jay: Is it not the lesson of 1955 and of the other runs on sterling in recent years that it is wise to act early? As the Chancellor tells us that he has no dogmatic objection to control—to the obvious dismay of his supporters—would it not be wiser to take now some of the additional powers which have been suggested today?
    Mr. Macmillan: I do not know on quite what experience the right hon. Gentleman draws as to the necessity to act early. Perhaps, he has rather bitter memories. However, I should say that it is exactly what I and my predecessor have done: we have acted early, and if we have, as I think we shall have, the general support of the country, we shall act successfully.
    Mr. H. Morrison: Does the right hon. Gentleman think his belief that the Government's economic policy is succeeding is still impressing the minds of the Conservative electors of Tonbridge?
    Mr. Macmillan: The right hon. Gentleman is a very old friend and colleague, and I should have thought that was not worthy of his best.

    CROWN LANDS (LEGISLATION)
    Mr. Hurdasked the Prime Minister whether he will make a statement about the proposed legislation on Crown lands.
    The Prime Minister (Sir Anthony Eden): Yes, Sir. A Bill on this subject will be presented to the House this week. The Bill will set up the board to manage Crown Lands which was recommended by Sir Malcolm Trustram Eve's Committee. It will also make the Lord Privy Seal and the Secretary of State for Scotland responsible to Parliament for the Crown Estate in future.
    Mr. Hurd: May I wish the Prime Minister many happy returns of the day, and ask him whether, in the case of the administration of the Crown lands, the Government have reached a happy outcome from the difficulties which faced them?
    The Prime Minister: I should riot like it to be thought that my birthday had anything to do with the change concerning Crown lands. It might be rather embarrassing.

    HAZARDS TO MAN OF NUCLEAR RADIATION (REPORT)
    Mr. Elliotasked the Prime Minister when he expects that the Report of the Medical Research Council Committee on the medical aspects of nuclear radiation will be available.
    The Prime Minister: The Report of the Medical Research Council Committee is being published as a Command Paper, and will be available in the Vote Office later today.
    This Report is an important document; it deals with complicated matters which will require careful study by all concerned. For this reason, it is obviously not possible at this stage to make detailed comments on its contents. The Committee's findings about radiation from such sources as the diagnostic use of X-rays will require much detailed consideration with the appropriate scientific, medical and industrial bodies. To the extent that Government Departments are concerned, we are arranging for the necessary studies to be made as soon as possible.
    Mr. Elliot: Is it possible for my right hon. Friend to see that a popular summary of the results is issued, as these documents are very technical and complicated, and difficult for the layman to understand?
    The Prime Minister: I hope I should not be asked to draw up such a summary. It would be a very difficult task for anyone who has seen the document. Of course, this is not a Government publication, in the sense that it is done by a body entirely free from Government control or influence. For that reason, it would be difficult to do as my right hon.
    240
    Friend asks. Perhaps I may suggest that if, after a study of the Report, the House considers what further elucidation, if necessary, it needs, we will then consider what we can do to help.

    ROYAL MARRIAGES ACT, 1772
    Lieut.-Colonel Liptonasked the Prime Minister whether he will submit proposals to the forthcoming Conference of Commonwealth Prime Ministers to amend the Royal Marriages Act, 1772.
    The Prime Minister: It it contrary to normal established practice to discuss in advance the agenda for Commonwealth Conferences. I wish, however, in this instance, to say that Her Majesty's Government in the United Kingdom do not intend to submit any such proposals at the forthcoming Conference.
    Lieut.-Colonel Lipton: Will the Prime Minister bear in mind that this antiquated law unfairly restricts the personal freedom of many people now some distance from the direct line of succession, and that if any changes are to be made, they ought to be made now, before any more instances of individual difficulty arise.
    The Prime Minister: I am aware of the objections which are felt to the machinery of this Act, but I am also very much aware of the divergent views which are held as to what should take its place. In this Commonwealth matter, it would not be right or proper for me to go beyond what I have said.

  HOUSING

    Local Authorities, North Warwickshire
    Mr. Mossasked the Minister of Housing and Local Government what local authorities in north Warwickshire have ceased to build houses for general purposes as a result of the reduction and proposed abolition of Government housing subsidies and increased loan charges; and what local authorities continue to build such houses.
    The Minister of Housing and Local Government (Mr. Duncan Sandys): I am not aware that any of these local authorities have decided to cease building for general needs.
    Mr. Moss: Will the right hon. Gentleman consent now to be made aware that some local authorities have ceased to build for general purposes, and that this decision appears to bear no relationship whatever to housing needs?
    Mr. Sandys: The hon. Member still has not given me any information.
    Mr. Mitchison: Ought not the right hon. Gentleman to find out and publish which local authorities throughout the country have ceased to build council houses? We all know that there are a great many of them, except that the right hon. Gentleman does not seem to have official knowledge of it.
    Mr. Sandys: As the hon. and learned Member knows, now that the allocation system has been abolished local authorities have no obligation to inform me how many houses they intend in future to build until they submit tenders for approval. Since, however, it is of interest and importance to know how things are proceeding, it is my intention to send a circular to local authorities asking them what are their plans for the next year.
    Mr. Mitchison: Will the Minister take steps to publish the results of his circular?
    Mr. Sandys: I have no doubt that the hon. and learned Gentleman will be able to ask me, and I shall no doubt be able to give him the information which he requires. There are no secrets about this matter.

    Birmingham (Overspill Housing)
    Mr. Mossasked the Minister of Housing and Local Government what local authorities in Warwickshire have made a contribution to the Birmingham overspill problem by agreeing to municipal houses being built in their areas by the Birmingham Corporation.
    Mr. Sandys: The Meriden Rural District Council has agreed to the Birmingham Corporation building in its area. In addition, the Corporation is considering proposals made by the Tamworth and Atherstone Rural District Councils.
    Mr. Moss: Can the right hon. Gentleman explain why only one local authority
    242
    has actually done this? What difficulties have existed to prevent the others from doing it also?
    Mr. Sandys: That would involve a very long answer. I have had many discussions with Birmingham and the county councils of the surrounding counties about this problem. There are many difficulties, but I am hopeful that they will be overcome. I am certainly doing everything in my power, not only in regard to Birmingham but in regard to the other big cities with overspill problems, to try to bring about agreement between the exporting cities and the receiving authorities.

    National Coal Board Houses (Rents)
    Mr. Mossasked the Minister of Housing and Local Government what will be the effect upon the average rents of National Coal Board houses of recent changes in Government housing policy.
    Mr. Sandys: Inquiries of this kind should be addressed to the National Coal Board.

  LOCAL GOVERNMENT

    Offa's Dyke Path
    Mr. Parkerasked the Minister of Housing and Local Government the total length of the proposed Offa's Dyke path; for how many miles the necessary rights of way have been obtained; and when the remainder will be opened.
    The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. J. Enoch Powell): The total length of the approved route is 169 miles and public rights of way exist over 125 miles. It is for the local authorities along the route to create public rights of way over the remainder of the route, and I cannot say when this will be completed.
    Mr. Parker: Will the Minister stimulate these authorities to get on with the job?
    Mr. Powell: The responsibility is theirs, and there is certainly no case at the moment for my right hon. Friend considering the use of any default powers.

    Coastal Paths, Cornwall and Pembrokeshire
    Mr. Parkerasked the Minister of Housing and Local Government what progress has been made with the proposed Cornish and Pembroke coastal paths.
    Mr. Powell: Most parts of the two coastal routes in Cornwall are open to the public. The completion of formal agreements where new rights of way are required is proceeding. As regards Pembrokeshire, arrangements have been made covering nearly half of the 64 miles of new path necessary.
    Mr. Parker: How long does the hon. Gentleman expect it will be before these two routes are completed?
    Mr. Powell: I cannot say exactly, but the local authorities are going on with the work.
    Mr. Hayman: Can the Minister say how many miles of the Cornish footpaths remain to be opened?
    Mr. Powell: Not without notice.

    Water Supplies
    Sir F. Medlicottasked the Minister of Housing and Local Government (1) what investigation is being made into means of enabling water used in industry to be re-used to the maximum extent, with a view to avoiding the present and increasing drain on our water resources by industrial users;
    (2) what study is being given to the problem created by the continually increasing quantities of water which are being used both by domestic and industrial users; and what measures are contemplated for increasing the national storage capacity and also for bringing about some economy in the quantity of water used.
    Mr. Powell: I would refer my hon. Friend to the reply which my right hon. Friend gave to the hon. Member for Orkney and Shetland (Mr. Grimond) on 5th June.
    Sir F. Medlicott: Will my hon. Friend bear in mind that the increase in the amount of water used by industry is so enormous that unless there can be some economy, no increase that can be foreseen in the conservation of water will meet the problem? Will he also bear in mind, in regard to our natural water resources, that London alone is drawing no less than 260 million gallons of water
    244
    a day from them, and that these natural resources are being diminished at a rather disturbing rate?
    Mr. Powell: These matters are within the extensive terms of reference within which the Central Advisory Water Committee is working, as my right hon. Friend said.

    Exchequer Equalisation Grants
    Mr. K. Thompsonasked the Minister of Housing and Local Government (1) what progress has been made in his statutory review of the operation of the Exchequer equalisation fund; and if he will make a statement;
    (2) if in view of the anomalies in the distribution of the Exchequer equalisation grant both before and since revaluation, he will introduce legislation to provide for a more satisfactory basis.
    Mr. Sandys: I would refer my hon. Friend to the reply which I gave to my hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman) on 8th May. The review of local government finance referred to in that reply naturally embraces the effects of revaluation as well as the distribution of the Exchequer equalisation grant.
    Mr. K. Thompsonasked the Minister of Housing and Local Government to publish a list showing, for county and non-county boroughs of England and Wales in receipt of Exchequer equalisation grant, the effect of this grant on rate poundage demanded for 1955–56 and for 1956–57.
    Mr. Sandys: Since the Answer contains a large number of figures, I will with permission circulate it in the OFFICIAL REPORT. Non-county boroughs do not receive equalisation grants.
    Mr. Thompson: Is my right hon. Friend aware that these three Questions draw attention to very grave dissatisfaction among most local authorities about the operation of the Exchequer equalisation grant on its present basis? Is he aware that this is a long-standing complaint, and that anything he can do to speed up an improvement in the system will be greatly welcomed by the local authorities concerned?
    Mr. Sandys: Since the revaluation, of course, different authorities are now discontented.
    Following is the Answer:
    The information asked for in respect of all the local authorities who are concerned is as follows:

    EXCHEQUER EQUALISATION GRANTS PAYABLE TO COUNTY BOROUGHS FOR 1955–56 AND 1956–57 EXPRESSED IN TERMS OF RATE POUNDAGE

    County boroughs

    1955–56 (Second estimate)

    1956–57 (Second estimate)

    s.

    d.

    s.

    d.

    Barnsley

    12

    5

    9

    1

    Barrow-in-Furness

    5

    5

    9

    1

    Birkenhead

    2

    11

    4

    7

    Birmingham

    5

    1

    —

    Blackburn

    3

    3

    5

    9

    Bolton

    3

    6

    4

    6

    Bootle

    3

    0

    4

    10

    Bradford

    1

    2

    3

    10

    Burnley

    3

    3

    6

    8

    Burton-upon-Trent

    5

    0

    1

    8

    Bury

    3

    2

    3

    6

    Carlise

    2

    11

    4

    2

    Coventry

    1

    10

    —

    Darlington

    11

    —

    Derby

    1

    3

    —

    Dewbury

    8

    6

    7

    6

    Doncaster

    —

    8

    Dudley

    11

    2

    3

    5

    East Ham

    5

    10

    1

    2

    Gateshead

    12

    2

    8

    11

    Gloucester

    2

    2

    1

    Great Yarmouth

    5

    —

    Grimsby

    8

    10

    4

    0

    Halifax

    5

    4

    5

    7

    Huddersfield

    —

    3

    1

    Ipswich

    3

    6

    —

    Kingston-up-on-Hull

    8

    5

    6

    2

    Leeds

    —

    2

    0

    Leicester

    8

    —

    Lincoln

    1

    1

    3

    7

    Liverpool

    —

    2

    6

    Middlesbrough

    12

    2

    6

    4

    Norwich

    —

    2

    Nottingham

    1

    0

    1

    0

    Oldham

    7

    8

    5

    6

    Preston

    5

    2

    3

    9

    Preston

    5

    1

    4

    8

    Rotherham

    9

    7

    5

    4

    St. Helens

    14

    4

    11

    4

    Salford

    7

    3

    8

    3

    Sheffield

    2

    6

    3

    10

    Smethwick

    9

    6

    6

    0

    South Shields

    9

    3

    7

    6

    Stockport

    4

    3

    4

    6

    Stock-on-Trent

    14

    0

    9

    11

    Sunderland

    9

    1

    4

    2

    Tynemouth

    2

    5

    4

    7

    Wakefield

    2

    6

    4

    1

    Wallasey

    —

    1

    5

    Walsall

    12

    5

    7

    0

    Warrington

    11

    4

    7

    10

    West Bromwich

    13

    6

    5

    4

    West Ham

    3

    9

    2

    West Hartlepool

    7

    5

    4

    10

    Wigan

    9

    1

    6

    7

    Wolverhampton

    3

    8

    5

    Worcester

    1

    9

    —

    York

    2

    9

    2

    9

    Merthyr Tydfil

    36

    10

    21

    10

    Newport (Mon.)

    2

    1

    1

    11

    Swansea

    3

    4

    1

    10

    EXCHEQUER EQUALISATION GRANT PAYABLE TO COUNTIES FOR THE YEARS 1955–56 AND 1956–57 EXPRESSED IN TERMS OF RATE POUNDAGE

    Administrative counties

    1955–56 (Second estimate)

    1956–57 (First estimate)

    s.

    d.

    s.

    d.

    Bedford

    7

    7

    1

    7

    Berks

    2

    10

    2

    1

    Buckingham

    1

    2

    —

    Cambridge

    8

    7

    1

    Chester

    4

    1

    2

    11

    Cornwell

    9

    10

    5

    11

    Cumberland

    14

    11

    12

    0

    Derby

    10

    9

    7

    7

    Devon

    2

    6

    8

    Dorest

    4

    1

    2

    6

    Durham

    20

    6

    11

    5

    Essex

    2

    11

    1

    4

    Gloucester

    11

    4

    3

    8

    Hereford

    13

    5

    9

    3

    Hertford

    2

    —

    Huntingdon

    20

    11

    8

    3

    Isle of Ely

    32

    8

    6

    9

    Lancaster

    6

    9

    5

    6

    Leicester

    14

    4

    5

    11

    Lincoln:

    Parts of Holland

    28

    5

    9

    10

    Parts of Kesteven

    18

    7

    10

    2

    Parts of Lindsey

    15

    1

    3

    9

    Norfolk

    23

    5

    9

    10

    Northampton

    14

    1

    6

    3

    Northumberland

    8

    10

    7

    3

    Nottimgham

    10

    1

    5

    10

    Oxford

    11

    5

    6

    2

    Rutland

    9

    4

    6

    2

    Salop

    14

    4

    7

    8

    Soke of Peterborough

    6

    0

    10

    Spmerset

    7

    6

    4

    0

    Southampton

    2

    5

    1

    5

    Stafford

    18

    2

    7

    9

    Suffolk East

    12

    9

    6

    10

    Suffolk West

    16

    5

    10

    0

    Warwick

    4

    6

    1

    11

    Westmorland

    4

    11

    4

    2

    Wilts

    7

    5

    4

    7

    Worcester

    13

    8

    4

    8

    Yorks:

    East Riding

    9

    8

    5

    0

    North Riding

    7

    3

    5

    1

    West Riding

    13

    5

    10

    5

    Anglesey

    25

    6

    13

    10

    Brecknock

    20

    7

    13

    11

    Caernarvon

    14

    1

    2

    8

    Cardigan

    63

    4

    18

    4

    Carmarthen

    39

    3

    12

    4

    Denbigh

    14

    4

    6

    10

    Flint

    7

    0

    2

    2

    Glamorgan

    24

    4

    10

    7

    Merioneth

    43

    6

    17

    1

    Monmouth

    30

    5

    17

    0

    Montgomery

    47

    9

    26

    9

    Pembroke

    38

    10

    17

    0

    Radnor

    9

    10

    14

    11

    Middlesex (Draft Development Plan)
    Mrs. Butlerasked the Minister of Housing and Local Government whether he can yet give any indication when the

    247
    Draft County of Middlesex Development Plan will be approved.
    Mr. Sandys: I expect to approve this plan very shortly.
    Mrs. Butler: Is the Minister aware that there will be great satisfaction at that reply and that I hope that it will be very shortly, because the inquiry was held in March, 1953, and the delay is causing considerable inconvenience to local authorities and other interests concerned?
    Mr. Sandys: I am glad to give satisfaction to the hon. Lady. This plan has, of course, raised a number of difficult issues. One of the main problems has been to devise means of checking the excessive growth of industry on the fringe of Greater London.

RACIAL DISCRIMINATION
Mr. A. Fenner Brockway: I beg to move,
That leave be given to bring in a Bill to make illegal discrimination to the detriment of any person on the grounds of colour, race and religion in the United Kingdom.
The Bill which I am seeking leave to introduce would define such discrimination as: a person exercises discrimination where he refuses, withholds from, or denies to any other person, facilities or advantages on the ground of the race, colour or religion of that other person. It is very difficult to estimate opinion on this matter. There are under-currents of feeling, it may even be in the subconscious, which will respond under favourable conditions towards, or retreat under unfavourable conditions from, racial equality. But, Sir, I would say that broadly speaking the British people recognise that identity as human beings is greater than differences of race, colour or religion.
I think that has been the experience of most of us. I remember very well, one Sunday morning, joining a train for Birmingham into which immigrants from the West Indies had entered. It was the first day of snow during this year and they came in garments which were more suited to their islands. Nevertheless, in the whole of that long compartment the English passengers gave their places to these West Indian immigrants, and, not only did that, but spontaneously offered
248
friendly advice, so that they could adjust themselves to our conditions.
I would say that the towns which have employed West Indian and other coloured conductresses, and our own experience of the railway porters announcing the stations on the underground trains of London, show that the feeling of our people towards them is one of friendliness and of encouragement. But there is a minority which is causing ill will, with serious effects. This is demonstrated in a remarkable series of monthly publications by the Royal Institute of International Affairs, at Chatham House. That minority is not only endangering the feelings of coloured people in this country towards the British people, but may have serious effects internationally as well.
I recognise that there must be a limitation of the powers of legislation. Often acts of discrimination are due to prejudice, to ignorance or to irrational repulsion, and those can be removed only by education or experience. More often they are due to social and economic conditions and fears: to housing overcrowding, concern about the under-cutting of standards if unemployment comes. Those can be removed only by social and economic solutions.
I also recognise that in seeking to establish the rights of coloured people in this country, we must not invade the personal rights of our own citizens. Probably the greatest effect of colour discrimination is where the private landlady refuses lodgings to a coloured person, but I would regard it as going beyond the legitimate sphere of legislation if we were to say that persons should not have the right to decide who should enter their own homes as lodgers.
There are, however, three spheres under the responsibility of the community where legislation is justified and necessary. Frequently, these are places where licences must be obtained from public representatives. The Bill which I seek to introduce would make discrimination illegal in inns and hotels, in common lodging houses, in restaurants and cafés, in dance halls, in concert halls, or in other places of public entertainment. I recognise that it is a minority of such places which impose discrimination. Indeed, the British Hotels and Restaurants

249
Association has already made arrangements with the Barbados Government to bring workers to Britain.
The second sphere in which my Bill would operate would be in the cases of leases covering houses, flats and premises. Any covenant or provision would be illegal in such leases on the around of discrimination. The evidence of the Royal Institute of International Affairs shows that there are such cases. It may not be so now, but, until recently, a large company owning flats in London would not accept any coloured person as a tenant.
Thirdly, my Bill would make illegal the action of an employer of more than 50 persons to refuse to employ or to promote a person on the grounds of race, colour or religion. It would also say that no person shall be entitled to act in consort to prevent such employment or promotion. The last meeting of the International Labour Office asked Governments to end such discrimination, and that proposal is in line with the declaration of our own national trade unions.
Sir, I urge that a legal declaration by this House against discrimination is necessary: first, to end the kind of cases to which I have referred; secondly, to
250
prevent reaction in the Colonial Territories when migrants from those territories return to them, and where they often exert great influence; and, thirdly, to exert an influence in territories such as South Africa which now practice discrimination.
Recognition that all persons are born equal in rights and dignity, whatever their race, colour or religion, is the fundamental condition of social justice, liberty and peace, and I hope that the House will give me permission to introduce the Bill.
Question put and agreed to.
Bill ordered to be brought in by Mr. Brockway, Mr. Sorensen, Mr. Hale, Mr. Benn, Mr. Orbach, Mr. Miss Lee, Mr. Mikardo, Mrs. Castle, Mr. Janner, Sir L. Plummer, Mr. J. Silverman, and Mr. Allaun.

RACIAL DISCRIMINATION
Bill to make illegal discrimination to the detriment of any person on the grounds of colour, race and religion in the United Kingdom. presented accordingly and read the First time; to be read a Second time upon Friday and to be printed. [Bill 146.]
ORDERS OF THE DAY

  FINANCE (No. 2) BILL
  Considered in Committee [Progress 11th June].
  [Sir CHARLES MACANDREW in the Chair]

  FINANCE (No. 2) BILL

    Clause 12.—(SUSPENSION OF INVESTMENT ALLOWANCES (WITH CERTAIN EXCEPTIONS).)
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    Question again proposed.
    3.42 p.m.
    Mr. Roy Jenkins: Throughout the whole of yesterday's debate we skirted, as it were, round the main point concerned in Clause 12. We were constantly reminded by Treasury spokesmen, and occasionally by the Chair, that the main point to be discussed would fall on the Question, "That the Clause stand part of the Bill," and not on the whole series of limiting Amendments which we attempted to move. We have now come to that Question and we can deploy the main case against the suspension of investment allowances.
    I believe this to be by far the most undesirable Clause in the Bill. Most of the other provisions do not amount to a very great deal, but the Clause is of substantial importance and may well be of considerable long-term importance. Consequently, it is necessary for us to consider in some detail the Government's case for the Clause. We have not yet heard it deployed as a whole, but in the course of the discussions on the skirting Amendments yesterday the Government's case for the Clause peeped through at a number of points.
    The Government's case came under four main headings. The first two were directed not so much against the merits of the case for the Clause as against the Opposition by saying that they were in no position to complain about what was being done. The first related to the suspension of initial allowances carried through in the 1951 Finance Act. The parallel of initial allowances is not a good one from the Government's point of view. I do not think that the Chancellor or the Economic Secretary would wish to press too hard the claim that circumstances today are comparable with those in 1951.
    252
    I notice the Chancellor smiling in agreement. It may be that he has in mind different things from what I have in mind.
    However, I am sure that he will agree with me that 1951 was very different in at least two important respects. In 1951 we had at one and the same time the mounting of a very large defence programme and a sensational move against us in the terms of trade. It is unlikely that this year there will be a comparable defence bill, and it is also unlikely that there will be a sensational movement against us in the terms of trade.
    Despite the very difficult circumstances in 1951, the Conservative Party resisted the suspension of initial allowances throughout a very long night sitting, and they did it, as is the custom when one is dealing with a Clause roughly of this sort, not merely by opposing the Clause as such but by moving a series of selective Amendments to it. I was astonished to hear last night the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) suggest that any fiscal discrimination against certain types of industry was so alien to his nature and to the constitutional principles in which he believes that he could hardly believe that such a proposal was put forward from this side of the Committee.
    This morning I found that in the course of that night, in 1951, the noble Lord voted on no fewer than six occasions for selective fiscal proposals exactly similar to those that he was denouncing last night.
    Viscount Hinchingbrooke: People in glass houses should not throw stones. The hon. Member for Stechford (Mr. Roy Jenkins) is in no better position than the position in which he is trying to put me, because he voted against all those Amendments, which shows the inconsistency of his thinking between then and now.
    3.45 p.m.
    Mr. Jenkins: The noble Lord is not merely throwing stones from a glass house but hurling boulders out of a crystal palace. That is certainly a very undesirable course on any occasion. The circumstances of the two occasions to which I have referred are in no way parallel.
    The other case at which the Economic Secretary hinted in the course of his

    253
    substantial number of very lucid interventions was that the Opposition was not in a very strong position to stand for no fiscal curb on the investment boom because we had opposed the Lord Privy Seal's Budget last autumn, a Budget which he suggested was directed largely against consumption, and in a time of manifest inflation one could not impose any curb on investment.
    If that is what the hon. Gentleman believes about our attitude to his right hon. Friend's Budget, he is gravely mistaken in his approach. We were not opposed to some curbs on consumption as such. Indeed, we were gravely distrustful of the fillip to consumption given by the Lord Privy Seal in his Budget the previous April. However, we were opposed to the particular curbs on consumption which he imposed last autumn because we thought, particularly taken in conjunction with his April Budget, they were socially inequitable, and, also, they were to a large extent ineffective and were only too likely, as has proved to be the case, to give a further twist to the upward spiral of the cost-of-living index. Our attitude was certainly not that consumption had to be allowed to rise without check and that we were unwilling to countenance any checks on consumption to make room for investment.
    The other point, rather more on the merits of the case, which I understand to be the Government view and the Government justification for the Clause, is that the investment boom is still very strong, and that, even with the Clause and the removal of investment allowances, the Government are certainly not knocking it on the head but are applying a little gentle moderation to it. Is it the case that the investment boom has, in the last year or so, been so strong that it is reasonable both to be fully satisfied about what has been happening in the field of investment and to be willing to accept certain curbs upon it at the present time? Perhaps more than most aspects of economic finances, investment provides us with figures, sometimes in arrears.
    I think it not inappropriate to recall to the Committee the figures for investment in Europe in 1954, which were published in the last Report of the Economic Commission for Europe, and then make certain comments upon them
    254
    to ascertain how the position has changed since then. The figures for net investment as a percentage of the net national product of different countries in 1954 provided by this E.C.E. document are a most frightening commentary on the state of our economy and the state into which we have got after three years of stewardship by hon. and right hon. Gentlemen opposite.
    The figures are striking and I will read to the Committee the salient part of the table. In descending order, the figures for net fixed investment as a fraction of the net national product were Norway, 22 per cent.; Finland, 21 per cent.; Austria, 15 per cent.; Western Germany, 15 per cent.; Switzerland, 14 per cent.; Netherlands, 13 per cent.; Denmark, 13 per cent.; Italy, 12 per cent.; Sweden, 11 per cent.; Greece, 10 per cent.; Turkey, 9 per cent.; France, 8 per cent.; Belgium and the United Kingdom, 6 per cent.
    Those are very striking figures for the position in 1954. We all recognise, of course, that the position has improved since then, but to what extent has it improved? According to the Economic Survey, fixed investment in this country in 1955 was up by 7½ per cent. over 1954 as a whole. The sort of investment with which we are probably most concerned, that in plant, machinery and vehicles, was up by more than that, because there was a fall in investment in housing. Fixed investment in the more restricted, but from our point of view more important type, was up by 14 per cent.
    That increase is an increase from the very low position in which we found ourselves in 1954 and an increase of that amount in no way leaves us in a very satisfactory position. The Economic Secretary said yesterday that all that the Government were attempting to do by the Clause was to moderate the rate of ascent of investment, but it should be remembered what that rate of ascent has been. It has been so uncontrolled over the past year that it has brought us from being in the fourteenth position in the table to which I referred to the twelfth or thirteenth position.
    That is the enormous investment boom which we are told must be moderated. We are also told that we should feel no doubts about the necessity for moderation, yet in many ways it is a very

    255
    moderate boom. If one makes a comparison with the position in Eastern Europe, and in the Soviet Union particularly, our position is even more disturbing than is shown by a comparison with other Western European countries. In dealing with Iron Curtain countries, exact statistical information is very difficult to get, but all the figures available indicate that, largely because of a very much higher rate of investment, the national income of the Soviet Union has been growing by about 10 per cent. per annum. All the indications are that it will continue to grow at that rate, whereas the national income in this country has been growing by 2 to 3 per cent. per annum.
    As a result of Government policy we have reached a production plateau where it is not growing at all. Even when it was growing, there was no doubt that the rate of growth of national income in the Soviet Union was three times, or even more, that of this country, largely because of a very much higher rate of investment. If these tendencies continue, it will not be so very long before the national income per head of the Soviet Union exceeds that of this country. That can happen in the middle or late 1960s.
    I should like to have a comment from the Chancellor upon what he thinks about these respective rates of growth, because they are things with which he is directly concerned and are of very great importance in considering whether Clause 12 should stand part of the Bill. In our consideration of it we are entitled to have the Government's view. Examination of the figures shows that it is necessary to reject the complacent view, which we heard peeping through the various speeches of the Economic Secretary yesterday, that the investment boom has been so great in the past year or 18 months that we can safely afford somewhat to restrict it, without being too frightened of the consequences.
    The rate of investment has been fast, but it has still been a good deal too low when measured against that of many other comparable countries, and the position to which it has led us is certainly not such that we can complacently consider restricting it. There is another point which emerged from Government speeches yesterday. The Economic Secretary told us that in his view we were suffering until
    256
    1954 from the effects of the removal of initial allowances in 1951.
    The Economic Secretary to the Treasury (Sir Edward Boyle): It did not, in fact, take place until 1952, because the Leader of the Opposition, who was then Chancellor of the Exchequer, gave a year's notice on that occasion.
    Mr. Jenkins: The point that the Economic Secretary was making—and I think he will agree that I am not misrepresenting him—was that the effect was long-term and applied not for a year or so, but for a number of years. That is one of the most disturbing features of Clause 12.
    We are dealing with a problem of inflation, balance of payments difficulties, gold reserve difficulties, which, we hope, will end eventually, even under this Chancellor and the present Government. Yet in order to deal with it we are removing an incentive to investment with the fair certainty that the effects of the removal will apply not merely in 1956, but in 1957, 1958 and 1959.
    By accepting the Clause we shall do something which will continue to have a very undesirable effect upon the economy and the rate of investment for many years to come. I hope that the Committee will seriously consider that before agreeing to the Clause. I hope that the Chancellor, from whom we have still heard very little indeed in our discussions, will reply to the debate on the Question now before the Committee.
    The Chancellor of the Exchequer (Mr. Harold Macmillan)indicated dissent.
    Mr. Roy Jenkins: The Chancellor shakes his head. This is a major matter on which we are entitled to hear from the Chancellor, and I hope that we shall do so before the debate ends.
    Let there be no mistake about it; if he were to resign tomorrow—and one never knows with Chancellors of the Exchequer these days—he would be remembered as having struck a blow at the investment boom. There is very little else which he has done and there is very little else in the Bill. That is the one thing which will continue to have a substantial effect upon our economy for many years to come.
    Sir James Hutchison: Before we part with it, I should like to say a few words about the Clause, which is causing a certain amount of anxiety in industry. All hon. Members will agree that one of the essentials which we must bear in mind all the time is that plant and machinery must be kept up to date, if we are to be able to face the international competition which is a growing danger to our economy and which will, as. Russia gets into her stride, probably become more acute still. It is, therefore, essential that we should not fall behind in the modernisation of our plant.
    My right hon. Friend has told us—and I believe it to be perfectly true—that the rate of investment in 1955 was too high and that, consequently, he has taken this step to moderate it. Presumably—and on this issue I am in agreement with much of what was said by the hon. Member for Stechford (Mr. Roy Jenkins)—it is essentially a short-term policy and we may hope to see investment allowances restored in a fairly short time.
    4.0 p.m.
    My anxiety arises not because of their being abolished, but because the yardstick which has been taken in deciding what shall be paid and what shall not be paid is creating anomalies and unfairness, and is not likely to achieve the short-term result which my right hon. Friend wants. I have no quarrel with cutting down the investment allowance for a very short period, but if we take as our yardstick a contract which has been placed we are going to delay its effect for a year or even two years, to a time when I should hope that the storm would have been weathered and there would be no further need for action of this kind, and investment allowances would have been restored or on the point of being restored.
    It is necessary to consider how industry goes about a large modernisation plan. First, there is a discussion as to whether the plan is desirable or necessary, and will pay its way. Then comes the actual elaboration of the plan, and a decision is then taken to go ahead. The contract is placed and, finally, work is started. There is a series of stages, and the ultimate payment is delayed for quite a time. To take as our yardstick or measuring rod the fact that a contract has or has not been placed not only creates
    258
    anomalies of the kind which I shall show in a moment, but may cause investment allowances to continue to be granted so that they bring about their interplay for a number of years ahead upon contracts which will run on for many years.
    A concern such as a dock authority, which does not put anything out to contract at all but merely formulates a plan, records it in its minutes so that the plan is easily checkable and then proceeds to do its own work, will at once lose any investment allowance benefit. In the case of another concern, which places contracts for part of its work and carries out the rest itself, the investment allowances will run on with the contracts which have been placed, perhaps for a number of years, but there will be no investment allowance upon the part for which no contract has been placed and which is carried out under the guidance and management of the concern itself.
    I should like to hear my right hon. Friend the Chancellor reply upon this point. I suggested earlier that if we want to cut down the period over which the investment allowance will have an effect we should do so by laying down a period of time, and not according to whether or not a contract has been placed. We could have taken the financial year 1956–57, or even the calendar year 1956, and said that the investment allowance would be allowed only in respect of contracts placed and work undertaken and carried out within that period. Everybody would then have been treated equally, the position would have been much less anomalous, and my right hon. Friend would have known exactly what control he had over investment allowances.
    The sooner we can restore investment allowances, and allow the flow of enterprise in the direction of the modernisation of plant and equipment to come into operation again, the better. I would still like to hear my right hon. Friend explain why it is necessary to take the contract as the yardstick of calculation, rather than a period of time.
    Mr. M. Philips Price: The hon. Member for Scotstoun (Sir J. Hutchison) has dealt with a point which shows what kind of effect the Clause will have upon certain contracts, and the complications which are bound to result. Those who are engaged in

    259
    industry, agriculture or whatever it may be, are continually faced with the danger of Finance Acts being introduced which alter the scale under which they derive relief from taxation. I agree that it would be very much better to make arrangements of the kind suggested by the hon. Member than to let matters go on as they will under the Clause.
    The Economic Secretary yesterday told us that, in spite of the credit squeeze and other restrictions, industrial investments last year showed no drop over the previous year; indeed, I believe the figures showed that there had been an increase. My hon. Friend the Member for Stechford (Mr. Roy Jenkins), however, has pointed out how poor those figures are compared with the figures for other countries. It shows how extremely unfortunate the effects of the Clause will be, coming just at this time. Moreover, even if the figures for investment last year showed an improvement upon previous years, that does not alter the main charge which hon. Members on this side of the Committee make against the Government.
    Large industrial concerns can always borrow from banks; they have good credit. Valuable as the investment allowance undoubtedly is to them, it does not have the same effect upon them as it has upon small people. It would not tilt the scale one way or the other, as it would in the case of the small industrial concern or the small farmer. For these people it would just tip the scale in the direction of their undertaking something which they otherwise would not. The Clause puts out of action altogether subsections (2) to (5) of Section 16 of the Finance Act, 1954, which gave this important relief.
    I know that in 1950, when my right hon. Friend was Chancellor of the Exchequer, he had to abolish initial allowances. That action was due entirely to the circumstances of the time. We were then engaged in rearming. There are cases where international considerations have to be reflected in Finance Acts, but this is not one of those cases. The trouble into which the Government have got themselves is due entirely to their financial policy of last year, the pre-Election Budget, and their whole policy of letting everything go and allowing free enterprise to have its head, with no kind of control
    260
    or planning. That is why we so strongly object to these cuts. The situation now is quite different from what it was when my right hon. Friend was Chancellor in 1950, when the nation was hard pressed owing to the international situation.
    We now have to push our export trade for all we are worth, and do all we can to bring our industries up to date and equip them with the latest plant and machinery. Farmers should be encouraged to improve their plant and equipment in order to produce more food, and food of a higher quality. Woodland owners should also be encouraged. We have to bear in mind all the devastation caused to our forests during the war, and the fact that large areas still have to be reclaimed. That involves considerable capital outlay. There is, for instance, a need for the construction of woodmen's cottages. All those factors would come in under the heading of investment allowances, but all that has to go now.
    If there must be a curtailment of expenditure—if the pull upon our resources is such as to cause the danger of inflation—these investments are the last things which should go. Productive capital investments are vitally important to our economy. The Government's policy is to put our economy on a Procrustean bed. Everything must be cut, good and bad, productive and consumptive capacity alike. There is no attempt to discriminate
    In the course of the last few months I have heard my constituents express fears as to what would happen to them if these investment allowances were taken away. I know of smallholders and small farmers who have been pressed by the county officials, under the various milk and dairies regulations, to improve their buildings so as to qualify under the terms of those regulations, and there are quite a number of premises which are still very much on the borderline. To the large farmer, this does not matter very much, because he can generally manage to find a means, somehow or other, of effecting the improvement, but to the small men, and I have many in my own constituency, it makes all the difference to get an allowance of this kind, which would reduce the incidence of taxation, so that they can feel that they can afford to make these improvements.
    There are plenty of small landowners who want to do their duty and improve

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    their properties, but who find it very hard to come by the capital required. In the case of companies investing in land, they can always draw on the bank, but the small landowner who owns a couple of farms, working one himself and letting the other, finds these investment allowances of very great benefit, and I referred a moment or two ago to owners of forests and woodlands and the problems which they have of reclaiming woodland areas derelict as a result of the last war.
    This decision is most unfortunate, and we on this side of the Committee feel very strongly that this is the worst Clause in the Bill; at least, I think so, and I am sure that many of my hon. Friends think so, too. It still prevents that kind of investment of which this country is so urgently in need. I would certainly agree that, owing to the danger of inflation, it may be necessary to curtail certain forms of consumption.
    The Government and their supporters cannot accuse us of opposing the taxes proposed in the supplementary Budget of last year. That was not to say that we were not in favour of reducing consumption, but it was to say that that form of taxation on the poorest section of the community was wrong. It was not only the form of the tax, but the way in which it was imposed, that was wrong. I think there is a case for slowing down consumption of anything that is not absolutely necessary, and which is not the consumption of the poorest section of the population.
    Sir E Boyle: May I ask the hon. Gentleman, who is always extremely fair in debate, how, by his criterion, he justifies in all cases having voted against the higher ranges of the Purchase Tax last autumn? Surely there was a very strong case, by any criterion, for increasing the Purchase Tax on cars and washing machines, even if he did not like the tax on pots and pans.
    Mr. Price: That has nothing to do with the arguments which I have been adducing. The point is that we voted against the tax on pots and pans, and that is what really matters. I see no objection to reducing the sales of cars at present. I think that we were justified in taking that line.
    It might be that in the worst circumstances, like the circumstances with
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    which my right hon. Friend the Leader of the Opposition was faced in 1950, it was necessary to reduce investments but now is not the time to do this. In view of the competition with which Britain is faced abroad, I think that this Clause is the worst in the Bill and I very much regret its inclusion.
    4.15 p.m.
    Mr. Gerald Nabarro: I could not agree with the hon. Member for Gloucestershire, West (Mr. Philips Price) that Clause 12 is the worst in the Bill, though I would not suggest that I think it is the best in the Bill. It is a Clause which I view with a lack of enthusiasm, but I think there is possibly, on balance, a little more to be said for it than there is to be said against it.
    Mr. R. T. Paget: Would the hon. Member for Kidderminster, (Mr. Nabarro) let us into the secret of which is the worst Clause in the Bill?
    Mr. Nabarro: I am quite sure that I should trespass upon your customary generosity in these matters. Sir Charles, if I strayed from the narrow confines of Clause 12.
    I want, first, to deal with a specialised aspect of this Clause, namely, the proposal to leave unaffected, investment allowances applicable to fuel economising equipment in industry and expenditure upon insulation of industrial buildings. I recall with pleasure that you, Sir Charles, were occupying the same position in the Chair on 8th June, 1951, when I, with due modesty, initiated in Committee stage debates on the Finance Bill of that year a discussion on the question of fuel efficiency in industry, and on that occasion, pleading from the Opposition benches, my purpose was to try to secure the retention of the 40 per cent. initial allowances on certain classes of coal economising equipment in industry, independent electrical generators and equipment of that kind.
    It is instructive to observe, in view of the arguments advanced by the hon. Member for Stechford (Mr. Roy Jenkins), that he and his hon. Friends then on this side of the Committee voted against such a discrimination. In subsequent years, from the other side of the Committee, he voted for an enlarged discrimination by

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    initial allowances of up to 100 per cent. for equipment of this kind. In fact, he was closely associated with the then hon. Member for Gloucestershire, South, Mr. Crosland, in pleading for initial allowances at the rate of 100 per cent, for fuel economising equipment in industry, in view of the extreme gravity of the coal situation.
    I do not wish to relate in close detail this afternoon all the vicissitudes of the arguments which have flowed to and to between opposite sides of the Committee during the Committee stages of successive Finance Bills since 1951. The fact is that I view with little enthusiasm the stimulating of investment in industry by what I consider to be artificial means and recourse to palliatives by means of investment allowances, initial allowances, and the like. All that may be said for these allowances is that they are modest in their incidence, they are long-term in character—for nothing contained in Clause 12 can have the least budgetary effect until the fiscal year 1958–59—and they are not accepted with any great degree of enthusiasm by those engaged in general industry in the country.
    What, then, is the proper recourse on this matter? I believe that, in the ultimate, only a reduction of direct industrial taxation can provide the stimulus to massive industrial investment. I do not believe that the actions of Socialist Governments in the past or Tory Governments during the last five years, in resorting to these recourses—expedients we may almost call them—of initial allowances at 20 or 40 per cent. and investment allowances at varying rates, will have the long-term effect to which the hon. Member for Stechford referred and that is the raising of investment standards in British industry to a level comparable with European and other nations who are our principal industrial competitors.
    Mr. M. Turner-Samuels: The hon. Gentleman's argument is addressed to helping the big businessmen, and not the small ones.
    Mr. Nabarro: I am sorry, but that is a totally fallacious statement. In fact, a reduction of direct industrial taxation affects, encourages and helps every class of businessman, from the I.C.I. combine down to the single-man business or the
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    business with perhaps only two or three employees.
    Mr. Turner-Samuels: The hon. Gentleman does not appear to see that it is not possible to reduce taxation in that way, but it is possible to make investment allowances so as to help the small business man.
    Mr. Nabarro: I do not propose to follow the hon. and learned Gentleman's intervention. It is based on the fallacy that there is a distinction in general industrial taxation arrangements as between large and small businesses. In fact, there is none. There is complete equity in this matter, as, indeed, there ought to be.
    I am grateful to the Economic Secretary for embracing in this Clause a principle which I believe to be of great importance in view of the growing gravity of the coal position during the last few years. It is the application of fiscal inducement, or incentive, to industry generally to install fuel economising equipment and properly to insulate buildings. Insulation must result in greater heat retention and, therefore, economy in the consumption of coal and fuel oil. For my part—I speak for myself alone from the Conservative benches, though I may have a measure of support—I do not believe that, in the long run, expedients of this kind, through investment or initial allowances, are any proper substitution for a progressive reduction of direct industrial taxation over the years.
    Of course, it may be pleaded that if one reduces the standard rate of Income Tax it is inflationary because of its effect on expenditure from personal incomes. But that is an added argument for doing what the Royal Commission so strongly recommended, namely, separating, in the form of a corporation tax, the direct taxation of industrial profits from the direct taxation of personal incomes. When that separation is achieved, a proper recourse to stimulating investment would be by a progressive reduction of the corporation taxation, which would replace the present Income Tax and Profits Tax combined.
    Surely, that would have a much greater impact on the rate of investment in British industry than the modest incentives—I am not condemning Clause 12 altogether—of a somewhat discriminatory character such as the Chancellor of the Exchequer has evolved in this instance.
    Mr. Cyril Bence: It is an astonishing experience to sit in this Committee, and sometimes in the House, and listen to the hon. Member for Kidderminster (Mr. Nabarro), who seems to have an ointment for every sore. Sometimes he has a different ointment for different sores, and sometimes the same ointment for every sore. As he says, he has been pleading for discriminatory fiscal action for every fuel economising device. That seems to be all right. But, at the same time, although he has been struggling for that—he claims with some success, as he usually does—he is against the principle of discriminatory fiscal action against any particular classes of industry or investment.
    Mr. Nabarro: The hon. Gentleman has completely misunderstood what I said—either deliberately or otherwise. I did not plead against discrimination. I said that the proper instrument for stimulating investment of a massive character was a reduction in direct taxation, and not the manipulation of investment or initial allowances.
    Mr. Bence: I remember the days when taxation on corporation profits and company profits was very low, and when Income Tax was very low. As an engineer, and one who has been associated with the industry for many years, I claim that the shareholders wanted so much that we never got enough money out of a company to do the necessary investment. I am sure that the hon. Member for Kidderminster knows as well as I that there are engineers in the Midlands who, when taxation was low, were frustrated in their efforts to invest in a particular industry. That was not because of Income Tax, but, more often than not, because the shareholders wanted the fruits of today's work and were not interested in investment.
    When my hon. Friend the Member for Gloucestershire, West (Mr. Philips Price) was speaking I was reminded of a lesson which I learned as a schoolboy, and which I shall never forget. I read an essay by Cobbett, who regretted that even in that period too many people were prepared to plant seeds from which they themselves could pluck the fruit, but were not prepared to plant the seeds of trees from which they would never pluck the fruit.
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    Today, we are concerned not with creating benefits for ourselves, for this generation, but benefits which will accrue in 1960 or 1970, and perhaps even later. I have in mind particularly the shipbuilding industry.
    The shipbuilding industry is now in a very fine state. It is doing well. We are holding our position in the world market. We can compete on price, and certainly we can compete on quality. "Clyde built" is still the finest criterion of quality in the world, and I say that with all respect to those from the Tyne and the Mersey. Capital investment in the shipbuilding industry today is evolved from the traditional techiques of building ships, but the new techniques are a very expensive business.
    The first difficulty which confronts our shipbuilders who wish to avail themselves of new techniques is lack of space. The French and Germans found it a simple proposition to expand the area of their shipbuilding yards, because we had bombed the area flat. The German Government found it possible to put up huge prefabricated shops in which cranes of 20, 30 and 50 tons could operate. That huge amount of investment could take place on land which was available.
    Provision is made for those with ships to get the initial allowance. But how will the companies who are engaged in building ships fare? One of the first things they must do is to acquire adjacent commercial property, very often at a value which is far in excess of the real quality of the property. Some of them have to acquire large areas of property in order to erect sheds in which a three-shift system may be worked to provide prefabricated units for a hull.
    The French yards are building hulls in dry docks and floating them out to the water line. They are building prefabricated sections on the three-shift system. In the British yards that is not possible, not because of lack of knowledge, but because of lack of space to put down huge areas of prefabrication. This is a serious matter, and it would be ridiculous for the Government to adopt the attitude that they cannot do anything for the shipbuilding industry, because of the dogmatic ideology of laissez-faire and freedom which prevents discrimination, when the whole world is discriminating against industries which are peculiarly strong in

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    their own countries, or industries in which they wish to build up representation.
    It is being done in Germany and Japan, and the Americans have done it for years. If we adopt the attitude that the shipbuilding industry must fend for itself, and be limited to pursuing traditional methods of shipbuilding, notwithstanding the competitive power of new techniques, the effect will be serious.
    4.30 p.m.
    I was surprised to learn, some years ago, that the prefabricated construction of American Liberty ships was evolved in Britain. It was evolved on the Tyne, but the whole equipment had to be exported to America because there was no room in our yards. The Tyne, the Clyde and the Mersey are all crowded. In my constituency, Messrs. John Brown have had to build plant on the opposite side of a main road because there is no room to extend prefabrication shops by the side of the Clyde.
    This question will be tremendously important to shipbuilding from about 1960 to 1970. We have orders for many years ahead, but, although the hon. Member for Kidderminster suggested, and other hon. Members opposite contend, that we cannot indulge in discrimination, I believe that we shall have to do so. We shall have to give particular help to particular industries under particular conditions.
    My hon. Friend the Member for Stechford (Mr. Roy Jenkins) quoted some figures, which, I think, were in the Economist, giving details of investment in Europe. They showed that our investment was one of the lowest and was on a par with that of Belgium. I claim that in the shipbuilding industry investment is far too small.
    Yesterday, I spoke about the machine tool industry. I did not want to speak for too long yesterday, but I must make this point today. I wish those who are concerned with the financial aspects of these matters would realise what a problem investment in the engineering industry is when the use of machine tools, particularly machine tools of a specialised nature, is involved. I remember that between 1922 and 1924, as a very young engineer, I was involved in the design
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    and development of a particular automatic machine tool. If I remember rightly, it was costed and put out at about £180. It was an automatic machine, hand-fed, and stood on its own as an independent unit. It can be bought by many companies and I know of many companies which use that machine.
    We observed it over many years and found that it was very satisfactory. By 1936 that machine tool, which had been a major unit in a process, had become a minor factor in a chain of processes. It was part of a production unit line costing about £20,000. The purchase of that unit in 1923, which then constituted a revolution in the technique of a process of production, had become a minor factor in a completely mechanical chain of production.
    The producer of an article by engineering processes today, if he wants to make new investment or write off old plant, has to put down a whole line of machines. Those who manufacture machine tools now find themselves in the position not merely of manufacturing a single unit as a machine tool, but having to put down the production plant to produce a whole line of products. I can give another instance in which I was involved. I can remember a plant being put down for the production of cycle chains. The machine tool manufacturers who, at one time, used to make presses and different types of operating machines for manufacturing cycle chains and motor-cycle chains, were in a German firm.
    They so changed their production lines in their factory, which was producing machine tools, that they no longer made a machine tool for producing cycle chains, but machine tools for a production line for cycle chains—a whole production line. On one plant on which I worked, which was put down in 1937, the whole factory building was cleared, and not one machine tool but a series of inter-connected and inter-linked machines was established for the production of cycle chains by purely automatic processes.
    In the production of pistons it is not a question of a machine tool being used to manufacture them now, but of a whole line of inter-connected machines costing £½ million. If we are to face competition in the modern world the industry and

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    the Government have to face this problem. In Britain we have to do everything we can by fiscal means—call them subsidies, or investment allowances—to enable the engineering industry not only to produce machines, but complete production lines. This has been done in the cycle industry and in the motor industry. Standard Motors, of Coventry, have bought from machine tool manufacturers not merely machine tools, but whole lines of production machines. The function of the machine tool makers today is not to make single machine tools, but to see what the customer wants and to design and produce machine tools for those products.
    That is very costly, yet in an age of automation the Government are making an indiscriminate cut of investment allowances which will mostly hurt those people we want to help, machine tool designers who manufacture a series of machine operations constituting a production line in order to make a product. If one goes to Cadbury's and other food processing factories one sees whole production lines and not merely single machine tools.
    Raising the Bank Rate is one way of penalising investment, but that is very expensive. The Bank Rate is crippling high-cost industrial investment. The investment allowance is another way. I hope that I am in order in pointing this out, but it is important that the Government should look very closely into this matter.
    As we keep on investing in our industries, increase mechanical capacity of production and bring these high-cost mechanical processes into industry and, at the same time, decrease the unit of labour required in the production of a given quantity of items, so our capacity for varying the price of products is reduced. That is because the variable factor, which was the labour factor in production, is reduced, whereas the fixed capital cost represented by bank charges and bank loans is increased by reason of the high cost of capital equipment. Everyone knows that if one wants to reduce bank charges one is up against it. Between the wars it was a stock phrase that when we were pleasing the customers most we were pleasing the bankers least. It seems to me that one never serves the bankers and the community at one and the same time.
    The Temporary Chairman (Mr. Malcolm MacPherson): I cannot see the relevance to this Clause of obiter dicta about serving the bankers and serving the community.
    Mr. Bence: I thought, Mr. MacPherson, that I was well up the line of production, but I was taken off at a tangent. Having been engaged in the engineering industry, I know that when one is in process of designing, manufacturing, drafting and producing a machine tool, often, half way through the process, one sees something else on the way and goes off at a tangent. That is where money is lost in designing aircraft and all sorts of things. If I deviated on this occasion, I hope that it was not to the cost of the Committee, or of the Chancellor of the Exchequer.
    I hope that the Government will take the Clause back and look at it again. If we consider the increases in the Bank Rate, the price of money today and the almost indiscriminate cutting of investment allowances, we must realise that these things will have a very serious effect upon investment in such industries as shipbuilding, engineering and the machine tool industry. It will have the very opposite effect to that which hon. Members opposite want.
    We must get on with the production of high-class mechanical devices as quickly as possible. Unless we do it quickly, our competitive position in the world will be almost eliminated. It is shocking to think that the Standard Motor Company must go to Germany to buy a tractor production plant at a cost of £4 million or £5 million. We have the engineers and the technicians to build this machinery, but the Government must give the incentive and not take it away. The Government must give every possible incentive for British engineers and scientists to go ahead with projects by which we become not only manufacturers of equipment for our own use but manufacturers of these production units for export.
    We must rebuild an export industry on the basis of high-quality production units rather than on the export of consumer products which, within the next 20 years, nearly every leading country will make for itself. Our future lies not in the export of cheap tin trays. but in the export

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    of high-quality production lines of machine tools and transfer machinery. The Government have the duty to give encouragement to the engineering community of the country for them to build a new export industry within the next 20 years. If they do not do something about it, we may lose the battle. It will be a sorry story for this country if we try to build our export trade on the export of cheap tin trays.
    Mr. Douglas Houghton: The time we have spent on the Clause shows the importance which right hon. and hon. Members on both sides attach to this question. The pity is that many people outside could not care less. I think that one of the most serious political crimes is to pander to the people who take the short view, and there are far too many people in this country today who are taking the short view.
    We are discussing here the foundation of our future well-being and national survival. I do not say that investment allowances alone will govern the rate of industrial investment, but they are a contribution towards it, and anything we do which discourages the forward movement of industrial investment is to be regretted.
    I will not detain the Committee for more than a moment or two, because I want principally to ask the Economic Secretary a question. It is about the future, and I can lead to my question by reminding the Committee of the chequered history of this form of tax relief for investment. Initial allowances were introduced in 1945; they were then increased; they were then suspended; they were then partially restored; they were then replaced to a large extent by something more favourable, investment allowances; and now we are reverting to the initial allowances at the 1953 level.
    Clearly, it is not a stable basis for forward planning in industrial investment when all that happens in the space of 10 years. It would be interesting to know, if the information were available—and probably a survey might give some sort of answer—how much industrial investment has been started by the encouragement given through initial allowances and investment allowances. Certainly industry will not find anything very stable
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    in looking at the experience of the last 10 years in these tax reliefs.
    The question I want to put to the Economic Secretary is, have we now finished with investment allowances? The Clause suspends them. Does it end them? Are we ever to see them again? Of course, there were some traditionalists who raised their eyebrows when investment allowances were introduced, because for the first time this conferred on industry not merely a tax-free loan by anticipating the depreciation allowances; it granted industry a subsidy by giving tax relief of more than 100 per cent. of the capital cost, and that was an innovation in our fiscal system.
    4.45 p.m.
    Has the Chancellor now decided to abandon that? If we stay on this "plateau of stability", which we are now supposed to be on, will investment allowances be restored again? Would it not be better to tell industry what is likely to happen to this aspect of our taxation system for several years ahead so that industrialists may know where they are? This is legislation by fits and starts, and that is a bad thing. The farmers demand stability. They impose their will on Governments and say they must be able to plan ahead. They say that the farmer cannot work from season to season; he must know several years ahead what prices he will get and what programme he should follow. I think the trade unions are asking for some form of stability so that they may be able to decide their wages policy for some time ahead. There is no sign of their doing it, I am sorry to say, but perhaps given more favourable conditions there would be a better chance of it.
    What message has the Chancellor to give to industry about the future of these allowances? That, I think, is a legitimate question to ask, just as it is an important question to ask. We know what the Clause does; it suspends investment allowances. But what of the next 12 months or two years? Is industry to make up its mind that its investment programme must be contained within the initial allowances at 1953 level, or can it expect a more favourable change in the near future?
    That is what I rose to ask. The question has not been put earlier in the

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    debate, and if the Economic Secretary is now able to say something about it, that might be helpful.
    Mr. Paget: I do not often intervene in finance debates, but during the course of my week-end reading I came across a passage in terms which I hoped would appeal to the Chancellor of the Exchequer and which seemed almost perfectly to express the Opposition's case against the indiscriminating nature of the Clause. That passage is:
    "An adequate policy must therefore provide for (a) a form of industrial organisation which curbs unwise speculative over-expansion in any industry and assists by an intelligent system of market anticipation in guiding capital investment into correct channels and in the correct proportions to maintain a balance in the quantities of separate goods which, if stability is to be preserved, must be exchanged for one another."
    I am glad that those words appeal to the Chancellor, because they are, of course, his own. They also seem to me to express quite admirably what we have been seeking to say from these benches during the debate. Indeed, when I reread with renewed pleasure "The Middle Way", I find myself the more surprised that one who in his youth so fully appreciated the need of planning and controls should have so departed from wisdom.
    Indeed, the right hon. Gentleman is almost the last person whom one would have expected to be under the illusion that we could leave an economy to be self-adjusting when we peg and tie down its two main adjusting factors—the level of employment and the level of international exchange. That it could be done at all happened only because of the beginner's luck which the Government had in the terms of trade in their favour during the initial years.
    We now hope that the right hon. Gentleman will return from the folly of his age to the wisdom of his youth and persuade some of the obscurantists behind him of that which he very well knows—that the modern economy cannot exist without planning and without adequate controls.
    Sir E. Boyle: We have had an extremely good discussion on the Clause, both on the Amendments and on the Question, "That the Clause stand part of the Bill" I must congratulate the hon. and learned Member for Northampton (Mr. Paget) on imbibing from sources of
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    wisdom, both in my right hon. Friend's excellent book, which he published before the war, and, if I am not mistaken, in Mr. Balogh's recent articles in the New Statesman.
    The hon. Member for Stechford (Mr. Roy Jenkins) opened this debate with a very enjoyable speech and, if I may, I should like to begin by taking up one point which he made. I certainly agree with him that there is no precise parallel between my right hon. Friend's decision to suspend the investment allowance this year and the decision of the right hon. Gentleman the Leader of the Opposition to suspend the initial allowance in 1951. I think that, in addition to those mentioned by the hon. Gentleman, there are two differences between those two situations which are highly relevant to this discussion.
    The first difference is, of course, that in 1951 the right hon. Gentleman gave industry a year's notice of the suspension of the initial allowance. We are still retaining the initial allowance; I think it must be remembered, therefore, that the effect on industry caused by the suspension of the investment allowance is very much less than was the effect on industry caused by the suspension of the initial allowance some years ago.
    I well remember the debates we had in this Committee in 1953 on the importance of the initial allowance. There was some controversy between my hon. Friend the Member for Oldham, East (Sir I. Horobin) who took rather a gloomy view of the allowance and said that it was nothing more than a tax-free loan, and the opposite view, put very ably by Mr. Crosland, who was then the Member for Gloucestershire, South, who pointed out that this was a matter of great importance to industry in making its expansion plans. Therefore, do not let us exaggerate what has been done to industry by this Clause. Industry still has the initial allowance at its disposal.
    There is another and, in a way, more important difference. It is important for us to remember that in 1951 when the initial allowance was suspended we were still just able in that year to export pretty large quantities of consumer goods. It is quite true that the sellers' market in consumer goods was coming to an end at that time. That was why the right hon. Gentleman, in his 1951 Budget, did

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    deliberately plan, as it were, for a running down of our foreign balance, because he said that we must take into account the limits of overseas markets to absorb our goods. Despite that, we were not relatively as dependent as we are today on the export of investment goods. It is very important to remember that, because one of the principle reasons for this Clause—as I shall explain in greater detail in a moment—is precisely that we have to think of the competing claims for resources by home investment and by our export trade.
    Mr. Roy Jenkins: I accept the hon. Gentleman's point as far as it goes, but when he says the total increase in claims upon what we call the investment goods industry is greater than it was in 1951, but he is surely leaving out of account the whole of the extra defence burden?
    Sir E. Boyle: Not at all. We still have the extra defence burden. I am merely pointing out that now that our markets are, to a large extent, markets for capital goods—and for just those capital goods which are likely most to be in demand, as a result of an investment boom—there is obviously greater competition for those resources by home investment and by exports than there was in 1951, and it is obviously difficult in those circumstances, therefore, to justify this special subsidy to investment.
    Let me turn next to consumption, which was referred to by the hon. Member for Stechford and by the hon. Member for Gloucestershire, West (Mr. Philips Price). Hon. Members opposite say that they were not, in principle, against curbs on consumption. They have certainly hardly shown that by their voting during the past year. Last year, when my right hon. Friend the Lord Privy Seal produced his April Budget, they complained that he did not do enough for the consumer. They said that if he was giving away this degree of money he should have given less to companies and more to the ordinary consumer.
    The principal reason for the autumn Budget of last year, as hon. Members will remember well, was that consumption, in view of the large, increasing demand for consumer durables, was pressing on the same resources as those that were needed by investment and by
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    exports. Hon. Members opposite did not simply vote against the pots and pans increase in that Budget but against every part of it. They voted against the increase in Purchase Tax on cars as well. I think it is also worth remembering that, placed as we were last autumn, with an investment boom and with consumption running very high, there was every economic justification for cutting the housing subsidy both as a curb on nonproductive investment and on consumption. Yet hon. Members voted against the Housing Subsidies Bill through all its stages as well. They therefore have no grounds at all for saying they were not against curbs on consumption.
    I now come to what I think is the most important point arising out of this debate; that is to say, whether it is necessary at the present time to have some curb on the investment boom. The hon. Member for Stechford quoted, very naturally in this connection, from the interesting recent Report of the Economic Commission for Europe. That certainly is a most valuable document, and I am glad that it fell to me to speak about it at the recent E.C.E. meeting at Geneva.
    I would first say, do not let us be too pessimistic about our achievements in the field of investment. I quite agree that we should not be complacent about it, but do not let us fall into the other extreme of being too gloomy. Over the last ten years the proportion of domestic fixed income to the gross national product has risen pretty substantially. It has risen from 10·3 per cent. in 1946 to 14·4 per cent. in 1950 and to 16·7 per cent. in 1955.
    Those, of course, are gross figures. In this calculation the figures include depreciation both as to investment and as to the national product. The Economic Survey for Europe table which has been very widely quoted gives net figures after depreciation. Those are net investment figures, and certainly the comparison between the United Kingdom and other European countries does seem to show our performance in a bad light. It is important to remember, however, that the United Kingdom is considerably richer than most other European countries, so that the amount of fixed investment per head of population is much higher in the United Kingdom than in Europe generally.

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    To put the comparisons into perspective, it is worth noting that over the period 1948–54 the fixed domestic investment as a percentage of the gross national product at market prices was 13 per cent. in the United Kingdom as against 16 per cent. in the United States of America—which is not so bad a comparison. Obviously, if we are dealing with figures of net investment it makes an enormous difference how much investment we already have. There are those economists who say that we should try to nearly double our net investment—and some say that we should aim at 10 per cent. of our gross national product. That would be a most astronomical achievement for a country as highly industrialised as ours.
    5.0 p.m.
    Mr. Roy Jenkins: It is rather surprising to hear the right hon. Gentleman, almost in the same sentence, say that we must not base too much on a comparison between our figures for investment as a proportion of the national income and those of the other European countries because we are richer than they are, and then say that the relative figures as between ourselves and the United States are 13 per cent. as against 16 per cent., without mentioning that the United States is three times as rich as we are.
    Sir E. Boyle: I quite agree. The United States started with even a bigger lead than we had. That is perfectly true. I am merely pointing out that it makes a big difference whether we are dealing with gross figures or net figures, and I think that those who draw a very unfavourable comparison between this country and other European countries should remember the extent to which we were in Britain a relatively developed and industrialised country already.
    I would, however, like to use one or two more general arguments. I thought that the hon. Member for Stechford, in his speech this afternoon, came dangerously close to thinking in terms of a closed economy, because, however much we may feel that an increase in investment is desirable, we have to think of the competing claims of our export trade for the same resources, and also think of the capacity of the investment goods industries themselves. Let me emphasise particularly this point about the other claims for those resources. The economic circumstances of the United Kingdom make
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    it very difficult indeed for us to finance a sudden or really dramatic increase in the proportion of investment to our gross national product. Do not let us forget that the United Kingdom is carrying out a heavy defence programme and has a number of overseas commitments which require a big surplus in our balance of payments.
    When we come down to it, the great problem which we have in our economy at the present time and the two great objectives that we have to reconcile are. first, the rising level of productive investment in this country, which we all agree is of the highest importance, with, at the same time, a surplus of at least £200 million a year in our balance of payments. Obviously there is a serious danger if we have too dramatic a rise at one time in our level of fixed investment, because that will make it difficult to achieve the balance of payments surplus that we must have if we are to fulfil our overseas commitments.
    In this connection, let me say a word on the subject of discrimination. A number of hon. Members referred to this. I think it is fair to remember that on the whole, it is precisely that investment which most people would agree was absolutely essential that makes the biggest impact on our balance of payments. I think that sometimes hon. Members opposite delude themselves a little about this.
    There is relatively little productive investment in industry which is obviously inessential. The amount of plant and machinery used for obviously inessential purposes in this country, and which competes directly with the resources for our export trade, is comparatively small. I say frankly to hon. Members opposite that if they really want to make a cut in non-productive investment which would have a substantial effect on our balance of payments, there is only one way in which they can do it—and I think that in their hearts they know it—and that is by making a really large reduction in the housing programme. If they think that we should go back to the Ebbw Vale housing programme of not more than 200,000 houses a year, that is an arguable view, but I think that they ought to say so. We know that houses use a large amount of timber, and the programme necessitates other forms of investment. too. A cut in the housing

    279
    programme is the only way in which we can make a really big cut in non-productive investment that would really have a considerable impact on the balance of payments.
    I should like to take up a point made by the hon. Member for Sowerby (Mr. Houghton) and the hon. Member for Stechford about the future. The hon. Member for Stechford spoke about the long-term effect of suspending the investment allowance. I must say that it puzzles me very much that hon. Members opposite who believe in economic planing have not yet appreciated what seems to me to be one absolutely essential point, which is that in economic policy we are always in a short-term situation whether we like to admit it or not. I do not know if hon. Members opposite read the admirable Reid lecture on this subject by the late Professor Sir Hubert Henderson delivered some ten years ago. Sir Hubert was a man wise enough, like my right hon. Friend, to be an apostle of the middle way and an adherent of the policy of the extreme centre, and nobody could complain that he was a supporter of complete laissez faire—he certainly was not.
    In this lecture, he pointed out very forcibly, that in economic affairs one is always in a short-term situation and it is no good trying to look too far ahead at any time. Clearly our present economic circumstances demand that we should have some moderation in the rate of climb of the investment boom. We cannot yet tell what the level of investment will be in 1957, but we can be sure of this, that if it looks as if the boom is moderating by then—and at the moment the climb is still a fairly steep one—there is plenty of investment that can be done in the public sector as well.
    Since the war, great resources have been devoted to the fuel and power industry, and there is now no shortage of electricity for our manufacturing industries. Electricity is a great consumer of coal, and an increase in production there is vital to our economy. But we still have a large amount of leeway to make up by way of transport, and a large amount of investment in the fields of roads and railways upon which we can embark should there be any sign at all of slower development in the private sector.
    280
    I say to the hon. Member for Sowerby that one has to realise that if any part of our economy ought to be flexible it is the tax system. Indeed there are those who would like to see the investment allowance used in an even more flexible way and who think that in a year like this it would be a good idea to have a sort of negative or minus investment allowance. I do not think that any Government need make any apology for using the tax weapons available to it in a flexible manner.
    This Government fully realise the very great importance of investment to the economy.
    Indeed, they want to raise the rate of investment both absolutely and proportionately. Their recent measures most certainly have not been designed to sacrifice investment to consumption; indeed, it was forecast in the Economic Survey that fixed investment in 1956 would be considerably higher than in 1955 when a notable rise took place.
    It is the object of the Government to foster a steady increase in fixed investment combined with an increase in savings. I would certainly say that one of the best features of the past year in this country has been the realisation on the part of very many people, particularly financial journalists, of the enormous importance of a high level of industrial investment to our economy, and I have myself on many occasions drawn attention to this.
    We must have regular re-equipment of our industries if we are to compete in a more competitive world, and there is also the point—I make no apology for mentioning it—that a high level of productive investment is essential if we are to have rising living standards, and quite obviously from every point of view technical progress is about the best thing that can happen to a community.
    We must achieve this rising level of production without inflation and without imposing too much strain on our balance of payments. It is with those considerations in mind that my right hon. Friend has decided that this year we must suspend the investment allowance in order to ensure that we build up our reserves and earn again a good surplus on our balance of payments.
    Mr. Douglas Jay: Although we always enjoy listening to the Economic Secretary, I think it rather extraordinary that we have heard nothing from the Chancellor of the Exchequer on this very important Clause. We have now reached the concluding stages of Clause 12 and so far we have had only two or three contributions from the Chancellor of the Exchequer on the Bill. I can well understand that he has many burdens on his mind, but we do not feel that he is treating the Committee entirely as it is accustomed to being treated.
    Mr. H. Macmillan: I do not wish to treat the Committee with any discourtesy. I think that the Committee have heard quite enough from me. Last night I made a somewhat lengthy speech on an Amendment, it is true, but it was such a comprehensive one that it was, in effect, a speech on the Clause stand part, so far as the rules of order permitted, and they were very wide. I think that it has been a long tradition to allow any of the Treasury Ministers to speak on these matters. I certainly did not wish to treat the Committee with discourtesy, and I hope that I shall not fall into that trap in the long discussions which we are still to have tonight.
    Mr. Jay: I think that the Chancellor took one wicket out of ten yesterday, and I am not quite sure that that is a captain's contribution.
    However, I rose to say that we must vote against this Clause because we believe that this country ought to have a higher investment economy.
    The argument is really very simple. We are a country with very little resources of raw materials. We have to live by exporting. Therefore, we have to do it by our own ingenuity, efficiency and productivity. That being so, we ought to be a higher investment country than most of our competitors, whereas, in fact, all the figures show that we are a low investment country. Therefore, in a temporary balance of payments crisis, we ought not to attack investment rather than consumption.
    In his speeches both yesterday and today, the Economic Secretary to the Treasury—who makes twelve speeches to every one made by the Chancellor—was a little in danger of juggling with figures
    282
    in order to bolster up his rather complacent attitude. After all, whichever way we look at them, the figures show that we are investing at a lower rate than our competitors. As my hon. Friend said, if we look at the straight comparison with Europe we see that we are at the bottom of the table. If we adopt the Economic Secretary's ingenious suggestion that one expects the country with a higher standard of living to have a lower rate of investment, we find the United States is ahead of us.
    Compared with the figures of 22 per cent. net investment by Norway and 6 per cent. by this country, Russia is probably investing something like 25 per cent. at the present time. We cannot really believe that these figures are encouraging or that the Economic Secretary is altogether innocent of some complacency about them. I entirely agree with the hon. Gentleman that if we are going to maintain and increase investment and if we are going to get our balance of payments right, we must restrain consumption.
    The hon. Gentleman accuses us of having failed to advocate that during the last two years. That really is not true at all. We have repeatedly said that the reductions in taxation on profits which the previous Chancellor made with the connivance of the Economic Secretary, and with the resulting increase of dividends and expenditure, should not have been made. We opposed this. We feel that if these needless cuts had not been made then the increase in expenditure would not have occurred.
    I will quote only one figure to the Economic Secretary from his own Economic Survey, which I am sure he reads even if the Chancellor does not. There was an increase in dividend payments between 1954 and 1955 of about £100 million. That was a very similar figure to the reduction in taxation of companies in that year, and it is also almost exactly the same figure as the Economic Survey gives for the excess of expenditure over resources in 1955 which led to the trouble. That is how we should have kept down consumption, and where we think the mistake was made. Since the Government refused yesterday to discriminate in this matter of the investment allowance, we have no alternative but to oppose the whole Clause.

    283
    The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) made a speech last night in which he said that to discriminate in these allowances would disrupt capitalism, ruin the country, disunite Europe, and so on. I told the noble Lord earlier today that I was going to mention this. When I pointed out to him that he voted for a similar proposal in 1951, he challenged me to produce chapter and verse for that statement. As it turns out, I did him an injustice; he did not vote once but six times for it. My hon. Friend has already mentioned that I have the HANSARD references if the noble Lord were here to question what I said.
    I wish to make one more point before we reach a decision on the Clause. As a result of the decision to abolish the investment allowance, we shall now be giving precisely the same capital allowance to the passenger motor car used for business or alleged business purposes as for any other item that attracts the allowance. The Economic Secretary will remember—I hope that the Chancellor is also aware of this—that when the investment allowance was introduced in 1954 motor cars were excluded, thus admitting by implication our argument that they ought never to have this allowance at all, and also admitting, what the Inland Revenue had up to then denied, that it was impracticable to discriminate between cars for this allowance and other types of capital assets.
    I hope that the Government will look at this matter very seriously. I know that the Economic Secretary knows the point well, but it never was the intention of Parliament that cars should be bought for nominally business purposes and used largely for private purposes at the expense of the Exchequer. In the past week we have had a very interesting statement from Lady Docker to the effect that the famous Daimlers with their golden doors, zebra-skin seats and tyres made of mink, or whatever it was, were not, in fact, the property of Lady Docker but the property of the Daimler Company. I take that to mean that these cars, like so many others, were bought partly at the expense of the Exchequer and with the assistance of the initial allowance.
    284
    I make this point in no party sense whatever, and I hope that the Chancellor win look seriously at it.
    5.15 p.m.
    Mr. H. Macmillan: I take it that the right hon. Gentleman means cars and not vehicles.
    Mr. Jay: I am speaking entirely of passenger cars. If the right hon. Gentleman looks it up, he will find that passenger cars were not among the vehicles included in 1954.
    For those reasons. I hope that we shall now reach a conclusion, and I ask my hon. Friends to vote against the Clause.
    Mr. J. T. Price: I congratulate my right hon. Friend on being able to raise a matter which on a previous occasion I thought would be outside the bounds of this Clause. But since it has been mentioned, I ask my right hon. Friend and the Chancellor to realise that the estimate given for the value of private cars placed on the market as new cars last year was of the order of £350 million. On reliable estimates, 80 per cent. of that was chargeable to business account and a 30 per cent. initial allowance was allowed on the purchase of those cars, which brings the total being allowed to somewhere in the region of £90 million for private cars charged to business account. That is a very serious matter.
    Mr. H. Macmillan: I take it that the party opposite would support the exclusion of private motor cars from the benefit of the initial allowances, although not, of course, from being charged as part of business expenses.
    Mr. Jay: Certainly, and as it is not in the power of the Opposition to put down an Amendment on Report, I hope that the right hon. Gentleman will do so to this effect.
    Mr. Macmillan: I should like to know, because it is a very interesting decision of the Opposition—[An HON. MEMBER: "In present conditions."]—in present conditions
    Question put:
    The Committee divided: Ayes 261, Noes 199.

    Division No. 211.]

    AYES

    [5.19 p.m.

    Agnew, Cmdr. P. G.

    Gower, H. R.

    Macpherson, Niall (Dumfries)

    Aitken, W. T.

    Graham, Sir Fergus

    Maddan, Martin

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

    Green, A.

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

    Alport, C. J. M.

    Grimond, J.

    Manningham-Buller, Rt. Hn. Sir R.

    Arbuthnot, John

    Grimston, Hon. John (St. Albans)

    Markham, Major Sir Frank

    Armstrong, C. W.

    Grimston, Sir Robert (Westbury)

    Marlowe, A. A. H.

    Ashton, H.

    Grosvenor, Lt.-Col. R. G.

    Marples, A. E.

    Astor, Hon. J. J.

    Hall, John (Wycombe)

    Marshall, Douglas

    Atkins, H. E.

    Hare, Rt. Hon. J. H.

    Mathew, R.

    Balniel, Lord

    Harris, Frederic (Croydon, N.W.)

    Mawby, R. L.

    Barber, Anthony

    Harris, Reader (Heston)

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

    Barlow, Sir John

    Harrison, A. B. C. (Malden)

    Medlioott, Sir Frank

    Barter, John

    Harrison, Col. J. H. (Eye)

    Milligan, Rt. Hon. W. R.

    Baxter, Sir Beverley

    Harvey, Air Cdre. A. V. (Macclesfd)

    Monckton, Rt. Hon. Sir Walter

    Bell, Philip (Bolton, E.)

    Harvey, Ian (Harrow, E.)

    Morrison, John (Salisbury)

    Bell, Ronald (Bucks, S.)

    Harvey, John (Walthamstow, E.)

    Nabarro, G. D. N.

    Bennett, F. M. (Torquay)

    Harvie-Watt, Sir George

    Nairn, D. L. S.

    Bidgood, J. C.

    Hay, John

    Neave, Airey

    Biggs-Davison, J. A.

    Head, Rt. Hon. A. H.

    Nicholson, Godfrey (Farnham)

    Birch, Rt. Hon. Nigel

    Heald, Rt. Hon. Sir Lionel

    Nioolson, N. (B'n'm'th, E. & Chr'ch)

    Bishop, F. P.

    Heath, Rt. Hon. E. R. G.

    Nield, Basil (Chester)

    Black, C. W.

    Henderson, John (Cathcart)

    Noble, Comdr. A. H. P.

    Body, R. F.

    Hicks-Beach, Mal. W. W.

    Nugent, G. R. H.

    Boothby, Sir Robert

    Hill, Rt. Hon. Charles (Luton)

    Nutting, Rt. Hon. Anthony

    Bossom, Sir Alfred

    Hill, Mrs. E. (Wythenshawe)

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

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

    Hill, John (S. Norfolk)

    Ormsby-Gore, Hon. W. D.

    Boyle, Sir Edward

    Hinchingbrooke, Viscount

    Page, R. G.

    Braine, B. R.

    Hirst, Geoffrey

    Pannell, N. A. (Kirkdale)

    Braithwaite, Sir Albert (Harrow, W.)

    Holland-Martin, C. J.

    Partridge, E.

    Brooke, Rt. Hon. Henry

    Holt, A. F.

    Peyton, J. W. W.

    Brooman-White, R. C,

    Hope, Lord John

    Pickthorn, K. W. M.

    Bryan, P.

    Hornby, R. P.

    Pilkington, Capt. R. A.

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

    Horobin, Sir Ian

    Pitman, I. J.

    Burden, F. F. A.

    Horsbrugh, Rt. Hon. Dame Florence

    Pitt, Miss E. M.

    Butcher, Sir Herbert

    Howard, John (Test)

    Pott, H. P.

    Campbell, Sir David

    Hudson, Sir Austin (Lewisham, N.)

    Powell, J. Enoch

    Carr, Robert

    Hughes, Hallet, Vice-Admiral J.

    Prior-Palmer, Brig. O. L.

    Cary, Sir Robert

    Hughes-Young, M. H. C.

    Profumo, J. D.

    Channon, H.

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

    Raikes, Sir Victor

    Chichester-Clark, R.

    Hyde, Montgomery

    Ramsden, J. E.

    Clarke, Brig. Terence (Portsmth, W.)

    Hylton-Foster, Sir H. B. H.

    Rawlinson, Peter

    Conant, Maj. Sir Roger

    Iremonger, T. L.

    Redmayne, M.

    Cooper, Sqn. Ldr. Albert

    Irvine, Bryant Codman (Rye)

    Rees-Davies, W. R.

    Cooper-Key, E. M.

    Jenkins, Robert (Dulwich)

    Renton, D. L. M.

    Cordeaux, Lt.-Col. J. K.

    Jennings, J. C. (Burton)

    Ridsdale, J. E.

    Corfield, Capt. F. V.

    Johnson, Dr. Donald (Carlisle)

    Roberts, Sir Peter (Heeley)

    Craddock, Beresford (Spelthorne)

    Johnson, Eris (Blackley)

    Robertson, Sir David

    Crosthwaite-Eyre, Col. O. E.

    Johnson, Howard (Kemptown)

    Robinson, Sir Roland (Blackpool, S.)

    Crouch, R. F.

    Jones, Rt. Hon. Aubrey (Hall Green)

    Rodgers, John (Sevenoaks)

    Crowder, Sir John (Finchley)

    Joynson-Hicks, Hon. Sir Lancelot

    Roper, Sir Harold

    Cunningham, Knox

    Keegan, D.

    Sandys, Rt. Hon. D.

    Currie, G. B. H.

    Kerby, Capt. H. B.

    Schofield, Lt.-Col. W.

    Dance, J. C. G.

    Kerr, H. W.

    Scott-Miller, Cmdr. R.

    Davidson, Viscountess

    Kimball, M.

    Sharples, R. C.

    D'Avigdor-Goldamid, Sir Henry

    Kirk, P. M.

    Shepherd, William

    Deedes, W. F.

    Lagden, G. W.

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

    Digby, Simon Wingfield

    Lambert, Hon. G.

    Smithers, Peter (Winchester)

    Donaldson, Cmdr. C. E. MoA.

    Lambton, Viscount

    Smyth, Brig. Sir John (Norwood)

    Drayson, G. B.

    Lancaster, Col. C. G.

    Soames, Capt. C.

    du Cann, E. D. L.

    Leather, E. H. C.

    Spearman, Sir Alexander

    Duncan, Capt. J. A. L.

    Leburn, W. G.

    Speir, R. M.

    Duthie, W. S.

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

    Spens, Rt. Hn. Sir P. (Kena'gt'n, S.)

    Eccles, Rt. Hon. Sir David

    Legh, Hon. Peter (Petersfield)

    Stanley, Capt. Hon. Richard

    Eden, J. B. (Bournemouth, West)

    Lindsay, Hon. James (Devon, N.)

    Stevens, Geoffrey

    Emmet, Hon. Mrs. Evelyn

    Lindsay, Martin (Solihull)

    Steward, Sir William (Woolwich, W.)

    Errington, Sir Eric

    Linstead, Sir H. N.

    Stewart, Henderson (Fife, E.)

    Erroll, F. J.

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

    Stoddart-Scott, Col, M.

    Farey-Jones, F. W.

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Studholme, Sir Henry

    Fell, A.

    Longden, Gilbert

    Summers, Sir Spencer

    Finlay, Graeme

    Lucas, Sir Jocelyn (Portsmouth, S.)

    Taylor, Sir Charles (Eastbourne)

    Fisher, Nigel

    Lucas, P. B. (Brentford & Chiswick)

    Taylor, William (Bradford, N.)

    Fleetwood Hesketh, R. F.

    Lucas-Tooth, Sir Hugh

    Teeling, W.

    Forrest, G.

    Macdonald, Sir Peter

    Thomas, Leslie (Canterbury)

    Fort, R.

    McKibbin, A. J.

    Thompson, Kenneth (Walton)

    Foster, John

    Mackie, J. H. (Galloway)

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

    Fraser, Sir Ian (M'cmbe & Lonsdale)

    McLaughlin, Mrs. P.

    Thornton-Kemsley, C. N.

    Freeth, D. K.

    Maclay, Rt. Hon. John

    Tiley, A. (Bradford, W.)

    Galbraith, Hon. T. G. D.

    Maclean, Fitzroy (Lancaster)

    Tilney, John (Wavertree)

    Garner-Evans, E. H.

    McLean, Neil (Inverness)

    Touche, Sir Gordon

    George, J. C. (Pollok)

    Macleod, Rt. Hn. Iain (Enfield, W.)

    Turner, H. F. L.

    Godber, J. B.

    MacLeod, John (Ross & Cromarty)

    Tweedsmuir, Lady

    Gomme-Duncan, Col. Sir Alan

    Macmillan,Rt.Hn.Harold(Bromley)

    Vane, W. M. F.

    Vaughan-Morgan, J. K.

    Wall, Major Patrick

    Williams, R. Dudley (Exeter)

    Vickers, Miss J. H.

    Ward, Hon. George (Woroester)

    Woollam, John Victor

    Vosper, D. F.

    Waterhouse, Capt. Rt. Hon. C.

    Yates, William (The Wrekin)

    Wakefield, Edward (Derbyshire, W.)

    Watkinson, Rt. Hon. Harold

    Wakefield, Sir Wavell (St. M'lebone)

    Whitelaw, W.S.I.(Penrith & Border)

    TELLERS FOR THE AYES:

    Walker-Smith, D. C.

    Williams, Paul (Sunderland, S.)

    Mr. Oakshott and Mr. Wills.

    NOES

    Ainsley, J. W.

    Griffiths, Rt. Hon. James (Lianelly)

    Paling, Will T. (Dewsbury)

    Albu, A. H.

    Griffiths, William (Exchange)

    Palmer, A. M. F.

    Allen, Arthur (Bosworth)

    Hall, Rt. Hn. Glenvil (Colne Valley)

    Pargiter, G. A.

    Allen, Scholefield (Crewe)

    Hamilton, W. W.

    Parker, J.

    Awbery, S. S.

    Hannan, W.

    Parkin, B. T.

    Bacon, Miss Alice

    Hayman, F. H.

    Paton, John

    Baird, J.

    Healey, Denis

    Pearl, T. F.

    Balfour, A.

    Henderson, Rt. Hn. A. (Rwly Regis)

    Plummer, Sir Leslie

    Bence, C. R. (Dunbartonshire, E.)

    Hobson, C. R.

    Price, J. T. (Westhoughton)

    Benn, Hn. Wedgwood (Bristol, S.E.)

    Holman, P.

    Price, Philips (Gloucestershire, W.)

    Benson, G.

    Holmes, Horace

    Probert, A. R.

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

    Houghton, Douglas

    Proctor, W. T.

    Blackburn, F.

    Howell, Charles (Perry Barr)

    Pryde, D. J.

    Blyton, W. R.

    Hubbard, T. F.

    Randall, H. E.

    Boardman, H.

    Hughes, Cledwyn (Anglesey)

    Rankin, John

    Bottomley, Rt. Hon. A. G.

    Hughes, Emrys (S. Ayrshire)

    Redhead, E. C.

    Bowden, H. W. (Leicester, S. W.)

    Hughes, Hector (Aberdeen, N.)

    Reeves, J.

    Bowen, E. R. (Cardigan)

    Hunter, A. E.

    Reid, William

    Bowles, F. G.

    Hynd, H. (Accrington)

    Roberts, Albert (Normanton)

    Boyd, T. C.

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

    Roberts, Goronwy (Caernarvon)

    Braddock, Mrs. Elizabeth

    Jeger, George (Goole)

    Robinson, Kenneth (St. Pancras, N.)

    Brockway, A. F.

    Jeger, Mrs. Lena (Holbn & St.Prics, S.)

    Rosa, William

    Brown, Rt. Hon. George (Belper)

    Jenkins, Roy (Stechford)

    Royle, C.

    Brown, Thomas (Ince)

    Jones, Rt. Hon. A. Creech(Wakefield)

    Shinwell, Rt. Hon. E.

    Burton, Miss F. E.

    Jones, David (The Hartlepools)

    Short, E. W.

    Butler, Herbert (Hackney, C.)

    Jones, Elwyn (W. Ham, S.)

    Shurmer, P. L. E.

    Butler, Mrs. Joyce (Wood Green)

    Jones, J. Idwal (Wrexham)

    Silverman, Julius (Aston)

    Callaghan, L. J.

    Jones, T. W. (Merioneth)

    Skeffington, A. M.

    Castle, Mrs. B. A.

    Kenyon, C.

    Slater, Mrs. H. (Stoke, N.)

    Chetwynd, G. R.

    Key, Rt. Hon. C. W.

    Slater, J. (Sedgefield)

    Clunie, J.

    King, Dr. H. M.

    Smith, Ellis (Stoke, S.)

    Coldrick, W.

    Lawson, G. M.

    Snow, J. W.

    Collick, P. H. (Birkenhead)

    Lee, Frederick (Newton)

    Sorensen, R. W.

    Collins, V. J. (Shoreditch & Finsbury)

    Lee, Miss Jennie (Cannock)

    Stewart, Michael (Fulham)

    Corbet, Mrs. Freda

    Lever, Harold (Cheetham)

    Stokes, Rt. Hon. R. R. (Ipswich)

    Cove, W. G.

    Lever, Leslie (Ardwick)

    Stones, W. (Conceit)

    Craddock, George (Bradford, S.)

    Lewis, Arthur

    Strachey, Rt. Hon. J.

    Cronin, J. D.

    Logan, D. G.

    Stross,Dr.Barnett(Stoke-on-Trent,C.)

    Crossman, R. H. S.

    Mabon, Dr. J. Dickson

    Summerskill, Rt. Hon. E.

    Cullen, Mrs. A.

    MacColl, J. E.

    Sylvester, G. O.

    Dalton, Rt. Hon. H.

    McGhee, H. G.

    Taylor, Bernard (Mansfield)

    Darling, George (Hillsborough)

    McInnes, J.

    Thomas, lorwerth (Rhondda, W.)

    Davies, Harold (Leek)

    McKay, John (Wallsend)

    Thomson, George (Dundee, E.)

    Davies, Stephen (Merthyr)

    Mahon, Simon

    Thornton, E.

    Deer, G.

    Mallalieu, E. L. (Brigg)

    Timmons. J.

    de Freitas, Geoffrey

    Mann, Mrs. Jean

    Turner-Samuels, M.

    Delargy, H. J.

    Marquand, Rt, Hon. H. A.

    Viant, S. P.

    Dodds, N. N.

    Mason, Roy

    Warbey, W. N.

    Dugdale, Rt. Hn. John (W. Brmwch)

    Mayhew, C. P.

    Wells, Percy (Faversham)

    Dye, S.

    Messer, S.,- F.

    West, D. G.

    Ede, Rt. Hon. J. C.

    Mikardo, Ian

    Wheeldon, W. E.

    Edwards, Rt. Hon. John (Brighouse)

    Mitchison, G. R.

    White, Mrs. Eirene (E. Flint)

    Edwards, Rt. Hon. Ness (Caerphilly)

    Monslow, W.

    White, Henry (Derbyshire, N.E.)

    Edwards, Robert (Bilston)

    Moody, A. S.

    Wigg, George

    Edwards, W. J. (Stepney)

    Morris, Percy (Swansea, W.)

    Wilkins, W. A.

    Evans, Albert (Islington, S.W.)

    Mort, D. L.

    Willey, Frederick

    Evans, Stanley (Wednesbury)

    Moss, R.

    Williams, David (Neath)

    Fernyhough, E.

    Moyle, A.

    Williams, W. R. (Openshaw)

    Fienburgh, W.

    Mulley, F. W.

    Willis, Eustace (Edinburgh, E.)

    Finch, H. J.

    Neal, Harold (Bolsover)

    Wilson, Rt. Hon. Harold (Huyton)

    Forman, J. C.

    Oliver, G. H.

    Winterbottom, Richard

    Fraser, Thomas (Hamilton)

    Orbach, M.

    Woodburn, Rt, Hon. A.

    Gibson, C. W.

    Oswald, T.

    Woof, R. E.

    Gordon Walker, Rt. Hon. P. C.

    Owen, W. J.

    Yates, V, (Ladywood)

    Grey, C. F.

    Padley, W. E.

    Younger, Rt. Hon. K.

    Griffiths, David (Rother Valley)

    Paget, R. T.

    Zilliacus, K.

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

    TELLERS FOR THE NOES:

    Mr. John Taylor and Mr. Rogers.

    Clause ordered to stand part of the Bill.

    Clause 13 ordered to stand part of the Bill.

    Question put and agreed to.

    Clause 14.—(CAPITAL ALLOWANCES FOR EXPENDITURE ON DREDGING.)
    Mr. John Howard: I beg to move, in page 14, line 44, after "dredging", to insert:
    "and either the trade consists of the maintenance or improvement of the navigation of a harbour, estuary or waterway or the dredging is".
    The Temporary Chairman: I suggest that with this Amendment it would be convenient to discuss the other two Amendments in the name of the hon. Member for Southampton, Test (Mr. J. Howard), in page 14, line 46, and page 15, line 41.
    Mr. Howard: The purpose of the Amendments is to extend the scope of the Clause to cover all capital expenditure on dredging incurred by dock and harbour authorities. As the Clause stands, a number of harbour authorities may be adversely affected, none of them more than the Southampton Harbour Board, which is within my constituency and with whose case I propose to illustrate the purpose of the Amendments.
    5.30 p.m.
    If dredging expenditure is to rank for initial and annual allowances under the Income Tax Act, 1952, it is necessary to meet the very narrow requirements of Clause 14 (1), namely, that the capital expenditure on dredging must be for the benefit of vessels coming to, leaving or using any dock or other premises occupied by the person carrying out that capital expenditure. This narrow definition will exclude almost the whole of the £1 million which Southampton Harbour Board has spent on deepening the approach and main channels to the port of Southampton. I am sure that that was not the intention of my right hon. Friend.
    Although Southampton Harbour Board is mainly charged with the duty of maintaining and improving the approach channels to the port of Southampton, the board itself occupies only a small dock and out of the 22 million tons of shipping which annually use the port of Southampton less than 5 per cent. of that tonnage uses the dock which is occupied by the Southampton Harbour Board. The rest use the British Transport Commission's main docks and the facilities at Fawley where tankers of 40,000 tons and more tie up at the oil refinery jetties.
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    The small dock is principally used by certain pleasure vessels and by small craft plying between Southampton and the Isle of Wight. They can be said to be the only vessels coming to, leaving or using the dock owned by the Southampton Harbour Board. For those reasons it can hardly be contended that expenditure on dredging and deepening the approach channel to enable the "Queen Mary, "the "Queen Elizabeth" and other large passenger and cargo vessels to reach Southampton docks, and to enable the tankers to move up the channel to the jetties at Fawley, is for the benefit of these small vessels using the Southampton Harbour Board dock.
    It is reasonable to suppose, therefore, that capital expenditure on dredging, which is incidentally responsible for making Southampton second only to London in the tonnage using the port annually, does not fall within Clause 14 (1). The Amendments would rectify that position and would enable the Southampton Harbour Board, and any other harbour authority similarly placed, to obtain tax relief in two ways. First, the board would obtain the initial allowance on all capital expenditure on dredging incurred in this fiscal year and henceforward. Secondly, it would obtain the annual allowance of one-fiftieth of all capital expenditure under the heading of dredging, with certain limitations in respect of capital expenditure already incurred.
    The last provision is the most important from the point of view of the Southampton Harbour Board. If the Amendment is carried, the Board will be allowed to claim an annual amount of one-fiftieth from 1956 onwards on expenditure incurred already, and it can be claimed for the balance of a period of fifty years commencing on the date on which the expediture first appeared in the balance sheet of the harbour authority.
    I should like to illustrate this point. This is a particularly valuable concession in the case of the authority in my constituency. A sum of £650,000 has been spent since the war on harbour improvements. Thus expenditure incurred immediately after the war, say ten years ago, will secure an annual allowance of one-fiftieth over the unexpired portion of the fifty years for which the annual allowances are available, namely forty years. Any later expenditure within the

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    post-war years will rank for allowance for a period of forty-one to forty-nine years from 1956-57. In the ten years immediately preceding the war, over £300,000 was spent by the harbour board on similar purposes in extending and improving the channel. Again, this allowance of one-fiftieth will be granted annually for periods of roughly twenty-three to twenty-seven years from 1956–57. Therefore, on the average, about half of that expenditure of £300,000 will rank for tax allowance. It is not putting it too highly to say that if the Amendment is accepted this very important concession will enable the harbour board to avoid putting up its harbour dues. Expenditure and costs have been rising and unless the concession is granted, it might be necessary to raise the dues.
    The Chancellor of the Exchequer has already recognised the importance of the shipping industry by continuing the investment allowances upon new ships, and I am sure that it was his intention to secure that all capital expenditure on the improvement of harbours would rank for allowance under Clause 14. As drafted, the Clause does not seem to cover the case of Southampton Harbour Board and it may be the cases of other harbour authorities. Therefore, I hope that, in view of their importance, the Amendments will be considered favourably.
    The Financial Secretary to the Treasury (Mr. Henry Brooke): I should like to congratulate my hon. Friend the Member for Southampton, Test (Mr. J. Howard) on the clarity with which he has explained to the Committee the highly technical point which his Amendments raise. I can assure him that my right hon. Friend the Chancellor of the Exchequer, when he presented the Bill, had no desire to discriminate against the great port of Southampton or, indeed, against any other port which was similarly placed.
    The point at issue is that the Clause as it stands is not wide enough to cover expenditure on dredging incurred by a harbour authority which does not itself occupy a dock that can be said to benefit from the dredging. My hon. Friend, who represents one part of the City of Southampton, has spotted and drawn to the attention of the Committee the fact that owing to the precise wording of the
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    Clause it would not be possible for Southampton to benefit, because the main docks at Southampton are owned by the British Transport Commission, and the Southampton harbour authority, which does the dredging, owns only one small dock and it could hardly be said that the dredging is carried on for the benefit of the vessels which use that small dock. There may well be other ports where the same situation arises.
    I cannot say for certain whether Southampton is unique in this respect, but I should like to assure my hon. Friend that my right hon. Friend is anxious that the Clause shall be drafted so that it will benefit harbour authorities in the position in which Southampton finds itself just as much as it will benefit other harbour authorities which own the main docks and can thereby gain the benefit of the Clause. I hope, therefore, that the whole Committee will agree with me that it will be an act of justice if we accept the three Amendments in the name of my hon. Friend.
    Mr. G. R Mitchison: I wonder if the right hon. Gentleman would answer a question which puzzles me a little. The Amendment says:
    "… the trade consists of the maintenance or improvement of the navigation of a harbour, estuary or waterway …"
    In the case that was put before us the harbour authority, apparently, does not own the docks. What is the taxable income of the harbour authority of Southampton in respect of that trade? I am sure there is an answer. I find it a little troubling. It clearly, of course, is not dock receipts. It would not be even if the authority owned the harbour—it might or it might not, but in this case the authority does not own the harbour. Whence does it get its funds? Upon what income is it taxed?
    Mr. Brooke: I am advised that the Southampton Harbour Board is taxed as carrying on a trade. I think that both I and my hon. Friend the Member for Southampton, Test mentioned that the harbour board does own one dock as a commercial proposition.
    Mr. Mitchison: So that the position is that the dredging of the estuary and the harbour, and so on, is incurred for the common benefit but the Southampton harbour authority is taxed on that solely

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    because it owns a dock which is not part of the trade, as I understand it, for this purpose. It seems rather rough on a public authority that that should be taken into account against it, as it were, which it does in its capacity as a public authority, simply because it happens to own one out of a number of docks, the majority, at any rate, of which belong to other people, including British Railways.
    Mr. Brooke: I addressed myself to the matter in general. I am not fully and in detail informed about the source of the revenue of the Southampton Harbour Board. There is no doubt, however, that at present no allowance can be claimed by the harbour authority, and I hope that the hon. and learned Gentleman will agree that it is wise that we should give it this advantage. Maybe my hon. Friend the Member for Southampton, Test can supply further information in detail about the doings of the Southampton Harbour Board.
    Mr. Mitchison: Let me assure the right hon. Gentleman at once that my anxiety was lest he had been over-taxing Southampton in the past in its capacity as a public authority. As he well knows, it is often very difficult to draw the line.
    Mr. J. Howard: Perhaps I can help. A considerable amount of the board's income is derived from dues collected from all vessels entering the harbour, including those which pass through our approach channels into the main docks owned by the British Transport Commission.
    Amendment agreed to.
    Further Amendments made: In page 14, line 46, leave out "those purposes" and insert:
    "the purposes of the trade".
    In page 15, line 41, leave out "the conditions" and insert:
    "any of the following conditions, that is to say:—

    (a) the condition that it consists of the maintenance or improvement of the navigation of a harbour, estuary or waterway; or

    (b) any condition".—[J. Howard.]

    Clause, as amended, ordered to stand part of the Bill.

    Clause 15.—(RELIEF FROM SURTAX FOR ESTATE DUTY ON ACCRUED INCOME.)
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    5.45 p.m.
    Mr. Houghton: This is the Clause which the Financial Secretary said was going to save him correspondence and save him from unpopularity. He had little to say about it in his speech on Second Reading but he did say this:
    "Clause 15 will remove a clear injustice where the present law in certain cases renders the same income liable, rather surprisingly, to both Estate Duty and Surtax."—[OFFICIAL REPORT, 9th May, 1956; Vol. 552, c. 1242.]
    "Rather surprisingly", he said, but there is no real surprise about our system of taxation, and I am surprised that the right hon. Gentleman should have been surprised, even though both Estate Duty and Surtax were chargeable on the same income.
    The Clause provides for relief from Surtax of a person having an absolute interest in the residue. Where an income accruing before death is taken into account in estimating the value of an estate the residuary income is to be treated as reduced in ascertaining Surtax liability of any person having an absolute interest in the residue of the estate. The amount of the reduction is set out in absolute gibberish in subsection (2), which, for the benefit of the Committee, I will read:
    "The amount of the reduction shall be an amount which, after deduction of income tax at the standard rate for the said year of assessment, would equal the amount of estate duty payable in respect of so much of the income taken into account as mentioned in the foregoing subsection as exceeds any liabilities so taken into account."
    If any hon. Member can tell me what that means I shall be very pleased to sit down and let him do so. I propose to sit down in any case in a moment, because this is as far as I can get with this Clause. That is why I am asking the right hon. Gentleman if he will throw a little light on it.
    There is another and even more serious question I want to ask him, and that is why the Chancellor proposes, as apparently is the case, to leave the injustices of the past unremedied. That is what the Clause seems to me to do. Subsection (9) says:
    "This section shall have effect as respects tax for the year 1956-57 and subsequent years of assessment."

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    I think it is a bit hard that past injustices should be left unremedied when injustices which, apparently, caused the right hon. Gentleman so much correspondence and so much unpopularity that he is now most anxious to remedy them are to be remedied. Perhaps the Financial Secretary will spare a few moments to tell us a bit more about it. I notice that since the Government changed the bowling the hon. Member for Southampton, Test (Mr. J. Howard) has scored three runs. I hope for similarly favourable treatment from the right hon. Gentleman.
    Mr. John Hall: I find myself in complete agreement with what has been said by the hon. Member for Sowerby (Mr. Houghton) and particularly with what he has said about the injustices of the past. I was most interested in the speech made by my right hon. Friend on the Second Reading of the Bill, a speech to which reference has already been made, and in which he said that the Clause would remove a clear injustice. It is quite true that it does, but only for the future, and not for the past. My right hon. Friend went on to say that a number of hon. Members had written to him in justified indignation about cases which had affected their constituents. I want to talk to him in justified indignation about a case which affects one of my own constituents. It is a very good example of the kind of thing which the Clause is intended to remedy.
    My constituent had an estate into which there fell an income to the value of £28,631. On that she paid Income Tax at £14,000-odd and Estate Duty of £9,000-odd and legacy duty of £1,400 leaving her with £3,866 out of the original income forming part of the estate. That, one would have thought, would have been bad enough. It did not leave very much of the original income in the estate of more than £28,000. But worse was still to come, because a Surtax demand for £11,000 was levied upon that income, which means that now she is called upon to pay £7,000 more than she actually received.
    That, of course, is injustice, which is recognised and which has been described as injustice. Is it asking too much that we should do something for those people—there cannot be many of them—who have suffered this injustice, due, apparently, either to clumsy draftsmanship
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    or to a complete lack of forethought in drafting the previous legislation on this matter?
    I know it is not easy to safeguard or compensate citizens against injustices which they might have suffered through bad, misleading or misguided legislation of the past. We have had a lot of examples of that between 1945 and 1951 from which some of us are suffering now, and so we cannot expect complete compensation in those cases. I should, however, like to know how many cases of this kind exist and what the cost would be of repaying them the sums they paid to the Treasury in excess of the sums which rightly should have been taken from them. I would not have thought it could be very much.
    I hope my right hon. Friend will took at the Clause and see whether it is not Possible to introduce a retrospective provision to make it possible to remedy this injustice. Retrospective legislation is not unknown. It has been indulged in before and in this instance it could be indulged in again to the satisfaction and justice of all those concerned.
    Mr. H. Brooke: I am happy to seek to explain the intricacies of the Clause, if I can do so briefly. The difficulties arise under legislation passed originally in 1938 although that legislation is now embodied in the Income Tax Act, 1952, which, as hon. Members will remember, i; a consolidating Act.
    The point is that income arising during the period when the estate of a deceased person is being administered is deemed to be the income of the beneficiary for purposes of Income Tax and Surtax. It may therefore be liable to Surtax in the hands of a residuary legatee if his income is big enough, but that part of the income which accrued before the death is also taken into account in computing Estate Duty on the estate. The same money may, therefore, be liable to both Estate Duty and Surtax, and with the present high rates it may in some cases total more than 20s. in the £, so that it would have been better from the legatee's point of view if the money had not been there at all.
    This is an anomaly which had come to light. We studied it and it was examined also by the Royal Commission on the Taxation of Profits and Income.

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    What we are doing in the Clause is in accordance with the recommendation of the Royal Commission that the Estate Duty attributable to the inclusion in the estate of accrued income which also ranks for Surtax purposes as part of the income of the residuary legatee should be deducted in computing the income on which Surtax is charged.
    Those words are perhaps the simplest in which I can explain the general effect of subsection (2), but perhaps I may use a few figures. Supposing there is a gross accrued dividend of £200 and the estate is liable for Estate Duty at the rate of 40 per cent., under subsection (2) the Estate Duty of £80 would be deducted from the gross amount of the dividend and the Surtax would be charged, not on £200, but on £120.
    The hon. Member for Sowerby (Mr. Houghton) and my hon. Friend the Member for Wycombe (Mr. John Hall) raised the question of restrospection. I agree at once that hardship has been suffered—
    Mr. Mitchison: Is the right hon. Gentleman quite sure that he has got his own Clause right? He spoke of an Estate Duty of £40. What it seems to me to be—I may be quite wrong—is an amount which, after deduction of Income Tax at the standard rate for the said year of assessment, would equal £40.
    Mr. Brooke: I said 40 per cent.
    Mr. Mitchison: I see.
    Mr. Brooke: I admit at once that I was trying to simplify my explanation. Perhaps I oversimplified it. If I were to give it in great detail, I might make both the Committee and myself more confused than before.
    On the question of retrospection, I quite agree that hardship has been suffered but I am bound to point out two things. First, when we make a tax change we do not normally make it retrospective. If we were always to do that we would open up a great many settlements and assessments which had been settled for many years past. In this case, as I said at the outset, the anomaly goes back to 1938. It would be physically impossible, even with the best will in the world, to clear up all the cases which have been examined by the Inland
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    Revenue and by the Estate Duty Office over the past seventeen years. We must, therefore, take a dividing line somewhere and I must advise the Committee that, despite the hardship which has been caused in individual cases, the only practical way of doing it is to make the change date from this tax year.
    Mr. John Hall: Can my right hon. Friend give any idea how many cases have been involved since 1938? It cannot be very many.
    Mr. Brooke: No. I could not make any conjecture of the number of cases over the past seventeen years.
    Mr. Houghton: Why did this banditry not stop before? If more has been taken in tax than the taxpayer received in money, why jib at retrospection for the remedying of such an obvious injustice? I do not know what the right hon. Gentleman has been thinking about to have received these protests and to have suffered this unpopularity without doing something earlier. The Government should repair the damage of their delay.
    Mr. Brooke: I am doing my best. I have been Financial Secretary for less than two years. I cannot say why all this occurred seventeen years ago. There is an element of ingratitude when one introduces a change that is generally welcome and then is merely criticised for not having done it before.
    Major W. Hicks Beach: I should like to make one suggestion about the question of retrospection. I should certainly not contradict my right hon. Friend in saying that these cases have been going on since 1938, but my impression, from actual practice, is that most of these cases have arisen following a decision of the court since the war. Perhaps my right hon. Friend would have another look at this question. A great injustice has been done to a great number of people and I think he will find that most of the injustices have arisen since the war.
    Mr. Brooke: This situation is not the result of the Stewarts Executors case, to which, I think, my hon. and gallant Friend is referring, but has existed ever since the 1938 Act. I do not, therefore, think it would be possible to find a later date and to make it the dividing line.
    Major Hicks Reach: I think I am right in saying that it was only enforced by the Inland Revenue since that case was decided in 1946. I hope my right hon. Friend will look at this matter again.
    6.0 p.m.
    Mr. Turner-Samuels: Can the right hon. Gentleman say whether, in view of the appalling circumstances about which we have heard, he has considered this matter from the point of view of making restoration? As the hon. Gentleman the Member for Wycombe (Mr. John Hall) has said, there cannot be a large number of cases, it is clear that in each one there has been a profound injustice committed, and, indeed, in many cases there must have been great hardship caused. To put it in plain words, all these people have paid money which they ought never have been asked to pay. It seems to me that as a moral consideration—if it is possible for the Treasury to consider anything of a moral nature—and not a question of whether this payment was made as a matter of law or as a mistake of fact, the Treasury ought to have considered the matter as to whether restoration should be made.
    From what the right hon. Gentleman has already said, it looks as though no consideration has been given to this particular matter. That is an appalling thing. If the Financial Secretary had been able to say to the Committee, "We have scrutinised this matter most carefully, we have been able to scan the various cases, but the complications are so great that it is impossible to do anything", that would have been one thing. But the right hon. Gentleman in effect tells the Committee in the face of this appalling injustice, "I do not know how many cases there are. I have not looked into this matter. The Treasury does not care two straws about it."
    Why then is the Treasury doing this now? Because they have had to recognise that a deep injustice has been done to citizens who have been made to pay money which they did not receive and have been left with deficits to meet out of their own pockets. One cannot imagine a more egregious case of business immorality than this. Yet the Financial Secretary has just boasted about the wonderful things the Government are now doing to amend this injustice. He told us plainly, nevertheless, that although this is so unjust that it has been essential to
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    put the matter right, he had not given a moment's thought and does not apparently intend to give a moment's thought to the injustices that have so far been done.
    That will not do. It is incumbent upon the right hon. Gentleman and upon the Government to look at this matter again. It does not help if the right hon. Gentleman says, "I am sorry but I cannot now look at this matter." The stigma will still remain. The fact is that this serious injustice has been allowed to happen and it ought to be remedied. It should be remedied for the past just as it is being remedied for the future. It is being remedied for the future because it is immoral, and it should be remedied for the past equally because it was immoral.
    I say, therefore, to the Financial Secretary that it is incumbent upon him to do something. We are not asking him to do something—not wonderful, or beneficient, or charitable. We are merely asking him to make restoration in cases where money has been wrongfully taken. It is in a sense almost a case of cheating. One has to be precise about these matters—to take money in this way and then, after it has been so taken, to turn round and say, "We ought never to have taken this money. We have dipped into the pockets of these people but we ought not to have done so," and yet do nothing about it.
    For the Financial Secretary to say in effect that because it was wrong it is to be put right now, but on the other hand that what has been done already is done, we have the swag and we intend to stick to it, is really not good enough. That is not the sort of thing that an honourable Treasury ought to do. Because it is not an honourable thing, because it is a wrong thing, because it is such a profound injustice, and because it is on the record now, by reason of this very Clause in the Bill, that it was and is an injustice, I ask the Financial Secretary to do the right thing now and to be as fair to the people who have suffered in the past as he is going to be fair to people in similar circumstances in the future.
    Mr. Gordon Walker: May I add my plea? We are partly to blame because this happened when we were in office. We admit that it is an injustice which should have been noticed

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    earlier than it was noticed. However, it has now been discovered, and it should be put right, at least as far back as 1946. Certainly it would be fairer to go back to 1946 than not to make the change retrospecive at all, and if we have to draw a line somewhere much less injustice will be done if it is drawn at 1946, though it would be better still to go back to 1938. However, the argument of drawing a line somewhere is in favour of 1946 rather than 1956, so I hope the Government will look at this matter again, since there is a strong case for restrospection in this matter.
    Mr. Brooke: I think I explained the reasons why on practical grounds retrospection to 1938 is impossible. We could not open up all those cases now long since settled. The hon. and learned Gentleman the Member for Gloucester (Mr. Turner-Samuels) was most unfair to me when he insinuated that I had taken no trouble about this matter, that I had not looked into it, and that I did not care. If all those allegations were true, how could I possibly have replied, as I did at once, to my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach), and show knowledge of the case which was clearly in his mind?
    Mr. Turner-Samuels: The right hon. Gentleman says that, but I will give him the reason why I said it, and with every justification. I am the last person in the world to want to make an allegation against the Financial Secretary, who usually is very fair and very thorough about these matters. The reason why I said that, and why I felt justified in saying it, was that in answer to the question as to whether the right hon. Gentleman knew how many cases there were of this kind, he indicated that he had no idea whatever, and the implication from that was that he had not looked into them.
    Mr. Brooke: I was asked how many cases there had been since 1938 and I replied, with truth, that I had no idea, because we do not keep classifications of these cases all the way back. It is happening in a not very large number of cases. It is not true that the Exchequer has taken this money immorally. It has been taken under the law, and we all know that the law operates in tax matters from time to time in an inequitable
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    manner because the law is not perfect in its detailed application to particular cases.
    I do not want to seem hard-hearted about this matter. Certainly I will draw the attention of my right hon. Friend the Chancellor of the Exchequer to what has been said. I hope I have proved that I have given consideration to it. From my knowledge of the matter, however, I must say that at the moment it appears to me to be impracticable to do otherwise than what is proposed in the Bill.
    Mr. Turner-Samuels: I want to say at once that if there was any implication in my words that the right hon. Gentleman had not given consideration to the matter, that was not an allegation which I wished to make. What I intended to convey was that it came to me as a surprise that he was unable to state how many cases, or in the region of how many cases, there were.
    Clause ordered to stand part of the Bill.

    Clause 16.—(POWER TO OBTAIN INFORMATION AS TO FEES, COMMISSIONS, ETC.)
    Mr. Houghton: I beg to move, in page 19, line 3, after "person", to insert:
    "or body of persons".
    It may be convenient, Sir Rhys, if I cover, at the same time, two consequential Amendments on the Notice Paper in the names of my hon. and learned Friend the Member for Kettering (Mr. Mitchison) and myself, in page 19, line 17, and page 20, line 6.
    This Clause is acceptable to my right hon. and hon. Friends. It carries out one of the recommendations of the Royal Commission on the Taxation of Profits and Income for the tightening up of the powers of the Inland Revenue to get information about the fees, commissions and payments of that kind which are not at present returned to the Inland Revenue except as a voluntary act.
    The Royal Commission referred, in paragraph 1065 of its final Report, to the types of payment about which at present the Inland Revenue has no power to get information, and said:
    "The Board have stated to us their belief that there is substantial evasion of tax in this field."

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    This has been referred to colloquially as "the B.B.C. Clause" because the British Broadcasting Corporation is one very large organisation which, quite within its rights, refuses to disclose to the Inland Revenue broadcasting fees and fees paid for the reproduction of talks in its publications, and so on. There must be a very large number of people who get fees from the B.B.C., and the total amount paid must be considerable. There are also newspapers which pay for articles. Some newspapers, as a matter of practice and of arrangement with the Inland Revenue, make return of fees paid for articles which they publish, but others do not.
    The Amendment merely seeks to make doubly sure that the Clause is comprehensive. We want to be certain that "Every person" in the first line means "Every person or body of persons", that "Every body of persons" in the first line of subsection (2) means also "Every person", and that "No person", in the first line of subsection (4), also means "No body of persons". This may be somewhat like a man who wears a belt as well as braces, but we want to be sure that, while we are at it, we make the Clause watertight.
    Captain J. A. L. Duncan: With reference to subsection (2), does the hon. Gentleman expect me, as an individual, to make a return to the surveyor every year of the number of tips which I give each taxi driver?
    Mr. Houghton: No, Sir. The hon. and gallant Member would be absolved from doing that by my reading of the Clause, because of the minimum amount which is laid down. However, if he tips his taxi driver more than £15, I am not so sure that we ought not to require a return from him. Such generosity would be dangerous from the point of view of tax evasion, and we should certainly want to close the net. But with great respect to the hon. and gallant Gentleman, I am quite sure that, being a Scot, he is unlikely to tip his taxi driver more than £15.
    I want to make sure that a person who may be carrying on some activity which is unspecified and makes payments in the course of doing so will make a return under the Clause. The Financial Secretary will probably say that it is all right and that he can set our fears at rest. If he
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    can do so, there will be no need to press the Amendment. Perhaps it will be suitable for me to say a few concluding remarks on the Question, "That the Clause stand part of the Bill."
    6.15 p.m.
    Mr. H. Brooke: I think I may be able to set at rest the doubts or fears of the hon. Member for Sowerby (Mr. Houghton) about this subtle trio of Amendments. If he will consult the Interpretation Act, 1889, he will find that the expression "person" includes "any body of persons corporate or incorporate." I trust that that will satisfy him on his first Amendment.
    The second Amendment concerns people who are carrying on any activity which does not constitute a trade or business. It appeared to us that these would be bodies of persons rather than individual persons from whom the information would be required. The hon. Member has clearly explained why application need not be made to my hon. and gallant Friend the Member for South Angus (Captain Duncan) for details of his tipping. I think that that would apply generally in relation to the payments of individuals. Subsection (2) is really directed to non-trading companies and societies and other bodies of persons, such as musical societies and the like, and, indeed, some local authorities, which may run concerts which do not constitute trading. There again, I think we have the correct wording.
    The third Amendment really alarmed me because the effect of it, as I understand, would be to make any small shareholder of a company, who took no part whatever in the management of the company, liable to render a return of payments made by the company, something which, obviously, he would be totally unable to do. Indeed, the Inland Revenue would be ill-advised to apply to him, because its right course would be to apply to the company, and, if the company failed to render a return, proceedings could be started against the company without pursuing the individual shareholders.
    I hope that, with that explanation, the hon. Gentleman will agree that the Clause is correctly drafted, and will then be willing to pass on to the general issues on which he said he would like to say a word.
    Mr. Mitchison: This is a musical comedy muddle. Take "company". In the view of the right hon. Gentleman, apparently, a "company" is a "body of persons". The right hon. Gentleman correctly quoted a Section of the Interpretation Act, which he really need not have done, as I think that all of us know that "a company" is "a person" and, consequently, any reference to "a body of persons" must refer either to "a body of individuals" or "a body of companies", whatever that may be.
    As "a person", by the same Interpretation Act. includes "persons" unless the contrary appears, we are still extremely uncertain what a "body of persons" is. I am sure I do not know. They are not corporate, because if they were they would be "a person" already. Therefore, what we have to consider in this respect is the sad case of an incorporeal body.
    I dare say the Treasury knows what it is talking about, but I am bound to say that I do not. I should have thought that the distinction which appeared to be drawn between, in one subsection, a "person", which, by reference to the Interpretation Act, also includes "persons" and, in the next one, a "body of persons", which, according to the curious conception in the right hon. Gentleman's mind, includes a "company" is, at any rate, sufficiently obscure to create a little uncertainty as to the reasons which promoted the remarkable distinction.
    I would urge the right hon. Gentleman to let us come down to brass tacks for a change. Why is it that "a person", which, we know, includes "a company" should not be required to take action under subsection (2) when "a body of persons" is required to do so? If "a body of persons" has any real meaning, why is "a body of persons" not required to do anything under subsection (1)? What we should like to know are the practical reasons for this. All we tried to do was to fill in the apparent gaps. What we have elicited is a sad story which seems to be—there is no other explanation—a story of complete confusion.
    As to the last matter, we did for once make a wholly unwarranted assumption. We assumed, contrary to all reason and
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    experience, that the officers charged with the administration of the Inland Revenue would use some sensible selection in requiring a person to make a return on behalf of a body of persons. Since, apparently, that is not to be postulated—since the right hon. Gentleman appears for the moment to have a rather more critical view than he usually has of the intelligence and discrimination of those who work under him—perhaps he will tell us how a body of persons makes a return. We do not expect him to answer now, but surely he will have a look at this and see whether he cannot get it right.
    Mr. Turner-Samuels: I quite agree with what the Financial Secretary said about the second word of the Clause, that "person" has also a plural meaning in the Interpretation Act, 1889. I should like him to tell the Committee—and I am sure that he will think that it is fair that we should know this—why this should be served up in the singular in subsection (1) and should make its appearance in subsection (2) in the garb of plurality. That should be explained. It may well be because it is some form of trade or activity which envisages more than one person, but we have not had a satisfactory explanation of that matter.
    In subsection (2) the singular person is clearly excluded. The subsection deals with one or more persons, or, to use the phrase of the subsection,
    "Every body of persons…"
    It is rather interesting and I have no doubt that the Financial Secretary will be able to explain it. Obviously, the draftsman had some notion when he indulged in this diversity between the two subsections. The Financial Secretary should explain why there is this distinction and what the applicability of the distinction is
    Mr. H. Brooke: I thought that I had explained this with perfect clarity on the first occasion, but if I have failed to do so I will willingly make another attempt. By Clause 16 we are placing obligations on persons and bodies of persons. In subsection (1) it is a general obligation both on an individual person carrying on a trade or business and on bodies of persons including companies.
    Mr. Mitckison: Then, in subsection (1), "person" includes "body of persons"? Is that right?
    Mr. Brooke: Yes, it does. I thought I had said so. The Interpretation Act has already said so.
    In subsection (2) we are dealing with people carrying on an activity which does not constitute a trade or business and we are placing certain obligations on them. I made it clear that this was designed to cover bodies like musical societies and local authorities giving entertainments, and others of that kind who are certainly not carrying on trade or business.
    Mr. Turner-Samuels: Why not a similar activity carried on by one person?
    Mr. Brooke: I cannot conceive of a case where there would be a single person who was not engaged in trade or business and who yet would be making a series of payments of this kind on a substantial scale. The hon. and learned Member will recollect that small payments are excluded. I do not think that it is desirable that the Committee should give tax authorities unlimited discretion to communicate with all kinds of individuals who are not in trade or business and ask them for returns. Indeed, on both sides of the Committee we are chary of giving powers like that. In this Clause, we are trying to adhere to what I have always known as the general sense of the Committee on both sides, that we should not ask for powers greater than are reasonably needed. That is the reason for the distinction. There is no mystery about it.
    Mr. Turner-Samuels: The mystery still remains, because it must be a mystery to an intelligent person why one should perform a certain act in relation to two or more people, who are doing something which is not in connection with a business or activity relevant to the Clause, and yet exclude its operation against a single person, who is doing precisely the same thing and in respect of whom there can be no reason why the same result ought not to happen in regard to him, as one person, as will now happen in relation to two or more persons.
    Mr. Mitehison: I do not want to take an undue amount of time, but this seems to depend on whether a body of persons carrying on an activity which does not constitute a trade or business really is a separate body of persons, or whether it is, for instance, the kind of company which can be incorporated under the Companies Acts for doing things which are not a
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    trade or business and which is often used for that purpose. The right hon. Gentleman, perhaps inadvertently, took a company as an instance of a body of persons which is strictly a single person.
    I suggest that he might consider whether he has not drawn the distinction between a person and a body of persons at the wrong place and whether he should not look again at the question of the company which is not in profit-making business at all.
    Mr. Brooke: With great respect to the hon. and learned Member for Kettering (Mr. Mitchison), I think that he is splitting very fine hairs. I will certainly examine the matter again in the light of the debate. I think we have it right, and I hope I have convinced the majority of the Committee that we do have it right and that the reason is that we do not want to give the tax authorities powers more extensive than they really need. However, between now and Report I will read what has been said.
    Mr. Houghton: In view of that assurance, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave. withdrawn.
    Sir Patrick Spans: I beg to move, in page 19, line 43, at the end to insert:
    (c) Particulars of payments made more than three years prior to the date of the notice from the surveyor.
    This is a very short Amendment and speaks for itself. The Clause refers to payments made on or after 6th April, 1956, but, on the other hand, there is no limit at any time after that date on how far back the surveyor may go in requiring returns from people who have made such payments. My right hon. Friend has just said that we do not want to give unnecessarily wide powers. It may well be that ten years hence the Revenue authorities may get on the track of some payments which had been made and it might be extremely burdensome for the payer, if he had to go back the whole ten years, even if he had records.
    In Clauses similar to this, in the past there has generally been a period beyond which the Revenue authorities cannot go back. We suggest that the Inland Revenue should not be allowed to go back in its inquiries beyond three years from the date of the service of the notice.
    6.30 p.m.
    Mr. H. Brooke: I am obliged to my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens) for raising this point. As he has mentioned, there is nothing in the Clause which would authorise inquiries to be made further back than the beginning of this financial year. His point is that if, ten years hence, the Inland Revenue has failed to make inquiries in a certain case, and wants that information, it might be awkward if it were to seek information many years back, when the records may have been destroyed.
    This point deserves consideration. I am certainly not going to agree to anything which would weaken the powers of the Inland Revenue to obtain the information which it requires. At the same time, my right hon. and learned Friend has pointed out that in at least one somewhat similar case a three-year limit was applied, namely, in Section 27 of the Finance Act, 1951—which is now Section 29 of the Income Tax Act, 1952—under which banks may be required to make returns of interest payments in excess of £15.
    If the Inland Revenue wished to go back more than three years it would be some kind of evidence that it had missed an opportunity which it should have taken upon an earlier occasion, and whereas we very much want the powers provided by the Clause we do not want them to be exercised in a way which effects no practical use. On the whole, I am inclined to advise the Committee that the interests both of the Inland Revenue and the taxpayer would be properly protected if a three-year limit were inserted here, as it exists in another context in the 1951 Act.
    My right hon. and learned Friend's Amendment is not quite satisfactory in its wording. I think that the date should be the date of the beginning of the Income Tax year and not precisely three years from the date of the notice, but if my right hon. and learned Friend is disposed to ask leave to withdraw the Amendment I would undertake that, on Report. my right hon. Friend would bring forward an Amendment with which to achieve the same purpose.
    Sir P. Spens: In those circumstances, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn
    310
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    Mr. Houghton: I do not know whether it is in order for me to say that I regret what we have just heard from the Financial Secretary, but I am very sorry that he has already begun to weaken the Clause. This Clause is in the Bill because the Royal Commission on the Taxation of Profits and Income drew attention to a substantial field of evasion in relation to the payment of fees to music hall artistes, free-lance journalists and others who earn a living not under a contract of service but by fees received for contributions literary, artistic, or in the world of entertainment.
    It is well known that there has been a good deal of such evasion. Ordinary, honest taxpayers have often read in the newspapers of music hall artistes and others in the world of entertainment who have been made bankrupt and have been found to be owing very large sums in Income Tax and Surtax. The public has wondered how that has come about, and why it is that although the Inland Revenue has all the workers in its grip, and has tax deducted from their pay packets in respect of every penny of overtime, production bonus or whatever it is they earn, another section of the community seems to get away with it.
    The Inland Revenue has come in for a good deal of criticism on account of these cases, much of which criticism has been undeserved. It has just not been possible for the Inland Revenue to put its hands on these people. It has not known what they have received; it has not had power to require those who pay them to declare what they have paid; it relies upon the taxpayer to render a return of Income Tax, and it fails to get one even though it serves notice after notice requiring him to comply with the Income Tax Acts. Very frequently, the persons concerned are very elusive. This Clause, in conjunction with Clause 17, will do a great deal to strengthen the hands of the Inland Revenue.
    Paragraph 1066 of the final Report of the Royal Commission says:
    "In those circumstances we feel no doubt that the right course is to give the Revenue a statutory power to call for returns of fees or other remuneration paid for artistic, literary or entertainment services on the same lines as its existing power under Section 28 of the Income Tax Act, 1952, to call for returns of commissions paid for services rendered."

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    Section 28 has no limitation of time. It provides that
    "Every person carrying on a trade or a business, if required to do so by notice from the surveyor, shall, within the times specified in the notice, make and deliver to the surveyor a return of all payments or other consideration to which this section applies, made or given during a year specified in the notice …"
    As the Clause stands, all the powers of Section 28 would rest in the hands of the Inland Revenue, and there would be no limit as to the time which it could go back, subject to the over-riding condition contained in subsection (7) of the Clause, which says:
    "This section shall apply to payments made on or after the sixth day of April, nineteen hundred and fifty-six."
    For the present that limits the power of inquiry to payments made in the future. If three, four, five or six years go by, and the Inland Revenue then has reason to believe that payments have been made by a person or body of persons and that those payments have not been disclosed, it would have power to inquire back as far as 6th April, 1956, as, in the same way, it has power to inquire back, without limit of time, under Section 28.
    It is much better that the Clause should stand part of the Bill as it is, and not be subject to any weakening Amendment, which the Financial Secretary seems to have hinted that his right hon. Friend will be prepared to introduce. It is far better that the Committee should do nothing to weaken the powers of the Inland Revenue in this connection. It has long been said by those who are in a position to know that there are two kinds of income tax in this country—Pay As You Earn and "Pay As You Like"—and many of these people do not like, and do not pay.
    It would be quite wrong for the Committee to limit the powers of the Inland Revenue to investigate. Some of the people who make the payments are also elusive. It is a question of the difficulty of getting hold not merely of the people who receive the money. but also of those who pay the money. All sorts of people mushroom into existence, float entertainment enterprises of one kind or another and subsequently vanish. The Inland Revenue may not become aware of the existence of the people who are making these payments until some
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    time afterwards, when they may get to know by accident. In those circumstances, it should have the power to inquire back.
    I hope I have not been too predatory in my remarks, but this is a serious matter. There is much discontent among the workers that they should be paying through P.A.Y.E. up to the hilt when there is another section of taxpayers in a less vulnerable position. I hope, therefore, that the right hon. Gentleman will have firm thoughts on his second thoughts, and that this Clause will stand as it is.
    Sir P. Spens: I only wish to say that I am entirely in concurrence with the hon. Member for Sowerby (Mr. Houghton) on what this Clause intends to do, but I think the Committee should realise that if, eventually, the Amendment which I moved is taken over by the Government and accepted, from the moment the Bill becomes law, the Inland Revenue will have three years in which to pursue any person. If, in the course of the three years, it can find neither the person who has received the money nor the person who paid it, then I think the Inland Revenue will be to blame and nobody else.
    While the hon. Gentleman says that there is a great deal of discontent, there are also some people who think that the Inland Revenue is extraordinarily dilatory in making its claims. If it has to make its claims within three years, no harm will be done to the Department.
    Mr. Frederick Mulley: The right hon. and learned Member for Kensington, South (Sir P. Spens) made an unwarrantable attack on the Inland Revenue, because I think that hon. Gentlemen opposite would be the first to come to the House with indignant letters if the Inland Revenue did not exercise a certain amount of tolerance, as it is bound to do, in requiring the actual return of Income Tax forms.
    I submit to the Financial Secretary that three years is an unreasonably short time in which the Department could possibly track down the kind of people whom this Clause is designed to catch. In the case of the ordinary straightforward taxpayer, I agree with the right hon. and learned Gentleman that three years is probably long enough, but this is a Clause which is designed to catch people who are

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    notoriously difficult over their Income Tax affairs. It is all very well to say that the Inland Revenue should never allow actresses and such people to go to America and build up big Income Tax arrears, but I think the right hon. and learned Gentleman should have drafted his Amendment so as to tell us how he would suggest that that could be done.
    I suggest to the Financial Secretary that he should look a little more carefully into the difference in the wording between subsections (1) and (2). He mentioned that subsection (2) was designed to deal with entertainment and things of that sort with which a body like a local authority or a somewhat similar group of persons would be concerned. I have no personal knowledge of these matters, but, from reading the newspapers, it seems that some people do go in for very expensive entertainments.
    One reads of £5,000 or £10,000 being spent on one party and I would not suggest that these are the kind of small sums which the Financial Secretary says he does not wish to catch by this Clause. If the newspapers are anything like accurate, it seems that, for personal reasons and not for the purposes of trade or business—and if it was for trade or business, it should be looked at even more carefully—there are certainly a few people who spend very large sums on private entertainment.
    I suggest that they should be brought within the purview of this Clause; otherwise, there will be one law for entertainers, those who work in the profession, and a separate law with the extra incentive of tax evasion for those who work for the people who give private parties. I ask the right hon. Gentleman to look more carefully into the matter before undertaking to introduce an Amendment on the Report stage, because I do not think that he should be so willing to restrict this to three years.
    6.45 p.m.
    Mr. Turner-Samuels: I was rather surprised at the very easy view which the Financial Secretary took of the reasonableness of this Clause. I am at one with the right hon. and learned Gentleman the Member for Kensington, South (Sir P. Spens) if his object is that a perfectly honest and reasonable person who is acting properly should not be troubled
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    after a period of three years to give information which the Inland Revenue could have received before then, and which it may be difficult for the person involved to supply after the exploration of that period.
    I do not understand why the Financial Secretary so easily takes the view that he expressed. He has to remember that he is dealing with the slippery eels of tax evasion, and that that puts an entirely different vista on the picture that was presented at first blush by the Amendment. I therefore ask the Financial Secretary not so readily to express the view that he thinks this is a reasonable Amendment which might, on consideration, be adopted.
    I would also put this consideration to the right hon. Gentleman. Let us suppose that there is a case—and as to this I am sure he will agree—in which it is not possible within the period of three years to get this information because of the deliberate suppression of that information by the person who ought to have given it. Let us further suppose that it is a deliberate suppression for the purpose of fraud, and that, after the expiration of the period of three years, it is discovered. Is the Financial Secretary going to tell the Committee that he thinks it is right and proper in those circumstances that an individual, merely because of the effluxion of three years before the discovery is made, should go scot free, although he is the perpetrator of an offence against both the Exchequer and the country? It is quite clear that in a case such as that it would be quite wrong to put that individual beyond the grip of the Treasury and beyond the scrutiny of the law.
    Mr. Geoffrey Stevens: I am obliged to the hon. and learned Gentleman, who is learned in the law as it affects Income Tax matters, for giving way. May I ask him whether it is not a fact that where fraud is concerned there are provisions in the existing Income Tax statutes for the abolition of the time bar?
    Mr. Turner-Samuels: The hon. Member shows that at all events he is not very learned in Income Tax law. This Amendment is quite clear in its terms. The purview of this Amendment would enable a person of the character which I have described to escape after three

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    years from the duty of making a return and becoming liable, as he ought to become, if he had done what it was his clear duty to do.
    Therefore, I say to the Financial Secretary that while it may be right to take one view on this matter relating to reasonably honest persons he should, nevertheless, pause for a moment and consider what the effect of the case would be if, instead of an honest person, it was a dishonest person with whom he was dealing. It is obvious that provision should be made to make impossible a deliberate fraud, or for a person committing a deliberate fraud by suppressing this information who is not found out until after the expiration of the period of three years, to escape his responsibilities. I am quite sure that that is a reasonable proposition. certainly equally as reasonable as anything in the Amendment to which I have referred, and I therefore hope that the Financial Secretary will bear that in mind.
    Mr. John Cronin: I wish to associate myself with my hon. Friends who have begged the Financial Secretary not to let this Clause be weakened in any way. At the same time, I do not think that the Committee would like the impression to go abroad that it considers that the acting profession as a whole tends to avoid the payment of Income Tax. A large proportion of members of the profession pay Income Tax very fairly. Of the remainder such tax evasion as takes place is probably quite inadvertent.
    The entertainment profession requires a considerable concentration of the mind, which produces a certain amount of absent-mindedness when its members are filling in Income Tax forms and are complying with the requirements of the Board of Inland Revenue. So I do not think that the profession should be spoken of in too harsh a manner. Nevertheless, this Clause should be welcomed, because it will substantially help to overcome this difficulty.
    I wish to ask the Financial Secretary two questions. One refers to subsection (4), which stipulates that no disclosure need be made where the total payment to any person does not exceed £15. That seems to me a rather large sum, because a considerable proportion of the fees paid
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    to members of the entertainment profession are less than £15. I feel that that figure impairs the strength of this Clause.
    For example, the B.B.C. habitually pays comparatively small fees. Recently, I saw in the Press that it even offered a fee of as little as five guineas to no less a person than Miss Diana Dors.
    Mr. Turner-Samuels: She has a good figure.
    Mr. Cronin: It is not material to my argument that that offer was rejected with contumely. I feel that £15 is too high a figure.
    The other matter on which I wish to hear the views of the Financial Secretary relates to subsection (6), which makes clear that the word "payment" includes
    "… the giving of any valuable consideration"
    and where payment is made in kind the disclosure of particulars is required. I do not see the purpose of that subsection. I presume that there is no question of members of the entertainment profession being taxed on what considerations they receive other than payment. In the entertainment profession it is customary to give large and lavish presents and this may well cause some confusion in the accounts of the people concerned.
    Mr. H. Brooke: Subsection (6) of the Clause is designed to make it clear that the Clause extends to commissions of any kind, and to payments in respect of expenses and payments in kind. If we are to have the power to seek this information I think it desirable that such power should be comprehensive.
    I agree entirely with the hon. Member for Loughborough (Mr. Cronin) and I deprecate any suggestion that the entertainment industry as a whole, actors, actresses and entertainers, are, in general, careless or dishonest about their Income Tax affairs. The fact remains that it is a precarious profession in which earnings may be high over a period and then low or non-existent. In those circumstances it becomes difficult to collect the taxes on the period of high earnings if there has been any delay.
    After careful examination it has been proved impossible to apply P.A.Y.E. The hon. Member for Sowerby (Mr. Houghton) said that we all came under Pay-as-you-earn or "Pay-as-you-like". But I know a number of people who do

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    not come under Pay-as-you-earn but who would hardly describe their Income Tax experiences as "Pay-as-you-like". I sincerely trust that the Committee will approve this Clause and the following Clause, not in the sense of something designed against a dishonest profession, because emphatically it is not that, but rather as a further weapon which is needed in the armoury of the Inland Revenue to collect tax from a profession where the working arrangements are distinctive and to which the normal procedure cannot be applied.
    I suggest that we should not spend any more time now arguing about the three-year limit, as it is not yet in the Clause and there will be a further opportunity to debate the matter when the Government Amendment is put down. But in case I may succeed in shortening the proceedings on Report by doing so, I should like to mention that both the £15 limit in the Clause and the three-year limit we are proposing to import into it are exactly in line with the Finance Act of 1951 in relation to bank interest and that Act was passed when hon. Members opposite were in power.
    Mr. Mulley: Would not the right hon. Gentleman agree that there must be a great difference between extracting information from a bank, where books are kept and where prompt replies are made to Income Tax inquiries, and extracting information from a profession where the method of work is not conducive to keeping good and proper accounts?
    Mr. Brooke: It is not a matter of requiring information from the profession, but from the employers in the profession.
    I assure the Committee that I have no Intention of allowing the teeth to he taken out of this Clause. I attach great importance to it. If I may be permitted a personal reminiscence, it so happens that one of the first Parliamentary Questions which it fell to me to answer from this Box was about the case of a film actor who owed the Revenue a great deal of money and who had gone abroad. I was able to say, when answering supplementary questions, that I had instituted inquiries on my own, before the matter was raised in the House, to see whether
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    further steps could be taken to prevent that kind of thing from happening again. As a result of that inquiry, and also of what was said by the Royal Commission, which reported on the same lines as had already occurred to us, these Clauses are being brought forward.
    I agree that a public scandal occurs when a person owes a great deal of unpaid Income Tax and has gone abroad. At that stage, it is often impossible to collect it. This Clause and the next are designed to minimise the chances of that happening. In the light of what I have said, I trust that the Committee will appreciate that I. for one, would not be willing to limit their effect unduly.
    Mr. Turner-Samuels: In relation to the Amendment about the three-year period to which he has referred, would the Financial Secretary consider making a qualification in the case of a person who obviously has suppressed information which could not, therefore, have been obtained by the Revenue within three years?
    Mr. Brooke: Let me make clear that the Amendment to which I referred could have no restrictive effect at all for three years from now, so that in any case we shall have three years to see how we get on. I think that, when it has these new powers. the Board of Inland Revenue will act quickly upon them.
    Mr. Turner-Samuels: Of course, such an Amendment would not operate straight away, and there is, as the Financial Secretary says, a period of three years to be taken into consideration. But I am concerned about what happens after that period. If the law has already protected such persons, then it is too late to take any proceedings against them. Will the right hon. Gentleman see that some provision is made to qualify the Clause at least to that extent?
    Mr. Brooke: I do not think it would be in order were I to say much more at this stage about an Amendment which is not yet on the Notice Paper, but I will consider everything which has been said
    Clause ordered to stand part of the Bill.

    Clause 17.—(PLACE OF ASSESSMENT UNDER SCHEDULE D.)
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    7.0 p.m.
    Mr. Houghton: This Clause will help not only the Inland Revenue, but will help particular types of taxpayers who have special difficulties and whose affairs will be better dealt with by bodies which can specialise. In his Second Reading speech, the Financial Secretary said:
    "The intention is to use this power to make directions only in relation to professional entertainers, and then, in their case, the right to assess them in the specified offices will not normally be exercised in the case of those who work outside London-like the resident Blackpool comedians."—[OFFICIAL REPORT, 9th May, 1956; Vol. 552, c. 1238.]
    I think that that is wise, although I do not think there need be any particular inhibition against concentrating assessments of a particular type of taxpayer. even though they may be working or living outside London or outside the area into which they are to be directed.
    Also, that by dealing with assessments of professional entertainers in one office, or one or two offices, it will be possible for the Inland Revenue to come to some arrangement with agencies and those responsible for engaging entertainers, whom they are paying fees, for the payment of tax on account. Half the trouble in these cases, as the right hon. Gentleman has just said, is that this is a precarious occupation. Very large fees are paid for a time, which is followed perhaps by a period of unemployment, or a period of less prosperous employment. In many cases money comes plentifully for a time and it is easily spent so that there is not then a reserve to meet tax liability. The concentration of assessments will enable some care to be taken of the interests of these taxpayers who very often are their own worst enemies, or who perhaps have no competent persons looking after their Income Tax affairs.
    To reconstruct Income Tax liability over the past frequently leads to what may appear, or actually be, an amount of tax owing simply because there is not the information on which correct assessments could be made. From an administrative point of view and the point of view of the taxpayers themselves. I believe that this method will be
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    a good thing. It will enable them to be dealt with by Inland Revenue officers who know all about the entertainment industry in just the same way as assessments of seafarers are concentrated in a district.
    In Cardiff Marine, for example, those going to sea can be dealt with by an office which keeps track of the movement of ships, the ports they go to, and when they go. This would be a similar arrangement by which those in the entertainment industry may deal with one office and agencies can render accounts and give information about their movements. The agencies will know when they have gone abroad and when they are coming back. An isolated assessment of this kind of taxpayer can be a nuisance in an office which is dealing with mineworkers, or cotton weavers and other people who are unlike those in the entertainment profession.
    Mr. H. Brooke: I am obliged to the hon. Member for Sowerby (Mr. Houghton) for what he has said about this Clause and, broadly, I am in agreement with him. I think that this Clause will be of value. He will appreciate that these powers are taken in general terms. Indeed, it would have been unpleasant and almost libellous to single out one industry for the attention that might be directed towards it under this and the previous Clause, but, as I said in my Second Reading speech, we are intending at present to apply these powers only in limited classes of cases. We may find they would be of value over a wider field, but it is primarily for these purposes that we need them.
    I think it will be found that the honest taxpayer—the great majority, fortunately, are honest—will gain rather than lose by having his affairs dealt with in an office which is fully acquainted with the changes and chances and special needs of the profession. The dishonest taxpayer may not gain by that, but, after all, that is part of our object. We want to help those who are perfectly honest with the Inland Revenue to claim and to receive all the allowances to which they are entitled.
    We wish, also, to be able to concentrate our attention through a few offices on members of the profession who are—shall I say—not quite so up to date or precise

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    in making returns. I very much hope that this Clause will fulfil the good wishes which the hon. Member and, I think, the Committee as a whole will extend to it.
    Clause ordered to stand part of the Bill.

    Clause 18.—(RETIREMENT ANNUITIES (RELIEF FOR PREMIUMS, AND EARNED INCOME RELIEF).)
    The Temporary Chairman (Sir Norman Hulbert): Before calling the hon. and learned Member for Northwich (Mr. J. Foster) to move the Amendment standing in his name, I should say that it would appear that we could also discuss the two Amendments in the name of the hon. and learned Member: in page 23, line 10, to leave out from "him" to the second "or" in line 11; and, in line 29, at the end to insert:
    (8) If during any relevant year of assessment an individual is the holder of a pensionable office or employment, any payment made by that individual under a sponsored superannuation scheme in respect of which relief is granted under any provision of the Income Tax Act, 1952, shall not be deemed to be a qualifying premium and the amount of such payment shall be deducted from the maximum amount which maybe deducted from or set off against his relevant earnings under the provisions of the next following section.
    and the Amendment in the name of the right hon. and learned Member for Kensington, South (Sir P. Spens): in page 20, line 41, at the end to insert:
    "or is a holder of any pensionable office or employment to which is related a sponsored superannuation scheme, the terms of which are conformable to the following subsections of this section and under which the contributions of the individual and the employer are together less than the maximum amount deductible under section nineteen of this Act".
    and the Amendment in the name of the hon. Member for Sowerby (Mr. Houghton): in page 23, line 41, after "to", to insert "whole time".
    Mr. John Foster: I beg to move, in page 20, line 40, to leave out from "him" to the end of line 41.
    The object of this Amendment is very simple, but I think it is important. As the Committee knows, Clause 18 provides for retirement annuities for people in a trade, profession or vocation, and also those who are employed but are not the recipients or payers under a sponsored pensions scheme. The Clause as drafted seems to exclude those people who have,
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    so to speak, a double employment, such as a doctor who earns so much in his practice and who, as a registrar of a hospital, is a member of a sponsored pensions scheme. I think the Committee will probably agree that it would be an undesirable result if such a person were excluded, and the object of these Amendments is to cure that position.
    The way in which we suggest that it should be cured is to take the pension premium which is paid under the sponsored scheme and deduct it from the maximum which is allowed under the new scheme in respect of a self-employed person's retirement annuity. To give an instance, if a solicitor were in receipt of £2,000 a year from his practice and were also a clerk to the justices at £500 a year, assuming that as clerk to the justices he paid £50 a year under a sponsored pensions scheme, he would be allowed under the Amendment—but not under the Clause as drafted—to come into the retired annuities scheme by being allowed to pay a maximum premium of 10 per cent. on £2,000, less £50. At present, as the Clause is drafted, he would be ineligible for the benefits of the new scheme because he would be already a payer under a sponsored pensions scheme. The problem is as simple as that, and I commend the principle of these Amendments to my right hon. Friend in order to deal with the position.
    A difficulty which looms ahead concerns the position of the man who is in employment and is already a member of a sponsored pension scheme, but the scheme does not take care of a sufficient slice of his income—for instance, someone who is receiving a salary of £20 a week but his sponsored scheme is the equivalent of a salary of only £5 or £10 a week. That position is not dealt with in my Amendments, but it may well be urged on my right hon. Friend that it should be covered, too. In the meantime, I feel that the person in double employment, whose circumstances I have described, should be allowed to come under the new scheme.
    Mr. John Taylor: The hon. and learned Member for Northwich (Mr. J. Foster) has moved his Amendment with characteristic moderation, and I should like, on behalf of my right hon. and hon. Friends. to give him every support for the principle behind his group of

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    Amendments. He might well have pointed out that this considerable body of self-employed people, mainly professional people, read the Chancellor's Budget speech with great satisfaction, and then a great many of them, when the Bill was published, found that they were not included within the provisions of the Clause.
    The hon. and learned Member has mentioned a considerable body of people whose income from practice might be about £2,000 and whose subsidiary occupation might bring them a small annual income of £500; but because that subsidiary occupation is pensionable, they cannot benefit from the provisions of the Clause. In other words, 20 per cent. of a person's total income renders him or her ineligible for this tax relief.
    May I mention a far less considerable body of people with whom I am in closer contact and whose proportion of pensionable subsidiary income is, as a general rule, very much less than 20 per cent.? Consider the position, for instance, of the town clerks of the small burghs, particularly in Scotland. There are about 150 of these small burghs which do not employ full-time town clerks. All but a very few of the small burghs employ 41 part-time town clerk.
    The civic duties of most of these clerks occupy only a small proportion of their total time; in many cases a few hours a week will suffice for the conduct of their duties as town clerks or burgh chamberlains. Such a man's main income is obtained from practice, almost invariably as a solicitor in the burgh. Nevertheless, I believe in every case the office carries a small superannuation scheme which bars these men from the relief provided in the Clause, although the superannuation scheme is in respect of a very small proportion of their total income.
    7.15 p.m.
    They could escape from this disqualification by resigning their offices as part-time town clerks, particularly in the smallest of the small burghs, but that would not solve the problem, because we require qualified persons as town clerks, since they have a very important responsibility. They have a multitude of duties, which may be small in the amount of time they take up but which are nevertheless important in the public weal and
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    in local government, civic interests and the national interest. We keep giving them more and more duties to do. Some qualified persons would have to undertake the job if they resigned, and because of this bar and this absence of relief arising from such a small part of the income, there might be a reluctance on the part of the best type of qualified persons to undertake the work.
    I am speaking for that perhaps very small group of people, but I dare say other hon. Members will think of other groups of people to whom this disqualification is a serious disadvantage and, In view of the hopes which had been built on the Chancellor's Budget speech, a great disappointment. I think that the group of Amendments could very reasonably be accepted by the Chancellor and the Bill amended to cover self-employed persons who are performing important public duties, for whom this advantage was welcomed by both sides of the House and who at the moment feel, quite legitimately and understandably, a sense of grievance.
    Mr. H. Brooke: This is an important Amendment, and the reason for which I rise early in the debate is because I want to see whether I can be helpful to the Committee. The Committee will appreciate that in Part III of the Bill, on which we are embarking, we are breaking fresh ground. It is relatively easy to amend and polish an existing body of tax law, but here we are venturing into something new, and my right hon. Friend and I have made it clear from the outset that we should count ourselves almost too fortunate if we got everything right first time. We have therefore presented Part III in this form, hoping that under ordinary democratic processes it would be examined by those who are affected and by those who are expert and that we should receive the benefit of their views.
    I need hardly say that since the Bill was published several weeks ago my right hon. Friend has received a good many representations on different points in Clauses 18, 19 and 20. He has authorised me to say that on Report he will put down certain Amendments to Clauses 18 and 19. It would be out of order for me to try to anticipate affairs by speaking more definitely at this moment. At this stage, all I can tell the Committee is what he has in mind about these people. whom

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    the Millard Tucker Committee referred to as the "partially provided for" persons. My right hon. Friend is very sympathetic to this problem and he has been seeking whether there is an overall solution to it. I do not think there is, but, as I will endeavour to show the Committee, there is a solution in the case of one of the two classes of people affected.
    There are two broad classes. First of all, there are the whole-time employees who have a pension scheme, but a pension scheme which provides benefits smaller than what one might describe as the normal scale. The Millard Tucker Committee made certain suggestions for their benefit. It suggested that those people should be entitled to the relief, but that the annual premium to be allowed should be abated to take account of the extent to which the benefits fall below the normal scale.
    I think that Amendments which are in this group now under discussion are designed to help that class of person. The difficulty is this. The Board of Inland Revenue has examined with the greatest and most sympathetic care the recommendations of the Millard Tucker Committee for these people, but I am bound to say that they simply would not work in practice. Nor have we been able to find any alternative method of assisting them.
    If the hon. Members who have put down these Amendments will examine them, I think they will find that the proposals would operate to the benefit of, for example. the civil servants who receive full pensions in regard to which neither they nor their employers make any contribution. Quite clearly, that is not the kind of person whom it is desired to bring in, because they have adequate pensions otherwise.
    I hope that the Committee will accept it from me that we have not examined this matter seeking to find reasons for turning it down, but the more we look into it the more we are convinced that it is not practicable to assist, under these Clauses, the type of person who is in full-time employment of a pensionable character, but where the pension itself is less than the normal scale. The only encouragement I can give to people of that type—and I think that I mentioned this point in my Second Reading speech—is that if they are so minded as to
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    put their savings into the purchase of ordinary life annuities they will, by Clause 22, get the benefit of exemption from tax of the capital portion of the annuities they receive.
    We now come to the second and what I would venture to call the more important class here—those who might be termed "two-job men." I think that my hon. Friend the Member for Carlton (Mr. Pickthorn) was the first to draw attention to this class in a speech which he made to the House at an earlier stage of the Budget debate. He quoted the university teacher or lecturer, part of whose income may come from pensionable employment but who adds to it by writing or lecturing outside. Nevertheless, under the Clause as it stands, he would be debarred from the opportunity of taking advantage of the provision. A further case has just been mentioned by the hon. Member for West Lothian (Mr. J. Taylor)—the case of the solicitor who acts as a part-time town clerk to the local council. His salary as town clerk may be by no means half of his total emoluments, but because part of his earnings are from pensionable employment he is cut out by the Clause as it stands.
    This is a problem to which my right hon. Friend thinks he can offer a solution, especially as these may be the very type of people whom the Clause is designed to help. They are professional or self-employed people who, maybe just by chance, have some part-time post which carries a pension with it. My right hon. Friend therefore authorises me to say that he proposes to bring forward on Report an Amendment which will have the broad effect of allowing these "two-job men" to pay qualifying premiums for deferred annuities up to 10 per cent. of their earnings from sources other than the pensionable employment.
    The maximum figure for them will, of course, have to be suitably reduced so that, taking pensionable and non-pensionable income into account, relief will not run at a greater amount of income for the two-job man than for the man who is wholly self-employed and can obtain the benefit. I hope that that will be generally acceptable. The Amendment will appear in good time for the Report stage. I am sure that the Committee will desire to examine this carefully then, but

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    I am giving a firm pledge, and I hope that I may have said enough to satisfy my hon. and learned Friend the Member for Northwich (Mr. J. Foster) that he would not be betraying the interests of these people by withdrawing his Amendment now.
    Mrs. Eirene White: I am sure that we have all been glad to hear the Financial Secretary give the undertaking which he has given, because I think that hon. Members in all parts of the House were very much disturbed at what appeared to be a most serious anomaly in the Bill as originally drafted. As we have been promised details at a later stage, I do not propose to go into them now.
    I should like to say, however, that personally I am glad that the Chancellor has not found means of dealing with the other group. I am perfectly aware that this other group has a case, but I think that that case is not against the Chancellor of the Exchequer but primarily against their employers. The other group to which I refer is that mentioned in paragraph 451 of the Millard Tucker Report, in which it is estimated—and it is only a rough estimate—that there are about 3 million employees at the present time who have in connection with their employment pension schemes which are inadequate.
    It seems to me that it would be doing a positive dis-service to these people to say to them, "Your employer is under no further obligation to you because now, under the new scheme, you will be able to look after yourselves". Therefore, I think that it is to be welcomed that in regard to these particular people the Chancellor has not found a solution. I am sure that he would have found it extremely difficult. Chapter 7 of the Millard Tucker Report is one of the more complicated chapters of a very complicated Report, and even the suggestions made in the Minority Report by Sir John J. Cater and Mr. Woodcock, based on variations of the income from insurance premiums, would, from the administrative point of view, have been very tricky to say the least. I am therefore not surprised that the right hon. Gentleman the Chancellor has not been able to deal with this.
    Frankly, I think that it would have been socially undesirable to have
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    weakened the bargaining powers of employees vis-à-vis their employers on this matter of pensions. While I have very great sympathy with the individuals concerned, taking the general good into account I think that it is, on the whole, better that they should now be fortified by the inability of the Chancellor of the Exchequer to admit them into his new scheme. They will now be able to go to their employers with much greater force and strength and say, "It is perfectly clear that we are now a downtrodden group of people and it is really up to you to revise your pension scheme to bring us to a reasonable level both as compared with other employees and with the self-employed who now have provision made for them." I do not very often agree with the right hon. Gentleman but on this I do agree; the conclusion to which he has come is, in the circumstances, the most satisfactory one.
    Mr. J. Foster: The subject which the hon. Lady the Member for Flint, East (Mrs. White) has mentioned is very much linked with the desirability of pension schemes being transferable. That is very desirable, and anything that the Government can do to help by legislation I think they ought to do. The reason that it is connected is that it makes it easier for employers to establish a pension scheme and makes it much easier for labour to be mobile. I welcome the assurance given by my right hon. Friend and thank him for it.
    7.30 p.m.
    Mr. Houghton: I, too, welcome the agreeable and helpful speech which the Financial Secretary has made. I readily admit to the hon. and learned Member for Northwich (Mr. J. Foster) that he has a better solution than the very simple one in my Amendment. Just to insert the words "whole time" before the word "service" in page 23, line 41, hardly accomplishes what we want to do, and I am glad that the hon. and learned Member thought of a better way of doing it, which I am sure will be the way in principle which will be followed by the Chancellor of the Exchequer.
    On the broader issue of inadequate pensions, there is a whole complicated, seventh chapter in the Millard Tucker Report. One of the signatories of the Report was Sir John J. Cater, a retired chief inspector of taxes who ought to

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    have known better than to have put his signature to a lot of rigmarole like that, but I am sure that he did his best. Chief inspectors of taxes have not a special reputation for simple expression and I have no doubt that he was under some kind of vocational handicap.
    This is a very big problem. I agree with the Financial Secretary that we are now moving into an untrodden field, and I am sure that it is only a beginning. We shall have to embellish, strengthen, smooth rough edges and remove anomalies. I am sure that no matter how hard the Committee tries to help the Chancellor and the Financial Secretary, they cannot possibly get it right the first time.
    I should like to draw attention to the position of a number of people who are in sponsored schemes and will be excluded by rigid adherence to subsection (9). They are people whose inadequate benefits flow from the simple reason that the employer or those who are organising the superannuation scheme will not allow back service to count. It is not that the scheme itself is inadequate for the future entrants who will serve the whole length of time in the scheme. The Chancellor will recall that he has a very large number of civil servants to whom has not been granted credit, for superannuation purposes, for the full length of their service.
    I use that merely as an example and not because I wish to draw attention to any special grievance they have. They must share with many others in sponsored schemes the inability or unwillingness of the employer to cover them for the whole of their service. That accounts for the majority of people who are in sponsored schemes and have inadequate benefit.
    I do not think that it is, on the whole, the failure of the employer to provide a useful scheme when he introduces it. In its framework and fullness of benefit it is in many cases a reasonably good scheme. I do not know of a scheme where a man receiving a salary of £1,000 a year is told by his employer that the benefit he will provide will be £1 pension for a lifetime of service. I do not think that there are many of those. These schemes are generally reasonably good schemes. We know the difficulties of financing them without requiring substantial contributions both from employers and workers in order to finance their retrospective effect; and not in all circumstances would payments for
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    retrospective benefits qualify for tax relief. We therefore have to bear that point in mind as well.
    How, then, is the Chancellor to deal with people who are in these schemes and are handicapped by the restriction of the amount of service that is allowed to count for pensions? Like my hon. Friend the Member for Flint, East (Mrs. White) I also have no desire to weaken the employees and their organisations in their discussions with employers on superannuation schemes. We do not want to give the employer the opportunity to say, "There is no need for me to do anything now. You can go on the scheme which the Government have provided and make good any deficiencies in my scheme by taking out a policy under the provisions of the Finance Bill and getting tax relief on the amount of premium you pay." We do not want that argument to be used.
    How, therefore, are we to provide for those whose employers give a reasonable scheme but who cannot, for reasons which in many cases are quite reasonable—and which the Government themselves on occasions have given for not covering past service—the opportunity of taking out policies under this scheme? That is the question to which the Chancellor will have to find an answer. It will be difficult, but he may find a formula. There are ingenious people waiting his command. They will think out a scheme which will have only one defect. It will be so equitable that it will be too complicated.
    Our passion for equity makes complications of otherwise perfectly simple ideas, but I hope that the Chancellor will find an answer to the problem and that it will be possible to widen the cover for those who are not fully provided and to go beyond the Amendment.
    Mr. Gordon Walker: I was very glad to hear what the Financial Secretary had to say about his right hon. Friend's intentions on Report, and we shall look forward with great eagerness and, I hope, pleasure to his Amendments. This is a considerable problem. As my hon. Friend the Member for West Lothian (Mr. J. Taylor) has said, a great many people found themselves left out when they began to have the Finance Bill interpreted to them. I understand from

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    the Millard Tucker Report that there are 3 million, a very large number, falling into two classes—the under-pensioned in not very adequate schemes, and the people who are in double or part-time employment.
    Is there any idea yet of how many of the 3 million fall into each of these two classes, or is that absolutely impossible to say? How many of them fall into the double or part-time employment class? My hon. Friend the Member for Sowerby (Mr. Houghton) was rather inclined to think that a very considerable number would fall into that class, which would certainly make us happy, because they have the better claim.
    My hon. Friend the Member for Flint, East (Mrs. White) and my hon. Friend the Member of Sowerby said that there was not very much of a case for the under-pensioned, those in full-time employment who have rather ineffective pension schemes, and that if we did anything about them it would weaken their bargaining power and the power of their trade unions. There is, of course, a very great deal to be said for that point of view.
    On the other hand, there is an injustice falling on the individual people in that they are actually debarred through being under-pensioned, that is, in an inadequate scheme, from the benefits which the Chancellor will give under the Bill. They are actually debarred by the fact that they are drawing an inadequate pension. Of course, there is the dissent by Mr. Woodcock to the Millard Tucker Report, and somebody else, I believe, and I am not quite sure that there is not something to be said on the other side of the case as well as for the case my two hon. Friends have stated. It is a very difficult thing to balance.
    Mr. William Shepherd: It is not the case, as the right hon. Gentleman appears to assume, that those inadequately pensioned persons are in a static position, because almost every day companies are writing policies to increase pensions provisions which may have been started 20 years before. Constant change is made.
    Mr. Gordon Walker: Of course there is constant change. That would not be very complicated, because under the
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    Bill each contract which a person makes for an annuity is a separate and distinct contract. The complications of this lie in something else. They lie in the sheer complexity of working out a formula. I quite agree that the Millard Tucker proposals in Chapter 7 of the Report are incredibly complicated and difficult to understand, and, I imagine, wholly unworkable.
    Some of the things the right hon. Gentleman said made me think that there may be ways of finding some solution to this problem. One does not want, of course, to include civil servants and people of that sort. We have in the 1947 Act the idea of the notional contribution. It is possible to work out what a notional contribution would be to a pension, and under the 1947 Act that is done in many cases, and it could be used to exclude civil servants and similar people, and to calculate what is an adequate or an inadequate pension.
    I therefore hope that the search for fuller justice for those people in part-time work will continue. As my hon. Friend the Member for Sowerby said, we must not give up. This is something which we all want to do if we can do it, and I hope that the Treasury, which is the best-equipped of all to make the search, will not give up the search, because if we can have a solution under both heads we shall be even more pleased.
    Mr. J. Foster: I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Mr. John Arbuthnot: I beg to move, in page 22, line 12, to leave out "five" and to insert "ten".
    In considering this problem of retirement and pension schemes, anybody who is thinking of going in for one of them will want to safeguard himself against the possibility that, having paid premiums for a considerable number of years, he may have the ill luck to die before he reaps the benefit from his premiums. It will give him peace of mind and be a great help to his family to know that, if he dies before he draws the benefit of the premiums through a pension, there will be an annuity certain payable to the family. As the Bill is drawn the length of time for which that annuity certain can be drawn is five years only.

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    Our Amendment proposes to extend the period from five to 10 years. I would say to my right hon. Friend the Financial Secretary that, personally, I cannot see any reason for any limit at all on the period for which the annuity certain may be drawn. I should have thought it could have been left without a time limit, because the longer the period for which the annuity certain is drawn the smaller will each annual payment on the annuity certainly he. Therefore, I hope that in the "polishing process," to which my right hon. Friend referred, and which will take place in future Finance Bills, it may be that the limitation on the length of the annuity certain will be wiped out completely.
    This is my ultimate objective, but, as a preliminary, I suggest that the figure of five years be replaced by the figure of 10 years, which, I think, will be more realistic and more encouraging to people to provide for their old age. They will then know that, if they die earlier than they expect, their families will at least get something from the premiums which they have paid up during their working life.
    7.45 p.m.
    Mr. H. Brooke: I think the Committee will appreciate that the object of the subsection which my hon. Friend the Member for Dover (Mr. Arbuthnot) seeks to amend is to meet the natural desire of people who feel doubtful about committing themselves to a policy of this character if they foresee the possibility that very soon after the annuity begins to become payable they may die and, therefore, may get very little of their money back. That is why we wrote this provision into the Bill. The Amendment suggests that the five-year period for the continuance of the annuity should be extended to ten.
    My hon. Friend went further than his Amendment and asked us to consider in the more distant future whether there is a necessity for any time limit at all. I think there is a necessity for a time limit as there is for having some provision for the period for which the annuity should be payable. I think it would be out of place to allow a man to provide for posterity for an indefinite period when the whole purpose of the Clause is to encourage people to save for their own old age or for that of their wives.
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    As between five years and ten years, I think my hon. Friend is perfectly justified in asking us to consider whether it would not be better to make it ten years rather than five. There is nothing sacrosanct about either of those figures. If it is the general view of the Committee that a ten-year period would be more reasonable and more attractive than a five-year period, then I can say that my right hon. Friend is quite prepared to accept this Amendment.
    Mr. J. T. Price: I have the impression that both the hon. Member for Dover (Mr. Arbuthnot), who moved the Amendment, and the Financial Secretary have got the point wrong. In a pension fund it is laid down that payment of the annuity is payable for life. If we introduce a term certain, of five years —or x years—it merely means that, if the annuitant dies, there is a five-year pension payable to the estate. That does not place a term on the possible length of time, which is the whole lifetime of the person enjoying pension. This brings in an actuarial consideration which has been, it seems, forgotten by the right hon. Gentleman. The actuarial consideration is an average expectation of life, which, in the case of a male annuitant aged 65, is 11½ years. If the term is fixed at ten years certain, an enormous burden is placed on the capital value of the pension which is converted. I suggest that the point needs much more careful scrutiny than the right hon. Gentleman has appeared to anticipate in his short remarks in giving a favourable reception to the proposal. It is by no means as simple as he supposes.
    Mr. H. Brooke: I am not sure whether the hon. Member has studied carefully the line of the Bill which it is proposed to amend. It does not specify five years. It says "not exceeding five years". All we are doing now is to widen somewhat the conditions which a policy would have to fulfil.
    If we did not amend the Bill, an annuity which was payable for the lifetime of the annuitant but which provided that in the event of his death it would be payable for a minimum period of six years, would not in future qualify under the Clause. The Amendment would enable a policy to be written which would provide, at the option of the

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    annuitant—of course, the terms would be adjusted accordingly—for an annuity which in the event of the annuitant's death would continue to be paid until 10 years' payments have been made.
    We are not giving directions to the insurance company. The insurance company through whom the annuity may be taken out would adjust its terms according to the type of annuity that the person wants. We are simply giving a wider discretion. We are seeking to suit the legitimate desires of people who may feel that it is not worth while taking out a policy of this kind if in the event of their death, their estate gets hardly any of their money back. That is the only purpose. If the hon. Member considers the matter further he will see that we are not doing anything rash. We are simply extending the range of policies which will qualify.
    Mr. Frederick Gough: I might be able to help the Committee a little. I should declare my interest, which I have declared before, in that when I am not in the House I am engaged normally in the life insurance business. It is the normal practice, in practically all insured pension schemes, to give a five-year guarantee whether or not an annuitant lives for that time, so that the annuitant or his family will be guaranteed to receive back at least as much as he has paid into a contributory pension scheme during his life. There is no mystique about a five-year period. I should be glad to see a ten-year period brought in, but I should like it to be left to individuals to choose what they like.
    On the actuarial side, I do not think that that enters into it. We are dealing mainly with the lives of males who retire at the age of 60 or 65 and females who retire at 60. In every case the expectation of life is more than five years, so the guarantee is a very small amount of loading on the premium.
    Mr. J. T. Price: The hon. Member has referred to my cursory remarks. I do not want to argue the matter scrappily across the Floor, for these are technical questions, but I do not accept the proposition he is now putting. Obviously, on the actuarial side, all pensions are based on average conditions of life. In dealing with an expectation of life of 11½ years for a man or 13½ years for a
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    woman, one is dealing with average conditions, but once the new factor of a stated term or a minimum number of years is introduced, one upsets the balance by going far beyond the notional point on the average. That was the point I was trying to make.
    Mr. Ede: I want to follow up the point made by my hon. Friend the Member for Westhoughton (Mr. J. T. Price). I spent a considerable number of hours during the early part of this year on the Teachers (Superannuation) Bill, when the question of the actuarial calculation kept us busy for a long time. These annuities, I understand, are calculated on what an insurance company expects will be the charge.
    In another place, a most reverend prelate admitted that he went in for this kind of thing because death was certain; it was not a gamble because he was in on a certainty. That is the kind of gambler who upsets me, because he upsets the odds for everybody. There are people who die the day after an annuity becomes payable and the insurance company does very well out of them. Therefore, the company can be rather more generous to those people whom they would not have insured at all had they known how long they would live after the annuity became payable.
    If this ten years certain is given to people and a number of them take advantage of it, what will happen is that they will have to pay a heavier premium than the people who do not ask for any certainty, who are genuine gamblers—the kind of people whom the Government are trying to encourage by their Premium Bonds—and the other people who are satisfied with five years. By increasing the time to ten years, some people will get additional Income Tax relief because they have gone in for this more expensive scheme. That means that the rest of us who are not in the scheme will have to make up the Income Tax that these people do not pay. As far as I know, the logic of that is sound so far, and when one—
    Mr. Gough rose
    Mr. Ede: Just a moment. I am asking for help, and if the hon. Member can give it I shall gratefully receive it at the appropriate time. When gambling, it is as well to be logical even in selecting the nationality of the horses one is backing.
    Mr. Gough: The right hon. Gentleman mentioned somebody getting a bigger Income Tax relief. We are confined here to limits. There is already a maximum limit which anyone can put by, so we need not be unduly worried about somebody getting away with more Income Tax relief. The right hon. Gentleman is right in saying that if a person opts to have a ten-year guarantee, generally for the benefit of his family—he gets no benefit himself, of course, when he is dead—he pays a higher premium and gets a smaller annuity. I should like the Bill to be sufficiently flexible for people to opt whether to "gamble", using the expression of the right hon. Gentleman, and say that they will live for a day or for thirty years, or to say whether they would like a guarantee for five or ten years.
    8.0 p.m.
    Mr. Ede: I am grateful to the hon. Gentleman, who seems to confirm the view which I have taken all along. The right hon. Gentleman the Financial Secretary accepted this proposed alteration from five years to ten years as if we had only to think of a number and would be only too grateful if we thought of a big one. I assure him that when this matter comes to be considered on the Report stage, he must expect that the Committee will be highly critical of any Amendments brought forward.
    Mr. Arbuthnot: May I thank my right hon. Friend for the favourable reception he has given to our Amendment?
    Mr. J. T. Price: Before leaving this technical point, which I do not want to drag out any further, may I ask the right hon. Gentleman, and his hon. Friends who are obviously well qualified on these matters, if they can give me the name of any reputable insurance company which is now selling annuities payable at the age of 60 or 65 with a guarantee of ten years certain under the present practice?
    Mr. H. Brooke: The reason I advised the Committee to accept this Amendment was that it offered a slightly wider choice to the potential saver whom we are seeking to encourage. The right hon. Gentleman the Member for South Shields (Mr. Ede) may be very good on his gambling, but he is not very good on his logic. He strongly suspects that certain people will gain more in tax
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    relief if this Amendment is accepted and that, therefore, other people will suffer a little.
    As my hon. Friend the Member for Horsham (Mr. Gough) said, everybody who takes advantage of this scheme will be limited by the figures, to which we are shortly to come, as to the amount of his earnings on which he can claim tax relief. If he decides to use that amount of his earnings up to the maximum permitted, surely it is reasonable to allow him to choose what type of policy suits him best?
    That is all we are doing here, and I earnestly assure the right hon. Gentleman that there is nothing sinister about this, and that we are not giving anybody an uncovenanted advantage against somebody else. We simply think that it is not unreasonable for people to take out policies which would give a guaranteed payment of the annuity for ten years in any circumstances instead of five years, if they wish to do so. If they wish to do so, however, they will have to pay higher premiums, but the amount on which they can claim tax relief will be strictly limited by the other provisions of the Bill. It is a simple matter—[HON. MEMBERS: "No."]—and there is nothing sinister in it.
    Amendment agreed to.
    Sir P. Spens: I beg to move, in page 22, line 15, at the end to insert:
    (e) notwithstanding anything in paragraph (b) of subsection (2) of this section, for part of the annuity payable to the individual to be capable of commutation if that part does not exceed two thousand pounds or one quarter of the total value of the annuity whichever is the less.
    This Amendment seeks to insert the right to commute a certain portion of the annuity not exceeding £2,000 or one quarter of the total value on the annuity, whichever is the less. I know that commutation on a scheme of this kind is probably not justified on actuarial grounds and on pure insurance theory. On the other hand, it is to be remembered that of the people for whose benefit this Clause has been put into the Bill the first of them will be people with very small incomes.
    When we look at the Millard Tucker Report we find there an estimate of the number of self-employed who will benefit by this Clause. This is given as 1,696,000,

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    of whom no fewer than 1,491,000 are persons with incomes of under £1,000 a year, and that only the balance have incomes of over that amount. The majority of pensionless employees must also be people with incomes of £1,000 a year or under, and those are the people who will benefit by this Clause.
    It is almost impossible to think that they will be able to make provision on retirement for anything much more than their annuity. They will not be able to save money in order to buy a home for themselves. In practically all the vast number of the present sponsored schemes, and in the Civil Service scheme, there are provisions by which, if a person so desires, he can take some portion of his annuity in the form of a lump sum payment, which is constantly taken for the purpose of having something with which to provide a home for old age. It may not be a logical and proper insurance argument, but it is an extremely human argument, that I believe all these hundreds of thousands of people will want to be able to commute some portion of their annuity for a lump sum, and it is for this reason that I urge the matter on my right hon. Friend.
    I am not very optimistic that I shall succeed on this occasion. However, as was said earlier in this debate, we are entering a completely new field here and, in time to come, we may be able to improve it—I hope we shall—from year to year. If it is impossible to take the risk of granting this benefit from the beginning, it is one for which I hope my right hon. Friend will realise there is a great demand, and that he will do his best to let us have it as soon as possible.
    Mr. H. Brooke: I have listened carefully to my right hon. and learned Friend, but I cannot advise the Committee to accept this Amendment. The reason why I have risen early is to make clear the position of the Government, and I certainly do not intend any discourtesy to any other hon. or right hon. Member who may wish to take part in the debate.
    The history of the matter is that the Millard-Tucker Committee made a recommendation and fixed the maximum for the lump sum in their scheme, and the minority of the Committee took a different view. The Royal Commission
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    re-examined the matter and recommended a different lump sum, and the minority of the Committee again took another view. So it cannot be said that the Government have received unanimous advice from any quarter. Therefore, they have to make up their own mind, and we have brought forward this Clause which does not make provision for lump sums.
    There are several reasons which have weighed with my right hon. Friend. One is that we have in front of us a number of recommendations of authoritative bodies regarding employees' pension schemes, on which the law is somewhat confused. My right hon. Friend has made it clear that he is not ready this year to take any action to clear up that confusion. Certainly the various recommendations in that respect will require attention, and at some stage proposals will have to be brought forward.
    I need not weary the Committee with a description of the different types of employees' pensions schemes or the conditions under which lump sum payments are allowed in some cases and not in others. What weighed with my right hon. Friend was that he wished to keep an open mind about the whole question of employees' pensions schemes until he really approached it and grappled with it. If he were to admit lump sums here and now generally for the self-employed, he would, I feel, have been queering the pitch for the innings which he will have to play at a later stage when he comes to tackle the law relating to employees' pensions schemes. That was one reason, a substantial reason, why he wished to keep his hands free.
    Furthermore, my right hon. Friend was aware of the seeming discrepancy in a system by which one can get tax relief on the premiums paid and then draw out a tax-free lump sum, even if it is only a limited amount, at a later stage. What he is particularly anxious to do by these proposals, and he is grateful for the general welcome which they have received, is to encourage saving by way of annuity provision for old age. If lump sums were to be permitted, that is a different kind of provision for old age, and the scheme might attract a number of people who were not really thinking of retiring but saw the attractiveness of getting tax relief on money which they

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    paid in from year to year in order afterwards to draw out a tax-free benefit.
    The term "self-employed" covers a great range of people in trade on their own account as well as professional people and many other classes. My right hon. Friend specially wanted to help the people who are genuinely seeking to enter into contracts which will enable them to get the equivalent of pension payments when they retire. Moreover, if he were to admit lump sum payments into the scheme here and now he would actually be giving the self-employed more favourable treatment in this respect than is at present available to many of those who are in employees' pensions schemes. I have indicated that the law relating to employees' pensions schemes may not remain unchanged forever. Nevertheless, it would be a queer way of trying to give the self-employed people opportunities in respect of tax as good as those which many employed people already have, that being the main object of Part III of the Bill, if in certain respects yet more favourable treatment were to be given to the self-employed than is available to many of those in employees' pensions schemes.
    Those are the reasons that my right hon. Friend had in mind. He was not taking any moral view for or against the lump sum, but what he asked me to put to the Committee in connection with this Amendment, and other Amendments to which we may come, is that the Government certainly do not regard these Clauses as likely to be, when they reach the Statute Book, like the law of the Medes and Persians, unalterable for all time. We think it most unlikely—I have been very frank and honest about this—that we shall in all respects get it right. The uncertainty about the future is indicated by the estimate that we have given that the Clauses will cost anything between £30 million and £50 million in loss of revenue. No hon. Member in the Committee can tell how attractive or unattractive the scheme will be.
    In the circumstances, my right hon. Friend is anxious to get on the Statute Book quickly a simple scheme, which will work, for the benefit of the self-employed. If at a later stage we find that it needs improvement or, as was said by an hon. Gentleman opposite, embellishment, we can look at it in future years in the light of experience, but, for the
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    reasons which I have given, I would ask my hon. Friends not to press the Amendment, because the Government must be quite firm in resisting it.
    8.15 p.m.
    Mr. Gordon Walker: The right hon. and learned Member for Kensington, South (Sir P. Spens) moved the Amendment with his usual charm and skill. He has shown great skill about the whole matter the Order Paper contains some very pretty Amendments in his name.
    I was glad to hear what the Financial Secretary said, because it would be a very great mistake to introduce the principle of lump sums into the scheme. Indeed, one of the great merits of subsection (2) is that lump sums are specifically and deliberately excluded.
    Although I was glad to hear that part of the right hon. Gentleman's speech, I was a little sorry at the hint which I seemed to detect that he or his right hon. Friend might think of introducing lump sums at a later stage. Whether the right hon. Gentleman meant that when he talked about improvements and embellishments and it not being like the law of the Medes and Persians, I do not know. If the Government ever think of introducing tax-free lump sum payments into the scheme, I hope the right hon. Gentleman will turn up the speech which he has just made, with all its very powerful logical and moral arguments against tax-free lump sums.
    The right hon. Gentleman said he did not want to be moral about it, but one can take a moral case. The Millard Tucker Committee was very weak on this point. All its arguments were against tax-free lump sums. It said that one could not defend them on any rational grounds and that it was wrong to have a tax-free payment out of an untaxed build up, that it would be monstrous to give the tax back twice over, and that it would open up all sorts of opportunities for tax evasion before we knew where we were.
    I am all for improving the Clause, but my hon. Friends and I do not think that to introduce tax-free lump sums would be an improvement. People who want lump sums can still get them with tax concessions in respect of life insurance premiums. There is such provision for people who want it, and I am among

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    them. Many people prefer life insurance because it provides for their family. I should not mind seeing an increase in tax remission in that case. If they want to, people can get lump sums in that way, but to get complete tax remission on the premiums and then get a tax-free lump sum seems to be wrong and improper.
    Mr. Stevens: Would the right hon. Gentleman be good enough to say whether he is in favour of abolishing the lump sum payments which are available by commutation of Civil Service pensions?
    Mr. Gordon Walker: I was coming to that matter immediately, and I will deal with it now. I think that tax-free lump sums are altogether wrong, whether they are Civil Service or "top hat" schemes, or, indeed, schemes under the 1921 Act, though they are a little better because they are taxed. Nonetheless, where people have built up a genuine, honest expectation, it would be against the spirit of our legal system to destroy such expectation. Therefore, I would not interfere with, as the Millard Tucker Committee said, the existing built-up expectations of civil servants or anybody else.
    However, I strongly agree with the minority report of the Royal Commission on the Taxation of Profits and Income which faces this quite clearly and says that it is wrong to have tax-free lump sums. What is wrong should not continue and from a certain date all new entrants, who know that they will not get the benefits, should not receive those sums; but that would not apply to those people who quite legally and properly under the existing system expect to receive them. In the main, I hope that the right hon. Gentleman will remember his own powerful argument and will not be misled into embellishments which will include the introduction of lump sum payments. If he should weaken in this, we shall read to him the arguments which he has developed so powerfully and so convincingly.
    Mr. Gough: I cannot allow the speech of the right hon. Member for Smethwick (Mr. Gordon Walker) to go unanswered, nor, for that matter, the first part of the speech of my right hon. Friend. I fully agree with the right hon. Gentleman that there might well be a case for reducing
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    the percentage of the lump sum, but the vast majority of people for whom the Clause caters are people in a small way of business, including, in my constituency, small farmers and shopkeepers. With taxation as it is today, this is their only way of saving.
    It is not up to hon. and right hon. Members to be able to say that those people should not be able to put a very small nest egg on one side—and it is a small nest egg—when Civil Service and other pensioners can do so. I am prepared to follow my right hon. Friend in saying that this is a method of quickly putting on the Statute Book something which will provide pensions for this enormous number of our fellow human beings, but I should not like to say that at some future date they should not have something on the lines of what their fellow countrymen enjoy.
    Mr. J. T. Price: For once in a way I find myself almost in entire agreement with the Financial Secretary. He has put forward a completely logical and sound argument to show why the Treasury should not entertain further expansion of lump sum payments. He said that the law on these matters was confused. In some respects it is, but in broad outline it is quite clear. Under Section 32 of the Finance Act, 1921, employees' schemes privately administered provide for premiums paid by the employer and employee into the funds to be relieved of tax, as is the investment revenue of the accumulating fund.
    It ought to be one of the primary objectives of the Committee to see that no developments in this wider sphere of insurance administered in contracts of indemnity of this kind do anything to undermine the status of the privately established employees' schemes which many of us have been jealously building up and which we regard as something of social value.
    On the question of the state of the law and the conflict between these ideas, it is germane to the argument to point out that the way in which the privately administered schemes operate under their trustees permits the share-out of surpluses, if any, which the contributors to the fund have built up, or, conversely, for any losses, if any, to be shared out. Nevertheless, they control their own destiny. In the

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    majority of these schemes there is a provision which allows the employee, when he leaves the company's service to enter other employment, or for any other reason, to receive back his own contribution with interest over the period he has been paying contributions and, sometimes, a share of that paid by the employer as well.
    In those circumstances provision is quite clear under the Finance Act, 1921, as subsequently amended, that all sums which are returned to the employee during his lifetime attract tax which is repayable to the Treasury at one-quarter of the standard rate, as the right hon. and learned Member for Kensington, South (Sir P. Spens) is well aware. Why should the Committee give any support to any proposition under which a person, having reached the maturity date of his contract for pension purposes, should be able to take all of the money tax-free? That is something which does not square with established practice where the money is repayable during the man's lifetime.
    We should be extremely careful not to advance that proposition. The general scheme is not strongly resisted from this side of the Committee. We appreciate its benefits and justice, but we must do nothing which will undermine the position of the established schemes, which have been operating successfully and with great value to the nation since 1921. In saying that, I share the view of the Financial Secretary that the Committee would not be justified in encouraging lump sum payments as suggested in the Amendment.
    Mr. Shepherd: As the hon. Member for Westhoughton (Mr. J. T. Price) said, in the case of the repayment of premiums and in certain cases of the commutation of trivial pensions the recipient has to pay tax at the standard rate of one-quarter of the cash value. I do not see what objection there can be in equity to causing those people who commute a restrictive part of their pensions to paying such a tax if they do. I do not feel that there would be any lack of equity if they paid the rate which is now charged on similar commutations.
    It is true that a number of people at the end of their lives want relatively small sums of money to do something special, like buying a house, or moving from one house to another. There is nothing seriously wrong with the idea of allowing
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    a limited commutation, provided that the recipient pays at the scale which is already assessed for trivial pensions and the repayment of contributions.
    Mr. J. T. Price: The Amendment does not say that.
    Mr. Shepherd: I was not supporting the Amendment in its entirety. My right hon. Friends and the Opposition have apparently turned their minds firmly against this idea. There are very strong social reasons for allowing a certain measure of commutation, provided that the Revenue is safeguarded against people who do it merely to acquire capital. There is a very strong case for giving the individual in genuine circumstances the right to acquire at the end of his life a small sum of money to meat exceptional circumstances when he retires from his trade or profession, but that individual should be liable to the rate of tax which applies to the commutation of trivial pensions and repayments of contributions.
    8.30 p.m.
    Mr. Gordon Walker: The Opposition have set their minds against what is in the Amendment and the Millard Tucker proposals, namely, the payment of tax-free lump sums. There is a quite different case for the payment of a lump sum under the 1921 Act funds, where one quarter of the standard rate of Income Tax is paid. That sort of proposal is not before us, but we have not necessarily closed our mind to it. What we have absolutely closed our mind to are these tax-free lump sums, which seem to us absolutely wrong and improper.
    Sir P. Spens: It is quite obvious that I cannot carry this Amendment any further tonight. In the circumstances, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Mr. Stevens: I beg to move, in page 23, to leave out lines 25 to 29.
    The words which the Amendment seeks to delete exclude from the benefit of the provisions for pensions for self-employed persons the remuneration of a controlling director of an investment company. I may be wrong, but as I read the words of subsection (7) it seemed to me that the draftsman had in mind the man who forms his private

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    estates into a limited company and tries to obtain certain tax advantages by so doing. I would think that to exclude such a person from the benefits of Part III is well justified.
    I suggest, however, that the Clause as drawn goes far too wide. It refers to a controlling director as defined by Section 390 of the Income Tax Act, 1952. Reference to that section shows that a controlling director is defined as one of a body of directors who, between them, control more than 50 per cent. of the share capital of a company of which the director concerned owns 5 per cent. or more. That seems to me to be going far wider than is necessary to catch merely the sort of person at whom I believe this part of the Clause to be directed.
    It may be that the proposal to omit lines 25 to 29 is going a little far the other way, but I am wondering whether my right hon. Friend would turn to Section 256 of the same Income Tax Act, where he will see that it provides for the shareholdings of relations of a director—whether wife, husband, brothers, sisters, children, uncles, aunts or nieces—and also nominees of directors, to be taken into account. I wonder whether we could not add some words at the end of the Clause to bring in all those people provided for by Section 256.
    In that way we should exclude from benefit those one-man estate companies which the whole Committee would probably wish to exclude, while leaving in directors of perfectly bona fide investment companies against whom the Clause is not directed.
    The Temporary Chairman (Mr. Malcolm MacPherson): I should have said that it would probably be convenient to the Committee if we discussed the next Amendment, in the name of the hon. Member for Stechford (Mr. Roy Jenkins), in page 23, line 25, to leave out from "of" to second "of" in line 27, and to insert "a company", together with the one which has just been moved.
    Mr. Gordon Walker: Yes, Mr. MacPherson. I want to address my remarks mainly to the next Amendment, which, as you say, it would be convenient to take with the one which has been moved.
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    The two Amendments are the exact opposite of each other, or perhaps even more than opposite, if that is possible. The purpose of the Amendment moved by the hon. Member for Langstone (Mr. Stevens) is to allow controlling directors of investment companies to have the benefit of the provisions of the Bill, they being excluded at the moment. The effect of my hon. Friend's Amendment, however, is to take out all controlling directors, not merely in investment companies. I am not only arguing against the proposal that we should let in the controlling directors of investment companies, but saying that we should go much further by excluding all controlling directors from the benefits proposed under this part of the Bill.
    Controlling directors are creatures known to the law. They have been defined as a special category of person in the 1952 Income Tax Act, because from time to time it has been felt proper to exclude them, because of their special privileged position in certain respects, from benefits which others have received. My hon. Friend's Amendment merely carries further something which has been done for a very long time. Controlling directors are excluded from benefiting from the 1921 Finance Act funds about which my hon. Friend the Member for Westhoughton (Mr. J. T. Price) was speaking on the last Amendment. They are specifically excluded from all approved schemes under that Act and also under the 1947 Act—the "top hat" schemes and all others.
    Over a very long period of time it has been clearly in the mind of Parliament that controlling directors should not receive the benefits of this sort of provision. There are two reasons for this. First, by definition they possess capital. Part of the definition of a controlling director is that he has to possess 5 per cent. of the capital of the concern of which he is a director. He is not in the same position as people who are without capital and need special help to enable them to save. A man with capital is obviously not in as difficult a position as the man without capital in that respect.
    Secondly, and perhaps more important, has been the fact that he is, more than anyone else, in a position to influence his own remuneration, being controlling director of the company which pays him.

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    The Millard Tucker Committee, in paragraph 353 of its Report, recommended that controlling directors should be included and I suppose that that is why the Government have not excluded them from this part of the Bill, but it is interesting to see that, in making the recommendation that controlling directors should not be excluded from this part of the Bill dealing with the buying of annuities, the Committee goes on to say that
    "… in some cases they can personally influence the amount of their remuneration."
    Having taken note of this very powerful qualification and argument against admitting them, the Millard Tucker Report does not in any way argue against it. It does nothing whatever to explain why, although controlling directors are able to fix their own remuneration, they should none the less be accepted into these schemes. The Report just states the objection and leaves it at that.
    This is one of the points on which the logic of the Millard Tucker Report is not very strong. In the main, it is a magnificent Report, but here and there it has certain defects. Obviously, the Committee started with prejudices, and where these prejudices are strong, it in effect sticks to them against all the arguments, and this is one of the cases. The Committee was honest enough to put the arguments against its own conclusion, but it did not really put any arguments on the other side in favour of its conclusions.
    Nevertheless, the Committee came to a conclusion, and, it is quite clear, came to that conclusion because the majority start with a prejudice in favour of including controlling directors. That is why there is a dissenting note written by the minority, which is particularly strong on this point. On the whole, it is against self-employed people coming in at all, and it is particularly strong against those with capital coming in, and controlling directors are, by legal definition, people with capital.
    The reason why controlling directors of investment companies are kept out under the Bill—and I hope that the right hon. Gentleman will resist his hon. Friend's Amendment—is made quite clear in one of the Millard Tucker Committee's proposals, and it is because such companies own capital. They operate in capital, and they are not really companies in the sense that other companies are earning
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    money or income. There is really no quite clear distinction to be drawn between controlling directors in investment companies on the ground that they deal in capital, and that, therefore, a lot of possible tax evasion will open up if they are let in—there is no line that can clearly be drawn between controlling directors of investment companies and ordinary controlling directors, because the same arguments apply and there is only a difference of degree.
    On the whole, the right hon. Gentleman is usually and quite correctly against drawing this sort of line, and he does not like the gaps which the drawing of such lines opens up. Here, he has no natural place at which to draw a line, except round the whole of controlling directors. He has, in fact, created a yawning gap between the controlling directors of investment companies and all others, and it would satisfy the very proper sense of propriety, logic and decency which he usually deploys in argument, much better if he drew the line clearly, neatly and cleanly round the whole class and category of controlling directors.
    Mr. H. Brooke: During our discussion on the last Amendment I had to point out that the Government were obliged to make up their own mind, because they had received three or four different kinds of advice from the bodies set up to study these difficult matters and to make recommendations. On this occasion the Government are in a more fortunate position. The Millard Tucker Committee made a recommendation and the right hon. and hon. Gentlemen on either side of the Committee are being "deviationists". I shall advise the Committee that we should stick to the main recommendation of the Millard Tucker Committeeߞ
    Mr. Gordon Walker: The right hon. Gentleman will be aware of the Minority Report of the Royal Commission. We are not deviationists. He has not had unanimous advice, but very conflicting advice.
    Mr. Brooke: It is not such confused advice as on the last occasion. But I am not seeking to base my argument simply on that. I wish to show what would be the effect of accepting either of these Amendments.
    I will take the second Amendment first. The right hon. Gentleman the Member

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    for Smethwick (Mr. Gordon Walker) has argued strongly for excluding controlling directors of companies. We must be realists in this matter, and keep in our minds that the controlling director of an ordinary company is very frequently someone who has previously been the owner or part-owner of the business which at some stage has been turned into a private limited company.
    It would be unfair were we to exclude him from the relief simply because of that change. We have permitted the relief to the owner of a business which has not been incorporated. That is my reason. Again, it is not for a reason of morality or political ideology or anything like that, but what appears to be a commonsense reason, that we think we should distinguish between controlling directors of investment companies and other controlling directors.
    My hon. Friend the Member for Lang-stone (Mr. Stevens) wished to delete this exclusion of controlling directors of investment companies, but I think that the Millard Tucker Committee was very sensible about this. It took the point that mere ownership of land or investments is not to be treated as a business and that, consequently, income derived from such property was not to qualify as earned income. It said that the same view must apply in the company field, also. It made this recommendation which is now embodied in the Bill.
    My hon. Friend argued that this was unreasonable. I think he had in mind to persuade the Committee that there were many controlling directors of investment companies who were doing something more than managing their own family property. Perhaps he will go this far with me, that it would be unreasonable to include in these provisions the controlling director of an investment company which is simply a body into which the owners of property have turned themselves. If I understand my hon. Friend aright, he is arguing that there are investment companies of which there may be controlling directors, who are not really in the position of owners of the property, and who are managing it just as the directors may manage any other kind of company.
    I and my advisers have thought hard about this, and I am bound to say that
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    we cannot visualise this situation arising. As my hon. Friend realised, the type of company affected is a company the directors of which, between them, have more than 50 per cent. of the voting rights, and it certainly appears to us as though virtually all of those companies would be companies in which the controlling directors, though individually they may not hold much more than 5 per cent. of the shares, are, nevertheless, managing what is really a family property.
    8.45 p.m.
    I do not want to seek to put to the Committee that the majority suggestion of the Millard Tucker Committee is going to operate precisely right in every case. One never gets the law absolutely right so as never to cause injustice, but, for the reasons I have given, I believe that if the second Amendment were adopted it would do injustice to a number of owners of businesses who have turned themselves into private limited com panies. I equally think that if the Amendment which has been moved were adopted, even in the modified form my hon. Friend suggested, it would let in a number of people who were simply managing family property.
    For those reasons, I would advise the Committee that it would be best to leave the Clause as it stands. I do not think that we shall improve it by trying to make it more accurate or precise in either direction. I suggest that the majority report of the Millard Tucker Committee was very wise in indicating that all controlling directors of investment companies, but not of other companies, should be excluded from these provisions.
    Mr. Mitchison: I am afraid I cannot regard that answer as satisfactory with reference to the position of controlling directors generally. This is not a question of who comes into a scheme or who is kept out of it; it is a question of what is to be considered relevant earnings for the purposes of this Clause.
    At present the line is drawn in this way between, on the one hand, the controlling director of an investment company and, on the other, a controlling director of any other company. I would say to the right hon. Gentleman, first, that he must know as well as I do that there are investment companies which are not investment companies in the eyes of the Income Tax Acts, but which, in

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    fact, carry on to a very considerable extent the business of investment and not much else.
    I can think of cases recently in which companies formed with entirely different objects have turned themselves into—to take a general word—holding companies and it is really a nice question of financial convenience whether or not they have technically become investment companies. True enough, most of those companies are large and the existence of controlling directors in them is rather unlikely, but the trouble about drawing a distinction on this very uncertain line seems to be that people will try to convert their companies into whatever happens to suit them from the tax point of view. Therefore, I dislike in principle the drawing of a line on what seems to be, no doubt a recognisable, but a rather artificial distinction.
    Then I come to the objection I have in principle to all this. The Millard Tucker Committee pointed out quite clearly that the trouble about controlling directors was that they could in effect control their own remuneration. What happens in one of these companies is that the controlling director can choose, and does choose, in the light of tax considerations how much he will get out of the company as a shareholder and how much he will get out of it as a controlling director; and when he gets his remuneration as a controlling director it may be in the form of a fixed annual payment or it may be, as the Millard Tucker Committee pointed out, wholly or partially in the form of some commission on earnings.
    It is the amount which he gets, whether fixed or by way of commission on earnings—to put it quite bluntly, the amount which he chooses to get out of the company—which will determine his relevant earnings and, therefore, the extent to which he can enter a scheme of this sort on a qualifying premium. In cases where it suits a man who is a controlling director to go into a scheme of this sort, the Clause confers the benefit of a positive invitation to him to take out an inordinate proportion of his own interest in the company in the form of a commission or fixed remuneration.
    I cannot see that that is a wise thing to do. I have looked at the relevant passage of the Millard Tucker Report and
    354
    I say frankly, with great respect to people who generally did an extremely good job, that I am very doubtful whether they considered this point with sufficient care. The paragraphs in the Report to which my right hon. Friend the Member for Smethwick (Mr. Gordon Walker) referred seemed to me to bear the marks of what I might call the post-midnight oil. That is the kind of oil which does not burn so clearly in the lamp, but enables one to get away to bed.
    Whatever the history of the matter, I do not think that the Report is enough on which to found this decision. As a matter of principle, I say that in this case the right hon. Gentleman is choosing to draw a line at a highly artificial point, and that if he draws it there it will not be fair in itself and it will lead to shifting to whichever side of the line happens to suit the taxpayer. That is always an objection to an uncertain line. A far more certain line is provided by the words "controlling director, without qualification."
    Secondly, on a question of principle, it will make a distinction between two things which in the case of a controlling director are very much a matter of his own choice—that is to say, what he gets out of the controlled company by way of dividends and what he gets out of it by way of remuneration. I do not believe that it is right to draw that sort of distinction and to invite people to add an increased artificiality to something apt to be a trifle artificial already—the remuneration of a controlling director paid by the company which he controls.
    For all those reasons, I regard the Amendment put forward by my right hon. Friend as sounder in principle, better in practice and less likely to lead to confusion and collusion than the proposal which the Government have in mind.
    Mr. Gough: Would the hon. and learned Member tell me the difference between the controlling director who chooses his own salary or remuneration and the learned barrister who marks a brief at 400 guineas or 800 guineas?
    Mr. Mitchison: The two people seem to be performing entirely different functions. I have never reached the eminent and somewhat peculiar position in which a barrister marks his own brief, nor have I heard of him doing so.
    Mr. Stevens: I stand as much in awe of the wisdom of my hon. Friend the Financial Secretary as I do of the knowledge and experience of Sir James Tucker. As the wisdom of the one and the knowledge and experience of the other seem to be in harmony, and I appear to be the odd man out, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Mr. Gordon Walker: I beg to move, in page 23, line 25, to leave out from "of" to second "of" in line 27 and to insert "a company".
    I advice my right hon. And hon. Friends to divide on this Amendment.
    Question put, That the words proposed to be left out stand part of the Clause:—
    The Committee divided: Ayes 246, Noes 190.

    Division No. 212.]

    AYES

    [8.56 p.m.

    Agnew, Cmdr. P. G.

    Fisher, Nigel

    Lindsay, Hon. James (Devon, N.)

    Altken, W. T.

    Fleetwood-Hesketh, R. F.

    Lindsay, Martin (Solihull)

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

    Foster, John

    Linstead, Sir H. N.

    Alport, C. J. M.

    Fraser, Sir Ian (M'cmbe & Lonsdale)

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

    Arbuthnot, John

    Freeth, D. K.

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Armstrong, C. W.

    Garner-Evans, E. H.

    Lloyd-George, Maj. Rt. Hon. G.

    Ashton, H.

    George, J. C. (Pollok)

    Longden, Gilbert

    Atkins, H. E.

    Glover, D.

    Low, Rt. Hon. A. R. W.

    Balniel, Lord

    Gomme-Duncan, Col. Sir Alan

    Lucas, Sir Jocelyn (Portsmouth, S.)

    Barber, Anthony

    Gower, H. R.

    Lucas, P. B. (Brentford & Chiswick)

    Barlow, Sir John

    Graham, Sir Fergus

    Lucas-Tooth, Sir Hugh

    Barter, John

    Green, A.

    Macdonald, Sir Peter

    Baxter, Sir Beverley

    Grimston, Hon. John (St. Albans)

    McKibbin, A. J.

    Bell, Philip (Bolton, E.)

    Grimston, Sir Robert (Westbury)

    Mackie, J. H. (Galloway)

    Bell, Ronald (Bucks, S.)

    Grosvenor, Lt.-Col. R. G.

    Maclay, Rt. Hon. John

    Bennett, F. M. (Torquay)

    Hare, Rt. Hon. J. H.

    Macleod, Rt. Hon. lain (Enfield, W.)

    Bidgood, J. C.

    Harris, Frederic (Croydon, N.W.)

    MacLeod, John (Ross & Cromarty)

    Biggs-Davison, J. A.

    Harrison, A. B. C. (Maldon)

    Macmillan,Rt.Hn.Harold(Bromley)

    Birch, Rt. Hon. Nigel

    Harrison, Col. J. H (Eye)

    Macpherson, Niall (Dumfries)

    Bishop, F. P.

    Harvey, Air Cdre. A. V. (Macclesfd)

    Madden, Martin

    Black, C. W.

    Harvey, John (Walthamstow, E.)

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

    Body, R. F.

    Harvie-Watt, Sir George

    Maitland, Hon. Patrick (Lanark)

    Boothby, Sir Robert

    Hay, John

    Markham, Major Sir Frank

    Bossom, Sir Alfred

    Heald, Rt. Hon Sir Lionel

    Marlowe, A. A. H.

    Bowen, E. R. (Cardigan)

    Heath, Rt. Hon. E. R. G.

    Marples, A. E.

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

    Hicks-Beach, Maj. W. W.

    Marshall, Douglas

    Boyle, Sir Edward

    Hill, Rt. Hon. Charles (Luton)

    Mathew, R.

    Bralne, B. R.

    Hill, Mrs. E. (Wythenshawe)

    Maude, Angus

    Brooke, Rt. Hon. Henry

    Hill, John (S. Norfolk)

    Mawby, R. L.

    Brooman-White, R. C.

    Hinchingbrooke, Viscount

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

    Bullus, Wing Commander E. E.

    Hirst, Geoffrey

    Medliciott, Sir Frank

    Burden, F. F. A.

    Holt, A. F.

    Milligan, Rt. Hon. W. R.

    Butcher, Sir Herbert

    Hornby, R. P.

    Monokton, Rt. Hon. Sir Walter

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

    Hornsby-Smith, Miss M. P.

    Morrison, John (Salisbury)

    Campbell, Sir David

    Horobin, Sir Ian

    Mott-Radelyffe, C. E.

    Carr, Robert

    Horsbrugh, Rt. Hon. Dame Florence

    Nabarro, G. D. N.

    Cary, Sir Robert

    Howard, John (Test)

    Nairn, D. L. S.

    Channon, H.

    Hudson, Sir Austin (Lewiston), N.)

    Neave, Airey

    Chichester-Clark, R.

    Hughes-Young, M. H. C.

    Nicholson, Godfrey (Farnham)

    Clarke, Brig. Terence (Portsmth.W.)

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

    Nicolson, N. (B'n'mth, E. & Chr'ch)

    Conant, Maj. Sir Roger

    Hyde, Montgomery

    Nield, Basil (Chester)

    Cooper, Sqn. Ldr. Albert

    Hylton-Foster, Sir H. B. H.

    Noble, Comdr. A. H. P.

    Cordeaux, Lt.-Col. J. K.

    Iremonger, T. L.

    Nugent, G. R. H.

    Corfield, Capt. F. V.

    Irvine, Bryant Godman (Rye)

    Oakshott, H. D.

    Crouch, R. F.

    Jenkins, Robert (Dulwich)

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

    Crowder, Sir John (Finchley)

    Jennings, J. C. (Burton)

    Ormsby-Gore, Hon. W. D.

    Cunningham, Knox

    Johnson, Dr. Donald (Carlisle)

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

    Currie, G. B. H.

    Johnson, Eric (Blackley)

    Osborne, C.

    Dance, J. C. C.

    Johnson, Howard (Kemptown)

    Page, R. G.

    Davidson, Viscountess

    Jones, Rt. Hon. Aubrey (Hall Green)

    Pannell, N. A. (Kirkdale)

    D'Avigdor-Goldsmid, Sir Henry

    Joseph, Sir Keith

    Partridge, E.

    Deedes, W. F.

    Joynson-Hicks, Hon. Sir Lancelot

    Peyton, J. W. W.

    Dodds-Parker, A. D.

    Kaherry, D.

    Pickthorn, K. W. M.

    Donaldson, Cmdr. C. E. McA.

    Keegan, D.

    Pilkington, Capt. R. A.

    Doughty, C. J. A.

    Kerby, Capt. H. B.

    Pitman, I. J.

    du Cann, E. D. L.

    Kerr, H. W.

    Pitt, Miss E. M.

    Duncan, Capt. J. A. L.

    Kershaw, J. A.

    Pott, H. P.

    Duthie, W. S.

    Kimball, M.

    Powell, J. Enoch

    Eccles, Rt. Hon. Sir David

    Kirk, P. M.

    Profumo, J. D.

    Eden, J. B. (Bournemouth, West)

    Lagden, G. W.

    Ramsden, J. E.

    Elliot, Rt. Hon. W. E.

    Lambert, Hon. C.

    Rawlinson, Peter

    Emmet, Hon. Mrs. Evelyn

    Lancaster, Col. C. G.

    Redmayne, M.

    Errington, Sir Eric

    Leather, E. H. C.

    Rees-Davies, W. R.

    Erroll, F. J.

    Leburn, W. G.

    Renton, D. L. M.

    Farey-Jones, F. W.

    Legge-Bourke Maj. E. A. H.

    Rippon, A. G. F.

    Fell, A.

    Legh, Hon. Peter (Petersfield)

    Roberts, Sir Peter (Heeley)

    Finlay, Graeme

    Robinson, sir Roland (Blackpool, S.)

    Stoddart-Scott, Col.M.

    Wakefield, Sir Wavell (St.M'lebone)

    Robson-Brown, W.

    Studholme, Sir Henry

    Walker-Smith, D.C.

    Rodgers, John (Sevenoaks)

    summer, Sir Spenoer

    Wall, Major Patrick

    Roper, Sir Harold

    Taylor, William (Bradford, N.)

    Ward, Hon. George (Worcester)

    Schofield, Lt.-Col. W.

    Thompson, Kenneth (Walton)

    Ward, Dame Irene (Tynemouth)

    Scott-Miller, Cmdr. R.

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

    Waterhouse, Capt. Rt. Hon. C.

    Shepherd, William

    Thornton-Kemsley, C. N.

    Watkinson, Rt. Hon. Harold

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

    Tiley, A. (Bradford, W.)

    Whitelaw,W.S.I.(Penrith & Border)

    Smithers, Peter (Winchester)

    Tilney, John (Wavertree)

    Williams, Paul (Sunderland, S.)

    Smyth, Brig. Sir John (Norwood)

    Touche, Sir Gordon

    Williams, R. Dudley (Exeter)

    Spearman, Sir Alexander

    Turner, H. F. L.

    Wills, G. (Bridgwater)

    Speir, R. M.

    Tweedsmuir, Lady

    Woollam, John Victor

    Spens, Rt. Hn. Sir P.(Kens'g'tn, S.)

    Vane, W. M. F.

    Yates, William (The Wrekin)

    Stanley, Capt. Hon. Richard

    Vaughan-Morgan, J. K.

    Stevens, Geoffrey

    Vickers, Miss J. H.

    TELLERS FOR THE AYES:

    Steward, Sir William (Woolwich,W.)

    Vosper, D. F.

    Mr. Godber and Mr. Bryan

    Stewart, Henderson (Fife, E.)

    Wakefield, Edward (Derbyshire, W.)

    NOES

    Ainsley, J. W.

    Hamilton, W. W.

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

    Albu, A. H.

    Allen, Arthur (Bosworth)

    Hannan, W.

    Paling, Will T. (Dewsbury)

    Allen, Scholefield (Crewe)

    Hastings, S.

    Palmer, A. M. F.

    Anderson, Frank

    Hayman, F. H.

    Pargiter, G. A.

    Awbery, S. S.

    Healey, Denis

    Parker, J.

    Bacon, Miss Alice

    Hobson, C. R.

    Paton, John

    Balfour, A.

    Holman, P.

    Peart, T. F.

    Bence, C. R. (Dunbartonshire, E.)

    Houghton, Douglas

    Price, J. T. (Westhoughton)

    Benn, Hn. Wedgwood (Bristol, S.E.)

    Howell, Charles (Perry Barr)

    Price, Philips (Gloucestershire, W.)

    Benson, G.

    Howell, Denis (All Saints)

    Probert, A. R.

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

    Hubbard, T. F.

    Proctor, W. T.

    Blackburn, F.

    Hughes, Cledwyn (Anglesey)

    Pryde, D. J.

    Blenkinsop, A.

    Hughes, Hector (Aberdeen, N.)

    Randall, H. E.

    Blyton, W. R.

    Hynd, H. (Accrington)

    Rankin, John

    Boardman, H.

    Irving, S. (Dartford)

    Redhead, E. C.

    Bottomley, Rt. Hon. A. G.

    Isaacs, Rt. Hon. G. A.

    Reid, William

    Bowden, H. W. (Leicester, S.W.)

    Janner, B.

    Robens, Rt. Hon. A.

    Bowles, F.G.

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

    Roberts, Goronwy (Caernarvon)

    Boyd, T. C.

    Jeger, George (Goole)

    Robinson, Kenneth (St. Pancras, N.)

    Braddock, Mrs. Elizabeth

    Jeger, Mrs. Lena (Holbn & St.Pncs,S.)

    Rogers, George (Kensington, N.)

    Brockway, A. F.

    Jenkins, Roy (Stechford)

    Ross, William

    Brown, Thomas (Ince)

    Johnson, James (Rugby)

    Shinwell, Rt. Hon. E.

    Burton, Miss F. E.

    Jones, Rt. Hon. A, Creech(Wakefield)

    Short, E. W.

    Butler, Herbert (Hackney, C.)

    Jones, Elwyn (W. Ham S.)

    Shurmer, P. L. E.

    Callaghan, L. J.

    Jones, Jack (Rotherham)

    Skeffington, A. M.

    Castle, Mrs. B. A.

    Jones, J. Idwal (Wrexham)

    Slater, J. (Sedgefield)

    Chetwynd, G. R.

    Jones, T. W. (Merioneth)

    Snow, J. W.

    Clunie, J.

    Kenyon, C.

    Sorensen, R. W.

    Coldrick, W.

    Key, Rt. Hon. C. W.

    Stewart, Michael (Fulham)

    Collick, P. H. (Birkenhead)

    King, Dr. H. M.

    Stones, W. (Consett)

    Collins, V. J.(Shoreditch & Finsbury)

    Lawson, G. M.

    Strachey, Rt. Hon. J.

    Corbet, Mrs. Freda

    Ledger, R. J.

    Stross, Dr. Barnett(Stoke-on-Trent.C.)

    Cove, W. G.

    Lee, Frederick (Newton)

    Summerskill, Rt. Hon. E.

    Craddock, George (Bradford, S.)

    Lee, Miss Jennie (Cannock)

    Sylvester, G. O.

    Cronin, J. D.

    Lever, Leslie (Ardwick)

    Taylor, Bernard (Mansfield)

    Crossman, R. H. S.

    Lipton, Lt.-Col. M.

    Taylor, John (West Lothian)

    Cullen, Mrs. A.

    Logan, D. G.

    Thomas, George (Cardiff)

    Dalton, Rt. Hon. H.

    Mabon, Dr. J. Dickson

    Thomas, Iorwerth (Rhondda, W.)

    Darling, George (Hillsborough)

    MacColl, J. E.

    Thomson, George (Dundee, E.)

    Davies, Stephen (Merthyr)

    McGhee, H. G.

    Thornton, E.

    Deer, G.

    Mclnnes, J.

    Timmons, J.

    de Freitas, Geoffrey

    McKay, John (Wallsend)

    Turner-Samuels, M.

    Delargy, H. J.

    Mahon, Simon

    Usborne, H. C.

    Dodds, N. N,

    Mallalieu, E. L. (Brigg)

    Viant, S. P.

    Donnelly, D. L.

    Mann, Mrs. Jean

    Warbey, W. N.

    Dugdale, Rt. Hn. John (W. Brmwch)

    Marquand, Rt. Hon. H. A.

    Weitzman, D.

    Dye, S.

    Mason, Roy

    Wells, Percy (Faversham)

    Ede, Rt. Hon. J. C.

    Messer, Sir F.

    Wells, William (Walsall, N.)

    Edwards, Rt. Hon. Ness (Caerphilly)

    Mitchison, G. R.

    West, D. C.

    Edwards, Robert (Bilston)

    Moody, A. S.

    Wheeldon, W. E.

    Evans. Stanley (Wednesbury)

    Morris, Percy (Swansea, W.)

    White, Mrs. Eirene (E. Flint)

    Fienburgh, W.

    Morrison,Rt.Hn.Herbert(Lewis'm,S.)

    White, Henry (Derbyshire, N.E.)

    Finch, H. J.

    Mort, D. L.

    Wilcock, Group Capt. C. A. B.

    Fletcher, Eric

    Moss, R.

    Wilkins, W. A.

    Forman, J. C.

    Moyle, A.

    Williams, David (Neath)

    Fraser, Thomas (Hamilton)

    Mulley, F. W.

    Williams, W. R. (Openshaw)

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

    Neal, Harold (Bolsover)

    Willis, Eustaee (Edinburgh, E.)

    Gibson, C. W.

    Noel-Baker, Francis (Swindon)

    Wilson, Rt. Hon. Harold (Huyton)

    Gordon Walker, Rt. Hon. P. C.

    O'Brien, Sir Thomas

    Winterbottom, Richard

    Grey, C. F.

    Oliver, G. H.

    Woodburn, Rt. Hon. A.

    Griffiths, David (Rother Valley)

    Oswald, T.

    Woof, R. E.

    Griffiths, Rt. Hon. James (Llanelly)

    Owen, W. J.

    Younger, Rt. Hon. K.

    Hale, Leslie

    Padley, W. E.

    Hall, Rt. Hn. Glenvil (Colne Valley)

    Paget, H. T.

    TELLERS FOR THE NOES

    Mr. Pearson and Mr. Holmes

    Question put and agreed to.

    Motion made, and Question proposed, of the Bill.
    That the Clause, as amended, stand part
    Mr. Gough: There is only one small and rather technical point on which I will not keep the Committee for more than two minutes. It refers to the type of insurance contract which is dealt with under the Clause. I do not wish to press the matter in any way but merely wish to put the point to my right hon. Friend.
    This is possibly the first Bill or Act of Parliament which has laid down that insurance companies—and it is the big insurance companies which will accept the contracts under the Clause—will undertake one particular type of contract, namely, an annuity. Would my right hon. Friend consider, not necessarily this year but perhaps in the future, whether he could extend that so that insurance companies would be freer to provide the different types of contracts which they now issue?
    Life assurance companies and societies have for generations dealt more in life assurance than in annuities. It is perfectly true that there is a type of annuity which can be issued to cover the various contingencies dealt with under the Clause, namely, an annuity not only for the person himself but for his widow and, in certain circumstances, his dependants. That is a reversionary annuity. It is an obscure type of contract which is not often used.
    The Clause rightly provides, with certain restrictions, for the widow in the event of the man himself dying long before he reaches the pension age. I submit that the type of insurance contract known as an endowment policy is very much better and cheaper than the type of annuity which, under this Clause, the insurance companies can issue. I would ask my right hon. Friend to consider the point, bearing in mind, as I do, that it must have the limitations for dealing with the capital sum, that it would be to the benefit of those who come under the Clause if they were allowed, in certain circumstances, to take out endowment insurances as well as annuities.
    Question put and agreed to.
    Clause, as amended, ordered to stand part of the Bill.

    Clause 19.—(NATURE AND AMOUNT OF RELIEF FOR QUALIFYING PREMIUMS.)
    Mr. Stevens: I beg to move, in page 24, line 21, to leave out "five hundred" and insert "seven hundred and fifty".
    360
    By direction of the Chair, this Amendment is to be taken together with the Amendment in line 22, leave out "one-tenth" and insert "fifteen per cent.", with the consequential Amendment in line 25, leave out "five hundred" and insert "seven hundred and fifty", and the Amendment in page 27, line 8, at end insert:
    (13) The limit of one-tenth prescribed by the first proviso to subsection (1) of this section shall, in the case of an individual who carried on any trade, profession, or vocation, or held any office or employment (other than a pensionable office or employment) at any time between the sixth day of April. one thousand nine hundred and thirty-nine, and the fifth day of April, one thousand nine hundred and fifty-six, be increased by five per cent. in respect of each year of assessment falling within that period during which he carried on or held the same or during which he was engaged in any form of war service preventing him from carrying on or holding the same and but for which he would have carried on or held the same, and the limit of five hundred pounds prescribed by the said proviso shall not apply in the case of such an individual.
    The last Amendment would deal with late entrants to the scheme, for which Part III of the Bill provides. The first two can be easily discussed together. The third is a rather different subject.
    The first Amendment provides for the raising of the maximum contribution admitted as a charge against Income Tax and Surtax from £500 to £750 each year. It is perfectly true that very few self-employed persons, whether they be professional men or traders, are likely to reach at any stage in their careers the relatively high net relevant earnings of £5,000 a year of which one-tenth is £500, the maximum at present allowed by the Clause. Fewer still of those hardworking, courageous and enterprising people will reach those higher salaries or net relevant earnings limits until the last few years of their careers, but if what I have just said is true, that they will not reach those higher earnings until the last few years of their careers, then it is true that in the early years of their careers one-tenth of their net relevant earnings will be very much less than £500. So that over the whole of their careers the average premium which they can pay for their retirement benefit will be substantially below £500.
    My Amendment seeks to raise the limit from £500 to £750. In the vast majority of cases, that can arise only in the last

    361
    few years of a successful professional or business man's career. For that reason there cannot be very much at stake for the Income Tax and the Surtax, but it will be necessary, in my view, to have a maximum, a ceiling, of at least £750 if the retirement annuities of successful business and professional men are to be of the same order as those which at present are paid to retired senior civil servants and retired senior officers of the Royal Navy, the Army and the Royal Air Force. I do not wish to weary the Committee with figures that are self-evident.
    The second of the Amendments fits the first. It is the Amendment which provides for the raising of the permitted proportion of the net relevant earnings, one-tenth or 10 per cent., to 15 per cent. of the net relevant earnings. One-tenth is below the notional contribution which any civil servant makes to his own retirement pension. It is true that most Civil Service pensions, though not all, and all retired pay of officers of the three Services are known, generally speaking, as noncontributory, but it is equally certain that the people who go into those Services accept a rather lower rate of remuneration than they would in any other comparable form of employment because they know there is a pension or there is retired pay at the end. It is fair to say that the notional contribution of people in the Civil Service is about 14 per cent. and not 10 per cent.
    Some well-earned tributes have been paid today, and I am glad to have this opportunity of adding mine, to the wisdom and hard work of Sir James Millard Tucker, and he and his Committee in their Report recommend not 10 per cent. but, for schemes such as are mentioned in the Bill, a contribution of 12 per cent. Therefore, I ask my right hon. Friend to consider whether 10 per cent., being, as it undoubtedly is, below the proportion of any other similar pension scheme in existence, should in the case of self-employed persons be increased.
    9.15 p.m.
    Those two points go together, but the third is entirely different. It is the rather longer Amendment which seeks to make provision for the late entrant to the scheme. Many of us have been hoping and working for Part III of the Bill for a long time. It is very galling when it
    362
    does come to find that we are excluded from its benefits. Speaking for professions as a whole, I thank my right hon. Friend the Chancellor, as I did in my speech on the Budget, for bringing hope to the professional man and to self-employed persons. I believe that these provisions will prevent what has been happening for a long time. Young men have qualified for a profession but as soon as they have got their qualification they have gone out into industry, where jobs with a full pension at the end are available to them. I believe that Part III of the Bill will put an end to this kind of thing, for a man will be able to provide a pension for himself in due course, but not so the "old boy" like myself.
    If we are lucky enough to have net relevant earnings of £5,000 or more a year, we may be able for another ten years of working life to set aside a maximum of £500 a year. But £500 a year for ten years would purchase a fairly small pension for a man who has held a responsible position in professional life or as a trader in the industrial and business life of a community. A man who retires at the age of 65 then has, as we heard only a few minutes ago, another 11½ years' expectation of life, at least ten of which may be useful years of life in which he may be able to play a valuable but voluntary part in the community life of the district in which he happens to live. The £500 a year which he is able to set aside for ten years from 1956 would buy him a very small pension with which to maintain the position which his life as a man of substance and authority demands.
    I have said that Part III of the Bill is excellent for young people, but there is no provision whatever for the late entrant. The last of the three Amendments seeks to help the late entrant. It seeks to add to the one-tenth, assuming there is no increase in the one-tenth, by 5 per cent.—in other words, one-half of 1 per cent.—for each year during which a person has been in a suitable self-employment since 5th April, 1939. This means that a maximum of 18½ per cent. of his net relevant earnings would be available in the last ten or fifteen years of his useful life.
    This last Amendment follows in principle the recommendations of the Tucker Committee, although it varies in detail. Bringing, as it does, some

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    measure of justice to the late entrant, it deserves the earnest consideration of my right hon. Friend. I very much hope that he will see fit to accept it as, I hope, he will accept the other two Amendments which I have introduced coincidentally.
    Mr. H. Brooke: If I rise now in the discussion it is not because I intend any discourtesy to the Committee, but because this is another occasion on which it may be helpful to right hon. and hon. Members if I state the views of the Government at an early stage in our debate. My hon. Friend the Member for Lang-stone (Mr. Stevens) has skilfully introduced in one speech three separate Amendments dealing with distinct but related points. I will seek one by one to indicate the view which my right hon. Friend the Chancellor of the Exchequer takes on each of them.
    The major Amendment, in terms of money, is the one in page 24, line 22, to leave out "one-tenth" and to insert "fifteen per cent". This is an endeavour to be as generous as possible to the self-employed. I am sure that is the prime consideration in the mind of my hon. Friend. I am sure, too, that he will be the first to appreciate that he is going further, in suggesting 15 per cent., than the Millard Tucker Committee went, except in relation to their recommendations for the late entrants. If my hon. Friend calculates this out, he will find that, in addition to suggesting a higher figure than the Millard Tucker Committee recommended, a maximum limit of 15 per cent. would also enable large numbers of people who entered the scheme early to provide for themselves pensions distinctly greater than their normal earnings, which is not what we are accustomed to in the rest of the pension field.
    I am not suggesting that there is any fixed percentage which is right but. generally speaking, in the case of employees' pensions we think of two-thirds of the earnings as being a good figure for the pension, and I know of no contributory or non-contributory scheme which would retire employees on pensions higher than their earnings. So I hope my hon. Friend will realise that I am not just resting on the dictates of the Millard Tucker Committee here. We have examined his suggestion in practical
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    terms and we see that among other practical objections to it—
    Mr. Stevens: I was startled when my right hon. Friend said that 15 per cent. would provide a larger pension than the net relevant earnings. He was not assuming, by any chance, an even level of earnings for the whole working life?
    Mr. Brooke: My hon. Friend is probably thinking there of the professional man, whereas this Clause concerns not only the professional man but the man who is self-employed in the sense that he is running his own business. If, for instance, a young man takes over his father's grocer's shop at the age of 25, and if it is an established business, he is not one who will be entitled to expect an upward trend of earnings from a low figure. If he is competent, he may improve the profits of the business; but he is in a very different position from that of the professional man who has to be content with quite a small income in his early years while he is building up his reputation.
    A simple arithmetical calculation will reveal to the Committee that if we were to accept this Amendment it would put up the cost of what I call the Millard Tucker relief by about 50 per cent. Apart from the other considerations which I have adduced, my right hon. Friend could not contemplate anything of that magnitude.
    I next come to the first Amendment, namely, to leave out "five hundred" and to insert "seven hundred and fifty". This does not raise financial problems of the same order of magnitude. Here it is a matter of judgment, and the reason why £500 is in the Bill is because £500 is 10 per cent. of £5,000, and we thought that £5,000 was about the reasonable top level of earnings for which to provide. However, I must tell the Committee frankly that since the Bill was published my right hon. Friend has received very authoritative deputations and representations on these matters making out a case in favour of a higher figure which certainly deserves consideration.
    I should like to set out the pros and cons. I think I have already given what was in our mind when we wrote £500 into the Bill. I confess that at that time we were thinking in terms of the person with fairly steady earnings. One point put

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    to us is the one which has just been mentioned by my hon. Friend the Member for Langstone in a slightly different connection, the fact that the professional man has to be content in the early years of his career, unless he is extraordinarily successful, with a relatively low income and may hope, if he is successful and fortunate, to enjoy a high income in the prime of life but for a comparatively short period, and that it may, therefore, be somewhat cruel to him to cut off the amount of the contribution on which he can claim tax relief just at the very period of his life when he would normally expect to be able to provide the most above his current needs by way of provision for the future.
    The case has also been put to us of people with fluctuating incomes. I think the Committee must give some attention to this, because one does not come across the fluctuating income in the same way in the case of the employees' pensions schemes. If there is, so to speak, a right figure up to which to provide tax relief for employed salary earners, then the appropriate maximum figure for the self-employed, particularly the self-employed professional man, will be somewhat higher, because with many self-employed people the actual incomes are liable to wide fluctuations from year to year. I can imagine a man in professional practice who might easily earn £2,000 one year. £8,000 the next and then drop to £3,000. It is no discredit to him; it is just a feature of life in some professions. What I am seeking to do is to show that the Government have endeavoured to study this aspect on a practical basis.
    The Committee will be aware that in employees' pensions schemes there is normally no maximum limit. Indeed, it might well be argued, theoretically at any rate, that here, where we are seeking to put the self-employed on to a basis akin to that of employed persons, there ought to be no maximum limit. Nevertheless. if there were no maximum, it might well be argued that that was opening the door of tax relief too wide in the case of the self-employed. I do not know; all these things are matters of judgment.
    What is extremely important is that, however we fashion Part III of the Bill, we should make our arrangements attractive enough both to persuade people to save for their retirement, and, if we can, to check the drift of professional people
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    out of the professions into salaried employment because of the very much more attractive tax relief arrangements and greater security available there. Some of these people with high earnings might note enviously that there is no maximum limit in the case of the employees.
    9.30 p.m.
    My right hon. Friend has considered this problem very carefully. It must be a matter of judgment. Nobody can put his hand on his heart and say that £5,000, £6,000, £7,500. or any particular figure is absolutely right. As I have said, we have to commit ourselves to a workable scheme and see how we get on. In view of the strength of the representations which have been received by my right hon. Friend from very authoritative quarters on this matter, he is inclined to recommend to the Committee that the figure of £500 should be increased to £750.
    I come now to the third of the matters dealt with in the comprehensive and lucid speech of my hon. Friend the Member for Langstone. That is the point which is raised by the Amendment in page 27, line 8. This is the problem of the older people in self-employment, the "late entrants", if I may use that term from the insurance field here. There are, as I said in an earlier stage in our debates, arguments of principle against a proposal for extra relief in these cases. It may be said to amount to retrospective relief for years that are past. On the other hand, against that argument, it can legitimately be contended in the case of superannuation funds set up by employers that contributions in respect of back service often rank for relief.
    There is no exact analogy here, but it has been forcefully represented to my right hon. Friend that the circumstances here are exceptional, indeed, unique. If we do nothing for these people who are now older, so that they would have very little opportunity of acquiring substantial pension rights under the scheme in the Clause, we should never have a later opportunity to put that right, whereas, as I have explained, over almost all the rest of the field, if we do not have it right this time, we can have another shot in subsequent Finance Bills.
    It therefore seems to us different from the normal case where a new tax relief

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    is introduced, or an existing relief increased, and where the rule against retrospection applies. As I explained in the Second Reading debate, the Millard Tucker Committee's scheme is administratively impracticable. I could not, I am afraid, recommend the Committee to accept the Amendment in page 27, line 8, as it stands.
    To look back at the circumstances of individual cases over periods going back for 17 years, for many of which years no records may be available, when a good deal of money might depend on what actually happened in one year, seems to us the wrong way to approach the problem. At the same time, my right hon. Friend is extremely anxious to put before the Committee a plan of some practicable kind which will help those who are now too old to acquire substantial pension rights under Part III.
    What he authorises me to tell the Committee, therefore, is that he has in mind to bring forward, on Report, a much simpler scheme than the Millard Tucker proposal—a scheme under which there will be increases both in the percentage limit and the maximum limit for people born before 1916. These are people who are now over 40 years old. I very much hope that what I am now about to say will make good that which, in the minds of many of us, was the part of the scheme most deservedly open to criticism.
    Under the Amendment which my right hon. Friend has in mind, people born after 1915 would receive the existing rights under the Bill, whatever they may be, but the percentage will increase with increasing age, up to a maximum of 15 per cent. for those born before 1908. [Interruption.] I notice that hon. Members opposite see opportunities of benefiting from this proposal. I hope that this fact will lubricate the passage of the Bill on Report. There would be intermediate rates between 10 per cent. and 15 per cent. for those born in the intervening years, and for each percentage rate there would be a corresponding appropriate figure for the maximum limit.
    These increases would apply irrespective of what the taxpayer was doing in past years, subject to certain limiting conditions. We are not going to probe into
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    the past and seek to determine whether a person was self-employed or working for an employer in 1940 or 1946, or anything like that. Some of the older men who are now in self-employment will already be receiving pensions for past service. Others will have an existing right to enjoy pensions from some future date. The special increases in the benefits designed for those who were always in self-employment ought not to apply in cases like that.
    I have endeavoured to give the Committee a rough outline of what the Chancellor has in mind. I suggest that on these matters the Committee might be disposed to suspend further comment until my right hon. Friend's Amendment has been put down, because it is necessarily somewhat complex and difficult to explain. I hope that I have given the Committee and the public outside, many of whom will be interested, a rough outline of my right hon. Friend's proposal. and I sense that it will give a great deal of contentment to many people.
    That is the answer which my right hon. Friend has authorised me to give upon each of the three matters which we have been discussing. We are not prepared to meet my hon. Friend or to make any concession about the main rate of 10 per cent., but in view of the authoritative representations we have received and the further examination we have made of what this proposal will mean in practice for self-employed people, especially those in professional occupations, we are prepared to recommend the Committee to raise the limit from £500 to £750. I hope that, on Report, we may be able to examine further the suggestion of my hon. Friend the Member for Langstone relating to later entrants.
    Mr. Gordon Walker: The Amendments we are discussing fall into two quite different classes. The last one deals with retrospective action, and although what the Financial Secretary is saying now is not in the least compatible with what he was saying on Clause 15 about retrospective legislation, none the less, in general principle, we are not against carrying this back to cope with the period during which prices have been rising really pretty fast, though we need to look at the details on paper, and it sounded to me to be likely to result in a good many anomalies, which we will have to look at.

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    I should like to ask the right hon. Gentleman what it will cost. Broadly speaking, what is going to pay for this concession to be given under the last Amendment we are discussing? Cannot the right hon. Gentleman give an indication of any kind?
    Mr. H. Brooke: I would not like to give any indication about late entrants at this stage. We shall certainly be able to give a figure when the Clause appears on the Notice Paper and is debated, but at this point I have been giving the Committee only an outline scheme.
    Mr. Gordon Walker: Can the right hon. Gentleman say whether the cost would be more or less than the cost of giving extra tobacco tokens to the old-age pensioners'? This is a very important matter. The right hon. Gentleman has been talking in this part of the discussion about authoritative representations. Would he tell us if he has received any authoritative representations on behalf of old-age pensioners' tobacco tokens? He has a very special idea of what authoritative representations are, and it really is significant that things are given away shortly after the by-election at Tonbridge, as in this kind of concession, as against the complete hard-headedness shown towards the case for giving the concession to the old-age pensioners.
    Of course, it is true that the Government are getting worried and upset about the Tonbridge by-election, and no doubt we are to get all sorts of concessions to people who can make what the right hon. Gentleman calls authoritative representations, but everybody else who makes representations for ordinary concessions to ordinary people will not be held to be authoritative.
    Mr. Brooke: When I used the phrase "authoritative representations", I used it because the representative bodies of the great professions of this country, certainly including members of all political parties, are well qualified to be described as "authoritative". As to the tobacco tokens, I see no connection whatever between these two issues. Indeed, it will be within the memory of the Committee, if not of the right hon. Gentleman, when I say that in my speech on the tobacco tokens issue I made it perfectly clear that it was not on the grounds of
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    money that I was resisting the Opposition Amendment, but because it would increase and aggravate the difficulties in an already unfair scheme.
    Mr. Gordon Walker: The fact remains that for a very small sum a concession could have been made for which everybody on this side of the Committee has asked, and which numbers of people who are extremely authoritative outside the House have wanted. The connection between what we are now talking about and the tobacco tokens is, of course, that that concession could have been afforded for a very small part of the cost of this concession. The right hon. Gentleman says that he will make this concession, to which we ourselves do not object, but he does not know what it will cost. He had a lot of knowledge about all the details and gave us a lot of information, but it really is most extraordinary and suggests that it was a very hurried decision, made perhaps, as I have suggested, since the Tonbridge by-election, to make a change of this sort without the Committee being given the slightest information or even a hint of what it would cost. That must mean that the right hon. Gentleman does not know the cost, and that he has not had time to work it out, and, therefore, it must have been a very hurried decision indeed.
    9.45 p.m.
    Now I come to the main Amendment on which the right hon. Gentleman and the Chancellor are giving way, namely the one to leave out £500 and to insert £750. We feel very strongly about this. We are strongly against raising the level in this way. One reason why, until now, we have, broadly speaking, supported the proposals of the Chancellor in this part of the Bill was that there was this limit of one-tenth or £500; because, directly we begin to raise this limit, the disadvantages, from our point of view, in the Millard Tucker proposals begin to mount—the inclusion of controlling directors and various sorts of self-employed people and things of that sort.
    The argument against that becomes more and more powerful the more money they are allowed to put in. The reason why we were not pushing, or taking very seriously, the objections which could be made on principle to the general proposals of the Millard Tucker Report was because the Chancellor put in this limit.

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    The limit stops many of the inequities which would arise on the principle, because it cuts them off at the level of £5,000 a year. The Millard Tucker Committee, as the right hon. Gentleman will have noticed, itself felt so bad about including controlling directors that it said that controlling directors with more than £5,000 a year should have special provisions made for them to limit their interest and their share in the benefits of these annuities.
    Now the right hon. Gentleman is proposing to include controlling directors with more than £5,000 a year. I ask because he is doing that, is he going to operate the other part of the Report which said that controlling directors with over £5,000 a year should be allowed to have a small percentage, and not the full percentage of their income, for the reasons we discussed during our debate on the earlier Amendment? It is a clear recommendation of the Millard Tucker Report that controlling directors with more than £5,000 a year should not have the full benefits open to everyone else. I must tell the right hon. Gentleman that if he gives way on this to these strong and authoritative representations, he must expect radical opposition from hon. Members on this side of the Committee to the general proposals which, up to now, we have accepted. We have criticised them on certain points, but generally we thought that they were reasonable and equitable, with the limits that were there before.
    If the right hon. Gentleman desires sharp party fighting over this, he is asking for it, if he takes that course of action. We shall fight it strongly and bitterly on the Report stage, and outside the House, and provisions in the Budget and the Finance Bill which have not been the subject of party issue will become the subject of party issue. It may be that right hon. and hon. Gentlemen opposite want that. And we shall reserve the right to do the things we think ought to be done when we return to office.
    I think it much better that these things should be done with party agreement; that these considerable changes should be done with the good will of both parties. Until this moment the right hon. Gentleman had the agreement of both sides of the Committee. But if he goes forward
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    with the intentions that he has been suggesting, he will lose that party agreement on this very important change in the whole of our tax structure, and that, I suggest to him, will be a great pity. If he wishes to have a party fight and strong argument, and a refusal to agree from hon. Members on this side of the Committee, the right hon. Gentleman knows how to create that situation. If he desires party agreement, not on every little point, but on the general run of these matters, similar to the sort of agreement we have had so far—with no divisions on the great issues and on the question of Clauses standing part of the Bill and the rest of it—let him stick to this part of the Finance Bill in its present form.
    I asked the right hon. Gentleman to ponder this matter seriously, and to weigh against the authority of the representations made to him the solid views of hon. Members on this side of the Committee that will greet any concession he makes to these anonymous, authoritative representations to which he has referred.
    Mr.Sir P. Spens: I was rather sorry to hear the tone of the speech to which we have just listened, because to date I believe the whole Committee was working together to try to produce a scheme which would be fair to all self-employed people.
    The right hon. Gentleman the Member for Smethwick (Mr. Gordon Walker) started by complaining that my right hon. Friend had no idea what the cost would be. The whole of this scheme is a scheme to induce savings. As it stands at present, without the last Amendment, nobody who is more than 40 will go into the scheme at all. The people who want the scheme above all others—
    Mr. Gordon Walker: I was not objecting to the Amendment in the name of the right hon. and learned Member for Kensington, South (Sir P. Spens). The bringing in of the late entrants is not a bad thing. It is the first Amendment to which we are bitterly opposed.
    Sir P. Spens: I am very much obliged to the right hon. Member for saying that, but it is important to realise that as the scheme stood, although it was extremely attractive to young men—young men starting a self-employed business, and so

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    forth—the vast number of people who are crying out for a scheme similar to those which can be obtained in industry were self-employed people who went back to business after the last war. They were the people who had to start late in their professions, or late in shop-keeping, or whatever it was, and they were not in a position to make provision for their old age in the same way.
    Whereas no doubt there have been dozens of young men who have already been talking about coming into this scheme, there have been literally thousands of middle-aged men who have been complaining that as the scheme stood there was nothing in it for them. They were the people above all others who, in my view, wanted assistance. Therefore, I say on behalf of the whole of that class—I am far too old to come into it—that we are very grateful indeed for the promise which has been made by my right hon. Friend to deal with the third Amendment.
    Now I turn to the Amendment which deals with the raising of the £500 to £750. The argument for that is that self-employed persons do not get to a position in which they can afford £750 as a premium until late in life and then for a very few years. Through the whole of the years in which they are making their way in life they can afford only a very small premium. I look round the Committee and see a number of hon. Members on both sides who are in my profession. I wonder how many of us could have thought of contributing £750 for a premium for our old age until we were—I was going to say, in my case, for the very few years when I was making something of an income at the Bar.
    The £750 premium is one which really applies only in the case of the self-employed person in the years when he is at the top of his profession and when he has a chance to add to the provision he is making for his old age. Even now, if what I hear of the self-employed professions is true, I wonder how many will ever be able to afford that amount at all. I do not think that the right hon. Member for Smethwick should pretend that this is a sort of encouragement to the rich man to come in in order to get something. It is, indeed, a chance for self-employed people who have had a desperately hard time, in the face of high taxation since the
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    war, if they happen to be successful, to make a little extra provision for their old age.
    I therefore hope that there will not be any prejudice brought into this Clause at all. I believe that the change is right and will be welcomed very much by most self-employed people, and I hope that the Committee will thank my right hon. Friend for having introduced it. This is the last Clause on the Millard Tucker proposals which we have to consider, and, without being out of order, I should like to add my thanks to Sir James Tucker for the work which he has done and to my right hon. Friends the Chancellor of the Exchequer and the Financial Secretary for the way in which they have at any rate tried to do something for self-employed persons of all classes.
    Mr. Roy Jenkins: The attitude of the right hon. and learned Member for Kensington, South (Sir P. Spens) to the concession to raise the limit from £500 to £750 seems very dichotomous. In the first place, he asks us to regard it as a most valuable concession, and in the second place he asks us to regard it as a most innocuous concession, since he could think of hardly anyone to whom it would be of any use. That is a point of view which it is difficult to accept.
    I want to return to what seems to me to be one of the major points—the extraordinary carelessness, which I think is not too strong a word to use, in the attitude of the Treasury Bench in accepting these two concessions without giving the Committee any idea at all what is the cost involved. In my comparatively short experience of Finance Bills, I find it impossible to think of a precedent in which this has occurred. I can remember no occasion on which a Financial Secretary or a Chancellor of the Exchequer has announced that he would accept a concession without being able to tell the Committee approximately what the concession would cost.
    Mr. H. Brooke: The Committee knows that I never want to be discourteous. I was asked a question about the cost of the proposed relief in respect of late entrants. That concerns an Amendment which is not before us. We shall discuss it on Report. Frankly, I thought it was perfectly reasonable to suggest that

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    everything in connection with that Amendment, including the cost, should be discussed when we had the Amendment before us on Report. The Committee is not invited to reach a decision upon it today; we could not do so.
    As for the other changes, to alter the figure of 10 per cent. to 15 per cent. would cost between £15 million and £25 million a year. That is one of the grounds on which we have resisted it, although I said there were also other practical objections to it. The change from £500 to £750, which I am recommending the Committee to accept, would cost a little over £1 million a year. It would cost virtually nothing in the current year, but it would cost a bit over £1 million in a full year.
    The hon. Member for Stechford (Mr. Roy Jenkins) will realise the margin of safety which we must claim with all these estimates of the financial cost of the Millard Tucker proposal. We have no idea how many people will take advantage of it. My estimate is that in a full year the cost will be something over £1 million and certainly less than £1½ million.
    Mr. Harold Wilson: If my hon. Friend the Member for Stechford (Mr. Roy Jenkins) will permit me to intervene for a moment, I should like to put a question to the Financial Secretary. We on this side of the Committee are very clear about the iniquity of what the Government have announced, but we are not clear where we stand as a Committee in relation to these Amendments. Do we understand from the right hon. Gentleman that we shall not be asked to take a decision on the Amendments tonight and that he will recommend his hon. Friend to withdraw the Amendment? Do we understand that no decision will be called for until we reach Report, when we shall have Government Amendments before us? Or is he suggesting that we shall be asked to accept one Amendment, at any rate, tonight and that on the other we shall have to wait for Report?
    Mr. Brooke: I am advising the Committee to accept the first and third of these Amendments tonight, substituting £750 for £500; to reject the second, substituting 15 per cent. for one-tenth; and on the fifth Amendment to Clause 19,
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    in page 27, line 8, I will request my hon. Friend the Member for Langstone (Mr. Stevens) to withdraw the Amendment, with a pledge that a Government Amendment dealing with that matter will be put down on Report.
    10.0 p.m.
    Mr. Roy Jenkins: We are now beginning to get a little more information about the Government's attitude to the Amendments, and the cost involved. We are grateful to the Financial Secretary for the estimate he has given. We fully appreciate that he should not be tied to some absolutely exact figure with regard to the cost of the £750 proposal, but I think that one must press a little further as to the cost of the last Amendment. What were the right hon. Gentleman's words in his last intervention? He is asking for the Amendment to be withdrawn, not on a vague offer to reconsider it, but on a pledge that the Government will introduce an Amendment to cover the point on Report.
    After all, the point of view of the Government must be considered by the Committee as a whole and not merely by the mover of the Amendment. If the Committee is to accept that position, surely we are entitled to some rough estimate of the cost involved in the third Amendment. We do not want to tie the Financial Secretary down to any narrow figure at all, but what figure is he thinking of? Surely he can give some estimate of the sum involved. I think it would be most unsatisfactory if we had to leave this point without a little further information.
    There is another point. In the course of the last half hour we have had in this Committee a rather sudden change of sentiment on the part of my right hon. and hon. Friends and myself. I know that the right hon. and learned Member for Kensington, South regrets it, and I am sure that others do also. We respect his point of view, and we hope that he will respect ours. It is particularly unfortunate that when one has in the Committee a perfectly reasonable but sudden change of attitude that, as has been so often the case on this Finance Bill, the Chancellor is not here to appreciate what is going on.
    Surely the purpose of having Amendments brought forward in Committee—and perhaps not reaching a final decision

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    on them now, but dealing with them subsequently on Report—is that the Chancellor should be fully aware of the reactions of all sides of the Committee. I doubt if there could ever have been a Chancellor who could have been so little aware of what was going on during the Committee stage of the Finance Bill as is this Chancellor. I am sure that the Financial Secretary will do his best to convey to his right hon. Friend some idea of what has been happening, but that is really not in any way the same thing as the Chancellor being here himself, particularly on a matter of this sort where there has been, for very good reasons, a rather sudden change of sentiment.
    From several points of view, I think that we are being asked by the Government to proceed at present under most difficult and unsatisfactory conditions. I cannot but believe that if the Government are to continue in this way, giving no exact estimates of the cost of their concessions but asking us continually to proceed without the Chancellor being here listening to what is happening, the Government will find themselves impeding the course of business.
    Dame Irene Ward: I am delighted to find by right hon. Friend the Financial Secretary in such a conciliatory frame of mind. In fact, he has been so helpful, so conciliatory that it fairly takes away my breath. I hope that it is the forerunner of things to come in other directions. However, as one of the authoritative representers—and I am delighted to find myself in that category—I want to thank my right hon. Friend for the manner in which he has received the representations which have been made.
    I am particularly glad about the late entrants. I think that all sides of the Committee will agree that we are at present—and since the war have been—going through most difficult times economically, and the people who will really benefit by this new decision of my right hon. Friend are those very people who are, to a large extent, bearing the heat and burden of the day. Therefore, I am more than grateful for and appreciative of the fact that my right hon. Friend has taken special action with regard to the late entrants.
    I am very glad to find myself able to say how pleased I am, and I join in paying tribute to Sir James Millard Tucker.
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    I have taken a great interest in all the proposals which have been made and all the work which has been done over a period of years. When any Government of whatever political complexion appoints an authoritative, representative and knowledgeable Committee to go into the most complicated aspects of providing for professional and self-employed people it is incumbent on the Government in power to do what they can to meet the recommendations of a Committee of that calibre. On that score alone I am delighted that my right hon. Friend has found himself able to move in harmony with the general desire and wish of the Millard Tucker Committee.
    Mr. Houghton: May I make a suggestion to the right hon. Gentleman? He has just indicated that he would be willing to accept the first and third of the Amendments. He rejects the second and gives a pledge that on the fourth his right hon. Friend will consider submitting a different Amendment which will be more satisfactory from his point of view. Would it not be better if all the Amendments were withdrawn to give the Committee time for further reflection?
    The right hon. Gentleman has sprung a surprise on the Committee. I do not know whether his hon. Friends were in the secret, and I do not ask them, but he certainly has sprung a surprise on hon. Members on this side of the Committee. All these matters hang together. They substantially change the framework of the scheme. It is unfair to ask the Committee to accept, off the cuff, so to speak, two Amendments which will lift the maximum amount, to reject one which proposes to increase the percentage, and to reserve decision on one which deals with the later entrants.
    Would it not be better if all the Amendments were withdrawn, so that fresh proposals from the Chancellor could be put down later? That would enable the House then to look at the new structure which is involved. These are not so much differences in principle but in scope, and scope matters in making a first step of this kind. I should not feel prepared to say definitely one way or the other at this moment whether the proposed increase from £500 to £750 is right or wrong.
    There are arguments non both sides, not only from the point of view of those who

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    may get the benefit of these concessions but of the effect on the public mind of these proposed extensions of the scheme in a Finance Bill which is giving statutory effect to a Budget which was intended to contain certain messages to the people.
    Those messages were that we could not give tax concessions at a time when we were trying to curb the investment boom and urging people to save and to spend less. This was, to some extent, to be an austerity Budget. It was to be a warning that the country had overstepped itself in expansion, especially of consumer goods. That side of this matter must be borne in mind. We must not give concessions to a particular section of the community if that is going to give the wrong kind of message to the people or is going to destroy the message that the Bill and the Budget has already given. I am very concerned about that. I am always concerned about the effect on the trade union mind of what is contained in proposals of this kind.
    I fully realise that under the proposals as they stand the maximum pension which is obtainable by a person aged 40 coming under the scheme is £1.900 a year. That may seem a rather big pension to a great many people, but it is less than half-pay to a man on £5.000 a year. A civil servant on £5,000, or a member of a nationalised industry on £5,000, or many in industrial pension schemes on £5,000, would receive a pension of more than £1.900 a year. We have to look at these things in relation to those who are now in pension schemes.
    The intention of these proposals in the Finance Bill is to give those who are not in pension schemes an opportunity of providing for themselves on a scale comparable with those in the professions, in salaried employment on the same salary and in a relative position. We have to bear in mind that these pensions are not provided by the State. They have to be paid for by those who will enjoy them. We are concerned with the tax relief on the alienation of income which it is necessary for those who come under the scheme to embark upon in order to pay the premiums. We must keep this matter in proper proportion.
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    I therefore put two sides of the considerations which are in my mind at the moment. If I may say so, I am not given to too hasty judgment on these matters. I have just emerged from discussions with the Treasury on the application of the Priestley recommendations affecting higher civil servants. I have seen substantial increases given to the higher Civil Service, as a result of the Priestley Report, which will carry with them on a non-contributory basis very substantially increased pensions and gratuities, which we regard as proper and fair in the public service and which have been the subject of the independent judgment of an authoritative Royal Commission. I think that the Government did right to accept the recommendations of the Priestley Committee even though, from many points of view, they came at a very inconvenient moment.
    That is one side of the matter. I have no doubt that many other vocational pension schemes on a non-contributory or, as is mostly the case, on a contributory basis for executive and managerial staffs will be made. I want to be fair in dealing with professional workers in private practice or occupations which carry no pension scheme. I think that the aim of the provisions in the Bill is to enable them to do something for themselves which nobody else is doing at the moment for them. There are, of course, different arguments to be used in connection with those self-employed persons who are in business and who have or may have substantial capital assets. There was a distinction drawn in the minority Report of the Millard Tucker Committee between those two sets of self-employed persons.
    10.15 p.m.
    However, I do not wish to pursue the general argument further. I think it is necessary to disclose my mind to the Committee so that it may understand my point of view. I think it would be better to enable both sides of the Committee to reflect on the new scope of the proposals which the right hon. Gentleman has outlined and to enable us to examine what the effect of the new proposals might be, especially on late entrants and on the provision which will be possible if the maximum amount were increased from £500 to £750 a year.
    There is an interesting article on this subject, from which I have taken the

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    figure I have quoted, in The Banker of this month, and that gives the possible pension provision that can be made under the limits at present prescribed in the Bill. I think these new proposals need to be examined in the light of those possibilities.
    That is my feeling about the matter, and I hope that hon. Members opposite will try to meet the Committee in this unexpected situation. I hope that the Financial Secretary will encourage them to do so. but whether he does so or not I hope they will. I think it would be better to do so than to allow us to go on in a spirit of hostility to or criticism of what the Government propose to do. I offer that as a personal suggestion which may help the Committee to proceed with the consideration of the Bill without getting into a state of misunderstanding and difficulty.
    Sir Ian Fraser: I do not see why there should be hostility or misunderstanding. All the proposals and concessions which the Government have made do not alter the character of the measure which was commended to us in the Budget speech, or outlined on Second Reading of the Bill.
    It is not possible for a private Member to estimate the total cost of the scheme or the difference made by all the Amendments taken together. Indeed, the Government themselves told us this was a new experiment and that it was very difficult in the absence of some years of experience to judge what it would cost in remissions of taxation, but, when all is said and done, the Amendments which have been made for a limited number of older people, and the arrangement whereby persons who already have some small contractual insurance or superannuation scheme will not be wholly excluded but may now take up the full quota allowable to others—all these arrangements together do not alter the character of the proposals.
    On Second Reading we approve principles. In Committee we amend them and alter them a little this way and a little that. While I think that these are most wise proposals, and most generous to the limited classes affected, I do not think that they alter the character or the general financial implications of the proposals. They must be well within the
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    limits which any Chancellor reserves to himself in the consideration of concessions during the Committee on any Finance Bill.
    I believe that the Committee would be most ill-advised to reject the proposals, so to speak, as the hon. Member for Sowerby (Mr. Houghton) has suggested, and to invite the Government to bring them forward again for new inspection and new consideration. If hon. Members opposite feel that they cannot admit that there are any persons in this country who deserve to earn a few thousand pounds a year or deserve pensions comparable with earnings of such amount, they have only to think of the many examples in the trade union movement and among those most worthy and able heads of the trade union movement who have taken high and important and well-deserved jobs in the national industries.
    I cannot imagine anything more detrimental to the earning power of the country than that it should go forward from the position that if they were in power, they would do nothing for this most deserving class in the community.
    Mr. H. Wilson: We never said it.
    Sir I. Fraser: If that is not what the Opposition were saying. I am glad to have drawn it from the right hon. Gentleman. That is what I hoped he would say.
    It appears, therefore, that there is general agreement in the Committee, as there was on Second Reading, that these proposals are in principle good and that the Amendments which it is proposed to make do not alter the principle in any way, but merely meet the thoughtful and wise suggestions which hon. Friends of mine on this side have put before the Chancellor.
    In those circumstances, I would have thought we could rejoice that the proposals brought forward by my right hon. Friend the Chancellor of the Exchequer from the Millard Tucker Report have got as far as they have and have been so much improved in Committee. I earnestly hope that we shall, therefore, without a Division and without differences of opinion, accept these proposals and thank the Government for being very wise in making them.
    Mr. Eric Fletcher: It is obvious from the speech of the hon. Member for Morecambe and Lonsdale (Sir I. Fraser) that he has not understood the attitude expressed from these benches. [HON. MEMBERS: "He has not long been here."] He may not have heard all the speeches which have been made.
    The hon. Member began by saying that he did not understand the hostility which had been expressed on this side. It is not so much a matter of hostility, but of complaint at the way it has been brought forward. Both the Chancellor of the Exchequer, in his Budget speech, and the Financial Secretary to the Treasury, in opening the Second Reading debate, went out of their way to stress the fact that the limit in the Clause was £500 and one-tenth of the earnings.
    It might have been very different had the Chancellor, in his Budget speech, initially proposed that the maximum should be £750 and had he said that the proportion should be different from one-tenth or had he said he was prepared to consider some retrospective operation. None of those things, however, was said, and the Budget and the Finance Bill have to be considered as a whole. The complaint that is made on these benches, as my hon. Friend the Member for Sowerby (Mr. Houghton) said, is at the way in which this matter has been handled.
    My experience is that when a major concession of this kind is made in Committee, it is made by the Chancellor of the Exchequer. I agree with my hon. Friend the Member for Stechford (Mr. Roy Jenkins) that it is unfortunate, and, I think, almost unprecedented, that we have not had the benefit of the presence of the Chancellor on this occasion. It is surprising that a major concession of this nature should be announced almost casually by the Financial Secretary.
    I am not commenting on the merits of the proposals. I am disposed to think, with my hon. Friend the Member for Sowerby, that there is a good deal to be said for them. One must, however, consider the effect of major concessions of this kind upon the country. This concession has been made on a Clause on which no Amendments have been put down by the Opposition, but on which there have been Amendments from the other side. What made matters worse
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    was the Financial Secretary's unfortunate statement that in making the announcement he was influenced by authoritative representations which had been made. I 'should have thought that here, in this Committee, was the place for authoritative representations to be made.
    The Financial Secretary has not told us what other representations he has received and why he has listened to them. This is the place where the merits of the major proposal in the Bill should be discussed. The Chancellor has treated the Committee with considerable discourtesy in not having been here himself to announce his intentions. It places the Committee in an unfortunate position if we have no idea of the cost of the concession of the increase to £750, apart from the estimate which the Financial Secretary has given us—
    Mr. H. Brooke: I want to make it perfectly clear that I gave the figure as soon as I was asked for it. At an earlier stage of the debate, I was asked for a different figure relating to an Amendment on the Notice Paper and I said that I could not give it. However, I did not withhold the other figure, of something over £1 million, the moment I was asked for it.
    Mr. Fletcher: I am not complaining about that. It is true that the Financial Secretary gave the figure to us when we asked for it. The odd thing was that the right hon. Gentleman did not give it when he said that he could not make the concession. Presumably he went into this question when the outside representations were made to him. If I may say so, for the benefit of the hon. Member for Morecambe and Lonsdale and others, we will reserve our comments for the moment, but we want to make a strong protest about the way in which the Committee has been treated.
    Mr. W. R. Rees-Davies: I want to raise one or two points which have arisen out of what the Financial Secretary said in the course of his observations about the late entrants. I want to pay my tribute likewise not only to the work of Sir James Millard Tucker, but to the imagination shown by my right hon. Friend the Chancellor of the Exchequer, and also by the Financial Secretary in his observations tonight.

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    I believe that for the late entrants the only satisfactory way in which this problem can be dealt with is by age groups. I have always felt that, and I know that this view was shared by certain hon. Gentlemen opposite who made a great contribution in representations of this matter. I believe it is right that there should be an age group of 40 and of 50 and of 60, but the specific point I want to put, and my reason for rising immediately to this matter with regard to the proposals which the Chancellor will lay on the Report stage, is as follows.
    I do not believe that we can lay down a purely arbitrary age limit and say that, for example, when 30th June, 1956, the time of the Report stage or any other stage is past, a person shall then be 30, or 40, or 50, or 60. That would be unfair. I must declare an interest here. It would be unfair to myself, for I am 39 now and will be 40 in a few months' time. I think the same applies to the right hon. Gentleman the Member for Huyton (Mr. H. Wilson), who is exactly the same age. Therefore, we would be excluded altogether by this scheme, and would only be able to have the 10 per cent. net relevant earnings. Whereas, if one happened to be 40 on 30th June one could have 15 per cent. of the net relevant earnings.
    That cannot be right. What clearly is right, is simple, and is a very small variant of the broad proposals which the Chancellor will put forward on the Report stage, is the following. Up to the age of 40, one would be able to have one-tenth of one's net relevant earnings for the figure, between the age of 40 and 50 that could go up to 15 per cent. and then increase, if the Chancellor thought fit, to 20 per cent. at 60 years of age or over. In that way the entrant at the age of 60 into the scheme would have a higher rate than the entrant at 50 or 40, so there would be a differential on net relevant earnings according to age. If that were so, then I believe that we would have a position which would be fair to the late entrants and fair to the professions.
    I do not really believe that there is any hostility amongst those hon. Gentlemen opposite who have given careful thought to this matter, if they have. I am very sorry in the debate on this Clause not to see present in this Chamber the right hon. and learned Gentleman the Member for St. Helens (Sir H. Shawcross).
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    I want to pay my tribute to the very great work which he did when he led a deputation on this very matter some time ago. He had a very considerable knowledge of the question of the Millard Tucker Report—and not only he, but Sir Frank Soskice when he was a Member of this House was also deeply concerned on this matter. I go no further than saying that I do not believe that either of those gentlemen would for one moment oppose the second proposal in this scheme if they gave it their careful consideration. With regard to the amount, therefore, I say that it seems to me that one needs to have a different percentage of net relevant earnings according to the age upon which one enters the scheme.
    10.30 p.m.
    In conclusion, with regard to the other point, the raising of the limit from £500 to £750, I would only say this, and leave it to the judgment of hon. Gentlemen as to whether it is right or wrong on the pure facts. The fact of the matter is that from the figures which I saw of the earnings of the profession of the Bar, the first five years showed an income of from about £250 to £750, from five to 15 years, from £750 up to under £2,000, and from 15 years to 25, less than 10 per cent. of that profession of 2,000 members—that is to say, altogether a matter of a mere 200—were earning really into the Surtax limit, and of those less than 5 per cent. are earning the figure of £5,000 a year and above.
    Those who enter that profession do so in the hope that one day, 20 to 25 years later, they might perhaps achieve a position when they have perhaps two or three years as a junior and, at most, up to four or five years as a Silk, having been a Queen's Counsel, in which they may achieve possible earnings of over £5,000 a year for those very few years. Is it really to be said that it is wrong that they should be deprived of the opportunity in those very few years of catching up with a man who can earn a far higher income at an earlier age, and who therefore could put in up to £500 a year for the first ten years, earlier than a barrister can do? I do not believe that, when one thinks of it, there can be any hostility to this.
    Mr. Gordon Walker: Why not?
    Mr. Rees-Davies: Unless the right hon. Gentleman does not understand it.
    Mr. Gordon Walker: Of course I understand it.
    Mr. Rees-Davies: I do not believe the right hon. Gentleman does, if he will bear with me for a moment.
    Hon. Members: Order.
    Mr. Gordon Walker: The hon. Gentleman should read the Report.
    Mr. Rees-Davies: It is all very well for hon. Members to shout "Order" at me. The right hon. Gentleman certainly shouted observations at me without rising, and I naturally replied. If he had had the courtesy to rise I would have given way. I am merely saying it really must be understood that anybody going into I.C.I. or one of these big concerns, earning £5,000 a year from the age of 35 to 55, which one can easily get for a person who is a successful barrister—
    Mr. William Ross: Nonsense.
    Mr. Rees-Davies: Certainly. He can leave the Bar and get £5,00 a year at 35 years of age. They do, and are doing it every day. If they earn that income, and can earn it, they would be able to apply £500 to the scheme for 15 years. All I say is that I know of very few men at the Bar who will be able to put up £500, let alone £750, except for at the most three or four years. I am quite sure that the hon. Member for Islington, East (Mr. E. Fletcher), who is nodding his head, and the hon. and learned Member for Kettering (Mr. Mitchison) will support me in this matter.
    Mr. J. T. Price: The hon. Gentleman is proceeding on this argument entirely on the assumption that this remarkable concession we have been told of tonight applies primarily to members—and downtrodden members at that—of the Bar. This applies to all self-employed persons and businessmen, except the small categories of excluded people dealt with in a previous Clause. My hon. Friends and I are concerned about not only the psychological ill-effect of the announcement on more deserving sections of the population but the fact that taxation is progressive. In the case of a man with £7,500 a year, the proposal to raise the limit to £750 a year, which is taken
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    chiefly from income liable to Surtax, is a much more valuable concession than the lower limit in the case of smaller-earning members of the community. The hon. Gentleman is entirely evading that argument.
    Mr. Rees-Davies: The hon. Gentleman intervened not to ask a question but to make a speech. Nevertheless, I will reply to that speech. [Interruption.] I wish the hon. Member for Cardiff, South-East (Mr. Callaghan) would keep quiet.
    Mr. James Callaghan rose—
    Mr. Rees-Davies: I shall not give way to the hon. Gentleman. He makes rude and irrelevant interruptions. I have not the slightest intention of giving way. I have already given way to a long intervention. I hope the hon. Member for Cardiff. South-East will keep quiet.
    The hon. Member for Westhoughton (Mr. J. T. Price) made the valid point that I was taking one example. I was taking the example of one profession, but I could take others. What I was saying would apply equally to the surgeon or physician of great skill and to others.
    The reason for the Millard Tucker recommendation was to meet the case of the professional man as against the industrialist. The professional man has a far shorter period than the industrialist in which to make money and provide for later years. For that reason, the Chancellor has rightly had to raise the amount to £750 to enable those few people to save in a matter of three or four years what they would not otherwise be able to save. The Chancellor is not trying to draw any distinction. We must give this opportunity. I support the Amendment and regard the proposals as imaginative and forceful.
    Mrs. White: I am sorry that we have reached this stage of the Bill with a feeling of very definite dissatisfaction on this side of the Committee.
    I cannot understand how the hon. Member for Morecambe and Lonsdale (Sir I. Fraser) can suggest that the most valuable section of the community is that earning between £5,000 and £7,500 per annum. Many of us imagine that there

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    are other extremely valuable members of the community who never hope to reach such income figures. A major concession is being made. It is a very large proportion indeed. It is not just a minor matter to raise the maximum limit of relief on an income of £7,500 per annum—
    Sir I. Fraser: I said "this most valuable section". I did not say "the most valuable section" in the sense that they are more valuable than any other.
    Mr. Ross: The hon. Gentleman said, not "valuable" but "deserving".
    Mrs. White: That is even more incongruous. The adverse psychological effect of this upon the people whom my hon. Friends and I largely represent would entirely outweigh the benefits to those earning more than £5,000 a year, which, on the admission of hon. Gentlemen opposite, is a very small percentage of the professions concerned.
    Is it worth accepting this proposal for the sake of the effect it may have upon a few persons when it will have an extremely upsetting effect upon a large number of others? I submit that the proposal is not in proportion. These people who are capable of earning so much are not precluded from making other provision for themselves by taking out ordinary life insurance or endowment policies. If we agree to this concession, we shall be allowing these people to make this extra provision for themselves at the taxpayers' expense, or very largely so. That is the whole object of the exercise.
    I am surprised that the hon. Member for Isle of Thanet (Mr. Rees-Davies) did not carry his argument to its logical conclusion. He talked about the necessary age categories for the late entrants. I thought he was going rather wide there, but at least I could follow the logic of his remarks. If we are going to have any concession, would it not be at least as logical to limit it to those of 50 years of age or more? The whole trend of the argument has been in favour of these poor professional folk who have these few miserable years in which they can make themselves large sums of money. It is for their benefit that we are asked to make a general extension.
    There is nothing in the Amendment to prevent a person aged 21—if he is in a
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    suitable business—from taking advantage of this concession. Any such person of insurable age can provide for himself at the rate of premium of £750. If the whole gravamen of the argument is that there are certain professions in which it is only late in life that a person reaches eminence, it would surely be logical to limit the concession to the precise class of person which it is primarily intended to benefit.
    Therefore, before asking the Committee to accept the Amendment, it should be taken back and reconsidered. Most hon. Members on this side of the Committee do not feel a great deal of sympathy with it, but at least we should feel that it was logical if it provided that those who had reached the age of, say, 50, and were able to afford to pay a premium of £750 a year, might be allowed to do so. We should not be satisfied with it even then, but there would be something to be said for it.
    I suggest that, rather than lose the good will of the Committee, which we have maintained so far on this part of the Bill, hon. Members opposite should consider the proposal which I have made. I hope that it will be acceptable to the right hon. and learned Member for Kensington, South (Sir P. Spens) and also to the other hon. Members opposite who support the Amendment.
    Mr. H. Brooke: Perhaps it would be helpful if I rose now and dealt with the points which have been raised in this debate. First. I ask the Committee to accept my word that the Chancellor had reached his decision upon what he would recommend to the Committee before the Tonbridge by-election, so I hope we shall hear no more of that sort of allegation. Second, the suggestion has been made that my right hon. Friend would be singling out one class of person for special treatment and handing out largesse to them if he accepted the proposal in connection with the £750 premium. But all those people, if employed persons receiving the benefit of the ordinary contributory pensions schemes which so many firms run, would be fully entitled to tax relief.
    10.45 p.m.
    There must be large numbers of people who are getting tax relief in such schemes up to an amount of £750 per annum.

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    So if there is this strong objection taken to the proposal, it must be on the ground that the self-employed should be treated worse than some other persons. That we are not disposed to accept. Moreover, it is not a largesse. The whole purpose of Part III of the Bill is to encourage saving and to seek to do justice between one category of persons and another. These are the people who, up to now, have been hardest hit by taxation, because they have not had the benefit which people with similar incomes in employment have enjoyed of providing for their old age, with the benefit of tax relief.
    These people have been denied tax relief. They have had the least chance of accumulating capital with which to meet their pension commitments, and on these grounds it seems to me quite impossible to establish a case, as some hon. Members have sought to do, that the Government are seeking to give some kind of specially favourable tax gift to these persons. I wish to tell the Committee, quite frankly, that when we examined this problem we went carefully into the possibility of dealing with it by some system of averaging. As I indicated earlier, one of the features of the financial position of these people is that their incomes are liable to fluctuate.
    As was said by my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies), not only do many of these professional men have to put up with low incomes while establishing their reputations and only touch high figures for a short period in the prime of life, but also, not only in the professions, but outside, the incomes of many of these self-employed persons fluctuate very markedly; and any limit is liable to cut off from them the advantage of their good years.
    We examined this matter of people who sometimes have an income of over £5,000, and in other years an income of well below £5,000, to see whether any machinery could be used to apply a principle of averaging, and we found it quite impracticable to do anything of that kind. That was one of the reasons why, in order to seek to do justice to these people whose incomes do fluctuate, we decided that this was the right thing to do.
    Mr. J. T. Price: It is so unlike the right hon. Gentleman even to appear to mislead the Committee that I must draw his attention to a misleading statement which he made, perhaps unconsciously. A moment ago he suggested that this is an attempt to put self-employed people in a position at least as favourable as that of people provided for under existing private schemes. If that is the proposition, there is a very serious flaw in it.
    In existing schemes, which are approved by the Commissioners of Inland Revenue under Section 32 of the Finance Act, 1921, and as administered by the officials of the right hon. Gentleman's own Department, when these approvals are sought there is always the request that the pension provided under the private scheme should not exceed £2,000 per annum. Serious objection has been taken to that request, which is not covered by the Statute. By allowing this increase in the limit to £750, he is bringing into the concession a class of person who will be able to provide a pension capital value far in excess of £750, if contributions have been paid for a sufficient number of years. That, as I see it, is the position under the present administration, and I should like an explanation from the right hon. Gentleman.
    Mr. Brooke: If I have, by any slip of the tongue, misled the Committee, I would apologise unreservedly. As the hon. Gentleman knows, there are many different kinds of pension schemes. and I think that if he examines them he will find that my words were fully justified.
    I wanted to satisfy my hon. Friend the Member for Thanet and, possibly, other hon. Members on this side of the Committee who fear that they may miss by a six weeks chance of their birthday the benefit of a good, round 5 per cent. It is not suggested that we should move on one day from 10 per cent. to 15 per cent. The plan is rather that there should be intermediate percentage rates for the intermediate years. However, I must say that the birthday of my hon. Friend the Member for Thanet makes me think that he may be one of the losers.
    Finally, we have heard the doctrine expounded—and frankly it is new to me—that during the Committee stage of the

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    Finance Bill the Government must never accept an Amendment because it may be a surprise to one side or the other of the Committee. If they feel disposed to accept the Amendment, they must put off doing so until the Report stage. This morning I was going through the new Clauses, to which I trust we shall come next week, and I saw one in the name of an hon. Member opposite which I was thinking of advising my right hon. Friend the Chancellor to accept. But if, when that occurs, the arguments that nothing must be accepted on Committee stage are valid, I shall have to reconsider my recommendation to him.
    Mr. H. Wilson: The right hon. Gentleman knows perfectly well that this particular concession must affect the attitude of the whole of the Committee to the whole of Part III of the Bill. Would the right hon. Gentleman just revert to the question of surprising the Committee, and give a straight answer to this question: at what stage did the hon. Members on his side of the Committee know about this concession?
    Mr. Brooke: I will give a straight answer to that. The great majority of my hon. Friends knew nothing about it until I announced it.
    Mr. J. T. Price: What about the minority?
    Mr. Brooke: It is perfectly true that I told one or two people, as I am sure the right hon. Gentleman himself did on occasions when he was in a responsible position—that he was thinking of recommending the Committee to accept some Amendment or other—but in so far as the vast majority of hon. Members here representing the Conservative Party are concerned, they knew nothing whatever about it until I spoke.
    Mr. Wilson: This really is a most alarming admission by the right hon. Gentleman. To make a change at the Committee stage of the Finance Bill is an important matter in relation to taxation, as must be obvious to the whole Committee. Surely, the right hon. Gentleman has just admitted to the Committee that there has been a leakage equivalent to a leakage of a Budget secret—that he has told hon. Members on his side of the Committee, even if they
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    are only a minority, of a forthcoming concession in a matter which will affect not only Stock Exchange values. A concession has been "leaked" to some hon. Members. In these circumstances, Sir Norman, I should like to know whether you will accept a Motion, "That the Chairman do report progress and ask leave to sit again," in order that the Chancellor of the Exchequer can consider the implications of the right hon. Gentleman's admission and make a statement to the House tomorrow.
    The Temporary Chairman (Sir Norman Hulbert): I cannot accept such a Motion.
    Mr. Ross: We have had quite a lengthy debate, and no fewer than three efforts have been made by the Financial Secretary to persuade us on the course he is pursuing. We had a belated entry to the Committee of the Chancellor himself. He has probably returned from some geographical search for the plateau he is seeking. What we have here is a major change in his Bill. I think it is a matter of importance to the Committee that he should have participated in this debate to let us know the reasons for this decision to accept the Amendment and to make certain changes.
    We certainly did not have them in the original statement of the Financial Secretary. In fact, we did not get from the Financial Secretary the actual decision whether the Government were going to accept that Amendment. I have an advantage which many hon. Members opposite did not have, in that I heard the speech of the Financial Secretary. He said that the Government were inclined to the view that they might accept the Amendment. I think that was the position on the first Amendment. The second he could not accept and, on the third, he said that on Report the Government would put down an Amendment which would do something or other but it was far too complicated to talk about it now. In the circumstances, I think that the suggestion made by my hon. Friend the Member for Sowerby (Mr. Houghton) was utterly unnecessary. I feel that the Government, in view of the fact that they were to make very considerable changes in the whole of this section of the Bill, decided they would do it on Report.
    The Bill we are discussing was printed on 25th April, and we had the benefit

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    of the remarks of the Chancellor during the debate on the Budget. There was no indication then that he was going to move from the sum of one-tenth or £500. Since that time the Treasury people have been going over it Clause by Clause, and we have on the Notice Paper Amendments in the name of the Chancellor of the Exchequer. On Clause 31, there is an Amendment in the name of the Chancellor. The Government have had their second thoughts on what should be done, but the Financial Secretary told us that he was "authorised by the Chancellor to say". Frankly, I am not convinced by what we have hitherto been told by the Financial Secretary. When did the Government come to that conclusion? If it was before the by-election we have heard so much about, what was to prevent the Chancellor putting his name to the Amendment and at the same time giving us his carefully-thought-out Amendment with regard to other points raised by the right hon. and learned Member for Kensington, South (Sir P. Spens)? In not doing that, the Chancellor surely ought to have said that they were looking at the whole of this concession and extending it and that their proposals would come on the Report stage.
    It is not as if this were a minor matter. The original figure was £500, or one-tenth. It is a very considerable jump from that to £750; it is a full 50 per cent. It is all very well for hon. Members opposite who greeted this with a considerable amount of applause. It may be all very well from the point of view of the people who are to benefit and be worthy of acclamation by them, but we also have to look at it from the point of view of the taxpayer. Eventually we got—and we had to drag it from the right hon. Gentleman—what it is going to cost. It is going to cost £1 million. That, of course, means that the Chancellor has to look for a saving of £101 million—
    Mr. H. Brooke: I said it would cost nothing at all this year.
    11.0 p.m.
    Mr. Ross: Nothing at all this year. Then it will be an additional search for another £1 million in another year. The actual fact is that in a full year this will cost £1 million to the taxpayer.
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    Who is to get the benefit of that £1 million? I have to look at this from the point of view of my constituents. The right hon. and learned Gentleman the Member for Kensington, South said that this concession would apply to very few people. Here we are in a position that very few people are to get the advantages of a concession that will cost in a full year £1 million It will be very difficult for me to put that across as something which is fair and just to the carpet and pottery workers in Kilmarnock who are working short time—and in Moscow also, because my people in Moscow will be equally concerned about this. Let me say here that this Moscow is a small village to the north of my constituency. From the point of view of the taxpayer, the practical proposition is that a very small number of people are to get a tax concession of £1 million.
    An hon. Member spoke about authoritative representation, and so did the hon. Lady the Member for Tyne-mouth (Dame Irene Ward). She was very glad to know that her authoritative representation had, on this occasion, been successful. She has often been authoritative in her representation but has not always been successful.
    Dame Irene Ward: No, but I am getting on.
    Mr. Ross: Sir Norman, that is a very unfortunate phrase. Certainly, in the part of Scotland from which I come, for a lady to admit that she is getting on is entirely unusual.
    It is not so long since other authoritative representations went to the Financial Secretary, and to the Chancellor, and to the Minister of Education. These representations also were related to questions quite akin to that which we are now considering—matters of superannuation. They were not only authoritative representations from the professional bodies themselves but from hon. Members. It may be that in that case the hon. Lady once again took part in those representations, but there was absolutely no response from the Financial Secretary.
    We even made representations in regard to late entry, but we got no reply. We made representations about late entry into the teaching profession, of buying in a

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    certain amount of superannuation—in all respects we were not met by the Chancellor. I cannot see how this can properly be justified in the light of the other decisions we have taken on this Finance Bill. I sincerely hope that we have not heard the last word from the Government on this matter.
    We must return to this subject, whether the hon. Member for Kidderminster (Mr. Nabarro) likes it or not. The Government are pledged to make an Amendment on Report, and though it may be that he does not know it, the fact is that, whatever may happen to other Amendments, Government Amendments must then be called. We will, therefore, be returning to this subject, and I sincerely hope that the Government will not tonight take part of a decision but will rather suggest to the Committee that we should wait to see the full picture as they propose to change it with their Amendment relating to the late entrants.
    I am very sorry indeed that the sense of justice of the Committee should be such that it is prepared to accept with acclamation an Amendment which, at the taxpayers' expense, gives a beneficial concession of £1 million to very few people, when only the other day it refused to give to so many thousands of old-age pensioners an extra fourpenny coupon to cover their dire needs in regard to the change in the Tobacco Duty.
    Mr. Austen Albu: The Chancellor of the Exchequer who, as my hon. Friends on the Front Bench may not realise, has been in the Chamber during the last three or four speeches, must by now be aware of what has happened to the atmosphere of the Committee as a result of this sudden concession. I hope he has heard enough of the debate to realise that the attitude of this side of the Committee towards these two Clauses is now changed. When we have the further Amendment on Report to which the Financial Secretary has referred and the full effect of the changes can be measured, and when we have the full measure of the cost to the other taxpayers in the community, the Chancellor will see the strength of the Opposition.
    A significant thing about this debate has been that the pressure for these changes and the support for the increase
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    from £500 to £750 has come entirely from members of the Bar. It is clear now, especially from what the hon. Member for the Isle of Thanet (Mr. Rees-Davies) said,—
    Mr. G. Stevens: May I inform the hon. Member and the Committee that I have never been to that kind of bar?
    Mr. Albu: It is clear from what was said by the hon. Member for Thanet that the weighty representations, the authoritative representations, which the Chancellor received came almost entirely from members of the Bar. The Chancellor is here, and I happen to have the privilege of being able to see him. I realise that the Opposition Front Bench cannot do so. There is one peculiar thing about members of the Bar in regard to taxation. One of my hon. Friends asks me whether the position of the Chancellor at the end of the Front Bench means that he is no longer able to take his usual position on that bench because he is no longer Chancellor.
    I was referring to the special position of members of the Bar, and especially of very successful ones. We understand that it is only to the very successful members to whom the concession applies. They have a peculiar tax position. I think it is well known that when they cease practising, or are appointed to the Bench, they do not pay tax on their last year's earnings.
    Sir P. Spens: If any of their earnings are paid before they retire, they pay the full tax. It is only on such earnings as the solicitors pay late that they do not pay tax.
    Mr. Albu: I have heard that explanation, which I accept; but I think hon. Members realised that, in effect, it comes to the same thing. It may be that I have been misled. They can arrange affairs in such a way that a large part of their earnings for the last year are free of tax. Does the Chancellor of the Exchequer wish to intervene? No, he does not. It would be extraordinary if he intervened on this Finance Bill. This is a serious argument which I am addressing to the Committee. I believe that this relief of taxation might well amount to considerable sums—to five, six, seven, or eight thousand pounds for those earning the sort of figures about which the hon.

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    and learned Gentleman was talking. If that is so, they are equivalent to the reliefs being given by this concession for a large number of years.
    It does not seem to me that this class of the community in these circumstances needs this concession. At any rate, the concession is one to which we ought to give very serious consideration. Although I realise that the hon. Member for Langstone (Mr. Stevens) brought one or two other professions in as well, including his own, nevertheless we can say that pressure for this concession has come from the Bar.
    I want to ask the Financial Secretary a question about the other concession. I realise that on this retrospective concession his mind has not yet been fully made up, and it may be that the form of the Amendment to be put on the Order Paper for the Report stage has not yet been worked out. I think the right hon. Gentleman will agree that there may be people who, over a fairly long life, have passed in and out of self-employment, people who for part of the time have been employed and for part of the time have been self-employed. Until very recent years, at any rate in industrial occupations, these superannuation and pension schemes did not exist. They have come into being on a large scale only in the last few years. There would be a considerable injustice if somebody who was not in any sort of pensionable employment—or in it for a very short period—and who was also for a large part of the time in fact self-employed were not entitled to benefit from this concession.
    I should like to know how that position will be dealt with. I should like to have an answer from the Chancellor, but I very much doubt whether he is fully aware what has been taking place in the discussion. He may not even know what his right hon. Friend the Financial Secretary has said on this matter. It was not very clear to me. I am sure the Chancellor knows little about it, and I am not sure that it is very clear to the Financial Secretary. This is an important and substantial point, and I should like to hear from the Financial Secretary how the Government propose to deal with it.
    Mr. Mitchison: This seems to me to be rather a squalid affair. The object of the exercise is to levy on the taxpayers—because that is what it comes to—rather over £1 million for the benefit of people whose net relevant earnings are between £5,000 and £7,000. That appears to be the object of the excursion. The right hon. Gentleman the Financial Secretary defended this. Butter would not have melted in his mouth. Morals oozed out of every word he said. Never have I seen such a pious picture of Philip drunk rebuking Philip sober.
    It could have been an excellent speech. All he said would have been well on the point if only quite a short time before he and the rest of the Government had not been explaining very carefully that the right figure was £500 or, in this case, an income of £5,000. Their enthusiasm for the small man, the small self-employed man, led them to make this concession. If an income of £5,000 was the right limit, how is it that it has suddenly become right—not only right but obviously patently right; the only just course, we understood—to substitute for it £7,500?
    No ordinary person listening to the right hon. Gentleman or considering the merits of the matter would find it easy to appreciate how this had happened. but, once again, the cat came out of the bag: there had been authoritative representations. Presumably, they must have been made at some stage since the £500, or the £5,000, had been decided upon, or the right hon. Gentleman and his hon. Friends would hardly have committed themselves with so much eloquence and conviction to the former figures. Very authoritative representations are made, apparently, on behalf of those whose incomes in this case reach this figure. That is one possibility. Perhaps a very large number of them are in South Kensington. I do not know.
    11.15 p.m.
    Then it is said they are made on behalf of the Bar. I, too, am a member of the Bar, and I am and always have been proud to be. The hon. Member for the Isle of Thanet (Mr. Rees-Davies) attributed to me and quite a number of other people views about which he seemed to have some secret and interior knowledge, but if he was as wrong about

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    them as he was about my own, they were, no doubt, equally not the views of the other people to whom he attributed them. If it is intended to make a limited concession for people who cannot earn an income that will enable them to pay premiums at all during a comparatively short time, this Amendment is not the way to do it.
    This is a general Amendment. What it does is to let high income people into this scheme, and to let them in at the expense of the general taxpayer.
    Were I asked what the very authoritative quarters were, I could make three suggestions to the right hon. Gentleman, since he has not thought fit to tell us. The first. I think, and the most obvious one, is that of the gentleman of means who contribute to the funds of the party opposite, because presumably those in the lower income groups make comparatively negligible contributions; and at whatever date this change of mind took place it may have been connected with the need to tighten up the party organisation and to spend a little more money in its work, the results of which the Tonbridge by-election have since then emphasised. That is one authoritative quarter.
    I can suggest another. I can suggest the 1922 Committee. It does some very remarkable things. Its doings are dark and devious. The effects of its representations seem to be very wide. Is it possible that the 1922 Committee has very nearly come out into the open as governing the country and as convincing the right hon. Gentleman that what he thought right a few days ago is wholly indefensible and wrong now?
    May I make yet a third suggestion? What about the insurance companies? They are pretty well off. Have they said, "We shall be better off still if you let in some of the higher income groups and let the taxpayer pay"? Because that is what does happen in all these Income Tax concessions: the taxpayers pay for them.
    How on earth even the Tory Party can reconcile with elementary morality this concession for the benefit of that group when day after day it has been cutting housing, denying tobacco concessions to old-age pensioners, and doing every single thing it could to refuse money on the ground of national need to those who stand sorely in need
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    of it at the moment, I do not know. I should have thought that to have admitted a concession of this sort would have been a little barefaced even at this hour of the night.
    Mr. Stevens: At the direction of the Chair, I moved four different Amendments simultaneously and had three different answers. However, I think my course is clear.
    The Temporary Chairman: The hon. Member did not move four Amendments together. He moved one. I said four could be discussed together.
    Mr. Stevens: I beg your pardon, Sir Norman.
    Mr. Gordon Walker: We are very glad that the Chancellor, although he is sitting very coyly at the wrong end of the Bench, has come back. He was good enough to tell us he would have to be away until 10 o'clock or so. He missed the earlier part of this debate, but I think he has heard enough since he has been back here to realise that there is a new mood in the Committee. This is a real change which has been made in the Bill. The hon. Gentleman the Member for Morecambe and Lonsdale (Sir I. Fraser) tried to dismiss it as a minor thing, but it really does, from our point of view, gravely alter the whole balance of these proposals. The limit of £5,000 a year, which was previously the limit, played a considerable part in our attitude to Part III of the Bill. We on this side of the Committee naturally considered the Millard Tucker proposals very carefully and were gravely influenced by the minority report of the Royal Commission on Taxation, which, of course, made very serious criticism of the Millard Tucker Report.
    It also made recommendations in the matter of self-employed people, excluding all except those taxed under Case II of Schedule "D" classification, and also excluding controlling directors, and made other limitations. When the Finance Bill was produced, we came to the conclusion that, because of the £5,000 limit, the objections of the minority report of the Royal Commission were not really so powerful, although we considered them to be extremely valid. Nevertheless, if the benefits were cut off at £5,000 a year, the disadvantages were not very great, and

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    solely because of the limit of £5,000, we came to the conclusion that it was right, broadly, to support the proposals in Part III of the Bill.
    Now that limit no longer applies. The new limit of £7,500 makes a very great difference to the whole merits of Part III. This is well above the Millard Tucker proposals, which, in paragraph 386, recommend that there should be two types for benefit. The Report refers to those as A and B types, and what the Government in effect have adopted is type B, and now we are going above and beyond the Millard Tucker proposals.
    There is another very important point to which I would draw the Chancellor's attention, because he was not. I believe, with us when we were talking about what are known as controlling directors. In paragraph 392 of the Report it is stated that where a controlling director receives more than £5,000 a year, he should not be able to get even the original 10 per cent. Up to £5,000, there should be the same benefits, but above that there should not be the same benefits as for other people, because these persons were in a different position from other people. Now, however, they will get the full benefits up to £7,500 a year. The Chancellor is going right beyond the limits even of the Millard Tucker Report and the suggestion originally made by the Royal Commission, which makes my case all the stronger, because the Royal Commission was critical of the Millard Tucker Report as it stood.
    The Financial Secretary has spoken of "authoritative representations"; but who, really, was interested in this matter? Here we have £1 million to £1½ million being taken away from the general body of the taxpayers and given to a very small number of people; for, by common consent. everybody agrees that this does concern only a very small number of people. They are the people who are earning between £5,000 and £7,500 a year. Nobody who is earning less than £5,000 a year can gain a penny from this new concession.
    This relatively small number of people who are earning between £5,000 a year—incidentally, it is net relevant earnings. which means that their actual incomes are bigger still—and £7,500 a year will share between them £1 to £1½million a
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    year at the expense of the general body of taxpayers. I suppose the Financial Secretary knows, roughly speaking, how many people will be involved, because he has worked out a sum that comes to £1—£1½ million a year, and presumably, in working out that sum, he had in mind a figure of the number of people who will benefit. Would it be possible for the right hon. Gentleman to give me that figure, or does he not have it in his possession? If that is the case, we will press for it on Report. The right hon. Gentleman must know the figure, because he cannot work out the £1—£1½ million without the number of people involved
    The only way that one can reach a sum of £1—£1½ million is by making an assumption about a certain number of people at certain levels of income. I had hoped the figure would be in the right hon. Gentleman's brief. If he cannot oblige us tonight with this figure from his official brief. I give him notice that we will ask him for this figure on Report.
    This small number of people, starting with those on £5,000 a year—nobody below that level gets a penny out of ir—is being given £1—£l½ million at the time when the Chancellor, in the same set of actions, is, for instance, abolishing the subsidy on bread. One thing must be set against another. This tiny number of fairly-well-off people will get this concession against the other kind of thing that the Chancellor is doing—the milk subsidy, the bread subsidy and the tobacco tokens and all the other things on which there have been authoritative representations, which have been pushed aside. Here, we get these authoritative representations on behalf of a very small number of our fellow citizens which is at once bowed down to. Indeed, the Financial Secretary was so keen on arguing for the Amendment that he made a powerful case against the Bill in its original form. I could not think why he had committed so great a crime as to produce it and defend it in its original form on Second Reading. It was he who did all these things in the first place and who excluded these people.
    I warn the Chancellor that if he pushes this proposal, our whole attitude on Part III, which we were supporting, will be changed. After considerable doubts and arguments among ourselves, we thought it was right and proper, if pos-

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    sible, to get party agreement on so big a change, and one which certainly was remedying many injustices which had been created. We were giving the Chancellor broad and fairly close detailed support and we were certainly not dividing on principles.
    Now, our attitude is different. The Chancellor must make up his mind whether he wants to carry both sides of the Committee on this important part of the Bill or whether he wants to carry it against strong, angry and bitter opposition, which we will take into the country and develop in every way we can and on which we must consider our whole future attitude. The Chancellor will, naturally, bear these things in mind and weigh them one with another. On the one hand, he has his authoritative representations and the events which have happened. On the other hand, he must consider that we will have a radically different attitude to this proposal. We shall have to consider our future attitude, because this is a new thing suddenly thrust upon us. We had no knowledge that this great change was going to come. We had thought that, broadly speaking, the Millard Tucker proposals as modified in the Finance Bill would be carried through.
    11.30 p.m.
    I hope that the Chancellor will think again about this, because we do not want to fight on this. We would far sooner agree. This is a matter on which we do not want to fight as a party if we can avoid it. There are plenty of other things to divide us. We would sooner agree on this, but, of course, if the Chancellor does go at it, stick at it, push it through, well then, the unity of the Committee will disappear and we shall fight this on Report and at every stage that we can, and will take our fight outside in all the ways that are open to a party. We feel very seriously indeed about this change, which is a change to benefit a minute number of rich people at a time when many more deserving people have, perhaps rightly in the economic circumstances, been turned down by the Chancellor. This really is something we cannot accept. We protest against it and will fight against it.
    Mr. Roy Jenkins: I hope the Chancellor will be able to clear up one point which has been worrying hon. Members
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    on this side of the Committee since the first intervention of the right hon. Gentleman the Financial Secretary. The Financial Secretary was quite unable to give us any idea of the cost of the Amendment which the Government undertook to put down in a slightly new form on the Report stage, which was to provide for late entry. He told us, in doing that, that he was authorised by the Chancellor to announce that the concession would be made on the Report stage. Although unusual, it was clearly possible that the Financial Secretary in such circumstances should not himself have been informed of the cost which would be involved in the proposal; but it is clearly out of the question that the Chancellor himself should have authorised the Financial Secretary to make such a statement committing the Government without himself knowing what the cost was and to what extent this would interfere with his general Budget plans.
    I therefore hope that the Chancellor, having come into the Committee, will enable us to make progress by telling the Committee of some figure—we do not want to press him in any great detail—of approximately the cost involved in the Amendment, the principle of which the Government are accepting with a view to putting down an Amendment at the Report stage. I hope the Chancellor, whom we have heard from, will be able to answer this question, which, I am sure my hon. and right hon. Friends will agree, has been worrying us all through the consideration, and fairly long consideration, of this important Amendment.
    Mr. H. Brooke: The hon. Member for Stechford (Mr. Roy Jenkins) has just asked a question. I have already given the answer to it. I have said that when we have a proposition before Parliament full information will be available. He knows as well as I do that at the moment there is not a proposition, nor can we come to a decision on an Amendment which is not before the Committee.
    The hon. Member for Edmonton (Mr. Albu) asked me whether I could clarify the situation as regards people who might not be able to receive the benefit from the wider limits of the late entrants. I do not think I can say any more than I said at an earlier stage. All I wanted

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    to do was to safeguard myself against misleading anybody into thinking that he might be able to gain additional advantage when, in fact, he already was enjoying a pension, or had pension rights. That Amendment will be on the Order Paper in good time, and the hon. Gentleman will be able to satisfy himself before we debate it.
    Finally, I heard it said by several right hon. and hon. Gentlemen opposite that the Government were, as it were, giving away a million pounds or more of the taxpayers' money. None of this money will go at all unless people do what the Chancellor is aiming in his Budget to induce them to do which is to save money and take out policies. None of this tax exemption operates unless people take advantage of the new facilities granted to them.
    That is the point which I am trying to bring home to right hon. and hon. Gentlemen opposite, and they will be deluding the country if they attempt to suggest that the purse strings of the Exchequer are being opened for the benefit of people who are doing nothing for themselves and deserve nothing. As I have explained, the object is to induce people to save and to endeavour to be as fair to those people who are characterised as self-employed as the tax law already is to those with similar incomes who are in employment.
    Mr. H. Wilson: I am sorry to interrupt the right hon. Gentleman and delay the Committee further, but we recognise that he has been batting a long time, is getting tired and is no longer at his best in presenting the case. That is why we hoped that the Chancellor, who has arrived among us comparatively fresh, might be prepared to take up the burden.
    Surely the right hon. Gentleman is, unwittingly I am sure, misleading the Committee in what he has just said, that there will be no cost to the Exchequer unless there is an increase in real saving. Rich men who are already saving can take advantage of the Clause. Consequently, there will be no net increase in saving but a cost to the Exchequer.
    Secondly, the main consequence of acceptance of the Amendment might be a situation in which rich men are living out of capital and getting tax concessions in respect of it. I know they can get it
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    only if it is one-tenth of their income, but rich men who are already living right up to their income and out of capital get tax exemption, and this would cost the Exchequer a lot and would result in no new saving and no benefit to the nation at all. It would, in fact, be a dis-saving out of capital which might at the same time involve a loss to the Exchequer. I am sorry that the right hon. Gentleman has not seen that point. I hope that by the Report stage he will have given his mind to it and realised what a serious implication there is in what he is doing.
    Mr. Jay: Is the Chancellor not going to answer the question addressed to him by my hon. Friend the Member for Stechford (Mr. Roy Jenkins)? Is it not merely adding gross discourtesy to the casual, contemptuous attitude which he has shown towards the Committee all day? May we invite the Chancellor now to answer that definite and specific question?
    Amendment agreed to.
    Further Amendment made: In page 24, line 25, leave out "five hundred" and insert "seven hundred and fifty."—[Dame Irene Ward.]
    Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.
    Mr. H. Wilson: I beg to move, That the Chairman do report Progress and ask leave to sit again.
    I want to make it quite clear that there are two reasons why I am making this proposal. First, it is quite usual at this time of night to ask the Government their intentions with regard to the future progress, if any, of a sitting. We have been going on for a very long time and it is normal at this time of night to ask the the Government if they can say how far they intend to get. Secondly, hon Members on both sides of the Committee will feel that it is really time that we heard the voice of the Chancellor of the Exchequer. Many of my hon. Friends cannot even see his face. We hope that he will not go on being shy but will move to a point where we can all see him.
    We have heard very little from the Chancellor all day. We know that he is extremely busy and has many responsibilities, and he had the courtesy to mention that he would be absent for a

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    few hours this evening, but he has been back here for an hour and a half now. While he was out some very serious decisions were announced by the Financial Secretary, and we do not even know whether the Chancellor is in agreement with his right hon. Friend in those announcements. He is sitting at some distance from the Financial Secretary—rather pointedly, it seems—and it would appear to some of us that the Financial Secretary may have taken advantage of the Chancellor's absence to make these concessions, perhaps unknown to the Chancellor.
    I should be out of order if I went into the question in detail, but we are already aware that at a similar time last Thursday night it became clear that the Chancellor had to make a big concession upon another Clause, due to the fact that he had not realised the effect of the Bill when originally introduced. Only when the consequences were drawn to his attention did he make the concession.
    Tonight, we have had a concession from the Financial Secretary which makes a considerable difference to our attitude to the Bill. We have indicated informally to the Patronage Secretary our willing agreement to go on sitting if it is felt desirable in order that further progress can be made, and I hope that when the Chancellor replies he will be willing to admit, as he must admit, that we have been extremely helpful, as an Opposition, in securing the passage of the Bill. Already, in the eight hours we have been discussing the Bill today, we have disposed of seven or eight Clauses.
    I understand that the Government have it in mind to cover several more tonight, some of which are relatively non-controversial—unless major changes are to be announced from that Box between now and the time of the Adjournment of the House. Nevertheless, if one studies the progress of past Finance Bills, not merely the one in the autumn, of which hon. Members opposite will have vidid memories, but most previous ones, one will find that most of them have been subject to far more ruthless and thorough probing by Amendments than we have subjected this Bill to.
    If we are to go on further tonight, to the point which I understand right hon. Gentlemen opposite want, we shall have made more progress on the Finance Bill
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    in one day than in the whole history of financial legislation in this country since William Ewart Gladstone first introduced the package Finance Bill in order to get the paper duties through in, I believe, 1862. I am willing to be corrected by the Patronage Secretary on that point, if he is able to mention another instance, but I do not think that the Chancellor can complain about the co-operation we have shown in getting the Bill to the stage it has already reached
    11.45 p.m.
    The Committee will have noticed that we have put down only about 40 Amendments to the 36 Clauses—of course, there is plenty of time to put down more—whereas hon. Members opposite have put down far more. Again, I doubt whether there is any precedent for that, until one gets back to the days when William Ewart Gladstone was Chancellor of the Exchequer. A great deal of the time of the Committee in the last three or four days has been taken up by hon. Gentlemen opposite and by the debates which have reasonably followed on their moving of Amendments. I will not draw the attention of the Committee to the fact—it is aware of the fact already—that hon. Gentlemen opposite have been more successful with their Amendments than we have been. As my right hon. Friend pointed out, it is very serious that Amendments of the kind. just accepted by the Government have been accepted, whereas Amendments, costing little, if any, more, moved from this side of the Committee have been bitterly opposed by right hon. Gentlemen opposite.
    I am perfectly willing to withdraw my Motion if we can have from the Chancellor a reasonable statement of the Government's intentions and what they desire to achieve in the remainder of this sitting. I must warn the Chancellor that the acceptance by the Financial Secretary of these Amendments which we have just been debating must make some difference to our attitude to Part III of the Bill—not to mention, as I am reminded, that there has been a rather serious leakage of the Government's intentions with regard to this concession. We have been told by the Financial Secretary that this decision was taken at least a week ago, at any rate, before the events which took place at Tonbridge last week.

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    We suspected that this was the reaction of the Government to the leaders which have appeared in almost every Conservative newspaper saying that the Government must make some concession to their own supporters. But we are told by the Parliamentary Secretary, and we accept it from his lips, that this decision was taken several days before. In that case we cannot understand why the Chancellor—if the right hon. Gentleman was told about the decision—did not put his name to the Amendments, or, at any rate, we cannot understand why he did not put the Amendments on the Notice Paper, so that the Committee would know where it stood in this matter.
    My right hon. Friend has made clear that it was not easy for us to accept the principle of the Millard Tucker Report. I will be frank with the Committee and say that we expected to see this in the Budget. This has a lot to do with the Motion I am moving, because it may be, finding that our attitude to Part III of the Bill has been affected by recent events, that the Chancellor may decide to make a different reply to the questions I have been putting to him. My right hon. and hon. Friends were actually meeting to discuss the Millard Tucker Report several days before we knew what would be in the Budget, and we thought that the principle of the minority report might be accepted if it was a fair Budget. We did not get a fair Budget, but we got the Report, and after some discussion though it was not easy after the changes in the treatment of the old-age pensioners, we felt we could support the principle of Part III of the Bill.
    Then tonight, without warning, and clearly after a decision was taken several days ago and communicated to some Conservative back benchers, I do not know how long ago—some hours ago at any rate—the whole position has been changed and the emphasis and balance of the Finance Bill has been completely altered by the decision of the right hon. Gentleman. In those circumstances, I hope that the Chancellor will tell us what are the intentions of the Government, not only with regard to the rest of tonight's sitting, but what they intend to do about Part III of the Bill in the light of the statement from the Financial
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    Secretary; and particularly what they intend to do in relation to the Report stage.
    Mr. H. Macmillan: The right hon. Gentleman has been such an agreeable colleague in the debate on this Bill up to now that I shall certainly say nothing, I hope, to create any ill feeling in the Committee. There are one or two observations I might have made in reply to some which he has thought fit to make, which would give me some pleasure but which I do not think would accelerate our proceedings. I was asked whether I would emulate the traditional Mr. Gladstone, but as far as I know he never made a speech of less than about five hours. I thought perhaps I would best accelerate the proceedings on this Bill by not talking too much and, certainly, not talking too long.
    I am grateful to the right hon. Gentleman and to the Opposition for the cooperation they have given, in accordance with our long-established traditions, that we should try to work together to make our life agreeable and to carry out our business in a way that puts the least possible burden on hon. Members. We have had now three days on the Committee stage of the Finance Bill. In each of those days we have got away at a reasonable time, and I think it was more or less understood that on this fourth day we should make sufficient progress perhaps to finish the main body of the Bill on the fifth day. Therefore, I hope we will be able to proceed now.
    We have had a little trouble about the Government accepting an Amendment. I shall take note of that. I have always been reproved for the stony, hard-hearted way in which we refused to accept any Amendments. However, I shall take note that for the Government to accept an Amendment is a very bad thing to do.
    There are some notable absentees from the Opposition Benches—many hon. Members who could have contributed to our debate from the Opposition side. I should have liked to see the right hon. and learned Gentleman the Member for St. Helens (Sir H. Shawcross), who might have contributed something.
    However, I would suggest that we just carry on and make what progress we can,

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    and it might well be possible—I would not have referred to it except that the right hon. Gentleman has very graciously referred to it—under the more or less informal understanding to reach a situation in which by the fifth day we should be able to enter on the Clause which gives so much interest to the world. So I hope we will go on a bit now and see whether we can make progress. We will, of course, try to resist the temptation to accept any Amendments before we end tonight.
    Mr. H. Wilson: The Chancellor will realise that it is not anything in this Bill but it is the Bank Rate which gives so much interest to the world, at the cost of about £150 million a year to our balance of payments. The right hon. Gentleman has suggested that we continue further this evening. Before we do so, I would like to put this to him, because I do not want him to misunderstand anything that has been said, and I am sure he will not do so when he puts his mind to the problem.
    We have criticised the right hon. Gentleman for being hard-hearted in his refusal to accept a whole number of important Amendments, ranging from the tobacco concession to old-age pensioners to the problems arising from the plight of the cotton industry. But while we have complained tonight that the right hon. Gentleman has accepted an Amendment from his own side of the Committee, he must not take that as meaning that we are opposed to the acceptance of all Amendments. He must be more discriminating. We know how difficult it is for him to be selective in anything, whether building licensing, import controls or anything else. But we shall make more progress in the Committee if he will accept our Amendments and be more stony-hearted about some of the wrecking Amendments proposed from his own side. We shall make more progress, and we shall serve the national interest more fully.
    Mr. H. Macmillan: I can accept that. I do see the bitterness of the idea of a Government accepting an Amendment from its own side, because that must be very hostile to the whole of the traditions of the Socialist Party.
    Question put and negatived.
    Clause, as amended, ordered to stand part of the Bill.

    Clause 20.—(TAXATION OF ASSURANCE COMPANIES DOING ANNUITY BUSINESS.)
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    Major Hicks Beach: This Clause proposes to extend the privilege of complete exemption from tax on interest during the build-up period of pensions schemes. That concession is at present enjoyed only by self-administered pensions approved under Section 379 of the Income Tax Act, which is the old Section 21 mentioned during the course of this afternoon's discussions.
    The concession given by this Clause means that those funds which reassure their liabilities with life policies, provided they comply with the conditions of Section 379, will now get the tax-free concession during the build-up period. I think it would be proper if I declare my interest as a director of an insurance company. This is a very valuable concession, which is appreciated by everyone who takes an interest in these pensions schemes, but it is a little complicated and I shall take a little time in explaining how it will work. The concession will be made by allowing life offices underwriting schemes to accumulate contributions in what is described in the Clause as a separate pensions annuity fund. That, as I have indicated, will be totally exempt from tax.
    In my judgment, there is one snag to this proposal. That is that at the moment, as the Clause is drawn, it is made to apply only to schemes approved by the Treasury under Section 379. A great number of valuable pensions schemes are in operation under Section 388 of the Income Tax Act, 1952, which I understand will not get the concession. From the practical point of view of people trying to run these pensions schemes, that is a very serious problem, because it will mean that those who are running the Section 21 or Section 379 schemes will have a great advantage. Presumably—I say this advisedly—they will be prepared to reduce their rates in view of the tax concession they get. From a practical point of view, it will mean that unless the concession is extended to a

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    limited extent—and I will explain the limitation I suggest should be put on it by the Government—a vast number of Section 388 proposals will switch to Section 379 proposals. I cannot see that anyone can argue that anything else will happen; I suggest that is inevitable.
    The result will be twofold. First—I say this quite openly—a vast amount of quite unproductive work will fall on life offices and, second—I hope my right hon. Friend will take note of this—in the next few months a vast amount of work will fall on the Treasury because the proposals switched from Section 388 schemes to Section 379 schemes will all have to be approved and resubmitted. If the Financial Secretary will make inquiries as to the number of Section 388 schemes in operation, he will find that there are several thousands which his Department will have to approve.
    12 midnight
    So far as the Treasury is concerned, the result in the long run will be exactly the same, because there will be a switch-over to the Section 379 schemes. In the long run, there will be no saving of tax, so I cannot see why, when the Government are considering this between now and the Report stage, they should not table some form of Amendment which will, to a limited extent at any rate, incorporate the Section 388 schemes.
    During the course of today's discussion, there have been continual references to the point—and I do not propose to argue it now, although I do not agree altogether with it—that there should be no tax concession in regard to pension schemes which provide for a capital sum or one which is commutable. That has been accepted by the Government, and I do not propose to argue about it now. But I do think the difficulty can be overcome by the Government in principle accepting, when considering this Clause before we reach the Report stage, that employers and employees should be given the opportunity of selecting the particular type of scheme they want.
    I would also suggest that the present difficulty can be overcome by ensuring that at least such part of the premium as is paid on behalf of an employee to provide him with a pension, as opposed to anything paid to provide a lump sum
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    on retirement, should have the privilege of accumulating free of tax in the same way as the Section 379 policies do at the moment. That does not mean that when the annuity becomes payable it is not subject to tax. The present position under Section 379 is that the interest on the premium element being accumulated is free of tax. All I ask is that the Government should consider whether some similar concession cannot be given to this great number of excellent policies and proposals which are at present operating under Section 388.
    Mrs. White: I do not wish to follow the hon. and gallant Member for Cheltenham (Major Hicks Beach), who is no doubt better versed than I in the complexities of these matters, although we have had representations from this side that this particular arrangement is likely to lead to a very great deal of switching from one scheme to another, involving a good deal of unnecessary clerical labour. As I say, I shall leave that matter to those better versed in these intricacies than I am.
    I wish to raise a quite different point on this Clause. The Amendment standing in the name of my hon. Friend the Member for Walthamstow, West (Mr. Redhead) and myself has not been called. so it would be improper for me to go into the details of it, but I should like to raise a matter of principle upon which I touched on Second Reading, and that is that these very considerable tax concessions should not be given to pension schemes which do not make proper provision for arrangements in certain circumstances for transfer—what are sometimes called "cold storage" arrangements—for the people concerned.
    A fair number of existing schemes do make some arrangements, but these arrangements are not required by the Revenue authorities as a condition of approval. My suggestion is that some such condition should be required before a pension scheme is approved. I am fortified in this opinion by the attention paid to this matter, not merely in the Millard Tucker Report—which is rather negative—but much more so in the Report of the Phillips Committee. We have never had a chance to debate that Committee's Report, but it was most em-

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    phatic on the desirability of allowing people to carry their superannuation rights from one employment to another.
    I should now like to remind the Committee that the Phillips Report states:
    "In our view, arrangements whereby the accrued pension rights of a person with substantial service—"
    it makes that condition:
    "may be preserved on a change of employment including movement between the public services and private employment, are in the general national interest …"
    The Phillips Committee stresses it particularly from the point of view of the need to adapt ourselves to rapid changes in demand and technological advances. It points out that re-adjustment of manpower ought not to be impeded by an artificial restriction arising from pension arrangements. So there is a strong economic argument for making certain that in giving these tax concessions to this large and increasing number of pension schemes we do something which is obviously in the national economic interest. I will not weary the Committee by quoting further from the Report, but there is no doubt of its view on the principle.
    Perhaps more strongly, I feel that this concession is necessary from the point of view of the individual. As I said on Second Reading, the individual can be placed in an extremely burdensome position when he has accumulated pension right over a period of years if, for some reason, he considers it desirable to change his employment but feels tied and shackled to a particular employer because, should he leave him, he may lose all his pension right if it is a non-contributory scheme. Or a substantial part if it is a contributory scheme.
    Other countries have made such provision. Two to which I would draw attention are the Netherlands—a sensible small nation—and the great Dominion of Canada. I understand that in both these countries, and there may be others of which I am not aware, tax concessions of the kind we are discussing are not made unless there is provision for transferability of pension right. They provide that this shall be done after a period of service.
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    One does not expect a person who has served a company for only a few months to be able to go in and out; but any person with substantial service ought not to take out only his own contributions but also something from the employer's side. The employer has enjoyed the service of that employee for a certain period. I feel strongly that it is in the interest of the individual—a matter of personal freedom—and in the interest of the country's economy, that this change should be made.
    The Millard Tucker Committee is less emphatic than is the Phillips Committee partly because it was not particularly required to consider the position of those who were in middle life or a little older. It overlooked the social and economic implications. It confined itself to the much narrower question of taxation, and it makes a negative recommendation that the existence of a rule permitting transfer of pension should not be an obstacle to approval. That is too negative an attitude, and this Committee ought to make clear that it recognises the strong argument now for ensuring that the question of transferability of accrued rights should be made available to a person who wishes to change his job as being in the general interest. I hope that the Chancellor will take note of these arguments, even if he is not able to do anything positive in this Finance Bill.
    We have heard from the Financial Secretary that the Chancellor is considering the whole question of superannuation schemes for employees. Therefore, I have said this now in the hope that when the wider review takes place this extremely important principle will be given full weight by the Chancellor.
    Mr. Shepherd: I should like to urge upon my right hon. Friend the Financial Secretary the merits of what has been said by the hon. Lady the Member for Flint, East (Mrs. White). If we are to get compulsory vesting, it can best be obtained on this occasion where the Government are making a substantial concession. Obviously, employers will not be too delighted about any compulsory vesting, and the occasion of a major concession is the best occasion on which to bring in this innovation.
    I hope that between now and the Report stage my right hon. Friend will

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    look at the possibility of following the lead of the Netherlands and Canada in making the remission of tax a condition of vesting after, say, a period of five years or some similar period. I want to try to impress upon my right hon. Friend the importance of what was said by my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) about the undesirability of forcing, as the Bill will do, schemes which are now under Section 388 into the rather old-fashioned Section 379. I cannot see that a Section designed largely for private trust funds is really a suitable Section under which to operate schemes which are run by outside assurance companies.
    I say right away that I have no financial interest whatever in this business. I only want to see that, as far as we can, we do the job in the right way. I feel very strongly indeed that the Treasury have got this the wrong way and that, if we carry on as is proposed now, we are going to rob the community of some very substantial advantages which it could have had had a different course been taken. It is perfectly obvious that hardly any employer will be able to continue the Section 388 schemes when his accountant, or somebody else, shows him the figures which will result if the Clause is approved. The compound interest of 7s. 6d. in the £ remission for, say, thirty years is a very substantial amount indeed. No employer, in the interests either of himself or his employers, could continue the old Section 388 when he sees the advantages which would accrue under Section 379 as far as pension value is concerned.
    There is no need to subject the Treasury and the insurance companies to the enormous burden of work of rewriting all these policies and, as my hon. and gallant Friend rightly said, there is the burden which will fall upon the Treasury in having to approve these new policies. There is no necessity to subject the Treasury and individual firms and persons to this bother.
    Moreover, Section 379 prevents insured persons and employers from selecting the kind of policy best fitted to their needs. I want those who want to insure for pension rights for their employees to have as wide as possible a choice of policy. Let them select the kind of
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    policy which will best suit their needs. Section 379 says that one cannot do that. The Government are saying "Although we know that in the last ten or twelve years, for example, endowment policies have been fashioned so that they meet the needs better than most other methods, under Section 379 endowment policies will not be allowed." It is most unfortunate to say that endowment policies will not be allowed under this provision when, clearly, they are in many cases the better form of insurance for pension purposes.
    12.15 a.m.
    I briefly give one or two reasons why an endowment policy, disallowed by the present provisions, is better for the insured person. First, it provides the insured person with a death benefit, which is a very important consideration for a man with a family. On a deferred annuity one gets the repayment in part of the premiums, but an endowment policy gives one a death benefit, very important to a man with a wife and family. Moreover, the endowment policy is of great advantage in an inflationary condition. Whereas a deferred annuity gives an individual at the stated period of 20, 30, or 40 years a specific annuity, an endowment policy accumulates the capital year by year, and when the accumulation is complete the annuity is bought. It is quite possible that in the circumstances 30 or 40 years ahead one will get a better deal by that means, and a hedge against inflation that one certainly will not get through a deferred annuity. Moreover the deferred annuity is a rather noncompetitive element in the insurance world, whereas endowment is a highly competitive one, and I want to see people have the advantage of the highly competitive side of the business.
    I know that my right hon. Friend has in mind that Section 379 does not allow commutation, and he feels commutation is probably not justified. I think there are arguments about that, but I would myself be prepared to accept the view that commutation without some quid pro quo ought not to be allowed. As we suggested earlier in our discussions, there is no reason why we should not allow the insurance to continue under Section 338 and cause any commuted amount to attract the same sort of tax attention as do the trivial pensions and repayments under deferred annuities; that is to say,

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    if we allow commuting of a certain amount, the amount commuted shall be taxed as to a quarter of the total at the standard rate of tax of 8s. 6d. in the £.
    I do not think all of us take the view some of my hon. Friends do, and necessarily stand on the right of commuting, and we could hope to drop the idea of commuting altogether, but I think any commuted portion should attract the same sort of tax as the trivial pension and the return on deferred annuity premiums.
    Therefore, I hope that between now and Report my right hon. Friends will look at this very carefully indeed, because we do not intend to let this matter rest. We think it is a new departure, but there is no real reason why we should have the second best if we can have the best, and certainly there is real scope for believing that by forcing policies into Section 379 and abandoning Section 378 we are not giving the insured persons the best value they can possibly get. I hope that by Report we shall see some suitable Amendments down by the Government, and if we do not we shall feel inclined to put our Amendments down again.
    Mr. Harold Lever: I suppose it is rather late in the night for me to air my somewhat eccentric minority view, which is against subsidising by public money any of these schemes at all. We apparently live in an age when the Committee is content to confer sectional benefits at the expense of the community and the taxpayers as a whole. A member of the community, having one child, gets no family allowance; but another, having two children, gets family allowance. If he is working in a factory where there is a pension scheme we all pay more for our beer, our tobacco, and in Income Tax and Surtax, because we want to foster thrift in the workpeople and stability in the mental atmosphere in the factory. As for the millions of people who do not participate in these share-outs, they can lump it, while they, and those also who do share in them wonder why Income Tax and indirect taxation are so high. Fortunately, the instruments of law which make these curious exceptional benefits available usually have the unanimous approval of the Committee because hon. Members do not understand the drafting of such Clauses. I submit that nobody could
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    follow this complex Clause unless he had uncommon enthusiasm or a very good legal training.
    So, on this note of dissent, I say that public money, raised from the very heavily taxed population at large, should be distributed fairly and not distributed in a sectional manner as exemplified by this Clause. I have only just read it, and hope that I am not wrong, but the effect of the Clause as I understand it is that insurance companies can now offer employers with pension schemes in factories arrangements whereby accumulated funds can be invested, with interest, in any direction at all and be exempt from Income Tax. In other words, if any hon. Member here is putting aside £50 a year towards his old age, the interest which he receives will be taxed; but the income of those who benefit under this Clause will not be taxed and, providing the money is drawn in the manner, style, and amount approved by a number of Treasury officials, they will go to a richer old age than any of us who do not come within the ambit of this concession.
    It is not only a late hour, but getting rather late in the century, when we should have known better, for us to confer piecemeal benefits on sections of the population while some get no benefits at all. People living in slums in my constituency may wonder why they should pay to subsidise very nice flats to be lived in by persons with three times their income; but now it will be possible to benefit some of the highly paid artisans in the factories as a result of the Chancellor's proposal. En addition, we shall now have the privilege of helping the profits of the insurance companies which, if I understand it correctly, are competing successfully with these works pension schemes. This Clause puts the insurance companies, whether profit-making or mutual, in a more competitive position vis-à-vis the works pension schemes which are free from tax, and it also raises a serious question as to what the Chancellor is going to do, having ladled out this money in so sectional a manner.
    Once one starts on a piecemeal scheme it becomes difficult not to continue piecemeal. It is difficult to know if one should support piecemeal legislation of this sort, although, of course, we might end up by covering the entire population in this way with the blessing of the Chancellor.

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    The point has now been reached concerning the insurance subsidy at the expense of the Income Tax when the Chancellor should take serious responsibility, not merely for the terms of the scheme in the sense that it must be a Section 379 scheme, as somebody called it, in which one gets an annual sum, and not a certain other Section scheme in which one gets at the age of 65 or 70 an endowment policy or some other thing that the hon. Member for Cheadle (Mr. Shepherd) sought to have brought within the benefits, where the aged recipient at the end of his years of thrift and labour would receive a large sum which he would be liable to spend thriftlessly. The Chancellor is encouraging the weekly payment kind of policy.
    The Chancellor must realise that, as he is subsidising all these schemes so heavily, he has a great responsibility to ensure that they are fair schemes, that the profits made from them are not excessive and that the interests indicated by my hon. Friend the Member for Flint, East (Mrs. White) and by the hon. Member for Cheadle should not work to the public disadvantage by discouraging a man from moving from place to place, or, what is perhaps more important, that his investment should be protected and the concession which, I take it, the Chancellor means should go to him should benefit him and no one else.
    Unless there is a proper arrangement of the kind demanded by my hon. Friends, a man who leaves his job would get 2 per cent. interest less tax, but there is no reason why he should lose the Chancellor's generosity which, misguided as it may be from my eccentric point of view, commends itself to the Committee. When the man leaves his job, what happens to the concession? Is any precaution taken by the Chancellor?
    When a man goes to other employment, is there any assurance that the benefits of this tax concession will go to the benefit of the workman who has contributed and not merely to the benefit of the insurance company which has underwritten the policy? Certainly the Chancellor owes it to the Committee to ensure that these concessions should go in the direction in which the House of Commons intends that they should go.
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    When we had a great spread of insurance in the early days of industrial insurance, the Governments of those days, reactionary as they were, realised that it was necessary to protect the people who paid the premiums and to see that certain principles of law should override the contracts of insurance. In this case, when we are contributing millions of public money to support and encourage these schemes, we ought at least to ensure the maintenance of what was thought reasonable and equitable half a century ago. We should not go backwards. Even the Tory Party should at least stay where it is. We do not expect it to advance, but we do not want it to be in a worse position politically and morally than at the turn of the century, when it was reasonable and intelligent enough to say that with those new policies the ordinary rule of contract could not be allowed to prevail and there must be some rules of law to override the rules of contract.
    Laws were enacted. Industrial insurance Acts were passed to protect policyholders from unfair treatment in their contracts of insurance. I am not saying that reputable companies today cheat their policy holders, but it is not for them to judge what is fair and reasonable. It is for the Chancellor, who is providing public money to support their activities, to draw the code, not merely of whether the pensions should be of a particular kind, but whether the whole conditions of the pension fund are fair and reasonable otherwise no insurance company failing to comply with the right hon. Gentleman's code of conduct for these policies should have the benefit of his tax concessions.
    I hope that, having heard this exposition, the Chancellor will at least answer the question whether he feels that, having handed out public money for this purpose. it is not his duty to ensure that the benefits of the tax concession go where he obviously intends them to go—to the workmen who subscribe to these policies.
    12.30 a.m.
    Mr. Gough: I am sure the hon. Member for Cheetham (Mr. H. Lever) will not want me at this very late hour to follow his line of argument, beyond saying that when he started he reminded me irresistibly of the much loved and lately lamented former Member for Orpington.
    Mr. H. Lever: Not physically, I hope.
    Mr. Gough: Not physically, no. He did, however, prove to me how he was able to achieve, I believe, one of the greatest long distance records in this House, because after merely glancing through the Clause—I hope it was the correct Clause he glanced through—he was able to make a speech of about 20 minutes in length. The only point I should like to make to him—and I think I can say this to him from practical experience—is that as the law already stands the Inland Revenue never approves of any sort of pension scheme unless it does protect, in all circumstances, the contributions of the employee. I think that can be said.
    Mr. Lever: I am not sure whether I shall get an answer from the Chancellor, but perhaps I can get one from the hon. Gentleman. Is he satisfied that insurance policies provide in the case of the transfer of a man after, say, three or four years, that he shall get the benefit of accumulated interest together with the tax concession that is being made in this Budget?
    Mr. Gough: If we went into that I think we should get ourselves into very involved insurance questions. I should he quite ready to discuss that with the hon. Gentleman outside, because it is a little bit late to do so in the Committee at this stage.
    Mr. Mitchison: Would the hon. Gentleman make this clear? I understood him to say that any insurance contract approved by the Revenue always safeguarded the position of the employee. Does it safeguard the position in relation to transferability? That is to say, if the employee moves from one employment to another, does he get the value not only of his own contribution but of the employer's?
    Mr. Gough: That raises another point, but I will certainly answer it. The Inland Revenue does not and will not give approval to any pension scheme unless that scheme lays down that an employee always gets the value of his own contribution.
    Mr. Lever: And the interest?
    Mr. Gough: And the interest, yes.
    Mrs. White: Would the hon. Gentleman then be good enough to comment on paragraph 246 of the Phillips Committee's Report, which says that under the existing arrangements of the Inland Revenue
    "a withdrawing employee may receive not more than a sum represented by his own contributions (usually accumulated at interest and less a deduction in respect of income tax), the value of which is much lower than the capital value of his accrued pension rights"?
    Mr. Gough: I hope the hon. Lady will not think I am being discourteous, but I rose at this stage to raise one point on this Clause. It is a most involved matter the hon. Lady has raised, and I do not think it comes under this Clause.
    The point which was raised previously by the hon. Lady, and by my hon. Friends the hon. and gallant Member for Cheltenham (Major Hicks Beach) and the hon. Member for Cheadle (Mr. Shepherd), is in fact this question of leaving out pension schemes approved under Section 388 and not treating them the same as schemes under Section 389. I want, if I may, to put to the Committee a certain amount of practical experience, because I really believe that unless my right hon. Friend can find some compromise whereby he can bring such schemes in, or that portion of the schemes which represents the pure pension, then I really believe there may be chaos in the Inland Revenue.
    It takes six or eight weeks, or even three months, for a pension scheme to receive approval by the Inland Revenue. That indicates the number of schemes being adopted. It is no criticism of the Inland Revenue. With its present personnel and working as hard as it can, it cannot do the job quicker than that.
    As has been said, if the concession is given in respect of schemes under Section 379 it will make a considerable difference. Far more pension schemes are approved under Section 388 than Section 379. Employers undertaking schemes under Section 388 are bound to be seriously tempted to wind them up and bring them within the scope of the concession.
    If that happens, quite apart from the enormous amount of unnecessary work which will fall on the insurance companies, the Inland Revenue, as now constituted, will be completely incapable of

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    coping, and there may be delays of two or three years in the adoption of such schemes. This will mean that other companies which wish to introduce pension schemes for the benefit of their workers will have to go to the back of the queue.
    For that reason alone, I would seriously ask my right hon. Friend to look into the matter again to see whether something can be done to prevent such a thing happening.
    Mr. Gordon Walker: There is something in the point that, on the face of it, there might be a considerable switch-over from one set of schemes to another simply because under the Bill Section 379 schemes would have an untaxed build-up whereas schemes under Section 388 would continue with a taxed buildup. The Clause will enable companies to build up the annuity fund tax-free, and they will be able, therefore, to offer markedly cheaper premiums for the same sort of annuity than under the other schemes.
    Hon. Gentlemen opposite have been talking as if the two sorts of schemes were interchangeable. There is a very good reason why they are different and come under different Sections. The Section 379 schemes are fully approved and have imposed upon them great restrictions from which the Section 388 schemes are free.
    I do not agree with the hon. Member for Cheadle (Mr. Shepherd) that, once having got the benefits of the Clause, people should be able to choose which sort of scheme they want. If Section 388 schemes are brought within the benefits of the Clause, they begin to get taxpayers' money.
    Mr. Shepherd: Is the right hon. Gentleman saying that there are not fully approved schemes under Section 388?
    Mr. Gordon Walker: They do not get the great advantage of a tax-free buildup. They get a smaller benefit. The hon. Gentleman wants them to have a much greater benefit.
    Mr. Gough: It is not a question of benefits. Schemes under Section 388 are often approved for far better benefits than those under Section 379.
    Mr. Gordon Walker: I meant the benefit of the untaxed build-up. "Benefit" here is a very ambiguous word.
    Mr. H. Lever: Will my right hon. Friend say what is the social advantage that makes it necessary to give a tax-free concession or a tax-free build-up where the retirement benefit is received in an annual payment and why the same benefit should not be given to somebody who prefers to have his moderate retirement benefit in the form of a lump sum?
    Mr. Gordon Walker: If my hon. Friend will allow me, I was just coming to that point. That is one of the main differences between the two schemes. Section 379 schemes are not allowed to pay tax-free lump sums, whereas Section 388 schemes are, and the Millard Tucker Report referred to cases of lump sums amounting to as much as £40,000 being paid out. I imagine that they are rather exceptional, but they do run as high as that. A scheme which can pay such enormous tax-free lump sums is a very different one from one which is not allowed to pay one at all.
    In any case, public money is going to be given, by remission of taxation. If taxation is remitted discriminately, it amounts to using taxpayers' money, because other taxpayers have to bear the burden. Section 388 schemes ought not to have the complete freedom of choice that the hon. Member for Cheadle wants. There must be restrictions. If they are to have the privilege of having their build-up untaxed they must enter under very rigid controls. Above all, there must not be anything at all in the nature of a tax-free lump sum payment.
    Mr. Lever: Is there anything to stop a man who is due to receive the benefit of this deferred annuity at the end of his working life from selling his right to receive the annuity. for a tax-free lump sum to a third party or to the insurance company itself?
    Mr. Gordon Walker: Certainly. Under the Section 379 schemes that is prohibited.
    Mr. Lever: Selling to a third party?
    Mr. Gordon Walker: Yes. They cannot be commuted in any way except in respect of one quarter, which is then

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    charged to tax at one quarter of the standard rate. But with the Section 388 schemes one can have a complete tax-free lump sum payment. with which one can do what one likes.
    The reason why a tax-free lump sum payment should not be allowed in those circumstances is that these schemes are enjoying a tax-free premium, then a tax-free build-up, and then a tax-free lump sum payment. Too much is being provided at the taxpayers' expense. The Millard Tucker Report says that these schemes have a tax-free build-up and then a tax-free lump sum payment. In other words, there is a double remission of taxation.
    Mr. Gough: The point which my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach was making was that only that portion which represents the pension shall have this benefit, and not the portion which represents the commutable sum.
    Mr. Gordon Walker: I do not like that. That is something which leads to all sorts of tax avoidance schemes. The hon. Member for Cheadle and others seem to have overlooked the fact that the reason for having such things as Section 388 schemes is to prevent tax avoidance. The provision in the 1947 Act, which is now translated into Section 388 of the 1952 Act, was introduced to stop tax avoidance. One must be very careful in these matters.
    There is a case for saying that Section 388 schemes ought to be brought in to avoid the danger of a switch—but only with very rigid conditions, one of which is that there should be an absolute upper limit to the amount of lump sum which can be paid; that in no case should it be more than one quarter, as is the case with the Section 379 schemes, and that it should pay one quarter the standard rate of Income Tax. We are dealing with clever gentlemen, and if we create a law in which it is perfectly legitimate to move things around in different sorts of ways, they will discover all kinds of ways to avoid the tax provided for by the law. On the other hand, so much of this is going on that I should never be a party to helping it. But were there this rigid control as regards lump sums, I think
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    there would be something to be said for the hon. Gentleman's proposal.
    12.45 a.m.
    The reason I say that is because I think there is going to be this big switch otherwise. It looks very much like it. I do not know whether the Government anticipated that when they originally worked out the cost of the scheme. May I ask the right hon. Gentleman whether they anticipated a switch from the Section 388 fund to the Section 379 fund? Did they expect a massive switch? If not—and all the experts foretell a massive switch—and if they do not do something about it, the cost will be bigger than they thought originally; in fact, the cost will be bigger whatever they do. If they did anticipate a massive switch they have been stupid, and if they did not they have underestimated the cost. I should like to know from the right hon. Gentleman whether the Government anticipated that there might be a considerable switch over.
    There is another way in which the switch could be stopped, and that is to withdraw paragraph (b) of subsection (7). If the concession to 379 schemes is withdrawn the switch would be stopped, because there would be no advantage of one over the other. I think that the right hon. Gentleman should do one thing or the other. To face us and his Department and the insurance companies with this enormous switch seems to me to be stupid legislation.
    Much more important is the point made by my hon. Friend the Member for Flint, East (Mr. White). It seems that it should be made a condition—I hope that we may get something down about this on Report stage, if the Government do not anticipate us—that no approval should be given unless there is proper provision for the transfer of the actuarial value of the contributor's interest. It seems that he does not get his actuarial value, or in many cases that is so. The point made by my hon. Friend the Member for Cheetham (Mr. H. Lever) was apposite. What happens to the untaxed build-up when, for one reason or another, a man abandons a scheme? The employee gets back his own contributions, but there has been a tax-free build-up in respect of the employer's contribution. If it is a scheme

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    approved under Section 379, who benefits? Does the benefit go to the people who are left in the scheme; does the employer benefit, or does the Chancellor get it in some way or other? What happens to it? It is there, and it is worth something. The employee who contributed originally does not get it, so who does?
    I was interested to see from the Millard Tucker Report that two most reputable countries have gone into the State life assurance business. That, of course, is the right and best way to provide transferable pensions. Canada and New Zealand have gone into the State life assurance business, partly, as I understand it, to make it easier for actuarial interest to be transferred. Neither country is Socialist in the extreme sense and neither has a Socialist Government at the moment. I do not think that we should approve of these changes and these great benefits and boons which can be given unless this is a provision of the contract.
    There is one other point. The lamentable change made without notice by the Government in an earlier Clause, about which we have expatiated at length, will "slop over" into this Clause. That is the trouble about legislation. What you do in one place begins to pop up in other places. Subsection (7, a) refers to the ability of insurance companies to build up untaxed annuity funds for the people described in Clause 18. This is the thing that enables the insurance companies to get the benefit of an untaxed build-up. But, of course, since Clause 19 has been amended this benefit is now to be given, as it was not previously given, to people who get between £5,000 and £7,500 a year. This changes our whole attitude to this concession to the insurance companies. We were prepared to accept it in its original form, but now it has been inflated in this grotesquely unjust and improper way it changes our whole attitude to Part III. But we would, nonetheless, prefer to see an Amendment on the lines of that on the Order Paper, though not selected, in the name of my hon. Friend the Member for Flint, East, and which I hope we can, in one way or another, discuss again on Report stage.
    Mr. H. Brooke: Hon. Members who are not deeply initiated into the intricacies of insurance schemes may by now have come to the conclusion that Clause 20
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    deals with subjects of extraordinary complexity, and they will not be far wrong. Let me say at once that I intend to read through all that has been said in this short debate, when it is printed in HANSARD, with a clear mind, in case I have failed to appreciate anything that has been said by any hon. Member, and because I wish to take into account the fact that I have now been sitting on the Bench and engaged in this debate for seven-and-a-half hours continuously; and it is possible that the Committee may take my mind as being not quite so acute as it should be. But I will endeavour to address myself briefly to the two main points which have been raised.
    I will first give precedence to the hon. Lady the Member for Flint, East (Mrs. White). Her suggestion, as I understand it, was to limit the exemption which this Clause gives on the investment income received by insurance companies in relation to approved superannuation funds for employees. She wanted the exemption given only in cases where the rules of the fund included a provision for the actuarial reserves relating to a member to be transferred to another fund if he changes his job, and she prayed in aid the report of the Phillips Committee, as well as other evidence. If the Committee acted in the way she suggested, it would apply a kind of compulsion to those funds which re-insure their liabilities with life insurance companies, while not touching those funds which do not do so. or those pension schemes which are not operated by means of a trust fund.
    Mrs. White: I am sure the right hon. Gentleman will appreciate that, within the limits of this particular Finance Bill, that is all one could do.
    Mr. Brooke: That brings me to exactly the point I was going to make, and I think it is a point which the hon. Lady herself had in mind: that if the matter to which she was addressing herself requires attention, this is not really the right place in which to deal with it.
    Mr. H. Lever: We never get the right place.
    Mr. Brooke: If the hon. Member will wait a moment, I think I can explain what I have in mind. I have said, and so has the Chancellor, that it is not possible to attempt to deal this year with all

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    the difficulties, curiosities and anomalies which exist in connection with pensions schemes for employees. That is something which has got to stand over and has got to be tackled. I suggest that the right time for addressing ourselves to the question which the hon. Lady has raised is when we are embarking generally on the law relating to pensions schemes for employees and when we consider whether or not it is desirable that the provision of transfer facilities should be made compulsory, so to speak, or that we should tackle it in another way by ensuring that when an employee leaves a job his pension should go into what is called cold storage.
    All those things will have to be considered. I think that in what I have said I have proved to the hon. Lady that the Government are not overlooking the importance of these matters, but it would be a mistake, and we might do a grave injustice, if we attempted to amend this Bill on Report stage to meet the point she raised.
    My hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) raised the question of the Section 388 and Section 379 schemes. The point he was putting was that Clause 20 exempts from tax that part of the income of a life assurance company which arises from the investment of premiums received in connection with annuity contracts which provide pensions for self-employed persons and are approved under Clause 18, and, secondly, in connection with approved superannuation funds which are set up by employers to provide pensions for their employees and have reinsured their liabilities with insurance companies. My hon. and gallant Friend was urging the Government to consider whether we could extend that exemption to a third part of the investment income of a life assurance company, that is to say, the income arising from premiums received in connection with employees' pensions schemes where no superannuation fund is established but where there is a contract directly between the employer and the insurance company.
    If I understood my hon. and gallant Friend rightly, he was urging this on the Government on two principal grounds, first that it was unfair to give relief on the investment income of reinsured funds and not on that of the 1947 Act schemes. Secondly, he and the right hon. Member
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    for Smethwick (Mr. Gordon Walker) and other hon. Members suggested that, as the reinsured funds in future will have a tax advantage, employers who now have the 1947 Act schemes will be strongly tempted to change over and that would give everyone concerned a great deal of bother for no clear benefit. He stated the case for doing that, and I will seek briefly to state the reasons why the Government have drafted this Clause in this way.
    First and foremost, as I said to the hon. Lady, this Bill is not attempting to deal generally with employees' retirement pensions arrangements. That we have got to come to later, but I quite appreciate that my hon. and gallant Friend will then ask why it was decided in this Bill to deal with the reinsured funds. There is more than one reason for that. One is that the absence of relief on investment income of reinsured funds has been a source of grievance for a long time, as he is aware. Indeed, the first Millard Tucker Committee, which reported as long ago as 1951, drew attention to the matter and recommended that the relief should be given. That view was supported by the second Millard Tucker Committee subsequently.
    1.0 a.m.
    There is another reason, which is that, if the relief were not given at all, then employees who are members of reinsured funds would be treated worse than the self-employed. The self-employed will get full tax relief on the build-up, whereas the employees in reinsured funds would get only partial relief on the build-up unless the law is altered as we propose. Although they would get full relief on their premiums, the investment income would not be exempt.
    I should here also mention that, in order to fulfil the proviso mentioned by some of my hon. Friends, each premium paid by each individual would, under their safeguarding suggestion, have to be divided into two parts and that, in itself, it seems to me, would cause a great deal of bother and calculation. It is by no means impossible, but it would not simplify matters.
    That brings me to the last question—whether we are letting everybody in for a tremendous turn-over. We did consider this very carefully before we brought forward the Bill, and I should like to give

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    the Committee, very shortly, the reasons why we do not anticipate a turn-over on anything like the scale foreshadowed by some people. One reason has already been mentioned. It is that an approved fund cannot pay lump sums, whereas a 1947 Act scheme can pay up to a maximum of a quarter of the total benefit.
    Another reason is that approved funds are more restricted in the death benefits which they can pay. A third reason, and one, I fancy, which will prove very cogent, is that even the mere fact of change-over from one type of scheme to another will involve a good deal of trouble and expense. As I have explained to the Committee in relation to earlier Amendments, what we are doing in this Bill is not necessarily to enact a law of the Medes and Persians. It may be seen in the light of experience that further alterations have to be made in future Finance Bills. That, surely, will be appreciated by the employers who have to take their decisions on these matters. It seems to me that that will be another ground for pausing, and not hastening to rush into a switch of schemes.
    I recognise again, as I have said elsewhere, that this is a matter of judgment. We have examined it very carefully and this is the conclusion that we have reached. Other people are fully entitled to hold, and to express, their own opinions, but I hope in what I have said on this Clause that, if I have not managed to elucidate all its dark places, I have at any rate managed to prove to the Committee that the Government have given very serious thought to both the main points that have been raised.
    Mr. Mitchison: I am sure I am not the only member of the Committee to have a very real sympathy with the right hon. Gentleman's long and diligent attendance here. I am the more sympathetic with him because of some of the things that he now has to defend so late in the night.
    The last incident we had was squalid. This is merely the story of actual and impending confusion. I shall not say anything more about Clause 18 for the moment. I realise that something or other has to be done in connection with the build-up as far as that scheme is concerned. But there is brought into this Clause—and therefore to the relief in
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    respect of build-up which the Clause supplies—one group of schemes which, rather obstinately, I will continue to call 1921 Act schemes. Schemes under the 1947 Act are not brought in.
    The reason for that is said to be, first, that all the 1921 Act schemes ought to be brought in; second, if I followed the right hon. Gentleman rightly, that it would be extremely difficult to bring in the 1947 Act schemes, at any rate in one respect, namely, that they include considerable commutation sums and that these, it is now suggested, would have to be treated separately from the annuity benefits. I gather that that was the main difficulty about bringing in these schemes. I can only say that clearly the Government do not know what the effects of giving this relief to one group of schemes and denying it to another broadly similar group is going to be. They have heard two of their hon. Friends—one of whom no doubt has special experience, and to the other I will merely attribute wide general experience—assure them that there will be a considerable switch in that direction.
    Is there any real reason why the one set of schemes should be brought in and the other not be brought in? I am sorry to be quite blunt with the Committee about this. I regard this group of Clauses as a pretty muddled collection of bits of legislation. One sees what the Chancellor has in mind. One sees that he had evolved a scheme up to a point. One then discovers that in a vital matter he has, during the progress of the Committee, changed his mind. Then one comes to the fringes and outskirts of the scheme and finds point after point where the Government have to admit that they were wrong; that they had forgotten this and will alter that in response to representations; or else the Government have given answers which could not satisfy a reasonable person. The conclusion I have reached is that the Chancellor has had one of those fiscal inspirations which sound all right in theory but do not work out in practice.
    The minority report of the Millard Tucker Committee, which saw a good deal of the complications of what was asked for in the majority report, made one simple suggestion. Whether that suggestion is adopted in place of that before the Committee, or is alternative to it, it seems to me to be far better,

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    because it is simple. The suggestion is to allow, in certain cases—broadly, the people concerned in Clause 18—increased life insurance relief instead of the complicated matter before us. I think it right that it should be added to it; but when one looks at what we are going into in Clauses 18, 19, and 20, I conclude that the Government do not know what they are doing, and that no one can tell us what the effect of this bit of legislation will be on a whole mass of schemes. What we have heard tonight amounted to not much more than that.
    The second outstanding point of this discussion is the question of transferability. That is the question of giving employees in schemes the right to have transferred the full actuarial value not merely of their own contributions, but of those of their employers also. I say at once that I fully recognise that there is nothing of the sort in legislation at present, but then what we are doing at the moment is giving new rights in respect of this kind of matter. We are told, "You must not attach a condition, however wise it may be, to these new rights because we, the Government, are going to think about the matter and we are going to deal with it later on." If it is right that these are new rights, is there any real reason why this condition, if it is a good condition, should not be attached to them?
    I would say this much in support of it. One does not really require even the Phillips Committee Report to see that it is only fair to a man. After all, if we take a transfer at present within a very large concern, for instance, the Civil Service, a man carries his full pension rights with him. By and large, the same goes for local government. The same would apply inside a very large concern. Why should a man who is moved from one scheme or fund to another thereby drop the benefit of his employer's previous contributions?
    It is said that this can apply only in the case of schemes where an insurance company comes in. That may be so under the Clause, but I am not even sure of that. I see no reason whatever why a person who, without recourse to an insurance company, chooses to work a scheme of his own, should not be made to hand over—or perhaps at this hour of the night I may be allowed to say cough up—the actuarial value of his em-
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    ployee's interest in the scheme when that employee moves away.
    I dare say hon. Members will remember that in the Dark Ages, which were quite a long time ago, there were people wandering about Europe who carried their own law with them, so that if one murdered a person of one nationality the penalty was appreciably different from what it would have been if one had hit on someone of another nationality. If people could carry a law about with them even in the Dark Ages, surely people can carry their pension rights with them in the year of grace 1956.
    I commend to the earliest attention of the Government not only their own misdeeds and confusions—those, I agree, will take them quite a long time to put right—but also the suggestion put to them tonight about attaching to these benefits the employee's right to carry the full value of his and his employer's accrued contributions with him when he changes his job.
    Clause ordered to stand part of the Bill.
    Clause 21 ordered to stand part of the Bill.

    Clause 22.—(PURCHASED LIFE ANNUITIES, OTHER THAN RETIREMENT ANNUITIES.)
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    Mr. Mitchison: Would the right hon. Gentleman, weary though he is, tell us a little about what the Clause does?
    Mr. H. Brooke: The main purpose of the Clause is to give effect to the recommendation of the Millard Tucker Committee that purchased life annuities should no longer be taxed in full but that so much of the annuity as represents a return of the purchase price paid should be exempt from taxation.
    I think I am right in saying that this has been a bone of contention for upwards of fifty years. In the past, a number of authoritative bodies have recommended that the old system of subjecting the whole of the annuity to tax should be continued though it seemed to anybody who approached the subject without knowledge to be grossly unfair. We have now had a definite recommendation from the Millard Tucker Committee,

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    which is in line with that which seems right to reasonable people looking at the matter with no great financial knowledge. So it appears that the amateurs and—shall I say?—the experts are in agreement. This is a Clause that will give effect to that recommendation, and it contains certain consequential provisions. I do not think there is any big question of principle here, or some Amendments would have been put down.
    1.15 a.m.
    Mr. Mitchison: I plead guilty to having got the right hon. Gentleman to explain that, in the very clear and simple language he used, in order to say how cordially I personally welcome this Clause. I think my hon. and right hon. Friends will do the same. I remember very well a distinguished and successful teacher in my constituency who was getting on in years coming to me and telling me he had been saving all his life for an annuity and of the real shock it was to him—he was not a teacher of economics or taxation—to discover he had to pay tax, not only on the interest, for he recognised that, but on the repayment element in it. I had absolutely no answer to him. I am exceedingly glad that what I think is a piece of simple justice is being done at last.
    Clause ordered to stand part of the Bill.

    Clause 23.—(PROCEDURE.)
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    Mr. Houghton: I should like to ask the Financial Secretary a question or two. Do I understand that an aggrieved person will have the option of appealing either to the General Commissioners or to the Special Commissioners? I am referring to subsection (1), which provides that
    "… any person aggrieved by any decision of the surveyor on any such claim may appeal within the prescribed time either to the General Commissioners or to the Special Commissioners …"
    Is the option in the hands of the appellant in this matter?
    I have a question also about the penalty mentioned in the very last line of the Clause. Subsection (4) says that if
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    any person, for the purpose of obtaining relief knowingly makes a false statement or false representation, he shall be liable to a penalty of £500. Section 505 of the Income Tax Act, 1952, deals with penalties for false statements made to obtain allowances. There is provision there for imprisonment for a term not exceeding six months. Are these penalties mutually exclusive? Would the Financial Secretary add a word about the inclusion of this very substantial money penalty in this Clause? I think it is probable that it is the largest money penalty to be found in the Income Tax Acts, saving, of course, the omnibus penalty of three times the duty lost. I should like the Financial Secretary to give a word of explanation on these matters.
    Mr. H. Brooke: This, of course, is a procedural Clause of a somewhat intricate nature. I think the hon. Member's question concerned the proviso to subsection (1). The position is that the aggrieved person will have a right of appeal either to the General Commissioners or to the Special Commissioners against the refusal of a claim. If it is a case of dispute about a split of a purchased annuity, then it will be an appeal to the Special Commissioners only. The reason for this distinction is that the second question might involve difficult actuarial calculations: and, also, the decision could well be one which would normally run for the whole currency of the annuity and not just the particular year of the appeal. That is why it is thought more appropriate for determination to be by a central tribunal rather than by local hearing.
    So far as the penalty in subsection (4) is concerned, I do not know if the hon. Gentleman thought that this maximum was too heavy or not heavy enough. But he will appreciate that it is a penalty that may be imposed not only where a person has made a false claim for himself, but also where a person has been aiding and abetting a false claim to be made by somebody else. I will certainly examine what he has said and see if this needs further attention, but I was putting the matter before the Committee as a perfectly simple proviso that that would be the maximum penalty in the case of anyone who tried to cheat, or who helped another person to cheat, in respect of this part of the Bill.
    Mr. Mitchison: I should like to ask the Financial Secretary if the hon. and learned Solicitor-General (Sir H. Hylton-Foster) is not going to say anything; because he could say, without doubt, whether these two penalties could be imposed on the same person; that is, under the 1952 Act, where there is imprisonment, and under this Bill, which provides for a fine of £500. Could those penalties be imposed for the same offence?
    Clause ordered to stand part of the Bill.

    Clause 24.—(INCREASE OF PROFITS TAX.)
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    Mr. J. Grimond: This is a most important Clause which is completely contrary to the general tenor of the Finance Bill. The Chancellor has impressed upon us that he introduced a "savings Budget." The country is notoriously short of savings, and particularly savings for investment. In fact, the trouble over Trinidad Oil is largely due to the fact that the company has not been able to put aside sufficient profits for its development and cannot raise the amount needed on the market. Yet, the Government are actually increasing tax on what one might call risk savings. The Government put up the rate of Profits Tax and, in so doing, not only hit the savings but also go contrary to the findings of a very distinguished Committee.
    What are the reasons advanced? We are told that this is done to appease the trade unions; but I do not believe that it will succeed, nor deserve to succeed. The trade unions are not interested in this Clause in the least, and I do not believe that they will abate their wage demands one jot or iota because of it. It is also said that it is necessary for the Chancellor to be helped in getting his surplus, but if that is so, then he could hardly have chosen a worse means than this, bearing in mind that he tells us he has introduced a "savings Budget." The case for this Clause, of course, is that profits, distributed or undistributed, belong to the shareholders, but the number of shareholders in public companies in this country is very small. The time has come to spread this ownership so that many
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    more people benefit from any increase in profit.
    As this Clause stands at present, it is contrary to the Chancellor's announced intentions, and contrary to various proposals put to him from different parts of the Committee. Secondly, I cannot believe that anyone would defend it as being of any benefit to industry at the present time. Indeed, it will reduce the amount of savings available for risk investment at the very moment when we need a large increase in that direction.
    Mr. H. Lever: I am sorry that my earlier contribution against the conferring of sectional benefits should result only in my being likened to a much-respected but now deceased Member of the House who used to ornament the back bench opposite. I hope that my contribution upon this Clause will not result in even more irritating and, perhaps, unfair—to the deceased person—comparison; but again I find myself rather in a minority view about the mechanism of the tax law which is so confidently used by successive Chancellors, of both parties.
    Ever since I have been here, there has been a myth prevalent in the House that there is virtue in a company ploughing back its profits and sinfulness in a company handing them out in the form of dividends, and that the community interest is best served inevitably and in all cases if money is ploughed back into companies and not handed out in dividends to shareholders.
    All this fits in with what I have long known to be a typical British habit. Anything that sounds pleasant must be regarded as liable to be harmful and discouraged and, therefore even those who are not shareholders must regard the handing out of dividends as causing pleasure to somebody: and there must be a feeling by everybody, if people can accept this strange and wholly illogical doctrine, that we must at all cost stop that pleasure of dividend receipt by the shareholder, and that if we do so the nation as a whole is bound to benefit.
    That theory is preposterous. There is not a word of logic to justify it as a generality. That is to say, merely to hear that a company has ploughed back its profits and has not given them away to shareholders is neither necessarily beneficial to the community nor to the Inland Revenue.

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    In the first place, it all depends what kind of company one is dealing with. If dealing with a great engineering concern making turbines to satisfy the insatiable appetite for these export goods on world markets, it is perhaps wise to encourage the ploughing back of profits to expand the business, obtain new capital, keep it up to date, and so on. If, on the other hand, one is dealing with an enterprising owner of pin-table saloons, there is no national advantage in discouraging him from paying out his money in dividends but encouraging him to plough back the money into his pintable business, thereby enabling him to push up the rents of shops which might be more usefully engaged, thereby giving him the liquid funds which enable him to put orders into engineering works, who thereupon proceed to make pin-table mechanisms instead of something which might be useful for turbines and other things.
    Let it be seen at once, therefore that none of these axioms like most of those which have activated successive Chancellors of the Exchequer, have any foundation at all. There is no general proposition which can be supported by any intelligent or knowledgeable individual that a gain for the community necessarily results if profits are ploughed back rather than paid out as dividends to all the shareholders.
    I had to point out, in connection with the insurance company Clause, that the Chancellor was giving away public money without taking even the kind of steps that were taken 50 years ago by his predecessors to protect the public interest. Oddly enough, we find the same sort of thing happening here. The Chancellor, who thinks he is progressive and forward-looking, has fallen into the error of supposing that by discouraging the payment of dividends he will make a net benefit to the revenue.
    1.30 a.m.
    Quite a long time ago—I think as long ago as 30 years—it was realised by the Inland Revenue that there was nothing the average capitalist liked better than to plough back his profits and not pay them away as dividends. This, of course, applied whether he was making pintables or electrical machinery. What happened was that he would pay the
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    standard rate upon profits, keep the rest in the business and spend from his other resources, knowing perfectly well that he was building up a capital fund in his business which one day would repay the capital he had spent from his other resources.
    Let me just take an illustration, because it will explain to a great many people who are unable to understand it how it is possible to enjoy an earned income of even £50,000 or £100,000 a year under present tax regulations. The interesting thing is that the Chancellor is encouraging the process.
    A man may own a business which earns £100,000 per annum in a limited liability company; after standard tax the company is left with roughly £60,000—say £55,000. Let him take no dividends out and he genuflects appreciatively towards the Chancellor and tells the Inland Revenue, "Because the Chancellor does not want me to pay dividends I am not going to pay any at all", so he keeps the £55,000 in his company. He can then afford to take out £20,000 from his private account of his own personal resources, if he has any, with confident assurance that as fast as he spends his personal assets outside the business he is accumulating in the wholly owned company of his own at the rate of £55,000 addition to his wealth. In that case, if a man has ten years reasonable prosperity he has a company with £500.000 cash or money's worth in the business; and even if he spends £200,000 outside, of his other resources, he will be £300,000 better off at the end of ten years than if he had paid it out in dividends.
    Mr. Albu: He is more likely to be in gaol.
    Mr. Lever: My hon. Friend says that, but he betrays a lamentable ignorance of the law upon the subject in making any such suggestion. I should like him to tell me where there is anything unlawful in the illustration I have just given, even in civil law, still less in criminal law.
    Mr. Albu: I imagine the gentleman would be assessed for Surtax. That is all.
    Mr. Lever: My hon. Friend is letting his imagination carry him away. I think it was Voltaire who once said it was men who spoke from knowledge and women from imagination, but apparently the fair

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    sex are not alone in that capacity. The facts of the matter are, of course, that he becomes assessed for Surtax only if he is not paying as much dividend as he paid when the Cripps "umbrella" was put up, because in the normal expectation he was then paying only a small sum, or no sum at all; there would be no Surtax applied against him in his business. It is perfectly possible—and in fact happens—for very large sums to be accumulated in business which are not attracting Surtax at all. My hon. Friend is completely away from an understanding of the point if he supposes that the man does anything unlawful or improper in accumulating.
    As we are speaking on the subject of accumulation and the like, let me say at once that I often hear violent denunciations from both sides of the Committee of those people who do this sort of thing, accumulating money in that way, rather than deliberately incurring a Surtax liability. I am an eccentric upon this point too. I have never been anxious to pay the Chancellor of the Exchequer a farthing more than I may be lawfully compelled to pay. I know that in that respect I am an exception. All the rest of the hon. Members who speak on this subject are violent enthusiasts for paying the maximum amount possible, and under no circumstances take any sort of advantage of any concessions which are available.
    I have heard these denunciations from both sides of the Committee. The more radical of those who make the denunciations are saying that the citizen should make the decision at what point he is to inflict upon himself the burden of taxation. Shall he tax himself at 16s in the £ by doing a little covenanting of his income to dependent relatives and girl friends? Shall he tax himself at 18s. in the £ by restricting the covenants to girl friends and letting the relatives go hang, or shall he pay no Surtax at all by means of the many devices which are available?
    What is being said is that the citizen is to blame if he makes the decision at the wrong point or at a point which does not give enough of his income to the Inland Revenue to satisfy the hon. Member who is denouncing him for his evil guile and rapacious greed. The odd thing is that the moral responsibility in the matter rests not upon the man—
    The Deputy-Chairman: The hon. Member seems to be getting wide of the Clause.
    Mr. Lever: Sir Rhys, I am talking about the consequences of the Clause and trying to enlighten the Committee. It is obvious that very great ignorance exists.
    The effect of this sort of legislation is that it is we who are responsible and not individuals outside who apply the legislation in order to give themselves the minimum tax liability. Hon. Members are in a position to alter the law. With tax rates as high as they are, we must not complain if people take every lawful step open to them to reduce the onerous burden. If one must complain to anybody, one must address one's complaints to the Chancellor, but not to the individuals who are asked to decide at what point they should take advantage of the tax law, at what point they should stop taking advantage of it, and what rate of taxation they should apply to themselves. It is a curious belief that it is for the citizen to decide as a matter of moral principle how far he will reduce his tax liability—
    The Deputy-Chairman: The hon. Gentleman is, no doubt, giving a very valuable dissertation on the general principles of taxation, but he is not dealing with the specific provisions of the Clause.
    Mr. Lever: I am very much assisted Sir Rhys, in coming back to the point that I was seeking to make. The Clause encourages not a gain to the revenue, as it purports to do, but a loss.
    I wish the Chancellor would look at the point again. He will find that his predecessors 30 years ago not merely encouraged dividend distribution in privately-owned companies but took unpleasant, uncomfortable statutory powers to compel dividends from companies which were unwilling to pay them. When a dividend is paid, of course, Surtax has to be paid on the receipts.
    I suppose the Chancellor himself is under the delusion that the Revenue is the gainer as the result of his Clause and policy. The Revenue, of course, loses very considerably, and has done so, by the application of this principle, which, I am afraid, has been in existence since the late Sir Stafford Cripps first introduced it.
    Mr. Houghton: Is my hon. Friend supporting the recommendation of the Radcliffe Commission for a flat-rate Profits Tax on distributed and undistributed profits alike?
    Mr. Lever: Being rather more cautious than most of the theorists in the Committee, I should not like to commit myself. I should like to reflect upon the different types of company and perhaps suggest different rates for different companies, but I cannot subscribe to the general principle here evidenced that it is a good thing necessarily to plough back profits and a bad thing necessarily to pay them out in dividends. On the whole, I lean towards the recommendation of the Royal Commission that there should be a flat rate rather than the complex differential which exists.
    The Chancellor is supposed to be discouraging unnecessary capital expenditure. One of the great sources of unnecessary capital expenditure has arisen because of the peculiarities of our tax system, especially the manifestation which we are discussing at this moment, because, as a result of this differential between the dividend distributions of the company and the ploughed back profits, a good many company directors who own very little of the share capital are thus encouraged to plough back money into the company whether or not they need to do so, because that is what successive Chancellors tell them is the right thing for the company, for the country, for the Revenue and for everybody. They continue to do so whether or not it is needed in the business.
    Then, after a while, a Mr. Clore comes along and sees this company as a juicy plum because, by reason of the discouragement of dividends, the price of the shares stands very low on the market, whereas the company has a large sum of money. There is therefore a dual pressure. The company's dividends will go down and down because of the policy of the Chancellor, although it is no doubt admired by all the economists—because whenever there is a wrong policy we can depend upon the economists to be behind it 100 per cent.
    I am not making an attack upon all the people who interest themselves in economics. I am referring to those who guide the very often palsied and trembling hand of the Chancellor as he writes one
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    more unintelligible tax Section after another into our tax law. Chancellors have been guided by all these experts, who have worked very considerable ruin to our economy for the last eleven years. All these people naturally favour this differential.
    Mr. Albu: My hon. Friend is much more convincing than the Sunday Times.
    Mr. Lever: I hope that my hon. Friend's next intervention will be more to the point at issue. We have this cohort of Treasury experts and the like on the one hand, and our Chancellors on the other, who are too harassed and too busy with their political speeches and moralising and telling us how we should save, to understand the position. They tell us we should not go for a lump sum but should use it up in the form of weekly payments. They tell us of disasters to come—and disaster probably will come if this sort of policy continues.
    The only relaxation the poor Chancellor is permitted is to lecture and to lard his lecture with some of his less well-known jokes, and even then he is chivvied and attacked and harassed.
    The Deputy-Chairman: I do not want to interrupt the hon. Member, but he is getting rather wide of the Clause.
    Mr. Lever: I am bound to say that one gets more clarity when one is not so insistent upon brevity.
    The Deputy-Chairman: The first point which concerns me is that of relevance.
    Mr. Lever: I would have said that in reference to this Clause nothing could have been more pertinent than my remarks about the harassed position of the Chancellor, but if you say that is going a little too wide, Sir Rhys, I will keep off that point.
    But it is quite plain that the Chancellor does not understand the workings of the Clause, which provides a differential rate. He is very keen to damp down unnecessary capital expenditure. As he must know by now—though he probably did not at the beginning—his policy is designed more or less to wreck all kinds of capital expenditure and discourage all kinds of useful ploughing back of our resources into capital investment in order to make us competitive in world markets.

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    But still, officially, he says he wants to damp down unnecessary capital expenditure.
    1.45 a.m.
    What greater likelihood have we of getting this unnecessary expenditure when we encourage all companies irrespective of their business—it does not matter whether they provide dubious furnished accommodation or make the latest form of electric motors—to plough back profits and not to pay them out in dividends and thus attract Surtax from the recipients of those dividends? The point I was getting to a little while ago, when perhaps we were diverted from the straight path of the argument, was where we were referring to some companies which collected large funds at the request of the Chancellor and paid no Surtax and did not need the money and did not pay any proper dividends to the shareholders and consequently the shares were low on the market. Then along comes the take-over man. To him, of course, it is an absolute plum, because the activities of the Government—
    The Deputy-Chairman: Order. I have heard this argument before. The hon. Gentleman is now repeating himself.
    Mr. Lever: I was diverted from completing that argument and I was just recapitulating the points I had made before I was diverted because of the lateness of the hour.
    What happens at this point—and this is a completely new argument—is that the directors who have these large funds realise that they will attract the attention of the take-over bidder if they remain with £500,000 or £200,000 in the bank and pay no dividends. The discontented shareholders—who often are not devotees of the Chancellor's economic theories, and have no honours graduates in economics at their elbows to assure them how wise and pleasant is the whole policy—are ready to sell out at any moment to a take-over bidder. What do the directors do to guard against that? They have to lock up the money and put it out of reach of the take-over bidder.
    Mr. Houghton: Or distribute it.
    Mr. Lever: They dare not distribute it because of the costs of distribution, and in any case, the Chancellor will wag his finger at them and the economists will
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    denounce them. Let us be fair and admit that many hon. Members on this side of the Committee would get up and denounce them for paying dividends to bloated shareholders.
    They dare not hold on to the cash. They have to invest it, whether they need the capital goods in which they invest or not. I am certain that the substantial pressure on the capital goods market is caused by companies fearful of a takeover bid, who will not allow the company to accumulate large liquid funds or pay out dividends because the Chancellor and the economists will not like it and some of my hon. Friends will scream at them. They will not leave the cash in the company because the take-over bidder will disturb their dictatorial sinecure. So they have to take the liquid funds of the company and invest them in something which ostensibly is an expansion of business.
    The Chancellor should give a little thought to his habit of discouraging the payment of dividends. We know that he intended it only as window dressing and that it does not affect the industrial situation. On the other hand, he is doing economic damage. He should take note of the Royal Commission which sat on the subject. After all, the Commission considered the matter carefully and had the advantage of knowing what was the effect, an advantage which is denied to most of us including the Chancellor. The right hon. Gentleman is a busy man. He has to worry about repairing the damage done by the credit squeeze and the Bank Rate and the like. He has no time to study this Clause and understand it.
    It is a difficult task to get into the prose style of the Economic Survey and to understand and master it. But now we have to master the language of this Clause, and I defy anyone who has even given a great deal of attention to the preceding Clauses to understand the complex provisions of these Profits Tax Clauses. This raises a further point which must be of importance to this House. Are we to go on passing laws, very often with criminal consequences, without even understanding what we have passed? At least in former days one would not get a Clause like this before the Committee—certainly not under a Labour Government—a Clause thrown at the Committee for anyone to elucidate, explain or illustrate, for he, like the

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    Chancellor with the women Conservatives, is liable to be harassed by the Chair—
    The Deputy-Chairman: Yes, but the hon. Member has been harassed in his argument when it has been irrelevant.
    Mr. Lever: I am not saying this with any disrespect to the Chair, Sir Rhys, but I do believe that the danger against which the Chair should guard is not excessive discussion of these Clauses but inadequate discussion.
    The Deputy-Chairman: The Chair does not interfere with the relevant discussion of this Clause at all. What I object to is the irrelevant discussion of it.
    Mr. Lever: It is not always apparent on these complicated Clauses what will prove relevant in the end. I might start by saying I was going to tell the Committee a story of what happened to a famous French poet of the eighteenth century, and the direct relevance of that to the Clause might not be clear, but the ultimate unwinding of the story might prove to the Committee that I was making a point of direct pertinence, relevance and interest to the Clause in hand. For example, one always knows that these Clauses can sometimes be so tedious, complex and difficult to understand that hundreds of my hon. Friends who would normally be on these benches are sitting in the libraries of the House, driven to feel that their time is better spent there than in attempting to cope with highly unintelligible Clauses, which are not fully explained by the Minister.
    Does the Chancellor intend to explain to us on this Committee stage—and the Committee stage of the Finance Bill is something rather special and different from the Committee stage of any other Bill—this Clause which affects the taxation of every limited liability company in the land? Relevant to that, if I were to discuss the effects of this Clause on the textile industry, it would be relevant to go into almost any of the industries affected by this Clause. Certainly we want to know whether the Chancellor understands his own Clause. We have not heard anything from the Government about the Clause, or why, on this Committee stage, it should be any advantage to perpetuate a system which is definitely
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    harmful in its effects, as I have tried to illustrate. In case the Chancellor is going to ride off because I am a lone eccentric in these matters—and, by the way, I could present him with a complete answer to all my arguments from my Division records—
    The Deputy-Chairman: I cannot possibly see how the hon. Member's Division record is relevant to this Clause.
    Mr. H. Wilson: Further to that point of order, Sir Rhys, is my hon. Friend aware that the only thing which is stopping us producing the retort for which he is asking is the fact that we cannot speak while he is on his feet?
    Mr. Lever: As those who are prepared with a retort cannot be repetitive and tedious by each of them making it, I am making it on their behalf in advance. I should like to revert to the merits of the Clause rather than to the merits of myself as a regular attender at debates. I shall soon release to my right hon. Friend or anyone else the opportunity of making any witticisms at my expense, and no one will enjoy it more than I shall, but all those hon. Members who are inclined to make the retort should make it on the Clause.
    The Chancellor must not try to ride away on the fact that all the sound thinkers on economics in this Committee are against me on this. We all know that they are against me on this. We all know that they will be in favour of anything that is calculated to cost the Revenue money; but they must not ride away on the answer that the only person who criticises this is the insignificant hon. Member for Cheetham. The Royal Commission, which studied this question, has seen all the evils of the differential, which are not only perpetuated but made worse by this Clause.
    May I ask the Chancellor to disturb his somnolence to say why it is that, if he is too idle to abolish the differential, he has greatly increased it? Can he tell the Committee why that is a good thing and how it will reduce the pressure on capital goods if he thinks it will encourage companies to pay Surtax on their profits? Can he tell us why he has no proposals to make to the Committee which will result in the ploughing back of profits and why, on the other hand, he forces companies not engaged on essential work

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    to distribute their profits with the usual Surtax consequences?
    In these circumstances, I shall be very reluctant to divide the Committee but, on the other hand, I hope that we shall have an explanation. I can see that no one else is prepared to divide the Committee, and I shall have to do so with the aid of such sympathy as I can command, from both sides, but I hope the Chancellor will mollify my antagonism by a reply at least to the point at which I might defer a more lengthy, careful and bitter opposition to this Clause to Report stage and avoid any such Division at this late hour.
    Mr. H. Wilson: I hope my hon. Friend the Member for Cheetham (Mr. H. Lever) will forgive me if I do not follow him in all the arguments he has made, but I am sure I shall be speaking for both sides of the Committee when I say what a pleasure it is to hear his voice and to compliment him on the speech he has made. He has addressed the Committee with great authority, and I can assure him that we shall be very glad to hear from him again on another occasion—not tonight—if he is successful in catching your eye, Sir Rhys.
    When my hon. Friend got up to speak, I must say my heart was full of sympathy for a number of right hon. and hon. Members opposite, for none more than the Patronage Secretary, because he will probably remember—not the last time my hon. Friend spoke, but the last time I heard him, on 20th November, 1953—when he entertained the House for more than three hours with a very powerful speech. I know the Patronage Secretary must have been afraid that was going to be inflicted on us tonight. I was also sorry for a number of hon. Members who had to restrain themselves with great difficulty from entering the debate on this Clause.
    I was going to raise this on a point of order, Sir Rhys. Why is it that the Amendments in the name of the hon. Member for Wycombe (Mr. John Hall): In page 34, line 42, to leave out "twenty-seven" and to insert "thirty"; and In page 35, line 2, to leave out "twenty-seven" and to insert "thirty". have not been called? Were they not selected, or not moved by the hon. Member who put them on the Notice Paper? It is very obvious to the Committee that a number
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    of hon. Gentlemen, not to mention noble Lords, opposite who feel very strongly on this Clause are restraining themselves and showing great patience tonight, and it must have been rather galling, however much some of them may have agreed with my hon. Friend to have felt that he was expressing their arguments while they felt precluded from addressing the Committee on this Clause.
    2.0 a.m.
    I do not intend to detain the Committee for more than two or three minutes on this particular Clause, though, as my hon. Friend has pointed out, it is a very important one. There are one or two points on which we would hope that the Chancellor or the Economic Secretary would give us an answer. I thought that my hon. Friend, if I may say so, was a little less than fair when he referred to the palsied hand of the Chancellor being guided by some economic theorist—
    Mr. H. Lever: Of this Chancellor.
    Mr. Wilson: Yes, of this Chancellor—being guided by some economic theorist on the permanent staff of the Treasury.
    We have all had doubts about the Chancellor's capability, especially two or three hours ago, but none of us has ever felt that his hand was palsied. If my hon. Friend attended our economic debates with rather greater frequency he would know by now that, whoever is the Conservative Chancellor, his hand, palsied or otherwise, is guided not by the Civil Service but by the Economic Secretary, who has succeeded year by year in persuading Chancellors to embark on all kinds of disastrous policies. The responsibility should really be placed on the shoulders of the hon. Gentleman.
    It has been said by the Liberal Chief Whip who spoke a few minutes ago—and we were all very glad to hear his intervention, even if most of us, on this side at any rate, disagreed with him—that the only motive that could have impelled the Chancellor to put this Clause into the Bill and to put this idea into the Budget was an attempt to appease—I think that was the idea of the Liberal Chief Whip—the trade unions; to buy them off from further wage claims.
    I must say that the same suspicion had occurred to me, and I think that I gave voice to it in the debate on the Budget.

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    I then said that if the Chancellor really hoped to solve the economic problems of the country and to put an end to the wage-price spiral by this increase in Profits Tax he was going about it in entirely the wrong way. I am sure that any trade union leader, or any member of the rank and file of the trade union movement, wondering what answer to give to the Chancellor's Newcastle speech—that very expensive speech; I do not know how many millions of dollars per word it cost us as a nation—would not be moved in the slightest degree by this Clause 24. The one thing that would move him would be a halt in the continuing and sharpening rise in the cost of living in recent months. If that is the motive of Clause 24, I must tell the Chancellor—what he must know by now—that it has failed. It may be that that was not his motive.
    Another suggestion put forward, not this evening—or rather this morning—is that the Chancellor has some mystic faith in the old Gladstonian principle of the division of tax revenue between direct and indirect taxation. Indeed, certain words in his Budget speech suggested that he felt that if he had to raise £X million more in revenue, half of £X million should go to indirect taxation and the other half to direct taxation. One could almost hear him—when he could divert his attention from Dickens to Gladstonian speeches—repeating, though not in the very words, the passage of Gladstone's most famous speech in which he referred to the two attractive sisters to whom a Chancellor should pay court—indirect and direct taxation.
    My hon. Friends have already warned the Chancellor of the effect on the cost of living and on wage demands of the increase in indirect taxation—
    Mr. Douglas Glover: Perhaps the right hon. Gentleman would agree that the two attractive sisters have by this time become a couple of old shrews.
    Mr. Wilson: I would like to go into the question with the hon. Member, but I fear that I should be very much out of order if I were to follow him in that particular argument. It is an important point, and I hope we shall have an opportunity on some future occasion
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    of debating the point he has raised. As far as I know, no one has suggested any substitute for the old shrews he has in mind.
    The main point raised in the debate so far is the question of continued differentials between distributed and undistributed profits. It is true that the Royal Commission's Report recommended in favour of a unified system of profits taxation. I am bound to say, though it is rather difficult to develop the point, and I do not intend to do so, that that recommendation of the Royal Commission is not one which commends itself to my hon. Friends and myself.
    It is important to hear from the Chancellor, or the Economic Secretary, what attitude they take. When the Lord Privy Seal, in the ill-fated autumn Budget which spelled the end of his own regime at the Treasury, increased Profits Tax, he went out of his way to say that it was entirely without prejudice to the question of unifying the two rates of Profits Tax; that he would consider the merits in due course, and that if he had widened the gap between the two rates, that did not mean that he had decided against the Royal Commission's recommendation.
    The present Chancellor spoke rather in these terms during the Budget debate but we would like tonight to hear the Treasury spokesman's view on this important question. It would be out of order to debate this, but I suggest to the Chancellor that he ought not to rush into any proposal, even though it is pressed upon him by two hon. Members, for amalgamating the two Profits Tax rates. I hope that, before he considers doing so, he will study the minority report. It is true that the Report of the Royal Commission has some favourable words about the possibility of amalgamating the two rates, but they make them conditional upon the acceptance of a capital gains tax first.
    I cannot tonight put to the Chancellor any of the argument in favour of a capital gains tax; but in case the Treasury spokesman is in danger of committing himself to unifying the rates, I hope he will, in his mind at least, make a reservation that it can only be considered if and when a capital gains tax has been introduced. When my hon. Friend, between references to eighteenth century French poets and other subjects,

    457
    referred to take-over bids and to the danger of the activities of Mr. Clore affecting companies which have large sums tucked away in undistributed profits, he was making the strongest case for a capital gains tax, because it would be impossible for these things to happen if there were a capital gains tax.
    I will not pursue that point, but I hope I have said enough to make clear that, if this Clause was intended as a sop to us, we reject it with contempt. [Interruption.] I am sorry that we have not heard the noble Lord on this Clause tonight, because I know that he is burning with feeling about it. I will not try to provoke him. There can be only one or two reasons why the Chancellor introduced this Clause. One is as a sop to the trade unions. We have heard that argument raised and discussed and I think rejected.
    The other reason was that perhaps he felt that if he offered something which we would welcome we would fail to notice the more sinister and objectionable parts of his Budget. The noble Lord may have noticed that in the Economist it was suggested that the Chancellor was doing this as a sop to this side of the Committee. If that was his intention, he will know how utterly he has failed.
    However, we do not think that the Clause is as disastrous as the noble Lord and my hon. Friend the Member for Cheetham feel. Subject to what may be said from the Treasury Bench, I do not suggest to my hon. Friends that we should divide the Committee against it. I think that we are prepared to tolerate the Clause, though we do not feel very enthusiastic about it.
    Many of the arguments of my hon. Friend the Member for Cheetham—and in some quarters of the Committee they were felt to be cogent and powerful—cannot be dealt with by Amendments to the Bill. For instance, we cannot deal with the capital gains tax or some of the other abuses to which he referred, and I do not propose that we should do so. It is, however, a great pity that we should be discussing an important question like this at quarter past two in the morning on a Bill which, like the last one we discussed, is very narrow in its approach, however objectionable it may have been. I suggest that, so that the whole Committee can get its ideas clear, not only
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    on Profits Tax but on other aspects raised during the debate, it would be very desirable, as soon as we have got this Bill out of the way and before we get the Finance (No. 3) Bill for the current Session, to devote a full day to a perhaps relatively uncontroversial debate on taxation generally.
    The Deputy-Chairman: The right hon. Gentleman is really now covering a very wide area.
    Mr. Wilson: Naturally I will not press the point. If we could have such a debate, I could make the point I have in mind much more fully, and I trust that I should be in order the whole time. Some very important matters are dealt with in the Clause. I know that the Chancellor will be able only to touch on them in his reply, but it is very important that on some occasion we should discuss the whole issue of Profits Tax, Income Tax and all the issues raised by the Clause.
    Mr. H. Macmillan: I listened to the speech of the hon. Member for Cheetham (Mr. H. Lever) with a great deal of pleasure, because it is very rarely that we have the opportunity of listening to views somewhat divergent from the more hackneyed, partisan and party positions which are taken up normally on both sides of the Committee. He claims to be an eccentric, and I must say that I welcome his eccentricities. Perhaps it is one of his eccentricities that he only gets going at a rather late hour in the night. We should enjoy his speeches perhaps even more if he would sometimes give us the pleasure of listening to them in the afternoons.
    The right hon. Member for Huyton (Mr. H. Wilson) covered a very wide range of topics and made a number of observations about quite a lot of other things. I did not gather from him any very clear picture, except that he wanted to have a debate on some other occasion on the broad problem of taxation. That was the good part of it—some other occasion. On this occasion I understood that he was not proposing to rally and marshal his great forces into the Lobby against the Clause.
    Mr. H. Wilson: I am sure that the right hon. Gentleman does not want to misrepresent what I said. I said that whether we shall rally our great forces

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    against the Clause very much depends on the answer we have from him.
    2.15 a.m.
    Mr. Macmillan: I hope that I shall give an unsatisfactory answer and force the Opposition to divide. I shall do my best to do that. Then we shall see what real enthusiasm the Opposition have for carrying on.
    All sorts of reasons have been attributed to me for having put forward this proposal. One is to appease the right hon. Gentleman. He is already so agreeable that I have no need to appease him. Another is to mark some view about the position taken on the Royal Commission about Profits Tax. That was not my intention. I still think we have to consider—and so I welcome the right hon. Gentleman's proposal that we should on some due occasion—this very difficult question of just how this matter should best be dealt with. I know the views of many of my hon. Friends on this subject, and they have, with great reticence, for which I am grateful to them, reserved them for that day's full-dress debate we are to have on some suitable occasion.
    I am not going to refer now to the Amendments which have not been moved, but there are some who feel that we ought not to have a tax on the undistributed profits at all. I think that that was the view of the Chief Whip of the Liberal Party. Had I done that, I think I should have turned the Profits Tax into a dividends tax entirely, with no character of a Profits Tax about it at all. Had we wiped out altogether tax on undistributed profits, we should have been changing the character of the tax from that of a Profits Tax to that of a dividends tax. That I did not wish to do.
    What I wished to do—and I put it frankly to the Committee—was to raise some money to fortify the surplus and to raise it in a way which would make the least disturbance of the present system. I leave over for future consideration what ought to be—it is a difficult question for us to settle—the proper position of Profits Tax in our taxation system.
    Since there seems to be a general agreement that this Clause is not to be
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    violently opposed, I hope it may be approved by the Committee, and I hope that as all those motives attributed to me are wrongly so attributed, the Committee will accept it from me that the quite simple purpose of the Clause is to raise a certain amount of money.
    Mr. H. Wilson: I am not sure whether the right hon. Gentleman's intention was to give a reply so satisfactory that we could welcome the Clause and let it go through, or so unsatisfactory we might feel called upon to divide against the Clause. I think that, in accordance with the principle he enunciated at a much more timely hour of the day, he seemed to be following the middle way between the two courses. He has certainly not filled us with any enthusiasm for anything in the Bill, not even this Clause, by what he has said. He suggested that he will give more thought to the question of Profits Tax before the great debate which, apparently, both sides of the Committee hope to have in the not too distant future.
    I can, perhaps, reply to the point made by the right hon. Gentleman about the possibility of our dividing on the Clause. He seemed to suggest that we were somewhat few in number here tonight—a suggestion which I thought rather surprising, because he referred to the enthusiasm with which we were fighting this Bill and our enthusiasm for being here at all. We have no enthusiasm for being here to discuss this Bill tonight. We shall be happy if the right hon. Gentleman immediately moves to report Progress so that we can go home to bed now and, and a more timely hour, discuss these important issues.
    The Deputy-Chairman: The right hon. Gentleman is departing far from the Clause now.
    Mr. Wilson: Yes, Sir Rhys. I come back to it at once. I do not know what is the wish of my hon. Friend the Member for Cheetham (Mr. H. Lever), but I do not propose to divide the Committee on this Clause; nor do I feel that we should have more people here for this particular type of Clause. We on this side believe that the controversy for which most of the hon. Members opposite are waiting will not be found in Clause 24 but in Clause 34.
    Mr. H. Lever: As I am, apparently, the only opponent of this Clause, I for my part would say that the answer given by the Chancellor has been completely evasive on the points which I raised. But, on the other hand, the answer was framed in so courteous a manner that I cannot believe the Chancellor intended any discourtesy by ignoring my remarks. Because of the late hour, he could not, perhaps, deal comprehensively with the matter, and I feel that I should defer dividing the Committee.
    Hon. Members: Divide.
    Mr. Lever: That is all very well, but the difficulty is that some hon. Members have only just arrived in the Committee. [An HON. MEMBER: "Oh."] Well, I observed that I was interrupted by the Chair when I referred to my attendances in the Committee, and I was ruled out of order; but apparently everybody else can refer to them.
    The Deputy-Chairman: The non. Member must restrain himself. We are now discussing the Question. "That the Clause stand part of the Bill."
    Mr. Lever: It appears that when I am trying to elaborate, in as simple a form as possible, what are my views, hon. Members come into the Committee and interrupt.
    The Deputy-Chairman: The hon. Gentleman is interrupted because he is irrelevant; and he is being irrelevant at the moment.
    Mr. Lever: Surely, Sir Rhys, one may refer to the personal attitude of right hon. and hon. Members. The Chancellor is no more a Member of this Committee than back benchers.
    The Deputy-Chairman: The Motion under discussion is that Clause 24 stand part of the Bill, and the hon. Member is completely out of order.
    Sir Robert Boothby: If the hon. Member is really maintaining that every time another hon. Member enters the Chamber then all the preceding arguments have to be repeated for his benefit, we should stay here for a very long time indeed.
    Mr. Lever: I was not attacking the hon. Gentleman. I am merely saying that it is idle for him or any other hon.
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    Member to come into the Committee and urge me to divide, but if I am urged to express my view, I am bound to say that we are in a most unsatisfactory position. But I will certainly arrange to contribute to further discussions on this and other matters if I am fortunate enough, Mr. Chairman, to catch your eye.
    Mr. Houghton: Or to get the time off.
    Mr. Lever: Or not be engaged in other activities, of which I have many outside this Chamber.
    But may I proceed? It is abundantly clear that some vigilance, actually in this Chamber, is required on matters which affect the whole of industry in this country. There has been no explanation from the Chancellor. If the Chancellor were to say that he was too tired to deal with the points I have raised and wanted to adjourn the discussion. I might be agreeable not to divide the Committee.
    I have raised direct points concerning taxation. It is no good saying that the Report stage is to follow. The Committee stage is the time when the Clause should be carefully rehearsed through the minds and judgment of hon. Members, on both sides, and the stage at which the Minister responsible should answer the arguments which have been addressed to him. The fact that the arguments have been addressed to him by one who neither has the backing of any school of economic thought nor is a member of the Privy Council does not absolve the Chancellor from his duty.
    I must raise certain questions in the hope that the Chancellor, like myself, will exercise his option of speaking twice—
    Mr. H. Wilson: As I feel some responsibility for getting my hon. Friend on his feet again, may I put this to him? It is an extremely late hour and there are still some important Clauses before us. The Chancellor has, quite agreeably and co-operatively, met the proposal that we should have an opportunity of debating the whole range of taxation. In view of that, would it not be more helpful to the progress of the Committee as a whole if my hon. Friend came quickly to a decision whether to divide the Committee?
    As far as we on this side are concerned. I do not wish to put any pressure on my hon. Friend as to how he comes

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    to his decision, as long as he does it reasonably quickly. If he decides to divide the Committee, while we reserve our own freedom of action, it will be a demonstration to the Chancellor what freedom means in my party.
    Mr. Lever: Having been thus encouraged, I will divide the Committee upon the Clause. I object to the Chancellor not merely not giving effect to the considered recommendations of the Royal Commission, but going far in the opposite

    Clause 25.—(GROUPS OF COMPANIES.)
    Mr. Stevens: I beg to move, in page 35, line 24, to leave out "is" and insert "was."
    I understand that it is your direction, Sir Charles, that we might at the same
    direction. It is all very well for him to say that he does not want the tax to be a dividend tax, but that is what it is for all practical purposes. In those circumstances, I shall certainly divide the Committee upon the Clause. The Chancellor will then be able to see what is the position of his own supporters as their heads are counted at this hour of the night.
    Question put:—
    The Committee divided: Ayes 125, Noes 0.

    Division No. 213.]

    AYES

    [2.29 a.m.

    Agnew, Cmdr. P. G.

    Hill, Mrs. E. (Wythenshawe)

    Heave, Airey

    Aitken, W. T.

    Hinchingbrooke, Viscount

    Nicolson, N. (B'n'm'th, E. & Chr'oh)

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

    Hirst, Geoffrey

    Oakshott, H. D.

    Arbuthnot, John

    Hornby, R. P.

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

    Ashton, H.

    Hornsby-Smith, Miss M. P.

    Ormsby-Gore, Hon. W. D.

    Balniel, Lord

    Howard, John (Test)

    Page, R. C.

    Barber, Anthony

    Hughes Hallett, Vice-Admiral J.

    Pannell, N. A. (Kirkdale)

    Barter, John

    Hughes-Young, M. H. C.

    Peyton, J. W. W.

    Baxter, Sir Beverley

    Hylton-Foster, Sir H. B. H.

    Pitman, I. J.

    Bell, Philip (Bolton, E.)

    Iremonger, T. L.

    Pott, H. P.

    Bennett, F. M. (Torquay)

    Irvine, Bryant Godman (Rye)

    Powell, J. Enoch

    Biggs-Davison, J. A.

    Jenkins, Robert (Dulwich)

    Rippon, A. G. F.

    Body, R. F.

    Jennings, J. C. (Burton)

    Robinson, Sir Roland (Blackpool, S.)

    Boothby, Sir Robert

    Johnson, Eric (Blackley)

    Schofield, Lt.-Col. W.

    Boyle, Sir Edward

    Joseph, Sir Keith

    Sharpies, R. C.

    Brooke, Rt. Hon. Henry

    Keegan, D.

    Shepherd, William

    Brooman-White, R. C.

    Kerby, Capt. H. B.

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

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

    Kerr, H. W.

    Smithers, Peter (Winchester)

    Channon, H.

    Kershaw, J. A.

    Spens, Rt. Hn. Sir P. (Kens'gt'n, S.)

    Chichester-Clark, R.

    Kimball, M.

    Stevens, Geoffrey

    Conant, Maj. Sir Roger

    Kirk, P. M.

    Steward, Sir William (Woolwich, W.)

    Cordeaux, Lt.-Col. J. K.

    Lagden, G. W.

    Stoddart-Scott, Col. M.

    Corfield, Capt. F. V.

    Leburn, W. G.

    Studholme, Sir Henry

    Crouch, R. F.

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

    Summers, Sir Spencer

    Currie, G. B. H.

    Legh, Hon. Peter (Petersfield)

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

    Dance, J. C. G.

    Lindsay, Hon. James (Devon, N.)

    Thornton-Kemsley, C. N.

    D'Avigdor-Goldsmid, Sir Henry

    Lindsay, Martin (Solihull)

    Tiley, A. (Bradford, W.)

    Donaldson, Cmdr. C. E. McA.

    Linstead, Sir H. N.

    Tilney, John (Wavertree)

    du Cann, E. D. L.

    Longden, Gilbert

    Vickers, Miss J. H.

    Elliot, Rt. Hon. W. E.

    Lucas-Tooth, Sir Hugh

    Vosper, D. F.

    Emmet, Hon. Mrs. Evelyn

    Mackie, J. H. (Galloway)

    Wakefield, Edward (Derbyshire, W.)

    Errington, Sir Eric

    McLean, Neil (Inverness)

    Wakefield, Sir Wavell (St. M'lebone)

    Fell, A.

    Macmillan, Rt.Hn.Harold(Bromley)

    Wall, Major Patrick

    Freeth, D. K.

    Maddan, Martin

    Ward, Dame Irene (Tynemouth)

    Galbraith, Hon. T. G. D.

    Marquand, Rt. Hon. H. A.

    Waterhouse, Capt. Rt. Hon. C.

    George, J. C. (Pollok)

    Mathew, R.

    Williams, Paul (Sunderland, S.)

    Glover, D.

    Maude, Angus

    Williams, R. Dudley (Exeter)

    Godber, J. B.

    Mawby, R. L.

    Wills, G. (Bridgwater)

    Green, A.

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

    Yates, William (The Wrekin)

    Grosvenor, Lt.-Col. R. G.

    Medlicott, Sir Frank

    Harrison, A. B. C. (Maldon)

    Morrison, John (Salisbury)

    TELLERS FOR THE AYES:

    Harrison, Col. J. H. (Eye)

    Nabarro, C. D. N.

    Mr. Redmayne and Bryan.

    Heath, Rt. Hon. E. R. G.

    Nairn, D. L. S.

    NOES

    Nil

    TELLERS FOR THE NOES: Mr. Grimond and Harold Lever.

    time discuss my consequential Amendment to line 25, after "business", to insert:
    "in the relevant chargeable accounting period."
    The Clause contains a departure from established practice. It concerns the

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    method by which, where there are a parent company and one or more subsidiaries, they can elect for group assessment of Profits Tax instead of each company being separately assessed. The original provision for grouping was in Section 22 of the Finance Act, 1937, which provided that the notice for group assessment could be given at any time within six months of the end of the chargeable accounting period. The Clause, as drafted, with "is" means that should the parent or a subsidiary cease to trade within six months after the chargeable accounting period, the grouping notice could not be given. That kind of thing can happen often, not least in reorganisation and reconstruction.
    I ask my hon. and learned Friend the Solicitor-General, by accepting the Amendments, to maintain the tradition of the 1937 Act and to let the period be six months from the end of the chargeable accounting period whether trading has ceased or not.
    The Solicitor-General (Sir Harry Hylton-Foster): My hon. Friend the Member for Langstone (Mr. Stevens) has so rapidly and lucidly explained the reason for his Amendments that there is no need for me to detain the Committee about them. Obviously a grouping notice ought not to be given in respect of a chargeable accounting period of a subsidiary during which one of the companies was not carrying on a trade or business chargeable to Profits Tax.
    It is clear that the Amendments are right in principle. I cannot, on behalf of the Government, accept my hon. Friend's words in his Amendments because they are not quite right, but, if my hon. Friend will withdraw his present Amendment, my right hon. Friend will arrange to table a suitable Amendment on Report which will effect the purpose which my hon. Friend has in mind.
    Mr. Stevens: I am glad to have that assurance from my hon. and learned Friend. On that understanding, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Motion made, and Question proposed. That the Clause stand part of the Bill.
    Mr. H. Wilson: I do not intend to detain the Committee for more than a minuteߞ[An HON. MEMBER: "We have
    466
    heard that before."] I do not—and if I am not interrupted for too long I shall do it in half a minute. I merely want to ask the learned Solicitor-General briefly to explain the purpose of the Clause. I am sure that nine-tenths of hon. Members below the Gangway do not know what it is about.
    The Solicitor-General: I shall do my best. We all have our wild moments of optimism—even Law Officers—but not even in my wildest moments of optimism could I do anything but think that an explanation of this Clause could be anything but dreary in the extreme. The difficulty is that some hon. and right hon. Members know all about it already and others do not—and most of them certainly do not want to.
    The truth is that Profits Tax falls with equal venom upon all companies—unless their profits are so small as to be exempted—whether they are in a group or not. If a group of companies is suitable for group treatment it can give notice, which has the effect of causing the profits and losses of the group of companies to be treated as profits and losses of the principal company, and the frank investment income of the subsidiaries is treated as that of the principal. Dividends and other distributions within the group do not carry the higher rate of tax.
    It all works merrily enough if all the companies concerned are subject to Profits Tax, but they might not be; they may be exempt from Profits Tax under the provisions appropriate to very tightly held companies who have their income apportioned among their proprietors for the purpose of Surtax, in which case they are exempt from Profits Tax. All would work well if group treatment and the effect of a grouping notice came to an end if one of the companies concerned became exempt from Profits Tax. It was thought that that was the position, but the courts last year said that it was not so. The result is a gaping hole in the Profits Tax provisions, because one could, by setting up a one-man holding company to hold the dividends of a trading company avoid the taxation of the profits of the trading company at the price of a modest payment of Surtax in respect of the dividends distributed by the principal.

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    The Clause sets that right in substance. The main provision is to be found in subsection (3) which provides that when one of the companies becomes exempt from Profits Tax the operation of the grouping notice is to be suspended. That is the principle upon which the Clause marches. Everything which follows subsection (3) is really a consequential adjustment of the law, resulting from that provision, subject to the fact that subsection (6) provides for an election which now exists by concession. It may suit a group of companies to keep group treatment at the price of waiving their exemption from Profits Tax, and the power of election to do that is provided by subsection (6).
    The first two subsections do nothing but validate the existing practice of the Revenue with regard to group treatment and grouping notices, in so far as doubt has been cast upon it by the decision of the courts. I am at the disposal of the Committee, but I am loth to detain them with further detail. I shall be glad to answer any questions which hon. Members may wish to ask me.
    2.45 a.m.
    Mr. H. Wilson: I am sure that the whole Committee owes a deep debt of gratitude to the Solicitor-General. [HON. MEMBERS: "Oh."] Yes, really, not only for the very agreeable way in which he explained this Clause, but also for the great clarity which he lent to its explanation. I see from the faces of some of the hon. Gentlemen below the Gangway opposite that they are wiser now about this Clause than I suspected that they were when I put the question to the Solicitor-General, and therefore I feel that the question was not put in vain. I am sure that the Solicitor-General's explanation was followed by hon. Members on both sides of the Committee.
    I wish to put one point to the hon. and learned Gentleman. This Clause was the subject of considerable reference by the Chancellor and by the Financial Secretary in the Budget debate and also on the Second Reading of the Finance Bill. When on those occasions we pressed for more information, it was suggested that we wait till the Committee stage. Well, here we are at the Committee stage, and I am sure that it would
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    be wrong to pass too quickly from this, because it is clear from what the Solicitor-General said that it is an important new departure and one on which I suspect the Treasury did not enter too happily.
    This case, if I remember rightly—and the Solicitor-General will correct me if I am wrong—derives from a decision in the courts known as the Heelex case. As the hon. and learned Gentleman has explained, it is simply a case of subsidiaries claiming a concession already claimed by the parent company. I think the Solicitor-General will agree that when this case went before the courts no one—certainly not the Inland Revenue—thought that subsidiaries could make such a claim, and that the concession applied only to the parent company. The decision, which was fully recorded in the taxation journals at the time—about March of last year—went against the Board of Inland Revenue, and here we have a case which is not found every year in the Finance Bill, but occurs now and again, where the Board of Inland Revenue has found its prey has escaped it because of a defect or minor loophole in the law, and the Board is trying to make certain that its prey will not escape again.
    It is clear from the drafting of this Clause that it is not retrospective. The Board is not trying to catch what it failed to get in the courts last year. But many companies, I know, are a little worried about the practice of the Inland Revenue of altering the law when it fails to get its prey because of the state of the law. We regard this Clause as a minor piece of anti-tax avoidance. This case and the other, the Clause which relates to the Universal Grinding Wheel Company decision, were held out during the Budget debate by the Chancellor, the Financial Secretary, and, I think, the Economic Secretary, as proof that the Government were ever vigilant in dealing with tax avoidance, a subject on which I spent a little time during that debate. These are minor cases, and we do not oppose them. No Government of any party—even if the hon. Member for Orkney and Zetland (Mr. Grimond) by any mischance ever became the Patronage Secretary—
    Dame Irene Ward: "Shetland".
    Hon. Members: "Zetland".
    Mr. Wilson: I am not sure whether that is in order.
    If the Liberal Party were to become the Government of this country, I think it very doubtful whether even a Liberal Chancellor would allow this particular state of affairs to continue, and we support the Government in what they are doing.
    Obviously, the Government did not take this decision because of the Heelex case but because they were afraid a number of other companies would follow suit. As the Financial Secretary said at the time, it was opening a door—I do not think he talked about a "yawning gap" on that occasion. I wish to ask the Solicitor-General whether the Board of Inland Revenue knows of any other cases which followed the Heelex precedent. We have had to wait twelve months for this decision. There was an opportunity in the autumn Budget, and perhaps the hon. and learned Gentleman will tell us whether the Government acted with all promptitude on what, I agree, is rather a minor case but one which raises an interesting point of tax law.
    Mr. H. Lever: As the only conceivable excuse for the hideous, prolix and unintelligible language in which these Clauses are framed is, as the Solicitor-General has told us, that an equally hideous, prolix and unintelligible Clause has been run through in the courts and replaced by this Clause, couched in the same language, will some effort now be made to have Clauses printed in English which can be readily understood, even at this hour of the night, by ordinary Members of the Committee who have got to vote?
    The Solicitor-General: I am not quite sure whether I ought, at this hour, to discuss prolixity with the hon. Member, but I must say I share his distress that this revenue legislation is now invariably so complicated. I feel sure that he, with his wisdom, would know how extremely difficult it is to rectify complexity without making complexity worse confused. I quite understand that he did not have time to read this Clause before getting here in the small hours of this morning, but perhaps he will have time to read and consider it, and I hope he will then think its meaning, for a technical matter, is reasonably clear.
    470
    If I might answer the right hon. Member for Huyton (Mr. H. Wilson), the Revenue, I understand, do not know of the existence of any case which has, if one likes, "profited" by the position which this is launched to cure. He referred to the well-known practice of the Revenue where they have had an established practice running a long time and it turns out that it is not legally sound. It is rather well known that it is liable to be put right, and no doubt that helps to secure that people do not profit in the interim from what has happened as a result of the surprising decision of the court.
    Mr. Houghton: I do not complain about the drafting of this Clause, but I think it is really worth while drawing the attention of the Committee to the fact that it has taken two and a half pages of this Finance Bill to close what my right hon. Friend described as a minor loophole in our taxation system. The next Clause in the Bill is another stopper-up of loopholes, so that makes a total of something like three and a half pages of the Finance Bill to deal with these two points alone. That is a standing warning against expecting too many loopholes to be closed in too few Bills.
    I sometimes feel that my hon. Friends have exaggerated hopes of what they can do in Finance Bills to stop up loopholes and to prevent avoidance and evasion in one fell swoop. I think this is perhaps a sobering reflection on that hope. My own belief is that we shall never really clean up our taxation system until we have a kind of umbrella Clause—though I know how offensive that would be to many purists in legislation—but we had, in connection with the Excess Profits Levy, an umbrella Clause to provide against practices which were against the intentions of Parliament.
    I do not pursue that, but I think it is worth while drawing attention to the difficulties of dealing with these matters—some of them comparatively small and some of them big, but all of them apparently taking a very large part of our Finance Bills to deal with. I hope that will be borne in mind, because this is a fairly complicated Finance Bill, and it hardly touches some seventeen recommendations of the Royal Commission on tax evasion and another dozen on tax

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    avoidance. These two Clauses are dealing with unexpected difficulties which have arisen as a result of the Court of Appeal decision in the case of the Heelex Investments Company and the House of Lords decision in the case of the Universal Grinding Wheel Co. Ltd., which is dealt with in the next Clause of the Bill.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 26.—(EXTENT TO WHICH SUMS APPLIED IN REDUCING SHARE CAPITAL OR REPAYING LOANS ARE TO BE TREATED AS DISTRIBUTIONS.)
    Mr. Stevens: I beg to move, in page 38, line 47, to leave out "redeemable preference".
    I understand that it is your wish, Sir Charles, that the Committee should discuss the next two Clauses coincidentally. Just as Clause 25 may be known familiarly as the Heelex Clause, so Clause 26 may be familiarly known as the Universial Grinding Wheel Clause. The Universal Grinding Wheel Company issued preference shares redeemable at a premium and the court held that that premium was not liable to distribution charge for Profits Tax purposes. As in the case of Heelex, so in the case of the Universal Grinding Wheel Company, the Inland Revenue decided to stop up a loophole, but, in contradistinction to Clause 25, which, as the hon. Member for Sowerby (Mr. Houghton) said, has no retrospective effect, Clause 26 has a retrospective effect. That I regret, and the object of the Amendment is to limit that retrospective effect.
    Before 1st January, 1947, when a change took place in the way in which Profits Tax was levied, where companies had in issue preference shares redeemable at a premium, or loans redeemable at a premium, I see no reason at all in justice or in equity why those companies, which could have had no knowledge of what was to come subsequently, should now find themselves liable—because the Revenue wish to stop up a loophole—to a distribution charge for Profits Tax purposes. In view of the late hour, I do not propose to say more. I hope this speech has been as clear and lucid to my hon. and learned Friend as the last, and that he will be in an equally agreeable state of mind to accept the Amendment.
    The Solicitor-GeneralSubsection (5) of this Clause has the effect of exempting from the operation of the Clause premiums paid on the redemption of capital pursuant to an obligation entered into before the Budget day of 1947 when we started into differential rates. As the Clause is drawn, that exemption is limited to premiums paid on the redemption of redeemable preference shares. The question the Amendment puts before the Committee is, ought the exemption to be limited to redeemable preference shares?
    The Clause is drawn like that because normally it is not easy to see how there could be an obligation to redeem arising out of the actual terms of the issue at a premium, save in respect of what are strictly redeemable preference shares to be so described in the company's balance sheet under the appropriate provisions of the Companies Act. My hon. Friend and the Committee will understand that one has to bear in mind the distinction between a commitment to redeem at a premium at a fixed date and a commitment to redeem at a premium if and when the share should be redeemed at all.
    3.0 a.m.
    It may be, and having listened to my hon. Friend I would desire to look further at the matter, that there are, though perhaps not strictly as matters of obligation, some issues which do involve a commitment to redeem at a premium, a commitment entered into before Budget day of 1947. If that be so, then I would agree with my hon. Friend that it seems right and fair in principle that the treatment enacted by subsection (5) should be extended to those issues too. I can only say that, scavenging through the wily pages of the Stock Exchange Year Book, these issues seem to me to be rather rare birds, if there are any at all. But if my hon. Friend would be content with what I offer him, I would ask that we might have further time to consider this.
    I cannot accept the wording of the Amendment. That would have to be further considered; indeed, I am not sure, as at present advised, that it actually effects the result which my hon. Friend desires. But if it be that there are share issues involving a commitment entered into before Budget day of 1947 to redeem at a premium when redemption does take place which fall fairly and

    473
    squarely within the principle of the subsection, my right hon. Friend has authorised me to say that he will arrange for an appropriate Amendment to be set down on Report. I hope that, on that undertaking, my hon. Friend will give a further opportunity for thought by with-drawing his Amendment.
    Mr. Mitchison: I hope that before that very careful offer is accepted, if it is to be accepted, by the mover of the Amendment, and the whole Treasury, not to mention the Law Officers' Department, are sent off on a wild goose chase without any assurance that there is such a thing as this wild goose, the mover will indicate that he can assure some of us of the actual existence of the bird. If he could add its name, it would be even kinder to his right hon. and learned Friends.
    Mr. Stevens: I can assure the Committee that I would not have troubled it with non-existent birds. They may not be in large number, but I see no reason why, small though the number may be, they should suffer injustice on that score. I am certainly happy with my hon. and learned Friend's assurance, and beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Clause ordered to stand part of the Bill.
    Clause 27 ordered to stand part of the Bill.

    Clause 28.—(RELIEF IN CASES OF COMPULSORY PURCHASE.)
    Mr. Arbuthnot: I beg to move, in page 41, line 26, to leave out "three" and insert "five".
    This is quite a simple Amendment, and the reason for tabling it is to give a little extra time. Several years may elapse between the first indication by a public authority of its intention to acquire land and the completion of the sale agreement. Exactly the same thing applies in the case of a notice to treat.
    Mr. Mitchison: I do hope that the Government are not intending to accept this Amendment. Three years seems to me to be plenty of time, and if the period is made as long as five years, goodness knows what kind of legislation the Government may introduce about land and, what is far more important, about
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    the houses on the land. I am quite certain that some of the legislation which has been introduced by this Government has already had a considerable and rapid effect on the values of house property up and down—both ways. I think it is far too long a time to let the amount of Duty run at the risk of the Government.
    The Solicitor-General: I listened to the hon. and learned Member for Kettering (Mr. Mitchison) in order to learn how impossible it is to please everybody at once. I must confess that if one is in sympathy with the general principle of this Clause it does seem to me to follow that it would be quite wrong to leave it in a state where the relief which it confers is so limited that it might really be defeated by the quite frequent occurrence of lapse of time between the first intimation by the acquiring authority that it intends to acquire and the actual acquisition. I am sure that no one would desire that result.
    We have made, pursuant to examination of the Amendment of my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach), who is now absent, inquiries to see whether there is any extravagance in practice in the idea that the relief might really be so limited if it were kept to three years that it might not take effect in cases where the Committee would desire it to do so, assuming it favours the general principle of this Clause. In that ground I would desire, on behalf of my right hon. Friend, to accept the Amendment and to advise the Committee that this is, on the information before us, the right way to secure the right result in accordance with the general purpose of this Clause.
    Mr. Mitchison: I desire to protest strongly against one thing. Three years was put into this Clause by the Government. Apparently no inquiry was made before that was done. I suppose it was when the Amendment appeared on the Order Paper that the Government, having arrived at three years on a hit-and-miss calculation, thought it had better find out whether that was the right period. If that is not a muddled method of legislating, what is?
    With a Clause of this kind, surely the least the Government could do was to make inquiries beforehand and make up their mind what was the right period and

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    not leave it to hon. Members, who have not the same facilities for collecting the information, to correct their hit and miss method. It is a disgraceful way to prepare legislation. I would say that, on the merits of the matter, the answer was short. If five years is needed for this purpose, what ought to be looked at is not merely the legislation before us, but the procedure for compulsory purchase. I commend that to the urgent attention of the Government.
    Amendment agreed to.
    Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.
    Mr. Charles A. Howell: May I ask the Solicitor- General what is meant by the words in line 28—
    "… is compulsorily acquired by, or sold to."
    Can he say if there is any significance in that phrasing?
    The Solicitor-General: Broadly, the principle of the enactment is that in appropriate cases one substitutes the compensation payable on compulsory purchase for the principal value which was used for Estate Duty. That is the general principle. The Clause deals with either compulsory purchase or acquisition by agreement by an authority which possesses compulsory purchase powers. The reference to which the hon. Member has drawn attention deals first with acquisition and then by sale; that is, by virtue of an agreement to a public authority possessing compulsory purchase powers. Either method of operating with the property works for the purpose of the Clause.
    Mr. Howell: I may be a little bit suspicious, but if I am right—and it is quite likely that at this time in the morning I shall be wrong—where land is compulsorily acquired it is acquired at a price fixed by the public valuer. I presume that the use of the words:
    "… interest is compulsorily acquired by …"
    means that the land is acquired at the public valuer's price. Then the Clause says, after a comma:
    "… or sold to."
    I want to be sure that at some time later on some clever Charlie will not say that
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    this is ordinary sale as against compulsory acquisition because of the wording of the Clause.
    The Solicitor-General: On the wording of the Clause as it stands, I think he would have to be a very clever Charlie. I assure the hon. Gentleman that we will leave no aperture at all for Charlies.
    Mr. Mitchison: I was under the impression that something of this sort had been the practice for some time past—an informal practice. If that is so, can the Solicitor-General tell me what has been the interval allowed in practice? Has it been three or five years? Does the Amendment which he accepted represent a change?
    The Solicitor-General: I did not desire to trouble the hon. and learned Member with the legislative history of the Clause, because that means troubling the Committee with it.
    Mitchison: Answer "Yes" or "No."
    The Solicitor-General: The hon. and learned Member asked whether there was a forerunner. I will answer if he likes with the word "Yes." This represents, with the exception of subsection (3), which is new, the following of a prototype. Five years would be a change. The reason three years was in the Clause originally was that an undertaking was given to my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) during the Committee stage of a previous Finance Bill. He put down a new Clause to that Bill which laid down three years as the appropriate time. Experience has shown that five years is better.
    Question put and agreed to.
    Clause, as amended, ordered to stand part of the Bill.

    Clause 29.—(ACCEPTANCE OF WORKS OF ART IN SATISFACTION OF DEATH DUTIES, AND AMENDMENT AS TO EXEMPTION.)
    Mr. Roy Jenkins: I beg to move, in page 44, line 14, after "merit", to insert "or its historical value."
    The Amendment is designed simply to extend in a very small way the scope of the works of art which may be taken over by the Treasury in payment of death

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    duties. It is designed to cover a set of circumstances in which it might be valuable to bring articles into the possession of the State. They might be of use and value to museums but might not strictly be of aesthetic merit. It is possible to imagine objects of historic interest in this category—letters, manuscripts and other matters of that kind which could usefully be acquired and handed over to museums. I hope that the Government can accept the Amendment.
    3.15 a.m.
    Mr. Grimond: I support the Amendment. It will be of value. I would ask the right hon. Gentleman to ensure that when objects, whether or not of pre-eminent merit or preeminent historical value, are accepted, considerable care is taken about where they are put. There has been a tendency, I think, to accumulate them in London or Edinburgh. There is a considerable number of objects and pictures hardly ever shown to the public at all. It would be a pity to overcrowd the main collections, and at the same time it would be of great value to other collections in the country if the objects were to be fairly freely offered to them, especially if the objects have some connection with a town or district where there is a collection in which they could be exhibited.
    Mr. H. Brooke: Before I deal with the Amendment, I think I should say a word about the background of the Clause. Of course, it is perfectly possible for the national institutions to purchase objects of historical interest quite apart from this Clause, but the Clause represents a widening of the power given in the Finance Act, 1953, which, as the hon. Member for Stechford (Mr. Roy Jenkins) will recollect, is confined to objects which were or had been associated with a building of a certain character and could be retained in that building. Here we are seeking to use the National Land Fund for financing the acquisition of works of art which the Treasury is satisfied are pre-eminent for aesthetic merit but which it may not be possible or appropriate to retain in that building where they have been.
    The Amendment asks that we shall extend this National Land Fund procedure to works which are of historical value and not keep it merely for works of aesthetic merit. I have considered
    478
    this very carefully, and I am doubtful whether this really would be an effective extension. If the work is pre-eminent for its historical value, almost certainly it will be pre-eminent for aesthetic merit. [HON. MEMBERS: "Not necessarily."] I am not saying that there would not be doubtful or borderline cases, but I am thinking of medieval manuscripts, for instance, which may be of great historical value but which quite possibly have high aesthetic merit, too.
    Mr. Gordon Walker: Possibly, but not necessarily.
    Mr. Brooke: I am quite ready to examine this further, if that is the wish of the Committee, and it would be helpful, in that case, if the hon. Member for Stechford would bring to my attention—not this morning but before Report—any examples of the sort of articles he would seek to include by his Amendment.
    Mr. Gordon Walker: Wellington's boots.
    Mr. Brooke: I must stress that already the national institutions have purchase grants which they can use for the purchase of articles which are not of exceptional value. The National Land Fund is needed when a work of art—and the hon. Member will bear in mind that it is confined to works of art—would cost a great deal of money to acquire. My own judgment is that these words which we have now will, in conjunction with the general power of the national institutions to acquire through their purchase grants, cover anything that is likely to be needed to be acquired. I have quite an open mind about it, and if I am wrong I invite the hon. Member to give me evidence of that.
    Mr. Roy Jenkins: I think, without holding up the Committee for more than a minute or two, that I might give the Financial Secretary some clear examples of what I have in mind. Let us suppose that one is dealing with a valuable collection of nineteenth century letters which it was desired should go to the British Museum, or some other collection. One might, in those circumstances, argue about whether there was any aesthetic value; but, in the case of nineteenth century letters, I do not see that the aesthetic merit enters into the argument.

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    One might think of some memento of value. My right hon. Friend the Member for Smethwick (Mr. Gordon Walker) has suggested the Duke of Wellington's boots. They might very well not be of aesthetic value, but they are of great historical value; but what I have primarily in mind is the collection of nineteenth century letters.
    Mr. Brooke: When the hon. Member mentions Wellington's boots, neither he nor his right hon. Friend can argue that they are a pre-eminent work of art. His Amendment does not alter the words, "works of art," and I must advise him that his Amendment is ill conceived. But perhaps we can investigate this matter further and arrive at some understanding before the Report stage.
    Mr. Mitchison: The things which in the past have been accepted in common with houses in which they were placed could be regarded partly as works of art of aesthetic merit and partly, to use a neutral phrase, of other merit. One good way of looking at the matter would he to think of the kind of thing which was acceptable in the past. A work of art may be of some aesthetic merit and be of some historical value, but it may be only pre-eminent in the one. The plate which is kept at Lloyd's and which belonged to Lord Nelson is—and this is entirely a personal opinion—certainly a work of art in one sense but not of exceptional merit. I do, however, regard it as of exceptional historical value.
    The same might apply to a number of portraits of Queen Elizabeth the First. They are works of art, but my personal view is that they are not of outstanding aesthetic merit. Since that lady did not have many portraits of outstanding historical value, the rarer the portrait the worse it is likely to be, but the greater its potential historical value. I do hope that we shall reconsider this matter because it is, I think, clear that the words in the original Clause were too narrow and not suitable for covering articles in landed property such as might become publicly owned.
    Mr. C. Howell: I do not think it is quite fair to my hon. Friend the Member for Stechford (Mr. Jenkins) to use as an example something which has not been purchased. Obviously we have to
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    be concerned with hypothetical case, and I have in mind a painting of an historical occasion. It is, perhaps, a poor example of the artist's work; it is of no aesthetic value, and some people may say that we have examples of his work in the National Gallery and so on and there is no need for this picture. It might, for example, be a painting of the Battle of Bannockburn and, therefore, be of great historical value to the people living in the area, although to the Sassenachs only a portrayal of some incident with which we were not very cognizant when at school.
    It is feasible that something which artists or people with an artistic temperament would say had no aesthetic value might be felt by people across the Border in Scotland to have real historical value. Something which had immense value in, say, Carlisle might have no value whatever in London, although for some part of the British Isles it had great historical value. I think that this aspect should be included.
    Mr. H. Wilson: I hope that the Financial Secretary, who indicated that he might think about the matter again, will give it thought before the Report stage and not rely exclusively on evidence supplied from this side that the Amendment might prove to be of value.
    One or two possible cases have been mentioned, but I do not think this is the best time of the night or day to think of the best illustrations to convince the right hon. Gentleman. It might be that a little postage stamp could come within the definition of the Amendment. If it were a work of art, it might be of great historical importance yet have relatively little aesthetic value. It might be worth while that power should be given under the Clause for it to be acquired. One might think of, say, a map or chart used by a great general or admiral in some historic encounter in the past which could be regarded as a work of art-the right hon. Gentleman has already interpreted the phrase "works of art" liberally—which would be of great historic value and might, therefore, be appropriate for acquisition.
    Under the Clause, it may be possible before long to acquire some of the Conservative Election posters of 1951. They are becoming very rare now. We cannot get hold of them even to look at.

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    They spoke of bringing down prices and they are rapidly becoming of great historical interest.
    Mr. Gordon Walker: Lord Woolton is buying them up.
    Mr. Wilson: They are being suppressed. They are of little aesthetic value but of great historic value. The only doubt is whether they would count as works of art.
    If the right hon. Gentleman applies his imaginative mind to the problem, he could think of a number of probable cases within the scope of the Amendment. Even if he does not feel able to accept the Amendment now, I hope he will approach it in a friendly spirit and see before Report stage whether it is possible to accept its intention.
    It will not have escaped attention that we have now gone through thirteen Clauses without a single debate arising on any Amendment proposed from this side of the Committee, until we came to the present Amendment. The past five or six hours have been spent in debating Amendments moved from the other side. Since we have at last reached an Amendment moved from this side, I hope the right hon. Gentleman will be as accommodating as possible and will tell us whether he accepts it in principle or will look at the matter to try to find examples to justify his accepting it.
    Mr. H. Brooke: I gladly undertake to look at this matter carefully and sympathetically. There is no party issue in this. The best thing would be if the hon. Member for Stechford (Mr. Roy Jenkins) would have a talk with me about it later today and see whether we can clear it up.
    The hon. Member for Perry Barr (Mr. C. Howell) is under a misapprehension. If an item is one of those interesting historical objects which can continue to be associated with the building where it has always been, there is no difficulty about its acquisition under the 1953 Act. Similarly, if it is an article of historical value which one of the national institutions or museums would like to acquire, again there is no difficulty. That institution can acquire it; it is perfectly free to acquire it out of its ordinary purchase grant. What we have particularly
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    in mind here is the great work of art of exceptional financial value which would be far beyond the scope of an ordinary purchase grant, and where it might be entirely suitable to use the National Land Fund, even though the work of art cannot be retained in the building with which it has been associated.
    Mr. Howell: I do not think I am under a misapprehension. Surely Clause 29 deals with the powers of the Commissioners of Inland Revenue to accept it, not for institutions to purchase.
    3.30 a.m.
    Mr. Brooke: The institutions have that independent value, and I would ask the hon. Gentleman to read this in conjunction with Clause 30, I think it is, of the Finance Act, 1953, which will indicate to him the very wide power that there is already to acquire objects of many kinds, provided they are to be retained in a building which is under public control.
    The whole situation is slightly more complex, I think, than perhaps some hon. Members of the Committee appreciate. I should be delighted to have a talk about it afterwards with the hon. Member for Stechford and any other hon. Members who are interested.
    Mr. Ross: Surely the right hon. Gentleman agrees that it may well be that one of these works of art to which my hon. Friend drew attention, whose value rests not on their aesthetic value but rather on their value with historic associations, might be equally costly and therefore would be outwith the buying powers of these institutions. Surely from that point of view it would be desirable to cover them in this Clause when we have the chance.
    Mr. Mitchison: The right hon. Gentleman's last observations disclosed one very obvious thing. A recent report, which he will remember, about the insufficiency of purchase grants for public museums and public galleries, is very well illustrated and reinforced by the observations he made just now. I am all in favour of the National Land Fund, or any other fund, being used to purchase valuable works of art, but it is really no substitute for what was asked for in that report, as regards which he has a departmental responsibility, and I hope he will bear in mind on some more suitable

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    occasion the possibility of increasing the purchasing resources of public museums and galleries.
    Mr. Gordon Walker: For reasons of order we had to limit this to works of art, but really what we are after, quite clearly from what we have been saying, are objects of historical interest which it might not be desirable to keep in the place to which they belonged when the building was handed over; say, a copy of Magna Charta. Of course, the Government are not restricted in this way by the rules of order in the same way, and if the right hon. Gentleman would consider what we were trying to get at, that it should be works of art of aesthetic merit and objects of great historical value, I think there is something of importance in this.
    Mr. Roy Jenkins: In view of what has been said, I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, with drawn.
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    Mr. H. Wilson: Clause 29 is, as my hon. Friends have pointed out in the debate on the last Amendment, very, very limited indeed. As my right hon. Friend the Member for Smethwick (Mr. Gordon Walker) has just said, it is limited to works of art. We welcome this very limited widening of the existing powers of the Land Fund, but it will have been noticed, even though an Amendment my hon. Friends put down was not called, that we feel that the definition of the words "work of art" should be considerably wider.
    My hon. Friends had on the Order Paper an Amendment suggesting that the phrase "work of art" should be deemed to include the equity shares of any company. I should probably be out of order in pressing the point in any detail because, for some reason which I have been unable to understand, the Amendment was not called. However, when the right hon. Gentleman is considering the Amendment so ably moved by my hon. Friend the Member for Stechford (Mr. Roy Jenkins), I hope he will give consideration to a possible widening of the Clause in this context. It may be that the reason why the Amendment was not
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    called was that it was considered redundant. The definition of the Clause may already cover the phrase "work of art" being deemed to include equity shares.
    The Deputy-Chairman: I think the right hon. Gentleman has gone as far as he should on that.
    Mr. Wilson: We have not been told, Sir Rhys, whether "work of art" can be taken as meaning these shares, but I will bow to your Ruling in this context and content myself with putting a point to the right hon. Gentleman.
    This is a very important, though limited, new development. It extends the powers of the Treasury to acquire objects of aesthetic or, it may be in due course historical value in settlement of death duties. What we are not clear about with the Clause as drafted is how they are to be valued. As we understand it, this will presumably depend upon an agreed valuation. I am sure the right hon. Gentleman will agree that one of our greatest difficulties in getting proper death duty revenue arises from the problem of valuation. There is a great deal of under-valuation. I refer to the purpose of probate, not the purpose of payment of death duty.
    I hope the right hon. Gentleman will assure us that the question will be fully looked at in the operation of the Clause. I hope that when he looks at it he will not weary in well doing but will ascertain how far the Clause can be extended to cover a far wider range of national property than is covered by the phrase "work of art."
    Mr. H. Brooke: On the point of valuation for death duties, the right hon. Member for Huyton (Mr. H. Wilson) will appreciate that the Clause makes no fundamental change anywhere, although subsections (1) and (2) are slight widenings of existing statutory powers. I do not think that the question of valuation is really raised afresh by the Clause in any way.
    We have used the words "work of art" in the Clause because, from our practical experience, we think that what is in subsection (1) will meet the one type of case which is not already covered. For the reasons which I gave, we do not anticipate that there will be any serious difficulty in acquiring for national purposes the

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    other kinds of articles which have been mentioned in the debate. I will not weary the Committee by going over that ground again. I will willingly discuss the matter in practical terms with any right hon. or hon. Gentleman on either side of the Committee who is interested.
    We do not want to take enormous new powers here if they are never going to be needed except for the type of work of art here mentioned. Having said that, I hope the right hon. Gentleman will accept that my approach is sympathetic and that we are trying to find a satisfactory solution.
    Mrs. White: I find it difficult to follow the right hon. Gentleman in his argument that it is in some way preferable that articles of historical value should be obtained by purchases from the very limited grants, as was pointed out by my hon. and learned Friend the Member for Kettering (Mr. Mitchison), instead of their being acquired by the other method.
    If there is an opportunity of obtaining something which one of the institutions to which we are referring would like to have, and which is of great historical value, I do not see what objection there is on the part of the right hon. Gentleman to obtaining it by this method, instead of by purchase. Perhaps it is the late hour of the morning which makes me a little stupid, but I cannot see that the right hon. Gentleman has made out any case for objecting to acquisition by this method. He says that these works of art can be purchased, and so they can, but the funds available are so extremely limited that they should be used for the other articles which will not come into the possession of institutions by these means.
    Mr. Ross: I think we are entitled to have a little more light thrown on this matter. It is all very well to say that these things can be purchased by these institutions, but whenever an institution goes into the market to buy one of them the Treasury has to produce a Supplementary Estimate. I can remember asking for an explanation from the Secretary of State for Scotland about the expenditure of the sum of £25,000, which turned out to be an additional grant to one of these Scottish institutions for the purchase of a work of art. The same thing could have applied to some of these objets d'art, and we are not entirely happy
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    about the narrowness of the definition of the phrase "work of art," or the other qualifications thereunto.
    Can the Financial Secretary give us any more definite information about the way in which the valuation will be carried out? The Treasury will carry out these transactions by way of settlement of Estate Duty, but what valuation will be placed upon these pre-eminent works of aesthetic merit? Will some value be suggested by a hypothetical purchaser from overseas? Or will it be related to some previous transaction, with a reference to the actual work of art being purchased? We should be given some assurance that the Treasury is not going to be over-generous with the taxpayers' money.
    If the matter were not settled in this way it would be settled with hard cash. Upon whose judgment will the Treasury rely in connection with the question whether or not something is worth accepting? Will it be an historical judgment? Will it rule out any reference to a modern work of art which a certain dominant set of critics has not yet recognised for its aesthetic merit? We should be given some idea of the extent to which the Clause will work.
    Will it apply only to a very narrow section of these works of art? I got the impression from what the Financial Secretary said that that really would be the case. I hope that there are some more venturesome spirits in the Treasury, with a little more interest in art, and that we shall try to obtain other objects, besides the more historic old masters, which could not otherwise be purchased by institutions. We are entitled to some indication from the Financial Secretary of the scope of his interpretation of the phrase "work of art," the method of valuation and the skill of those who will judge the pre-eminence and aesthetic merit of these works of art.
    3.45 a.m.
    The Deputy-Chairman: The Question is—
    Mr. Ross: I have put a special question to the Financial Secretary, and I think I must insist that he should at least attempt to answer, even if it is late—[HON. MEMBERS: "Insist?"] I can request that. I do not think that I put my points in an antagonistic way, and I

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    am disappointed that the right hon. Gentleman made no attempt to reply.
    Mr. H. Brooke: If the hon. Member requests and does not insist, I will willingly try to answer him.
    So far as the valuation is concerned, he will appreciate that in the last resort it has to be a valuation acceptable to both parties; because the Treasury, advised by its expert valuers, will not enter into one of these agreements to take over articles in satisfaction of death duties unless it is satisfied on the point of value. And the owner of the article will not offer it in satisfaction of death duties unless he is satisfied that the price is reasonably fixed. There is no compulsion here on either side to enter into a bargain.
    Mr. Ross: There may not be compulsion in respect of this, but very often the owner cannot sell it outside the country where the most likely purchasers would be found, and from that point of view there is a certain amount of compulsion.
    Mr. Brooke: There is no compulsion on a man to sell or dispose of the article at all.
    As to the question raised by the hon. Member for Flint, East (Mrs. White), I can assure her that we already have considerable powers and that this is simply a slight increase in them. I think that the hon. Member for Kilmarnock (Mr. Ross) was under the impression that our present powers were limited. He suggested that whenever one of the national institutions wished to purchase an object of historic value it went to the Treasury for a Supplementary Estimate. That is totally untrue. Each institution has its annual purchase grant and accumulated and trust funds. No question of a Supplementary Estimate arises, except when it is an article of exceptional value.
    By this Clause we are seeking to provide a new method whereby works of art of outstanding aesthetic merit could be acquired with the help of the National Land Fund. The hon. Lady asked what would be the objection to putting wide words in here. One practical objection might be that, knowing that the National Land Fund had more than £50 million in its coffers, owners might rush to offer
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    all kinds of things to take advantage of this Clause. The whole machinery would break down were we to become cluttered up with innumerable offers, when all we are trying to do is to make it possible to acquire some works of art of such outstanding value that it would be difficult to get hold of them without this special provision.
    Mr. Mitchison: Would not the owners, if I may use a rather Irish expression, have to die before they made an offer?
    Mr. Brooke: The representative of the owner, whoever it might be, responsible for finding the death duty would be the person to make the offer. I am sure that the hon. and learned Gentleman appreciates that. Normally, it would be the heir.
    Mr. Mitchison: I was wondering what would induce a rush of deaths of owners of pre-eminent works of art.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 30.—(CONVEYANCES ON SALE.)
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    Mr. Martin Lindsay: I am sure that all those people who are purchasing houses, and particularly young married couples, will very much welcome this Clause. But it is regrettable that owing to the fact that Resolutions in Committees of Ways and Means do not have the effect of force of law regarding Stamp Duty, this concession is being put off for 3½ months, since the date that has been written into the Bill has been chosen as after the passage of the Finance Bill.
    This Clause has put a virtual stop on all house purchases. No one is going to complete house purchases at present, knowing that he can save £30–£50 by putting it off for a matter of months, except in the case of a small number of people who, somewhat naturally, assumed that this Measure was taking effect from the beginning of the financial year. In that case, they have been "stung." I wonder whether my right hon. Friend would look at this point with a view to amending the Bill in this respect at the next stage. Would he perhaps see whether it would be possible to date this

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    retrospectively, either from the beginning of the financial year or some such date? I do not think it would cause any great difficulty for a refund if the Revenue authorities had produced a form of contract with the Stamp Duty paid at the old rate.
    Mr. H. Brooke: I can assure my hon. Friend that we have looked into this already. I raise no objection to his bringing forward the point, and I agree that it is something of a difficulty that the Provisional Collection of Tax Act, 1913, does not apply to the Stamp Duty, and, therefore, there is no means of making an alteration in the Stamp Duty take effect until the Finance Bill becomes law. For that reason I August is put in here as the date when these reductions of duty will operate.
    My hon. Friend has suggested it would be relatively easy, in practice, if the Government were to amend this Clause and fix an earlier date, say I May, or what you will. We carefully investigated that possibility, but the difficulties are so enormous as to be insuperable. We cannot assume that the law is different from what it actually is, and, therefore, all instruments which are presented for stamping before the passing of the Bill into law must be stamped at the old rates, whatever date is put into the Bill. Then the excess duty paid on all those instruments would have to be refunded after the Bill became law.
    A very large number of instruments would be affected—I am advised about 20,000 a month—and the mere work of reassessing the Stamp Duty on them all would be very considerable. In addition to that, the claimant would have to add to the instrument the appropriate certificate of value required by Subsection (1) of this Clause. He would also have to get the certificate signed by the other party to the instrument. Furthermore, he would have to produce evidence that he himself paid the original duty as that could not be confirmed from the document. Clearly, it would be wrong to refund money to the wrong man.
    I must warn the Committee that these proceedings, which may seem simple when they are recounted at five minutes to four in the morning, would put a really terrifying additional amount of work on those who would have to
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    administer these arrangements. For those reasons, much as I regret it myself, we cannot put an earlier date than 1st August for the operation of these new rates of Stamp Duty. I am very much afraid there is no alternative.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.

    Clause 31.—(ANNUITY CONTRACTS.)
    Mr. H. Brooke: I beg to move, in page 46, line 14, after "annuities," to insert:
    "or the business of issuing policies of life insurance."
    This Amendment and the Amendments proposed to lines 16 and 47 are somewhat technical. As the Committee knows, Clause 31 authorises the Commissioners of Inland Revenue to make agreements with insurance companies under which they pay over the total amount of Stamp Duty on annuity contracts periodically in a lump sum instead of having to send the documents to the Revenue for additional stamps to be impressed on them.
    The point which has come to light since the publication of the Bill is that this will really only go part of the way to meet the need at which the Clause is directed because the provisions of Clause 31 apply only to annuity contracts. Therefore it will not cover the majority of group policies because those so frequently provide life insurance as well as annuity benefits. The intention of these Amendments is to extend the scope of the Clause so as to permit Stamp Duty on life insurance benefits to be paid over to the Revenue in the same way as that on the annuity benefits; There is no loss of revenue involved. It will be a considerable saving of trouble to everybody if these Amendments are accepted and I hope they will prove entirely uncontroversial.
    Mr. Mitchison: I have only two questions to ask the right hon. Gentleman about this Clause. The first is a very simple one. Have any representations—authoritative or very authoritative—been made to the right hon. Gentleman to induce him to make this change, or did he think of it himself?
    The second question is a little near the mark. The right hon. Gentleman will know, or he will find if he looks it

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    up, that there is a rather similar difficulty about marine insurance policies, large numbers of which cannot be stamped at present under existing legislation. I merely express the hope that at some time or other that question will be considered and the marine insurers of this great centre of commerce be relieved from the probably illegal conspiracy in which they have been engaged for so long. He will find authority for that from Lord Atkin.
    Mr. H. Brooke: I trust the hon. and learned Member for Kettering (Mr. Mitchison) will forgive me if I do not put to sea with him at this hour of the morning and pursue his marine insurance policies. As to the other question, certainly this has been brought to our attention from various quarters. I know that he has attempted to insinuate to the Committee at earlier stages that there is something sinister in the Government paying attention to representations, but I must say that I have often had deputations brought to see me—authoritative deputations introduced by hon. Members opposite—and I do not think that the Government could go on unless we exposed ourselves to receiving representations and deputations and heard what they said; but, ultimately, we have to make up our minds and we have done so on this Bill.
    Amendment agreed to.
    Further Amendments made: In page 46, line 16, leave out from "on" to "the" in line 19 and insert:
    "grants or contracts for payment of such annuities or on policies of life insurance should be charged and paid on such instruments issued by the body in the course of that business"
    In line 47. at end add:
    (7) This section shall have effect from the first day of August, nineteen hundred and fifty-six; and any agreement made before that date under section seventy-two of the Finance Act, 1948 (which in relation to industrial assurance policies makes provisions similar to those of subsections (2) to (5) of this section), shall be treated as having been made under this section. [Mr. H. Brooke.]
    Clause, as amended, ordered to stand part of the Bill.

    Clause 32.—(INDIAN, PAKISTAN AND COLONIAL PENSIONS (INCOME TAX AND ESTATE DUTY).)
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    4.0 a.m.
    Mr. Gordon Walker: This Clause is obviously desirable, and we would support it, but I am not quite clear why the proviso starting at line 21 is inserted in it. I remember the passage of some of the Pensions (Increase) Acts. Some of them passed when we were in office. At the moment, I cannot see why concessions, or whatever the term may be—my mind will not work too well at this hour of the morning—which are rightly made are not, in fact, extended to this increase which, as far as I remember, merely increased the existing pensions. It did not alter their nature. I should have thought that we would get into an awful muddle if bits of pensions get the benefit of the Clause while other bits of the same pensions do not. There may be a special reason for the proviso that has escaped my powers of penetration.
    Mr. H. Brooke: I will endeavour to explain this point. The proviso relates only to the Indian, Pakistan and colonial pensions. It makes it clear that the exemption provided in the subsection is not to apply to payments made by the United Kingdom Government under the various Pensions (Increase) Acts. These payments have always been chargeable to United Kingdom tax, whether the recipient was resident or not, and they are not in any way affected by the Pensions (India, Pakistan and Burma) Act.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.
    Clause 33 ordered to stand part of the Bill.

    Clause 34.—(EXCHEQUER ADVANCES TO NATIONALISED INDUSTRIES AND UNDERTAKINGS.)
    Motion made, and Question proposed. That the Clause stand part of the Bill.
    Mr. J. Grimond: It is, I think, regrettable that we should be discussing this Clause, which is of great importance, at a little after 4 o'clock in the morning. This is a Clause which alters the whole method of financing the nationalised industries, which are almost vital to our economy—yet this is the time we choose to consider it. That being so, I may say that I do not intend to deploy the whole of the case that could be made out.

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    At various times, and especially during our debates on the Budget and the Finance Bill, a good many questions have been put to the Chancellor, and I take it that we shall, this morning, learn a great deal more of the reasons for this change and the way it has been effected. As I understand, the reason for the change is that the Chancellor feels that he will be able to time the approaches to the market of the nationalised industries better than they have been timed of late.
    I cannot understand why those industries could not themselves have arranged to approach the market at more convenient times, when interest rates were lower, just as any ordinary commercial firm does. Is it now intended that these industries will only go into the market at very long intervals indeed, and that, in between times, their long-term capital requirements will be met by these advances from the Treasury which will, presumably, in turn be met by Treasury bills? If so, that would seem to be of itself inflationary.
    Secondly, as I understand, there is to be no difference in the advances of the banks for temporary needs, working capital and so on. At what rates is money to be advanced to these industries, and on what terms? I have often thought it was illogical to finance them entirely on fixed interest rates under a Government guarantee. It was suggested by the Chancellor in his Budget speech that the time was coming when some of these industries would have to go to the market, stand on their own legs, and raise money without the guarantee. I think we might be told a little more about when that happy day may be. So far as electricity and vas are concerned, it may not be so far off.
    With regard to those nationalised industries, like the railways, which would have difficulty in raising money on the market, there is a strong case for an investment board to advise the Treasury on their needs and the best method of meeting them, and to relate those needs both as between one industry and another and between the amount of capital needed for the oil industry in the private sector and the coal industry in the public.
    I have great doubt whether Parliament or the Treasury is the set-up to give effective consideration to this sort of
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    commercial undertaking. Parliament considers matters often when it is too late to take effective action in regard to long-term plans. Parliament is a gathering of amateurs elected for other purposes. I have doubt about its ability to decide how much money is necessary. Specialised boards of people chosen for their knowledge of this sort of operation would fulfil a useful function.
    I think we might ask how much information Parliament or the public are to get when advances are made. It was suggested in a previous debate that no more advances should be made to any nationalised industry without a positive order from Parliament. I do not know whether the Treasury will be in a position to pay out to these industries a definite sum of money, or whether any further check is considered necessary.
    Mr. Nabarro: Perhaps the hon. Member will let me correct him. The proposition was only made in regard to the National Coal Board, which has always been financed in the way in which it is proposed in this Clause that the other nationalised industries should be financed.
    Mr. Grimond: As the other nationalised industries are to be put on the same basis will it be a suggestion that they should be made subject to an affirmative Resolution of the House before they get any money? I do not think that at this time one can enter into the financial background of the nationalised industries, but I hope that the Chancellor will tell us more about the terms on which they are to get money, why the proposed change has been necessary, and what greater control over these industries he feels that he, the House of Commons, and the public will get through this change of procedure.
    Viscount Hinchingbrooke: Like the hon. Member for Orkney and Shetland (Mr. Grimond) I apologise for introducing this theme at this early hour of the morning, when, the doctors tell us, life is at its lowest ebb. It remains to be seen whether the topic will stimulate sufficient excitement to keep our hearts beating for another half hour or so. We must acknowledge that there is incorporated in this Clause a certain limitation to its operation for which we should all be grateful, a limitation of the amount and of the time to be allowed.

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    The time factor certainly is within the range of my right hon. Friend the Chancellor's promise in his Budget statement that he would think again about the operation of the nationalised industries and their requirements from the point of view of going to the market within that time. Certainly, there is no fear that very large sums of money will be taken within that time, because the figure is mentioned in the Clause. Both those things are covered, but this raises the whole question of the position of the nationalised industries' capital requirements being taken up by the taxpayer.
    Two major errors of policy are incorporated in the Clause. They are, first, that the Clause invites the same treatment for all the other nationalised industries as is now given for coal; that is to say, making the taxpayers pay for their capital requirements. Secondly, it brings the nationalised industries more and more under the aegis of the State and it establishes a procedure which it is going to be extremely difficult to reverse.
    I know that my right hon. Friend has the highest hope of reversing it. I very much hope that he will be in his present office for the two years, and very much more, so that he can redeem his promises, but if there was a change of Chancellor and a new Chancellor operating on a different line from that of my right hon. Friend was to have recourse to this Clause—or Section as it would be then—we might see a distinct change, a most undesirable change, in the processes involved.
    Let me take the first complaint, the example of coal. It is made quite clear in page 23 of the Financial Statement, and no one could possibly contest the view, that coal requirements are met by the taxpayer and met in full today. The net sum to be borrowed or met from surplus is £803 million. We subtract from that the £350 million that the Chancellor is for the first time putting below the line under his new policy, and we are left with £453 million, which is less than the surplus above the line. That means in effect that the taxpayer is providing for long-term investment in local authority housing, in new towns, in Post Office capital expenditure, in town and country planning compensation and in coal to the tune of £70 million.
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    It is my view, and I think that of some of my hon. Friends that this sort of expenditure ought to be provided for out of the genuine savings of the community at large. I tried in the debates on the Finance Bill, two years ago, to suggest that the State was having recourse to the taxpayer for £170 million or £180 million for long-term capital investments in the sort of assets which the State provides. That was not at all public building or schools or anything of that kind, but a whole variety of investments which ought to be provided for out of the savings of the nation, and many of them out of the stock market and the City of London.
    What prospects are there of reducing the floating debt or of reducing taxation while this policy continues? I should very much like to know my right hon. Friend's answer to that question. Now we have the new item of £350 million which is to go below the line. I really am very suspicious indeed of the whole trend of this policy.
    I know that my right hon. Friend said in his Budget speech:
    "My purpose will be that this sum for the nationalised industries, with other borrowing by the Government—"
    there is significance in that phrase—
    "should be successfully absorbed by the public during the year—that is, draw in real savings and not depend on inflationary finance."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 865.]
    I do not see what hope there is of achieving this, because the sum involved is, as I have said, £803 million this year below the line, and last year there was a net increase in the funded and un-funded debt of £350 million, less than half the sum required this year, that is, after taking into account reductions in Treasury bills and Ways and Means advances. Even if the funding operation were twice as great as is envisaged, what shall we have achieved at the end of it?
    4.15 a.m.
    I come now to the second major objection to this proposal and the second major error of policy, as I conceive it to be. I should be very grateful if my right hon. Friend could, even at this very late hour, give us some explanation of it. It seems to me that either the Departments of State are now to begin

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    to hold the stocks of the nationalised industries, in which case the Ministry of Transport and Civil Aviation will begin to own the railways and the air corporations and the Ministry of Fuel and Power will begin to own the gas and electricity stocks and the Scottish Office will begin to own the stocks of the Scottish Hydro-Electricity Board, or else the Treasury will issue British Government stock representing the capital requirements of the nationalised industries, in which case no one, no investor, will henceforward know into which nationalised industry his investments have gone.
    Mr. H. Wilson: The noble Lord has just referred to transport and civil aviation and to the Scottish Hydro-Electricity Boards. Does he not feel that even at this late hour we ought not to debate this question without the Ministers responsible being here? The Minister of Fuel and Power, to his credit, is here for this debate. It is quite wrong, however, to attempt to debate this matter in the absence of the Minister of Transport and Civil Aviation, and ought he not to be sent for?
    Viscount Hinchingbrooke: No. I noticed the presence of the Minister of Fuel and Power, and I thought it lent a new state of excellence to our proceedings. Therefore, I am grateful to him for coming in. However, I think that the right hon. Gentleman the Member for Huyton (Mr. H. Wilson) ought to admit that we have a sufficiently important hierarchy on the Treasury Bench at the moment to listen to the debate and even to satisfy him. He was complaining earlier that practically nobody was there.
    Those are the two alternatives. Either the Departments of State are themselves to become holders of the assets of these various corporations, or else the Treasury is to issue Government stock, and in that case investors in the nationalised industries, and the nationalised industries themselves, will see their stock aggregated into unidentifiable Government loans, which means we shall be drawing further and further away from direct contact between the public and the nationalised industries.
    Either of those two alternatives will, first, make a further divorce between the public and the industries which they are supposed to own; secondly, establish an
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    almost irreversible procedure; and, thirdly, render such ideas as are incorporated in the Herbert Report for separate borrowing by the electricity area boards almost impossible of attainment. Fourthly, and most importantly from the point of view of my hon. and right hon. Friends on these benches, they seem to us to inhibit and frustrate the implementation of Conservative policy.
    The right hon. Gentleman the Member for Lewisham, South (Mr. H. Morrison) invented the technique for these nationalised boards. His idea was that they should become separate autonomous entities within the State, supervised by Parliament at intervals of time; but that they should go—with the exception of coal, which was nationalised rather hurriedly and before the technique was developed—to the market for their capital requirements.
    They were all to be separate bodies, and were to stimulate each other by producing the best report that they could, and to pay their way, taking one year with another. All this he called socialisation. He always resented the term "nationalisation," and there was something in that idea because these industries were never brought under the aegis of the State.
    What is the new philosophy today? In default of careful thinking and preparation, and because the Treasury is so busy with day-to-day matters, or because something goes wrong with the market and the corporations cannot borrow sufficiently, or in time, we are somehow being drawn towards an undesirable political policy. I would ask, even at this hour, for a definition of what this policy is, because it seems to me to be so violently in contrast with the declared policy of the Government in other directions.
    For example, local authorities have wisely been pushed on to the market and are no longer under the umbrella of the State for their money needs. What is the difference between local authorities and the nationalised industries? Why, also, cannot we push the nationalised industries on to the open market and make them competitive? Why not adopt the recommendations of the Herbert Report so that these industries achieve a measure of independence and accept a certain sense of competition?

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    I ventured to say during the Budget debate that there was sufficient money available for all forms of investment. I tried to explain that fixed investment requirements stood at about £2,000 million, leaving about £1,000 million savings mostly in the hands of the workers, one is glad to note. But instead of these savings being organised and canalised into the right channels by the Treasury, they have all been drawn into the purposes of the central Government. They should have been made available to the market through unit trust schemes in the City of London so that the nationalised industries could have had their demands immediately met.
    It really does grieve me very deeply to have to say, at this stage in the life of our second Conservative Government after the war, that we have not achieved the thinking and the preparation necessary to do these things. I finish here and respectfully hope that my right hon. Friend will be able, even now, to justify to the Committee the lines upon which he is moving.
    Mr. Albu: This is an early hour of the morning to have the second stage of the great revolt by hon. Members opposite on the nationalised industries. I was rather surprised at the line taken by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), which seemed to me to deal very little with the Clause. A large part of his speech was an attack on the budgetary policy of his right hon. Friend.
    Whether finance for the nationalised industries is raised from the Budget surplus, or is raised by means of loan, is a matter for the Treasury to decide. As far as the Clause is concerned, it could be done either way. Therefore, the attack made by the noble Lord was on the policy, in a situation which the Chancellor of the Exchequer himself admits is inflationary, of increasing his Budget surplus and providing for a number of things, to which the noble Lord referred as public activities, out of that Budget surplus. The noble Lord knows, I think, that we on this side are in favour of such a policy. Obviously, the details from year to year vary according to the state of the economy.
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    The noble Lord, it seems to me, has not made up his mind whether the Conservative Party should accept the nationalised industries as nationalised industries. At the end of his speech he spoke of them being in healthy competition and going to the market and raising money under normal market conditions. First, some of them are not, and never have been, industries in competition. The electricity industry has always been a statutory monopoly locally and, now, in area boards.
    Mr. Nabarro: Of course it has not been.
    Mr. Albu: I cannot remember any time in my lifetime in which in any one area there were two electricity authorities operating.
    Mr. Nabarro: The hon. Member has obviously neglected to read the details of the Herbert Committee's Report, which in the appropriate paragraphs relates this very point and brings out clearly that it is desirable for the area boards to go to the market for their capital and that the gas boards in competition with them should do the same as many other of the industries of a much higher level of efficiency.
    Mr. Albu: I was referring to the fact that, as far as I know, the electricity industry has always been run by local statutory monopolies.
    Mr. H. Wilson: I must point this out to the Government Front Bench. We on this side have shown great restraint this morning in not intervening in many of the debates which have emanated from hon. Members opposite. If the hon. Member for Kidderminster (Mr. Nabarro), the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) Or anyone else wants to turn the debate into a discussion on the merits or efficiency of the natinalised industries, we are quite prepared to do it. In fact, I wonder at the restraint of one or two of my hon. Friends—indeed, of myself—in not wanting to speak for half an hour. [An HON. MEMBER: "Where are your hon. Friends?"] They are not far away; they could come back quickly.
    If the Government want to make progress with the Bill tonight, they might restrain their own back benchers. Personally, I feel. with the noble Lord

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    and with the hon. Member for Kidderminster, that this is an important Clause. We might take different views about it, but it is extremely important. If hon. Members opposite want to turn this into a general debate on nationalisation, I am afraid the Chancellor will not get the Clause before 3.30 this afternoon.
    The Chairman: The debate should not be turned into a debate on nationalisation. That is beyond the Clause.
    Mr. Albu: I am not sure whether you were in the Chair, Sir Charles, but when the noble Lord was speaking he covered a wide range of matters, dealing not only with the Clause but with economic policy and the whole organisation and management of the nationalised industries, whether they should be broken up into separate units and matters of that sort.
    These are all matters on which we on this side of the Committee feel very strongly indeed, and which we should be very prepared to debate on a suitable occasion, but I naturally bow to your Ruling, Sir Charles, that the Clause deals merely with the methods by which the nationalised industries should be financed.
    4.30 a.m.
    The suggestion that the nationalised industries should be asked to go to the market has been made, particularly from the Liberal benches, for a long time. If I might say so, some of us enjoyed the reversal of smiles on the faces of some hon. Members opposite when the Chancellor came to this passage in his Budget speech; it really was a tonic to see it, because it was quite obvious that many of them were expecting exactly the opposite conclusion to his remarks.
    I have never been quite able to understand how this was to be related to the keen enthusiasm of the hon. Member for Kidderminster for having the Minister of Fuel and Power, in particular, and any other Ministers concerned with nationalised industries on the mat of the House of Commons almost every other week. He would soon lose his reputation as Minister slayer. The idea that one can continually discuss in detail the actual investment policy of every nationalised industry and criticise it, which he seems to want to do, does not seem to me to tie in with his suggestion that what ought
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    to happen is that the Ministers should have no responsibility for the investment programmes, but they should be entirely determined by the market.
    I can understand the point of view of the hon. Member for Orkney and Shetland (Mr. Grimond). But, of course, if this were to be accepted we should be faced with a very different situation in these industries. We should be faced, first, of course, with a very substantial rise in the price of coal, and it may be that that is what the hon. Member for Kidderminster would like.
    Mr. Nabarro: Why a rise?
    Mr. Albu: What would happen is that it would not be possible to do this unless the boards were running on a free market basis, and I imagine that a very large number of coal pits would have to close down, the profitable ones would be able to continue, and the price would rise commensurately until a balance was struck between the price at which they should raise their capital and the profit they could earn in particular pits.
    Mr. Angus Maude: Who is starting a general debate on the nationalised industries now?
    Mr. Albu: The hon. Gentleman will be able to make his speech for as long as he likes when I have sat down.
    Mr. Maude: I was simply asking who was starting a general debate on the conduct of the nationalised industries.
    Mr. Albu: The noble Lord started a general debate on the conduct of the nationalised industries. In any case, I do not know whether the hon. Gentleman heard the hon. Member for Orkney and Shetland open the debate, because the whole tenor of his argument was that the boards should be forced to go to the market to raise their capital at the market rate.
    Mr. Grimond: I am sorry to interrupt. It is rather difficult, at this hour, to remember what one has said, but I hope I said it would be those boards which had a chance of raising capital at the moment, which I think are probably only electricity and gas, as the Chancellor mentioned himself that he hoped they will eventually go to the market, and we should be told how soon that will be. I admit that the Coal Board and the

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    railways cannot at the moment, and as far as they are concerned I suggest that possibly some sort of investment board to keep an eye on their general requirements would be more effective than continual interference by this House.
    Mr. Albu: With that part of the hon. Gentleman's remarks I have some sympathy. I do not think it is possible for this House to investigate the investment policy of each separate board, because it is exactly the question of the relationship between the investment policy of industries, whether nationalised or private, which really is the concern of the House when it discusses general economic matters. The great criticism we have made during the course of some of the debates on this Bill and on Government policy in the last year or so is that no estimate was made of the total investment to be expected from the combined nationalised and private industries of the country, as a result of which we had this indiscriminate expansion and eventually a very quick clamping down.
    I agree with the hon. Member that what we need is a far greater surveillance of the whole investment policy to ensure that it is in balance. One of the best ways by which the Government can maintain the general investment of the country in balance is by control of the investment policy of the nationalised industries. The Opposition welcome the closer bringing under direct Government control of the investment policy of the nationalised industries by the Clause, though we realise that it is not much more than a technical change, because the Treasury has always had complete control over the investment policies of industry, even if it has not had control over the exact timing and placing of loans.
    The noble Lord said he welcomed the fact that the Clause contained a subsection which imposed a time limit of two years. The Opposition see no reason for this at all. We should prefer it left open. We are made suspicious by the introduction of a time limit. We begin to wonder what the intention of the Conservative Party is about some of these industries. We do not desire to see the industries removed from the overall economic control of the Government of the day. We rather welcome the strengthening of the present control.
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    I could not understand that portion of the noble Lord's speech in which he dealt with the more general budgetary situation. He referred to a surplus of £1,000 million of savings, which, as I understood, was not being used at all. If this is the situation, I cannot understand why we are now in what is generally considered to be an inflationary situation. If there are £1,000 million of unused savings ready to be put into the nationalised industries, there is something peculiar in Government statistics or Government policy. I do not understand it. Perhaps at some other time the noble Lord will explain exactly what he meant.
    There is a value in this debate because it shows those on this side of the Committee who take a serious interest in these industries and in the planning of the national economy to what length some hon. Members opposite will go in their hatred of the principle of nationalisation and their determination to ensure that at any rate the rather profitable sections of the industries, as some of them would be if run in the way some hon. Members opposite would like, are returned to the ordinary shareholders.
    I take it that what is intended is that there should be equity shares as well as fixed-interest shares and that we should have a return to the normal situation in ordinary joint stock companies. That is something which the Opposition would certainly oppose to the bitter end.
    Mr. Maude: There are two points I should like to put to the Committee. It seemed to me that the hon. Member for Edmonton (Mr. Albu) overlooked one and was wrong about the other.
    At the time that he was pleased to be witty, as he thought, at the expense of my hon. Friend the Member for Kidderminster (Mr. Nabarro), he said that it did not seem to him to be consistent with a desire for the financing of the nationalised industries through the market to be seeking at the same time a greater measure of Parliamentary control over the investment of those industries. He seems to have overlooked the point that it is precisely because of the absence of the financial discipline of the market that some of us think it desirable that Parliament should have control over the investment policies of the nationalised industries.

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    He also went much too far at the end of his speech in leaping, at this stage—because the matter is not under discussion at the moment—to the question whether or not de-nationalisation, accompanied by the issue of equity shares to shareholders, should or should not take place. That is not a point which we are discussing now. What we are discussing is a comparatively minor deviation, in the case of those nationalised industries other than the coal industry, from the present system by which those industries raise their capital in the market with a Treasury guarantee. It is quite clear that from that point policy could change in one of two directions—either in the direction of forcing those industries into the market without a Treasury guarantee, or of bringing them much more closely under the control of the Treasury through direct Government financing. It is upon this question that we feel that some further information is desirable before we can completely make up our minds about the wisdom of the policy enshrined in the Clause.
    My noble Friend the hon. Member for Dorset, South (Viscount Hinchingbrooke) mentioned the recommendations of the Herbert Committee, which are extremely important. It will be remembered that that Committee, whose terms of reference were limited to the electricity supply industry, said that it thought that that industry should be subjected to the discipline of raising its capital in the open market. That is to say, upon the merits of that industry alone the Committee thought that a case could be made out for making it go into the open market without a Treasury guarantee.
    The Herbert Committee went on to qualify that statement by saying that it was not making this recommendation whole-heartedly only because it felt that it would be inequitable and unwise to push the electricity supply industry into the market without a Treasury guarantee while it was unable, at the same time, to push into the market the gas boards and the coal industry, which in some senses were directly competitive with the electricity supply industry, but probably could not keep their heads above water financially if they were pushed into the market.
    That does not detract from the fact that in the case of this one extremely important industry the Herbert Com-
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    mittee thought that a case could be made out for market financing without Treasury guarantee. In my view, it should be the aim and object of Her Majesty's Government to try to create a situation in which all the nationalised industries are able to raise their finance in this way. There are a number of reasons why that is desirable, all of which I certainly do not propose to go into now, but the main and obvious reason is that the present situation has the virtues of no system at all, because it is not a system.
    Mr. Nabarro: Flabby.
    Mr. Maude: Unfortunately, in the case of at least one of these industries, and probably more, economic laws have almost totally ceased to operate, and unless economic laws can be made to operate again it is very difficult to see how the industries can ever become economically efficient. I should have thought that, ultimately, one of two things was bound to happen—either the discipline of pure market financing must be introduced, or these industries must be brought nearer the condition of the Post Office, in which direct Government control over finance in almost every detail of its economic work is made much more complete. It is quite possible that the step which my right hon. Friend is taking in the Clause is a move in one of those two directions.
    We should like to know exactly which direction, and particularly whether it will make easier a movement in the direction of free market financing. Until we know more, it is inevitable that I and some of my hon. Friends should feel apprehensive about it. We are apprehensive about the whole course of the financing of the nationalised industries and, indeed, about their whole future, since they are basic to the whole prosperity of our economy. There is a great deal of apprehension in the country about that situation and we should like some reassurance about the future policy of the Government in that respect.
    4.45 a.m.
    Mr. C. Howell: It used to be a popular opening remark to say, "Unaccustomed as I am to public speaking …" but this morning it seems popular to begin one's remarks by apologising even for speaking,

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    because it is now a quarter to five. I make no such apology. For upwards of 35 years I was an employee in an industry which is now nationalised. I have spent a considerable amount of my life on duty at this time in the morning, so it is nothing unusual for me to be up at this hour.
    The hon. Member for Ealing, South (Mr. Maude) is the only speaker from the Government back benches who has kept to the subject of the Clause. One becomes used to the fact that any opportunity is used by Government backbenchers to snipe, and I was not surprised when the noble Lord the Member for Dorset. South (Viscount Hinchingbrooke) took the opportunity to snipe at the nationalised industries. The financial provisions of the Clause would not have been necessary had the millions of pounds held by the Government and earned by the nationalised industries and their predecessors been used originally to buy them out.
    First, the noble Lord said that the whole of the finances of the nationalised industries came from the public, and that is true. Then he wanted to compel the Chancellor to make the nationalised industries go into the market to raise money. I do not know which way the noble Lord wishes to go. I do not know which race he is in. He is running up the straight, but he does not know whether he is getting to the winning post—
    Mr. Nabarro: The hon. Gentleman is round the bend.
    Mr. Howell: I am delighted that the hon. Member is so quick with his alleged wit at this time in the morning. If he is called to speak, I hope that he will punctuate his speech with more of it.
    The noble Lord complained that the public have to pay and then he went on to object to the Clause, which, I presume, the Chancellor is presenting to enable him to raise the money so that the nationalised industries may have it at a lesser rate of interest than the right hon. Gentleman is compelling the banks to charge in this inflationary period. If the right hon. Gentleman does not do that, it will mean that the public will have to pay. I hope the noble Lord will make up his mind whether he is objecting to the public paying more or to the
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    Chancellor missing the opportunity to make them pay more. If the nationalised industries are forced into the market, it means that they will have to pay more every time the Bank Rate goes up, and and I imagine that it has not finished going up yet.
    It would appear to me that the Chancellor of the Exchequer has seen what he is doing in this respect, and it may have been that his Newcastle speech was behind this particular Clause. I can understand that there are no philanthropists in the open market, and certainly none on the Government side of the Committee, who are prepared to lend money for less than they can sell it anywhere else. They will go anywhere for the biggest penny, and we have seen an example of it in industry this week, where they were prepared to sell out British interests to fill their own pockets—and that is what would happen here. If the nationalised industries had to go into the open market there would be no cheap money for them. They would have to pay the highest possible premium for their money, which means, again, that the public have to pay for it.
    For that reason I support this Clause, because I assume it is the Chancellor's intention to enable these nationalised industries to get the necessary money at a reasonable rate, which they cannot get in the open market today. It is a very easy way for the noble Lord to get what he wants. I do not think that either he or his Government would have the courage to attempt to denationalise these industries.
    From a financial point of view, he must know that the railways could not raise any money in the open market before nationalisation. If one denationalised them, they would never be able to raise any money again. If this goes through, and the Chancellor can raise the money for the nationalised industries, he may be able to follow a policy which many hon. Members on this side of the Committee support: that there should be a different rate of interest for different things.
    My view is that if a nationalised industry or a local authority wishes to borrow money for necessary purposes, it should not be compelled to pay the same rate of interest as people who borrow money to build public houses, cinemas, petrol stations, or other places of vast

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    profit. I think that that is a policy which this country would substantiate, and which would certainly commend itself to the majority of the people for whom the noble Lord has at times some feeling—the ratepayers.
    If the Chancellor now intends to lend to the nationalised industries money at a lower rate than it is possible for them to obtain it on the open market, he will get as much support from hon. Members on this side of the Committee, and from people in the country, as his hon. Friend the Member for Tonbridge (Mr. Hornby) had at Tonbridge during last week—and probably very much more.
    The amount of money which can be got by 1958 is very small. Hon. Members opposite who have been taking some interest in the nationalised industries will know their proposals on a long-term policy. Surely no one is suggesting that that should come within the £700 million for 1958. We have been told time and time again that the most money invested in new works and industry is that invested in the nationalised industries. Right hon. Members on the Government Front Bench have been boasting of that. Now it would appear that the back benchers want to take away the only jewel the Government have had in their policies for the last few years—that investment is rising. Take that investment from the nationalised industries and we would have a very sorry picture. If the hon. Member for Ealing, South, who seemed to have some doubts about what we were talking about, will read the OFFICIAL REPORT, he will find that what we have had has been a sniping debate on the nationalised industries and not a debate on Clause 34 of the Finance Bill.
    Mr. Nabarro: My hon. Friend the Member for Ealing, South (Mr. Maude) expressed some apprehension about Government policy on the finances of the nationalised industries. I am afraid that I am a great deal more downright than he is in that connection. I am extremely suspicious of where this financial policy is likely to lead us.
    It seems to me that the drift of Conservative policy—[HON. MEMBERS: "Drift?"] Yes, drift—in this vital matter of financing the nationalised industries during the last year or two has steadily been towards the concentration of additional financial strength in the hands of
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    the Treasury, presided over by bureaucratic means, instead of submitting, as should be the case, to commercial considerations of the open money market. The Minister of Fuel and Power, on innumerable occasions—both the present Minister and the previous Minister—has said that it is the purpose of the Conservative Administration to turn these nationalised boards into commercial concerns. In fact, not one of the nationalised boards mentioned in Clause 34 can ever be a commercial concern so long as it is able to secure moneys on artificially cheap terms from the Treasury and thereby gain not only an advantage over other nationalised boards—that is only one facet of the problem—but gain a thoroughly unfair advantage over private enterprise competitors with that State board.
    Mr. H. Wilson rose—
    Mr. Nabarro: Before I give way to the right hon. Member for Huyton (Mr. H. Wilson), I think we ought to put the finances in terms of sterling into the right perspective in this Clause and realise how much money is being dealt with for each of these industries.
    Approximately, per annum, the electricity industry will have £200 million; gas, £60 million; transport, £80 million; airways, £20 million; and the balance of £400 million per annum, approximately £40 million is for the Scottish electricity undertakings. If I can derive a modicum of comfort from this Clause—all the comfort there is to be derived—it is that the Chancellor places a time limit on this form of financial operation of only 21 months, which hon. Members opposite seek to remove. I think that that is perhaps the only modestly satisfactory aspect of the Clause.
    Mr. Wilson: I wonder whether the hon. Member will address himself to this point? Both he and the hon. Member for Ealing, South (Mr. Maude) have advocated putting the nationalised industries' finances against the test of what they can achieve in the market in competition with private enterprise. That, presumably, would normally imply free competition and free enterprise and not monopolies. He will be aware that the big private monopolies can borrow quite easily in the market because they are free to charge whatever price they wish for their products and can, therefore, pay a reason-

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    able return on capital. Is not the implication of all that the hon. Member is saying that the nationalised industries must be free to charge whatever price they wish, and that there should be no opposition by the Minister of Fuel and Power—or the hon. Member himself when he becomes Minister of Fuel and Power—to the freedom of the nationalised industries charging the market price for their products as monopolies?
    5.0 a.m.
    Mr. Nabarro: I am grateful to the right hon. Gentleman. I am sure that his brain must be befuddled by the early hour.
    Let me go through the nationalised industries which are referred to in Clause 34. Take the Central Electricity Authority. That Authority has complete power in itself, and absolute autonomy today, to charge exactly what it pleases for all its services. It is not subject to any sort of Ministerial control at all. If I am wrong, I plead with my right hon. Friend the Minister of Fuel and Power to contradict me. I have asked him time and time again, in debate, to explain various points in connection with the charges. He invariably replies, "I have no power in the matter. The Authority fixes its own charges and tariffs."
    The gas boards fix their own tariffs—and so one may go through the whole gamut. [An HON. MEMBER: "The rail-ways."] There is a special procedure for the railways, and we all know the machinery of that procedure—but perhaps I may be permitted to pursue my argument for a few moments without interruption.
    When I gave way to the right hon. Gentleman I was making the point-and I put it in every seriousness to the Chancellor—that this is a question of approximately £400 million a year of capital investment. Of that capital investment, 50 per cent.—about £200 million a year—is in respect of the electricity industry. If the whole of that £200 million per annum were legitimately for the purpose of generating, distributing and selling electrical current I would view it with a great deal more favour, but it is not.
    Large sums of money which will come under this Clause are in respect of working capital for area electricity boards are for the purpose of purely commercial
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    operations—selling refrigerators, selling television sets, selling radio sets; competing within the field of electrical contracting and electrical work with private enterprise. But the private enterprise firms, who are competitors of the State boards, have to find their money on the open money market and upon competitive terms.
    Why, therefore, should we give a State board the unfair advantage of being able to borrow within the terms of this Clause? I quote subsection (4):
    "Any advances which a Minister makes under this section shall be repaid to him at such times and by such methods, and interest thereon shall be paid to him at such rates and at such times, as he may, with the approval of the Treasury, direct."
    Unless the Chancellor of the Exchequer contradicts me later, that connotes to me the highly-subsidised finance for State boards that we have grown accustomed to in the last few years, all of which are so grossly unfair to private enterprise traders. It is another form of direct Treasury subsidy to these nationalised industries in respect of their commercial undertakings.
    Mr. Albu: But can the hon. Gentleman give an estimate of the amounts which will be used for the purposes he is now describing out of the capital to be raised?
    Mr. Nabarro: If the hon. Member will read the last annual Report of the Electricity Authority he will find that its commercial operations are on a very considerable scale. Its retail sales alone amount to nearly £50 million per annum. It is difficult to ascertain how often appliance and equipment stocks are turned over and, therefore, how much capital is directly involved, but I should say that it is possibly £25 million to £30 million within the whole field of State electricity as an aggregate of the capital involved in retail sales and contracting.
    Whatever the amount, I am here concerned with principles. If the amount were only £5 per annum I see no reason at all why the Conservative Party should support a philosophy that really belongs on the benches opposite, namely, the subsidising of State boards and State industries to cut the throat of private enterprise commercial concerns-because that is just what it means in this particular context.

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    I pass now to another aspect of this proposition. It is well known, from a number of speeches I have made in this Chamber, that I am profoundly dissatisfied with the matter of accountability to Parliament of these State industries. I am not alone in that. Many hon. Members opposite are equally concerned. The effect of this Clause is to place further outside the review of Parliament at regular intervals the operation of these boards. Once the Clause goes through the Treasury may, in effect, grant large sums within the global limit, at intervals, to these boards without any control by Parliament.
    Reference was made earlier to my suggestion that there should be an annual scrutiny. All that Parliament has been able to do during the last few years is to view these vast accretions of industrial strength in the form of nationalised industries in long retrospect. It has never been able to look forward in considering what their operations will be in the ensuing years, by judging the suitability or otherwise of their capital investment programmes.
    This Clause will put the capital investment programmes of the nationalised industries further from Parliamentary control. They will be more difficult to scrutinise and comment upon, which is a matter which should not divide either side of the Committee. Whereas it is undesirable that there should be detailed control over the day to day operations of these industries, we ought to have once a year, in the House, the opportunity to debate the capital investment programme of each nationalised industry for the ensuing year.
    I want to say a few words about the Herbert Committee. It is important in this context. The Herbert Committee's inquiry was the first full scale inquiry into the affairs of a nationalised board. No one would suggest that the committee was weighted politically on either the Socialist or the Conservative side. It was a strong Committee. I can claim, with due modesty, to be the only Member of Parliament to give oral evidence before it. After being grilled for an afternoon I was impressed by the qualification of every member of the Committee to investigate the affairs of a complex industry. The Committee arrived at a unanimous
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    and unequivocal conclusion on the question of capital finances.
    The Committee published its Report just before the Budget. Hon. Members have referred shortly to what the Committee said, but where we are discussing a sum running to £400 million a year, and £700 million under this Clause, we ought to bear in mind the words used in the Report. They are instructive. The Committee said:
    "The second objection "—
    that is, the objection to raising money on the open money market,
    "is that it might prove impracticable to raise the sum of capital required annually to finance the present programme of the Electricity Boards. This again does not appear to us to be an insuperable objection. Whether the required sums could be raised or not could only be determined by experience. If they could be raised, then the fact of raising them would be evidence of the economic justifiability of the expenditure concerned. If they could not be raised, the economic basis of the expenditure would have to be reviewed and the industry might be obliged to change its policies, or to defer its development programmes. If, in order to avoid this situation, the industry were impelled to find more efficient ways of achieving its objects, the result would be wholly beneficial."
    An hon. Gentleman opposite seems to be muttering more than usual.
    Mr. Gordon Walker: That is what the hon. Gentleman is doing.
    Mr. Nabarro: I was not aware that my voice lacked resonance even at this time in the morning. The exact words of the Herbert Committee's short recommendation are:
    "The efficient use of capital would be encouraged if the Boards had to compete for capital funds on the market without the support of the Treasury guarantee, but this course could only be followed if it were also applied to other nationalised industries."
    That surely means, in this context, the nationalised industry directly in competition with electricity, namely, the gas industry.
    Those are the findings of a completely independent Committee of Inquiry that deliberated the whole of the affairs of this industry for several months. Those views are amply confirmed by the Economist which wrote on 18th May last, in terms, I thought, that were a little sterner than they need have been, that the Tory rebels would best be serving the national interest if they pursued as

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    a single objective accountability to the money market for all the capital sums required by the nationalised industries, for—and I add these words myself—once money market accountability is established and there is proper financial discipline imposed on these boards by their having to go to the money market and submit to it, then there will be little need for Parliamentary accountability.
    Thus, the objective of my right hon. Friend the Minister of Fuel and Power which he so constantly reiterates, that he wishes to turn these boards into commercial concerns, might be achieved always so long as they submit to the same rigorous financial disciplinary codes that private enterprise is accustomed to, in the form of the open money market.
    I claim that the Chancellor is, in this Clause, going in exactly the opposite direction and that the course being pursued will in the ultimate, prove harmful to our economy, inflationary, and damaging to the structure of these nationalised industries.
    Mr. H. Wilson: Having heard the Tory rebels, as the hon. Gentleman the Member for Kidderminster (Mr. Nabarro) has just described himself and his hon. Friends, quoting the Economist, I would paraphrase the advice of the Economist and say that the national interest would have been far better pursued if they had gone to bed an hour earlier.
    We have not had very much in the way of constructive proposals from them during the last hour. I must remind them, because there does not seem to be anyone on the benches opposite capable of reminding them, that they have been keeping the Chancellor out of bed for a very long time now, and when all is said that can be said about him he is the best Chancellor we have, as the Lord Privy Seal would be the first to admit.
    I do not say that he is the best we could have. I know that a number of hon. Members opposite have been trying to prove all night that they could do the job better than he can, but I am not at all certain that it is in the best interests of the nation that at so critical a time in our economic affairs, when one slip of the tongue by the Chancellor can cost us millions of dollars, and frequently does, he should be kept out of bed for the whole of the night for the sake of the
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    kind of debate we have had since ten o'clock last night.
    Again, I must remind hon. Gentlemen opposite that there are two sides to this Committee and that for the greater part of the night we have been kept up discussing either Amendments from the opposite side or subjects raised by hon. Gentlemen opposite in debates on the various Clauses.
    Since such a wide subject has been raised by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) in a very agreeable speech, even though we do not find ourselves in agreement with it, we on our side would be justified in keeping the debate going for quite a long time yet if only to reply to points which have been made, quite apart from the reply of the Chancellor. It may reassure hon. Gentlemen opposite if I say that I do not intend to detain the Committee on this occasion for more than an hour. [HON. MEMBERS: "Hear, hear."] Yes, provided I am not interrupted too much.
    5.15 a.m.
    I have already referred to the restraint we have shown. [HON. MEMBERS: "What about the hon. Member for Cheetham?"] My hon. Friend the Member for Cheetham (Mr. L. M. Lever), we hope, is safely tucked up in bed. But I cannot guarantee that. At any moment now I may find I am wrong. However, we shall look after our own rebels at this time in the morning, and we can do so with far greater proficiency than the Tory Patronage Secretary can look after his.
    I was referring to the restraint we have shown in the debate. We have resisted a very strong temptation, that might have been felt by less altruistic people, in that we have done everything we could to facilitate the Government Chief Whip's plot to have this debate, involving this split in the Tory Party, occur in the middle of the night, or the very early hours of the morning, when the Press are not very active, rather than in the afternoon. No doubt, could such a split have occurred among us, the debate would have been timed for the afternoon.
    Mr. Nabarro: There is the 8 a.m. news.
    Mr. Wilson: The hon. Member is muttering something?
    Mr. Nabarro: What I said sotto voce was that we have the 8 o'clock wireless news.
    The Deputy-Chairman: Order. We have the Clause, too, and, perhaps, we could come to it.
    Mr. Wilson: I hope to come to the Clause, Sir Rhys, and to have dealt with it exhaustively by the time we reach the 8 o'clock news.
    The hon. Gentleman the Member for Kidderminster has been extremely eloquent, and very cogent in the way he has put his arguments.
    Mr. Gordon Walker: Not elegant.
    Mr. Wilson: I said "eloquent." I think he will realise that far more eloquent than any words of his will be his vote. If he really meant what he said he would vote against the Clause.
    Mr. Mitchison: If he meant any of it.
    Mr. Wilson: Perhaps we may see the hon. Member vote against the Government. If not, he will have been wasting the time of the Committee, and very much of it, staging this mock rebellion, this demonstration against the Government. The hon. Gentleman seems to be muttering something about a little mild criticism. If he turns to HANSARD when it is available he will then find his words went much further than that.
    For all that he said, I am disappointed in him, because he did not answer the question I put to him. Perhaps, I may remind him of the question. Perhaps the hon. Member for Ealing, South (Mr. Maude) may care to answer it, because he, jointly with the hon. Member for Kidderminster, raised the matter of subjecting the nationalised industries to the rigours of the market. This was the question I tried to put. Perhaps I did not put it sufficiently clearly for the hon. Member for Kidderminster. I put it again.
    Both he and the hon. Member for Ealing, South suggest that we shall not see the nationalised industries subject to what they both, I think, called the economic laws until they have to go to the market for their capital and there is competition on equal terms with private enterprise. That is, I think, the argument put to us by both hon. Gentlemen. I tried to suggest that that argument presupposes a competitive system. Once we
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    get into an age of monopolies we have a very different situation.
    I have no doubt that the hon. Gentlemen would say that monopolies such as I.C.I. and Unilever and others are able to go to the market, able to raise capital, even in this time of the credit squeeze, with reasonable success, even if, perhaps, at rather high rates of interest. They are able to do that because of the financial strength of the undertaking and because of their acceptable dividend rate. But of course, none of us can form any opinion or measure the economic efficiency of these great monopolies. They are free to charge whatever prices they like. The private monopolies are able to charge whatever prices they like and that fixes the amount of their profits, distributed and undistributed; and, ultimately; their dividends.
    I would suggest to the hon. Member for Ealing, South, who may accept it more readily than the hon. Member for Kidderminster, that the implication of what has been said is that these public monopolies should be free, not only in law, but also in fact, to charge whatever prices they think the market will bear. When I put that to the hon. Member for Kidderminster he replied that I must be fuddled because of the lateness of the hour. I would tell him that I am very refreshed. I have had an excellent meal of bacon and egg, and I hope that he will be able to have something similar very soon. I assure him I was in no way fuddled.
    Mr. Nabarro: I thank the right hon. Gentleman for giving way, and if he will let me clear this point up for all time, I shall not interrupt his speech again.
    There are seven nationalised industries mentioned in Clause 34. Six of them have absolute autonomy in the matter of fixing their prices and tariffs. The only one with any Ministerial control is the British Transport Commission so far as the railways are concerned. The others. have absolute autonomy in fixing charges.
    Mr. Wilson: Of course, and the British Transport Commission has time and time again been prevented by this Government from charging the rates which they think are right. That happened in 1952, and we lost a Minister of Transport because of the intervention of

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    the former Prime Minister. In the case of the railways, there is not that freedom which must be inferred if the remarks of the hon. Member for Kidderminster about recourse to the commercial market are to have any meaning at all.
    The coal industry is not referred to in the Clause, but it has been referred to during our discussion. There are seven authorities listed in this Clause, but coal is not one of them; but coal, which is in the hands of the Treasury so far as borrowing is concerned, will affect the conditions under which these other industries will be borrowing. It is wrong to say that the coal industry can raise its charges whenever it wants to do so. Of course, technically and legally it can, but ever since 1942, when the mines came under statutory control, there has been this voluntary agreement.
    During the war the private coal owners would not have increased their prices without the consent of the then Minister of Fuel and Power, who is now the Home Secretary. It is well known that the National Coal Board could not increase its prices today without the good will and permission of the Government. In fact, we are all very well aware of the extent to which the deficit that the Coal Board has accumulated was due to the fact that the Government prevented it from increasing coal prices before the last Election.
    That argument, therefore, about subjecting the nationalised industries to economic laws falls to the ground. Let us, therefore, consider the other arguments which have been put forward. The speech of the noble Lord was extremely persuasive. It was marred a little by the use of the word "taxpayer." He kept talking as though the system which exists before the Bill comes into operation in some way involves the taxpayer. Of course, there is in the ultimate a contingent liability assumed by the taxpayer—that must be the case whenever there is any borrowing under Treasury guarantee; but what has been going on so far as borrowing is concerned all this time has been borrowing under Treasury guarantee, first, from the joint stock banks for short periods, and then borrowing with the help of Treasury guarantee on the market.
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    When the noble Lord looks at what he said, he will feel that the exact words he used might have been improved.
    Viscount Hinchingbrooke: As far as coal is concerned, the taxpayer has been providing capital for coal throughout and so far there has been an over-all balance below the line. In the other nationalised industries there is about to begin the policy of putting them below the line. We have to see whether taxation is raised to balance that.
    Mr. Wilson: I thought that on the frequent occasions when he mentioned the word "taxpayer," the noble Lord was referring to the other nationalised industries and was drawing a distinction from coal and was talking about gas and electricity. If I have misinterpreted him, I apologise.
    The noble Lord drew a distinction using words which had been given currency by my right hon. Friend the Member for Lewisham, South (Mr. H. Morrison), between "socialisation" and "nationalisation." As the noble Lord put it, my right hon. Friend suggested that what happened in 1946, 1947 and 1948 was socialisation because the boards that were set up were given a statutory duty to manage their own affairs and to balance their accounts taking one year with another. The noble Lord is right; it is only now that we are getting real nationalisation so far as some of these industries are concerned. Coal, of course, has in this sense been under national control so far as its borrowing is concerned.
    If this were the night when the House of Commons were being asked to approve the nationalisation of these great industries for the first time. we would feel justified in having a considerably longer and more far-reaching debate, but I will not play with the words which were used by the noble Lord. He and other hon. Members have raised the question of whether Parliament should have closer control over what the nationalised industries are doing.. There are some hon. Members opposite who feel that it is a good thing for the Treasury—and, therefore, ultimately Parliament—to have closer control over what the nationalised industries are doing. It is an arguable question.

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    If we were debating nationalised industries in general, and not just the question of their borrowing, we could have a productive and interesting debate on the accountability of these industries to Parliament. Perhaps we will be having that debate shortly when we discuss the nationalised industries. I do not propose to go into that wide question this morning, although hon. Gentlemen opposite have touched upon it.
    Certainly, those hon. Members who in the past have complained that the nationalised industries were not sufficiently accountable to Parliament and to Ministers—for example, the hon. Member for Kidderminster, who seems now to have disappeared—
    Mr. Nabarro: No, I have not.
    Mr. Wilson: I beg his pardon. Obviously, he is copying what the Chancellor was doing four or five hours ago and has moved to another bench. We are not accustomed to seeing him in that position.
    The hon. Gentleman—if we can fix him at one point for a few minutes—was complaining a few minutes ago that the nationalised industries were borrowing this money, not only, to take the electricity industry, for the generation and distribution of electric current, but also for engaging in what he called commercial activities, competing with the private enterprise market in, for instance, the sale or the hiring out of refrigerators, cookers and other electrical equipment. Of course, if he complains about their doing that—and we recall Questions from him on that subject—perhaps he should welcome the fact that these activities will come more closely under the control of the Chancellor. That ought to be the logic of what he has suggested.
    5.30 a.m.
    The Chancellor himself said during the Budget debate, in one of his more colourful passages, something about the piper calling the tune. I cannot remember the exact words, but perhaps the Chancellor will remind us. He said something about pressing the fee into his hand so that he will have even more control over the tune. Surely the hon. Gentleman should admit that, since the Chancellor is taking these additional powers, he will have a tighter control over these operations of the nationalised industries, and, therefore, I
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    should have thought he would welcome what the Chancellor is doing.
    We ourselves welcome this Clause. I think I have made that clear in earlier debates. We welcome this proposal. Our only doubt about it is on the very point which provides the only crumb of solace for the hon. Member for Kidderminster.
    Mr. Nabarro: Modicum.
    Mr. Wilson: "Modicum of comfort" was the term. That is the reference to the temporary nature of these powers. Whereas the hon. Member for Kidderminster is cheered—if cheered is the word to describe the mood he has been in this morning—by the fact that these powers are likely to end in 21 months time, we for our part regret that the Chancellor is limiting himself in that way and would welcome it if he would extend it for a considerably longer period.
    Our chief worry is, in fact, that the Chancellor may use this control too tightly; that he will control even more tightly than he has been doing the investment programmes of these nationalised industries. Every time we have had an economic crisis in the past 15 months or so, one Chancellor or another has come along and announced a series of measures of varying degrees of value, but common to all of them, or nearly all of them, has been a further cut or threat of cut in the investment programmes of the nationalised industries. We had it from the Lord Privy Seal last July, we had it again in the autumn Budget, we had it again in the statement of the present Chancellor in February, and now, of course, in the Budget he has said he is to take powers to give him a still tighter grip on the financial borrowing of the nationalised industries.
    As I have said on many occasions—and I do not intend to pursue this point very far tonight—we feel that the Government's doctrinaire refusal to introduce controls in the private sector—I should be out of order to pursue that and I will not do so—goes ill with this tight grip on the nationalised sector. In other words, whereas hon. Members opposite are complaining about the control over the private sector and saying there should be a tighter control over the nationalised industries, we think it should be entirely the other way round. I am not going to go into these questions of capital investment in the private sector, all this

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    inessential building, all this inessential expenditure. What is certain is that essential building and essential expenditure within the public sector is being held up, deferred and delayed as a result of the Government's activities.
    What we fear is that the tighter grip on the public sector which the Chancellor is taking by means of the Clause may be used for that purpose. If we felt that the Chancellor would deal with privately-owned monopolies as toughly as he intends to deal with public monopolies, we should feel a great deal easier in our minds.
    I have only one last point to put to the Chancellor. Hon. Gentlemen opposite will realise—I say this in no party sense, because I think many of them will agree with this—that the nationalised industries have before them a vast programme of investment expenditure, whatever assumption one might make about the methods of raising the money. There is the coal industry's plan. I am not concerned with whether or not hon. Gentlemen opposite agree with the details of the plan. The coal industry has been spending, and will have to spend, hundreds of millions of pounds. We believe that that is because of a whole generation in which capital expenditure was not undertaken. I think that many hon. Members opposite, in their heart of hearts, know that to be true. Private enterprise did not develop the coal mines between the two wars.
    Mr. Philip Bell: That is the party point that the right hon. Member said that he was not going to make.
    Mr. Wilson: I am surprised that the hon. and learned Member should say that is a party point. I am merely quoting the Reid Report. The Reid Committee was appointed by the present Home Secretary, and there was not a single Socialist on it. It is not a party point to say that the private owners entirely failed to develop our coal mines. I should have thought that was an incontestable statement of fact. It is agreed by everybody. If one looks at what the Chancellor himself used to write about these things before the war, he was very frank and fair about it. It was not the—
    Mr. H. Macmillan: It is a party point that the right hon. Gentleman is making. It is no good pretending that it is not.
    Mr. Wilson: If it was not the fault of the coal owners who owned the enterprises, I do not know whose fault the Chancellor thinks it was.
    Mr. Macmillan: I have no objection to the right hon. Gentleman making a party point, but it was rather objectionable to make one and then say that he was not going to make one.
    The Chairman: I think we shall get on better if we deal with Exchequer advances and not the coal owners.
    Mr. Wilson: Very well, Sir Charles. If the right hon. Gentleman thought that was a party point, I will take it, but I am very surprised that he would not agree that it was a statement of fact, in view of what he said about it before the war.
    Coming to the present and to the borrowing that has to be undertaken under the Clause, a vast, essential expenditure is required which for one reason or another was not carried out before the war. We may have different explanations why it was not done, and I should be interested to hear what the Chancellor's explanation is. But it was not done, and we now have to spend hundreds of millions of pounds which perhaps ought to have been raised and spent in the days when it would have been easier to raise the money.
    We have the same problem with the railways. We also have it with the electricity industry, which has had to be doubled in size since the war to meet what has so far at any rate been an expanding economy. We also have the gas industry which, for the first time, is being regarded as a national industry and not a series of little units. Therefore, the amount of borrowing to be undertaken is truly prodigious.
    Probably the Chancellor's motive—I hope he will tell us this—in introducing the Clause is not so much that he wants to get a tighter grip on the capital investment programmes of the nationalised industries. He is doing this because it is impossible for him to manage the capital market, to "rig the market" in the best sense of the word. I am not using the term in any other sense. The phrase "rigging the market" is frequently used. The Treasury has to do it every day of its life, and is probably

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    doing it now. To do this, the Chancellor cannot allow these large items of capital expenditure to be carried out in what he would regard as an unplanned way from the point of view of raising the capital.
    That, I believe, is the main motive. We support him in it and, as I have said, we certainly do not intend to divide against the Clause, whatever hon. Members below the Gangway may decide to do. But I hope that the Chancellor can tell us—without giving away too many Treasury secrets in relation to policy, market borrowing and market rates—a little more about what he has in mind as to the exact operation of the Clause upon the markets, and particularly the relevance of this borrowing to the funding policy which he referred to in his Budget speech.
    Mr. H. Macmillan: I do not intend to engage in a general debate upon the nationalised industries. Subject to your Ruling, Sir Charles—and without intending any discourtesy to right hon. and hon. Members who have addressed the Committee—I propose to make a brief intervention upon the subject of the Clause.
    My hon. Friend the Member for Dorset, South (Viscount Hinchingbrooke) made a very interesting speech, in which he raised some wide topics, but he tended to over-rate the significance of the above-the-line and the below-the-line calculations as they have been made in recent years. It is not really the precise way in which these figures are put into the Budget statement that matters; what matters, from the broad, economic point of view, is whether the total amount of savings, from whatever source—Budget surplus, private savings or the internal savings of various businesses—is sufficient to finance the total amount of investment. If investment is going on at a higher rate than the total amount of compulsory or voluntary savings justifies, nothing can prevent an inflationary situation; but if the total amount of savings is sufficient to finance the investment of the year, the economy will be in balance. I think that hon. Members have tended to over-rate the importance of the above-the-line and the below-the-line balances for the year.
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    The Clause, which has given rise to a very interesting discussion, is very much more limited than most hon. Members who have spoken have regarded it. It makes only a technical change in the method of borrowing. It is, to use the agreeable phrase of the right hon. Member for Huyton (Mr. H. Wilson) "in the best sense of the word, 'rigging the market'." I have not much experience of either the good or the bad sense of rigging the market, but it is true to say that this is a purely technical change, which I venture to recommend to the Committee for purely technical reasons.
    So far as I can see, it has no effect whatever upon the control of the Minister or the Treasury over the capital schemes of the various nationalised industries. Under our present procedure, at each relevant period those are brought up for the approval of the Minister by the boards of the industries, and are then approved, in consultation with the Treasury. This change will have no effect whatever upon that procedure.
    Mr. Grimond: The right hon. Gentleman said that if we pressed money into the musician's hands we had rather more control over the tune.
    Mr. Macmillan: To some extent I agree that it brings to the closer knowledge of the Chancellor the detailed working of the plans as they are moving, but it makes no technical change in the present position. It certainly makes no change in the interest rates, whether those are varied in this way or upon Government guarantee in the market.
    5.45 a.m.
    The real reason for the change is a simple one, and I may venture to repeat it, though I set it out in great detail in my Budget speech. At present the nationalised industries, other than the Coal Board, which is financed in the way I am proposing that the others should he financed, raise their capital either by temporary borrowing from the banks or by stock issues in the market, with Government guarantee. I propose that for the next two years—and that limitation, I am glad to see, has the approval of my hon. Friends—the nationalised industries shall cease to borrow on the stock market and have their capital requirements met by finances from the Exchequer.

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    There will be a gradual repayment of bank advances outstanding as these new arrangements start, and afterwards—and this is of considerable importance—the industries will look to the banks only for their normal short-term needs. They will not run up large-scale advances from the banks. In 1955-56 stocks were issued by these boards to a total of £387 million, of which the Central Electricity Authority issued £200 million and the Gas Council £100 million. These stock issues, in so far as they are not taken up, or not fully taken up, by the market subscribers are, in one way or another, supported by the Exchequer until they are partially or completely absorbed by the market. In recent months support of this nature from the Exchequer has had to be substantial and prolonged.
    Further large issues by some of the nationalised industries would, as the right hon. Gentleman said—and I think everyone admits, whatever be the system—be necessary in the near future. I anticipate that about £300 million to £350 million, depending on the extent to which the issues had to anticipate future requirements as well as to refund bank advances, would probably have been required in 1956, had we not made this proposal. They would have been made in the way they have been made up to now.
    There are two great disadvantages in that arrangement, particularly in the present circumstances. The first is that, by and large, official support can only be given to these stock issues by borrowing the necessary funds on Treasury Bills. That is the only way in which we can give support to those issues when they are not fully taken up in the market, and the continual issuing of Treasury bills adds to the liquidity of the banking system, and so often to the difficulties of operating monetary control. That is the first difficulty in the present circumstances.
    The second is that frequent issues of the stock of these boards, which are made by Statute under Treasury guarantee, and therefore involve Government credit, have to be made at inconvenient times; not when it would suit the market, but at the particular time when a particular industry has reached the limit of its borrowing powers from the joint stock banks. The fact that they are going on
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    at a time necessary to them, but not suitable for the broad management of Government credit and Government funding, prejudices the general Government programme of borrowing and refinancing and funding.
    I ask the Committee to accept the view that since the Exchequer has in present circumstances to bear the burden of providing at least the bulk of the capital finances of these industries, it is better, in the wider interests of the management of Government credit and funding Government debt, that the Exchequer should be in control of the whole operation.
    Mr. Nabarro: What my right hon. Friend has said depresses me, though I recognise that there is a very sound and well-based economic argument for it. It depresses me, because it seems to suggest that for all time we have got to go on with this system, and shall never be able to make progress towards these industries going to the market.
    Mr. Macmillan: My hon. Friend is not easily depressed, but what depresses me is that, after all this time, he has not read the Clause, which is not for all time. It is for two years. If he would read the Clause before he spends such a great time in criticising the Government on it, it would be better. It is for two years and not for all time. It is to meet the present conditions of the market and to assist those who have the responsibility of managing the market, in the broad sense, to get rid of this system, which impinges upon these particular borrowings in a way that is not suitable under present conditions.
    There are, therefore, two purposes: first, because at present the monetary control is made more difficult because of the method by which we have to support these borrowings, and, second, because the timing of them is inconvenient in the situation in which we are to-day, but from which we may hope to escape. And that answers both the right hon. Gentleman and my hon. Friends below the Gangway as to why we have given the two-year limit.
    Mr. Gordon Walker: Does the two-year limit mean that at the end we will either go on with what we are to have now or go back to what we used to have?
    Mr. Macmillan: It means that at the end of two years we shall see what the situation is and make a decision appropriate in those conditions.
    Mr. H. Wilson: We shall be doing that.
    Mr. Macmillan: It seems to me a very sensible thing to do. I thought the party opposite were very hopeful people—but not as hopeful as that. They will make a mess of it, and then there will be another mess to clear up. So far they have run away from every situation which they have got into.
    Mr. Wilson: Perhaps the Chancellor will recall that we took over responsibility for the economic situation in 1945, when this country was in the most disastrous and bankrupt condition that it has ever faced.
    Mr. Macmillan: I do not know about 1945. I thought we had just, after considerable efforts, won a great war—the whole nation, the Coalition Government. [Interruption.] All right; if the party opposite want to stir this up, they can. I do not want to. I was trying to answer the party point put by the right hon. Gentleman, who claimed that he would continue to deal with this matter in a particular way. I am putting a proposal to the Committee which leaves it open to the Committee, or to Parliament, after two years, to make an appropriate decision, either from technical considerations, or from doctrinaire considerations.
    Of course, we should like to move in the direction of the Herbert Committee's Report. It would be a good thing if these industries could borrow from the market on their own credit, but I do not think that is practical. We have to face facts as they are, and the necessity for meeting the needs for capital investment in these industries at present by going to the market. Therefore, the only thing to do is for us, as a Government, to undertake the capital requirements of these industries for the next two years.
    For the next two years they will not borrow on the stock market, but will have their requirements advanced from the Exchequer. They will gradually repay the bank advances outstanding when the new arrangements come into effect. As I have said—it is an important point—they will only look to the joint stock
    530
    banking system for normal overdraft requirements on a short-term basis.
    The Economic Secretary promised the hon. Member for Orkney and Shetland (Mr. Grimond) further information about the terms on which the Exchequer loans will be made available. The detailed arrangements, including the terms of repayment, have in fact been discussed with the boards of the seven nationalised undertakings. A great deal of progress has been made, but discussions are still continuing and, therefore, I can only give him, I regret, an interim report. The rate of interest on the Exchequer advances will correspond broadly to those appropriate to Government credit for a comparable period of years. The rate for similar Exchequer advances is at present 5 per cent. for loans of over 15 years.
    It has not been Exchequer practice to make maturity loans and no exception will be made in the case of the nationalised industries. The loans will be repayable either on the basis of equated annuities, or by equal instalments of principal throughout the life of the advances. The choice is left to the borrower, who will have to opt for one method or the other. The period of advances appropriate in each case is still under discussion.
    The main consideration which has to be taken into account is the life of the assets being created, and they vary, of course. Then we have to consider the period over which the assets will be written off, if that is shorter than the life of the advance. But account will be taken of other factors, such as the period for which the authority has been in the habit of borrowing on the stock market. It seems likely that periods of between twenty-five and forty years will be fixed in most cases. A shorter period may, however, be appropriate for the two Airways Corporations, whose assets have a relatively short life.
    A detailed programme of advances for the first few months of the new arrangement is being worked out. It will take account of the likely needs of the boards for new capital and also of the state of their overdrafts. It is probable that Exchequer advances of new capital will be made at regular intervals.
    I think there was one further question that the hon. Member asked. It was, will Parliament be informed when advances are made to the boards? The

    531
    answer is that the advances are to be published, when made, in the weekly Exchequer returns. That is done in the case of the National Coal Board now. The entries will be made available in new entries below the line. I think that gives the answer to the rather technical points raised, some of which we have not settled, and it will indicate the line of thought in the discussions which are going on between the Treasury and the boards.
    As I said before, while I can understand that it should be convenient to hang on the peg of this Clause a general discussion on the finances of nationalised industries, I would ask the Committee to believe—what is the absolute truth—that the reasons why I have introduced this Clause are the two financial reasons which I gave. A heavy burden lies upon those whose duty it is to manage our affairs in this field. We have very big funding operations and quite a lot of data to deal with. I think it is only fair, although it has been an additional burden, I fear, upon the Committee and upon the Government, to include this Clause. I thought it fair to those who have to carry this burden to make it easier for them. I am quite certain that this system, at any rate for the next two years. will make that task easier for them.
    Mr. H. Wilson: I am sure that the whole Committee is grateful to the right hon. Gentleman for the answer he has given. He has confirmed the view that I put forward, that his motive for this policy was a purely technical and financial one and not related to any desire to get control over the investment programmes of the nationalised industries.
    With the hon. Member for Orkney and Shetland (Mr. Grimond), I asked the right hon. Gentleman to give some account of how he thought the policy would work in the market, and we are grateful for the very full account which the Chancellor has given in reply. I only want to make it clear that when I used the phrase, "rigging the market" and said, "in the best sense," I meant the best sense in which the Treasury do it—rigging the market for the purposes of fixing the rate of interest for funding operations. The bad sense of the term is when private traders rig the market for
    532
    high prices and high profits. I only want to assure the right hon. Gentleman that I did not have any sinister meaning in mind when I used that phrase.
    6.0 a.m.
    The answer of the right hon. Gentleman, although it has been made at an unusual hour, will be studied, I think, with great interest, not only by hon. Members who have not spent the night with us, but by many who have and who would like to study it at greater leisure. It will also be studied with great interest in the City and the markets generally. So far as this side of the Committee is concerned, I do not think that we can carry the debate any further with profit to ourselves or the problem which we are discussing. I can assure the Chancellor that we do feel that he has made an important statement during the course of the last half hour. I think one would be right in assuming that it was a considered statement, carefully prepared and phrased, and not just an extempore reply to the debate.
    As I say, we will study what he has said. We may want to come back to this matter either in the debate on the nationalised industries or in the debate on the economic situation, because it obviously has a very close bearing on both subjects. After a very long and, at times, weary night of debate, I think that it is right to pay a tribute to the Chancellor for that particular reply. I am almost reaching the conclusion, although at this time of day it is difficult to reach conclusions, that this debate has been worth while, and we shall want to study very carefully what has been said.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.
    Mr. Macmillan: I beg to move, That the Chairman do report Progress and ask leave to sit again.
    We have made very good progress, and I think it would be a pity to embark now on the question of the Premium Bonds. Perhaps we might leave that subject over until Monday afternoon.
    Mr. H. Wilson: All things considered, I think that the Chancellor is probably right. We are disappointed that the "chocolate soldier" from Kidderminster was not prepared to back his eloquence

    533
    in the Lobby. The noble Lord, the Member for Dorset, South (Viscount Hinchingbrooke) showed a little more courage in at least shouting "No" once, but it is a very disappointing conclusion to what looked like being a rather promising and healthy Tory split.
    All I now want to do is to endorse what the right hon. Gentleman has said. I think that we have made remarkable progress since 3.30 yesterday afternoon. We have dealt with 23 Clauses in that period. I know that before he goes to bed the Patronage Secretary will undertake the research which I invited him to make earlier and so find whether there is any comparable case in the whole history of financial legislation of getting through 23 Clauses in a single sitting. If so, I will withdraw what I said earlier.
    I think the Chancellor can be very satisfied with the co-operation which we have shown. He knows that had it not been for the pertinacious work of some of his hon. Friends—and I do not mean only in the last debate—we might have got as far as ordering Clause 34 to stand part of the Bill before midnight.
    Question put and agreed to.
    Committee report Progress; to sit again this day.

  WAYS AND MEANS [11th June]
  Resolution reported,
  That any Act of the present Session relating to Finance may, notwithstanding any resulting charge to estate duty, include provision as to the treatment for purposes of estate duty of annuity contracts and annuities to which any provisions of that Act giving relief from income tax relate.
  Resolution read a Second time.
  Question, That this House doth agree with the Committee in the said Resolution, put forthwith, pursuant to Standing Order No. 86 (Ways and Means Motions and Resolutions), and agreed to.
  Instruction to the Committee on the Finance Bill that they have power to make provision therein pursuant to the said Resolution.

  SECONDARY MODERN SCHOOLS
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Barber.]
  6.5 a.m.
  Dr. Horace King: In October, 1953, I asked the then Minister of Education to institute an inquiry and make a report on progress since secondary education for all began in 1946. Now that Political and Economic Planning has published such a report on secondary modern schools I repeat the request for a Ministry report. The P.E.P. report is, of necessity. sketchy. At times it fails to see the wood of achievement because of the trees of difficulty remaining, and the forests ahead.
  Britain ought to be proud of what has been done in secondary education so far. It all began under grave handicaps—the established status and prestige of the grammar school; inadequate buildings, most of them, at first, only the old elementary schools, manned by the old teaching staffs; the new problems confronting teachers who faced for the first time in 1947 youngsters of 15, and were perhaps a little afraid of the new task and of the adolescent; the battle to persuade local education authorities to give the equipment, laboratories, workshops, textbooks, playing fields, even school prizes.
  Moreover, with an increasing demand for grammar school education, teachers in secondary modern schools encountered parents who had cruelly discouraged their children because they had failed to win special places; parents who regarded the secondary modern school as a disappointment, and who were unkind and unwise enough to let their children and the staff know it. The children left school at 15 instead of the grammar school leaving age of 16 and later. The wide range of ability was from children who ought to be in grammar schools to those who were educationally sub-normal. The dice were loaded against the new schools; but at once things began to happen.
  What has been achieved so far? A successful battle against the illiteracy which had grown, perhaps not surprisingly, during the war. We have not abolished illiteracy. There will always be

  535
  a few children who cannot be taught to read, but work in small classes for backward children, with teachers today volunteering for such work, and specially training for it, is having its effect.
  The Ministry's pamphlet, "Reading Ability", should now be supplemented by the striking figures of what is being achieved in this field. At the other end of the scale is what is being done for bright children. In 1955, 5,550 secondary modern school children entered for the General Certificate of Education. In a single county in 1953, 102 children passed in 115, and in 1955, 440 children passed in 679, subjects.
  Last year, a girl in a secondary modern school of which I am a governor passed in six subjects—most grammar school children would be happy to do as well as this. Some children in Hampshire who began in a secondary modern school are now at the university. In 1949, 13,000 secondary modern schoolchildren stayed on after 15, and 1,500 after 16. In 1954, the numbers were 21,000 and 3,000. Secondary modern school education has proved really worth while for these children, most of them victims of the 11-plus selection system.
  Secondary modern schools have developed new courses of study. Mr. Richard Hickman, in a recent lecture under the auspices of the National Union of Teachers, at Blackpool, gave a striking list of about 20 different types of such courses, including rural science, auto-engineering, pre-apprenticeship, practical crafts, and electrical science. What is significant here is the vital and natural opening up of new avenues.
  This is a far cry from the "projects" which were all that official documents could visualise in the raw days of 1945, on the one hand, and on the other, the reaching out to types of work traditionally associated with grammar and technical schools; the beginning of the seeping away, which I believe inevitable, of the clumsy tripartite system which still fetters us, and faltering though unconscious moves towards comprehensive secondary education. Able children from fifth forms of secondary modern schools are transferring to sixth forms of grammar schools and are doing well there; and all this apart from the deliberate setting up of comprehensive
  536
  secondary schools by some forward-looking local education authorities.
  But, important as all this is, much more important is what is being done for the average child. Recently, Dr. Thomas, Director of Education for Leicester, paid a tribute, which I echo, to the maturity, poise and confidence of our secondary modern children. Anyone who visits the schools and sees the children on sports day, speech day, school excursion or, school camp, or who sees their work in education exhibitions, must know that things, vital things, are happening here just as surely as free milk is building their fine young bodies.
  I often wonder why the Press does not write about the splendid average young children of Britain. It is because I know what is being achieved that I am alarmed about the immediate future. All that has been won so far is in danger. One and a quarter million more children are now coming into our secondary schools. Some of the newest buildings can take the extra children, but senior schools built between 1931 and 1939, good as they were, will not be adequate and cannot cope with the bulge. Perhaps one third of our children are in neither new schools nor in "senior" schools, but in old, cramped buildings, which are already full to capacity before the bulge hits them.
  Worst off of all are the quarter of a million children in the all-age schools, for whom the glory of secondary education has really not yet begun. I know that the Minister has wisely set the local education authorities the target of complete reorganisation of all-age rural schools within the next four years. But he still withholds a similar programme for urban schools. This is the most urgent demand that I shall make in this debate.
  The Minister has caused a second lag in school building. I know that his defence for cutting building programmes is that the local education authorities are not building quickly enough the schools he has already permitted, but what is wanted now is a bold and rapidly expanding building programme with an assurance of steel and materials and labour. We want more schools and fewer petrol stations and blocks of offices. I do not like the new check the Minister has recently imposed on the local education authorities, who now have to submit each new school to him for approval before

  537
  going out to tender, even though each of these schools is already in an annual programme which the Minister has already approved.
  My own local education authority has an emergency, prefabricated hut programme to provide the extra teaching spaces needed by our older secondary modern schools if we are to get through next year without a tremendous increase in the size of classes. I urge the Minister to encourage such first-aid action throughout the country.
  The position is worse than many imagine. By law, secondary school classes ought to be a maximum of 30. Yet in 1948 nearly 70 per cent. of the classes were over 30. By 1954 the percentage had dropped to 54, but it will now rise again unless speedy action is taken. In January, 1955, there were 22.000 over-large secondary modern school classes, 1 million children in classes over 30, and even 120,000 in classes over 40.
  If we are to extend the ablest pupils—and everyone who believes in secondary modern education believes that that is one of its most important tasks—and I believe the ability is there; if we are to feed the new demands of a technical age with new cadres of ability which can only be drawn from the 75 per cent. of our children now in secondary modern schools; if we are to develop what is being done for backward and delicate children, all this demands smaller classes. Yet at the moment they are getting larger.
  One and a quarter million more children means that at the height of the bulge, in 1961, we ought to have another 40,000 secondary teachers for classes of 30, or 30,000 more if only to keep classes below 40. How far does the Minister think he is providing that number?
  I note with pleasure his suggestion that local education authorities should release teachers for special training for secondary school work, and I hope they will respond to his suggestion and make adequate financial provision for such teachers seconded.
  It would be wrong to think the teaching problem of secondary modern schools can be solved merely by transferring primary teachers and so make primary education foot the bill this time as it has been made to do throughout the century
  538
  every time an educational advance has been made. At the same time, it will be a tragedy if the children who have been educated in classes of 50 in primary schools have to have their secondary modern education in similarly large classes. This may be the fate of many children unless the Minister acts quickly.
  I am sorry that the Minister has abandoned the quota system for teachers. With all its faults it meant fairer sharing over the country of the new teachers available. I know that the teaching profession does not share my view on this, but with some local education authorities, like Birmingham, facing a desperate shortage of teachers and the bulge at the same time, I think that the Minister will be compelled to put the children first and not let things just drift.
  I hope the Minister will think again about secondary modern leaving examinations. Nobody wants these schools to be tied to examinations, or children to be sacrificed to an examination syllabus. The grammar schools are just escaping from the slavery of examinations, but parents, employers, teachers and the children themselves have something to gain from the sense of purpose, the incentive, and the guidance of a leaving examination. The decision should be with the school itself. Some groups are making their own leaving certificates. Others wish to send some of their children in for examinations such as those offered by the London College of Preceptors. I do not think that they should still be discouraged from taking and even forbidden, as they are under the grant regulations, to take such examinations.
  The development of secondary modern education varies from place to place and school to school. We do not want uniformity, but we do want equality of opportunity for our children. There are still areas where children who are fit and able cannot continue at school after 15 in a secondary modern school because no five-year course is provided. I believe that the great 1944 Act means that every child has the right to the length of secondary education from which he is able to profit, and if the G.C.E. course or similar five-year course is not available in the school in which the child happens to be, then there ought to be somewhere under the local education

  539
  authority a school to which he can be transferred if he is fit and able to profit by such a course.
  We have not solved yet the problem of the 11-plus selection; and I do not think that we ever shall, under the tripartite system. At least, however, the Minister can pool the best experience of the local authorities on methods of selection. I welcome the advance made by Kent and similar local education authorities in their attempts to break down the nightmare of the examination at 11 plus, but some local education authorities are moving backwards, not forwards. I know of one which recently boasted that it was giving greater weight to attainment tests than to intelligence tests, despite the fact that attainment up to 11 plus depends on other things besides ability, among them being the nature of the primary school in which the child is educated—and primary schools range from the large, well organised, and well staffed junior school to the often cramped and ugly village slum school or the all-age school.
  The evils of coaching for selection still remain. I have not time to discuss as I should like to in a longer debate the content and quality and the purpose, the moral and spiritual value, of what secondary modern education is beginning to be, its intellectual content, and the importance of a sound, basic, common curriculum, including, incidentally, the vital and much maligned "three Rs". This is allied to recruitment from secondary modern schools for advanced technical education. The need for raising the school-leaving age to 16, or, as a first step, to the end of the school year in which the child becomes 15—and, here, a summer examination would be an inducement to parents to allow their children to stay—demands more teachers.
  There is the need not only for teachers, but also for better qualified teachers by extending the training college course to three years; and here I would pay tribute to the great work which is being done in our training colleges. I believe that they are itching to be permitted to institute the three-year teacher training course. All these are matters for the Ministerial inquiry for which I ask, and for consequent recommendations and action.
  540
  My purpose in this debate is to call attention, like the Political and Economic Planning report, to the grave danger of losing the undoubted—if not nation-wide—gains of the first decade of modern education, and to urge the Government, and the country, which spends more on beer, or tobacco, or armaments, or in interest on war debt, than it does on education, to arouse itself to immediate action. I urge the nation to realise just how much can be lost.
  I would like to quote from what the Central Advisory Council on Education stated in its 1947 Report, "School and Life":
  "The majority of children will continue to be denied adequate education, and the harmful struggle for admission to the relatively few well provided schools will persist until good secondary schools are available for all."
  I believe that that is still true. Recently, Lord Hives, that great and forward-looking man said,
  "There is talent wasted in all schools, but especially in technical and secondary modern schools. The position is vitally affected by the supply of suitable teachers."
  There is nothing wrong with the children of Britain, or with the conception of universal secondary education. I ask the Parliamentary Secretary what the Government are doing, in the matter of buildings and teachers, to give our children their chance.
  6.22 a.m.
  The Parliamentary Secretary to the Ministry of Education (Mr. Dennis Vosper): I am sorry that the generosity and kindness of the hon. Gentleman the Member for Southampton, Itchen (Dr. King) in deferring this debate from an earlier occasion should have resulted in his having to speak at a somewhat unusual hour and also to have deprived him of the audience to which he is entitled.
  The hon. Member has raised a subject which is both important and topical and he packed a great deal into his remarks. I cannot promise to take up all the points he has raised in the limited time at my disposal, but I welcome the tenor of his speech. He has drawn attention to some of the many good things which are happening in secondary modern schools, instead of the more fashionable habit of referring to the deficiencies of which we are well aware, and which it is everybody's concern to remedy as fast as conditions allow.

  541
  The hon. Gentleman has based this debate on the recently published P.E.P. report, and which, in its opening paragraph, does me the honour of quoting from a recent speech in which I said, "Give the secondary modern school a chance to show its paces." I stand by that statement because I believe that the 10 years of its development is a comparatively short period, especially when one remembers the economic crises and the increase in child population which have occurred during those years. I put it to the House that it is as if we were examining the state of the local authority grammar schools just before the First World War.
  Nevertheless, secondary modern schools have shown their paces in plenty of places, and the hon. Member has made a considerable contribution in this respect. A most important thing to recognise is that there is no such thing as "the secondary modern school." There are secondary modern schools—more than 3,500 of them, and they differ in innumerable ways.
  About half of them cater for boys and girls together, a quarter for boys and a quarter for girls. While 3,000 have between 100 and 500 pupils on roll, they vary in size from fewer than 50 pupils to more than 1,000. Most of them are county schools, but more than 400 are Church of England or Roman Catholic foundations. They educate about 1¼ million of our children—two out of three of all the senior children in the maintained schools.
  Nearly 56,000 full-time teachers work in them—approximately, one teacher to 22 children. The average size of their classes, of which there are more than 40,000, is between 30 and 31 pupils. They are housed in buildings that vary in age between 70 years and one month. Some are in the centres of crowded cities, many in suburban areas, a growing number in country towns or right in the countryside. They contain pupils who are brighter or duller than the average in varying proportions, pupils of diverse gifts and interests or backgrounds. They differ in aim, in atmosphere and in tradition. The hon. Member will, I am sure, support me in that.
  It is, therefore, much easier to define the purpose of a secondary grammar or technical school than it is of a secondary
  542
  modern school, which creates and develops its individuality by adapting itself to its environment. Secondary modern schools, like all schools, are social institutions as well as places of instruction. Literacy and mastery of the "three Rs" must be accompanied by a respect for hard work, self-discipline and good manners. They are concerned as well to give to the duller children a sense of competence and achivement, to the average all-round development of their brains and bodies, to the brightest a challenge to stretch themselves.
  How a secondary modern school sets out to fulfil this purpose varies widely, and I submit that this must be so because the secondary modern school has the opportunity to plan its curriculum in much closer relation to local conditions and needs, and, therefore, has much more freedom for experiment than the grammar school. In the best modern schools, the education is, rightly, related to the conditions in which many of the children live, with which most of them will be familiar, and in which many of them will expect to work when they grow up.
  While it is important for them to see subjects in their widest setting, it is not unreasonable to expect children to take a great interest in subjects connected with what they are likely to do after leaving school. In this connection—the hon. Member drew attention to this—it will be vital to forge new links between the secondary modern school and the technical college. Most authorities are, therefore, encouraging the development of an increasing range of extended courses which will be spread over a number of schools in the area. An excellent example of this is to be found in the hon. Member's constituency, in Southampton.
  Some pupils may want to take the General Certificate of Education. They ought to do so if they are suitable for it, but it would be a great mistake for the interest of the rest of the children to be subordinated to what is always likely to be a small minority. The job of the modern school is to develop its own personality and not to ape the grammar school.
  I thought it important to begin on this note, because while it supports most of what the hon. Member has said, it does not seem to be fully understood by some

  543
  of those who have within recent weeks criticised secondary modern schools.
  I should now like to turn to the physical side of the problem and deal with several of the points he raised. Perhaps I should begin by bringing the P.E.P. figures up to date. By 1st February, 1956, 536 new secondary modern schools, providing places for 211,780 children, had been completed since the war and 366 more secondary modern schools, providing a total of 149,420 places, were under construction. This gives a total of 902 new secondary modern schools either completed or under construction, providing a total of 361,000 places. These figures make no allowances for new places in other kinds of secondary schools.
  At the same time, by January, 1955, the numbers of seniors in all-age schools had fallen to 10·5 per cent. as opposed to the 12·2 per cent. quoted in the P.E.P. report; the percentage will be even lower at this moment and there will be well under 200,000 children now in all-age schools. Rural reorganisation is making steady progress, and while I certainly agree with the hon. Member about the importance of urban reorganisation, I can at present give him no date by which it will be possible to start this next phase.
  The weight of school building programmes has, of course, been shifting from primary to secondary schools to cope with the bulge which has now begun to enter the secondary schools, which, in 1961, will have to contain three-quarters of a million more pupils than in 1954—three-quarters of a million, and not the figure of 1¼ million mentioned both in the P.E.P. report and in the hon. Gentleman's speech. This increase will require about 25,000 more teachers in secondary moderns to maintain the present staffing ratios or standards.
  Despite the hon. Member's fears, the provision of schools and teachers at the present rate of recruitment and maintenance of the teaching force should be adequate, although I can hold out little hope of improvement of staffing ratios in secondary schools; and, of course, there is no doubt that it will be difficult to find enough of the many different kinds of specialist teachers now being required for the secondary schools.
  544
  I was glad to hear the hon. Member's appreciation of the arrangements that have already been made and are being considered at the moment by the Ministry, training colleges and L.E.As. to train and retrain teachers for secondary schools. Although it should be possible to maintain a steady reduction in the size of primary classes, it is obvious that many teachers will have to transfer from primary to secondary. In disagreeing with the Minister and the N.U.T. about the abandonment of teacher rationing, the hon. Member must not assume that if a teacher is stopped from going where he wants to go he will automatically go where he is needed.
  On examinations, I can only say that I will note the contribution the hon. Member has made to the debate which my right hon. Friend deliberately provoked some months ago. As far as selection is concerned, my opinion is that each month sees further progress as L.E.As. improve their arrangements as a result of experience and experiment. I believe that, whatever form of secondary education we follow, some form of selection is inevitable. Our aim, I think, must be to improve it.
  My conclusion in this very brief debate is that if each head is encouraged to employ the methods best suited to the needs of the children in his or her care, the secondary modern schools will get the increasing support of the parents. Some evidence of this is found in the steady trend in the number of children staying on beyond the leaving age, and more recent figures are even better than those quoted by the hon. Member.
  In the many visits I have paid to these schools in the last 18 months, I have found much evidence in support of this statement. There are many weaknesses, but our aim must be, as far as resources allow, to improve the physical staffing conditions which will permit all of these schools to follow the lead of the best. The hon. Gentleman suggested a survey. Although I do not reject this idea out of hand, I can see dangers. We will consider it, but meanwhile I will welcome the initiative taken by some of our leading educational journals in telling the public of the good work done in these schools.

  545
  I only wish I had time to refer to some of the very excellent full inspection reports which I have studied in recent days describing the range of courses becoming available in these schools. There is much to be done, but I hope that this debate will be still further evidence that the first
  546
  10 years have not been wasted, and that the next ten, despite the undoubted difficulties, will see encouraging developments.
  Question put and agreed to.
  Adjourned accordingly at twenty-five minutes to Seven o'clock a.m.

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  Expenditure
  Expenditure
  East Retford By-pass
  East Retford By-pass
  Oxford Circus
  Oxford Circus
SHIPPING
  Accidents in Fog (English Channel and North Sea)
  Accidents in Fog (English Channel and North Sea)
CIVIL AVIATION
  Airways (Control Arrangements)
  Airways (Control Arrangements)
FUEL AND POWER
  United Kingdom Oil Companies
  United Kingdom Oil Companies
  PARIS CONSULTATIVE GROUP (CO-ORDINATING COMMITTEE)
  PARIS CONSULTATIVE GROUP (CO-ORDINATING COMMITTEE)
AGRICULTURE, FISHERIES AND FOOD
  Potato Marketing Board (Levies)
  Potato Marketing Board (Levies)
ROYAL AIR FORCE
  Nursing Orderlies (Airwomen)
  Nursing Orderlies (Airwomen)
BRITISH CARIBBEAN
  Migrants to United Kingdom (Welfare Service)
  Migrants to United Kingdom (Welfare Service)
HOME DEPARTMENT
  Firework Factory, Finchampstead (Inspections)
  Firework Factory, Finchampstead (Inspections)
Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers
  RHYL URBAN DISTRICT COUNCIL BILL [H.L.]
  Read 3a, and passed, and sent to the Commons.
FYLDE WATER BOARD BILL [H.L.]
Read 3a, and passed, and sent to the Commons.

RETIRED OFFICERS' PENSIONS
2.35 p.m.
LORD SALTOUN: My Lords, I beg to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether it is the case, as seems to have been implied by the Parliamentary Secretary, Ministry of Defence, on Wednesday last, that the recent increase in the pensions of retired officers is calculated as 10 per cent. of the basic pension diminished by any portion which has been commuted on the ground that, the commutation having been made into sterling of a higher intrinsic value than it has to-day, no increment can fairly be expected in respect of it.]
THE PARLIAMENTARY SECRETARY, MINISTRY OF DEFENCE (THE EARL OF GOSFORD): My Lords, in previous pensions increase schemes applicable to retired officers it has been the normal practice that increases in pensions should be assessed on the basic rate of retired pay after deducting the part of the pension which has been commuted, since commutations have always been regarded as final transactions that cannot be reopened. The 1956 increase is intended to do no more than relieve hardship among those public service
840
pensioners living on a fixed income who have suffered from the fall in the value of money. It follows that the increase is not awarded on that part of a pension which has been converted into capital and is no longer part of the current income of the pensioner.
The only exception to this has been the increases granted under the 1944, 1947 and 1954 pensions increase schemes which were calculated on the stabilised pension rate of 1935, irrespective of commutation in consideration of the special circumstances of the stabilisation. Her Majesty's Government have now decided, however, to modify the previous rule on commutations so that commutations which took or take place after the introduction of any pensions increase measure will be ignored in assessing the benefits accruing from that measure. The retired pay of officers eligible for increases as a result of this modification is being reassessed, and these increases will be payable from April 1, 1956.
LORD SALTOUN: My Lords, I am grateful to the noble Earl for that reply. May I ask him first, before asking any further supplementary question, whether the last portion of his reply applies to the increases of pensions which have just been awarded? One of them was paid on June 2.
THE EARL OF GOSFORD: That, in fact, is so but only in the event of an officer commuting any part of his pension after that scheme.
LORD SALTOUN: I am sorry, but I did not understand that reply.
THE EARL OF GOSFORD: I am afraid that this is an extremely difficult subject; it took me several hours to understand it myself. It works out like this. An officer who commutes a portion of his pension after the increase scheme will from now onwards be assessed on the pension including the part of his pension which he has commuted.
LORD SALTOUN: I am grateful to the noble Earl. I recognise, of course, that if the cash were spent on dinners at the Ritz or buying a house, there would be great force in the attitude of Her Majesty's Government, but with regard to the recent increase and those officers who have commuted in the past, may I ask the noble Earl whether it is

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not the case that the capital sum and the sterling income derived from it have lost their intrinsic value, in common with all currency? Would it not be fairer if each case were examined on its merits? Because there might be many occasions—I pointed one out last Wednesday—when the whole value of the commutation has been lost by the officer in consequence of the action of Her Majesty's Government themselves in recalling the officer for service in the war.
THE EARL OF GOSFORD: The retired officers who commuted their pensions did so of their own free will and received the full capital value at the time of commutation. Whether this transaction was remunerative or not to the officer concerned cannot be held to be the responsibility of the taxpayer. I will go into the question put by the noble Lord about looking into certain cases and let him have an answer later on.

ROAD TRAFFIC BILL
2.42 p.m.
Order of the Day for the Second Reading read.
THE CHANCELLOR OF THE DUCHY OF LANCASTER (THE EARL OF SELKIRK): My Lords, I think I can truthfully describe this Bill as old wine in new bottles, because we have already had the greater part of this Bill before us for discussion. I think I can say that the alterations which we made in it have come out almost unscathed during its passage through another place. If the Bill has not grown in stature, it has certainly grown in volume. We started eighteen months ago, in December, 1954, with twenty-five clauses; we handed the Bill on with thirty-four clauses and it now comes back with forty-seven clauses, and there are at least eleven entirely new subjects which have been brought up in it.
I do not propose to make any general review of Government policy in regard to Road Transport, but I should like to say that the object of this Bill is to make the roads safer and to make their use as economic as we possibly can. This is the first Road Traffic Bill that we have had for twenty years and during that time there has beer a vastly expanding transport industry. I think it is fair to remember that there already exists a fairly
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substantial body of rules and regulations which can be drawn upon, and in this sense the Bill fills in some of the gaps and expands existing rules and regulations. Fortunately, this is not what is generally regarded as a controversial subject in a political sense, but I would not say that, in an individual sense, it is not indeed highly controversial, because there are different interests: there are pedestrians, cyclists, motorists and householders, many of whom may have quite different views as to the way the roads can best be used. What I think makes it even more controversial is that while we may agree fairly fully as to the objective to be attained, there will be a great deal of disagreement as to the method employed—in other words, how we can translate these purposes into law and how they can be made administratively most effective. I think that on the whole there will be a division between what is practicable and what is ideal, and I expect that, on behalf of the Government, generally we shall be seeking to show that what is practicable is much better than what may be superior theoretically. I think that that is a point which will arise fairly often.
There is one other element which I should like to emphasise at the beginning: namely, that a great deal of this Bill has to be administered by the police, and it is of the utmost importance that the task we put upon them, a body for whom we have the highest regard and who perform such a tremendous service in our community, should be well within their compass and that they should not feel that they are exacerbating the public against them in the exercise of their duties, but rather that they are working with the public. I suggest that that is a consideration that we must bear in mind all the way through this Bill. This is a miscellaneous Bill and there is really little of a general character which I can say about it, except that it raises generally the standard of discipline on the roads. When we consider the nature of the motor car, the damage it can do and the relatively limited facilities in which it has to operate, I do not think there can be any question that a higher standard is necessary, and I personally think that we are fortunate that the great body of users of the roads most readily accept the discipline which is imposed.

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I will now turn to the clauses of the Bill. There are four clauses dealing with the mechanical condition of vehicles: namely, Clauses 1, 2, 3 and 7. This is something of an innovation to the motor car industry, so I will deal with the matter a little more fully. I say straight away that it is difficult statistically to show that mechanical defects have played a big part in contributing towards accidents. Indeed, I think I am right in saying that the 1954–55 list shows not more than about 7,000 cases in which vehicles are recorded as contributing to accidents. That is quite a substantial number, but it is still not big in the quarter of a million-odd accidents which are reportable. But what has been obvious from the earliest times is that if motoring is to be safe, cars must be mechanically efficient. Parliament has laid down conditions, but what has happened up to now is that Parliament has never enforced them.
Quite frankly, it is not possible to examine the causative and complex factors in the 250,000-odd reportable accidents which occurred in 1954–55 and to say with any accuracy how far mechanical causes have played a part. None the less since last year we have some most interesting statistics which have been drawn from the vehicle testing centre which has been set up at Hendon. I expect that some of your Lordships have taken your cars there and have had them tested. I confess that I have taken my own car and also my official car and put them through the test in order to see what checks are made. This station is, of course, voluntary and it is free. While the cars that go there may be held to be a fair cross-section of cars on the road, it is probable that the majority of people who go there are those who are more interested in the mechanical condition of their cars than the average person. These figures show that up to the end of April 14,500 cars had been tested, and of those 78 per cent. had one or more major defect. The major defects included those in footbrakes, steering, tyres and headlamps. I should like to give a number of figures which I think are striking. For instance, older cars clearly have a higher percentage of defects. Take footbrakes which required attention: 27 per cent. of the cars of 1945 "vintage" or older required attention; of those between 1945
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and 1953 11 per cent., and of those after 1953, 4 per cent. When we come to headlights that required attention—of course, it may not be a very serious fault but I am given to understand that some of these defects were quite marked—in the cars older than the 1945 class 92 per cent. required attention; of those between 1945 and 1953, 75 per cent., and those after 1953, 59 per cent. No one can seriously argue that defects of this sort are unlikely to be a causative factor in accidents—in other words, it is clear that they must play a considerable part. What we are asking motorists to do is really no more than any good motorist does in the ordinary course of looking after his car.
The question with which I believe we shall be faced is how it should be done. Clause 7 which, if I may, I will call Lord Howe's Amendment, makes it an offence, except in certain circumstances, to sell a car which is not roadworthy. Clause 3 strengthens the position for spot-checking. We have always been in a position to do this, and this clause clarifies and extends the provisions relating to those powers. I believe, however, that there is a limit to which this clause can be carried and it would be extremely inconvenient and would only add to congestion if cars were constantly being stopped on the road. Whilst, therefore, this clause must play a part, I am bound to say that we attach rather more importance to the provisions of Clauses 1 and 2. These take powers to set up testing stations, and visualise tests of cars ten years old or more when sufficient testing establishments have been set up. This obligation will not apply to public service vehicles or to taxis where they are already being tested, or to certain other classes of vehicles.
The problem with which most of your Lordships will be concerned is how this can be done efficiently and with the least possible inconvenience to the motoring public. So far as the efficiency of the method is concerned, this depends to a large extent on the right equipment and on keeping the inspection to clearly laid down features. The Minister envisages that it will be confined to steering, lights and brakes, which are so obviously connected with safety. It is felt that this proposal has a psychological aspect because it will emphasise to the general public the importance of ensuring that motor vehicles are in proper and serviceable condition. The figures of countries

845
which have tried this experiment are not conclusive; none the less I believe it is true to say, from the United States figures, that there is a fairly consistent reduction in total accidents in those States where compulsory periodic testing has been introduced. The figures seem to vary from about 12 to 20 per cent. It is also interesting to note that the investigations of the Road Research Laboratory in this matter show that in about 20 per cent. of the accidents mechanical defects played some part in the causative factors which led to accidents. But whether the figure be 10 per cent., 20 per cent. or a lesser percentage, it is not in itself inconsiderable when one is dealing with an annual death rate exceeding 5,000 a year.
It is obviously necessary to take public opinion with us in this experiment and we are particularly anxious to carry it out in a way which is most convenient. The first necessity is to have an adequate number of stations, well spread out over the country. Excessive delays in this matter would be an intolerable burden on the motoring public. It is for this reason that we wish to enlist as widely as possible all authorities and organisations who are willing and competent to do this work. The Bill envisages that these will include Government stations and municipal and private stations. We are aware that some doubt has been felt about leaving this work in the hands of private stations; but if it is to be done within a reasonable time the plain fact is that it is impracticable unless the assistance of private garages is enlisted. We believe this can be done satisfactorily with proper supervision and investigation, which the Minister proposes to exercise. This will not be a question of selecting garages so much as of authorising any garages who have the necessary equipment and are willing and able to carry out the tests, and who satisfy the Minister that they will do so reliably and efficiently. It is not sufficient, of course, to have cars looked at only once a year; nevertheless, it does make clear that: Parliament expects every motorist to do that as an absolute minimum. As a start, the Bill makes it an obligation on motorists with cars which are ten years old or more. No doubt we shall examine that more fully, but I have given your Lordships a broad picture of what we have endeavoured to do in this matter.
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May I now go through the other clauses more quickly. Clause 4 makes the 30 m.p.h. speed limit permanent; Clause 5 grants additional powers for the dissemination of information, propaganda and training in regard to road safety. Clause 6 gives the police power to remove cars which are causing obstruction. Clause 7 I have dealt with. All these are clauses which we have considered before. Clause 8 was intro6iced in this House last year and creates the new offence of causing death by reckless or dangerous driving. Clause 9, a new clause, seeks to resolve a problem with which we are very much concerned—to distinguish between "driving under the influence" and "drunk in charge". This point was brought very forcefully to our attention by the noble Lord, Lord Brabazon of Tara, and the discussions which we then had have laid the foundation for the proposals now in this clause. Broadly, the offence of being drunk in charge is now treated as a separate offence to which there is a statutory defence that the driver had not, in fact, driven the car and that there was no likelihood of his doing so. I very much hope that this solution will commend itself to the House. It has been very carefully examined.
Clause 10 is a new clause which enables the Minister to raise the minimum age at which motor-cycles can be driven from the present level of sixteen years. Your Lordships are familiar with Clause 11 which makes it an offence to ride a pedal cycle dangerously or carelessly; we have now added the offence of riding a pedal cycle under the influence of drink or drugs. Clause 12 is an old friend giving the police greater powers to control pedestrians. Clause 13 is another subject on which we have had a good deal of discussion—the control of dogs on the road. I hope that this clause, which enables local authorities to designate roads on which it will be an offence to take a dog without a lead, will be considered workable and, within limits, effective. Clause 14 gives power to local authorities to refuse provisional licences where the applicant seems reluctant to submit himself to a test. This applies particularly to motor cycles and was discussed by the House earlier.
Clauses 15 to 20 deal with parking meters; and let me say at once that no

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one can say with any certainty how effective the introduction of parking meters is going to be. I have no doubt that it will not resolve our parking problems in all cases. At the same time I do not think that anyone would deny that if the introduction of meters materially helps in any place they are well worth trying as an experiment; and that is precisely what Her Majesty's Government are asking authorities to do. It is an urgent necessity to use to the maximum extent the roads we have in our cities, and there is no doubt that indiscriminate parking, particularly by the all-day parker, is materially reducing the free movement of road traffic in many parts of our towns. The principle on which these proposals work is to make rules for parking simpler, clearer and accordingly more easily enforceable by the police—which frankly is not the case at the present time. We envisage that in any district the experiment must be carried out over a fairly substantial area. It would not achieve its object if parking meters were applied to only one or two places without considering the whole parking space of the area in question, for in those circumstances the experiment would not have a fair chance.
This is not, after all, a wild experiment, because it has been extensively tried in a number of countries, though I admit that conditions are different—as they are in many parts of this country. We know that this system has been tried in New Zealand and Stockholm, and extensively in Canada and the United States. What is interesting is that a recent census in the United States shows that 96 per cent. of the people (and in America "the people" means very nearly "the motoring public") believe or approve of the use of parking meters.
There are three general points which I should like to make. First, unlike, I think, any scheme abroad, the proceeds of parking meters are directly and exclusively linked with the provision of off-street parking. This objective is pretty closely tied up by Statute. I know that some people will say that off-street parking should be provided before parking meters; but, frankly, this is a question of the egg and the chicken, and we must start somewhere. I hope that the two things, in fact, will proceed together. The second point is that any scheme which
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has to be prepared can be prepared only after a full and extensive investigation has been carried out. If your Lordships will look at the Third Schedule, you will see the nature of the investigation which has to be carried out. This, of course, includes the opportunity for the making of objections by people who are on the fringe or on the edge of a parking scheme, and others. Third, the scheme has to be laid before Parliament, which will have full opportunity of making any representation or, indeed, of negativing the proposal.
The only new thing that is in these proposals since we last approved them is Clause 15 (5). This is really a reserve power which enables the Minister himself to carry out in the Metropolitan area an experiment or demonstration in the use of parking meters. It seems probable that local authorities will seek to use the powers so that the Minister may not then need to exercise the reserve powers here envisaged. But even then, it might be useful for him to fill a gap where a local authority has not originally put up a scheme. I can say that we should rather not use the powers unless we have to. Nevertheless we felt that if Parliament accorded the right to install parking meters on an experimental basis, we should at least have the power to de so if necessary.
Clause 21 deals with penalties. Since we last saw this clause speeding offences have been removed and the proposal for compulsory driving tests has also been excised for certain motoring offences. Otherwise, the clause stands as it was when it left this House. Clause 22 deals with obligations for removal of disqualification from driving. This clause is a new clause, and it makes it rather more difficult for the motorist to apply for the removal of such disqualification. Broadly speaking, he must serve at least half his sentence before asking for such removal. Clause 23 allows appeals against disqualification.
Clause 24 is a new clause which deals with persons charged with failing to maintain third-party insurance. The first subsection gives an employee, and only an employee, charged with this offence, the defence that he had no reason to believe that the third-party insurance was not in force. Subsection (2) removes, subject to special reasons, the automatic

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disqualification on conviction for this offence, and replaces it by discretion of the courts in imposing disqualification. The reason for this is that it was felt that the special reasons it gave had been given too narrow an interpretation. Subsection (3) flows from the wider discretion given in subsection (2), and it now seems unnecessary to distinguish between classes and descriptions of vehicles when considering the need to impose driving disqualification. This means the power of the court to limit disqualification is abolished for this and for other offences. Clause 25 extends the offences for which warning of intended prosecution is unnecessary. Clause 26 enables the police to require the surrender of a licence in cases of disqualification, or where it has been obtained by a false statement.
Clause 27 extends the power of the police to obtain information regarding a person driving a vehicle at a time when the driver is alleged to have committed certain offences. These offences will now include parking offences. Clause 28 is a new clause which seeks to clarify the extent of the Minister's powers under Sections 48 and 49 of the 1930 Act, particularly the powers in regard to the erection, display and illumination of traffic signs. We very much hope that this clause will bring greater uniformity in traffic signs in general. Clause 29 is also a new clause and it enables the police in London to carry out in the London area, with the consent of the Minister, experimental traffic arrangements. This puts beyond a doubt, in fact, what they have already been doing under the old Act of 1839 which is rather out of date.
Clauses 30 and 31 deal with similar points. They are intended to put beyond all doubt the legal validity of police signs of a prescribed character. Clause 30 is a new clause and it clarifies the powers of the police to erect signs relating to special occasions. Clause 31 is also new and it enables temporary signs to be put up for what is described as extraordinary occasions—that is to say some unexpected event such as, for example, a gas main breaking. th clauses are intended to be of a temporary character. Clauses 33 really deal with a new definitio of contract carriages. We discussed this matter at some length last time, and I can say that the
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proposals which we agreed to then have hardly been altered during the passage of the Bill in another place. It is not an easy distinction between a stage coach and a contract carriage, but we have tried to draw the distinction as clearly as we can. Very roughly, we have said here that a contract carriage—that is, a charter bus—can run without a public service licence provided that the party is not gathered together by means of a public advertisement and that they all go to the same place but do not do it regularly. No doubt, we shall have discussions on this subject. I think that what I have said covers very briefly what the clause is intended to do.
Clause 34 is one which we examined carefully before. It is intended to deal with the situation created by the High Court in connection with the cases of Blenkin v. Bell and Wooley v. Moore. The proposals we agreed to here have not been altered in the other place. Clause 35 is a new clause which deals with A and B licences. This enables a licence to be revoked where the holder of a licence is running his vehicle below cost for the express purpose of "doing down" his competitors. To put it in its simplest form, it is intended to prevent a large organisation from grossly undercutting prices for the express purpose of putting a competitor out of business. It would be used only in flagrant cases. Clause 36 is a clause which we inserted in this House, and it ensures that the thirty miles per hour speed limit is not automatically extended as soon as a street lighting system is installed. Clause 37 deals with roundabouts. It is intended to clarify the powers of highway authorities to do certain obvious and essential works.
Clause 38 is a clause that we know. It enables the Minister to make special regulations applying to particular crossings. Clause 39 is a clause that we also know and it grants the right to appeal against refusal to vary the conditions of a licence. Clause 40 enables a motor car driving licence to be extended to a period of three years and raises the corresponding fee to fifteen shillings. Clause 41 is an amendment of the constitution of the London and Home Counties Traffic Advisory Committee. It is to have on it one additional person representing those using pedal cycles. Clause 42 is a familiar clause about grass cutters.

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The only other point of detail to which I think I need draw your Lordships' attention is dealt with in paragraph 8 of the Sixth Schedule. There, it is provided that the Minister may, by order, permit the use on our roads of vehicles that do not comply with current regulations for construction and use if they are being used for tests and trials for export, or if they are fitted with "new or improved equipment." I think that this is a useful development to encourage new ideas and to encourage export.
Before I sit down, perhaps I may say a few words about one or two matters on which we propose to put down Amendments on the Committee stage. We propose to put down an Amendment about the power of highway authorities to trim the trees on country roads. We also propose to regulate rather more closely the conditions under which cycle racing can take place on highways, in particular, in regard to mass starts. We also propose to amend Section 46 of the Road Traffic Act, 1930, so as to give local authorities a further degree of autonomy in regard to making traffic regulations. We also propose to clarify the present law in regard to restrictions on traffic when roads are under repair. Then we are considering withdrawing the exemption of driving tests of drivers who have held driving licences before 1934 in cases where they have not renewed their licence over a considerable number of years. Another point: there is an obvious anomaly in lighting-up time. We propose to bring the law in regard to lighting-up time more into line with what is good practice at the present time.
My Lords, this is largely an enabling Bill, and it is the administrative side that will follow which is of importance. However, I suggest that it will lay the foundation of what I hope will prove to be solid progress, both in the promotion of safety and in the reduction of congestion. I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read 2a.—(The Earl of Selkirk.)
3.11 p.m.
LORD LUCAS OF CHILWORTH: My Lords, before I venture to address your Lordships upon the Bill, so admirably and so fairly presented to the House by the noble Earl, Lord Selkirk, may I make a few general observations upon the
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problem, in general? While we may quarrel about the means, there can be no division of opinion on any side of your Lordships' House about the end we all wish to achieve—that is, a reduction in the number of road accidents in this country. It is a social scourge and no one with any conscience can sit complacently whilst people are being killed or maimed on the roads in the numbers they are to-day. May I say straight away that we on this side of the House are at one with the Government in seeking to improve the position.
I think that in many ways this Bill will add to the effectiveness of road control. The Bill, however, is based largely upon American experience. We in this country are peculiar people: because we envy the Americans many of the things they do, we try to put them into operation in this country on a vastly modified scale, but still hoping to achieve the same results. It is a dangerous thing to compare America with this country. We ought to be careful, not only because there are so many States, with varying laws, but because the thing we consider priceless—the liberty of the subject—is not held in so high an esteem, where road offences are concerned, in America. During the winter I spent a long time in America, in California, and I had an opportunity of studying the methods used there. One thing impressed itself upon me at once: the American motorist is more competent than the British, more considerate of the needs of others on the roads, and the pedestrian is far better disciplined than the pedestrian in this country. The reason is that the law is enforced.
When I was in San Francisco my friends kindly provided me with a marvellous Cadillac—the latest model, 325 h.p.—and a chauffeur. We had only to get within yards of a pedestrian crossing and the chauffeur stopped, and if there was a pedestrian within yards, he waited for him to cross over. I said to him one day, "You are very careful about observing pedestrian crossings", and in that delightful Pacific Coast drawl he replied, "Yeh; you see our pedestrians are expensive." In San Francisco, pedestrians are controlled marvellously. At every intersection are red phase traffic lights with large electric signs—large ones, two feet square. "Walk", they say to the pedestrian; or

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"Don't walk". And jay-walking in the centre of San Francisco is practically unknown. The people all congregate at the intersections and walk across the road, like the Israelites crossing the Red Sea. I was a "greenhorn" from Britain and did not take any notice of these signs; I never had done in London; why should I in San Francisco? I could not put a foot off the kerb without some kindly American gripping me by the arm and saying, "Say, you wanna ticket?" One seldom sees a policeman patrolling the streets in San Francisco, because nobody thinks of jay-walking. I do not know what would happen if we had that system in this country. I think we have added to the number of accidents through ignoring many of these elementary things.
I should like to give your Lordships this illustration. The roads of Oxford have been debated in your Lordships' House on many occasions. Right in the centre of Oxford there has been an all-red traffic phase for two or three years, but nobody save a few city officials knows of it. In consequence, the pedestrians scutter about like a lot of frightened hens and make up their minds to cross the road only when the traffic is starting again. Yet the local authority could have put up "Walk" and "Don't walk" signs, and there would have been orderliness. In America, pedestrians think nothing of walking fifty yards to the next intersection to cross the street. I wonder what would happen if in this country we asked anybody to walk fifty yards to a crossing before crossing the road. The truth is that road safety is a purchasable commodity, but in this country we are not prepared to pay the price by giving up these individual liberties of driving cars as we like, leaving them where we like, crossing roads when we like—in fact, doing just as we like. I cannot see that we shall get any further until we have greater enforcement of the law.
Many of the provisions in this Bill are admirable, but will they be enforced? When we were discussing the last Road Traffic Bill in December, 1954, I recited to your Lordships the average fine for all traffic offences as given in the Home Office returns for 1952. It was appalling. I am not going to delay your Lordships this afternoon by going through them; I shall do that on Committee stage. Through the courtesy of the Home Office
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and of the Ministry of Transport, I have the latest returns for 1954, and they show no improvement whatsoever. I know that it is not a popular thing to criticise the police. Yet until we have enforcement of these traffic Jaws we shall never make any inroads upon the road traffic problem. Let us be fair to the police. If I go to them and say, "Why do you not enforce these laws? Why do you not bring prosecutions?", they say, "What is the good? We fill up the anterooms of magistrates' courts with our officers, wasting their time, and the average fine or penalty which the modern magistrate will impose is about 10 per cent. of the maximum. We are not going to waste our time in that way." Those are the facts.
Our trouble is that we have passed law upon law and regulation upon regulation until it is impossible to fight one's way through them. In this way they get into disrepute, and that is why the traffic laws of this country are held in contempt by everybody. I served for two years at the Ministry of Transport, and I tried to persuade them to do something. But "No," they say, "it is not the Ministry of Transport's responsibility to enforce the law." When one asks whose responsibility it is, the answer is that it is that of the Home Office. You go to the Home Office, and they say that they cannot tell chief constables to enforce the law. Well, who can? There is a never-ending "passing of the buck." Parliament must soon think of some way of enforcing these laws, because if we in this country—I have said this before, but I do not think it loses anything by repetition—hold that punishment is a deterrent to wrongdoing—and breaking the traffic law is wrongdoing—then the punishment must be a deterrent, which it has not proved to be in the past.
Let me now come to the Bill itself. I must confess that I am puzzled. The noble Earl said that the Bill produced to your Lordships' House on December 21, 1954, contained twenty-five clauses; in another place it had thirty-four clauses, and then, owing to the General Election, it fell into the "slaughter of the innocents". This Bill now comes to us with forty-seven clauses. And even now, as to the major part of it, I do not know what the policy of the Government is. Cannot the Government make up their minds about some of these things? They

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change their minds so often, and every time they do so ten clauses get into a Bill. The most controversial, and I think the most important, are those dealing with vehicle inspection. It has been argued—I have argued it myself—that the police records show that only 2 per cent. of the accidents taking place on the roads of this country are due to mechanical failure, whereas the Road Research Laboratory put the proportion at 20 per cent. I do not care whether it is 2 per cent. or 20 per cent.—it is too many. And I am on the side of compulsory vehicle inspection and always have been.
I had better keep on saying this, because when this Bill goes back to another place I do not want to be misrepresented; and I do not want your Lordships' House to be so grossly misrepresented as it was in another place when the Minister tried to defend the removal from the Bill of the clause which your Lordships threw out. Your Lordships have never been against compulsory inspection; but you have been against the method which has been employed. Again I would ask your Lordships to look upon this matter with some reserve. The noble Earl, Lord Selkirk, with reserve, I grant, quoted the experience of a certain American State—I forget which State it was—and said that 20 per cent.—
THE EARL OF SELKIRK: I did not actually quote figures. I said it was a tendency which showed generally what was the case.
LORD LUCAS OF CHILWORTH: Yes, a tendency. I will not dispute that. But in the State that I believe the noble Earl has in mind all vehicles are tested twice a year under a comprehensive plan. What we propose in this Bill is that motor cars—not commercial vehicles, the most accident-prone vehicles on the road—shall be subjected to a very minor test once a year if they are ten years old and over. So your Lordships will not think that we are going to get spectacular results. I dispute, again in a friendly way, the noble Earl's figures of the Hendon experiment. According to the noble Earl, the testing station at Hendon has proved that four out of every five motor cars tested there are unroadworthy. As I say, I dispute that. Some of the cars at Hendon
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have been faulted when they have not had faults. At a later stage I shall join issue with the noble Earl on equipment. I made it my business to find out about this matter, and some of the cars at Hendon have been faulted, by a brake-testing machine, for having defective brakes. They have then been taken to independent examiners and found to have no fault whatsoever with them.
The reason is that if there is one inaccurate machine in the engineering world it is a brake-testing machine. No good automobile engineer will ever trust a brake-testing machine. Is it not significant that the makers of the world's best car never test their brakes on a brake-testing machine? They test their brakes in the only place where brakes should be tested—on the road. If your Lordships will forgive a personal reference, more years ago than I care to remember, when I was right at the bottom of the ladder and learning my engineering the hard way, I was a vehicle tester in a manufacturing works. So this is a subject about which I should know something. Any mechanic can find out all the faults, except serious internal faults with brakes, and by testing a car on the road for fifty yards can report on the efficiency of brakes far better, than the brake-testing machine at Hendon, or anywhere else. Your Lordships will find, in point of fact, that for that reason, in the most up-to-date service stations to-day brake-testing machines have been abandoned.
I want to take Clauses 1, 2 and 3, and to ask the noble Lord who is to wind up the debate whether he thinks that the lack of policy displayed by those three clauses can be made up by regulations, some affirmative and some negative. Clause 1 provides for a motor car having a test in a testing station; and, as the noble Earl, Lord Selkirk, has rightly said, the testing stations can be Government testing stations, municipal testing stations or testing stations run by private enterprise. The Minister said in another place [OFFICIAL REPORT, Commons, Vol. 553 (No. 159), col. 248] that the test proposed should be
"a very simple list—brakes, steering and lights. Subject to one overriding factor, only those three things would be tested. The overriding thing is, of course, that if in testing a car the experts found that it was in such a dangerous condition as to be unsafe for the owner to take on the road they would tell him so.

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I have in mind such things as a tyre so badly slit that it might burst at any moment, a cracked chassis, or some other serious defect. The owner would then be told. But the purpose of the test would be to see that the brakes, steering and lights were of a sufficient standard to make that car reasonably roadworthy and not a danger to other users of the road."
So I take it that if the brakes, steering and lights are satisfactory, the owner of the ear will be given a certificate of roadworthiness, in spite of the fact that there may be other factors, such as the Minister has enumerated, that would make the car a positive danger on the roads. Where is the policy? I have already quoted what the Minister has said. It means that the motorist will get a certificate that will be a passport for him to run that car on the roads of this country for twelve months. Clause 2 says that he must have mat certificate before he can get his excise licence. Now is that a contribution to road safety? It is a staggering thing, but this is what the Minister himself has said. The only thing that will happen is that the owner will be told if his car is unsafe—but he will still be issued with a certificate.
Clause 3 institutes the spot check. The spot check will be carried out on the road, under two Statutes. It will be a more severe test than that under Clause 1, because it will take care not only of brakes, lights and steering, but things such as windscreen-wipers and the other accessories that are enumerated in Regulation 75 of the Construction and Use Regulations brought into force under, I think, Section 3 of the Road Traffic Act, 1930. If a motorist does not go through station No. 1 but goes through station No. 2, the spot check, and secures a 100 per cent. credit, he does not get a certificate. Why not? Very likely he has a better motor car than the one who went through station No. 1. And what happens if the driver who takes his car and gets the certificate on the No. I check, under Clause 1, runs into a spot check and it is found that his car has a cracked chassis or a split tyre? Does he "cock a snook" at them, wave the certificate which he has been given to give him complete immunity for eleven months or so, and say, "You cannot stop me; here is my passport"? The Minister himself has said that nothing done on check No. 2 will be used to prosecute because a driver who allows a car to be run on the road with all these
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defects can be prosecuted under the Construction and Use Regulations. What is the policeman to do? See a potential danger drive away? What is the policy? I ask that seriously. Really, these first three clauses do not add up to sense.
The Bill refers to "private garages". I want to make an appeal to the noble Earl. Would he try and find another nomenclature for this? "A garage" was all right in Victorian days, but "garage" is a French word meaning a place in which to house a motor car, and the up-to-date modern service station is no more a garage than is your Lordships' House. Do you not think we could try and lift this matter up? If the noble Earl has a spare moment, would he see if he cart think of a better term?
That is where we joined issue with the Government on the 1954 Bill, and that is where we shall join issue with them again. We hold this quite clearly: that where a certificate is to be issued which gives the right to obtain a licence to run a motor car on the road, it should be issued and the test should be carried out by an official of Her Majesty's Government. It is not fair and it is not right that you should place upon the repairing trade the responsibility of deciding who shall, and who shall not, have a licence to use a motor car, because that is what you are doing. If I am wrong, and the Government are right, why do they not hand over the whole of the driving tests to the motor trade? What is the difference between testing a driver and giving him a certificate which will enable him to get a licence to drive a motor car, and testing the vehicle that he is going to drive to see whether it is a fit vehicle for that person to drive? There is no difference between the two. Yet on the one hand you have an official tester, an official examiner, and on the other you want to put the onus upon the motor trade.
I do not give any credence whatsoever to the suggestion that the motor trade may be dishonest. It is not a fair imposition to place upon it. It is not a fair imposition that any garage or repair works proprietor should be faced with the duty of turning down one of his own customers, or turning down a man who is a customer of his rival. This provision will have to be altered, because I have proved to your Lordships, surely, without any argument whatsoever, that it is wrong for a motor car that will pass a standard

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test with its brakes, steering and lights, but still has a serious mechanical defect, to have a certificate of road-worthiness. Where is the line going, to be drawn? Who is going to draw the line? It should be done only by an official.
May I put one other point to your Lordships? If you will read the Bill carefully, you will find that, as is usual when we do things in this country, we must have a mass of paper work. If the garage mechanic turns the car down and says, "I cannot give you a certificate," he has to write out a report; he has to state the reasons; he has to issue a notification of the refusal, stating the grounds thereof, and he may, upon appeal, have to repay part or the whole of the fee he has charged. He has to keep a register of test certificates in the prescribed form containing the prescribed particulars, and he has to keep records and fortify them by way of returns and information to the Minister. The clerical work that is going to be put upon a garage proprietor is even heavier and more expensive than the technical examination of the car. And if you think you are going to set away with 5s. for this you are greatly mistaken. It is going to cost £1 every time there is a test; and every time the man is turned down he has to pay another £1 to have the test made again. If the experience of some of my friends is right—that of taking a perfectly good motor-car and having it turned down because an inefficient brake-testing machine has said that the brakes were not up to standard—a great amount of money is going to be spent to get somebody to say they are.
On the Committee stage we shall try to make these three clauses work. At present they will not, for many reasons which I will not deploy in full to-day, because I shall only have to repeat them all on Committee stage. May I give the noble Earl this assurance: that we shall try to make them workable within the general principle of what we think the Minister wants. But we shall seek to take out of this Bill this great responsibility—and it is an increasing responsibility, because as the ten-year period shortens and commercial vehicles come in, those commercial vehicles, if the figures from Hendon mean anything,
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have a greater accident potential, especially those which are ten years old and go along the roads, as we all know, grossly overladen. There, again, there is only one way to test a commercial vehicle for mechanical fitness for the road as regards brakes and steering, and that is by testing it on the road with the load which it habitually carries. But these vehicles cannot go into one of these stations carrying such a load. They will go in empty. The brakes of a ten years' old commercial vehicle when it is empty are a vastly different proposition from those brakes when the vehicle has a 25 per cent. overload. As I say, we shall try to make the clauses workable: but it is only fair to give the noble Earl the warning that we shall seek to remove from the Bill the employment of private repair stations with this responsibility.
Let me leave Clauses 1, 2 and 3 and come to Clause 6, which is interesting. The amplification of Clause 6 contains the American answer to congestion, because one of the greatest deterrents in America to long-term parking is what is known there as the "tow away zone". If you leave your car in a no parking area and come back and find it has gone, you find a notice telling you where you can get it. To retrieve it "out of pawn" you have to pay so many dollars, 50 per cent. of which goes to the highway authority as a fine and the rest to the tow away people who have towed the car away. As I say, there is this ruthlessness about the American system: once they make up their minds that they are going to do away with this kind of thing, they do away with it. But the limited power under Clause 6 to tow cars away will not get us very far.
I think that Clause 7 is useful—this is what the noble Earl calls "Lord Howe's Amendment"—but there are no "teeth" in it. It is admirable so far as it goes, but I think that what we and the noble Earl, Lord Howe, will have to consider is this question: why not have a certificate issued? How are we going to find out that a vehicle is sold according to the terms of the Statute? It is an excellent clause, and I think that with a little amplification it should go a long way towards making a major contribution to the solution of the problem which the Government want to solve. But it is no good having a pious hope that anything will be done unless there is a real

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sanction against it and the sanction is appliable.
I come now to Clause 8. I am unhappy about this clause. It imposes a maximum penalty of two years where a driver is convicted of dangerous or reckless driving; but if death ensues the maximum is five years. Your Lordships will remember the clause. I should like to hear other views about it. In the other place there appeared to be a division of opinion. I myself think that we could achieve the end in another way. This is a desperately serious matter, and I want to ask the noble Lord, Lord Mancroft, who is to wind up the debate, whether the Government themselves have any further thoughts upon this subject. If he will tell us that, it may guide us in the action we shall take upon the Committee stage.
I shall perhaps seek to put down an Amendment to Clause 12. Here again the Bill gives a little nibble. It says that the police constable who is on point or traffic duty can have authority to prevent a pedestrian from doing something foolish, but the policeman who is walking along the pavement cannot. I may seek to alter that. With regard to Clause 13, I suppose I should be a very happy man, because I remember trying to get acceptance of this clause which took notice of the fact that dogs every year contribute to 2,600 accidents in which personal injury is involved. The net result of my efforts was a rasher strict admonition from the noble Marquess who leads your Lordships' House, who told me that I was the only one in the entire House who thought that this law could be enforced. How happy am I now to have his conversion to my point of view! It is a very sensible clause, but during the Committee stage I may seek to move out the proviso that the local authority cannot put this into operation without—I will not say the consent of the police, but almost the consent of the police; because if dogs cause 2,600 accidents involving personal injury, surely the police will have to see that the clause is enforced. We cannot afford to say that 2,600 accidents involving personal injury are not worth bothering about.
We come now to Clauses 15 to 20, dealing with parking places and meters. I am not going to argue this matter at any great length. I listened intently to
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what the noble Earl said. He said that the Government's view is—and would he correct me if I am wrong, because this is very important?—that the installation of parking meters will prevent congestion and ease the flow of traffic through the streets. I think that is what he said.
THE EARL OF SELKIRK: I think the noble Lord had better read what I said. I did not put it ms definitely as that. I said that anyone could see how it would work.
LORD LUCAS OF CHILWORTH: I will read in Hansard what the noble Earl said. The American experience is directly to the contrary, and so will the noble Earl's be, because the proof of whether the noble Earl's object has been achieved is whether or not the parking-by-meters places are empty. That will be the proof of whether he has succeeded in relieving congestion. When I asked people, from the police chiefs downwards, in all the places I went to in California, what their experience of parking meters was, they would confine themselves to one observation. They said, "Well, they collect a lot of money"—and that is a fact; they collect a lot of money. But to the relief of congestion they contribute nothing at all, because the streets are always full up with them. The noble Earl did not say this, but the Parliamentary Secretary in another place said that what the Government seek to do is to bring what they call the price mechanism to work: for the first two hours parking may cost 1s. or 2s. and thereafter 7s. 6d. When "price mechanism" is mentioned I have a shrewd suspicion that what it means is that the rich will benefit and the less rich will suffer.
A new approach is needed to the whole of this parking question. For years and years off-street parking has been neglected by local authorities. That must come first. It is no good saying that the provision of off-street parking is another sop to the motorist. Off-street parking is an amenity which every local authority should provide, because the poor shopkeeper, who has to pay increasingly heavy rates, will never get customers into his shop if motorists are frightened out of these towns and cities. It is a local authority responsibility, and for years the local authorities have been dilatory. I doubt very much whether by putting these parking meters over the country, enough

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money will be collected to pay for the off-street parking. I see no reason whatsoever why the Government cannot give guarantees to loans for local authorities. Local authorities have to face this problem and face it very quickly.
My Lords, when we deal with Clause 21 on the Committee stage I shall try to see whether we cannot get over this anomaly of the low average penalty which is inflicted for wrongdoing. I am not going to spend any time on the point now, but we have got to do something to see that the penalties are higher. I cannot think for one moment that increasing the maximum penalty will do any good at all. With regard to traffic signs, I hope that the Minister will see that my suggestion about all-red phases and traffic control at intersections will be followed. I shall try to do something about that.
The last clause upon which I shall comment this afternoon is one of the most humorous that I have ever seen in any Bill. By Clause 35 it is now proposed, in contra-distinction to the President of the Board of Trade, to stop competition in the road haulage industry. Clause 35 sets up the twelve licensing authorities in this country as arbiters as to whether the British Transport Commission and other hauliers are undercutting each other in their rates—and this at a time when Her Majesty's Government are doing their best to convince industry and trade that their prices and charges should come down! They are encouraging a haulier who thinks his competitor is being unfair—and when I have been in business I have always thought that all competition was unfair—to say that another haulier is cutting his price, although he may be more efficient, and that that should be a reason for taking him before the licensing authority traffic courts and having his accounts and his business methods dissected. I have never heard anything so silly as that. On the Committee stage I shall seek to have that clause deleted from the Bill. Before that time arrives perhaps the noble Earl will have a conversation with the President of the Board of Trade to see how this clause lines up with the policy outlined in the Restrictive Trade Practices Bill which is now going through another place.
My Lords, I have detained your Lordships too long, and I apologise. This is
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one of the most important Bills that we have had to deal with, and I thought it only fair that I should try to make some constructive criticism—I hope that the noble Earl will not think I have been too destructive. I repeat, that on Committee stage I shall try to be helpful, within the scope of what I know he wants, by making suggestions which I believe will make effective the three clauses which I have proved, without any argument, are just unworkable at the present moment.
3.55 p.m.
LORD TEYNHAM: My Lords, I have been most intrigued and interested in the argument put forward by the noble Lord who has just sat down—in fact, I think he has thrown a new light on certain parts of the Bill, especially on dealing with spot checking and the certificate which the motorist will get every year to show that his car is roadworthy. I hope to deal with those points a little later. In the first place, however, I should like to offer my congratulations to the Minister of Transport who has done so much work on this Bill to make it a workable measure. He took it over when it was already halfway through Committee in another place. I think he has done very well, and I should like to add my congratulations to him.
It has been said in some quarters that the motoring organisations are in opposition to all the main proposals in this Bill. I can assure your Lordships that that is quite untrue. Speaking for my own organisation, I can say that we felt it our duty to point out the practical difficulties in the implementation of some of the proposals in this Bill. The noble Earl, Lord Selkirk, has said that there is a division between the practical and the ideal. I quite agree, but I am not quite sure which side the Minister is on. My organisation has been in close touch with the Department and we put before them our views, many of which we feel have been helpful.
As regards the question of parking meters, I have always said that we do not object to the experiment at all—in fact in many ways we welcome it, although I am not yet convinced that it will be a success. On the other hand, I would say that it is much better to try something to relieve the congestion in London than nothing at all, even if it fails. I do not

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want to weary your Lordships by repeating again all the arguments for and against the use of parking meters, but I should like to have an assurance from the Minister in charge of the Bill that right of access to private and business premises will be safeguarded. I think this is a most important point. I wonder whether it has been fully realised that one of the effects of parking meters will be to pour more traffic into the streets adjoining those in which cars have been parked. Owing to the two-hour period or the one-hour period—whatever it may be—allowed, there will be a constant movement of traffic. I cannot help feeling that owners will be looking for a place to park for the next two hours, so that there will be a great increase in the flow of traffic along the main arteries. The parking meter may well increase the congestion, rather than diminish it, until such time as adequate off-the-street parking has been provided. I appreciate the simile of the chicken and the egg, but I still think that something must be done quickly to provide off-street parking facilities. Surely it ought to be the law that any new building now put up should have adequate parking arrangements beneath it for as many cars as is possible.
I hope that the Minister of Transport will be a big enough man to remove the parking meters, if they are found not to be effective, either in the London area or elsewhere. It may well happen that traffic meters will encourage motorists to bring their cars to London. I hope that everything will be done to induce motorists to leave their cars on the outskirts. I appreciate that certain steps are already being taken in that direction. I need hardly add that if motorists do leave their cars in the suburbs and come into the centre by public transport, public transport will itself have to be much improved to carry the additional traffic, because at present, as your Lordships know, at certain times of the day it becomes completely overburdened.
It has been said that the parked car is the cause of the London traffic problem. I believe this to be untrue. The real trouble, I think, is the inadequate capacity of the main arteries, and especially the incapacity of the main traffic intersections. It is the hold-ups at such places as the Strand, at the Waterloo Bridge intersection, at Piccadilly Circus, at Hyde Park Corner and Marble Arch and so on which cause
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the trouble. If one looks around for parked cars at these intersections which are supposed to be causing congestion they will not be found, because the cars are not there.
Then it has been argued that if the side streets were not so restricted by a number of parked cars more traffic would use them, thereby relieving the main arteries and the main intersections. I suggest that this argument is wrong, because it ignores the facts that the carrying capacity of a major traffic artery decreases in ratio to the number of points of intersection with it, and use of the side roads must inevitably involve crossing main arteries at some point. We must face up to the fact that the London traffic problem will be solved only when really positive measures of reconstruction are carried out. In other great cities, such as Paris, for example, great efforts are being made, by tunnelling and otherwise, to relieve traffic routes at important intersections. I hope that we shall speed up our own schemes and also try to think of something new.
I should like now to turn to the vexed question of compulsory tests which has been raised so fully by the noble Lord opposite. It is true that in the past I have criticised this proposal, because I feel that it is almost impossible to carry it out efficiently. The Bill as now drafted is, of course, to cover only the testing of brakes, lights and steering; but I would say that it may be difficult to carry out even those tests owing to the number of vehicles involved. I was most interested to hear from the noble Lord, Lord Lucas of Chilworth, that brake-testing machines have already been given up in a large number of modern garages. I understand from the Minister of Transport that brake-testing machines are one of the basic items in this testing outfit. I believe that at the present time there are something like 2 million cars and motor-cycles over ten years old, and if the testing is carried out in anything like the way it is carried out at Hendon, I reckon that it would take 700 examiners at seventy testing stations one year to test them all. I cannot help feeling fiat unless the testing organisation is a large one, with stations all over the country, owners of cars will be put to very great inconvenience, owing to the distance they may have to go in order to have their test carried out, and also because of the time they may have

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to waste in a queue waiting for the certificate to be given. I suggest that even if private garages are used there is bound to be considerable delay, because garages will still have their own work to do.
I am still more in favour of spot checks for which provision is already embodied in the Bill. I believe that, on the whole, these would be more effective than compulsory testing for every car over ten years old—or later on, perhaps, for cars very much less than ten years old. Incidentally, it has not by any means been proved that the old car is a danger on the roads, or more dangerous than the new car. The old family car is usually driven very carefully, not only to preserve a hard-won conveyance but also to economise on petrol, and certainly it cannot be driven at the high speeds of the modern light car. I should like to support what has been said about spot checks by the noble Lord, Lord Lucas of Chilworth; I am sure he is right in that respect. It must be borne in mind that spot checks will tend to deter motorists from bringing unsuitable vehicles on to the roads at any time, whereas compulsory inspection will ensure safety only once a year. In fact, compulsory inspection will tend to cause adequate maintenance only at the time when the test is actually carried out.
With regard to Clause 8, I am rather doubtful about the creation of this new offence of causing death by reckless driving. Surely it is wrong that punishment should be dependent on the results of a wrongful act and not on the nature of the act. If, for example, through bad driving, a motorist is involved in a collision with a motor-cyclist and the motorcyclist receives head injuries, these may be fatal or otherwise, according to whether or not he is wearing a crash helmet. Surely it is illogical that the absence of a crash helmet should make the accused liable to five years' imprisonment under this clause, instead of to two years on a charge of reckless or dangerous driving. I shall certainly be most interested to hear the legal arguments on this matter which might help me to revise my opinion of this clause. I am a little doubtful about Clause 13, which contains provision for the control of dogs on certain roads, a matter forcefully rut forward by the noble Lord, Lord Lucas of Chilworth, when we last
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dealt with a similar Bill. I welcome this clause as an attempt to tackle the problem of road accidents caused by dogs—and I see, from figures I have, that the proportion of such accidents is as high as one in eight. On the other hand, the practical difficulties of enforcement are very great. Might it not be better to confine the offence to straying dogs which actually cause accidents?
I should like next to refer to Clause 24, which deals with offences against Section 35 of the 1930 Act. May I give your Lordships the example of a farm labourer who may drive an agricultural tractor only on roads between different parts of a particular farm? If he is convicted of an offence while driving his motor-cycle, the court, at the present time, I understand, may consider that a disqualification to prevent him from riding a motor-cycle is sufficient; but under Clause 24 of the Bill, the court will have no power to limit the disqualification, so that the farm labourer would automatically be prevented from driving his tractor to earn his livelihood. I cannot believe that this result is the intention of the clause. I noticed that the Minister of Transport implied, perhaps inadvertently, in his speech in another place that as this Bill had been considered so carefully already, and a great deal of time had been spent on it, this House would be unlikely to change it very much. I am sure your Lordships will wish to consider this Bill on its merits and amend it fully, if that is considered necessary. I support the Bill, as a whole, as yet another contribution to relieving our traffic difficulties, and I pray that it will be a success.
4.8 p.m.
LORD BRABAZON OF TARA: My Lords, it is always pleasant to see an old friend again, and we have spent many hours on a similar measure. It is interesting to see the reverse process being adopted—trying it on the Lower House first and then giving it to this House. But the Lower House had a great advantage, because in its early stages this measure had a most gruelling examination here and emerged very much improved; and it was the improvement which was put before the Lower House. Looking at it from the Second Reading point of view, I feel one cannot but say that the measure will pass unchallenged, at any rate in its broad sense.

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I do not think it is right to argue at any length on many points of detail on Second Reading, because those will all emerge and be debated when we come to the Committee stage; but I should like to say a word about parking schemes. I may be very old-fashioned, but I was always brought up on the idea that the road was for the circulation of traffic, and that when one was not circulating one put the horses in the stable and the vehicle in the coach-house. That is the word my noble friend wants—coach-house. With the advent of the motor car, people imagine that they can leave vehicles all over the place, wherever they like and at any time they like. I believe we have to get rid of that idea. If there is obstruction, I do not see how that can be got over by charging a fee or doing anything else. The only course is to get the vehicle away from the road. References have been made to American practices. One of the most stringent regulations in America is that no car must be stopped on a high road; it must go off the road. Otherwise you are liable to be charged with one of the most serious offences—leaving a car upon the high road—even if it stays there for only five minutes. We might well adopt that sort of system here.
On the question of inspection, I say broadly: "Yes". But I can see a tremendous amount of time being spent on these three clauses. They are a little contradictory. Though we should all like to see a system of inspection in operation, I do not think we are all agreed as to what is the best way of doing it. With regard to the clause relating to causing death by reckless driving, I suppose that that was founded on some remarks made by my noble and learned friend the Lord Chief Justice. If your Lordships will remember, he said here that it was difficult to get a jury to convict. With the greatest respect to my noble and learned friend the Lord Chief Justice, I have much more confidence in the juries of this country than I have in the opinions of disappointed lawyers. If juries do not want to convict, they will not convict, and God bless them for not doing it! But I do not think that that is a justification for making tie offence dependent, as Lord Teynham said, on the result of the accident.
I must thank the Minister very much for the time and thought he must have given to the clause about drunkenness.
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Your Lordships will remember that we debated that subject at some length. Everyone said it was quite impossible to introduce a clause which satisfied everyone. At any rate, a very good attempt has been made. I think it is quite satisfactory. I believe it will have a most salutary effect in stopping what I think is one of the most terrible offences that anyone can possibly commit upon the roads—that is, driving while drunk. And it is pleasant to sec that the Minister has introduced some other clauses which will be welcome, no doubt, from the motorists' point of view, and which show great understanding of the position. The point I want to stress is that the ordinary man in the street does not come up against the law in any other of his activities apart from motoring. He drives too fast, he drives recklessly, he disobeys a constable's instructions or he parks wrongly. That is the sort of thing in which the ordinary man in the street goes against the law more than in any other walk of life. Clearly, when we have a Bill like this it is most important that it should be crystal clear to everyone. I do not think we have really achieved that in all respects.
This, your Lordships will bear in mind, is the third Bill to come before Parliament on this subject. It amends an Act which amended an Act previous to that. If you really want to understand the situation to-day—and I submit that the ordinary man in the street is incapable of doing so—you must have the three Acts in hand in order to find out what you have done wrong. I think that that is a great mistake; it is most undesirable. I know that Parliamentary draftsmen will have their little joke. But I should like your Lordships to look at Clause 28 (2) on page 24 of the Bill. You will get a hearty laugh out of Clause 28 (2). I agree that it does not affect the ordinary man in the street, but it is entirely and completely incomprehensible to anyone. I will not read it. There it is; have a look at it sometime. I agree that it affects local authorities and not us as individuals, but it is absolutely a joke.
Could we not indulge in this? If we are going to amend a section in a past Act, could we not take the section out of the old Act and put in a fresh clause in the new Bill, so that we should all know exactly where we were? I am sure

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that that would be very welcome to the ordinary man in the street. We could easily do it. The Minister is extremely capable, and so are the Ministry officials. It is only a matter of Parliamentary procedure. As I say, I am sure that it would be welcome.
I have now reached an age when I can look back a very long time, to the time, indeed, when motorists were regarded as low. That was a horsey age. The motor car was looked upon as an innovation. Sometimes we were hit with whips and had to endure other things of that sort. But that really was not because we were riding in motor cars; it was because we were unsociable by reason of the dust we raised. One great thing that has happened in this country in the last sixty years is the disappearance of the dust. The abolition of dust is one great thing we have done well. But I think that that old tradition of the motorist being a separate rich class still remains, to a small extent. And we have to remember that over sixty years all that, in fact, has changed. We are all motorists to-day—every one of us. It is quite ridiculous to say, as was said in another place, that some of us motorists are anti-social. It is not true. If you are anti-motorist you are anti-society, because we are all motorists to-day.
What we have to remember, I think, is this. During our days we may be several things. We may be cyclists early in the morning, then motorists, then pedestrians—all within an hour or two. And there is no class of one and class of another. That was said by the noble Lord, Lord Lucas of Chilworth. There is no discipline for some of us in one of these classes. We know that when we are on the road we have to keep to the left. Do we know any rule of the pavement as to where we ought to go? None at all. If we consider this Bill, bearing in mind that under the new civilisation as it exists to-day we have all to obey certain rules, if we in this House remember that we are at one time one thing and at another time something else, if we look at it in that broad sense, and try to work out something which will diminish accidents and bring discipline upon the roads, then I think we shall have created a measure which it will be good to see upon the Statute Book.
4.18 p.m.
LORD MATHERS: My Lords, noble Lords who have preceded me have all, I think, been motor users and motor owners. I am in the position of not being the owner of a motor car, and perhaps I look at things from a somewhat different point of view, although I agree with the noble Lord who has just preceded me that, so far as this Bill is concerned, there is no question of distinction of interests. We all want what the Minister declared was the purpose of the Bill—to make the roads safer. The noble Lord, Lord Brabazon of Tara, speaking about the way in which motor cars used to be detested, caused me to recall the days of my youth and a veterinary surgeon I knew who, on seeing one of the new machines on the road, used to say "Here comes another of those sparrow-starvers". I hope the reference is not too obscure for your Lordships.
The noble Earl, Lord Selkirk, who moved the Second Reading of the Bill, said that the desire of the Government is to make the roads safer. That is my wish, and I am sure it is the wish of all of us. The noble Earl also said that the task put upon our police must be simplified. I want to help in that direction as well. He paid a tribute to the public by saying that the great body of road users accept the standard of discipline applied on the roads as a proper imposition, and with that I agree. I want to see the position made easier for the police, who have to impose the discipline that is applied to those who disregard a proper code of manners, courtesy and usage of the road.
I am not going over the whole of the Bill, because I look at it from a particular point of view. My first impression is that it is regrettable that, in this renewed attempt to legislate for a road code, the opportunity has not been taken to apply certain measures for the use of the roads. My noble friend Lord Lucas of Chilworth showed that the penalties imposed have not proved adequate to achieve their intended purpose. For instance, he talked about the provision in the Bill for making a spot check on road vehicles and claimed that the spot check is the only method that can be effective. I will make another claim: that there should be a spot check on motorists who are involved in accidents,

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especially on drivers of vehicles that have caused serious accidents.
So far as penalties are concerned, I think there is a great deal to be said for the change made in Clause 9 of the Bill, which, instead of tightening up the penalties, gives some relief to motorists who are found under the influence of drink in charge of cars. Under the clause a motorist will not be convicted if he can show that he was not driving the car, even though he was in charge of it. I think there is a great deal to be said for that improvement, if it can be proved to full satisfaction that there was no likelihood of the person concerned driving the vehicle away. I regret that the Bill ignores the large question of accidents which may be caused by "small quantities of alcohol," as the Highway Code prescribes—quantities much less than are necessary to produce drunkenness. I have previously urged in your Lordships' House that consideration should be given to the imposition of a test to ascertain the alcoholic content in the blood of any driver of a motor vehicle involved in an accident. Such a test is imposed, for example, in Sweden, and the information I have is that it has resulted in a great improvement in the position on the roads in Sweden.
The Government have claimed to be interested in this matter of tests for at least two years. Previous answers that I have received when I posed the question in your Lordships' House with regard to the Medical Research Council's Report on this matter show that the Report has not been considered. I would ask: what is the position now with regard to that Report? I do not think it has been published: why is there no declaration, as it seems to me time that it was published? Why is there this apparent complacency on the part of the Government, if I may judge by the contents of the Bill we are discussing, with regard to the appalling toll that takes place on the roads as the result of drunken drivers. That may not be proved by the statistics to the extent that I think it could be, owing to the fact that unless it can be proved up to the hilt that drunkenness was the cause of an accident, it is difficult for the police to obtain a conviction on that ground. That is why I want to put the police in the position of applying a test about which there can be no argument—the quantity of alcohol
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in the bloodstream of anyone who is involved in a road accident.
I am not going to labour this point—my point of view has been sufficiently stated. But I would put this question to the noble Earl: will the Minister give consideration to an Amendment on this point if I put one down for Committee stage? I think there is full justification for that being done, and I should like some indication that the point of view I hold, which is also held by many thousands of people throughout this country, will receive proper consideration at the hands of the Government.
I have tried to put the human side of the problem, as contrasted to the mechanical side which has been so much emphasised, especially by my noble friend Lord Lucas of Chilworth. I do not want to appear to be in any way insulting, but when he speaks of his long connection with the motor industry one might think he had petrol in his veins, as well as the lively blood that enables him to talk so eloquently from this Box when dealing with matters connected with the motor industry. As I say, I have tried to put the human side, which I think is very important. I hope to have from the noble Earl, when he conics to reply, a reasonable answer to the point I raised.
4.30 p.m.
LORD ELTON: My Lords, I should like to go on record at once as saying how disappointed I am that throughout this Bill there has not been a single Bishop on these two Front Benches. We all remember the leading part which the late, much revered Archbishop of York played in the road safety campaign; and with road accidents at their present total, surely this is a matter on which the Church and, indeed, the Churches, ought to speak; and to do them justice, they have spoken, at other times and in other places. I feel it is a pity that no Bishop has found it possible to be present here this afternoon.
In spite of the absence of the Bishops, or possibly because of it, this discussion, compared with our previous debates on earlier versions of the Road Traffic Bill, has been practically a love feast, and I am only sorry that I shall have to strike a discordant note by making, quite briefly I hope, the sort of speech which most of your Lordships will think the crank's speech inevitable on a subject

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of this kind, and which I am sure the noble Earl, Lord Selkirk (I am sorry to see he is not here), will undoubtedly say, to judge from his inaugural remarks, is too much preoccupied with the ideal and too little founded on practical politics. But I should have liked, had he been here, to remind the noble Earl that successive Governments have been applying practical politics to road casualties for about thirty years. And where are we now? More than 200,000 citizens killed or injured on the roads every year. And what are practical politics? Practical politics, I should have thought, are what public opinion permits you to do. And I should like to remind the Government that a courageous Government—which, in this respect at least, we have not got—can give a lead to public opinion. It can form public opinion, and thereby enormously extend the range of these practical politics of which cautious Ministers forever remind us when they are introducing inadequate Bills.
I do not want to break in upon the love feast too discordantly or at too great length, but I must say that I feel that the truth about this Bill is that if road accidents had been standing at a total of 1,000 a year, it would have been a moderately good Bill; but with road accidents standing at over 200,000, it is merely a lost opportunity. Of course, there are all sorts of standards by which it is possible to judge a measure of this kind, and we have heard some of them brought into play this afternoon. It is possible to judge the Bill by its success in easing the traffic congestion, or in solving the parking problem, or even in promoting the prosperity of the motor industry. But, surely, there is only one standard which we ought to apply. With more than 200,000 men, women and children killed or injured every year, the one question, surely, which we must first ask of any Road Traffic Bill is: what is it going to do to diminish that barbarous annual massacre? I am afraid that, in respect of this particular Bill, the answer must be: remarkably little. Compared with previous Road Traffic Bills, it is moderately good; but by the standard of what is needed, it is surely, extraordinarly inadequate.
The tragedy is that, as the late Archbishop used so often to remind us, we
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have allowed ourselves to grow accustomed to this annual slaughter and to take it for granted. We have allowed ourselves to be content year after year with ameliorative measures which may or may not save a few score, or a few hundred, lives; and we have assumed that the price, in inconvenience to ourselves, of the more drastic measures which might save tens of thousands of lives is too high to pay. Supposing that some enemy had inflicted 200,000 casualties on us last year, how eager we should be to spend tens of millions of pounds, how ready to impose the severest restrictions on individual liberty, in order to bring the bloodshed to an end! But as it is, and because it is British citizens who are mutually slaughtering themselves on the roads, the Government have not even the energy or the courage to see that the existing speed limit in built-up areas is effectively enforced.
I sometimes think that the only hope of effective legislation is that we should by some miracle contrive to see this problem with fresh eyes, as it were, for the first time. Suppose that the House of Lords of fifty years ago, in 1906, by some prophetic pre-vision, could have been aware that fifty years later, in 1956, 200,000-odd of our citizens would be being killed and mangled on the roads every year, they would, of course, have been incredulous and appalled. And if, in response to their not unnatural curiosity as to how their successors would cope with so unprecedented and monstrous a social problem, they had been allowed a pre-view of this Bill, I believe they would have been equally incredulous and appalled at seeing so puny a measure brandished in the face of so monstrous a menace as this annual massacre.
Of course, I am a crank on this subject, and it is easy to get carried away; but I do not want to produce the impression that I am not aware that there are clauses in the Bill for which we must be grateful. Many of the clauses, perhaps most of them, will do something to stay the massacre. The tragedy is that, add them all up together, and multiply them by ten, and they will not do nearly enough. If only we could persuade ourselves that it is possible to put an end to this perpetual slaughter, and that it is not beyond the bounds of human possibility. For the

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sake of argument, take the extreme instance. If we abolished all motor vehicles, the road casualties would drop at once from 200,000 to about 20 a year. Admittedly, that is not practical politics, and as a motorist myself of over forty years' standing even I should regard that as an excessive price to pay—although it may well be that the 2½ million who, at the present rate of slaughter, will be killed or wounded on the roads in the next ten years, or their relatives, if they could foresee the future, might be prepared to pay even that price. But, surely, it is only a question of degree, and somewhere between that extreme of total prohibition and this half-hearted Bill there is the point at which, without an impossible degree of self-sacrifice or self-discipline, we might contrive to stay the slaughter.
For example—and here I am admittedly indulging in a flight of individual imagination—suppose that we were effectively to enforce the speed limit in built-up areas—and it could easily be done; suppose that, in addition, we were to impose a 50 m.p.h. speed limit on the open road; suppose that every driver who was convicted of killing or injuring through dangerous, incompetent or drunken driving knew that on the first offence he would have his licence suspended, and on the second it would be terminated for good; suppose that every pedestrian and cyclist who caused death or injury through selfish or undisciplined conduct knew that he would be subject to severe penalties; and, if you will, suppose, further, that we set out to transform our main roads into dual carriageways carrying one-way streams of traffic. That programme, of course, is not practical politics; but it would not require an unimaginable effort of self-discipline or self-sacrifice, and it would certainly make a prodigious reduction in the annual road casualties.
For those who believe that a Christian community ought not to tolerate the situation which we have now tolerated for so many years, and would be prepared, therefore, for measures scarcely less drastic than those I have just imagined, possibly the most ironic and depressing clause in this Bill is the clause which renders permanent that speed limit which no Government have had the courage as yet to enforce—a speed limit which is everywhere disregarded with impunity.
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I should like to add one word upon that matter, because I remember the noble Lord, Lord Lucas of Chilworth, saying in a recent debate that statistics showed that speed was not a very important contributor to accidents. Of course, in a limited sense that is true. The percentage of accidents recorded as clue to excessive speed is not a large percentage, but why is that? It is because it is quite impossible statistically, at any rate by our present statistical methods, to represent the contribution of speed to accidents. In the first place, the policeman who fills up the forms has rarely seen the accident, and in many instances he is compelled to take the evidence of the only witnesses, who may be the driver and occupants of the car which has killed or injured a pedestrian or cyclist, who is not in a position to give evidence. We all know that, from the most impartial witnesses, evidence as to speed is highly chancy, to say the least of it. A man is driving at 50 m.p.h. and a child steps off the pavement ten yards in front of him. He brakes at once, and by the time the moment of impact conies, he may be going at 15 or 20 m.p.h., and at what speed he estimates the accident to have taken place one does not know.
Or, again, the police have a choice of thirty-eight different circumstances, as they are called, which they have to report and which eventually go into the return of statistics. Of those thirty-eight, one is excessive speed; but ten others are causes, or circumstances, such as improperly overtaking or cutting in, in which speed is almost invariably present. Yet if the accident is reported as due to cutting in, or to improperly overtaking, the word "speed" is not fed into the statistical machine, and therefore it does not emerge at the other end. In any case, we all know without statistics that accidents are clue to the fact that a car is driven at a speed at which it is impossible to arrest it before it has collided with somebody, or something, else on the road. Anybody who has seen a boy of seventeen on a motor-cycle weaving in and out of traffic at 70 m.p.h. will have no doubt that speed contributes to accidents.
I should have liked to ask the noble Lord, Lord Hore-Belisha, whether I am not right in remembering that he, as

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Minister of Transport, used a phrase I have never forgotten: "the crowning mercy of the control of speed". When the speed limit was introduced in 1935 it was effectively enforced at first, and in the first twenty-eight weeks of its enforcement 22 per cent. fewer people were killed on the roads in towns. An even more striking instance is that of the comparatively small town of Providence, in the United States, which in 1935 imposed its own speed limit. That is a town with narrow winding lanes and a population of 250,000. They decided that they had had enough slaughter, and they imposed a speed limit of 25 m.p.h. which was rigorously enforced. In the first six months they reduced deaths by 50 per cent. and injuries by 60 per cent. If those figures were applied to our totals, it would mean reducing our annual massacre by something approaching 100,000 a year. Surely that is worth paying a price for. The only question is: how much price are we prepared to pay?
Finally—I have said this before, but I cannot refrain from saying it again—the speed limit can be quite easily enforced, and it is a mockery to enact the permanence of a regulation which is notoriously left unenforced and which 99 respectable citizens out of 100 disregard with impunity. There are many ways of enforcing the speed limit. Some of them require mechanical gadgets, such as visible speed indicators; but without any mechanical gadgets, if we motorists—and I speak as a man who drives at least 250 miles a week on an average—knew that there were plain clothes police patrols observing our speed, and even concealed plain clothes police (that odious police trap which we have all been brought up to hate), I am sure we should observe the law far more constantly than we do at present, and should thereby, if figures mean anything, effect a startling reduction in the annual slaughter. We are told of course that such methods are un-English. It is English to protect property with plain clothes police, but un-English to protect life with plain clothes police. There is much substance in what my noble friend Lord Selkirk said in his opening speech about the desirability of not bringing the police into any sort of bad relations with the public. Neverthe-
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less, let us never forget that we are talking about the saving of life, and if we are going to have this speed limit permanently on the Statute Book, for God's sake! let us enforce it and see whether it will not once more, as it did in the past, when it was enforced, save life.
Finally, I must end with a compliment, after having said so many rude things. Among other clauses I am most grateful for Clause 8, which has been somewhat pulled to pieces by the last two speakers but which does seek, by creating a new form of crime or misdemeanour, to put an end to the present culpable leniency in respect of killing on the roads. I agree that there is a lot in what my noble friend Lord Teynham and the previous speaker said, about the illogicality of punishing a man because the boy on the motor-cycle he has just killed was not wearing a crash helmet. But allowing for all that, for goodness' sake do not let us whittle down this attempt to see that certain kinds of murderous driving are effectively punished! Only yesterday, I read the account of a man who was convicted last September of careless driving and who has this month been convicted of dangerous driving which resulted in the killing of a pedestrian. What was the penalty? A fine of £20, with 7s. costs and suspension of the licence for three months, by the Huntingdon Magistrates. I hope that this clause will put an end to that sort of culpable leniency by the benches. I end by repeating what I said at the beginning, that if this Bill had been put before your Lordships when the road casualties were running at 1,000 a year it would have been a pretty good Bill, but since they are to-day running at over 200.000, it is a tragic lost opportunity.
4.50 p.m.
EARL HOWE: My Lords, I hope that your Lordships will not think the worse of me if I do not follow the previous speaker in all the things he has said. I am sure every one of us must realise the absolute sincerity with which we have heard him speak, not only to-day, but so often in the past. There are three main points in this Bill. There is vehicle inspection, parking meters and, in Clause 8, to which the noble Lord, Lord Elton, has just referred, the new offence. There is the examination and testing of vehicles, founded on the theory that old cars are

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mainly responsible for accidents. The noble Earl, Lord Selkirk, gave us a few figures to-day. I wrote them down and tried to check them, but all the figures that have been given on these points are variable. The official figures stated 2 per cent., the noble Earl, Lord Selkirk, gave us to-day 12 per cent., and the Road Research Board have given us 20 per cent. What the real and correct figure is I do not know, and I am not sure that anybody knows.
The Bill proposes to tackle brakes, silencers, steering, tyres, lighting and reflectors, in that order. Why silencers? What has that to do with road safety? Surely any of these tests must be thorough to be adequate. Let us look for a moment at brakes. I want to find out how thorough this Bill is going to be in its inspection of vehicles. Can anybody tell me how one can possibly ascertain the condition of the brakes of a car unless one takes off the drums? It is quite absurd to suggest that one can jack up a car, put on the brakes and try to move it, or that one can put the vehicle on to some sort of roller arrangement and test the brakes in that way. What is essential is to find out how much lining is left on the drums. Are the linings worn down to the rivets? The brakes may hold on a test, but it may well be that within a week of the test the car will have no brakes at all. Is that the sort of test that is proposed for vehicles? I hope that the noble Lord, Lord Mancroft, who is to reply to this debate, will be able to deal with that point, because it is of vital importance and will indicate whether or not the test is going to be thorough.
If we assume that a car is inspected to-day, it probably will not be inspected again for another year, unless it is subjected to a spot check. As other speakers before me have said, in deciding whether a vehicle is roadworthy or not does not everything depend on how it has been maintained? I submit to your Lordships that this brief inspection will not give any sort of clue as to how the vehicle has been maintained; but the spot check will. As I think the noble Lord, Lord Mathers, suggested, would it not be practical and useful, in any case of accident, that there should inevitably be a spot check or examination of the vehicle concerned? Would that not be a practical suggestion? Again, would it
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not be much better if we could have tests and examinations of vehicles on resale? If the tests were thorough and really adequate, I believe that the motoring community would welcome such a proposal. It would be a great protection to the man who was contemplating purchasing a second-hand car. It might even help the seller. I believe that the motoring world would accept tests on resale, provided that they were thorough and really worth-while, The Minister seems to have been very much impressed by the results of the Hendon station. I should like to ask your Lordships: are we really sure that we can depend upon any deductions drawn from so limited an experiment? Would it be necessary to apply all these things to tests carried out in a garage exactly as has been done at Hendon? It seems to me that it is a little dangerous to draw quite so much of an inference from the tests at Hendon.
With regard to bringing private and commercial garages and the like into the scheme, does not this open the door wide (I think the last time we considered this matter we all decided that it did) to every sort of obvious malpractice? The Times in a leading article on May 30, said this:
"Garages have an interest in repairs. Authority to require a motorist to undertake them should be divorced from the service of carrying them out."
Those are very wise words coming from so important a source. I hope that the Government will take due note of them. It is true that we are told garages will be carefully supervised, but what many of us would like to know is, how many garages will be selected? The noble Earl said something about that in his opening speech, but it seemed to me that it was going to be a sort of "free for all," that any garage which wanted to come into the scheme could do so. These garages, we are told, are to be inspected. The more garages under the scheme, if the inspection is to be worth anything at all, the more inspectors will be needed. What sort of people will these inspectors be? Who is going to select them? What sort of experience and qualifications, and so on, will be laid down?
Another question is this. What will the cost be, first of all to the country, and secondly to the individual? I apologise to your Lordships for asking so many questions, but there are many more to come. How far will the motorist have

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to go to undergo a test? Will it be ten miles, fifty miles or a hundred miles? I think that, when the Minister is appointing garages right throughout the country, it is most important to bear in mind that the motorist should not have to go an undue distance and sacrifice a lot of time in order to undergo his test. When he gets to the garage, will he have to join a queue, or can he fix a time by appointment? I hope that the Minister will be able to give us a clue in that respect. During what hours will the motorist have to go to have his car inspected? What about the staff of the garages up and down the country? As many of us know, garages are very shorthanded and find it almost impossible to get adequate staff with sufficient skill. Presumably, if any garage applies to carry out tests of vehicles, that will be in addition to its normal work. I suppose that point has been thought of. I wonder whether the Minister has inquired into these points and, if so, what the results of his inquiries have been. I am sure he must have done, because the whole success of this examination depends upon its being a competent examination. I should be grateful if we could be told something about the Minister's inquiries with regard to that.
Then again, if a garage is appointed to the scheme what extra machinery will it have to provide in order to carry out tests? Who is to pay for this machinery? What remuneration will there be for the garage owner? This is a most important question, and I hope the noble Earl will be able to give us some information. Then, will all the tests carried out throughout the country be identical? That is most important. If there are differences in machinery and equipment and that sort of thing as between various garages, differentials will appear in the results of the tests, which will obviously be most undesirable.
The tests are to apply to cars over ten years old. If your Lordships visit any large factory you will see large car parks for the workers' cars. You will see that the majority of those cars are old cars—probably over ten years old, and possibly third, fourth or fifth hand. The owner of one of those cars takes his car to the testing station. When he gets there he is told, let us say, for the sake of argument, that his steering is not good
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enough and that he must have some new parts. So he gets in touch with the maker and says, "Please can I have some new parts for my car?" The maker says, "I am sorry, but the car is no longer in production." So what happens? The owner has either to accept the fact that his car is unroadworthy and can no longer be used for him to get to work, or for the little relaxation that he is able to get, or he has to "scrounge round" to see if he can find some old car of a similar make and model that he can "cannibalise" in order to get the parts he wants. If he is lucky and finds the parts, he will probably have to pay a great deal more for them than they are worth. Otherwise, he will have to have the parts specially made. It is easy to lay down stringent requirements such as would meet the approval of the noble Lord, Lord Elton, but they would make it quite impossible for the more humble members of the motoring world to get their cars on the road at all. I think that is a point that should be borne in mind.
Another question which is of great importance and which I hope the noble Earl will be able to answer, is this: Will there be any appeal from the judgment of a testing station? That is a most important point. I do not know whether that is provided for in the Bill.
THE EARL OF SELKIRK: Perhaps I may answer that straight away. The noble Earl will see that in Clause 1 (4).
EARL HOWE: That is provided for? I am glad. Can the Minister tell us what sort of test there is to be in the case of motor-cycles? As your Lordships know, there are all sorts of variants of motorcycle. There is the ordinary motor-cycle, which we all know; there is the motor scooter and the motor-assisted pedal cycle. What sort of tests will be laid down for them? There are more motorcyclists in this country than in America, so I think we ought to be told about that. There is one further question I should like to ask the noble Earl. At an approved garage will testing have priority over repair work for hours and facilities? That is an important aspect of the scheme. If it is at all possible, I think we should be told that now.
With regard to the Hendon station, the noble Earl gave us some figures which I heard for the first time. The figures that I have are not necessarily up to date, but

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so far as I can ascertain, Hendon tested 6,000 cars in ten weeks, with a staff of ten men. That would appear to be the equivalent of about 30,000 cars per year. That would mean, taking 2,000,000 as being the number of cars to be tested in a year (I think the noble Earl mentioned that figure this afternoon), it would require 700 men at about 70 stations to compete with the work. That gives some idea of the magnitude of the problem. I have not been to Hendon, but the motoring organisations have. The motoring organisations have been subjected to a considerable amour t of hostile criticism in another place, but they sent sixteen cars of post-war construction to Hendon to be tested—they were all staff cars, subject to regular maintenance. Only the oldest car passed without criticism. The main criticism in regard to these sixteen cars was that the headlamp beams were too low. One car was faulted at Hendon because it WAS said to have a one-eighth of an inch "toe-in"—your Lordships will know what that expression means—on the front wheels. The makers were consulted, and they said that this was the correct setting for the car. So it would seem that everything at Hendon cannot he taken for granted as being absolutely correct.
What is going to be the cost of all this to the country and to the individual? A figure of "ten bob" has been mentioned from the point of view of the car owner. Well, "ten bob" per car, and 2,000,000 cars a year means that another £1 million will go on to the expenses of the motoring world. We are already paying over £400 million in taxation, in one way or another, and by comparison I suppose £1 million is mere chicken feed. But the motorist is conscious, and is becoming more conscious, of the fact that for this £400 million a year he gets the worst and most congested roads in Europe. I suggest to the Government that they will get far better co-operation from the motor world if they do something really effective to improve the roads. I hope that, when they do, they will be fortunate enough to secure the support of the noble Lord, Lord Elton, as a contributor to road safety. Unless the Government can really give satisfactory answers to the questions that I have ventured to submit, I shall be forced to the conclusion that the whole of these proposals embodied in the testing and examination of vehicles
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are just "half-baked" proposals which have not been thought out properly; that they should not form a part of our legislation and that, for the second time, we should say so.
We now come to parking meters. I believe that this idea came from the United States, where it has been adopted in some States but has been given up in others. I wonder whether the Minister can give us some figures in regard to parking meters. It is true that they have been adopted in some, but certainly not all, the States of America. Only the other day it was stated that three States had given them up. I think it must also be remembered that the layout of cities in the United States is different from that here, and that although the parking meter may suit the cities of the United States, if will not necessarily suit the cities of this country, particularly London. Where cars can be parked diagonally, or at right angles to the kerb, the experiment of parking meters may be possible; but I submit that where cars must be parked longitudinally along the street, parking meters will be no good at all, because they cannot make allowance for the varying sizes of vehicles parked there. I suggest that the wholesale adoption of parking meters will be subject to every kind of snag, and that they will not solve the problem of congestion. If anyone doubts this, let him look at Oxford Street, Piccadilly or Regent Street You will not find parked cars in any of these big arteries but at certain hours you will find there congestion quite as impossible as it can be anywhere.
There is another point: some time ago the Minister set up a Working Party, representing the police, local authorities and all who could contribute anything to consideration of the question. That Working Party was absolutely unanimous that the parking meter experiment should be tried, but that it should on no account be done until off-street parking accommodation was available. In going ahead with parking meters without adequate garage accommodation (which we know is the situation all over London), the Minister is going directly against the advice of the Working Party which he set up to consider this very question. I hope that Her Majesty's Government will be able to deal with that particular point. What are parking meters going to cost, and who is to supervise them, by clay and by night?

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I understand that in the United States a new industry is growing up. In the City of New York, 305 parking meters were broken into and looted in one month; so they require supervision. Who is going to look after them? And what are the proposed charges going to be?
Experimenting with parking meters is, in my view, tackling the problem of congestion at the wrong end. I believe, as I have suggested to the House before, that in order effectively to deal with congestion, London must be zoned: a person should not be allowed to come into the central zone unless he had on his windscreen a badge obtainable only by proving to the satisfaction of the police that he had off-street parking accommodation available to him in the central area. That badge would give a motorist a right of way into the central zone; without it he would have to stay outside. Site values in the central area of London are such that we cannot possibly expect adequate garage accommodation in central London to spring up overnight. It would be quite impossible for anything, effective to be done in that direction. Outside the central area, the position is much more hopeful. There are many bombed sites in various areas that have not been used, and the site value of such properties is such as not to rule out their use as an economic proposition. If we could do that, we should be tackling the problem in the right way. The real problem is the commuter who rushes up to London each day, arriving about nine or half past nine in the morning, and rushes away again in the evening at half past five or six o'clock. He leaves his car anywhere during the day. I do not much like the zoning idea, but something effective must be done or the traffic of London will come to a full stop. That is not just a figure of speech.
There are many more things the Minister might do, but I suppose they could not be dealt with in this Bill. The principal thing would be to have vehicle tunnels. Noble Lords who have been to Paris will have seen the enormous improvement which has been achieved in Paris traffic by making traffic tunnels at various places. Overhead roads might also be tried. I am afraid all these proposals would cost money, and they will not be popular with Her Majesty's Government, particularly at the present time;
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but if we do not do something like this what are we to do? We cannot contemplate the traffic of London coming to a complete and absolute stop, and that is what it nearly does already.
I should like, finally, to say a few words on this new offence of "causing death by dangerous or reckless driving." Various members of your Lordships' House have already touched upon this subject and therefore I will say only a few words about it. The Times, when talking of this, referred to it as a "questionable proposal" and "a piece of psychological legislation." It is a piece of psychological legislation if it is dealt with in this way, because the whole idea behind it is that jurors have a psychological objection to bringing in a verdict of manslaughter. I am unable to say whether or not that is founded on fact. I accept it as a fact because so eminent a parson as the noble and learned Lord the Lord Chief Justice said so in this House, but I cannot with satisfaction contemplate legislation which deals with the question simply by results. Surely that cannot be the right thing to do. I submit that whether one causes death as a result of an accident or not is a pure fluke, and the pains and penalties to be suffered by a driver should not depend on a matter of chance. It should he dealt with as a matter of fact. There may be an analogy for it in law, and if there is I should be delighted to hear it; but I cannot think of anything which would resemble that. We naturally have to accept the Bill as a whole, but I am sure that your Lordships will want to consider many of the details of this Bill in Committee, and in particular its three main proposals, one of which we dealt with last time. I cannot see that the position has changed since that episode.
5.18 p.m.
VISCOUNT HUDSON: My Lords, the noble Lord, Lord Lucas of Chilworth, started by suggesting that one of the reasons for the comparatively low accident figures in America was the enforcement of the law. I most profoundly agree with him. That the law is not at present enforced is not the fault of the police, for they are understaffed and have many other things to do; and I hope that I am not hurting their feelings in any way. It is a fact that the law at present does not contain the powers which

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it ought to have. It is, to all intents and purposes, completely unenforced. If anyone wants an example he need only go down the Great West Road, where he will see lines of traffic, vehicles of all kinds, which are supposed to keep within the marked lines. It is the rarest possible thing to find vehicles keeping within the lines. If one asks a mobile policeman or senior official who is looking after the traffic why he tolerates that, why he does not report those people, he says: "What is the good? They will not suffer any adequate fine. I have to bring some kind of person along to back up what I say before a magistrate will convict. What chance is there of getting an ordinary individual who has been driving along the road to come to court and support my words?" So the law is not enforced at all.
One thing I rather missed from the speech of the noble Earl, Lord Selkirk, if I may say sc with respect, was the fact that under the Bill a great number of things have to be done by regulation. For example, there is the question of keeping within the white lines. That is bound to be dealt with by legislation by reference, so as to enable the police to deal with a man who goes over the white line as an offender. This sort of thing is to be found all along the Great West Road, especially on the way out to Heath Row.
The noble Lord, Lord Elton, has a long connection, I gather, with Oxford, which I think one might describe as the home of lost causes. His speech certainly was largely the speech of a man who regretted the lost causes of a period. Incidentally, he spoke of an experiment carried out by the chief constable of Oxfordshire in the course of which, I gather, he has gone to the extent of putting policemen in plain clothes to patrol the roads in order to try to improve the general conduct of road users. I can tell him that it just does not work. There is nothing those men can do to enforce the law. If the House will forgive a personal reminiscence, I should like to tell them of this experience of mine. I came back from Oxford Show last year, and just after passing the roundabout at Cowley, and from then until I had passed Wheatley, there were two lorries in front of me. One was slightly further from the kerb than the other. I could not pass, and people
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behind me were entirely held up, because those two lorries travelled at about 20 m.p.h. and kept far enough away from the kerb to prevent anyone from passing. That means that, instead of traffic being facilitated—which is the task of the police—in this instance something was being done which had the reverse effect.
That is true all through our road system. Except that I do not wish to bore your Lordships, I could tell you a good deal derived from my experience of riding on London's buses. Time after time we have seen buses driving in London and holding up traffic because they refuse to give way, and obstruct the passage of other vehicles by not leaving sufficient room for those other vehicles to pass. The ordinary policeman has no sanction at all in such cases: he has just got to put up with it. If one makes a personal protest to the driver concerned, the only result, in the majority of cases, is a volley of abuse.
One of the main causes of bad driving of buses in London is, I think, the instructions that are issued. Lord Latham told me that drivers were extremely well trained at Chiswick, and if one goes there one can see that that is true. One can see a bus being driven at 20 m.p.h. stop suddenly and swing round, under perfect control. But drivers are taught to keep five feet away from the pavement. But five feet away front the pavement means, in the majority of cases, continual obstruction of other traffic which wants to pass. I had a long talk with the chief of the bus transport, Mr. Burnell. I finally said that I had a most fantastic letter written by Sir John Elliot, and that if he was going to be so stupid I should read that letter in your Lordships' House. He said: "For Heaven's sake, Lord Hudson, don't do that!" As a result, he has changed the rule. But it is quite intolerable that one has to bring pressure of that kind to bear to get a cause of nuisance abolished. I think that since that has been done the traffic control of buses is slightly better—but only slightly better—than it was.
I am sure that we shall not solve these problems until we get laid down a system of traffic lanes which a man will cross at his peril. It is quite easy to prove that a man has been across a lane without having to go through the rigmarole of getting some other man to come for-

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ward and give supporting evidence. I hope that the noble Lord who is going to reply will say that these things are being considered. I am sure it is a very difficult matter to ensure that speed "cops" are used to make people conform to the ordinary rules of good driving—and it is much more a question of driving properly than of driving carefully or driving safely. If we could get that done, I am sure that most of the difficulties with which we are faced would disappear.
5.27 p.m.
LORD CONESFORD: My Lords, I support this measure. Indeed, I think that that has been the conclusion of all noble Lords who have spoken, and if I intervene it will be mainly on Committee points. But it may be useful to Her Majesty's Government to have some advance information of some of the matters that are troubling some of us. My noble friend who has just spoken said that Lord Elton appeared to be a supporter of lost causes. I should like to say that I agree with Lord Elton completely in what he said about the magnitude of the problem and the scandal of the slaughter on the roads. I also agree about the importance of enforcement. I must say that when I drive, as often I have to drive at week-ends, on, say A40 or the Henley Road, I am astonished not at the number of accidents but at the fact that there are not more, because I think the standard of driving is so scandalous. Anyone who wishes to test that has only to go on any main road against the general stream of traffic and see how often he is obliged to slow down or go right into the side in order to save the life of some lunatic driving in the opposite direction who has pulled out in order to overtake something and then cut in. I believe that many of these problems can be dealt with only by enforcement by police on the road.
But that belief is no argument at all against the provisions Her Majesty's Government are seeking to enact in this Bill, most of which I believe to be useful, or potentially useful. The noble Earl in moving the Second Reading mentioned Clause 7 of the Bill which amends Section 8 of the Act of 1934. He referred to the Amendment as the work of the noble Earl, Lord Howe. He may perhaps be interested to know that Section 8
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of the Act of 1934 was my work. I will tell him the rather interesting circumstances in which that particular section got in the Statute Book. I was only an ordinary member of the public at that time—not a Member of the House of Commons—but I was very much outraged by a matter which does not seem much to trouble Lord Howe—inadequately silenced cars. I found that the scandal of inadequately silenced cars was accounted for by what I considered a defect in the law. Under the Construction and Use Regulations there had to be a proper silencer, and anyone who used a car on the road that had not a proper silencer committed an offence. Unfortunately, no offence was committed by the manufacturer, the original vendor of the car, if he had not fitted an adequate silencer, and some of the makers of sports cars deliberately put on an inadequate silencer because inadequate silencing was very popular with the young lunatics who drove their cars.
Struck by this fact, I thought that what now is embodied in Section 8 of the Road Traffic Act of 1934 would be very useful. I will tell the House what I did. I drafted two Amendments with the aid of some of my learned colleagues in the Temple and gave them to two friends of mine in another place. I think I chose very well, because those two friends are now the Minister of Health and the Home Secretary. The Minister of Health moved my Amendments in Committee, where they were resisted by His Majesty's Government, as it was then, and defeated. On Report stage, the present Home Secretary moved my Amendments. They were again opposed by the Government and were either negatived or not pressed to a Division.
But I did not despair. I remembered your Lordships' House. I handed these two Amendments to my noble friend, Lord Elton, and gave him ammunition which I thought in a reasonable assembly would cause my Amendments to be accepted. They were again resisted by the Government, which I might remind your Lordships was a Conservative Government; but your Lordships' House showed its natural independence by pressing them to a Division and defeating the Government. On Report stage in this House my two Amendments were combined by a Government Amendment into what is now Section 8 of the Road Traffic

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Act, 1934. If I am reasonably proud of that achievement, I am reduced to modesty by the thought that, though I was for twenty years in another place, I never once succeeded there in carrying anything against the Government of the day.
I agree with my noble friend, Lord Elton, about the importance of every step we take to diminish the casualties on the roads, and when we get to Committee stage I think we ought carefully to consider whether disqualification from driving should not be the automatic result even of a first conviction for certain offences. May I come now to the question of parking meters and parking dealt with in Clauses 15 to 20 of the present Bill. I agree heartily with my noble friend, Lord Selkirk, who commended the Second Reading of this Bill, that these experiments are well worth trying. In my opinion it is quite right to bring the price mechanism into play in order to encourage the provision of garages. I do not agree with noble Lords who have said that we must first supply garages before we restrain the parking. I do not believe that even existing garages are or will be fully used so long as people are permitted to park in the streets for nothing.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, would the noble Lord apply that to London? I am very interested in the use of the money factor in parking in order to support the development of garages. But if we have to pay 4s. 6d. or 5s. to go into a garage, what sort of fee for parking is now contemplated? I am not quite sure about it.
LORD CONESFORD: I am going to say some more on this subject of parking, and I am not taking the view—nor would my noble friend, Lord Selkirk—that all parking problems in Central London are going to be solved; but I suggest to the noble Viscount who just intervened that we shall never start to solve the problem so long as we permit people to park in the streets of Central London for nothing. There are two possible methods of preventing that. These methods do not exclude each other: in fact, I believe strongly that we have to use both. One is the method of parking meters new suggested by Her Majesty's Government. The other is to enforce the law against obstruction. While it is arguable that to
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enforce the law against obstruction could succeed even without the parking meters, it is not arguable that parking meters can succeed without the enforcement of the law against obstruction. So long as people are permitted to obstruct the streets of London, the problem is absolutely insoluble.
Nothing could be more preposterous, both in fact and in law, than the argument sometimes put forward by motorists, and I believe sometimes by motoring organisations, that there is some claim by a member of the public to free parking on the highway. I was glad to hear what my noble friend Lord Brabazon of Tara said about that. In discussion of the proposed parking meters, it is often assumed that the only interests concerned are the interests of free movement in the streets and the interests of motorists. That is not so. There are also the important interests of the owners and occupiers of private houses and flats and of professional and business premises. What I sometimes wonder is whether Her Majesty's Government have fully considered the injury done to private householders at the present time by the habit of some people of leaving cars in front of other people's houses. I would say to my noble friend, Lord Howe, who has just indicated his approval of what I am saying, and I am grateful to him, that it is not simply the problem of the commuters, as he said. There are many people living in Chelsea, I know, who never garage the monstrously large American cars which they use and leave out in the streets twenty-four hours a day. Incidentally, I cannot imagine why Her Majesty's Government permit these monstrously large cars under the Construction and Use Regulations at all. They are utterly unsuited for bringing on to the roads in this crowded Island, and ought to be prohibited under the Construction and Use Regulations.
Apart altogether from that, the problem is one that very much affects the householder. I have mentioned Chelsea, which I happen to know from personal experience; but let me give an example which I believe is known to noble Lords in all quarters of the House. Let them look at Harley Street and Wimpole Street, which are often filled with -the cars of people, very often commuters, who have just left them there; and the unfortunate doctor, who may have to go out in an emergency,

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often has no place whatever in front of his house for his car or for the cars of patients who may be visiting him. It will be quite useless to provide these parking meters unless there is also strict enforcement of the law against obstruction. I suggest to your Lordships that an ordinary householder who is paying rent, rates and taxes for his premises in London has some right to approach his own front door or to have visitors to his house able to do so. It is monstrous that a number of people living in the area park their cars in front of their neighbours' houses for nothing. It is not merely a question of speeding the traffic in the road; it is also a question of doing justice to the owners and occupiers of the premises concerned.
Let me tell the noble Lord exactly why I think this is directly relevant. At pr, sent a person injured in the way of which I have spoken has always the possibility to look forward to that one day the police may do something about obstruction. I may say that there are recent decisions of the courts which make it comparatively easy to prove obstruction merely when a car is left on the highway. So long as there is no parking meter, there is, at least, that chance that the law will one day be enforced. But if a parking meter should be put in front of a dwelling house, then parking there will be legitimate and there will be no remedy whatever to be derived from the law of obstruction.
I know that it is the desire of Her Majesty's Government that these parking meters should not be put in an unsuitable place where they would do the sort of damage that I have mentioned. But the question is: have they, under the clauses of the Bill as they now stand, sufficiently provided against this danger? I am aware that in Clause 15 (2) of the Bill it says:
"The matters to which the Minister shall have regard in determining what parking places are to be designated under this section shall include—
(b) the need for maintaining reasonable access to premises …"
That looks comforting, so far as it goes, but I am bound to mention two things. First of all, that provision was not in the Bill as it was originally produced, but was introduced by way of Amendment in another place. Secondly, what is meant by "the need for maintaining reasonable
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access to premises"? Let me tell the Government one of my grounds for some doubt as to whether the Minister has in his mind what I think most of us hope he has. In his terms of reference for the new Parking Survey, which he recently instituted, he said:
"The overriding need for a coherent parking plan may well involve some degree of interference with existing doctrines in regard to access."
I very much wonder what he means by that.
There are, I know, under the Bill as it stands—indeed, my noble friend who moved the Second Reading drew attention to the Third Schedule—certain safe-guarding provisions to ensure that people concerned get prior knowledge of the sites proposed for these parking meters in order that they may make representations, and no doubt they will be able to make known their objections to the local authority or to the Minister. But I doubt whether those provisions are strong enough; and I doubt, too, whether we are right not to provide for any possibility of compensating either private or professional men, or the owners of business premises, if the value of their property, or the possibility of carrying on their business, is detrimentally affected by the placing of these parking meters near their premises. I think that we shall have to consider Amendments to meet these dangers: indeed, I hope that Her Majesty's Government will themselves see whether the dangers I have mentioned do not warrant their consulting their most able draftsmen to see whether it is not possible to meet some of them.
I should like to add a word or two about the design of the parking meters. I admit that I have always been keen on questions of design, and I am horrified with some of the street furniture that has been erected, both in town and country, which has damaged amenities quite unnecessarily. I do not necessarily demand that the provision shall be in the Bill, but I hope that we shall have, at least, the assurance of the Government that the design of these parking meters will be decided only after consultation with the Council of Industrial Design, which is, after all, a body set up by the Government.
The only other matter I would mention is Clause 8, which has been referred to by several previous speakers and which

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creates the new offence of causing death by reckless or dangerous driving of motor vehicles. I certainly am not going to attack that clause without studying the considered argument of my right honourable and learned friend the Attorney General in another place, or what the Lord Chancellor or others may have to say to us in this House, but I think it is true that this clause, though it may possibly be wise or necessary, is in some ways illogical, and it does worry many people for some of the reasons that previous speakers have given. In answer to my noble friend Lord Brabazon of Tara, I think there are substantial reasons against relying wholly on the law of manslaughter. It is not that juries, for proper reasons, will not convict. I think the difficulty is that the summing up to a jury on the exact degree of negligence in the driving of a motor car which would constitute manslaughter is so complicated that the jury has great difficulty in following it. Therefore, I think there is a case for the amendment of the law.
Nevertheless, I would ask Her Majesty's Government to consider, if they have not already done so, whether the same object which is now met by Clause 8 of the Bill, to which objection has been taken in various quarters, could not be fulfilled by increasing the penalty for dangerous driving, so that bad cases could be punished by a far higher penalty than can at present be meted out for that offence. I say at once that this is a matter which strikes me at first sight on looking at the clause, but it is possible that the Government have good reasons for it. If they have not fully considered the alternative, I would ask them to do so.
5.48 p.m.
VISCOUNT COLVILLE OF CULROSS: My Lords, I rise with diffidence at this hour, but there are a few points that I should like to make. No one so far has mentioned Clause 5 and its companion, the Second Schedule. This is largely a road safety Bill, and I think it is admirable that Her Majesty's Government should have put down so clearly the encouragement and assistance they are prepared to give, both moral and financial, to the various road safety committees and organisations throughout the country. On the disputed question of vehicle inspections and spot checks, I have one small
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point on which, if possible, I should like some reassurance from the noble Lord, Lord Mancroft, when he replies. Under Clause 3 (3) a deferred test for a spot check is allowed, and the details of this are given in the First Schedule. That Schedule says that there will be a duty on the owner of the vehicle to produce it at the time and place fixed for the deferred test. In Clause 2 there are penalties for driving a car without a certificate, if it needs one, hut I should be glad to know that in the case of deferred tests there are suitable methods of enforcing that the owner of the car who has had his test deferred does, in fact, bring it into the station when he has arranged to do so.
On Clauses 15 to 20 with regard to parking meters, I hope I may be allowed to run through the method which, so far as I can make out, will be employed at these parking places where meters are provided. When one first drives in one's car, there will be a small charge of 1s. or 2s. for an initial two-hour period. After that time, I gather, the meter will put up some sort of red card or plate in the glass window provided, with the word, "Obstruction" written upon it. From that moment, a heavy excess parking charge will be imposed for a further two hours. This excess charge cannot be put into the meter itself, because it is adapted only to take the two-hour initial charge which is much smaller, and therefore it must be paid in to the local authority concerned. At the end of the excess period the police step in and can issue a summons for obstruction.
I wonder whether this is an enforceable method. I have had some experience of the parking meter system, and I have grave doubts as to whether it will work. In the first place, there is little to prevent a motorist, at the end of his initial period, from going back and putting another 2s. into the meter. The meter, of course, would have to be adapted for this, because if the original car is taken away and a new one brought in a new initial charge will be paid. Therefore, there is no mechanical reason why the original motorist should not put in another 2s. The answer may be that the parking meter attendant ought to stop this practice. But if he has to look after a whole row of cars in the street, and the motorist comes back at the far end and puts in the extra 2s.—and

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quickly at that!—it will be very difficult to tell exactly which was the meter. The alternative, of course, is for each parking attendant to have a log in which he puts down the number of each car, the time it arrived and the amount its owner has paid. But this is a highly complicated system, and would require a great deal of work and intelligence on the part of the parking meter attendant. This method of feeding the meter is not just a speculation. I have seen schemes of this kind in operation, and this sort of thing occurs all the time. And of course, it would completely ruin the whole system of an excess charge after the first two hours. I wonder, therefore, whether this is the right attitude. Parking in congested areas is, of course, an obstruction to the traffic, but will parking meters prove an answer at all? If there is one car there all day, it causes an obstruction. If there is a parking meter and a permanent turnover of cars, there will still be cars there all day, and the obstruction will be just the same.
I wonder, too, about the police. Presumably there will have to be a permanent patrol going round all these cars in the parking area, checking up after the excess period, when and to whom they are to issue a summons. Here again, are the police patrols going to wait until the owner comes back before they can issue a summons, or are they going to take the car away on their special removal vehicle, as laid down by Clause 6 of this Bill?
The amount of time, trouble and paper work that will be involved on both sides—by the motorist and by the local authorities, in handing in these excess charges, acknowledging them and generally organising the thing—will be enormous and will cause a great deal of aggravation among the motoring public and, presumably, among the local authorities. I wonder whether this system is not too complicated. At the same time, it is a contributory scheme and a preventive one. It is contributory, of course, in an admirable way to the essential feature of providing off street parking. Any money that can be provided for that is very welcome. It is obviously right that the motorist should pay a small rent for a piece of public highway that he occupies temporarily while his car is parked there, and if this money can be used in due
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course for providing proper parking places and garages well and good.
Can this system be justified as a preventive measure? I doubt it. I would suggest rather that if parking meters have to be provided at all—and I would not say that they have not—the system could be made much simpler if it were merely a contributory scheme. That would work as follows. The motorist drives his car in; he puts in his small initial charge, and it is then up to him to see that his red flag does not go up in the meter. All the parking attendants or the police have to do is to check up on meters which have the red obstruction flags up. The money will come in just the same, and it will cut out an enormous amount of time, trouble and manpower in the process.
The noble Lord, Lord Brabazon of Tara, made a plea for clarity and comprehensibility in this Bill on the ground that it was of enormous importance to so many people up and down the country who use the roads all the time. I agree most heartily with that, and in addition to the example that he gave I should like to quote Clause 36, which has to do with the provision of street lighting and its effect on making the road one in a built-up area, with the result that, automatically, it becomes restricted. This matter is very complicated, and I do not want to go into details because it ties up with both the 1930 and the 1934 Acts. The point is this. The clause itself says that it wishes to be a "guidance," and I imagine that means both to motorists and also to the courts when it comes to a case of prosecution for speeding. I submit that the effect it should have is this. When a road has a system of street lighting on it, a motorist, as he goes along, should be able to assume, unless there are de-restriction signs on the street lights, as there are in many cases to-day, that it is a road in a built-up area. If a road has no system of street lighting, however, it should be assumed, unless there are built-up signs on it, that it is an unrestricted road. Unless I have my facts wrong, that is not in the least the effect of Clause 36.
That clause lays down for the motorist two requirements of knowledge with regard to street lighting. In the first place, he has to know when the system of lighting was put up. If it

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was after the coming into operation of this Act, it may not mean that it is a built-up area. Therefore, he must know when the lighting was put up. In the second place, he has to know whether the lamp-posts are 200 yards apart, or more. Without those two pieces of knowledge, he still cannot be certain whether he is in a built-up area or not. I maintain, with all humility, that in a clause like this it would be no bad thing to lay down in black and white that when a road has street lighting on it it is built-up, and that, when it has not, it is not built-up unless contrary signs are clearly shown at frequent intervals. 'That would make driving a great deal easier, and would simplify matters enormously. With those few observations, I welcome this Bill and wish it good progress in its belated journey.
6.0 p.m.
VISCOUNT BRIDGEMAN: My Lords, my noble friend who has just sat down said one or two things to which I want to refer again in a moment, and with which I am in complete agreement. One was the emphasis on the road safety aspect of this Bill and the other was the effect of this Bill on the work of the police. I will say a little more in a minute about that. I hope the noble Lord will forgive me for not following him into the details of parking meters and such things, about which he and the noble Lord, Lord Conesford, know a great deal more than I do. I should like to echo what my noble friend hoped, that parking meters will be of a satisfactory design, although I am sure that, if they do come, we shall have to take the risk of yet another hurdle and another point of controversy surrounding the parking meters when the artistic people get busy.
I was going to spend the few minutes for which I wish to detain the House in trying to light two small amber lights which I hope will be seen later on by those Departments who have to administer the Bill when it becomes an Act. The first one is this. Noble Lords will have noticed during this debate that nearly all the instances taken of things which were wrong and needed to be put right came from the London area. That is not at all surprising, because the London problem, as the Bill recognises by devoting certain clauses
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and Schedules to the London problem, is something totally different in size and in almost every other way from the traffic problem in England outside the Metropolitan Police Area. The danger, therefore, is in trying to deal with the country as a whole as if it were all London; because a great many of the regulations which will be necessary in London, unless I am very wrong, will turn out to be unnecessary, restrictive and onerous in parts of the country where the traffic problem is lighter. In a great many things that we talk about in this House the London problem is different from the problem outside London. All I would say now is that I hope that those who have to make regulations under this Act will take care to remember that a regulation which is right for London is unlikely to apply to the rest of the country. Even such big centres as Birmingham and Manchester have problems which are trivial compared with those of London; and, vice versa, the regulation which is designed for places outside London is not likely to fill the bill in the Metropolitan Police Area.
Mention of the Metropolitan Police Area brings me for a moment to this question of the police. In this debate it is about time that we had a short look at this problem from the police point of view rather than from the point of view of transport and motoring. We all know that this problem is much in the minds of the police and those who have to administer the police, and also those who are concerned with magistrates' courts. I have here a recent annual Report of Her Majesty's Inspectors of Constabulary which has just come out. It says rather plaintively:
"Many chief constables continue to grapple with road safety with depleted numbers of men available for road patrol duties."
It mentions how greatly motoring offences have increased, and says, at page 15:
"The main increases were in the number of persons found guilty of traffic offences (393,148 in 1954, compared with 374,856 in 1953, an increase of … 4·9 per cent.)."
It goes on in the same strain. We are, I think, within measurable distance of finding that if we place any more burdens on the police in administering the Road 'Traffic Acts we shall have no police time available for dealing with other things for which the police are responsible, such as

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the arrests of burglars, housebreakers and criminals of that sort.
Last year, in the county from which I come, in the course of a magistrates' conference I had figures showing the percentage of the total number of prosecutions brought in magistrates' courts which were concerned with motoring offences. Of the prosecutions which were brought by the police—that is, leaving out prosecutions under clean milk, failing to pay rates, et cetera—75 per cent. were concerned with motoring in some form or another; and, taking the whole of the prosecutions, including clean milk and everything of that sort, the figure was about 60 per cent. So it is apparent that we have to bear in mind the effect which any further load on the police, with their present depleted establishments, will have on the police work as a whole and on the community who expect to benefit from police protection in other walks of life besides motoring.
LORD LUCAS OF CHILWORTH: I am grateful to the noble Viscount for his interesting figures. He tells us that in Shropshire 60 per cent. of the total prosecutions brought by the police were in regard to offences against the Road Traffic Acts.
VISCOUNT BRIDGEMAN: Connected with road traffic.
LORD LUCAS OF CHILWORTH: Connected with road traffic. But did the noble Viscount go still further in his researches? How many of the prosecutions that the police brought to the local benches in Shropshire were turned into convictions by the magistrates? Has he got that figure? What I am interested in is this: was the effort of the police, of which I think the 60 per cent. of the prosecutions he has just cited was a fine example, supported by the magistrates in returning convictions?
VISCOUNT BRIDGEMAN: I am grateful to the noble Lord for raising that point. I hope he will forgive my not giving a figure now. As I have not that figure in my mind, I prefer not to give it in the House. I can comfort him by saying that I feel certain—I will not say that the magistrates supported the police cases, but that the magistrates found in the large majority of cases brought that the police prosecutions were well founded.
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There is a slight difference in the approach to the question, as the noble Lord will appreciate.
LORD LUCAS OF CHILWORTH: Yes. The gilt was taken off the police gingerbread throughout the country by the imposing of parsimonious fines which provided no deterrent to wrongdoing.
VISCOUNT BRIDGEMAN: That may be so. I was hoping to come back to that point in a moment. As I say, it will leave little time for dealing with indictable offences. We also come to this problem: that, unless there are enough police to enforce these laws, the whole thing will break down under its own weight. That is a very serious matter when we think not merely of the Road Traffic Acts but also of the administration of the whole law of the land. It is particularly serious because, as some noble Lords said in the course of this debate, the type of offender who conies into court on a motoring offence is usually a much more respectable and responsible citizen than the people who are charged with offences of other kinds. It is important that when we come to administer this Act we should find a way of making its enforcement effective. I wish I thought that the mere provisions of this measure would go more than a very little way to do amt. but I am afraid I do not think so.
The noble Lord, Lord Lucas of Chilworth, has referred to the question of penalties. I am glad that the noble and learned Viscount has just returned to the Woolsack at the opportune moment, because this is a matter which exercises often magistrates in many different parts of the country. They are concerned, amongst other matters, with these two things. First of all, I am sure that all good magistrates want to give the offender the benefit of any doubt that there may be. That is a practice which goes far beyond motoring offences. The second thing is that in regard to cases which are committed all over the country, such as motoring offences, it would be an excellent thing if each bench considered the offence with the same degree of severity. These things are by their nature hard to regulate, and that can be done from time to time only by advice which is given to benches by my noble and learned friend or perhaps by his right

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honourable friend the Home Secretary, or sometimes by other people of that kind.
But what we really conic hack to is this: that it is going to be much easier for magistrates to give more severe penalties when they feel, perhaps more than they do now, that it is more reasonable to expect motorists not to commit the offence. All sorts of things contribute towards offences because of the lack of steps which we in this country have taken to improve the conditions of motoring in past years. A lot of accidents may be inexcusable, but, none the less, they are due to the fact that the road is not wide enough. A lot of parking offences may be inexcusable, but we all know that they would not happen if local authorities made proper provision for people to park.
So we go on, and so we conic back to the point that my noble friend Lord Colville of Culross raised in regard to road safety, which is another form of crime prevention. Those are the kind of points which I feel we ought to raise on this Bill equally with the more detailed points about parking meters and suchlike, because they affect the administration of the law generally, and because we all know that if we want to prevent crime we must remove some of the causes of it. For example, we all know that the problem of the black market and the enforcement of anti-black market legislation disappeared as soon as we had got rid of scarcity after the war. We all imagine—I most certainly do, and probably many noble Lords share my view—that we shall get rid of a great deal of the trouble in regard to tax evasion when taxes are not so heavy and when people think that they are more equally distributed among the community. In exactly the same way we shall get rid of a lot of motoring offences when it is more reasonable to suppose that the ordinary citizen has a better chance of getting from one place to another on good roads, and a reasonable chance when he gets to the other place of being able to park his car in a place that is provided for it.
My Lords, if we give a fair wind to this Bill, as I am sure we are all going to do, I think we shall do it bearing in mind that there are other things outside the scope of the Bill which will have a great effect, for better or worse, on the
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success of the Bill as a contribution to better motoring and to road safety. That is why I have ventured to take up a little time in going rather outside the strict provisions of the Bill to mention some of them to your Lordships.
6.15 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, we have had an interesting debate to-day on a Bill which is generally supported in principle, in that its aim is to reduce the awful carnage upon the roads of this country. At the same time, we have heard a certain amount of criticism because of the nature of the construction of the Bill itself in facing this great task. I must say that in 1954, when my noble friend Lord Lucas of Chilworth was devoting a great deal of attention to the Bill and I was unable to do so, I did not pay anything like the attention to this matter that I ought to have done. However, now that I look at the Bill that has come before the House, I feel that, in view of the great problem the Government and the local authorities have to face in this matter, it is a Bill which I would describe as one of "bits and pieces."
I thought that the noble Lord, Lord Brabazon of Tara, made art exceedingly good point to-day in regard to the difficulties with which motorists are faced, of having within a short time to consult at least three Acts of Parliament before they know whether or not they are within the law. He did not add what I think is of almost greater importance—namely, the books of regulations which have been issued by the Ministry from time to time, and which often carry, for their nonobservance, very heavy penalties indeed. In such a major campaign as any Government have to face in trying to cure this evil, it is about time that we had a constructive policy as a whole, and that the law was revised in such a way that the things which are really uppermost in the minds of different sections of the community, all of whom have been mentioned by one or another speaker to-day, are embodied in one complete policy, and so that we have comprehensive legislation in the matter.
I admit that no Government could be expected to hold up for a moment what must be regarded as urgent reforms in order to bring in legislation of this kind. But I think my point has been proved

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by the comment of the noble Earl, Lord Selkirk—who, as I have said before, always charms this House when he introduces a measure which is not too controversial—that the Bill left this House in its initial form with twenty-five clauses and has now arrived back with forty-seven clauses. He was very quiet about the Schedules—I notice that there are eighteen pages of those as well. So this Bill of bits and pieces, as I call it, becomes most difficult for the public hereafter to understand.
I believe the whole nation has a great responsibility at the present to back up both Government and local authorities in campaigning against the frightful massacre upon the roads. I am quite sure of this, too: that in meeting the various claims of sections of motorists and road users we ought to keep in mind that dreadful carnage, rather than be led into the sometimes specious argument that greater freedom for the motorist is going to lead to fewer accidents. I am quite sure that the Pedestrians' Association has from time to time sent its literature to the noble Earl and to all those who deal with this matter. At any rate, I do not regard it from that point of view.
As a motorist for more than thirty years, the more I look at the problem the more I hope the Government will not continue in the way in which a former Minister progressed in dealing with the size of heavy vehicles which are sanctioned on the road—or, in any future decision he may make, the speed at which they may be allowed to travel. I believe that this is fundamental. I do not believe that any noble Lord who has taken part in, or listened to, this debate to-day can have failed, from his own observation on the roads, to notice the difference that has occurred in the general atmosphere of ordinary car drivers on the road since the last amendment took place in regard to the permitted size of vehicles, especially heavy ones. So far as I can see now, although they have already increased greatly in size, there is now a proposal that their size should be even greater, and that the overall width of the load on the vehicle, which may he up to 30 ft. in length, may he as much as 9ft. 6ins. Until the general body of motorists, who for a great many years have paid "through the nose," both in
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direct taxation and in indirect taxation on petrol, get a system of roads adequate to take such loads, that sort of change ought not to be made.
It is true that the point I am making is not covered or in any way referred to in this Bill: it is a matter covered by regulations issued by the Minister of Transport under previous Statutes dealing with road transport; but as a driver I am very concerned. I should not regard myself as an especially good driver, even though I have been driving for thirty years. Very often, when I am on the verge of doing something wrong and see other people's licences being endorsed while I still have a clean licence, I feel like the person who said, "There, but for the grace of God, goes Bradford." I have no doubt that a great many fellow-motorists also feel like that from time to time.
I believe that the extraordinary outpouring of extra traffic in enormous loads on the roads in the last ten years, most of which ought to be carried by rail, canal or coastal transport, is adding hand over fist to the difficulties of the individual motorist and, generally, to the list of casualties. The mere profit-making desires of people in the industries concerned ought not to be allowed to take precedence over our great national campaign for road safety and the sanctity of human life. It is not only a question of people on the lunatic fringe—I quite agree with the noble Lord, Lord Cones-ford, that they can cause innocent drivers to be mixed up in accidents—but it is to a large part the deliberate policy of transferring to the roads traffic that ought to be carried by other means of transport.
Unless all these huge reserves of money (at least. they ought to be reserves) resulting from the taxation on motorists can be used in providing roads to meet the changed situation which has been brought about in the ordering of transport in industry, Her Majesty's Government should stop issuing regulations that will increase the size of these vehicles and thus make transport on our trunk roads system even more congested—roads which, in many parts of the country, are not more than 20 ft. wide and, in the case of some special bottlenecks, even narrower. I hope that Her Majesty's Government will pay some attention to that matter. More especially, arising out

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of what was said by the noble Lord, Lord Brabazon of Tara, I would plead that we should have drawn up a general policy, to be submitted to Parliament and the country, containing and consolidating all legislation so far as it is retained after Her Majesty's Government have, by their policy, amended the existing law, so that for some years ahead we may have comprehensive and understandable legislation in the hands of those who come within this industry.
When the noble Lord. Lord Conesford, was talking about the use to be made of revenue from parking meters, I wondered what would become of that revenue. From what has been said. I gather that local authorities will be able, if they wish, to run meters at a loss. They will be able to take revenue in the future and will not be called to account if they are still paying off deficits which they have incurred in the past. Probably the revenue from these parking meters will be lost in an ocean of administration, just as so much of the revenue from the tax on motorists by way of licensing and fuel has been lost.
LORD CONESFORD: My Lords, I am grateful to the noble Viscount for permitting me to interrupt, but in fact I did not mention revenue from parking meters. I used the argument that doing away with free parking on the highway might induce motorists to go to a garage where they would have to pay.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I found that exceedingly difficult to follow, unless what was whispered in my ear when I asked for guidance is true. There was a suggestion that parking meters might start with a charge of 1s. for the first hour, and 1s. for the second hour, and then, for the third hour, might run up to 7s. or 8s. One would be able to get into a garage for a charge which perhaps might not be so great as the accumulated meter charge for three hours. I am rot sure about that, but the other argument remains. I very much doubt whether there will be much improvement in the provision of parking places which are required to safeguard the interests of the individual citizen, and his own household and his own user2 by the meter system. I have very grave suspicion of it.
With those comments, and those made by my noble friend who takes such in-
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terest in these matters, we wish Her Majesty's Government success in their campaign against the awful slaughter on the roads, and on those points we back them at any time. But I do hope that, if Her Majesty's Government are to continue in office for any length of time after such a shock as Tonbridge has brought them, they will put That time to a useful purpose and will give us a comprehensive policy in transport and one which would he understandable and usable. I listened with great interest to the speech of one of the youngest noble Lords in the House, the noble Viscount, Lord Colville of Culross. Though I was so busy thinking what I should say that I did not hear all he said, I was diverted and listened to some of his unusual suggestions. I shall read the noble Lord's speech with very great interest tomorrow, and I should like to congratulate him upon it.
6.28 p.m.
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR THE HOME DEPARTMENT (LORD MANCROFT): My Lords, my noble friend Lord Selkirk and I are grateful to your Lordships for the guarded approval with which you have welcomed this Bill. My noble friend Lord Selkirk described the Bill as old wine in new bottles. The bottle has now circulated to no fewer than thirteen noble Lords and there is not a great deal left in it. At this hour I doubt whether your Lordships wish me to embark on a detailed examination of its cork and label, because you are by now thoroughly familiar with the vintages—'53, '54 and '55 and now the '56 vintage. I am afraid noble Lords will also be familiar with the two vintners, the noble Lord, Lord Selkirk, and myself.
The noble Viscount, Lord Alexander of Hillsborough, in a rather cavalier but not wholly inaccurate way, described the Bill as a matter of bits and pieces. Up to a point it is of necessity a large number of detailed proposals put together under one heading, which makes it a little difficult for me, at this stage of the proceedings, to deal with the sixty-six specific points and questions which have been raised in the course of this long and interesting debate. Without being in any way disrespectful or unwilling to help if I can possibly do so. I would, say that most of them tend to be Committee points, because, as the noble Lord, Lord Lucas of Chilworth, said in his interesting

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speech, there is only one slight theme, but a most important one, running through this collection, as the noble Viscount, Lord Alexander, called it, of bits and pieces, and that is the all important one of keeping death off the roads without actually bringing traffic to a standstill.
I was therefore very glad to hear the noble Lord, Lord Lucas of Chilworth, concentrating on this question of the appalling carnage on the roads in opening his speech. He called it a social scourge and many of your Lordships took up and emphasised that point. I was glad because I believe that that aspect tends occasionally to become lost in some of the arguments concerning the details of the Bill and in what we are actually trying to do: 267,000 people were killed and wounded on the roads of Great Britain last year, 1955–267,000, which is almost exactly the same as the number of subjects of The King who were killed and wounded in the Battle of the Somme. And, as the noble Lord, Lord Lucas of Chilworth, says, we take it far too casually. Therefore, I was very glad to hear many noble Lords return to this point time and again to-day. That is what we are trying to do: to reduce these figures.
With regard to the second point, keeping death off the roads without actually bringing traffic to a standstill—and, as the noble Earl, Lord Howe, pointed out, we have almost got traffic brought to a standstill—I believe that the constant frustration of the traffic jams on the road contributes to accidents by causing irritation and bad temper, thus encouraging rash and careless driving. In this country there are eighteen vehicles to the mile compared with seven to the mile in a country like France. That indicates a problem which is not going to grow any less. Let me say at once, in answer to several noble Lords who have raised the point, that I naturally agree that the question of parking meters and many of the other matters dealt with in the Bill are inextricably linked with the questions of off-street parking, garages, street widening, and, indeed, the road programme of the Government as a whole. But there is a limit to off-street parking, there is a limit to the garages that can be provided, there is a limit to street widening in London, and there is a limit to our road programme. Everywhere we can effect
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improvement in these matters we must try to do so, but a line has to be drawn somewhere.
Let me point out this to the noble Viscount, Lord Alexander of Hillsborough, in answer to the interesting intervention he made during the speech of Lord Conesford concerning parking meters, as to why the movement of cars should be controlled by parking meters. If lie were to go with me this evening—I hope the noble Viscount will forgive my introducing a personal note—to Portman House, the home of my noble landlord, Lord Portman, he would see there a very large garage, but I am certain that he would find it a quarter, if not a half, empty. And the reason is that people can park outside my house next door in Montagu Square without having to pay any fee. We certainly hope that parking meters will contribute their share to the solution of the problem. I say "contribute" only; I do not pretend they are going to cure, or anything like cure, the whole of the evil. But it is something we must try out and I was glad to hear the noble Lord. Lord Teynham—who speaks with such authority by reason of his position with the Automobile Association—say that he was not opposed to the proposal and that he did not think the Government was "anti" anyone. There has been an idea in some quarters that this Bill is "anti motorist. Nothing of the sort. It merely is this: we have got to the position where, in the words of the popular song, "Something has got to give". At the moment it looks as if the man who has to give way is the man who brings a car up day by day and parks it all day in the centre of London. I think that this long-term parker is starting to realise that, and more and more commuters are coming up four or more in one car rather than individually in separate cars.
British Railways are trying to contribute to tackling this problem by making more parking spaces at peripheral stations. Probably many of the people who come into London by car are in a group which come in later than the earlier workers, and when the rush hours are past the situation tends to become a little easier. We hope that this tendency will continue. The Government do not, for one moment, suggest that parking meters will cure everything; but they have been a success up to a point in other countries. The noble Earl, Lord

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Howe, suggested, that there is some tailing off in enthusiasm in America. Well, they have there 1,500,000 parking meters in 3,400 cities and that number is increasing at the rate of 100,000 a year. I think the experiment has also proved successful in other countries like Switzerland, Sweden and New Zealand, where the ways of life of the people are perhaps even closer to ours than is that of the Americans. Therefore, I think that this experiment has to be given a trial.
I agree with what the noble Lord, Lord Colville of Culross, said in his interesting speech, that there may be things to be changed here or experimented with there. It will be a process, to some extent, of trial and error. But I think it is well worth doing, despite the obvious difficulties and objections which your Lordships have raised in considerable profusion this afternoon. We will consider those most carefully, as indeed all other suggestions, on the Committee stage. Let us give this experiment a trial and see whether we cannot make it contribute in some way to the solution of the problem of congestion on the roads.
The next point made by many noble Lords who have spoken this afternoon related to the creation of new offences. I would most certainly agree that it is undesirable to create new offences unless you cannot possibly avoid it. I would heartily endorse what was said by the noble Viscount, Lord Bridgeman, and other Peers, concerning good will between police and motorists and how essential it is that that good will which, at the moment, is in some ways endangered, should be restored. I think it is endangered as much as anything else by the possibility of police, motorists and pedestrians alike regarding some of our laws as either futile or unenforceable. The noble Viscount, Lord Bridgeman, touched upon this point very strongly.
If there is one thing the police hate, it is having some motorist, when approached by an officer after committing an offence of a minor nature, say (and I am sure many of your Lordships have heard something of the kind): "Why aren't you chaps catching burglars instead of wasting time talking about my parking on the wrong side of the road?" That sort of thing is bad for the relationship between police and public. I can assure your Lordships that we are trying
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to get away from this in some ways by accepting the major recommendation of the Sharpe Committee. Your Lordships will remember that that was designed to prevent people from having to go miles to plead guilty to some minor motoring charge, and ten or fifteen constables from having to spend most of the day hanging about in court. We are attempting to do away with that in order to get more police on important jobs.
But even if new offences are being created, as several noble Lords have indicated, all we are trying to do is to bring dangerous or thoughtless drivers up to the normal standard of the good driver. As a matter of fact, very few drivers behave in the way which so many of these offences indicate. The noble Lord, Lord Lucas of Chilworth, talked about "tow-away" zones in America. He was not so bold as to suggest that we should adopt that drastic system in this country, though it would solve many of the problems which he touched upon. As your Lordships will remember, we had at the Committee stage of the last Bill a great deal of discussion on a provision authorising the removal of a vehicle causing obstruction. That, I agree, is a very small second cousin of the proposal which the noble Lord was discussing. I have discovered that in Paris, where they have a similar provision, only ten vehicles a day are so removed. I agree that if the new laws are reasonable, and appear to be reasonable, they will be accepted, albeit grudgingly, by the public. That is the aim of this Bill.
I have been asked to say a word on the question connected with the new Clause 8—the dangerous driving and manslaughter point. This is a very vexed point which, as the House knows, was strenuously debated last time. Many experts gave us their opinions about it. This is a matter not of black and white, but of shades of grey: there is room for opinions on both sides. The Government feel that they are putting forward the best solution they can offer, and they hope that your Lordships, though perhaps with misgivings, which are very understandable, will be prepared to accept it, I think it will certainly help a great deal towards dealing with this difficult problem.
LORD LUCAS OF CHILWORTH: Would the noble Lord forgive me for interrupting? I feel certain that I shall

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have an answer in the affirmative, but I should just like to put this point. Her Majesty's Government will not, I feel sure, shut their minds to an alternative which might be even more in the direction aimed at than the provision in the present Clause 8.
LORD MANCROFT: I give that assurance straight away. But as things are, before an alternative is produced, we feel that we have the best solution of the problem that we can get.
I was talking of the relationship between police and public. I would strongly endorse in this connection the remarks of the noble Viscount, Lord Hudson. The police wish more than anything else to be helpers and guiders, and not to be thought of as constantly on the look out for grounds to bring prosecutions. I remember that this point came up on the Committee stage of the last Bill. Far too many drivers are potential accidents looking for somewhere to happen. And it is not prosecutions that the police want: they want to give help and guidance in order to stop these accidents from happening.
I turn now to the other major point upon which nearly every other noble Lord who has taken part in this debate has spoken—that is the question of vehicle testing. The speakers were a little critical of the details, but accepted the general principles. May I say here that we are in real danger of letting the best be the enemy of the good. It is easy to find fault with the details of a complicated and novel scheme like this: I myself could probably find a few faults to add to those which have already been found. But let us give it a trial. We shall probably have to change one or two of our preconceived ideas in the course of the experiment, and the Bill is so drawn, and the regulations will be so drawn, as to give the Minister the widest latitude in working out this scheme. I do not say that it will have an immediate and striking effect upon casualties on the roads, and I will not quarrel with the noble Lord, Lord Lucas of Chilworth, about the Hendon figures or the American figures. But a reduction of between 12 and 20 per cent. in the number of accidents in this type of vehicle should not be ignored. It gives some encourage-
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ment, I think for proceeding with this experiment.
It is an experiment; a pilot scheme—or, rather, the extension of a pilot scheme. I think we may well have to consider the psychological effects, as well as the practical effects, and I readily admit that in the early stages the practical effects will necessarily be small. Some noble Lords have argued that we are not going far enough; but we should like to start off cautiously. We should like to see this working well from the word, "Go." I admit to the noble Lord, Lord Lucas of Chilworth, that there is no guarantee, merely because a motorist gets a certificate on January 1, that his car will be in first-class working order on July 1.
LORD LUCAS OF CHILWORTH: Or on January 2.
LORD MANCROFT: Or on January 2; there is no guarantee. But if the noble Lord goes to his dentist for a thorough check on January 1, there is a sporting chance that he will not have a roaring toothache on January 2.
LORD LUCAS OF CHILWORTH: I do not get a licence from the Government in order to wear my teeth, but I must to have my car on the road.
LORD MANCROFT: The noble Lord cannot kill people with his teeth. My noble friend Lord Howe has asked: why pick on the ten-year-olds? There is nothing sacrosanct about the ten years period; it is merely an obvious way in which to start. There are 2,000,000 ye-hides over ten years old, and the Americans found a large number of defects in their cars as old as this—so it seems a good way to start. We do not want the noble Lord to queue or to have to go more than twenty miles, but we shall have to work this out carefully. I would say to the noble Lord, Lord Lucas of Chilworth, that we do not want to make an excessive demand on manpower or upon our economic resources.
The garages must participate if this scheme is going to work. I thought that the noble Lord made rather heavy weather with the difficulties of paper administration for the garage proprietor. The Bill says that he need not volunteer to participate in the scheme. We do not think that it will be so cumbersome, and if it turns out to be, it must be simplified.

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I was glad to hear the noble Lord defend the morality of garage owners, which I think has been criticised unfairly, not in your Lordships' House this afternoon but outside. It has been suggested, not to put too fine an edge on it, that the garage owners are not to be trusted to carry out this scheme without committing dishonesty of some kind. I do not see what right anyone has to suggest that. There are black sheep in all professions, of course, but I am quite certain that this scheme will be carried out honestly, probably if only for the rather cynical reason that there is not much gain to be had out of it otherwise. But I would put it more highly than that. I am quite certain that this will work well and with the good will of the garage proprietors. Perhaps the noble Lord, Lord Lucas of Chilworth, would like to find another word for them between now and Report stage.
My Lords, it is easy to criticise the Bill, but I hope that the objections which can be so easily raised will not allow its obvious merits and purpose to be overlooked. It represents a genuine attempt to cope with one or two appalling social evils. No doubt it is not wholly perfect, but we shall try to perfect it in Committee stage, as we have tried with previous Bills of this nature. Every soldier is supposed to carry a field marshal's baton in his knapsack. I believe that every Member of your Lordships' House has a Road Traffic Bill somewhere in his briefcase. I am sorry that my noble friend Lord Elton is not in his place. He produced a Road Traffic Bill and if he had been here, I should have liked to have some words with him about it. It is no good running down the Bill we have produced, unless the critics have something better to put in its place. What the noble Lord had to put in its place was wholly impractical, I am afraid. We are trying to do something which we hope is practical and will work. There are objections to every provision in this Bill, and I have no doubt that in some of the Private Members' Bills introduced by your Lordships we could find something more to criticise; but I believe that the objectives the Bill sets out to achieve are sound. Accordingly, I commend the Bill as a solid attempt to get traffic moving more smoothly, more swiftly and more safely.
LORD MATHERS: My Lords, before the noble Lord sits down, may I remind him that I put a specific question to him? I know that it is really a Committee point, but it seems to me that it would be unnecessary to put down an Amendment for Committee if there were no hope at all of having the point examined by the Government. I should like to know what is the situation with regard to the Medical Research Committee's Report on the question of road safety.
EARL HOWE: I have already asked too many questions, and I hope I may be forgiven for saying another word; but I should be most grateful if the noble Lord could let me have the answers in writing.
LORD MANCROFT: My Lords, I must apologise for inflicting myself on your Lordships again. I am afraid that I cannot promise to answer every one of the noble Earl's questions, but I will certainly have them looked at carefully. I would tell the noble Lord, Lord Mathers, that I cannot hold out much hope that the Amendment he suggested will have a successful outcome, but I will look again carefully at the point he made about the B.M.A. Report.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

TRANSPORT (DISPOSAL OF ROAD HAULAGE PROPERTY) BILL
6.46 p.m.
Read 3a (according to Order), with the Amendments, and passed, and returned to the Commons.

LOCAL GOVERNMENT ELECTIONS BILL
Read 3a (according to Order), and passed.

BUSINESS OF THE HOUSE
6.47 p.m.
EARL FORTESCUE: My Lords, I have to inform your Lordships that it has been arranged through the usual channels that we shall have the Committee stage of the Road Traffic Bill, which we have debated this afternoon, on Monday, July 2, and Tuesday, July 3.

BRISTOL CORPORATION BILL
Returned from the Commons, with the Amendments agreed to.
MIDDLESEX COUNTY COUNCIL BILL [H.L.]
Reported, with Amendments.

CHERTSEY URBAN DISTRICT COUNCIL BILL
The CHAIRMAN OF COMMITTEES informed the House that the opposition to
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the Bill was withdrawn; the Order made on May 30 last discharged, and Bill committed.

CAMMELL LAIRD AND COMPANY BILL [H.L.]
The Queen's Consent signified, and Bill reported from the Select Committee, with Amendments.
House adjourned at twelve minutes before seven o'clock.