Sitting of 27 June 1957

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS
    BUCKINGHAMSHIRE COUNTY COUNCIL BILL [Lords]
    As amended, considered: to be read the Third time.
    ARUNDEL ESTATE BILL [Lords] (By Order)
    Second Reading deferred till Monday next.
    LONDON COUNTY COUNCIL (GENERAL POWERS) BILL [Lords] (By Order)
    Second Reading deferred till Thursday next.
    LIVERPOOL CORPORATION BILL [Lords] (By Order)
    Second Reading deferred till Wednesday next, at Seven o'clock.
  PETITION

    Nuclear Weapons
    Mr. H. Butler: With your permission, Mr. Speaker, and that of the House, I desire to present a Petition from the citizens of the Borough of Hackney, which has been signed by approximately 9,600 residents, including the civic dignitaries, the Worshipful Mayor and Mayoress, leading people of religious thought, trade unionists, housewives and people who are concerned.
    And the Petition
    Sheweth that the future of all the peoples of the world including our own British people is endangered by nuclear weapons and that every fresh explosion of a bomb increases the danger both to people now alive and to those yet unborn.
    Wherefore your Petitioners pray that the honourable the House of Commons of the United Kingdom of Great Britain and Northern Ireland should immediately propose the abolition of nuclear bomb tests through international agreement and any further tests
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    should be deferred until an answer has been received from interested Governments.
    And your Petitioners, as in duty bound, will ever pray.
    In view of the fact that I have read the Petition, I do not propose to ask the learned Clerk to read it again.
    To lie upon the Table.

ORAL ANSWERS TO QUESTIONS
  MALAYA

    Constitution
    Mr. Peytonasked the Secretary of State for the Colonies when he intends to publish his proposals for the new constitution of Malaya.
    The Secretary of State for the Colonies (Mr. Alan Lennox-Boyd): It is hoped to publish a White Paper on the agreement reached between Her Majesty's Government, Their Highnesses the Rulers and the Government of the Federation of Malaya early next week.
    Mr. Peyton: Whilst I am very glad to hear that my right hon. Friend has such definite news on this subject, may I ask him if he is aware of the widespread interest with which the proposals are awaited and also of the certain amount of anxiety that there should be as little as possible of racial discrimination which might otherwise prejudice the future success of these proposals?
    Mr. Lennox-Boyd: I am aware of both those considerations.
    Mr. Teelingasked the Secretary of State for the Colonies whether he will place the memoranda submitted by Her Majesty's Government to the Reid Constitutional Commission for Malaya in the Library.
    Mr. Lennox-Boyd: No, Sir. I do not propose to do this.
    Mr. Teeling: Does my right hon. Friend realise that there is still a certain amount of anxiety in this country, in the Dominions and in the Commonwealth as a whole about the way in which the new constitution is being rather rushed? If he cannot put the whole facts in the Library, cannot he place there some kind

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    of memorandum about them in order to ensure that people realise what is our attitude and how far we are going?
    Mr. Lennox-Boyd: The proposals which are now being considered are entirely acceptable to Her Majesty's Government, and when the White Paper is published shortly our point of view will be clearly shown.
    Sir A. V. Harveyasked the Secretary of State for the Colonies whether he will ensure that in the forthcoming White Paper relating to the new Malayan Constitution it will be clearly indicated whether or not the special privileges to be given to the Malay section of the population are to be granted to immigrant Indonesians domiciled in Malaya on Independence Day; and whether or not they will be denied to persons born in Malaya or Chinese families which have been continuously domiciled there for over 200 years.
    Mr. Lennox-Boyd: Safeguards for the rights of all races in the Federation will be provided in the new constitution. For an answer to his special points, I would ask my hon. and gallant Friend to await the publication of the White Paper.

    Population (Statistics)
    Mr. Awberyasked the Secretary of State for the Colonies if he will publish a table showing the Malay, Indian and Chinese percentage of the population of each of the States and Settlements of the Malayan Federation in the first decade of this century and at the last census, and also a table showing the percentages of the electorate enjoyed by these three races in each State and Settlement in the 1955 election to the States and Settlements Councils; and what percentage of members of each State and Settlement Council, respectively, are at present elected and what percentage are nominated.
    Mr. Lennox-Boyd: I have asked the High Commissioner for the Federation of Malaya to provide this information and will send it to the hon. Member.
    Mr. Awbery: I am obliged to the Minister for acceding to my request to ascertain these figures. May I assure him that I will read them with interest and will come back with further questions?
    Mr. Lennox-Boyd: I do not doubt it.

  HONG KONG

    Cotton Cloth (Exports to United Kingdom)
    Mr. Allaunasked the Secretary of State for the Colonies whether, following the recent refusal of Hong Kong to limit cotton cloth exports to Great Britain, he will now consider introducing a minimum wage in Hong Kong textile mills.
    The Under-Secretary of State for the Colonies (Mr. John Profumo): No, Sir. As my right hon. Friend informed the hon. Member on 24th October, 1956, wages and working conditions in this industry compare favourably with those in other industries, and it is not proposed to introduce a legal minimum wage.
    Mr. Allaun: But is the Minister aware that Lancashire is increasingly alarmed by the growth of cotton imports, made by underpaid Hong Kong labour, which has increased from 5 million square yards six years ago to 55 million square yards last year? Since the wages of textile workers in Hong Kong are so far below those of the workers in Lancashire, would it not be in the interest of both to introduce a legal minimum wage?
    Mr. Profumo: No, Sir, and I do not agree that they are underpaid. I think it would be improper to enforce a higher minimum wage simply to protect the United Kingdom cotton industry.

    Franchise
    Mr. Rankinasked the Secretary of State for the Colonies when the Government of Hong Kong proposes to introduce an extension of the franchise.
    Mr. Lennox-Boyd: No proposal for an extension is being considered at present.
    Mr. Rankin: Would not the right hon. Gentleman ask the Hong Kong Administration to think about this matter? Is he aware that the great mass of the pre-war population in Hong Kong has not the right to vote? Does he not think that it is very difficult to attack dictatorships in other parts of the world when we ourselves are maintaining a dictatorship, however benevolent, in Hong Kong?
    Mr. Lennox-Boyd: Nobody in Hong Kong thinks for a moment that he is

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    living under a dictatorship. Many hundreds of thousands have left a dictatorship to go to live in Hong Kong. There is no significant public demand for this change, and I suggest that if the hon. Member went to live there, even he himself would quickly absorb the prevailing atmosphere.

  CYPRUS

    Police and Security Forces (Allegations)
    Mr. K. Robinsonasked the Secretary of State for the Colonies if he will now state what form of inquiry will be instituted by the Governor of Cyprus in order to clear the good name of the Cyprus Police Force and the security forces.
    Mr. Grimondasked the Secretary of State for the Colonies if he will make a statement on the refusal of the Governor to hold an inquiry into police methods in Cyprus.
    Miss Leeasked the Secretary of State for the Colonies what steps he is taking to investigate allegations of ill treatment while in Cyprus made by Cypriot prisoners now in Wormwood Scrubs.
    Mr. Brockwayasked the Secretary of State for the Colonies if he will establish an independent inquiry into allegations of ill-treatment by members of the Special Branch in Cyprus, copies of which have been sent to him through the Home Office, made by Cypriot prisoners in Wormwood Scrubs prison.
    Miss Leeasked the Secretary of State for the Colonies if he will set up an independent committee to investigate conditions in British prisons in Cyprus.
    Mr. Edelmanasked the Secretary of State for the Colonies whether he will move to set up a Select Committee in order to examine and report on the treatment of political prisoners in Cyprus by British officials.
    Mr. Lennox-Boyd: The campaign of vilification against the police and security forces in Cyprus culminated in a statement by Archbishop Makarios last week. Complaints made to the hon. Member for Cannock (Miss Lee) and the hon.
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    Member for Eton and Slough (Mr. Brockway) by Cypriot prisoners in Wormwood Scrubs are clearly, by their timing, part of this campaign. Hon. Members will, I am sure, not be misled by the motives of this campaign.
    Archbishop Makarios, who, despite his association with terrorism and murder, has been given every encouragement to put forward constructive ideas on the future of the island, has failed to make any constructive move during his sojourn in Athens. Instead, he devotes himself to making fantastic charges against our fellow-citizens in Cyprus who are carrying out a difficult task with the courage and restraint which are associated with the British police and armed forces everywhere. I know that most hon. Members on both sides of the House who represent these men and men like them in Parliament know that they are not the sort of people likely to commit the acts alleged by Archbishop Makarios in this campaign.
    Nevertheless, the Governor is investigating the allegations of ill-treatment recently made wherever they are framed in sufficiently specific terms to make investigation possible, and as soon as these investigations are completed I will place detailed comments in the Library so that the House can form its own judgment on them. I am, however, satisfied, that these wild charges do not justify a special inquiry.
    Mr. Robinson: Is the right hon. Gentleman aware that no investigation by the Governor or the Cyprus Government can possibly allay the very real concern that is felt by numbers of people about this? Is he further aware that not only Greek Cypriots but responsible people in Cyprus have expressed great anxiety about some of the incidents which had been reported, and since he said a week or two ago that the Governor was anxious to clear the good name of the security forces, will he not realise that the only way in which this can be done is by an independent inquiry?
    Mr. Lennox-Boyd: I think that some hon. Members do not perhaps altogether understand the conditions at the moment in Cyprus under which witnesses who wanted to give evidence against statements made under E.O.K.A. pressure would be placed if they were asked to

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    make those statements to some other inquiry. I am absolutely satisfied that one of the main reasons for this campaign of denigration is to enable E.O.K.A. to discover and to eliminate weaknesses in its own organisation and methods of operation which have enabled the security forces to make such inroads upon it. One of the so-called victims of these charges, in effect, said a week or so ago that there really was no charge to make. He said, "The Church is very powerful here." Does the hon. Gentleman really think that I, or any other responsible person, should set in motion machinery under which that and similar statements would be published in a way which would identify the individuals?
    Miss Lee: Is the Minister not aware that it would be quite improper for Cypriot prisoners who are making allegations of maltreatment to be judge and jury in their own case? Is he also aware that the logic which applies to these Cypriot prisoners applies to himself and to the Governor of Cyprus? Is he further aware that, if the situation remains as it now is, in the eyes of the world the British Government have pleaded guilty? [HON. MEMBERS: "Nonsense.] Therefore I ask, if we are to justify the good name of our British soldiers abroad, of which we are all proud, that in their interests as well as in the interest of the honour of the Government, it is absolutely essential that an independent inquiry should be set up?
    Mr. Lennox-Boyd: I cannot accept the hon. Lady's conclusions. Her own visit with the hon. Member for 'Eton and Slough (Mr. Brockway) to Wormwood Scrubs, which the Home Secretary was very ready to facilitate, brought her into contact with a number of men who made charges. These men in Wormwood Scrubs were all examined in the routine manner by the prison medical officers on their arrival last year and at the beginning of this year. I have seen and read carefully every one of the reports.
    No marks, bruises, or anything else suggesting injury or ill-treatment were noticed on any of these men, and no complaints of such ill-treatment were made at the time of their entry into Wormwood Scrubs. Of the men that the hon. Lady saw, four complained when they were in Cyprus of rough treatment in Cyprus,
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    and those four cases will be dealt with in a statement that I will lay in the Library. I would ask the House to note—to put it mildly—the curious coincidence in timing between the suggestion made that these two hon. Members should visit Wormwood Scrubs and the statement made by Archbishop Makarios in Athens.
    Several Hon. Members rose—
    Mr. Speaker: I hope this will not become a debate on these Questions. There are a number of other Questions to be dealt with. If any hon. Member wishes to give notice to raise the matter on the Adjournment, he can, of course, do so.
    Mr. Callaghan: While I accept your suggestion, Mr. Speaker, in one sense, may I submit that the Colonial Secretary has made three very long statements—they are not answers to Questions—which could perhaps have been better made at the end of Questions? This is a most important topic, and I must submit that it would be quite improper not improper on your part, Mr. Speaker—but it would be unworthy if the Colonial Secretary by the vehemence of his language and the length of his replies were to get away with statements which are quite unfounded, especially in so far as they reflect on the conduct and honour of my hon. Friends.
    Mr. Speaker: I think that if the hon. Member reflects he will agree that some of the supplementary questions which have been asked did cover a good deal of ground, as did the answers. I am perfectly willing to call hon. Members to ask supplementary questions on this matter. I would only ask that they be questions and not speeches.
    Mr. Dudley Williams: On a point of order, Mr. Speaker. There is very strong feeling on this side of the House that the statement which has been made by my right hon. Friend completely exonerates the forces concerned with security in Cyprus. In view of that fact, would it not be fair to my hon. Friend the Member for Wokingham (Mr. Remnant)—
    Mr. Speaker: I have my eye on him.
    Miss Lee: Further to that point of order. In view of the urgency and the

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    gravity of this matter, which is now eating into the normal rights of hon. Members at Question Time, would it be in order to move the Adjournment of the House at the end of Questions so that we can give the serious discussion to this matter which it requires?
    Mr. Speaker: In any case, this is the wrong time to move such a Motion; but I can tell the hon. Lady that it is not a matter which falls within Standing Order No. 9.
    Mr. Brockway: Is the right hon. Gentleman aware that the hon. Lady the Member for Cannock (Miss Lee) and I saw the injuries upon nine of these prisoners, and that while many of those injuries might have taken place in ordinary fighting, some, like deep cuts around both wrists, were quite obviously due to other treatment than that? In view of these facts, will he not only investigate these cases but investigate a large number of other cases of which evidence has been given by an independent inquiry for which we have asked?
    Mr. Lennox-Boyd: I am not challenging the hon. Member's belief in what he saw, but I would suggest that it would have been better and probably more valuable to the course of justice if those prisoners had themselves complained to the prison medical officer when they were received at Wormwood Scrubs. I have given an answer. I have read the medical officer's report, and I have given the answer that is based on those reports. As my right hon. Friend the Lord Privy Seal and Home Secretary has told one of the hon. Members who went to Wormwood Scrubs, the prison medical officer is carrying out a further investigation into these matters, and I think the House will hear about it with interest in due course.
    Mr. Remnant: Would not my right hon. Friend agree that it is an old-established custom in this country to regard an accused person as innocent until he is proved guilty? Since accusation is not proof, should not hon. Members remain neutral until my right hon. Friend has completed his inquiry, when differences of opinion as to the value of the inquiry can be expressed, rather than take sides at this stage?
    Mr. Lennox-Boyd: It is certainly a civilised practice.
    Several Hon. Members rose—
    Sir P. Agnew: On a point of order. Although I am quite satisfied with my right hon. Friend's reply, I beg to give notice that I shall raise this matter on the Adjournment to point out how ill-founded these accusations are.
    Mr. Edelman: On another point of order. May I ask, Mr. Speaker, whether you had not called me before the hon. Member for Worcestershire, South (Sir P. Agnew) raised his point of order and whether, therefore, I have not the possession of the House; in which case, am I not entitled to put a supplementary question?
    Mr. Speaker: A point of order takes precedence of other business, because if something has been done which is out of order I am bound to listen to it before I can go on. On the main point, I remember a similar incident happening when a previous Government were in office and when the then Speaker, my predecessor, deprecated the giving of notice to raise a matter on the Adjournment by the same side of the House as was under cross-examination. I would remind the House of that, and I agree with what my predecessor said. I hope we may now pass on, as notice has been given and I am bound by it.
    Mr. J. Griffiths: Further to the point of order. It is within the recollection of the House that the hon. Member for Worcestershire, South (Sir P. Agnew), who has just given the Adjournment notice, must have been aware of your desire and intention to call for supplementary questions hon. Members who had put Questions down on this subject. In view of the fact that the hon. Member must have heard you say that, was it not very discourteous of him to take the action he did?
    Sir P. Agnew: I had due regard to the interests of the House before I gave notice. If you, Mr. Speaker, should express a wish that I should withdraw the notice, I will do so; but I shall not do so unless you indicate it. I think it would be right that other hon. Members should have an opportunity of putting their Questions.
    Mr. Speaker: We have passed that stage now. I have no interest in the matter except to secure a fair division

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    of time among hon. Members who have other Questions on the Order Paper. If notice is given to raise a matter on the Adjournment, I am bound to proceed.
    Mr. Griffiths: The hon. Member having given notice to raise the matter on the Adjournment, what steps can be taken if he does not proceed to seek to raise it on the Adjournment?
    Mr. Speaker: That matter would require consideration. At the moment it is hypothetical.
    Mr. Edelman: Is it not an illegitimate procedure and an abuse of the tolerance of the House for an hon. Member to get up and say that although he is satisfied with the Minister's reply none the less he wishes to raise the matter on the Adjournment? Is not the whole tradition of the control of the debate that a Private Member who is dissatisfied with a Minister's reply then proceeds to give notice that he will raise the matter on the Adjournment, and is not the action that has now been taken most undesirable?
    Mr. Speaker: The hon. Member is quite right. That is the usual practice. Notice to raise a matter on the Adjournment usually arises because an hon. Member is dissatisfied with a reply, but it does not affect the validity of the notice whatever the reason an hon. Member gives.
    Mr. Nabarro: Is it not a fact that my hon. Friend the Member for Worcestershire, South (Sir P. Agnew) and myself are very concerned about this matter? May not the purpose of an Adjournment notice be to express approbation of Ministerial conduct as well as the alternative expression of dissatisfaction? My hon. Friend gave notice that he wished to raise the matter on the Adjournment but not to express dissatisfaction surely that is not a contravention of the rules of order.
    Mr. Speaker: I have ruled that the notice was effective. I merely said that it was the usual thing in this House for an hon. Member who was dissatisfied with an answer that had been given to give notice of that kind.
    Mr. Rankin: Further to the point of order. In view of the fact that I desire to express extreme disapproval of the
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    Minister's reply, I beg to give notice that I shall raise the matter on the Adjournment.
    Later—
    Miss Lee: On a point of order, Mr. Speaker. May I have an answer to Question No. 18?
    Mr. Speaker: I understood that that Question was answered with Question No. 3.
    Miss Lee: No, Mr. Speaker. It was quite a different Question and it was not answered.
    Mr. Lennox-Boyd: I expressly read out the hon. Lady's Question, which seemed to me to be part of the same story which certain hon. Members were anxious to develop. I answered it with Question No. 3 and regarded my long Answer as covering the Question by the hon. Lady.
    Mr. Speaker: That is what I understood. I thought I heard the right hon. Gentleman say that.
    Miss Lee: There were a great many Questions answered together, and no previous notice was given to us that they were to be answered together. This Question specifically asks for an inquiry into prison conditions and does not deal with actual cases.
    Mr. Lennox-Boyd: It is within my recollection, Mr. Speaker, that at a certain moment you said that you were ready to receive certain supplementary questions from hon. Members who had Questions on the Order Paper, and the hon. Lady then rose.
    Mr. Speaker: I think it was dealt with.
    Mr. Callaghan: Further to that point of order. [HON. MEMBERS: "Oh."] We have had some pretty ungentlemanly conduct this afternoon. If my hon. Friend the Member for Cannock (Miss Lee) asks for the Question to be answered again when it is reached, is there anything that would prevent it being answered again?
    Mr. Speaker: Yes, the fact that it has been answered already is a bar.
    Mr. Callaghan: I have always understood that the tradition was that it is by the consent of the House and of the hon. Members concerned that a group of Questions is answered together. If an

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    hon. Member insists on an Answer being repeated, there is nothing to stop that being done if the Minister is prepared to receive further supplementary questions, which would have been asked if it were not for the intervention of the hon. Member for Worcestershire, South (Sir P. Agnew).
    Mr. Speaker: The case might have been different if the hon. Lady had not asked a supplementary question—[HON. MEMBERS: "On Question 16."] Order. I specifically gave her an opportunity of supplementing her Question on the Order Paper. I have to accept, therefore, that her Question has been answered.
    Mr. Callaghan: May I point out that the hon. Lady has two Questions on the Order Paper, Questions Nos. 16 and 18? She asked her supplementary questions in relation to the conditions of prisoners in Wormwood Scrubs, to which the Colonial Secretary replied, but she has had no answer at all to Question No. 18.
    Mr. Speaker: I cannot help that now. The hon. Lady should have asked her question about it then.

    Deep-Water Port
    Mr. P. Williamsasked the Secretary of State for the Colonies if he will make a further statement on the progress being made in the provision of a deep-water port in Cyprus.
    Mr. Lennox-Boyd: The consulting engineers are working on the detailed plans and specifications for the extension of Famagusta Harbour. They have indicated that tenders could be invited by the end of August.
    Mr. Williams: Can my right hon. Friend give any indication of the expected cost of this development plan?
    Mr. Lennox-Boyd: It is a very expensive scheme; I think it is about £3¾ million.
    Mr. Callaghan: Further to that last answer and before money is spent on a project of this sort, can we have an assurance that the Government will take into account the recent visit of the Minister of Defence to this area to see whether money to this extent will be wasted by being spent there?
    Mr. Lennox-Boyd: All Ministers in this Administration act in harmony and in knowledge of each other's doings.

  UGANDA

    Price Assistance Funds (Grant)
    Mr. Stonehouseasked the Secretary of State for the Colonies what consultations the Uganda Government held with farmers' organisations before deciding to take £7,500,000 out of the Cotton and Coffee Price Assistance Funds as a grant to Government funds.
    Mr. Profumo: There has been no such decision. A proposal to convert to a grant an interest-free loan of £7½ million from the Price Assistance Funds sanctioned by the Legislative Council in March was debated by the Council on 6th June, but, by consent, the Motion was withdrawn.

    Co-operative Ginneries
    Mr. Stonehouseasked the Secretary of State for the Colonies how many cotton ginneries have been made available for co-operative unions in Uganda under the cotton reorganisation scheme; and how many more will be made available during the next five years.
    Mr. Lennox-Boyd: Nine, Sir. I hope that five more co-operative ginneries will be established in the next five years.
    Mr. Stonehouse: Would the Secretary of State give an undertaking that the transfer of these cotton ginneries will be made at a rate of compensation which will not prove an undue burden on the cooperative unions?
    Mr. Lennox-Boyd: The Governor, who recently came to England and is still here, as the hon. Member knows, is very conscious of the importance of securing that the co-operative unions are required to provide one-third of the capital cost of the ginneries, the balance of capital cost being lent by the Government at the rate of 5¾ per cent. to make up the balance.

  TANGANYIKA

    Assistant Ministers (Appointment)
    Mr. Stonehouseasked the Secretary of State for the Colonies on what basis it is proposed to appoint Assistant Ministers in Tanganyika in the interim development of the Ministerial system.
    Mr. Lennox-Boyd: I am circulating in the OFFICIAL REPORT the passage in

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    the Governor's speech to the Tanganyika Legislative Council on 30th April, in which he announced the proposed appointment of six Assistant Ministers. As I said during the course of the debate on 4th June, the people chosen for these posts are those who, in the Governor's view, are the individuals best fitted by experience and interest to address themselves to the aspects of government concerned.
    Following is extract from the Governor's speech:
    "At the same time, and again with the agreement of the Secretary of State and subject to the approval of this Council, I propose to appoint six Unofficial Assistant Ministers. These Assistant Ministers will be expected to relieve the Ministers of many of the executive and administrative responsibilities for the departments which will be allocated to them, the departments having been chosen because the activities affect a large section of the population. In any case it is important that Ministers, if they are to devote themselves to policy, should be free as far as may be possible from such executive and administrative work. The Assistant Ministers would, furthermore, speak for their departments in Legislative Council, and where matters affecting these departments came before Executive Council, would attend meetings of Executive Council and take part in discussions. Finally, Assistant Ministers will have the duty of travelling widely in the territory and of acquiring first-hand information, assessing public opinion and explaining Government's policies. They will also be available to serve as chairmen or members of committees, or to undertake enquiries.
    In the very near future I shall be inviting certain individuals to accept appointment as Assistant Ministers; the name of those who have agreed to accept, together with the subjects assigned to them, will then be announced. It is proposed to make these selections on a non-racial basis and no special significance should be attached to any racial balance which my emerge from those selected and prepared to serve as Assistant Ministers in this interim measure in the development of a Ministerial system."

  SEYCHELLES

    Constitution and Administration
    Mr. Swinglerasked the Secretary of State for the Colonies when was the last occasion on which an independent committee investigated the constitutional and administrative system of the Seychelles; what recommendations were made; and with what results.
    Mr. Profumo: I cannot trace any investigation of this kind. There was an examination of the financial position of
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    the Colony, carried out in 1933 by Mr. T. Reid, who was well known and respected in this House as Member for Swindon.
    Mr. Swingler: That was a long time ago. Does this not show that it is time some investigation of this kind were held? Is the Under-Secretary of State aware that I now have the support of The Times in favour of such an inquiry? In view of the serious scandals that have taken place in the Seychelles year after year and revealed in the Auditor's Report, as well as an accumulation of inefficiencies and irregularities, would he not now set up an investigation?
    Mr. Profumo: I find the hon. Gentleman's charges exaggerated. None the less, a Commissioner is being appointed to examine the financial and fiscal policy, and the investigation will necessarily include aspects of the administrative system.

    Loans and Grants
    Mr. Swinglerasked the Secretary of State for the Colonies what loans and grants have been made by the United Kingdom to the Seychelles in each of the last five years; and for what purposes.
    Mr. Profumo: Since 1952, £130,031 has been granted to Seychelles under C.D. & W. schemes mainly for health, housing, agriculture, communications and education. For details, I would refer the hon. Member to the Return of Schemes made under the C.D. & W. Acts published each year as a House of Commons Paper.
    Mr. Swingler: While welcoming the announcement that a Commissioner is to be appointed to investigate the administration of the Seychelles, even though it was announced in a rather haphazard way, may I ask whether we are to understand that it will be part of this Commissioner's function to investigate how this money has been spent and to ensure that in future it is spent through the proper channels and is properly accounted for?
    Mr. Profumo: We had better await the result of the Commission, which will cover all the sort of things that the hon. Member has in mind.

    Judicial Appointments
    Mr. E. Fletcherasked the Secretary of State for the Colonies if he will now state what changes will be made in the judicial appointments in the Seychelles.
    Mr. Lennox-Boyd: Apart from filling the vacancy in the office of Chief Justice, no changes are contemplated.
    Mr. Fletcher: Can the right hon. Gentleman say who the new Chief Justice will be?
    Mr. Lennox-Boyd: No, Sir. I am not as yet prepared to say. Consideration is being given to a number of names, and, obviously, a wise appointment will be be made.

  KENYA

    Constitution
    Mr. Brockwayasked the Secretary of State for the Colonies what official discussions between the four races who are represented on the Legislative Council of Kenya have taken place on the possibility of constitutional changes before 1960.
    Mr. J. Johnsonasked the Secretary of State for the Colonies if he will make a statement upon the further progress in constitutional advance in Kenya following the recent meeting of the European elected members of the Legislative Council led by Sir Charles Vincent and the African Elected Members under Mr. Tom Mboya.
    Mr. Lennox-Boyd: I have nothing to add to the repy made by my hon. Friend to the hon. Member for St. Pancras, North (Mr. K. Robinson) on 5th June.
    Mr. Brockway: In view of the fact that the Asian Group in the Legislative Council has supported the African Group in asking for further representation, is it not possible in order to ease the situation in Kenya to bring some pressure to bear upon the European Group to meet with them and come to an agreement?
    Mr. Lennox-Boyd: The meeting was actually started through the initiative of the Europeans. I think practical results
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    are more likely to be ensured by the less we talk about it at this stage in this House.
    Mr. Johnson: Does not the right hon. Gentleman think he has been much too negative in this matter? Would he consider sending out a constitutional adviser to the Colony to help those unofficial talks which are going on between the Europeans and Africans?
    Mr. Lennox-Boyd: No, Sir, I think it is a very positive contribution to enable all the races in Kenya to face the big responsibilities which lie ahead of all of them.

    Public Meetings (Tape Recordings)
    Mr. J. Johnsonasked the Secretary of State for the Colonies whether the tape recordings made by Kenya Government officials of the speeches of African members of the Legislative Council at their public meetings will be used in evidence against these speakers: and whether copies of these records are deposited with them.
    Mr. Lennox-Boyd: The production of these recordings as evidence in any case brought by the Crown for an alleged contravention of the law would be a matter for the Attorney-General of Kenya. I am consulting the Governor on the second part of the Question and will write to the hon. Member when I have his reply.
    Mr. Johnson: But would not the right hon. Gentleman agree that the absolute accuracy of tape recording can always be questioned, because it can be so easily tampered with? Does he not think, then, that it is at least against all our canons of justice, and those of the United States and the Continent, to use this sort of evidence now or in the future?
    Mr. Lennox-Boyd: I am sure that the hon. Gentleman is not suggesting that the police or any other responsible authority would do that in Kenya—[Hors. MEMBERS: "Oh."] Well, in view of the glowing tributes paid by hon. Members opposite to the Government of Kenya after a recent visit, those jeers sound a little unreal, but I must point out that the value of any such evidence would, of course, be a matter for the court to determine.

  BAHAMAS

    Domestic and Agricultural Workers (Union Representation)
    Mr. Allaunasked the Secretary of State for the Colonies if he is aware that domestic and agricultural workers, comprising the majority of Bahamas wage-earners, are still prevented from joining trade unions by the Trade Union Act, 1943; and what steps he proposes to take to end this ban.
    Mr. Profumo: A Select Committee of the Bahamas House of Assembly is at present considering legislation designed to remove restrictions imposed on these workers by the Trade Unions Act of 1943.
    Mr. Allaun: Does the Minister remember that eight months ago he told me that the Bahamas Government intended to introduce legislation to end this ban? How much longer is it to continue?
    Mr. Profumo: That legislation has since been introduced and is now before a Select Committee of the House of Assembly, which is expected to report in the very near future.
    Mr. D. Jones: Is it not the case that recently two civil servants were sent to the Bahamas from the Colonial Office, that they made a report and that report was submitted by the right hon. Gentleman to the Governor and came before the Legislative Council, which rejected it with contempt?
    Mr. Profumo: No, Sir, the recommendations that were made for changes are those which the Government now have in mind.

  NIGERIA

    Union des Populations du Cameroun
    Mr. Brockwayasked the Secretary of State for the Colonies on what evidence of intention to resort to violence the Union des Populations du Cameroun has been declared by the Governor-General in Council of Nigeria to be art unlawful society; and on what charges 13 leaders have been arrested and ordered to leave the country.
    Mr. Lennox-Boyd: In declaring the Union des Populations du Cameroun an unlawful society and detaining some of its alien leaders with a view to deportation, the Acting Governor-General acted on the advice of the Nigerian Council of Ministers and with the full support of the Executive Council of the Southern Cameroons.
    This action was in accordance with the Criminal Code and the Aliens Deportation Ordinance, and was taken after careful examination of evidence leading to the conclusion that the U.P.C. had become a serious threat to law and order in the Southern Cameroons. The Governor-General is not bound to give the evidence on which he reached his decision, and I am satisfied that it would not be in the public interest to do so.
    Mr. Brockway: Is the right hon. Gentleman aware that many of us take a very serious view when deportations take place from Colonial Territories? Is it the case that these men and women are being deported, not because of any unlawful act, but because, to quote the words of the Extraordinary Gazette,
    "there now exists a grave possibility that, in order to achieve its political objectives, the party may have to resort to violence."
    Are we really deporting men for intentions rather than for acts?
    Mr. Lennox-Boyd: The hon. Member works himself up into a state which would give the impression that these people are British subjects. They are aliens who have abused the hospitality of British-protected territory. I have no intention whatever of asking the Government, who have a large measure of local autonomy in the Southern Cameroons—even more as a result of the agreement I have recently made with them—to reconsider the decision they have reached.

  TRINIDAD AND BRITISH GUIANA

    Mr. Alan Bush (Entry Permit)
    Mr. Zilliacusasked the Secretary of State for the Colonies on what grounds Mr. Alan Bush was refused permission by the Government of British Guiana to go ashore in order to record folk songs of the territory.
    Mr. Bairdasked the Secretary of State for the Colonies why Her Majesty's Governors in Trinidad and British Guiana refused permission for Mr. Alan Bush to land in their territories.
    Mr. Profumo: Mr. Bush was deemed to be an undesirable visitor in both territories under the respective Immigration Ordinance. The Governments concerned are not required to give reasons for this action.
    Mr. Zilliacus: Is it not a fact that there is no right of appeal under the existing immigration restriction order against procedure of this sort? Will not the Government take steps to provide that there should be some right of appeal against arbitrary acts of this kind, which have an awful smell of something like the phone tapping scandal to which we have just listened?
    Mr. Profumo: No, Sir. I do not think it has got any smell about it at all, and I am not prepared to take any further action.
    Mr. Baird: There is a lot of smell about it. This distinguished musician has been found guilty without a trial. Is there no way in which this gentleman can be informed on what ground he has been refused entry into British Guiana? We all know the view of the right hon. Gentleman about Fascism, but in British Guiana the constitution was destroyed, and now that there is to be an election the constituencies have been gerrymandered, and now British subjects have been refused entry.
    Mr. Profumo: Those must be matters for local people to decide.

    Imperial College of Tropical Agriculture
    Mr. Royleasked the Secretary of State for the Colonies what decisions have been reached as a result of the discussion between the governing bodies of the Imperial College of Tropical Agriculture, Trinidad, and the University College of the West Indies on the proposal to grant university status to the Imperial College of Tropical Agriculture.
    Mr. Profumo: I understand that recent discussions between the governing bodies of the Imperial College of Tropical Agriculture, Trinidad, and the University
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    College of the West Indies were concerned with the question of providing a first degree in agriculture in the Caribbean by developing a special relationship between the two colleges. No final conclusion as a result of these discussions has yet been reached.
    Mr. Royle: In view of the regard in which this College is held, not only in the West Indies but throughout the Commonwealth, will the Minister do everything he can to aid this aim?

    Housing
    Sir R. Robinsonasked the Secretary of State for the Colonies what progress has been made in housing in British Guiana during the last three years; and what proportion of these loans has been financed through the British Guiana Credit Corporation.
    Mr. Profumo: Since 1954, over 7,000 houses have been built under Government and private schemes. A further 1,800 are in varying stages of construction. Credit Corporation loans amounted to £1·3 million, representing about two-thirds of the total borrowing during this period.

  NYASALAND

    School Documents (Declaration of Human Rights)
    Mr. Pargiterasked the Secretary of State for the Colonies why permission was refused by the Nyasaland Legislative Council for the United Nations' Universal Declaration of Human Rights to be made available for use in African schools.
    Mr. Profumo: I assume the hon. Member is referring to a reply given in the Nyasaland Legislative Council on 7th February to a request that the Government take immediate steps to see that the schools were provided with the Declaration and other United Nations documents as part of their reading materials. The Government spokesman said that the terminology of such documents was such that they were not generally suitable for, nor readily understandable by, schoolchildren.
    Mr. Pargiter: Could not something be provided in a simpler form, perhaps with a preface that whilst all men are born

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    equal in the sight of God, some are more equal than others? Might not something to that effect be suitable?
    Mr. Profumo: I think that is a slightly different question. I was answering the Question on the Order Paper, but I will look into what the hon. Member has suggested.

    Wages and Conditions
    Mr. Pargiterasked the Secretary of State for the Colonies what are the statutory minimum wages for industrial, agricultural and other classes of labour in Nyasaland; and in which classes rations and housing are included.
    Mr. Profumo: As the information requested by the hon. Member is somewhat lengthy, I am arranging for it to he circulated in the OFFICIAL REPORT.
    Mr. Pargiter: I am grateful to know that I shall be able to get this information. Is the hon. Member aware that there is considerable dissatisfaction at the extremely low wages paid in Nyasaland, which are lower than in many other parts of Africa? Having regard to the fact that qualifications for voting and matters of that kind are involved, does the hon. Gentleman realise how impossible it would be for any of these people ever to achieve any political equity at all? Can something be done to raise the very low standard?
    Mr. Profumo: I think that perhaps when the hon. Member reads my reply he will not feel quite as worried about it. I would add that in practice the minimum wages are often exceeded.
    Following is the information:
    The statutory minimum wage for agricultural labour, and for industrial and other classes of labour (except in the tailoring industry in the Central Province) employed in industrial areas outside the main towns is 1s. per day and this will be increased to Is. 3d, from 1st July.
    2. In the tailoring industry in the Central Province, the rates are:—

    Apprentice tailors 1s. 7d. per working day.

    3rd class tailors 2s. per working day.

    2nd class tailors (and above that grade), 2s. 5d. per working day.

    3. The minimum wage for industry and other classes of labour in the main townships is 1s. 4d. per day, which is to be increased from 1st July, 1957, to 2s. per day for the Blantyre/Limbe area and to 1s. 9d. per day for the Zomba/Lilongwe townships.
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    4. All the above figures are inclusive of the value of proper and sufficient food, if supplied by the employer, and the amount allowed to be deducted for this is limited by law.
    5. Generally, for all classes of African labour, employers are required to provide, at their own expense, housing accommodation for any employee who is unable to return to his home on completion of the day's work.
    6. The minimum wages are often exceeded in practice and in most industrial employments a free mid-day meal without a deduction from pay is given by employers as an inducement.

  NIGERIA

    Shell-B.P. Petroleum Development Company
    Mr. Sydney Irvingasked the Secretary of State for the Colonies what conditions have been imposed in the licences granted to the Shell-B.P. Petroleum Development Company of Nigeria Limited, by the Government of Nigeria with regard to employment and conditions of foreign and African labour, and the safeguarding of trade union rights; and to whom compensation will be paid for the use of the land and natural resources.
    Mr. Profumo: Conditions of employment and trade union rights are regulated by the laws of Nigeria. The only condition of this kind in the licences is that the Company must comply with any instructions given by the Chief Inspector of Mines for securing the health and safety of workers. Compensation will be paid to the occupiers and owners of the land.
    Mr. Sydney Irvingasked the Secretary of State for the Colonies what concessions have been given to Shell-B.P. by the Government of Nigeria; and what are the conditions of the contract awarded to Taylor Woodrow (Nigeria) Limited, for laying and welding a 10-inch pipe-line from Olibiri to Port Harcourt with regard to labour to be employed and the training of Africans in skilled work connected with such concessions and contracts and royalties to be paid.
    Mr. Profumo: Twenty prospecting licences and one exploration licence have been given. The royalty on crude oil is 4s. per ton. on oil produced during the prospecting stage and will be increased to 12½ per cent. ad valorem when commercial production commences. There is

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    no training requirement in the Shell-B.P. licences but the Company have their own trade school in Nigeria and also give scholarships for technical training in the United Kingdom and Nigeria to suitable Africans. Minimum wage and fair conditions of employment clauses are included in the pipe-line contract. Africans are being trained as tractor drivers and welders.
    Mr. Irving: The House will be gratified that progress is being made in the development of oil in Nigeria, but does not the hon. Gentleman agree that it is important that when concessions of this kind are given they should fully accord with the new status of this nation, now approaching independence, and will be not publish the details in the Library so that we can see that they accord with this status?
    Mr. Profumo: Yes, Sir. I will look into that.
    Mr. J. Johnson: Can the hon. Member say whether oil has been found in sufficiently large commercial quantities to justify the high hopes, because this will make an enormous difference to the future of Eastern Nigeria, in particular?
    Mr. Profumo: I agree that it will make a great deal of difference to the future, but I should not like to answer that detailed point without the notice which it deserves.

    Coal Exports
    Mr. Sydney Irvingasked the Secretary of State for the Colonies what is the amount of coal which is being exported from Nigeria; what amounts are used in the Territory; and for what purpose.
    Mr. Profumo: A total of 70,560 tons of coal were exported during the year ending 31st March, 1957. 719,470 tons were consumed in Nigeria, 400,000 tons by the railway and the remainder by the Electricity Corporation and smaller users.

    Hydro-Electric Schemes
    Mr. E. L. Mallalieuasked the Secretary of State for the Colonies what are the results of the investigation of the hydro-electrical potential of the Niger River and of the Cameroon Mountains undertaken by the Nigerian Government.
    Mr. Profumo: I have asked the Acting Governor-General of the Federation of Nigeria for this information and will write later to the hon. and learned Member.
    Mr. Mallalieu: Since it is nearly a year from the time of the publication by Her Majesty's Stationery Office of the pamphlet "Economic Development within the Commonwealth," in which it was stated that these matters were then being pursued actively, can the hon. Member assure us that the very utmost despatch will be used in seeing that this is done, because the need for power in Nigeria is apparent?
    Mr. Profumo: I fully accept what the hon. and learned Member says. At the same time, I ought to make it plain that these are immensely complicated matters which of necessity must take a great deal of time to do properly.

  NORTHERN RHODESIA

    African National Congress
    Mr. J. Johnsonasked the Secretary of State for the Colonies if he will now publish the findings of the Commission under Mr. Justice Wyndham that sat upon the detention and banishment of African National Congress and trade union leaders from the Copperbelt of Northern Rhodesia.
    Mr. Lennox-Boyd: No, Sir. The reports are made to the Governor, and will not be published. As my hon. Friend, the Parliamentary Under-Secretary of State, told the hon. Member on 22nd May, I will let the hon. Member know if the Governor decides to make any substantive restriction orders.
    Mr. Johnson: While accepting the fact that these men are exiled for the time being and until the end of the year, may I ask whether the right hon. Gentleman will give the House an assurance that they will be allowed to go back to the Copper-belt, to their homes, their wives and their jobs at the end of the year, when the Bill which has been passed by the Legislative Council expires?
    Mr. Lennox-Boyd: I am not prepared to give any assurance. I am only answering this Question. From my own knowledge of the situation—and I was there

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    fairly recently with the Governor—I am certain that these cases are kept under constant review, and I do not think the hon. Member need fear that justice will not be done in all cases.
    Mr. Johnson: Will the right hon. Gentleman give me an assurance that if I put a Question down on this matter he will answer it?
    Mr. Lennox-Boyd: I will give an answer.

  DOMINICA

    Doctors
    Mr. D. Jonesasked the Secretary of State for the Colonies whether he is aware that the ratio of persons per doctor is considerably higher in the Island of Dominica than any other part of the Colonial Territories; whether he is aware that modes of communication in this island are very bad, adding to the difficulties of doctors seeking to get from one part of the island to another; and what steps he is taking to increase the number of doctors on this island.
    Mr. Profumo: The number of doctors in Dominica in relation to population compares favourably with the position in the Colonial Territories generally. I know of the difficulties of communications; a very large road building programme is under way as part of the current development plan. Any question of an increase in the number of Government doctors is for consideration, in the first instance, by the Government of Dominica in the light of other competing demands and of the resources available.
    Mr. Jones: The hon. Gentleman will be aware that in a communication which he sent me on 2nd May he revealed that there are three times as many persons per doctor in this island as there are in the United Kingdom; that there are twice as many per doctor in this island as there are in Jamaica; twice as many as in Trinidad, twice as many as in British Guiana, and that, in fact, the mode of transport in this island is worse than in any other island in the West Indies. Is he now saying that he proposes to do nothing at all, except to leave it to the local Government to provide additional doctors?
    Mr. Profumo: I said no more than I told the hon. Gentleman in my Answer, but I would add that, bearing in mind the fact that Dominica is poor, the comparison is not bad, and that in Dominica all doctors are provided by the Government. There are no private practitioners.

  GAMBIA

    Housing
    Sir R. Robinsonasked the Secretary of State for the Colonies what action has been taken on the report by the housing adviser which recommended a model estate on reclaimed land in Bathurst; and when it is hoped that construction will begin.
    Mr. Profumo: The report which my hon. Friend has in mind did not contain final proposals so much as suggestions to be considered further after a more comprehensive survey had been made of local conditions and needs. This is now proceeding.
    Sir R. Robinsonasked the Secretary of State for the Colonies what steps are being taken to improve housing conditions in Gambia.
    Mr. Profumo: While housing conditions in the Gambia do not compare unfavourably with those in many parts of the tropics, there is much room for improvement, particularly in sanitation. The Gambia Government has begun laying out some of the recently reclaimed land at Bathurst. New building regulations are being prepared. Increasing use is being made of cement products and steel which will reduce the considerable damage caused by termites, and water supplies are being improved in Bathurst and the Protectorate.

  HOME DEPARTMENT

    Air-Raid Shelters, Newcastle-under-Lyme
    Mr. Swinglerasked the Secretary of State for the Home Department what representations about the demolition of air-raid shelters he has received from Newcastle-under-Lyme Rural District Council; what inquiries he has made at a result; and what action he proposes to take.
    The Secretary of State for the Home Department and Lord Privy Seal (Mr. R. A. Butler): This Council has asked for the removal of two air-raid shelters at Bignall End which are on land on which building development is proceeding. There was no need for inquiries to supplement the information supplied by the Council and I have authorised the demolition of the shelters.
    Mr. Royle: Will the Home Secretary look at this matter in the more general sense? Is it not time that all these menaces to good health were pulled down, and will he not now give authority to local authorities to remove them?
    Mr. Butler: Well, I have previously answered Questions about other shelters. We do take into consideration the question of health as well as that of potential safety, but I must judge each case on its merits.

  ROAD AUTHORITY
  Mr. E. Johnsonasked the Prime Minister if he will introduce legislation to set up a Road Authority with power to raise loans for road construction.
  Mr. R. A. Butler: I have been asked to reply. No, Sir. My right hon. Friend thinks that the present arrangement under which the road programme is in charge of Ministers responsible to Parliament is more satisfactory.
  Mr. Johnson: Is my right hon. Friend aware that a road authority has been used with phenomenal success in Belgium? Will he at least study it and see what has been done there?
  Mr. Butler: I am sure that my right hon. Friends the Prime Minister and the Minister of Transport will study any example, especially one put forward by my hon. Friend, but the Answer that I have given represents the view of my right hon. Friend the Prime Minister.

  CYPRUS (ARCHBISHOP MAKARIOS)
  Mr. Emrys Hughesasked the Prime Minister if, in view of the danger of renewed violence in Cyprus, he will propose to Archbishop Makarios that he
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  and the Archbishop should issue a joint declaration denouncing the use of violence for political ends.
  Mr. R. A. Butler: I have been asked to reply. All British Governments and, indeed, the whole British people would happily join in any declaration denouncing the use of violence in Cyprus or anywhere else for political ends. My right hon. Friend would be only too glad if the Archbishop associated himself with those views.
  Mr. Hughes: Does that Answer mean that the British Government no longer believe in using violence?
  Mr. Butler: The British Government are not using violence. They are maintaining certain precautions, but they have made many relaxations.

  NUCLEAR WEAPONS AND TESTS
  Mr. Grimondasked the Prime Minister if he will place in the Library of the House of Commons details of the latest medical and scientific conclusions as to the dangers from various types of atomic and nuclear weapons and industrial developments.
  Mr. Edelmanasked the Prime Minister whether he will publish the latest report of the Medical Research Council on hydrogen bomb tests.
  Mr. R. A. Butler: I have been asked to reply. It would not be in the public interest to give details of the performance of the various types of nuclear weapons, but so far as danger from test explosions is concerned, the degree of danger from fall-out varies not so much according to the nature of the weapon as according to the manner of its detonation. The degree of danger is negligible when high air bursts are used, as they were in the recent British tests.
  So far as the industrial use of atomic energy is concerned, the safety precautions taken ensure that there is less risk either to the general public or to the staff on the premises, than from many other kinds of industrial activity.
  The latest report of the Medical Research Council was published in June, 1956. Figures for the measurement of fall-out are released periodically by the Atomic Energy Authority, and the two

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  latest documents have been placed in the Library. It is wrong to suggest that there is a further report which my right hon. Friend has declined to publish.
  Mr. Grimond: I thank the right hon. Gentleman for that reply that he will consider placing reports in the Library, but does he not agree that there is considerable doubt and anxiety in the public mind over the whole question of the danger from nuclear weapons and industrial processes? Could he not consider, without giving away State secrets, issuing a simple statement of what the dangers are, and how they vary between one weapon and another and one process and another?
  Mr. Butler: In so far as the matter can be simplified it has been done by my right hon. Friend the Prime Minister, notably in his major speech on the subject, but, of course, anything we can do to bring this home to people in simple language we shall attempt to do.
  Mr. Gresham Cooke: Is my right hon. Friend aware that experiments are now going on in America into the use of using beta and gamma rays for the preservation of food, and that the American Army is setting up a plant, using the radiation from by-products of nuclear fission for food preservation? In the light of that, does he not think that really too much play is being made of some of the dangers of radiation in other respects?
  Mr. Butler: I should need to examine the evidence submitted by my hon. Friend before I gave a final answer.

  BURDEN ON MINISTERS (PRIVY COUNCILLORS' INQUIRY)
  Mr. Emrys Hughesasked the Prime Minister if he will consider asking the Committee of Privy Councillors studying the question of the burden on Cabinet Ministers to report as to how far these burdens might be relieved by extending the committee system which will enable more honourable Members to take their share in the work of Government.
  Mr. R. A. Butler: I have been asked to reply.
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  No doubt the Committee of Privy Councillors will take note of this suggestion, although my right hon. Friend is not quite clear exactly what the hon. Gentleman has in mind.
  Mr. Hughes: Is the Leader of the House aware that what I had in mind was that if the Committee system were extended, many hon. Members on both sides of the House with great experience of all kinds of industrial and social problems would have an opportunity of giving greater service to the House, and relieving the Ministers?
  Mr. Butler: What I was not quite sure about was whether the hon. Member had in mind the idea of Congressional Committees as in the United States. If so, I am not at all clear that it would lessen the burden on Ministers. Judging by the experience of the United States legislature, it would increase the burden on Ministers.
  Mr. Emrys Hughesasked the Prime Minister what steps he intends to take to lighten the burden which now falls on the holder of the office of Secretary of State for Foreign Affairs.
  Mr, R. A. Butler: I have been asked to reply.
  This is also a matter which will no doubt be considered in general by the Committee of Privy Councillors.
  Mr. Hughes: Is the Leader of the House aware that the Foreign Secretary is showing obvious signs of overstrain, and that the right hon. Gentlemon would be doing a good service to the Minister and to the country if he relieved his right hon. and learned Friend of these onerous burdens, including those of broadcasting in "Women's Hour"? Is he aware that responsible American papers recently said that the odds are three to two that the Foreign Secretary will be removed of his office by the autumn, and are these odds the real odds?
  Mr. Butler: Her Majesty's Government have the utmost confidence in the ability and freshness of my right hon. and learned Friend the Foreign Secretary, and if he is to be relieved of certain anxieties, perhaps the hon. Gentleman will put down fewer Questions of this sort on the Order Paper.

TELEPHONE COMMUNICATIONS (INTERCEPTION)
The following Questions stood upon the Order Paper:
Viscount HINCHINGBROOKE: To ask the Secretary of State for the Home Department (1) whether he will list the alleged offences for which permission is given to tap telephone calls;
(2) how many times in the last 12 months permission has been given to the police to tap telephones; and what was the average annual incidence in the interwar years; and
(3) what steps he takes to ensure that no police tapping of telephone calls takes place without his express permission; and whether such permission is given in categories or only in individual cases.
Mr. LEWIS: To ask the Secretary of State for the Home Department if he will give the dates since 1945 when the telephone at the National Trade Union Club, 12, Great Newport Street, was tapped, and details of other trade union organisations which have had their telephones tapped since 1945.
Mr. COLLINS: To ask the Secretary of State for the Home Department the number of occasions, since 1st January, 1956, when the police have been authorised to tap telephones, and, of these, the number of such authorisations which were made, respectively, on grounds of security and to assist in the detection or prevention of crime.
Mr. GRIMOND: To ask the Secretary of State for the Home Department at whose request or suggestion the results of the tapping of Mr. Marrinan's conversations were handed over to the Bar Council.
Mr. E. FLETCHER: To ask the Secretary of State for the Home Department if he will advise an exercise of powers under Section 4 of the Judicial Committee Act, 1833, for hearing and advice by the Judicial Committee of the Privy Council on the extent of the prerogative rights of the Crown to intercept telephone conversations between private persons and to convey a record of them to third parties.
Mr. LEE: To ask the Secretary of State for the Home Department on what occasions telephone conversations involving trade union officials have been tapped by State security organisations.
Mr. LANGFORD-HOLT: To ask the Secretary of State for the Home Department, (1) on how many occasions in each calendar year since 1945 his authority has been sought for the tapping of telephone lines, firstly, in cases involving national security, and secondly, in cases involving serious crime;
(2) what categories of crime are covered by the definition of serious crime in cases where his authority may be sought for the tapping of telephone lines.
Mr. LIPTON: To ask the Secretary of State for the Home Department for what offences other than treason or espionage permission is granted to tap telephones.
The Secretary of State for the Home Department and Lord Privy Seal (Mr. R. A. Butler): As the Questions on the Order Paper dealing with telephone intercepts have not been reached, I will, with your permission, and, perhaps, for the convenience of the House, answer these Questions now in the form of this general statement.
First, as regards the manner in which the power of interception is exercised. Interception is carried out not by the police but by the Post Office, acting on the authority of a warrant of a Secretary of State addressed to the Postmaster-General. The police and the Post Office are well aware that this authority is required; and I am informed that if a Post Office servant intercepts a telephone line and discloses the information obtained contrary to his duty he commits an offence.
The Secretary of State considers each application to intercept a telephone line individually; permission is not given in relation to categories of offence or in relation to all offences of a given description. Each application is considered in relation to the circumstances of the particular case. No list of categories or offences can, therefore, be given.
The answer to a further series of Questions is that, as I informed the House on 25th June, I should not be justified in the public interest in disclosing either the number of interceptions authorised or

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whether a warrant has been issued in any particular case or in relation to any particular class of persons.
I have also been asked at whose request or suggestion the results of intercepting were handed over to the Bar Council in a particular case. The answer is as follows:
On 26th October, 1956, the Attorney-General, as Head of the Bar, referred to the Bar Council a complaint of alleged unprofessional conduct by Mr. Marrinan, in a matter about which evidence had been given in a trial at the Central Criminal Court. The Secretary of the Council asked the police whether any further information was available about Mr. Marrinan's conduct. The only further information in the possession of the police was information obtained in June and July, 1956, as the result of an interception of the telephone line not of the barrister but of a Mr. Hill.
The Secretary of State authorised disclosure of this information to the Chairman of the Bar Council, the right hon. and learned Member for St. Helens (Sir H. Shawcross), who subsequently asked that he might have a copy of it and for permission to disclose its existence to the Bar Council, to the Benchers of Mr. Marrinan's Inn, and to Mr. Marrinan, so that, if necessary, it might be used in connection with any investigation into the conduct of Mr. Marrinan. This permission was given.
As regards the suggestion that this matter should be referred to the Judicial Committee of the Privy Council, my present view is that this procedure is neither necessary or appropriate.
Finally, the House would like to know that my right hon. Friend the Prime Minister and I are meeting the Leader of the Opposition and the Leader of the Liberal Party this evening to discuss how certain aspects of this matter could best be handled in future.
Mr. Gaitskell: On the last sentence of the right hon. Gentleman's statement, I should like, to avoid any possible misunderstanding, to make it clear that, while I am very glad to meet the Prime Minister and the right hon. Gentleman to discuss this question, there can be no question, as far as we are concerned, of ignoring either the past or the present
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situation, nor could there be any question of our regarding such a meeting as a substitute for a debate in this House.
May I ask the right hon. Gentleman, as I asked him just before the Whitsun Recess, whether there is any precedent for disclosure of information obtained in this way to any outside body, and, if there is no such precedent, why did the then Home Secretary make this disclosure?
Mr. Butler: I quite understand the reservations made by the right hon. Gentleman about the meeting this evening. No terms and conditions have been laid down for the meeting, and, no doubt, we may have reservations of our own on our side. But I hope that the meeting will be successful in making some progress with this matter and seeing how this sort of question could best be handled in the future. That is all we can hope, and that the meeting will be successful.
On the question of precedent, it is not easy to discover a case similar to this, so far as my researches have gone up to date. As I said, we do not intend that this shall be a precedent.
As regards the reference to my predecessor, I should simply like to say that, from studying the papers, I am quite satisfied that he acted with the highest motives in handing this information over, because he felt that he was doing something which might help to retain the highest standards of the Bar. I am satisfied as to his motives in so doing.
Mr. Gaitskell: There is, of course, no question of impugning the motives of the noble Lord who then held the office of Home Secretary, but there is very grave doubt as to the appropriateness of his action. Will the right hon. Gentleman make it plain that on no future occasion will any information obtained in this way be disclosed to the Bar Council?
Mr. Butler: I think we might even take the matter further than that. I certainly do not propose that this matter should be treated as a precedent, and I hope that, partly out of our meeting this evening and out of further developments, we may be able to form some procedure which gives satisfaction to the House in this matter. I think that that would be more satisfactory to all concerned.
Mr. Grimond: If, as I understand, the then Home Secretary actually volunteered the information that this tapping had taken place, does the present Home Secretary hold that that could possibly have been covered by the prerogative in any form?
Mr. Butler: The prerogative covers only the question of the Secretary of State of the day authorising interceptions, and the rest is a matter of judgment on the part of the Secretary of State of the day in regard to the action he took. He responded, in fact, to a request from the secretary of the Bar Council to the police, asking whether any further information was available about Mr. Marrinan's conduct. When it was discovered that this further information was available, he decided, in his discretion, to make it available, for the reasons I have given.
Viscount Hinchingbrooke: On the general issue, is my right hon. Friend aware that so much public anxiety has been aroused that it is unlikely to be resolved by a debate, because my right hon. Friend will feel himself just as restricted in that debate as he has been in his considered answers to Questions which have been put down. In those circumstances, would it be possible to consider, with the right hon. Gentleman the Leader of the Opposition, the appointment of a Select Committee of this House to take evidence and report, with discretion, to the House and the country?
Mr. Butler: I myself feel that something rather more than a debate may be necessary, although, of course, I do not exclude a debate in our ordinary constitutional procedure. It is precisely that sort of matter which I should like to discuss with right hon. Gentlemen and my right hon. Friend this evening, when we have an opportunity. We will take into account what my noble Friend suggests. I am not quite certain that the solution would be exactly on those lines, but I think that it may be necessary to reassure the House in some way on the sort of lines he suggests.
Mr. H. Morrison: The Home Secretary, I thought, suggested earlier that this information was given at the request of the chairman of the Bar Council specifically—[HON. MEMBERS: "The secretary."]—or the secretary; I thought it
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was then the chairman. In view of his later statement, may I ask the Home Secretary now whether it is the case that the Bar Council asked the police whether they had any further information on the case, which may have been quite legitimate, but that then the then Home Secretary voluntarily offered the record which was the result of the interceptions? In those circumstances, would not the Home Secretary agree that the major responsibility for this exceptional action was not on the Bar Council, but on the then Secretary of State?
Mr. Butler: It is a little difficult exactly to apportion responsibility. The right hon. Gentleman is correct in saying that the original request as to whether there was any information came from the secretary of the Bar Council to the police. The further, subsequent, development was that the Secretary of State, as I said in my statement today, authorised the disclosure of this information to the chairman of the Bar Council. I think that hon. Members must, therefore, make up their own minds where they think responsibility lies.
Mr. Gaitskell: Is it not the case that the Home Secretary authorised the disclosure of this information in the first place to the secretary of the Bar Council and that only subsequently did the chairman of the Bar Council ask for a copy of the transcript?
Mr. Butler: Exactly what happened was this. The information was, as I have ascertained from the papers, made available to the secretary of the Bar Council. It so happened that the chairman was away at the time and the information was made available to the secretary. When the chairman returned, he gained this information and subsequently contact was made between the chairman of the Bar Council and the Secretary of State of the day. The right hon. Gentleman is correct in saying that, in the first place, the information was given to the secretary.
Mr. Doughty: As members of the Bar have to take part in the public administration of public law, is it not vital that their conduct, if criticised, should be inquired into from every angle and that all information, from whatever source, should be available to that inquiry?

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My right hon. Friend referred to the tapping of the telephone conversations of a Mr. Hill. Is that the same gentleman who, I have read in the papers, describes himself as the "King of the underworld?"
Mr. Butler: The answer to the latter part of my hon. and learned Friend's supplementary question is, "Yes, Sir." He does describe himself by that title, which, I think, he seems to have deserved.
The answer to the first question is that I would rather make no further observations, because, as everybody knows, this case is being considered by the Benchers today, tomorrow and the next day.
Mr. Fletcher: In view of the very wide anxiety that this case has aroused, and the grave doubts concerning the extent of the prerogative claimed by the Home Secretary, will the Government not reconsider the desirability, to ally public anxiety, of referring this whole question to the Judicial Committee of the Privy Council, so that there may be an authoritative pronouncement not only on the extent of the prerogative to tap telephone conversations, but on whether such prerogative exists and covers in any circumstances the conveying of such information to outside bodies?
Mr. Butler: I am satisfied that my predecessors have exercised this power from the very earliest time, not only in respect of letters but also telegrams and, after the Edison case, in relation to telephones—that is, for many years. I am satisfied that they have been right in doing so. I would rather not give a final opinion on the legal position in question and answer, because it is extremely complicated. Therefore, I would rather reserve that for another occasion when a decision can be taken with the advice of our own Law Officers.
Mr. Langford-Holt: Is my right hon. Friend aware that everyone appreciates that he has a very difficult job in holding the balance between the freedom of the individual and the security of the State? If, however, this House is to maintain its control over such matters, will my right hon. Friend consider the possibility of some form of return to this House, directly or indirectly, as to how this power has been used previously?
Mr. Butler: If we did that, we should have to do it with some regard to the question of security and the obvious question of secrecy, but I will certainly bear in mind what my hon. Friend suggests.
Mr. Shinwell: In view of allegations that have been made that the telephone communications of hon. Members have been tapped, can the Home Secretary give an assurance that that is not so and that hon. Members will be protected against infiltrations of this kind?
Mr. Butler: I am not prepared to depart from the general line taken by myself and, I notice, also by Sir William Harcourt and some of my more distinguished predecessors, by naming any category of persons who may be covered by this power. That does not mean that by taking a line of that sort I am implying that any hon. Member's telephone has, in fact, been interfered with. I am simply saying that I am not prepared to make any exception in regard to the categories mentioned.
Mr. Shinwell: Are we to understand from that astonishing reply that at present, or in the past, and in the future—
Mr. F. Harris: The right hon. Gentleman was in power too.
Mr. Shinwell:—telephone communications of hon. Members can be—[An HON. MEMBER: "Are being."]—intercepted? If hon. Members opposite prefer to have that situation, they can have it. Can we be assured that the communications of hon. Members on this side are not being intercepted? In the absence of a definite assurance of that kind, can we have a response to the quite legitimate request of the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), that a Select Committee of this House be set up to inquire into the whole matter?
Mr. Butler: The only assurance I can give to the right hon. Gentleman on this important matter, which, I quite understand, affects the feelings of all hon. Members and may, indeed, arouse a feeling of Privilege, is that I am quite prepared to consider that tonight with the Leader of the Opposition and the Leader of the Liberal Party, but I am not prepared to issue statements about categories of persons, including Members of Parliament.

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In this connection, I go back to a precedent, although telephones were not invented at that time, on the subject of interception of communications in 1735, from which date the House has always resolved that the Secretary of State of the day has special powers by warrant. I am not prepared to go back on the tradition, nor am I prepared to make any statement of categories.
Mr. Bellenger: Is not the question of the interception of telephone calls of Members of Parliament a matter that might raise a question of Privilege, in which you, Mr. Speaker, would have to be concerned? Although I do not ask for any Ruling at the moment, might it not be a question that you should consider and upon which you, as the guardian of the rights of hon. Members of this House, should guide us?
Mr. Speaker: The House is the guardian of its own privileges. My duties, as I have frequently explained, are procedural, if a case is brought before me, to say whether a prima facie case has been made out. There is, however, no sort of case before me at the moment and I could not express an opinion without such a case and its relevant facts.
Mr. Fort: Is my right hon. Friend aware that many of us in this House want to be treated in this matter like our fellow citizens and that that is only fair?
Mr. Lee: If the right hon. Gentleman will not mention categories of people, can he give the House any assurance on the number of occasions on which this practice is now happening? In other words, is it happening more frequently now than at any other period?
Mr. Butler: I do not think that I should be out of order in saying that, having looked at the records very carefully, I see really no difference in practice under the present Administration and that which was carried out under my predecessors. I certainly see no increase of the power used, which, as I have said before, is a distasteful power and must be used with great care by the Secretary of State of the day.
Mr. Lipton: Is the right hon. Gentleman aware that everything he has said today still leaves the position most unsatisfactory from the point of view of
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both hon. Members and the general public, and that we are justified in believing that we are living in a police State? In view of the fact that it is, I think, generally agreed that there should never be any disclosure of police intercepts to outside bodies, why did the Home Secretary reject the suggestion made by my right hon. Friend the Leader of the Opposition to recall the transcripts that had been wrongly sent to the Bar Council? Why did he reject that legitimate suggestion and not show that at least to that extent he regretted the very grave blunder that had been made in disclosing these intercepts to an outside body?
Mr. Butler: I did not take any further action on the transcripts because I thought they seemed to have got quite enough publicity already—in fact, many people, in the Press and elsewhere, say that they have seen them—and I did not think that it would do any good to withdraw the transcripts from the Bar Council. Nor do I think it would have been right to do so in view of the motives which animated my predecessor in sending them to the Bar Council.
Mr. Collins: Although the right hon. Gentleman refuses to give any information about categories, will he say whether this power of interception of telephone conversations has been used in any type of case other than security or the detection of crime? If so, what are the criteria which would govern the right hon. Gentleman in his decision on these matters?
Mr. Butler: I am not aware of cases which would not fall within the categories I have mentioned in my previous statement, namely, national security or the detection of crime, and those should be the criteria in dealing with these matters.
Mr. Shinwell: The right hon. Gentleman referred to a meeting which is to take place tonight with the Leader of the Opposition 'and some of his right hon. Friends and, I think, the Leader of the Liberal Party. Are we to understand that a report of the proceedings will be made to the House, or is there any possibility of interception of some kind? Quite seriously, are we to understand that the House will be informed of the deliberations?
Mr. Butler: That is a matter for agreement between those who are meeting this evening. What is quite clear is that owing to the great interest naturally aroused in this matter in the House and in the country we certainly have, to use a House of Commons expression, to report progress in due course to the House.
As Leader of the House, I should like to say that, although these discussions are taking place officially with the Leader of the Opposition and the Leader of the Liberal Party, I do not exclude contact with any other right hon. or hon. Member who is keenly interested in the subject. If I can be of service to them I shall be at their disposal.
Later—
Mr. Short: On a point of order, Mr. Speaker. When the Home Secretary was answering Questions on telephone tapping, I stood on my feet each time and tried to catch your eye. One Privy Councillor asked these supplementary questions, and on each occasion when he was called I was on my feet. In fact, I think I was the only hon. Member who stood up and was not called. May I ask whether there is any limit to the precedence given to Privy Councillors on these occasions?
Mr. Speaker: There is no limit to the discretion which may be exercised by a Privy Councillors, if that is what the hon. Member is asking, but that is another matter. I fear I could only find time for Privy Councillors and those who took the trouble to put Questions, on the Order Paper, and I do not recollect that the hon. Member did so.
Mr. Short: Further to that point of order, Sir. The point I am putting is not that at all. The point I am putting is whether or not the Chair is bound to call a Privy Councillor on every occasion when he stands up, especially in a series of Questions like this, when he has already had one supplementary question.
Mr. Speaker: I think I must say that there are limits to the patience of the
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Chair. I have to exercise my duties bearing in mind the long-continued practice of the House.

BARNBURGH MAIN COLLIERY (EXPLOSION)
Mr. T. Williamsasked the Paymaster-General whether he has any statement to make on the gas explosion at the Barnburgh Main Colliery on Wednesday, 26th June.
The Parliamentary Secretary to the Ministry of Power (Mr. David Renton): An ignition of fire damp occurred at about 3 p.m. yesterday, 26th June, at Barnburgh Main Colliery, Yorkshire, when a shot was being fired in a back ripping about 70 yards from the face of a middle gate leading to a long wall conveyor face.
I regret to have to inform the House that 20 men working at the face were burned, some severely. I am sure that the House will wish to join with me in hoping that the injured men will make a speedy recovery.
Her Majesty's inspectors are investigating the circumstances.
Mr. Williams: Whilst associating myself with every right hon. and hon. Member in expressions of sympathy, may I ask the hon. and learned Gentleman whether, despite the fact that mercifully there have been no fatalities so far, the ordinary kind of inquiry will be undertaken to ascertain the real cause of the explosion?
Mr. Renton: I am not quite sure what the right hon. Gentleman means by "ordinary kind of inquiry". The first step is that Her Majesty's inspector should investigate the full circumstances. That necessarily may take some time, owing to the fact that some of the necessary witnesses have been injured. When that has been done it will be for my noble Friend to decide what formal steps, if any, should be taken by way of special report or public inquiry.

BUSINESS OF THE HOUSE
Mr. Gaitskell: May I ask the Leader of the House whether he will state the business for next week?
The Secretary of State for the Home Department and Lord Privy Seal (Mr. R. A. Butler): Yes, Sir. The business for next week will be as follows:
MONDAY, 1ST JULY AND TUESDAY, 2ND JULY—We shall resume the Committee stage of the Finance Bill.
WEDNESDAY, 3RD JULY—It is hoped to conclude the Committee stage of the Finance Bill by 7 o'clock.
The House is no doubt aware that the Deputy Chairman of Ways and Means has already set down an opposed Private Bill—the Liverpool Corporation Bill [Lords]—for consideration at 7 o'clock on that evening.
Consideration of the Motion to approve the White Fish and Herring Industries (Conversion Grants) Scheme.
THURSDAY, 4TH JULY—Report stage of the Coal Mining (Subsidence) Bill.
Committee and remaining stages of the Winfrith Heath Bill.
FRIDAY, 5TH JULY—Conclusion of the Report stage of the Coal Mining (Subsidence) Bill, if not already concluded, and Third Reading.
We then hope to obtain the Second Reading of the Army Enlistment Bill, and of the Tanganyika Agricultural Corporation Bill, for which Bill a Money Resolution is also necessary.
In addition to the business already announced, we hope it will be agreeable to the House to take tonight the Committee and remaining stages of the Superannuation Bill.
Mr. Gaitskell: I understand that the remaining stages of the Superannuation Bill are almost entirely formal and, as the Bill is urgently required, the Opposition are prepared to agree to the right hon. Gentleman's proposal on it.
Mr. Butler: I am very much obliged to the right hon. Gentleman.
Mrs. Jeger: In view of the fact that the safety and lives of many of our folk in
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Cyprus are dependent upon the continuance of the uneasy truce in the island, may I ask the right hon. Gentleman whether he can say when the House can have an opportunity to discuss a more permanent solution to this grievous problem?
Mr. Butler: As the hon. Lady knows, there was an interchange at Question Time with my right hon. Friend the Colonial Secretary, but I realise that there is anxiety on this matter in the House. All I can do is to undertake to discuss it with my right hon. Friend.
Mr. Hamilton: Can the right hon. Gentleman give any assurance that the Government will find time between now and the Summer Recess for some debate, whether a full or a half-day, on the United Nations Report on events in Hungary late last year?
Mr. Butler: I cannot give any undertaking, but I will make a note of what the hon. Member has said.
Mr. Blenkinsop: Will any arrangement be made for the House to discuss the very important Royal Commission Report on Mental Illness and Mental Deficiency?
Mr. Butler: I do not know whether we shall have time before we rise in August, but this is a matter on which we are at present consulting. It is of the utmost importance. I will bear in mind that the House must have an opportunity of considering it before there is any question of the Government having to make up their mind on action.
Mr. Gower: In view of the fact that there has been a period of greater stability in the cost of living in recent months, may I ask my right hon. Friend whether there will be an opportunity at an early date to discuss the increase in coal charges and the possibility of increases in postal charges, which have come as a great shock to public opinion?
Mr. Butler: I will make a note of that, also.
Mr. Fernyhough: Can the Leader of the House say when the necessary legislation to give Parliamentary sanction to

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the increases of pay which the judges are already receiving is to be brought before the House? What is causing the delay?
Mr. Butler: I cannot give an exact date, but I have it in mind.
Mr. Nabarro: Will my right hon. Friend—
Mr. Speaker: Order. The hon. Member started to speak before he was called.
Mr. Nabarro: If I did so, Mr. Speaker, I humbly apologise. There was so much noise going on on the Front Bench opposite. May I start the question again?
My right hon. Friend the Leader of the House will recall that I asked him, fourteen days ago, whether it would be possible to have a debate this year, within a reasonable time of the publication of the Report and Accounts of the National Coal Board, instead of waiting for a period of six or eight months before the debate took place. Can my right hon. Friend say, therefore, whether the three days allotted to the nationalised industries will form the subject of debate before we rise in August?
Mr. Butler: There will be a real difficulty in fitting in a day and we must try to see what can be done. I realise that my hon. Friend wishes to consider this matter in relation to the publication of the Report and not too late. Further than that I cannot go today.
Mr. Shinwell: Do I understand from the reply that the Leader of the House gave to my hon. Friend the Member for Jarrow (Mr. Fernyhough) about judges' salaries that these gentlemen are receiving the increases of salary arranged for them without the necessary legislation? Does not that mean that this is an illegal act? If so, ought not the Government to be indemnified for having provided increases of salary without legislation? What is the cause of this? If that can be arranged in the case of judges, could it not be arranged for hon. Members, who are rather more impoverished?
Mr. Speaker: That may be a very important matter, but it is not a question on next week's business.

LUNG CANCER AND SMOKING
The Parliamentary Secretary to the Ministry of Health (Mr. J. K. Vaughan-Morgan): The House will be sorry to learn of the sudden illness of my right hon. Friend the Minister of Health. With your permission, Mr. Speaker, and that of the House, I wish to make a statement on lung cancer on his behalf.
In its Annual Report, and more particularly in its special report on tobacco smoking and cancer of the lung—which will be available in the Vote Office at 5 p.m. this evening—the Medical Research Council has advised the Government that the most reasonable interpretation of the very great increase in deaths from lung cancer in males during the past twenty-five years is that a major part of it is caused by smoking tobacco, particularly heavy cigarette smoking. The Council points to the evidence derived from investigations in many countries in support of this conclusion in particular to identification of several carcinogenic substances in tobacco smoke.
The Government feel that it is right to ensure that this latest authoritative opinion is brought effectively to public notice, so that everyone may know the risks involved in smoking. The Government consider that these facts should be made known to all those with responsibility for health education. The Minister of Education included in his recently published Handbook for Teachers on Health Education advice about the dangers of smoking and he is circulating copies of this statement to local education authorities and education authorities generally. Corresponding action will be taken by the Scottish Education Department in Scotland.
The Government now propose to bring these views to the notice of the local health authorities who are concerned under Statute in the prevention of illness and who are responsible for health education as a means of prevention. Local health authorities will be asked to take appropriate steps to inform the general public and in this task they will have the assistance of the Central and Scottish Councils for Health Education.
Once the risks are known everyone who smokes will have to measure them

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and make up his or her own mind, and must be relied upon, as a responsible person, to act as seems best.
The Medical Research Council is at present supporting an extensive programme of work designed to discover the way in which tobacco smoke exerts its effect and the relative importance of other factors, such as atmospheric pollution, which may also play a part in the causation of lung cancer. The recent expansion of this programme has been greatly assisted by a substantial grant made in 1954 by a leading group of tobacco manufacturers; on the advice of my right hon. Friend's predecessor, the present Minister of Labour, this sum was given to the Medical Research Council with complete discretion as to the choice of research projects to be supported and to the publication of results.
The work at present in progress consists largely of chemical and biological studies of the many different constituents of tobacco smoke and atmospheric pollution. In addition, surveys of the role of atmospheric pollution and of specific industrial hazards in the causation of the disease are being, undertaken. Work along these lines is being supported in many centres in different parts of the country and the Council has also established, as part of its own organisation, three new research groups in Exeter, London and Sheffield, where long-term studies of different aspects of the problem are being carried out. Every opportunity will be taken by the Medical Research Council to pursue any promising new lines of research which may become apparent.
Mr. Lipton: On a point of order, Sir. Is not the Parliamentary Secretary, in effect, answering Question No. 94, whether by accident or design?
Mr. Speaker: I gather not. This is a statement.
Dr. Summerskill: I should like to express the sympathy of my right hon. and hon. Friends with the Minister and the hope that he will have a speedy recovery.
I welcome the statement which the Parliamentary Secretary has made, because I believe it contains a warning, a rather overdue but important warning, to the smokers of this country. May I ask him two questions? First, will he also consider following, in his publicity,
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a practice which has been adopted in the public health field before—that is, to display notices in those places where large numbers of people congregate? Secondly, would the hon. Gentleman tell us how he proposes to counter the propaganda of the tobacco interests, who are seeking to allay the fears of the public?
Mr. Vaughan-Morgan: May I express to the right hon. Lady my gratitude for her good wishes to my right hon. Friend, which I shall extend to the Minister's wife, who has had some anxious hours.
On the point about publicity, we are proposing, in this case, to use the local health authorities as the agents for the dissemination of information. A circular is going to them today asking them to take appropriate steps to inform the general public.
Mr. Wade: May I add my sympathy with the right hon. Gentleman the Minister of Health in his illness?
I do not want to ask a frivolous question but the hon. Gentleman referred to the effect of heavy cigarette smoking on males. May we assume, first, that heavy cigarette smoking on the part of females might have a similar effect? In the investigations that are taking place, may I ask, secondly, whether the Medical Research Council will consider the comparative effects of different qualities of tobacco? Thirdly, will consideration be given to the effect of saltpetre in the paper which is used in the making of cigarettes?
Mr. Vaughan-Morgan: On the question of cigarette smoking by females, there has been an increase in the incidence of lung cancer, but I would ask hon. Members not to ask too many technical questions—I am not trying to evade anything—until they have had a chance to study the Report itself and the circular which is going out. I am sure that the Medical Research Council will bear in mind the other points raised by the right hon. Gentleman.
Mr. Turton: Can my hon. Friend say whether the Report contains any observations on the effect of giving up heavy smoking on the risk of contracting cancer of the lung?
Mr. Vaughan-Morgan: It does say that it helps to give up smoking at a certain period of life.
Mr. Lipton: May we have an assurance from the Parliamentary Secretary that the Government will not impose any restriction on reasonable expenditure by local health authorities in the publicity they want to undertake to let people know of the dangers of lung cancer? Will he also say whether, in the case of local health authorities that do not take appropriate action, measures will be taken to compel them to do what is necessary?
Mr. Vaughan-Morgan: The publicity material will be supplied by the Central Council for Health Education and it will be purchased by the local health authorities, who receive an Exchequer grant of 50 per cent. of their expenditure. As to defaulting authorities, we will see how they get along.
Dr. Bennett: Will my hon. Friend bear in mind the possibility of his Department encouraging the putting up of notices banning smoking in places of public assembly, in view of the fact that many who do not smoke find themselves inhaling other people's smoke in large quantities in such places?
Mr. Vaughan-Morgan: I am sure that that is a point which will be brought forcefully to the attention of all local health authorities.
Mr. Blenkinsop: Would the hon. Gentleman agree that what is needed here is continuing education rather than a single, settled campaign? Secondly, would he give us an assurance that there will be no limitation on the availability of finance into further research into this problem, as it becomes possible'?
Mr. Vaughan-Morgan: On the latter point, I will, if I may, quote my own words in an Adjournment debate on 1st March:
"It can fairly be said that there is at present no promising line of research which is being neglected for lack of funds."—[OFFICIAL, REPORT, 6th March, 1957; Vol. 565, c. 1645]
The limiting factors are personnel and ideas. I am sorry, I have forgotten the hon. Gentleman's other question.
Mr. Blenkinsop: The other question was on continuing education.
Mr. Vaughan-Morgan: Yes, this is a question of continuing education.
Lady Tweedsmuir: Will my hon. Friend say whether it is now considered that smoking is a major cause of cancer? Will he also say what grant is given by the Government to direct research into this particular cause of cancer?
Mr. Vaughan-Morgan: I want to choose my words very carefully on the first part of the noble Lady's question. I think it would be best if hon. Members drew their own conclusions from the Report. Words in this matter are of the greatest importance.
As to the amount which is being spent, the Medical Research Council's expenditure on this particular item has risen substantially and now amounts to approximately £40,000 a year. That is quite apart from expenditure on cancer research generally.
Mr. Usborne: Has the Minister considered a slightly different aspect from that which has been put by my right hon. Friend the Member for Warrington (Dr. Summerskill) and an hon. Member opposite—namely, that the public object to inhaling the atmosphere created by other smokers, so much so that I want to ask whether he will consider banning smoking altogether in public vehicles, or, at any rate, seeing that smoking is forbidden at peak hours, and whether, in particular, he will see that there are more non-smoking carriages in railway trains?
Mr. Vaughan-Morgan: Many of those are questions which should be addressed to some of my colleagues. As a non-smoker myself, I should not allow myself to be prejudiced in my reply.
Mr. Fort: Would my hon. Friend point out to the health education authorities that local authorities have the power to stop smoking in cinemas and thereby to bring this country into conformity with almost every other civilised country in the world?
Mr. Vaughan-Morgan: I am sure that all local health authorities will pay great attention to everything which has been said today.
Mr. M. Stewart: Will the hon. Gentleman, together with his colleagues, consider whether central and local government and public corporations ought any longer to accept advertisements for tobacco in any of the media under their control?
Mr. Vaughan-Morgan: That raises rather different issues, if I may say so.
Mr. C. Howell: Now that the Ministry has accepted the fact that lung cancer or carcinoma is on the increase, and since I also presume that it has accepted the fact that tuberculosis is on the decrease, would the Ministry now consider giving directives, or making recommendations, to the regional hospital boards that where facilities are available, and where beds are becoming vacant in tuberculosis hospitals, they should be turned over to chest investigation units?
Mr. Vaughan-Morgan: I do not think that a general answer on that matter would be very helpful. I think that that ought to be considered in detail in particular regions. As for the first part of the hon. Member's question, what the Government have done throughout is to make available to the public the facts as they have become known.
Mr, Langford-Holt: My hon. Friend said that local health authorities are being asked to take appropriate steps to inform the general public. Do we infer from that that they are being asked to consider or to take no other steps in that direction, but merely to see that the public are informed?
Mr. Vaughan-Morgan: That is their main duty, as the authorities responsible for the prevention of illness. The means by which they carry it out is for the moment for them to decide.
Mr. Woodburn: Would the hon. Member consider making use of the valuable services of the B.B.C. in this direction, because science on television will bring home to people more quickly than anything else the terrors of this disease? A great many people think of cancer only as a name, but if the B.B.C. could show the speed with which this disease works on the lungs I am certain that it would bring the matter home to people in a far more serious way.
Mr. Vaughan-Morgan: I shall be giving some information on B.B.C. television and radio today.

LUNG CANCER AND SMOKING
  BUSINESS OF THE HOUSE
  Proceedings on the Superannuation Bill exempted, at this day's Sitting, from the provisions of Standing Order No. 1 (Sittings of the House).—[Mr. R. A. Butler.]

  SCOTTISH ESTIMATES
  Committee of Supply discharged from considering the Estimates set out hereunder and the said Estimates referred to the Scottish Standing Committee:—
  Class VIII, Vote 12, Department of Agriculture for Scotland;
  Class VIII, Vote 13, Fisheries (Scotland) and Herring Industry.—[Mr. R. A. Butler.]

ORDERS OF THE DAY

  FINANCE BILL
  Considered in Committee. [Progress, 26th June.]
  [Sir GORDON TOUCHE in the Chair]

  FINANCE BILL

    Clause 21.—(OVERSEAS TRADE CORPORATIONS: DISQUALIFICATIONS.)
    4.17 p.m.
    The Financial Secretary to the Treasury (Mr. J. Enoch Powell): I beg to move, in page 17, line 10, to leave out "received" and to insert "receivable."
    This Amendment corrects a minor error. The payments in question will be allowed for the tax purposes of the company which makes them in the year in which they become due and not necessarily in the year in which they are made. Consequently, they should be charged to tax to the company which receives them in the year in which they are receivable, not necessarily that in which they are received.
    Amendment agreed to.
    Mr. Douglas Jay: I beg to move, in page 17, line 20, to leave out from "Kingdom" to the end of line 28.
    The purpose of this Amendment is to ensure that an overseas trade corporation shall not be exempt from tax, unless it at least pays some tax in the country in which it is carrying on its trading operations. We understand that it is the Chancellor's purpose in the whole of this O.T.C. device to avoid discrimination as he calls, it, between a British company trading overseas and its foreign competitors.
    Although we do not accept in full the whole of this plan, taking it for granted for the moment, I can see that there may be some case for arguing that if a United Kingdom firm trading overseas pays some Income Tax or Profits Tax, or whatever the tax arrangements may be in the country where it carries on trade, then it should be relieved of United Kingdom taxation in this specially far-reaching fashion.
    But supposing there is no local tax levied, as, I believe, is the case in certain countries, then to exempt the overseas trade corporation from. British taxation
    434
    altogether is to put it in a fantastically favourable position vis-à-vis other British companies which may be exporting and carrying on overseas trade in various ways. It seems to me an extraordinary conclusion, if one sets out to try to put United Kingdom companies on a fair level with their competitors and, indeed, with other trading companies generally, to reach a point at which a certain minority of companies may be absolutely exempt from all tax, either in the country concerned or in the United Kingdom—unless, presumably, they remit dividends to shareholders here, in which case to that extent they would still pay United Kingdom tax.
    I am informed that no tax is chargeable in, for instance, Kuwait and Bermuda, of a kind which would preclude this concession applying to a company which was an O.T.C. Therefore, it appears to be true that if there were a British O.T.C. operating in those two countries, it would pay virtually no tax. Perhaps the Financial Secretary will explain how this will work. I suppose that it will mean that if there were an oil company, or a branch of one of the great oil companies which had created an O.T.C. for the purpose and which had its management in the United Kingdom and which carried on trade in Kuwait—where, presumably, it would carry on some of its trading operations—that company would be almost completely exempt from taxation.
    In the case of Bermuda, would it be possible for Mr. Noel Coward, for instance—and I use his name not to advertise, but just to take a realistic example—or for some other playwright to form a private company—and, unless the Financial Secretary contradicts me, I assume that there is nothing to prevent a private company as well as a public company becoming an overseas trade corporation—and forming an O.T.C. which would have its management and control in the United Kingdom and which would carry on the trade of selling plays or books or other literary products, perhaps the copyrights, whatever may be the most appropriate legal method, in Bermuda.
    Supposing the whole of the shares of that company were held by a British playwright or an actor or somebody of that kind, who for the purpose of the law was resident not in the United Kingdom but in Bermuda, would we not then reach the conclusion that on the profits of those

    435
    operations, if there were profits, no tax would be paid, either Profits Tax or Income Tax, either by the company or by the shareholder, in either that country or the United Kingdom? I agree that that may be a rather extreme case.
    This concession has the double and rather extraordinary effect that at one and the same time it gives a bonus to British investors to invest abroad and to foreign investors to invest in this country. There may be an argument for that, but it is a rather strange thing that this tax concession, at much expense to the Revenue, should produce those two mutually contradictory effects. This provision also leaves the Chancellor in the position of having to assume that a tax described as of a character and scope corresponding in all respects to Income Tax, that is to say, to our Income Tax, is charged in another country where in fact it is not charged. We are reaching a remarkable Alice-in-Wonderland position in tax law if we base the liability of a United Kingdom taxpayer on assuming that some tax exists in some other country where, in fact, we explicity recognise that it does not exist.
    I am sure that the Financial Secretary is aware that Australia, when introducing a similar concession, specifically enjoined that it should not apply in a country where there is no tax similar to the British Income Tax or Profits Tax. That is our intention. My authority for saying that is the memorandum from the Board of Inland Revenue, which we have all read. Of course, we have now learned that the Chancellor has not as high an opinion of the Board of Inland Revenue as have some of us and that he is disposed to disregard its advice. Indeed, he seems to think that he is acting correctly as Chancellor when he says that he knows that the Board of Inland Revenue thought of it, but that he has decided to neglect what it said.
    I do not know whether the Chancellor will go very far on those principles. Even if he does not pay attention to the advice of the Board of Inland Revenue about what he should do in matters of policy, I hope that he will at least be prepared to accept it as an authority on the actual legal practice in other countries, and I hope that the Financial Secretary will agree that a limitation on the concession is enforced in Australia.
    436
    If the Australians are able to effect a limitation of that kind, it must be practical and possible to administer it in our country. This seems to us another case where, as it stands, the Bill has been carried to extreme lengths to permit this class of company to pay virtually no tax and I hope that the Committee will feel that this is a case where we can reasonably and legitimately lay down some limitation.
    Mr. Powell: The general object of this part of the Bill is to place companies resident in the United Kingdom in the same position as non-resident companies trading abroad in the same country. Of course, that includes companies resident in that foreign country where the trade in question is being carried on. That being the purpose of this part of the Bill, it would be quite impossible to pick and choose between one territory and another and to say that here is a territory which has an income tax—admittedly low, but an income tax—and, therefore, the provisions of Part IV should apply—
    Mr. Jay: May I ask a question about the purpose? Is it really the Government's purpose—because we have had it stated both ways—to put a British company in, say, Kuwait on a level with a non-resident company, presumably a British company operating and registered there, or, as we originally thought, with some other foreign company, perhaps an Australian company, operating in the same business in Kuwait? If it is the latter, it will not be achieved by this concession.
    Mr. Powell: The object is as I originally stated, and it is not consistent with that object that one should select one set of territories where one tax system exists and allow Part IV to operate there while refusing to allow it to operate in another kind of territory with a different tax system.
    The right hon. Gentleman imagined a case of a private company whose business it is to sell or otherwise to exploit the works of a playwright. He will find that that possibility is excluded by subparagraph (ii) of subsection (3, b). The subsection to which the Amendment relates has the purpose of ensuring that all companies whose trading profits are exempt by this part of the Bill have a

    437
    permanent establishment somewhere so as to be a legitimate object of local taxation in the country concerned. It is not the object of this part of the Bill to create a situation in which a company escapes taxation anywhere, whatever the taxation may be in the various countries or places in which it operates. That is not the object for which the O.T.C. provisions were designed.
    Paragraph (b), which the Amendment proposes to leave out, is, therefore, essential. It assumes that throughout the world there is a tax system identical with that in this country and it is a requirement that all the profits of a company obtaining exemption under Part IV should, on this hypothesis, be caught by tax. That is to say, they will, somewhere or other, have a permanent establishment which will render them liable to whatever local taxation there is.
    4.30 p.m.
    Paragraph (b) is, in fact, sufficient to achieve that purpose without paragraph (a). Paragraph (a) applies the actual test of whether a tax similar in character to Income Tax or Profits Tax is being paid. As the Committee will observe, that case is covered by the universal and theoretical test of paragraph (b), but paragraph (a) is a convenient way of finding out whether Income Tax or Profits Tax was, in fact, being paid in some overseas country. That simple and actual test will often suffice, and it is helpful to have it side by side in the Bill with the universal and theoretical test in paragraph (b).
    To omit paragraph (a) would, therefore, be quite possible, although inconvenient; to omit paragraph (b) would be disastrous. If we omitted paragraph (b), it would mean, for example, that the pioneer relief given in some overseas countries would he frustrated, because it would mean that a company which, under the local law and for deliberate local purposes, was exempted from tax, would not benefit by Part IV of the Bill. It would be back again in the original position of bearing full United Kingdom taxation, because it would not be able to qualify as an overseas trading corporation.
    The effect of leaving out paragraph (b) would be that it would frustrate the deliberate tax relief given in overseas countries; in other words, it would defeat
    438
    the one purpose which right hon. and hon. Gentlemen opposite have recognised as valid in this part of the Bill.
    Mr. Jay: Might it not be possible, as the Australians appear to do, to give the pioneer relief, but so to frame the concession as to limit the relief in the way we propose?
    Mr. Powell: We are not debating whether Part IV of the Bill ought to be restricted to giving pioneer relief, but whether this paragraph should stand. I am pointing out to the Committee that if this test is omitted, pioneer relief, amongst other things, will automatically be frustrated.
    By the omission of this paragraph, we would bring in companies which I am sure nobody in the Committee would want to be exempt from tax. It is possible for a company to be carrying on trade in no country at all. It might, for example, be drilling for oil under the sea beyond the territorial limit. It may be carrying on whaling operations, whilst resident in this country and therefore taxable in this country, apart from Part IV of the Bill. It is precisely to ensure that companies are not in the position of carrying on all their operations in no country, while resident in the United Kingdom, and thus, by virtue of this part of the Bill, escape all taxation, that we must have the universal test in paragraph (b).
    Therefore, because its omission would leave out companies which everybody wants to bring in and would bring in companies which everyone would like to be left out, I suggest that we must retain paragraph (b).
    Mr. G. R. Mitchison: May I ask the hon. Gentleman one or two questions? I am intrigued by this possibility of a company having operations in the middle of the ocean. I suppose that the example of whaling would do, but even then one would have to bring in the products of whaling to land ultimately. I see that the Financial Secretary to the Treasury is shaking his head, and I understand from him that he knows of a company which carries on whaling and never brings any products to the land.
    Mr. Powell: The company might be organised so that the bringing of the

    439
    products to land was the business of another company.
    Mr. Mitchison: These fascinating possibilities have not been as fully developed in my mind as in the remarkably ingenious mind of the Parliamentary Secretary. I would ask him how does the Clause operate there, because there is no assumption that, in a place which is not a country outside the United Kingdom, there is any tax at all. Apparently, there appears to be an unfair discrimination between those who carry on their whaling operations or whatever they may be inside territorial waters and those who do it outside territorial waters. That is the first question which I should like to put to him, and I feel certain that the hon. Gentleman's ingenuity will provide an immediate answer.
    The second question is a little different. A company is not to qualify as an overseas trading corporation unless, to put it shortly, all of its trading profits are chargeable to something similar to Income Tax or Profits Tax. Let us assume that the whole of the profits are chargeable to Profits Tax. I do not think—and here I stand to be corrected, if need be—that the standards for the assessment of Profits Tax and Income Tax are the same, and, therefore, the profits so chargeable might be different. What happens in that case? If the profits are, in fact, chargeable to anything like Profits Tax, then I suppose there is no assumption to be made about Income Tax at all. Perhaps the hon. Gentleman could elucidate that.
    Mr. Eric Fletcher: Speaking for myself, I am more confused about this than I was before I heard the Financial Secretary's attempted explanation of it. While I do not want to delay the Committee, I think that in the interests of clarity we ought to know what this means before we pass from it.
    I wish to refer to subsection (5), paragraphs (a) and (b), but before I do so, I should like to refer to what I thought were the very significant observations of my right hon. Friend the Member for Battersea, North (Mr. Jay), which I thought the Financial Secretary seemed to brush aside as if they did not matter. My right hon. Friend referred to the example of a company carrying on trade largely outside the United Kingdom, and he inquired what would be the position
    440
    of a private company which acquired the rights of Mr. Noel Coward's talent and so forth. I think that my right hon. Friend asked a very sensible and intelligent question, but what was the answer?
    The Financial Secretary referred us to a paragraph which has no relation to the matter at all. It has to deal with ships and aircraft, and I am not sure that Mr. Noel Coward has any connection with ships and aircraft, though I quite understand that he may be thought to have some connection with copyright in literary, dramatic, musical or artistic works. How does that subsection affect the matter? Paragraph (b, ii) of subsection (5) merely deals with
    "payments in respect of copyright in literary, dramatic, musical or artistic works, the author of which is ordinarily resident in the United Kingdom."
    That has nothing to do with the point which my right hon. Friend was raising. My right hon. Friend was saying suppose we had a gentleman—or a company enjoying the benefits of his talent and works—operating very largely outside the United Kingdom.
    Mr. Powell: Non-resident?
    Mr. Fletcher: Yes, non-resident.
    Mr. Powell: They would not pay tax.
    Mr. Fletcher: The Financial Secretary says they would not pay tax. I am not sure whether my right hon. Friend will think that a very satisfactory answer, but if so, I do not think it is the end of the matter. It certainly makes the position a little clearer. The Minister is now saying to my right hon. Friend that such a gentleman pays no tax.
    Mr. Powell: At the moment.
    Mr. Fletcher: May we take it that that is the intention of this part of the Bill, and that he should pay no tax?
    Mr. Powell: That is the present position.
    Mr. Fletcher: Is it intended that it should continue and that other people should be able, if they so desire, to take advantage of this part of the Bill, put themselves in a similar position and, therefore, pay no tax? I take it that it will make it easier for them to do so than is the case at present.

    441
    There is quite a serious problem here. The Minister is now saying that certain people can take advantage of the law as it stands to avoid paying tax. We want to know whether it is the effect or the intention of Part IV that artistes and others carrying on a similar kind of profession should be able to obtain greater benefits from the Income Tax laws than they enjoy at present. I think that that was the purport of my right hon. Friend's question.
    I now revert to the principal object of the Amendment, namely, the elimination of paragraph (b). The Minister said that it would not matter if paragraph (a) were in the Bill or not, but that paragraph (b) was essential. If it does not matter about paragraph (a) I am at a loss to understand why it should be included. If the Minister is content to rely upon paragraph (b) why not rely upon it, and not have paragraph (a)? Either paragraph (a) is necessary or it is not.
    Contrary to the Minister, I should have thought that paragraph (a) was essential, and that it would have been much better to rely upon it and to eliminate paragraph (b). One of the reasons why I think that is that paragraph (b) seems to be quite unintelligible. It says:
    "A company shall not qualify as an Overseas Trade Corporation unless"—
    then come certain assumptions—
    "the profits arising from the whole of the trade carried on by the company would he chargeable in one or more such countries to tax of that character."
    This is a very novel form of Parliamentary draftsmanship, as I am sure the Minister, who has made some study of phraseology, will admit. How, in an Act of Parliament, can one define an obligation or qualification which is based upon an assumption? I know of no precedent for it whatever.
    Let us analyse the situation. First, what is the assumption? It is that in every country outside the United Kingdom there is a tax of a character and scope corresponding in all respects to Income Tax. Who will decide that? Other countries have different kinds of fiscal laws. It is not every country which thinks that the most sensible way of raising revenue is by way of Income Tax. Other countries have withholding tax and sales tax—all kinds of comic taxes not
    442
    known to this country. Some may well be of a scope not identical with our Income Tax, but in some respects similar. Who is to say whether the tax laws of a country such as Kuwait or Bahrein correspond to our Income Tax laws? There may be considerable argument about that.
    Let us suppose that there is a doubt about it, and that it is arguable whether a given country, such as Kuwait, has a tax, corresponding to our Income Tax. The assumption made in paragraph (b) would not then hold good, and I take it that the Minister would then agree that the rest of the operative words of the paragraph would not apply. What would be the position then? In other words, what would be the effect upon whaling companies and similar organisations? Can the Minister tell us whether or not it is intended to disqualify companies from having the benefit of the overseas trade corporation provisions on such ambiguous grounds as these? If the Minister is right, and paragraph (b) is the one upon which he relies, would it not be more sensible to withdraw paragraph (a) and rewrite paragraph (b) in a form which is quite definite and intelligible? I believe that my right hon. Friend has raised a very sensible point, which I hope the Committee will press before we part with this part of the Clause.
    Amendment negatived.
    4.45 p.m.
    Mr. Roy Jenkins: I beg to move, in page 17, line 31, at the end to add:
    "or in any European country which the Board of Trade, with the consent of the Treasury, may declare to be part of a European free trade area including the United Kingdom:
    Provided that any such declaration shall be made in the form of a statutory instrument and shall be laid before Parliament."
    This is a comparatively simple, but important, Amendment. It deals with subsection (6), which says:
    "A company shall not qualify as an Overseas Trade Corporation if it is carrying on a trade in the Republic of Ireland."
    The Amendment seeks to extend the provisions of this subsection so that it will also apply to any European country which came to form part of the European Free Trade Area, if and when such a trade area is set up—although the declaration from

    443
    the Board of Trade to specify which countries should be included would be required, and it would have to be laid before Parliament in the form of a Statutory Instrument.
    It seems clear that if and when a European Free Trade Area comes about it will be undesirable in many respects—and I should have thought that this would certainly be recognised by the Government and hon. Members opposite—for it to be possible for overseas trade corporations to operate within the Free Trade Area and to gain the benefits of Part IV of the Bill.
    For instance, we are all aware that it is quite possible for a United Kingdom manufacturing company to hive off an export company which will enjoy the benefits of being an overseas trade corporation. If the European Free Trade Area were to come into being, without some such provisions as the Amendment provides it would seem possible for United Kingdom capital to be used—and perhaps United Kingdom manufacturing expertise or "know-how"—to set up a manufacturing company in Germany or Belgium, let us say, which would manufacture goods largely for export into the British market but which would have a separate, importing company to take over and do the actual importing and selling of goods in this country, so that the manufacturing company, set up with British capital and "know-how", operating under British auspices in Europe and able to enjoy a much more favourable tax position than if it were set up and manufacturing in this country, would not disqualify itself from the provisions of Part IV by trading in this country. This would be a most undesirable situation.
    There are many powerful arguments in favour of our participating in a European Free Trade Area, but there are no arguments in favour of such participation providing incentives, by way of favourable tax concessions, for British capital to be used not in this country but in Europe for the manufacture of goods which may ultimately be exported into this country. There is a point of real danger here.
    The whole of Part IV deals with extremely complicated matters, which lead us inevitably to put our remarks in the form of questions rather than assertions. I therefore do that in regard to the example which I have just quoted.
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    I should like the Economic Secretary, who, I trust, will apply himself extremely closely to this matter, to give a detailed explanation of the dangers which do, or do not, exist here, and to tell us whether this is a real danger. If he takes the view that a danger does not exist, that it is not necessary to make safeguards such as we propose, I hope that, alternatively, he will explain why it is necessary to make this special provision concerning the Republic of Ireland with which we are already, as it were, within a free trade area; and why it is not so necessary to make it with other countries which would be in a wider free trade area when this came to be set up. Therefore, believing this to be the real danger with which we have to deal, I should like the Economic Secretary to tell us what is the position.
    I hope that he will not sweep this matter aside. In our debates yesterday we found a slightly alarming dichotomy in the attitude of the Government to some of the anti-avoidance provisions in this part of the Bill. I believe it was the Financial Secretary—he is not present at the moment—who was most eloquent on this point. Sometimes the Government say that this part of the Bill is hedged round with the most meticulous provisions to make sure that there is no abuse, and that they want to give this concession in such a way that there will be no avoidance and no evasion. At other times the Chancellor of the Exchequer—who is rapidly qualifying as one of the most reckless Chancellors we have ever had in this country—says, "This is a concession which I want to give as widely as possible. I want to benefit all shareholders of companies. I want to see British trade encouraged, and if it leads to dangers, that must be put up with. I am taking a clear view. I am a 'one hundred per center' on this and other issues."
    This is rather an alarming difference. I hope that the Economic Secretary, speaking in the absence of both his right hon. Friend the Chancellor and his hon. Friend the Financial Secretary, will, in dealing with this Amendment, lean a little more towards the technique practised by the Financial Secretary and give a close and detailed explanation of the position regarding the real danger in this part of the Bill. I hope that he will tell us

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    whether, when a European Free Trade Area is set up, there will be a tax incentive to manufacturers, employing British capital and "know-how", to carry on, not here at home employing British labour, but elsewhere on the Continent of Europe employing non-British labour.
    The Economic Secretary to the Treasury (Mr. Nigel Birch): The reason for the omission of the Republic of Ireland is that there is a special double taxation agreement with Southern Ireland in which companies trading there are not subject to Irish Income Tax. They are subject to a small corporation Profits Tax of 10 per cent. if they make more than £2,500. In view of this special agreement, which does not exist elsewhere, it was thought right to omit Ireland. We have been in consultation with the Government of Ireland who agree that this is the correct way to deal with the matter.
    Mr. Roy Jenkins: Why is Ireland different, because Ireland excludes the United Kingdom resident companies operating in Ireland from the operation of Irish Income Tax? Why is there a difference of principle between Ireland and, shall we say, some other overseas territory which gives pioneer relief exempting a company entirely from local taxation, and the position of a United Kingdom resident company, say, in Bermuda, where, as we heard during the debate on a previous Amendment, Income Tax does not exist?
    Mr. Birch: The main reason Ireland is different is because of this exclusive agreement. There may be certain places where no taxation is charged and where a special case may apply, but that is the general principle.
    The main object of the Amendment is to exclude countries in the Free Trade Area from the benefit of Part IV of the Bill. Having listened to the hon. Member for Stechford (Mr. Roy Jenkins) I am still not altogether clear why the party opposite wish to make the Amendment. This provision is based on the idea of jurisdiction—that the taxation of a company should in the first instance be in the country where it operates and that the taxation in the country of residence or origin, as it were, comes in only when the profits are distributed. I do not
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    understand what would be the object of cutting out the Free Trade Area from that general principle. Risks mentioned by the hon. Gentleman would exist just as much anywhere else as in the Free Trade Area.
    Mr. Jenkins: I think not. It would not be possible to manufacture goods in most parts of the world and import them duty free into this country, as would be possible from the Free Trade Area.
    Mr. Birch: It would certainly be easier to import them from the Commonwealth at easier rates of duty.
    Mr. Jenkins: But not duty-free.
    Mr. Birch: That is certainly a point. But I think the real reason, the main reason, against accepting the Amendment is that it seems to me to be a highly hostile act, when we are trying to negotiate a Free Trade Area, to say that we will make other countries in the area pariahs, as it were, and not allow trading on the same terms in that area as in the rest of the world.
    So far as the migration of companies is concerned, and the dangers which ma), ensue from that, we should be in a far worse position if the Free Trade Area did not come about because the inducement to companies to set up abroad in order to avoid United Kingdom tax would be far greater if the common market comes about with no Free Trade Area than if we had a free trade union with other countries.
    I am glad that the hon. Gentleman is in favour of a Free Trade Area. It seems to me wrong to make a special distinction here. Of course companies manufacturing overseas in the Free Trade Area could not export directly to this country while trading as O.T.Cs. There would have to be elaborate arrangements with a third party which would be subject to taxation. I do not think there is any real danger here, and I think that it would be a retrograde step to take action such as this which could be considered only as something hostile to the whole conception.
    Mr. Roy Jenkins: After listening to the Economic Secretary I am by no means entirely convinced. The right hon. Gentleman said that after listening to my speech he was not clear why we put down

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    the Amendment. My trouble is that after listening to his speech I am not clear why the Government introduced Part IV of the Bill. The right hon. Gentleman failed to explain most of the points. He told us the reason for the specific exclusion of Ireland was this special form of double taxation agreement. I do not know exactly the details of the double taxation agreement and perhaps the right hon. Gentleman does not either, but I do not think he made absolutely clear what was the difference in principle in the treatment of companies operating in Ireland under this double taxation agreement and companies operating in overseas countries where there are special concessions such as pioneer relief.
    As to the position in Europe, I agree that if we had a common market without a Free Trade Area there would be a danger that we would have to set up companies within the wall of the Common Market if we were to compete within the Common Market. But what we all believe—and the Government do not seem to have done much about it in recent months—is that we should guard against the danger of extending the narrow Common Market into a wider Free Trade Area. The danger I was concerned with was a more extreme danger than that which the right hon. Gentleman talked about. I was not concerned with the position in which we would have to set up companies within the fence of the Common Market, in order to sell within the six countries on reasonably favourable terms.
    I was concerned about the position in which, the Free Trade Area having come about, it might be advantageous for British manufacturers to set up special companies operating within Europe under
    more favourable tax conditions in order to sell, not in Europe, but to a hived-off importing or exporting company—according to which way one looks at it—into the British home market.
    5.0 p.m.
    This seems to me a very undesirable situation. The Government believe in the Free Trade Area and we on this side of the Committee believe in the Free Trade Area, though recognising some of its dangers, but we want to minimise those dangers and certainly while the negotiations are being conducted, however dilatorily by the Government. We do not want to see developing the situation in which we actually carry through a tax provision which would give a direct incentive for British capital and "know-how" to be exported to Europe and used there to manufacture goods for the home market. Because I feel that this is a real danger and because I am unconvinced by the Economic Secretary's arguments I hope that my hon. Friends will carry the matter into the Division Lobby.
    Mr. H. Wilson: Are we not to have a reply to my hon. Friend from the Economic Secretary?
    Mr. Birch: I have already replied to that point. If, of course, a country in Europe has a more easy tax system than ours that of itself gives advantage to the manufacturers of that country whether British, French or whatever their nationality. However, I do not think that that of itself is a reason for taking away the O.T.C. concessions from the Free Trade Area. I think that that would be a most retrograde step.
    Question put, That those words be there added:—
    The Committee divided: Ayes 206, Noes 250.

    Division No. 147.]

    AYES

    [5.2 p.m.

    Ainsley, J. W.

    Bottomley, Rt. Hon. A. G.

    Coldrick, W.

    Allaun, Frank (Salford, E.)

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

    Collick, P. H. (Birkenhead)

    Allen, Arthur (Bosworth)

    Bowen, E. R. (Cardigan)

    Collins, V. J.(Shoreditch & Finsbury)

    Allen, Scholefield (Crewe)

    Bowles, F. G.

    Corbet, Mrs. Freda

    Awbery, S. S.

    Boyd, T. C.

    Cove, W. G.

    Bacon, Miss Alice

    Brookway, A. F.

    Craddock, George (Bradford, S.)

    Balfour, A.

    Brown, Rt. Hon. George (Belper)

    Cronin, J. D.

    Bellenger, Rt. Hon. F. J.

    Brown, Thomas (Ince)

    Grossman, R. H. S.

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

    Burton, Miss F. E.

    Cullen, Mrs. A.

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

    Butler, Mrs. Joyce (Wood Green)

    Darling, George (Hillsborough)

    Benton, G.

    Callaghan, L. J.

    Davies, Rt. Hn. Clement(Montgomery)

    Beswick, Frank

    Carmichael, J.

    Davies, Ernest (Enfield, E.)

    Blackburn, F.

    Champion, A. J.

    Davies, Harold (Leek)

    Blenkinsop, A.

    Chapman, W. D.

    Deer, G.

    Blyton, W. R.

    Chetwynd, G. R.

    de Freitas, Geoffrey

    Boardman, H.

    Clunie, J.

    Dodds, N. N.

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

    Lee, Miss Jennie (Cannock)

    Shinwell, Rt. Hon. E.

    Dye, S.

    Lewis, Arthur

    Short, E. W.

    Edelman, M.

    Lindgren, G. S.

    Silverman, Julius (Aston)

    Edwards, Rt. Hon. John (Brighouse)

    Lipton, Marcus

    Simmons, C. J. (Brierley Hill)

    Edwards, Rt. Hon. Ness (Caerphilly)

    Logan, D. G.

    Skeffington, A. M.

    Edwards, W.J. (Stepney)

    MacColl, J. E.

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

    Evans, Albert (Islington, S.W.)

    McInnes, J.

    Slater, J. (Sedgefield)

    Fernyhough, E.

    McKay, John (Wallsend)

    Snow, J. W.

    Fienburgh, W.

    MacMillan, M. K. (Western Isles)

    Sorensen, R. W.

    Forman, J. C.

    MacPherson, Malcolm (Stirling)

    Sparks, J, A.

    Fraser, Thomas (Hamilton)

    Mahon, Simon

    Steele, T.

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

    Mallalieu, E. L. (Brigg)

    Stewart, Michael (Fulham)

    Gibson, C. W.

    Mann, Mrs. Jean

    Stonehouse, John

    Gordon Walker, Rt. Hon. P. C.

    Marquand, Rt. Hon. H. A.

    Stones, W. (Consett)

    Greenwood, Anthony

    Mellish, R. J.

    Strachey, Rt. Hon. J.

    Grey, C. F.

    Messer, Sir F.

    Strauss, Rt. Hon. George (Vauxhall)

    Griffiths, David (Rother Valley)

    Mlkardo, Ian

    Summerskill, Rt. Hon. E.

    Griffiths, Rt. Hon. James (Llanelly)

    Mitchison, G. R.

    Swingler, S. T.

    Grimond, J.

    Moody, A. S.

    Sylvester, G. O.

    Hale, Leslie

    Moss, R.

    Taylor, Bernard (Mansfield)

    Hall, Rt. Hn. Glenvil (Colne Valley)

    Moyle, A.

    Thomas, Iorwerth (Rhondda, W.)

    Hamilton, W. W.

    Mulley, F. W.

    Thomson, George (Dundee, E.)

    Hannan, W.

    Noel-Baker, Rt. Hon. P. (Derby, S.)

    Thornton, E.

    Harrison, J. (Nottingham, N.)

    Oliver, G. H.

    Tomney, F.

    Hastings, S.

    Oram, A. E.

    Ungoed-Thomas, Sir Lynn

    Hayman, F. H.

    Orbach, M.

    Usborne, H. C.

    Healey, Denis

    Oswald, T.

    Viant, S. P.

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

    Owen, W. J.

    Wade, D. W.

    Hobson, C. R. (Keighley)

    Padley, W. E.

    Warbey, W. N.

    Holmes, Horace

    Palmer, A. M. F.

    Watkins, T. E.

    Holt, A. F.

    Panned, Charles (Leeds, W.)

    Wells, Percy (Faversham)

    Houghton, Douglas

    Pargiter, G. A.

    West, D. G.

    Howell, Charles (Perry Barr)

    Parker, J,

    Wheeldon, W. E.

    Hoy, J. H.

    Parkin, B. T.

    White, Mrs. Eirene (E. Flint)

    Hughes, Cledwyn (Anglesey)

    Paton, John

    White, Henry (Derbyshire, N.E.)

    Hughes, Emrys (S. Ayrshire)

    Pearson, A,

    Wigg, George

    Hughes, Hector (Aberdeen, N.)

    Peart, T. F.

    Wilkins, W. A.

    Hunter, A. E.

    Pentland, N.

    Willey, Frederick

    Hynd, H. (Accrington)

    Popplewell, E.

    Williams, Rev. Llywelyn (Ab'tillery)

    Hynd, J. B. (Attercliffe)

    Prentice, R. E.

    Williams, Ronald (Wigan)

    Irving, Sydney (Dart ford)

    Price, J. T. (Westhoughton)

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

    Isaacs, Rt. Hon. G. A.

    Probert, A. R.

    Williams, W. R. (Openshaw)

    Janner, B.

    Proctor, W. T.

    Willis, Eustace (Edinburgh, E.)

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

    Pryde, D. J.

    Wilson, Rt. Hon. Harold (Huyton)

    Jeger, George (Goole)

    Randall, H. E.

    Winterbottom, Richard

    Jenkins, Roy (Stechford)

    Rankin, John

    Woodburn, Rt. Hon. A.

    Johnson, James (Rugby)

    Redhead, E. C.

    Woof, R. E.

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

    Reid, William

    Yates, V. (Ladywood)

    Jones, David (The Hartlepools)

    Rhodes, H.

    Younger, Rt. Hon. K.

    Jones, Jack (Rotherham)

    Robens, Rt. Hon. A.

    Zilliacus, K.

    Kenyon, C.

    Roberts, Goronwy (Caernarvon)

    Key, Rt. Hon. C. W.

    Robinson, Kenneth (St. Pancras, N.)

    TELLERS FOR THE AYES:

    Ledger, R. J.

    Ross, William

    Mr. J. Taylor and Mr. G. H. R. Rogers.

    Lee, Frederick (Newton)

    Royle, C.

    NOES

    Agnew, Sir Peter

    Bossom, Sir Alfred

    Cunningham, Knox

    Aitken, W. T.

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

    Currie, G. B. H.

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

    Braine, B. R.

    Dance, J. C. G.

    Amery, Julian (Preston, N.)

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

    Davidson, Viscountess

    Amory, Rt. Hn. Heathcoat (Tiverton)

    Brooman-White, R. C.

    D'Avigdor-Goldsmid, Sir Henry

    Arbuthnot, John

    Browne, J. Nixon (Craigton)

    Deedes, W. F.

    Armstrong, C. W.

    Bryan, P.

    Digby, Simon Wingfield

    Ashton, H.

    Bullus, Wing Commander E. E.

    Dodds-Parker, A. D.

    Astor, Hon. J. J.

    Burden, F. F. A.

    Donaldson, Cmdr. C. E. McA.

    Atkins, H. E.

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

    Doughty, C. J. A.

    Baldock, Lt.-Cmdr. J. M.

    Campbell, Sir David

    Drayson, G. B.

    Baldwin, A. E.

    Carr, Robert

    du Cann, E. D. L.

    Balniel, Lord

    Cary, Sir Robert

    Dugdale, Rt. Hn. Sir T. (Richmond)

    Barber, Anthony

    Channon, Sir Henry

    Eden, J. B. (Bournemouth, West)

    Barlow, Sir John

    Chichester-Clark, R.

    Elliott, W.W.(N'castle upon Tyne, N.)

    Barter, John

    Clarke, Brig. Terence (Portsmth, W.)

    Emmet, Hon. Mrs. Evelyn

    Baxter, Sir Beverley

    Cole, Norman

    Erroll, F. J.

    Beamish, Maj Tufton

    Conant, Maj. Sir Roger

    Farey-Jones, F. W.

    Bell, Philip (Bolton, E.)

    Cooke, Robert

    Fell, A.

    Bell, Ronald (Bucks, S.)

    Cooper, A. E.

    Finlay, Graeme

    Bennett, F. M. (Torquay)

    Cooper-Key, E. M.

    Fisher, Nigel

    Bevins, J. R. (Toxteth)

    Cordeaux, Lt.-Col. J. K.

    Fletcher-Cooke, C.

    Bidgood, J. C.

    Corfield, Capt. F. V.

    Foster, John

    Birch, Rt. Hon. Nigel

    Craddock, Beresford (Spelthorne)

    Fraser, Sir Ian (M'cmbe & Lonsdale)

    Bishop, F. P.

    Crowder, Sir John (Finchley)

    Freeth, Denzil

    Body, R. F.

    Crowder, Petre (Ruislip—Northwood)

    Galbraith, Hon. T. G. D.

    450

    451

    Gammans, Lady

    Kimball, M.

    Raikes, Sir Victor

    Garner-Evans, E. H.

    Lagden, G. W.

    Ramsden, J. E.

    George, J. C. (Pollok)

    Lambton, Viscount

    Rawlinson, Peter

    Gibson-Watt, D.

    Lancaster, Col. C. G.

    Redmayne, M.

    Glover, D.

    Langford-Holt, J. A.

    Rees-Davies, W. R.

    Godber, J. B.

    Leavey, J. A.

    Remnant, Hon. P.

    Gomme-Duncan, Col. Sir Alan

    Leburn, W. G.

    Renton, D. L. M.

    Goodhart, Philip

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

    Ridsdale, J. E.

    Cower, H. R.

    Lindsay, Hon. James (Devon, N.)

    Rippon, A. G. F.

    Graham, Sir Fergus

    Lindsay, Martin (Solihull)

    Robinson, Sir Roland (Blackpool, S.)

    Gram, W. (Woodside)

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

    Rodgers, John (Sevenoaks)

    Green, A.

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

    Roper, Sir Harold

    Grosvenor, Lt.-Col. R. G.

    Lucas, P. B. (Brentford & Chiswick)

    Ropner, Col. Sir Leonard

    Gurden, Harold

    Lucas-Tooth, Sir Hugh

    Russell, R. S.

    Hall, John (Wycombe)

    McAdden, S. J.

    Schofield, Lt.-Col. W.

    Harris, Frederic (Croydon, N.W.)

    Macdonald, Sir Peter

    Scott-Miller, Cmdr. R.

    Harris, Reader (Heston)

    Mackeson, Brig. Sir Harry

    Sharples, R. C.

    Harrison, A. B. C. (Maldon)

    Mackie, J. H. (Galloway)

    Shepherd, William

    Harrison, Col. J. H. (Eye)

    McLaughlin, Mrs. P.

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

    Harvey, Sir Arthur Vere (Macclesfd)

    Maclean, Fitzroy (Lancaster)

    Smithers, Peter (Winchester)

    Harvey, John (Walthamstow, E.)

    McLean, Neil (Inverness)

    Spearman, Sir Alexander

    Hay, John

    Macmillan, Maurice (Halifax)

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

    Heald, Rt. Hon. Sir Lionel

    Macpherson, Niall (Dumfries)

    Stanley, Capt. Hon. Richard

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

    Maddan, Martin

    Stevens, Geoffrey

    Henderson, John (Cathcart)

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

    Steward, Harold (Stockport, S.)

    Hesketh, R. F.

    Maitland, Hon. Patrick (Lanark)

    Steward, Sir William (Woolwich, W.)

    Hicks-Beach, Maj. W. W.

    Manningham-Buller, Rt. Hn. Sir R.

    Storey, S.

    Kill, Rt. Hon. Charles (Luton)

    Markham, Major Sir Frank

    Studholme, Sir Henry

    Hill, Mrs. E. (Wythenshawe)

    Marlowe, A. A. H.

    Summers, Sir Spencer

    Hill, John (S. Norfolk)

    Marshall, Douglas

    Sumner, W. D. M. (Orpington)

    Hinchinbrooke, Viscount

    Mathew, R.

    Taylor, Sir Charles (Eastbourne)

    Hirst, Geoffrey

    Mawby, R. L.

    Teeling, W.

    Holland-Martin, C. J.

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

    Temple, John M.

    Hope, Lord John

    Milligan, Rt. Hon. W. R.

    Thomas, Leslie (Canterbury)

    Hornby, R. P.

    Molson, Rt. Hon. Hugh

    Thompson, Kenneth (Walton)

    Hornsby-Smith, Miss M. P.

    Morrison, John (Salisbury)

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

    Horobin, Sir Ian

    Mott-Radclyffe, Sir Charles

    Thorneycroft, Rt. Hon. P.

    Howard, Hon. Greville (St. Ives)

    Nabarro, G. D. N.

    Thornton-Kemsley, C. N.

    Howard, John (Test)

    Neave, Airey

    Tilney, John (Wavertree)

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

    Nicholls, Harmar

    Turton, Rt. Hon. R. H.

    Hughes Hallett, Vice-Admiral J.

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

    Tweedsmuir, Lady

    Hughes-Young, M. H. C.

    Oakshott, H. D.

    Vane, W. M. F.

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

    Ormsby-Gore, Rt. Hon. W. D.

    Vickers, Miss Joan

    Hutchison, Sir James (Scotstoun)

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

    Wakefield, Edward (Derbyshire, W.)

    Hutchison, Michael Clark (E'b'gh, S.)

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

    Wall, Major Patrick

    Hylton-Foster, Rt. Hon. Sir Harry

    Osborne, C.

    Ward, Rt. Hon. G. R. (Worcester)

    Iremonger, T. L.

    Page, R. G.

    Ward, Dame Irene (Tynemouth)

    Irvine, Bryant Godman (Rye)

    Panned, N. A. (Kirkdale)

    Watkinson, Rt. Hon. Harold

    Jenkins, Robert (Dulwich)

    Partridge, E.

    Webbe, Sir H.

    Jennings, J. C. (Burton)

    Peyton, J. W. W.

    Whitelaw, W. S. I.

    Johnson, Dr. Donald (Carlisle)

    Pickthorn, K. W. M.

    Williams, Paul (Sunderland, S.)

    Johnson, Eric (Blackley)

    pike, Miss Mervyn

    Williams, R. Dudley (Exeter)

    Johnson, Howard (Kemptown)

    Pilkington, Capt. R. A.

    Wood, Hon. R.

    Joynson-Hicks, Hon. Sir Lancelot

    Pitman, I. J.

    Woollam, John Victor

    Keegan, D.

    Pitt, Miss E. M.

    Yates, William (The Wrekin)

    Pott, H. P.

    Kerby, Capt. H. B.

    Powell, J. Enoch

    TELLERS FOR THE NOES:

    Kerr, Sir Hamilton

    Price, Henry (Lewisham, W.)

    Mr. Wills and Legh.

    Kershaw, J. A.

    Profumo, J. D.

    Motion made and Question proposed, That the Clause, as amended, stand part of the Bill.
    Mr. Mitchison: This is the Clause which is going to save everything. It provides those stringent conditions which are to make impossible the tax avoidance which has been so freely prophesied by I think everyone who has studied this part of the Bill. Let us have a look at it. The importance of it, it seems to me, is that it is intended to do that which the Board of Inland Revenue thought impracticable and unworkable. While I agree that on questions of policy its opinion is not infallible, nor indeed always relevant, on
    452
    questions of administration we are bound to pay attention to its knowledge and experience of the practical side.
    It is quite a long Clause. It starts by making a general exclusion of companies that carry on a trade in this country. That in itself, though by now the words are pretty definite in their meaning, has certainly led to a great deal of trouble in the past, and even now is not as clear as all that. We could have had no better instance than the little dispute which arose, I think it was yesterday, about whether a company buying and selling land is or is not carrying on a trade. That dispute reflected quite a deal of legal controversy on exactly that point.

    453
    Then we come to an exception which will depend on the meaning, among other things, of "a recognised market," and the Government are so confident that everyone attaches the same meaning to those words that they have not thought fit to include a definition. So far as I know, the words have never before occurred in any Statute, fiscal or otherwise. The nearest we ever got to them was a recognised Stock Exchange, and that is a bit different.
    We come after that to the question of exporting companies. This was a matter that was again considered very carefully by the Board when it was putting in its observations to the Royal Commission. I think that the conditions laid down here reflect some of the comments which were made in those memoranda. But I remember, and the Committee will remember, that yesterday vigorous protests were made from the Government benches about not tying up businesses, not compelling people to carry on their trade in one way or another and not, in fact, interfering with the ordinary run of free business.
    Look at subsection (2). Look at the conditions which are here imposed and which have the effect that if, in fact they are not strictly complied with, a company ceases to be an overseas trade corporation. I agree with the Government that if we are to have an overseas trade corporation at all we have to try to draw a line; but the Government go on to say, "We have drawn a line." They may have done, but my conclusion is a little different. If this is a line we are trying to draw, then a concession of this sort depends on such narrow distinctions that it is really indefensible in principle.
    We shall not carry out the object we have in mind if this is the sort of distinction we have to draw. I would say that it is possible for a company so minded to comply with these conditions. It is, of course, a considerable interference with business in one form or another. I agree that it is possible to do it, but the distinction, fiscal, moral or any other between a company which does comply and a company which does not comply seems to me to be completely bogus.
    I think that it is perfectly possible for a company to arrange to comply with many of these conditions and in fact to do things which, I am sure, are not within
    454
    the general intentions of this part of the Bill, at any rate as it has been explained to us. We could not have had a more remarkable instance of a completely inconsistent addition to this Clause as a whole than the one that we had yesterday when the Government accepted an Amendment which would allow a company trading abroad to sell in this country not merely the produce that it made or produced abroad but any commodity of the same kind. Any distinction that there may previously have been between a producing company and a merchant company disappeared the moment that that quite illogical concession was made.
    5.15 p.m.
    The fact that the concession was argued, let alone conceded, shows the extraordinary artificiality of the lines that are drawn in this Clause. Naturally a good many hon. Members opposite say, "Oh, well; we and our friends would like the concessions to be as large as possible; let us make a sieve so full of holes that anybody can get through them. Let us extend to every conceivable purpose the special concession that is to be given only in special circumstances to special companies." We have had a good deal of that.
    Is not there another deduction to he drawn from all this? Is not the other deduction simply that this is the wrong way in which to try to give a special concession to companies trading overseas when we do it purely on the fiscal basis of it being what is here called an overseas trade corporation and refrain from doing it with regard to the purposes that that company is serving.
    I had a good deal of sympathy with an Amendment moved yesterday from the benches opposite about the special case of some chartered companies. I am not sure, when we look at it, that it did not really boil down to a single company. It is no doubt true that there are companies registered and resident in this country which are carrying out projects of special value to parts of the Commonwealth in particular. We argued last year, and we shall argue again today, that a concession, having regard to that sort of purpose and that sort of project and that sort of enterprise, is thoroughly justified.
    This proposal goes wildly beyond that. The line that is attempted to be drawn

    455
    here does not depend in any way on the character of the trade that is served, on its use to the Commonwealth or its use for any other special purpose that might commend itself to the Committee, but purely on the character of the business. How extraordinarily narrow it is. Look, for instance, at the subsection to which I was referring, about exporting. The first part says that the goods have to be sold on what are commonly called "free-on-board" terms, or perhaps others indicating delivery at a rather later stage.
    Nothing whatever is to be done about insurance, commission and other charges by anyone but the seller. That is the ordinary procedure with a delivery of that kind; the purchasing company is not to provide service. That does restrict it to f.o.b. deliveries or to cost, insurance and freight deliveries at some later stage. In practice, the type of delivery that is carried out in many of these cases is a strange mixture that does not fall into the somewhat rigid categories here laid down.
    I would not draw the conclusion that we ought to make no provision at all but would simply point out that it is not a good way of drawing the line if we have to depend on a dictation so rigid and so abstract. I find a great deal of support for that point of view in the Bill.
    When I turn to the miscellaneous Clauses—to which I refer for purposes of illustration—I find in the special subsection the very remarkable provision that if the company has done anything by mistake or has been obliged to do it, and has not had any material advantage out of it, the Commissioners may disregard it. We may have to consider that provision when we come to it.
    The need to insert a provision of that sort illustrates better than any words I can use the artificialities that are introduced into the Clause. My conclusion is not that the distinctions are not necessary or are too wide or too narrow. That is not what I am considering. It is that the lines on which those distinctions are drawn must be wrong, and they throw a light on the artificial character of the proposals in Part IV. If, instead of drawing the line in this way, it had been drawn in relation to the special relief provided for Dominion countries, or in
    456
    relation to the particular purpose of the company, or something of that sort, it would have been far easier to work. Here I rely on the Board of Inland Revenue's opinion. It would have been far easier for those concerned to understand and conform to than are these elaborate provisions.
    We shall not oppose the Clause. It is obvious that if we are to have some provision of the wide kind indicated by the preceding Clause, we must have qualifications and disqualifications, and we must try to draw our line somewhere. The Clause illustrates that the purpose of Part IV is misconceived because we have to draw such a wholly artificial line if we are to make any sense out of it.
    Before I sit down I cannot forbear teasing the Financial Secretary on his complete failure to answer the extremely difficult question that his own almost excessive ingenuity raised in connection with subsection (5). He devised out of the recesses of his mind the conception—it may be perfectly real—of a company which did not carry on a trade in any country because it carried it on in the middle of the sea. When I asked what we did about that the hon. Gentleman did not explain what the company was.
    Mr. Powell: The hon. and learned Member for Kettering (Mr. Mitchison) will observe in paragraph (b) that the profits arising from the whole of the trade carried on by such a company would not be chargeable in any country and therefore the company would not qualify as an overseas trade corporation.
    Mr. Mitchison: I am very glad we have an answer at last. We might perhaps have had it when the point was raised, but there it is. Does not it illustrate the fantastic character of this part of the Bill? Suppose a company which does a little bit of whaling, sometimes inside and sometimes outside territorial waters, or two companies, one of which fishes inside territorial waters and the other outside—[Interruption.] One of my hon. Friends points out that they might catch something even better and fruitier than fish. They might find oil. We all know what that means. It will depend upon territorial waters whether the company becomes an overseas trade corporation.
    Curiously enough, the middle of the ocean is not overseas, but the territorial

    457
    waters on the other side are. That is as it may be. I take it only as an instance of the extreme artificiality of the line we have to draw. I suggest that a line so drawn is unworkable and opens the door to evasion, and consequently to the administrative difficulties that the Board foresaw. The need to draw it shows that there is something wrong in the character of the concession that is offered by the Bill. What is fundamentally wrong is that the concession has no regard to the purpose for which the company is operating. I include in that Commonwealth purposes.
    Mr. Geoffrey Stevens: As I listened to the hon. and learned Member for Kettering (Mr. Mitchison), it seemed that he overlooked the undoubted fact that the overseas trade corporation is an entirely new conception in our taxation law and practice. In the circumstances, it must be somewhat complicated. I am less pessimistic than he. I prefer that the conditions of disqualification be reasonably fully set out. In any case, our taxation practice is based not only upon statute law but upon case law, which is derived from it.
    Before very long, we shall be able to solve such problems as what is and what is not a recognised market to the satisfaction of the hon. and learned Member for Kettering and the learned profession which he represents, of which he is so distinguished an ornament, and which may benefit very greatly from the complexities of Clause 21, if, indeed, the Clause is as complex as the hon. and learned Gentleman suggests.
    I have only one point to raise. I would say how much we welcome Part IV and, in broad terms, accept the disqualifications of Clause 21. As the hon. and learned Gentleman has said, the line has to be drawn somewhere, but I am puzzled about one particular bit of the line, indicated by subsection (3, a (i)). Banking is excluded from overseas trade corporation status. On the Second Reading of the Bill the Financial Secretary to the Treasury gave the Government's reasons. He said:
    "The activities of banking, finance and insurance are also excluded, because it would be difficult to say of any concern of that kind that its day-to-day operations can be separated from the activities of central control and management."—[OFFICIAL REPORT, 7th May, 1957; Vol. 569, c. 819.]
    458
    That may be true, but I see absolutely no reason why that should disqualify a bank from overseas trade corporation status.
    5.30 p.m.
    A great part of the problem of the balance of payments position of this country is eased by the overseas banking services provided by our banking institutions. To a large extent, they carry them out in overseas territories, not by subsidiary companies only, but by branches. It might well be advantageous to put them on the same basis as the financial institutions of the countries with whom they will be in competition. There is a little difficulty here. I agree that it is not so easy to think of suitable conditions in which all banking organisations could be brought in. I am not at all certain that the banks themselves in this country having overseas activities are entirely happy about the precise lines upon which they might be allowed to qualify. Therefore, I have no practical proposal to make at present for bringing banks within the framework of this Bill.
    None the less, I think it important that the position of the banks should be considered. I should like the Financial Secretary to give a little further explanation on the Motion, That the Clause stand part of the Bill, of the consideration which the Government have given to the position of banks and indicate that they would be willing in the months ahead to consider the position again, so that if a good case could be made—as may well prove to be so—perhaps in a subsequent Finance Bill the banks could be brought within the ambit of Part IV.
    Mr, Edward du CannWhile welcoming, like my hon. Friend the Member for Langstone (Mr. Stevens), the provisions of Part IV and accepting the disqualifications and the way in which they are drafted, none the less I wish to ask the Financial Secretary for some further clarification of subsection (3, a (11)) in relation to the ordinary commercial operations of pastoral and stock and station agencies in Australasia, as they are called.
    This Clause deals with lending money. The point I wish to make is a relatively narrow one as to what "wholly or mainly" means. I had an Amendment on the Order Paper which, if it had been

    459
    called, might have clarified the matter, but I can explain the point quite shortly. These businesses consist largely of the following categories of work: firstly, the sale of wool, of land and of stock for auction and by private treaty on a commercial basis; secondly, the sale of agricultural merchandise of various kinds to their clients, machinery and other agricultural necessities—in particular to farmers in Australasia; and, thirdly, the operation of grazing properties.
    Of those categories, by far the most important is the sale of livestock and the sale of wool and the sale of land. As the Committee will be aware, that is vital to Australasian economy and it is of vital importance to the British Commonwealth in the export trade. The Committee will be familiar with the amount of wool sold, in particular to the United States of America. The United Kingdom companies—there are five or six of them—behave with very great responsibility and have a high reputation in Australasia for the manner in which they carry out their operations.
    One of the matters which is particularly highly regarded is the way in which they arrange orderly marketing of agricultural products and in that connection, as a customary part of their operations, they provide their clients with finance pending the sales of commodities in which they are interested. For instance, they might lend money to a farmer while the wool is growing on the back of his sheep. That is an example, but there are many other such activities. This is an ordinary matter of quite natural commercial practice.
    I have looked at the accounts of a number of these companies and I have the accounts of one such company in front of me. When we look at the total income derived from these different activities and compare the activities of buying and selling on commission in the way I have described with the activities of lending to clients and the gross income derived from those two things, it is clear that the lending of money constitutes a very small part of the business, but when we look at the net figure when a large sum of money is involved, a rather different picture is shown.
    It is not clear at the moment how the Inland Revenue will judge this matter, whether it will judge it on the basis of the gross figure, which I should have
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    thought the logical basis, or judge it on the basis of the net figure. Should it judge it on the basis of the net figure, it would seem quite unreasonable because that would mean that these companies would be disqualified from being considered overseas trade corporations, although in fact on the face of it, in logic and from the point of view of the layman, they would seem abundantly qualified.
    That is the point I ask the Financial Secretary to give an answer to or to resolve in some way, but two other points arise out of this subsection. Firstly, in regard to the wording of the Clause it may be that I have slightly misunderstood it, but it seems that the long sentence comprises two different things, lending money on the one hand and providing capital for hire purchase operations on the other. I take it that those are two separate things and that one should not read the subsection as meaning lending money for the purpose of its provision for hire purchase purposes. I take it that entirely separate operations are concerned in that subsection.
    The second additional point is this. I do not wish to enter upon a discussion of Clause 32 at the moment because I realise that would be out of order, but we find that subsection (2, b) of that Clause comprises the lending of money without security. In this case the question of whether or not the clients of the companies concerned give security for the loans they receive is not mentioned. I am told that in Australia in particular, and especially in the State of Victoria, if one asks for security one is thought to be quite mad. To ask for security is not done.
    I wonder why there should be this distinction in the Clause. It might be that hon. Members may think Victoria is a very desirable place in which to live, but this is a matter of some importance to the companies concerned. In dealing with these matters this is a large part of their important business, which is vital to this country. I should be grateful if the Financial Secretary could say why the difference is made in the wording later and not here. I am quite satisfied with the way in which the Clause is drafted.
    Mr. Donald Chapman: I wish to ask the Financial Secretary a question about the interpretation of subsection (5). He will be aware

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    that we put down some Amendments to this Clause which, in effect, would have stipulated that the companies must have a permanent establishment in the area in which they are trading in order to qualify as O.T.C.s.
    Those Amendments have not been called, so we have to look at the interpretation of the subsection as it remains unamended. The question I want to ask is this. Subsection (5) says:
    "A company shall not qualify as an Overseas Trade Corporation unless—
    (a) the profits arising from the whole of the trade carried on by the company are chargeable in a country or countries…to income tax…"
    That means, in other words, unless Income Tax would have been paid on its trade in the foreign country.
    Suppose that a company in this country sells not by means of a permanent establishment in a foreign country but merely by means of an agent who is more or less a general broker and does not confine himself to selling the firm's goods, but the goods are nevertheless sold in such a way that Income Tax in that country will fall on the proceeds, is not the exporting company in some way brought within the terms of the Clause? It would be selling merely through an agent and undertaking little or no risk. However, because the profits on its wares would be subject to Income Tax in the foreign country as they passed through the hands of an agent, that company would be able to qualify as an O.T.C. and accumulate untaxed reserves in that foreign country which might presumably be used for starting up a business there or establishing its own sales outlet there.
    The puzzle is what will happen where exporting companies are merely acting through agents. Will they have the benefit of the Clause? Will they be able to accumulate funds in the countries where they are merely selling? Where companies are undertaking no risks of any magnitude in the foreign market and meeting no real competition but are merely leaving it all to an agent, is it right that the Bill should be extended to cover them? These are problems which one foresees if the Clause is unamended.
    Mr. Powell: My hon. Friend the Member for Langstone (Mr. Stevens) reminded the Committee that we are taking the
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    first, and necessarily experimental, step in a new departure in our tax law. Therefore, he will realise that such questions as he raised about the possibility of bringing banking in any form within the ambit of Part IV must be given further consideration. The main problem, as he recognised, is that it is extremely difficult to separate that part of the profits of a banking business which are made in this country by the central operations from those made overseas. That is at the heart of the difficulty about placing banking business in the same position as other businesses which qualify under Part IV. As I have said, this is the first stage, and we shall have to see what experience teaches us as we go on in its application.
    With regard to the point raised by my hon. Friend the Member for Taunton (Mr. du Cann), I understand that the companies which he has particularly in mind have been in touch with the Inland Revenue which is examining the facts of the undertakings and their business. Therefore, all that I ought to say at the moment is that "consisting wholly or mainly" is intended to convey the general emphasis of the undertakings of the firm concerned. My hon. Friend also referred to Clause 32, but that is concerned with a different matter, not with the disqualification of a company but with whether part of its receipts rank as trading or investment income. I can confirm, as he said, that the two matters which are dealt with in sub-paragraph (ii) are separate and not cumulative.
    5.45 p.m.
    The hon. Member for Northfield (Mr. Chapman) spoke about an overseas trade corporation carrying on a merchant business, but carrying it on, as it were, indirectly and not directly. It must, of course, be entirely an overseas merchant business, and it must be one in which no profits are earned in this country. The other provisions of the Clause and other Clauses in Part IV are designed to produce that effect. That being so, what the subsection in question is designed to achieve is that no part of those profits—they are profits of the company and not of the agent; we are dealing only with the profits of the company—are earned in such circumstances that no local tax system bites upon them. That is why the Bill does not in any way have the effect

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    of absolving from both United Kingdom tax and local tax, whatever or wherever it is, any part of the profits of a company.
    If there is a situation in which as a result of these provisions there would be no tax liability anywhere, here or in any other country, then the company would be disqualified by subsection (5). I think that the main problem which the hon. Member had in mind was concerned with-other parts of the Clause and other provisions of this Part of the Bill, those which ensure that no profits earned in this country shall rank for the exemption given by Part IV.
    Mr. Gordon Walker: I am grateful to the hon. Gentleman for the care with which he has replied to the points raised. I had intended to speak before he rose. First, can he tell us what a "recognised market" is? I should have thought that "recognised" demands "by" after it. It must be recognised by someone. I hope that he will be able to deal with this point.
    Subsection (2) deals with the necessity to sell exports at f.o.b. prices to an overseas subsidiary if it is to be an O.T.C. I presume from my reading of the Bill that any O.T.C. which broke these provisions by not selling at genuine f.o.b. prices would be disqualified as an O.T.C. Who decides that it should be disqualified? How long would it be disqualified? Would it have an appeal against disqualification?
    These are important points, because subsection (2) has been inserted specially to satisfy foreign criticism, particularly about the terms of G.A.T.T., and if it is not clear how the provision is to be enforced there will be very considerable doubts in the minds of other countries which are members of G.A.T.T. We are inclined to think that this part of the Clause will be unenforceable. It is extremely important that there should be a very clear penalty on anyone who is caught. However, I think it would be extremely difficult to enforce in the general run of things. Our view is that all these f.o.b. provisions are eyewash put in to satisfy foreign critics of the Government. We do not wish to divide against the Clause, because it contains disqualifications which must be provided. The
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    f.o.b. part of it will arise again on Clause 28 where we can go into the matter at greater length.
    One major point about the Clause to which I should like to draw the hon. Gentleman's attention is this. The Clause contains the disqualifications. I take it that any overseas trade corporation can disqualify itself deliberately by infringing any of these provisions. The disqualifications apply whether done deliberately or not. Therefore, any overseas trade corporation that found it convenient to stop being one just disqualifies itself, and then, presumably, requalifies itself later if it so wishes.
    In other words, is it not true that by the provisions of Clause 21, which are designed to limit the concessions of this part, a company can, so to speak, pop in and out of the status of an overseas trade corporation as it wishes; that it can deliberately disqualify itself and then requalify itself? Say it does a little trading at home—it disqualifies itself by doing so, and it might be very convenient for it to do so. For some tax reason or other it then wants to requalify, so it stops that trading at home. Is not the effect of the Clause that companies can, if it is convenient for them for tax purposes, opt in and out?
    How are we to guard against that? if that is the effect, does it not open up a rather wide door for people to dispose of their status as an overseas trade corporation, or disqualifying themselves as one? Does it not mean that they could really arrange their tax affairs more freely than could those companies in the United Kingdom that could not possibly qualify as overseas trade corporations? This would give special benefit to those who could qualify for that status, then disqualify themselves and later requalify. This seems to us to be a point of some importance, and I should like to hear the views of the Government on it.
    Mr. Powell: Perhaps the Committee will excuse me if I do not at this stage deal with the question of a recognised market, since we shall in due course reach Amendments dealing with that.
    The second point that the right hon. Member for Smethwick (Mr. Gordon Walker) put to me related to the matters set out in subsection (2)—if there is disqualification, how long does it last and

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    what right of appeal is there? In the first instance, of course, it is the business of the Inland Revenue to apply the tax law. If it appears to the Inland Revenue that the trading income of a company is not exempt, that the company does not qualify as an overseas trade corporation by reason of the disqualifications here set out, the Department will assess it for tax in this country as not being an overseas trade corporation—
    Mr. Mitchison: These are very detailed provisions about the terms of particular contracts. How does the hon. Gentleman anticipate that, in the ordinary course of taxation practice, the Inland Revenue is to find out whether such and such a sale, in the case of a company which may carry on many sales in the year, was strictly f.o.b., without any services being rendered or charges incurred?
    Mr. Powell: Of course, the Inland Revenue will have to be satisfied about the business as a whole and that the conditions in this part of the Bill are fulfilled. It is proposed to give the Department extensive powers to obtain the necessary information. The price charged is a matter which arises under Clause 28, and the existing powers of the Income Tax Acts are there applied to transactions such as one might here be concerned with. But the general procedure is clearly—
    Mr. Mitchison: I apologise for troubling the hon. Gentleman again, but I know of no provision at present under which the Inland Revenue would be able to get this detailed information. Perhaps even now, or on some future occasion, the Financial Secretary would tell me about it. It would seem to involve disclosure of the particular contracts. Moreover, I do not understand how the Inland Revenue is to begin. It is given the accounts of a company, or whatever it is—and these are the terms of every single contract. As I understand it, if a company enters into a single contract otherwise than on strict f.o.b. terms, it is thereby disqualified for a period.
    Mr. Powell: As we shall see when we come to Clause 28, the Inland Revenue already inquires into the prices at which transactions take place between companies, and inquires into the details of those transactions for tax purposes. There is no essential difference between
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    its satisfying itself on these matters and satisfying itself as to the starting point of the business which is carried on by a company claiming overseas trade corporation status.
    As I have said, the procedure will be that if the Inland Revenue is not satisfied that the company has avoided these disqualifications its duty will be to assess the company to United Kingdom Income Tax. The normal appeal procedure will then follow—the appeal to the Commissioners, and, on points of law, appeal to the High Court. There is, therefore, the normal, impartial resort as between the taxpayer and the Inland Revenue in this case, as generally.
    The disqualification, like the qualification, applies, in general—and detailed exceptions appear later in the part—for a year. Overseas trade corporation status, like the tax code on which it bites, is a matter of the tax year. It is a year to year matter, and it is therefore for the Inland Revenue to satisfy itself year by year that companies to which this status is accorded are not disqualified in any of the ways set out in the Bill.
    The right hon. Gentleman raised the very important question of a company deliberately disqualifying itself, for tax avoidance purposes, in years when it was convenient for it not to be an overseas trade corporation. This is a matter which is germane to that discussed by the Committee yesterday, when my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens) raised the question of an option—to be or not to be an overseas trade corporation.
    It will quite clearly be necessary to take steps to prevent companies from being able to disqualify themselves for tax avoidance purposes, and to give a discretion to the Inland Revenue, such as it has in a good many circumstances already—as it already has, for example, under Clause 27—not to accord overseas trade corporation status to a company which is clearly hopping in and out of that status for tax avoidance purposes. It is my right hon. Friend's intention to take measures to that end in the Amendments which he will table on Report to meet, in part, the point raised yesterday by my right hon. and learned Friend.
    Mr. Mitchison: Does that mean that what the Commissioners will have to consider is the question of the company's intentions in entering into contracts or making other arrangements which disqualify it for a period?
    Mr. Powell: Yes.
    Question put and agreed to.
    Clause, as amended, ordered to stand part of the Bill.

    Clause 22.—(EXEMPTION OF TRADING INCOME FROM INCOME TAX.)
    Mr. Gordon Walker: I beg to move, in page 17, line 46, after "excluded", to insert:
    "to the extent stated in the Schedule (Extent of exclusion from charge to income tax of trading income arising to an Overseas Trade Corporation) to this Act".
    The Temporary Chairman (Mr. George Thomas): I am advised that the New Schedule entitled

    Clause 22.—(EXEMPTION OF TRADING INCOME FROM INCOME TAX.)

      EXTENT OF EXCLUSION FROM CHARGE TO INCOME TAX OF TRADING INCOME ARISING TO AN OVERSEAS TRADE CORPORATION
      should be discussed with this Amendment.
      Mr. Gordon Walker: Yes, it would be very much more convenient to discuss that Schedule with this Amendment which, indeed, is just put down to bring in the Schedule.
      This is a major Amendment from our point of view. Granted that the principle of the Bill is being accepted, this is the best we can do with it, and I hope that the Chancellor will pay serious attention to the arguments we use. So far, he has been a bit slap-happy and reckless, not to say frivolous, in his attitude to our Amendments He says that it does not matter what the Board of Inland Revenue says and it does not matter what the Royal Commission says. He says that it does not matter what the effect on our balance of payments is. All that matters is something called overseas trade, which sounds rather good—one can make a patriotic appeal about it—but which, apparently, really means that things now manufactured in this country will be manufactured abroad with the blessing and encouragement of the Government. That is really the essence of the Chancellor's argument so far. It is really not good enough for him to brush everything else aside and
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      work on a sort of instinct, giving no reasons at all for what he is doing, and certainly not troubling to controvert, if he can, the arguments we put forward.
      6.0 p.m.
      I will not go through the things we have to say about the general principle of the Bill, but it is clear that we are very doubtful about the whole project of setting up overseas trade corporations. We do not believe that the country commands the necessary resources to be diverted on such a scale to overseas investment at the moment, and we think that it will damage our balance of payments. Indeed, the Chancellor is in agreement with us about that; at any rate, in the short run—and we really do not know how long will be the run—the Government's proposal, he admits, will have a bad effect on our balance of payments. It is, moreover, clear that certain sorts of overseas trade will have a worse effect on our balance of payments than others.
      Holding those views, we have put down the proposed new Schedule, the purposes of which is, first, to scale down the whole extent of this concession and, secondly, to discriminate between one sort of undertaking in overseas trade and another, partly for political reasons, in order to give preference to trade in the Commonwealth, and partly for economic reasons, because there are certain sorts of overseas trade which are less harmful to our balance of payments in the short run than other forms of overseas investment.
      The principle we adopt is to differentiate by percentage of United Kingdom tax remitted and by reference to the area in which the trade is taking place. There are many examples in the world of these two methods being used, either separately or in conjunction, and it cannot, therefore, be argued that what we propose is unworkable. It may be argued that it is undesirable, but it cannot be argued that it is unworkable. The United States, for instance, does just this; it gives a percentage reduction against home tax and it discriminates according to the area in which the overseas trade is taking place.
      American trade in the Western hemisphere, but not elsewhere, is given between 27 and 30 per cent. rebate against local United States tax. That is very much the same as we are proposing in our Amendment. Trade in the United

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      States possessions is given 100 per cent. remission of United States tax. The Americans. therefore, are doing just what we suggest we should do; they are discriminating by percentage rebate according to areas and the political importance of the trade for the United States or United States possessions.
      We ourselves in our own legislation have drawn this distinction between Commonwealth and non-Commonwealth or extra-Commonwealth trade by the very same device of a percentage in the unilateral double taxation relief provided for in Section 348 of the Income Tax Act, 1952. If one is trading with a Commonwealth country with which we have not got a double taxation agreement and we therefore give unilateral double taxation relief, 75 per cent. of United Kingdom tax is remitted; whereas if one is trading in similar circumstances in a foreign country, not in the Commonwealth, the rebate for double taxation is only 50 per cent. It will be seen that we ourselves already, in our own existing legislation, make the distinction by variable percentage between Commonwealth and non-Commonwealth trade. New Zealand gives concessions only to overseas trade in other Commonwealth countries, not in foreign countries. Belgium does it by percentage, giving 20 per cent. relief. France gives special reliefs in the French Union.
      There are plenty of examples of the method being used. Indeed, the way it is proposed to do it in the Bill really seems to be unique. When one looks at what other nations do, one does not find that any of them have picked that way. Practically all other countries which use this sort of device have, in fact, done it more or less along the lines which we propose in our new Schedule. We argue, therefore, with conviction, that our proposals are at least practicable and workable, and they will stand up.
      The actual way in which we apply the principles is really very simple. Every overseas trade corporation would get a basic rate of 20 per cent. of its United Kingdom tax remitted to it for overseas trade, which happens to be the level that Belgium gives to her overseas trade corporations. We, however, add to that, namely that if the overseas trade corporation is trading in the Commonwealth it
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      shall have double the basic rate, namely a 40 per cent. remission of United Kingdom Income Tax. Then we give a bonus of 10 per cent. over and above that in both cases to all overseas trade corporations dealing in plantations, mines, oil wells, public utilities and similar things. In other words, for such overseas trade corporations as deal in extractive industries of one sort or another, the basic remission of Income Tax would be 30 per cent. and, if trading in the Commonwealth, 50 per cent.
      The reason for the bonus is that undertakings engaged in the sort of operations referred to are the best from the point of view of our balance of payments. They are operations of a kind designed to produce imports into this country at as cheap a rate as possible. If one is going to do this at all, there is a good deal to be said for encouraging investment particularly in the sort of undertakings which are more likely to turn the terms of trade in our favour. If there is to be. as the Chancellor has admitted, at any rate an ill effect in the short run upon our balance of payments, it is better to try to arrange mattes so that that bad effect is as small as possible.
      Notice taken that 40 Members were not present:
      House counted, and, 40 Members being present:—
      Mr. Gordon Walker: In our proposed Schedule, we recognise what has been argued from both sides of the Committee, that there is a special reason for giving full benefit to what we call pioneer companies, companies which are given pioneer relief in some Colony. We provide that, where there is pioneer relief of this sort, the British company concerned shall get the full extent of that relief should it be more than it would get otherwise under our proposed Schedule according to the type of trade it is conducting.
      This proposal, therefore, is a workable one. It is very much more sensible than the Government's proposal. It is related to the true needs and interests of the nation and of the Commonwealth. It is extremely important, when discriminating in this way, to give a clear preference in favour of the Commonwealth, and this we do in our Schedule. The Government stubbornly and stoutly refused to do it, though, of course, they have today every

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      opportunity of doing so by accepting our Amendment.
      If the Chancellor or the Economic Secretary advise the Committee to reject the Amendment, they will be asking the Committee to reject the whole principle of giving preference to the Commonwealth when dealing with this sort of thing. In our view this is a constructive, carefully thought-out proposal which is greatly preferable to the one at present in Part IV.
      Mr. Bernard Braine: I would not have risen but for the observations made repeatedly throughout the debate yesterday that the Amendment and its attendant Schedule were to be the great feature of the debate and that those of us who were deeply attached to the cause of Commonwealth development should find ourselves in the Lobby with the right hon. Gentleman the Member for Smethwick (Mr. Gordon Walker).
      Mr. Gordon Walker: The hon. Member is wrong. Our real proposal is in a new Clause. This method is merely assuming that it has to be done the way the Government want it. The new Clause should really attract the hon. Member, because it would give the entire help to the Commonwealth.
      Mr. Braine: The right hon. Gentleman at least began his remarks by saying that this was a most important Amendment. If he now wishes to run away from that, I am in company with him, because while I am always ready to support any proposal which effectively discriminates in favour of Commonwealth interests, I do not think that this proposal would do so.
      There may well be a case for giving selective reliefs. Certainly, throughout our discussions so far, the balance of payments has loomed large and I well see the motive behind the argument which has been advanced from the benches opposite. I should have thought, however, that if any particular trades were to be given selective reliefs, basing the case for doing so on the balance of payments argument, they should be those earning dollars and hard currency.
      There is a fallacy, which perhaps the Committee has noticed, in the right hon. Gentleman's arguments. The provisions of the Amendment and the Schedule
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      apply only to overseas trade corporations—that is to say, to companies trading overseas and resident in the United Kingdom. If that be so, they cannot apply to the subsidiaries of British companies trading overseas. Yet the Schedule draws attention to the frustration of pioneer reliefs and the whole purpose of the proposal, I take it, is that that frusttration should, in part at least, be removed.
      Mr. Gordon Walker: Wholly removed.
      Mr. Braine: Agreed. But the point with which the right hon. Gentleman is not seized is that pioneer concessions are given in British Colonial Territories—at least, in the main, if not wholly—to companies registered abroad, which are wholly excluded from the Bill and which are not overseas trade corporations and are, therefore, quite outside the scope of these proposals. Thus, the Schedule is complete nonsense.
      As I understand it, the proposal here is that benefits arising from overseas trade corporation status should be enjoyed on a discriminatory basis, the maximum benefit being 50 per cent. in the case of certain companies and certain kinds of trade. It is interesting to observe, therefore, that the party opposite wishes in respect of these companies to whittle down by half the concession which my right hon. Friend is willing to extend to them. That is an odd way of helping the Commonwealth.
      6.15 p.m.
      I ask the Committee, however, to observe something else in order to get the matter in perspective. The argument used by the right hon. Gentleman—it was implied throughout everything said by him and his hon. Friends yesterday—is that this proposal was designed to help the Commonwealth. I should point out that while such companies operating in foreign countries would get a 50 per cent. relief, other companies operating in the Commonwealth will get only a 40 per cent. relief or less. This is not only a discriminatory provision, but in some respect it discriminates against companies operating in the Commonwealth. Because of that, I consider the right hon. Gentleman's proposal mean, restrictive and cumbersome and I hope that the Committee will reject it.
      Mr. Roy Jenkins: Which foreign countries would get 50 per cent.?
      Mr. Braine: If the hon. Member looks at the new Schedule, he will see Class C:
      "Of the description in class A and carrying on a trade arising wholly or mainly out of the ownership or management of a foreign plantation, mine or oil well"
      The words
      "foreign plantation, mine or oil well"
      can only mean undertakings outside the Commonwealth.
      Mr. Birch: The right hon. Member for Smethwick (Mr. Gordon Walker) was, I thought, glowing with the pride of authorship when he made his speech. It is certainly an ingenious proposal and it is a pleasure to see hon. Members opposite seeking to give some preference to the Commonwealth. That, of course, is a great change from the past. So many Socialist idols have fallen that they now find it necessary to lay their votive gifts at the feet of Lord Beaverbrook. At any rate, it is something that we can welcome.
      The first point to be noted if one wants to benefit the Commonwealth is that the effect of accepting the Amendment would be to reduce the amount of relief granted to those companies. Secondly, it departs entirely from the principle both of the Royal Commission Report and of the Bill, that is, the principle of jurisdiction. In other words, the tax is levied in the country where the company is operating. The Amendment departs from that and it goes in for a large amount of discrimination—one might say discrimination with a vengeance. The right hon. Gentleman yesterday was very severe about discrimination. He said:
      "…we do not like the radical departure from the basic tax principle of this country, that there should not be discrimination between taxpayers."—[OFFICIAL REPORT, 26th June, 1957; Vol. 572, c. 310.]
      The Amendment would bring about very considerable discrimination, and, in the nature of the case, that discrimination would be bound to be arbitrary. For example, the taxation on mining companies operating outside the Commonwealth would be higher than on those mining companies operating inside the Commonwealth, regardless of whether the metal that the mine produces was available in the Commonwealth. For
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      example, borax is not, I think, available in the Commonwealth. This provision would penalise the production of something which is of immense importance to this country.
      We all want to help the Commonwealth, but we cannot invest in the Commonwealth unless we have money to invest, and we cannot get that money unless we can trade all over the world. We cannot live in the Commonwealth simply by taking in each other's washing. Therefore, discrimination of this sort would not only be against the principle of the Bill and against what was said in the Royal Commission's Report, but it would also diminish our capacity to help the Commonwealth by reducing our trade, our world wide balance of payments and our economic strength. It is on our economic strength that our ability to help the Commonwealth depends.
      Mr. John Cronin: I am rather surprised at the Economic Secretary's reply. I agree that yesterday we on this side of the Committee said that we were against discrimination, and I agree that our Amendment produces discrimination, but, if the right hon. Gentleman will recollect, we were yesterday opposed to the whole principle of Part IV of the Bill, and our point is that if we have to accept Part IV then let the discrimination be in the most favourable way for the Commonwealth.
      I should like to refer to three aspects of the Amendment, namely, the partial relief, the Commonwealth preference and the discrimination in favour of the extractive and agricultural industries. The Chancellor said yesterday that he was a hundred percenter. He showed that he had a bold and buccaneering spirit, and he was loudly cheered by his supporters. This is very encouraging. It has an almost schoolboyish charm about it, but, of course, this bold spirit is being shown at the expense of other people's money and at the expense of the right hon. Gentleman's own responsibilities. Therefore, it is not quite as commendable as it might at first seem to be.
      I suggest to the Chancellor that when he is indulging in a completely unknown and unforeseeable type of fiscal measure he should proceed cautiously, and to proceed cautiously here is to make these reliefs partial. The right hon. Gentleman

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      must bear in mind that there will be regulations in other countries. It is quite likely that other countries will start making concessions to their overseas corporations, or their equivalent, and will therefore nullify the measures that we are taking today.
      If, on the other hand, our measures are of a partial nature they are not likely to cause such a stir and such a strong reaction on the part of other countries. The Chancellor must bear in mind that in many countries where there are overseas trade corporations there is a strong feeling of nationalism. A sudden sweeping 100 per cent., such as is proposed in the Bill, might well give the impression that there is to be a wholesale invasion of those countries by British firms, and it might result in nationalistic disapproval.
      As to the aspect of caution, from the purely budgetary point of view if we have these discriminatory percentages they can be varied from year to year in accordance with the conditions of world trade. All Chancellors over the past few years have been painfully familiar with the sudden and repeated variations which there can be in world trading conditions. Here, by means of the Amendment, we on this side of the Committee are providing a mechanism for varying discrimination so as to obtain the maximum advantage.
      Obviously, there is a strong argument for giving preference to the Commonwealth because it occupies such a high place in our export trade, and the sterling area is in a constant state of capital shortage. If the Chancellor accepted the Amendment he would certainly ensure that capital would be exported to those places where it would produce the maximum advantage both to ourselves and to the sterling area. The Chancellor will also find that the constant problem that he has to face is that of the sterling balances. Our Amendment would ensure that such capital as is exported would tend to go into the sterling area rather than outside it, and would tend on the whole to ease that problem.
      The Chancellor is already aware that Commonwealth trade is considerably weakened. There have been difficulties in our trade with Australia and New Zealand and a very big decrease in Commonwealth trade as opposed to
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      world trade as a whole. Therefore, here again our Amendment will have a very helpful effect. The right hon. Gentleman must also bear in mind that there is a definite psychological value in any Amendment which gives Commonwealth preference, because Commonwealth ties have been rather painfully weakened in the last year through unhappy events into which we will not now go in detail.
      The other aspect of the Amendment is the preference for the extractive and agricultural industries. That is an obvious advantage in that these industries produce substances of which we have a great need in this country and of which there is a world shortage. Therefore. anything that tends to increase their production will be valuable. In addition, capital invested in extractive industries and agricultural production will cheapen those products. Thereby, there will he an improvement in our terms of trade and consequent benefit to our balance of payments. On the other hand, if the Chancellor's concessions are given to manufacturing, processing and distributing industries, there will be a tendency for those industries to sell their goods at considerably lower prices without any increased productivity, and that will have an opposite effect of making the terms of trade move against us. Again, there will be a tendency for the interests of British workers to be prejudiced if Part IV of the Bill is passed completely unamended.
      Another matter which the Chancellor should particularly bear in mind is that there will be competition between various countries to obtain British capital. The result will be that the poorer countries, which will be unable to give tax concessions, will tend to fall away in the race and they will suffer. That, from an elementary point of view of humanity, anyone who has any familiarity with the standard of living in some of the Commonwealth and Colonial territories will certainly take very seriously in mind.
      The Amendment, therefore, is something of a watershed. It is the dividing point. The Committee should be told quite clearly what the Chancellor's intentions are. Does he intend that Part IV should be of real value to our balance of payments position and to world trade generally, or is Part IV simply another concession to the shareholders and to the upper income groups, rather like his

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      Surtax concession? Here we on this side of the Committee are providing an Amendment which will have a logical effect and will make sure that the benefits of Part IV, such as they are, will be distributed in the manner most acceptable to our balance of payments and to our Commonwealth generally.
      Yesterday the Chancellor made a statement which should receive a prize as the under-statement of the Session when he said that he was not shocked by shareholders benefiting. Is that the keynote to Part IV? Is it first and foremost a question of shareholders benefiting, or does the right hon. Gentleman want to produce a useful Measure that will produce ultimate prosperity for the country?
      6.30 p.m.
      Mr. Douglas Houghton: The Amendment under discussion relates to Clause 22, which is really the main operative Clause in Part IV of the Bill. First we had Clause 20 which gave us the definition of an overseas trade corporation. then Clause 21 gave us the disqualifications, and Clause 22 gives us the main Income Tax relief on overseas trade corporations.
      I can understand the Treasury Bench feeling so weary of all this at this stage for it is a wearisome and complicated task. This is the kind of provision in the Finance Bill which can go through without adequate discussion because it is so complex. and it is so difficult to grasp that it might easily escape critical examination in this Committee. Yet under this Clause there are more millions of tax relief, I think I am right in saying, than in any other Clause in the Bill. That shows how important it is. I will not say that this is the Clause under which—
      The Deputy-Chairman (Sir W. Anstruther-Gray): We are not discussing the Question that the Clause stand part we are discussing a specific Amendment.
      Mr. Houghton: Yes, Sir William. I was coming to the Amendment in a moment. I thought I had better first say what the Clause did before I discussed what the Amendment tried to do with it. It probably takes a little longer but I will get there very soon. I was about to say that the Royal Commission on the Taxation of Profits and Income
      478
      devoted about twenty-four pages of its report to the matter with which this Clause deals and which our Amendment seeks to alter.
      There is no doubt that the Royal Commission had great difficulty in making up its mind on this matter. If we re-read Chapter 24 of that report which deals with overseas profits, we appreciate that the arguments and the counter-arguments and the analyses of the taxation aspects of this matter gave the Royal Commission a good deal of trouble. It is a form of discrimination in our tax system which the House of Commons always looks at very critically. The Clause proposes one way of doing it, the Royal Commission examined an alternative as well as the method adopted in the Clause, and the Amendment suggests another way of doing the same thing.
      What we are dealing with is a matter of opinion based on examination of the administration problems involved and the purposes of the tax relief which it is proposed to give. It depends on consideration of all those matters as to what conclusion we reach. In paragraph 666 the Royal Commission said that there were two main alternatives in the methods of granting exemption. One was to define a particular kind of profit as overseas profit and to exempt that in the hands of the taxpayer. The other was to define a particular kind of corporation as an overseas trader and to exempt all the profits or, perhaps, all the income and profits of that corporation.
      There are difficulties about both, both as matters of policy and of administration. The Amendment suggests a third way of channelling this tax relief into overseas activities in the Commonwealth. The Economic Secretary has raised some objections to it. There are objections to be raised to almost anything one can think of in this context, and it is a matter of the balance of considerations which leads to the final conclusion.
      The main point, however, is what are we trying to do? The Chancellor seems to be in no doubt about what he wants to do. He wants to give this relief to overseas trade activities on a very wide scale. It can be questioned whether the full extent of the Chancellor's purpose is necessary to bring about that incentive to the development of overseas trade, which is the only purpose of this tax relief.

      479
      There are few grounds for this relief by reference to considerations of equity.
      Their economic purpose is really the mainspring of these proposals, and when the Royal Commission reached certain conclusions under the heading of "The Action Recommended" on page 206 of the report, it said:
      "Any scheme that is put into operation on these lines touches economic issues of great importance. We have tried to identify and analyse those issues in the earlier part of this Chapter. Such a scheme can only be justified in the long run by its contribution towards success in the handling of those issues. It is by this that it will have to be judged rather than by theoretical arguments of equity."
      It is by reference to that criterion that we have to judge the Chancellor's proposals and the alternative to them in the Amendment. However doubtful we may feel as to the case for this relief in general, there is no doubt that we should feel more enthusiastic about it if the relief were being given to help overseas trade in the Commonwealth. That, at least, is something which has great sentimental interest as well as an economic and Commonwealth purpose, and is to be warmly welcomed.
      The Chancellor's proposals, of course, go much further and really amount to a wide discrimination in favour of capital which is employed outside the United Kingdom and not necessarily within the Commonwealth. I know some people think that it is a bad principle to discriminate between the home and the export trade in any circumstances. There are also criticisms which can be levelled against proposals which compel firms in this country with overseas activities to go through complicated processes of hiving off their overseas trading activities in order to bring them within the scope of this relief, involving reorganisation, extensive professional advice, the creation of fresh companies and the like, none of which will increase the national income in this country by a single penny—though the Chancellor no doubt says in his mind that eventually he not only hopes he will, but feels confident that he will achieve this result.
      There are administrative difficulties which can be raised against our Amendment. There are administrative difficulties which can be raised against the Clause and any alternative to the Clause. Indeed it is no secret now, it appears, that the Board of Inland Revenue addressed
      480
      themselves at great length to the Royal Commission on a great number of them. It is unfortunate that their evidence to the Royal Commission on matters covered by this Clause and by this Amendment have become available in such a queer fashion.
      The Financial Secretary reminded me last night that documents prepared by the Inland Revenue and submitted to the Royal Commission were dealt with in a certain way by the Royal Commission, and copies of these documents were deposited in the British Museum, the National Library of Scotland and other libraries mentioned in paragraph 12 of the Final Report of the Royal Commission. No mention was made about the documents being in the Library of the House of Commons. I went to the Library a few moments ago and got hold of the last copy. Hon. Members who want to look at the memoranda will be at a disadvantage because there will be no copies in the Library. I do not think that is the proper way to do business.
      I do not want to quote from any of the memoranda, because I think that in a way they were privileged documents. The Inland Revenue addressed itself not only to the difficulties of administration of the Clause and anything resembling our Amendment, but to the policy of the matter as well. I am not questioning its right to do so. It is fully entitled to say that those who are claiming relief under Clause 22 have failed to make out their case for it if that opinion is based on the evidence and information in the possession of the Department. I am not quarrelling with that.
      However, I am not sure whether that view should be available for publication and quotation unless the consent of the Inland Revenue has been obtained and unless it is available for all to see and it is not merely confined to libraries or those hon. Members who may have visited our Library a little earlier than I did. All I would say on that is that some hon. Members are better equipped than others to deal with the problems arising on the Clause and our Amendment, and this is solely due to the memoranda being given a restricted circulation instead of their having the full benefit of publication.
      Leaving that aside, I think we can go to the main bible of this and other

      481
      matters in Part IV, and that is the Report of the Royal Commission. Extended consideration was given to the subject. The headings in Chapter 24 are suggestive:
      "General observations.
      The problem ascertained.
      The case for exemption.
      The case against exemption.
      Further differences of view on the general argument."
      We have not finished yet. Even when we have stated all the arguments for exemption and all the arguments against it, there is more to be said, and it was said under the heading:
      "Further differences of view on the general argument."
      Other headings were:
      "Possible methods of exemption.
      The charge on distributions.
      The action recommended."
      The Chancellor has adopted in the Clause the recommendation, if it can be called that, of the Royal Commission, though it says in coming down on that side of the fence—that is, discrimination in favour of an Overseas Trade Corporation rather than discrimination in favour of particular types of overseas income or profit—
      "We have decided to base our recommendation on a scheme of this kind because it is the one that would receive the largest measure of support among the signatories to this Report, of whom some would not be ready to recommend a more comprehensive measure." So the Royal Commission was hesitant and even divided right to the last in making its recommendation.
      6.45 p.m.
      We have to ask ourselves whether this very large tax relief is necessary or justified for the whole range of overseas trade corporations, written down by the disqualifications in the preceding Clause, in the present economic situation. On that, as we were saying yesterday, opinions will differ considerably. The narrow issue on the Amendment is whether those reliefs should be given to overseas trade activities in the Commonwealth and not generally, and even then there would be variations in the amount of the relief according to the type of company or activity undertaken.
      All our reservations against the scheme as a whole come out once more on this
      482
      Clause. The Government have said that they will not accept the Amendment Presumably, in a few moments we shall pass to a discussion on the Clause, which is the real issue of Part IV. There is a large body of opinion in the country and among those who have been discussing these matters intelligently that it would have been better, as a beginning at all events, to give the relief a more restricted scope than that proposed in the Clause and to give greater emphasis to Commonwealth development in doing so.
      Mr. Roy Jenkins: I wish to return to the points put before the Committee by the hon. Member for Essex, South-East (Mr. Braine) and the Economic Secretary.
      We all followed the speech of the hon. Member for Essex, South-East very closely, and were grateful for it. It has been rare even to see a Government back bencher, and the privilege of both seeing and hearing one is so remarkable that we do not allow it to go by default. Apart from that, his words would have commanded attention on their own merit.
      None the less, I thought there were one or two fallacies in the hon. Member's points. He reverted to a point on which he was very eloquent yesterday and said that the Schedule was nonsense because it tried to help pioneer companies without dealing with the case of a company which was not resident in this country. As I pointed out in an aside at the time, to the extent that the Schedule is nonsense in that respect, the Bill is equally nonsense. The Chancellor, with whom I am in full agreement on the point, dealt is completely with the issue yesterday. It is one which has a certain amount of force behind it, but it is untrue to say that no help is given to pioneer companies unless the particular point of view of the hon. Member is accepted.
      With regard to another point, I think that the hon. Member has not read the Schedule. I had read it carefully, but I have read it even more carefully since his intervention. I also thought, even more surprisingly, that the Economic Secretary had not read it, because he implied that there were circumstances in which an extractive company outside the Commonwealth would be more favourably treated than any company within the Commonwealth could be.
      Mr. Birch: It is exactly the opposite.
      Mr. Jenkins: Might we again have what the right hon. Gentleman said on that point?
      Mr. Birch: It is all in HANSARD.
      Mr. Jenkins: HANSARD is not available at this stage. Perhaps we may have what the hon. Member for Essex, South-East said, and maybe it will work out.
      Mr. Braine: The hon. Gentleman referred to something I said and I am glad that he has asked for clarification. I am greatly relieved to hear that the party opposite does not regard Colonial Territories as foreign. If the learned Gentleman looks at line 24 of the Schedule he will see the word "foreign" used there. Amendments and Schedules put before the Committee ought to be couched in language which is clear. Will the hon. Member confirm that the effects of this discrimination might be regarded by the Commonwealth Governments concerned as an attempt by the United Kingdom Government to interfere with, to dictate to or to shape their economies, and that this might invite retaliation? This is really a most dangerous proposal.
      Mr. Roy Jenkins: In the course of explaining why he misunderstood the Schedule in the first place, the hon. Member has raised an entirely new matter. The use of the phrase
      "foreign plantation, mine or oil well"
      arises entirely because we were referring to language used in a previous Act in this respect.
      Clearly, there are two sets of qualifications which we are seeking to apply. First, we are dividing companies into those which operate in the Commonwealth and those which do not. Secondly, we are dividing companies into those which operate plantations, mines or oil wells, broadly speaking, extractive companies, and those which are not extractive companies. On the whole, we are more in favour of Commonwealth countries than non-Commonwealth countries, and more in favour of extractive companies than non-extractive companies. Leaving aside pioneer relief, the type of company which will get the maximum relief, 50 per cent. under our Schedule, is one which fulfils both qualifications, being a Commonwealth company and an extractive company. One which is one or the other, a Commonwealth company but not an
      484
      extractive company, gets a slightly lower rate, 40 per cent.; one which is an extractive company, but not a Commonwealth company gets a still lower rate, 30 per cent.; one which is neither gets 20 per cent. I hope that we are all clear on that, including the Economic Secretary. This seems to be a sensible basis of discrimination.
      A perfectly fair point made by the Economic Secretary and which must be met is that yesterday my right hon. Friend the Member for Smethwick (Mr. Gordon Walker) and other hon. Members on this side of the Committee made much of saying that discrimination in tax matters was of itself dangerous. The Economic Secretary thought that he could therefore say today that our discriminatory Schedule was in contradiction to what we had been saying yesterday. That is a point which must be met and which can be met.
      We are confronted with Part IV of the Bill which is extremely discriminatory among companies which, roughly speaking, have an equivalent ability to pay. However, we are not framing our own scheme, but seeking to amend a series of Clauses put forward by the Government themselves and which are very discriminatory. The degree of discrimination does not depend on the number of classes of discrimination. It depends on the difference between those which are chosen and those which are not chosen.
      Our Amendment reduces the difference between those chosen and those not chosen and also puts it on a basis which would be more helpful to our economy and to the purposes which we wish to serve. Nothing we said yesterday should be taken to mean that we believe that discrimination in the tax system can be avoided in all circumstances. What it can be taken to mean is that discrimination is in itself a bad thing and that before one does it one must be sure that there are strong economic arguments in favour of doing it. The Schedule does not cut across the general principles which we put forward yesterday.
      There is something to be said for discrimination in favour of Commonwealth countries, even though under our arrangement the amount of relief permitted, even to Commonwealth countries, is not as great as that under the Chancellor's flat provision. One of the things about which

      485
      we are concerned is the channelling of capital into countries overseas, particularly into Commonwealth countries. Yesterday I made it clear that I doubted whether the Bill went too far in offering incentives for the export of capital. Leaving that point aside, it is surely the case, if we are dealing with the export of capital, that if we have discrimination in favour of Commonwealth countries, then, even if the absolute rate of relief is lower than under the Chancellor's proposals, the effect is that more favourable treatment is being given to Commonwealth countries than to non-Commonwealth countries, which means that under our arrangement such capital as is exported is more likely to go to Commonwealth rather than to other countries than would be the case under the Chancellor's flat rate arrangement.
      With our other form of discrimination in favour of extractive industries as opposed to processing, manufacturing, and other categories of industries, we are concentrating upon those industries, the
      development of which is more likely to improve than to damage our balance of payments and our trading position in the future.
      Those are powerful reasons for accepting this carefully worked out Schedule. We are presented with a position in which the Chancellor is trying to do something, the objects of which we do not dislike, but by methods which we cannot accept. We are circumscribed at this stage to move within the framework which the Chancellor has laid down. We believe that this method would be less harmful to the Revenue and to the balance of payments and more beneficial to the Commonwealth and to the type of industries we want to encourage. I hope that my hon. Friends will carry this matter into the Division Lobby.
      Question put, That those words be there inserted:—
      The Committee divided: Ayes 186, Noes 239.

      Division No. 148.]

      AYES

      [6.58 p.m.

      Ainsley, J. W.

      Fernyhough, E.

      Kenyon, C.

      Allaun, Frank (Salford, E.)

      Flenburgh, W.

      Key, Rt. Hon. C. W.

      Allen, Arthur (Bosworth)

      Fletcher, Eric

      King, Dr. H. M.

      Allen, Scholefield (Crewe)

      Forman, J. C.

      Ledger, R. J.

      Awbery, S. S.

      Fraser, Thomas (Hamilton)

      Lee, Frederick (Newton)

      Bacon, Miss Alice

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

      Lee, Miss Jennie (Cannock)

      Bellenger, Rt. Hon. F. J.

      Gibson, C. W.

      Lewis, Arthur

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

      Gordon Walker, Rt. Hon. P. C.

      Lindgren, G. S.

      Benson, G.

      Greenwood, Anthony

      Lipton, Marcus

      Beswick, Frank

      Grey, C. F.

      Logan, D. G.

      Blackburn, F.

      Griffiths, David (Rother Valley)

      MacColl, J. E.

      Blenkinsop, A.

      Griffiths, Rt. Hon. James (Llanelly)

      McInnes, J.

      Blyton, W. R.

      Hale, Leslie

      McKay, John (Wallsend)

      Boardman, H.

      Hall, Rt. Hn. Glenvil (Colne Valley)

      MacMillan, M. K. (Western Isles)

      Bottomley, Rt. Hon. A. G.

      Hamilton, W. W.

      MacPherson, Malcolm (Stirling)

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

      Hannan, W.

      Mahon, Simon

      Bowles, F. G.

      Hastings, S.

      Mallalieu, E. L. (Brigg)

      Boyd, T. C.

      Hayman, F. H.

      Mann, Mrs. Jean

      Brockway, A. F.

      Healey, Denis

      Marquand, Rt. Hon. H. A.

      Brown, Rt. Hon. George (Belper)

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

      Mellish, R. J.

      Brown, Thomas (Ince)

      Hobson, C. R. (Keighley)

      Messer, Sir F.

      Burton, Miss F. E.

      Holmes, Horace

      Mikardo, Ian

      Callaghan, L. J.

      Houghton, Douglas

      Mitchison, G. R.

      Champion, A. J.

      Howell, Charles (Perry Barr)

      Monslow, W.

      Chapman, W. D.

      Hughes, Cledwyn (Anglesey)

      Moody, A. S.

      Chetwynd, G, R.

      Hughes, Emrys (S. Ayrshire)

      Morris, Percy (Swansea, W.)

      Clunie, J.

      Hughes, Hector (Aberdeen, N.)

      Moyle, A.

      Coldrick, W.

      Hunter, A. E.

      Mulley, F. W.

      Collick, P. H. (Birkenhead)

      Hynd, H. (Accrington)

      Noel-Baker, Rt. Hon. P. (Derby, S.)

      Collins, V. J.(Shoreditch & Finsbury)

      Hynd, J. B. (Attercliffe)

      Oliver, G. H.

      Cove, W. G.

      Irvine, A. J. (Edge Hill)

      Oram, A. E.

      Craddock, George (Bradford, S.)

      Irving, Sydney (Dartford)

      Orbach, M.

      Cronin, J. D.

      Isaacs, Rt. Hon. G. A.

      Oswald, T.

      Darling, George (Hillsborough)

      Janner, B.

      Owen, W. J.

      Davies, Ernest (Enfield, E.)

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

      Padley, W. E.

      Davies, Harold (Leek)

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

      Palmer, A. M. F.

      de Freitas, Geoffrey

      Jenkins, Roy (Stechford)

      Pannell, Charles (Leeds, W.)

      Delargy, H. J.

      Johnson, James (Rugby)

      Pargiter, G. A.

      Dodds, N. N.

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

      Parker, J.

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

      Jones, David (The Hartlepools)

      Parkin, B. T.

      Edwards, Rt. Hon. John (Brighouse)

      Jones, J. Idwal (Wrexham)

      Paton, John

      Evans, Albert (Islington, S.W,)

      Jones, T. W. (Merioneth)

      Pearson, A.

      Peart, T. F.

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

      Wells, William (Walsall, N.)

      Pentland, N.

      Slater, J. (Sedgefield)

      West, D. G

      Popplewell, E,

      Sorensen, R. W.

      Wheeldon, W. E.

      Prentice, R. E.

      Soskice, Rt. Hon. Sir Frank

      White, Mrs. Eirene (E. Flint)

      Price, J. T. (Westhoughton)

      Sparks, J. A.

      White, Henry (Derbyshire, N.E.)

      Price, Philips (Gloucestershire, W.)

      Steele, T.

      Wilcock, Group Capt. C. A. B.

      Probert, A. R.

      Stewart, Michael (Fulham)

      Wilkins, W. A.

      Proctor, W. T.

      Stonehouse, John

      Willey, Frederick

      Pryde, D. J.

      Stones, W. (Consett)

      Williams, Rev. Llywelyn (Ab'tillery)

      Randall, H. E.

      Strachey, Rt. Hon. J.

      Williams, Ronald (Wigan)

      Rankin, John

      Strauss, Rt. Hon. George (Vauxhall)

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

      Redhead, E. C.

      Swingler, S. T.

      Williams, W. R. (Openshaw)

      Rhodes, H.

      Sylvester, G. O.

      Willis, Eustace (Edinburgh, E.)

      Roberts, Goronwy (Caernarvon)

      Taylor, John (West Lothian)

      Wilson. Rt. Hon. Harold (Huyton)

      Robinson, Kenneth(St. Pancras, N.)

      Thomson, George (Dundee, E.)

      Winterbottom, Richard

      Rogers, George (Kensington, N.)

      Thornton, E.

      Woof, R. E.

      Ross, William

      Tomney, F.

      Yates, Victor (Ladywood)

      Royle, C.

      Ungoed-Thomas, Sir Lynn

      Younger, Rt. Hon. K.

      Shinwell, Rt. Hon. E.

      Viant, S. P.

      Simmons, C. J. (Brierley Hill)

      Warbey, W. N.

      TELLERS FOR THE AYES:

      Skeffington. A. M.

      Wells, Percy (Faversham)

      Mr. Short and Mr. Deer.

      NOES

      Agnew, Sir Peter

      Fell, A.

      Johnson, Dr. Donald (Carlisle)

      Aitken, W. T.

      Finlay, Graeme

      Johnson, Eric (Blackley)

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

      Fisher, Nigel

      Johnson, Howard (Kemptown)

      Amery, Julian (Preston, N.)

      Fletcher-Cooke, C.

      Joynson-Hicks, Hon. Sir Lancelot

      Arbuthnot, John

      Foster, John

      Keegan, D.

      Armstrong, C. W.

      Fraser, Sir Ian (M'cmbe & Lonsdale)

      Kerby, Capt. H. B.

      Ashton, H.

      Freeth, Denzil

      Kerr, Sir Hamilton

      Atkins, H. E.

      Gammans, Lady

      Kershaw, J. A.

      Baldock, Lt.-Cmdr. J. M.

      Garner-Evans, E. H.

      Kimball, M.

      Baldwin, A. E.

      George, J. C. (Pollok)

      Lagden, G. W.

      Barlow, Sir John

      Glover, D.

      Lambton, Viscount

      Barter, John

      Godber, J. B.

      Lancaster, Col. C. G.

      Baxter, Sir Beverley

      Gomme-Duncan, Col. Sir Alan

      Leather, E. H. C.

      Beamish, Maj. Tufton

      Goodhart, Philip

      Leavey, J. A.

      Bell, Philip (Bolton, E.)

      Gower, H. R.

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

      Bell, Ronald (Bucks, S.)

      Graham, Sir Fergus

      Legh, Hon. Peter (Petersfield)

      Bevins, J. R. (Toxteth)

      Grant, W. (Woodside)

      Lindsay, Hon. James (Devon, N.)

      Bidgood, J. C.

      Grant-Ferris, Wg Cdr. R.(Nantwich)

      Lindsay, Martin (Solihull)

      Biggs-Davison, J. A.

      Green, A.

      Linstead, sir H. N.

      Birch, Rt. Hon. Nigel

      Grimond, J.

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

      Bishop, F. P.

      Grosvenor, Lt.-Col. R. G.

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

      Body, R. F.

      Gurden, Harold

      Lucas, P. B. (Brentford & Chiswick)

      Bossom, Sir Alfred

      Hall, John (Wycombe)

      Lucas-Tooth, Sir Hugh

      Bowen, E. R. (Cardigan)

      Harris, Frederic (Croydon, N.W.)

      McAdden, S. J.

      Braine, B. R.

      Harris, Reader (Heston)

      Macdonald, Sir Peter

      Brooman-White, R. C.

      Harrison, Col. J. H. (Eye)

      Mackeson, Brig, Sir Harry

      Bryan, P.

      Harvey, Sir Arthur Vere (Macclesfd)

      Mackie, J. H. (Galloway)

      Bullus, Wing Commander E. E.

      Harvey, John (Walthamstow, E.)

      McLaughlin, Mrs. P.

      Burden, F. F. A.

      Heald, Rt. Hon. Sir Lionel

      Maclean, Fitzroy (Lancaster)

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

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

      McLean, Neil (Inverness)

      Carr, Robert

      Henderson, John (Cathcart)

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

      Cary, Sir Robert

      Henderson-Stewart, Sir James

      Macmillan, Rt. Hn. Harold(Bromley)

      Channon, sir Henry

      Hesketh, R. F.

      Macmillan, Maurice (Halifax)

      Chichester-Clark, R.

      Hicks-Beach, Maj. W. W.

      Macpherson, Niall (Dumfries)

      Clarke, Brig. Terence (Portsmth, W.)

      Hill, Rt. Hon. Charles (Luton)

      Maddan, Martin

      Cole, Norman

      Hill, Mrs. E. (Wythenshawe)

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

      Cooke, Robert

      Hill, John (S. Norfolk)

      Maitland, Hon. Patrick (Lanark)

      Cooper, A. E.

      Hinchingbrooke, Viscount

      Manningham-Buller, Rt. Hn. Sir R.

      Cooper-Key, E. M.

      Hirst, Geoffrey

      Markham, Major Sir Frank

      Cordeaux, Lt.-Col. J. K.

      Holland-Martin, C. J.

      Marlowe, A. A. H.

      Corfield, Capt. F. V.

      Holt, A. F.

      Marshall, Douglas

      Craddock, Beresford (Spelthorne)

      Hope, Lord John

      Mathew, R.

      Crowder, Sir John (Finchley)

      Hornby, R. P.

      Mawby, R. L.

      Crowder, Petre (Ruislip—Northwood)

      Hornsby-Smith, Miss M. P.

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

      Cunningham, Knox

      Horobin, Sir Ian

      Milligan, Rt. Hon. W. R.

      Currie, G. B. H.

      Howard, Hon. Greville (St. Ives)

      Morrison, John (Salisbury)

      Dance, J. C. G.

      Howard, John (Test)

      Mott-Radclyffe, Sir Charles

      Davidson, Viscountess

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

      Nabarro, G. D. N.

      D'Avigdor-Goldsmid, Sir Henry

      Hughes Hallett, Vice-Admiral J.

      Neave, Airey

      Deedes, W. F.

      Hughes-Young, M. H. C.

      Nicolson, N.(B'n'm'th, E. A Chr'ch)

      Dodds-Parker, A. D.

      Hurd, A. R.

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

      Doughty, C. J. A.

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

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

      Drayson, G. B.

      Hutchison, Sir James (Scotstoun)

      Osborne, C.

      duCann, E. D. L.

      Hutchison, Michael Clark (E'b'gh, S.)

      Page, R. G.

      Dugdale, Rt. Hn. Sir T. (Richmond)

      Hylton-Foster, Rt. Hon. Sir Harry

      Pannell, N. A. (Kirkdale)

      Eden, J. B. (Bournemouth, West)

      Iremonger, T. L.

      Partridge, E.

      Elliott, R. W.(N'castle uponTyne, N.)

      Irvine, Bryant Godman (Rye)

      Peyton, J. W. W.

      Erroll, F. J.

      Jenkins, Robert (Dulwich)

      Pickthorn, K. W. M.

      Farey-Jones, F. W.

      Jennings, J. C. (Burton)

      488

      489

      Pike, Miss Mervyn

      Sharples, R. C.

      Tilney, John (Wavertree)

      Pilkington, Capt. R. A.

      Shepherd, William

      Turner, H. F. L.

      Pitman, I. J.

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

      Turton, Rt. Hon. R. H.

      Pitt, Miss E. M.

      Smithers, Peter (Winchester)

      Tweedsmuir, Lady

      Pott, H. P.

      Spearman, Sir Alexander

      Vane, W. M. F.

      Powell, J. Enoch

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

      Vickers, Miss Joan

      Price, Henry (Lewisham, W.)

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

      Wade, D. W.

      Raikes, Sir Victor

      Stanley, Capt. Hon. Richard

      Wakefield, Edward (Derbyshire, W.)

      Ramsden, J. E.

      Stevens, Geoffrey

      Wall, Major Patrick

      Rawlinson, Peter

      Steward, Harold (Stockport, S.)

      Ward, Rt. Hon. G. R. (Worcester)

      Redmayne, M.

      Storey, S.

      Ward, Dame Irene (Tynemouth)

      Rees-Davies, w. R.

      Studholme, Sir Henry

      Watkinson, Rt. Hon. Harold

      Remnant, Hon. P.

      Summers, Sir Spencer

      Webbe, Sir H.

      Renton, D. L. M.

      Sumner, W. D. M. (Orpington)

      Whitelaw, W. S. I.

      Rippon, A. G. F.

      Taylor, Sir Charles (Eastbourne)

      Williams, Paul (Sunderland, S.)

      Robinson, Sir Roland(Blackpool, S.)

      Teeling, W.

      Wills, G. (Bridgwater)

      Rodgers, John (Sevenoaks)

      Temple, John M.

      Wood, Hon. R.

      Roper, sir Harold

      Thomas, Leslie (Canterbury)

      Woollam, John Victor

      Ropner, Col. Sir Leonard

      Thompson, Kenneth (Walton)

      Yates, William (The Wrekin)

      Russell, R. S.

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

      Schofield, Lt.-Col. W.

      Thorneycroft, Rt. Hon. P.

      TELLERS FOR THE NOES:

      Scott-Miller, Cmdr. R.

      Thornton-Kemsley, C. N.

      Mr. Oakshott and Mr. Barber.

      Motion made, and Question proposed, That the Clause stand part of the Bill.
      Mr. Houghton: The Committee will be glad to know that most of what I have to say in the debate on the Question, "That the Clause stand part of the Bill", I contrived to say in my speech on the last Amendment. This Clause exempts the trading income of an overseas trade corporation from Income Tax. It does not exempt its investment income, and it prohibits the setting off of trading losses against investment income. It also provides that, notwithstanding the tax relief given in the provisions of this part of the Bill, companies making distributions of profits must deduct Income Tax at the standard rate.
      We do not complain about the latter provision. We do not complain about the prohibition against the setting off of trading losses against investment income, nor about the exclusion of investment income itself from the concession. But the main provision of the Clause is to exempt from Income Tax the trading income of those companies which qualify under the Bill for status as overseas trade corporations.
      This is the biggest "give away" in the Bill. I must be careful in using that phrase, because the Chancellor objects to people saying that he is giving away money when he relieves people of taxation. He prefers to put it that he is allowing the taxpayer to retain more of his own income by the tax relief given. The right hon. Gentleman can have it how he likes, but the fact is that this is a very substantial tax relief indeed, and, in the context of the Budget as a whole, represents approximately one-quarter of
      490
      the £100 million tax reliefs given. Therefore, we are discussing a Clause of no small importance. In fact, the whole issue of Part IV of the Bill centres upon the tax relief given and the way of giving it.
      I suppose the first question to ask is whether the tax relief should be given at all. Then, if the answer is "Yes", we consider what is the most appropriate way of giving it. If I were to utilise all the information at my disposal against the principle of the Clause I should have to quote from the memoranda, which I have said I will try not to do. After hearing the evidence of the Board of Inland Revenue and of many other people in trade and in the professions, of economists and others, the Royal Commission, with some hesitation and division of opinion among its members, which seems obvious, came down in favour of the method of giving relief which the Chancellor has adopted.
      I cannot say that the alternative which the Commission examined would have been freer of administrative complications, although I think that it would have enabled the Chancellor to be a little more pointed in his discriminatory policy. The Committee will remember that the two alternatives were, first, to define the kind of income from overseas activities which should be exempted and, secondly, to exempt all income of a particular type of corporation. The former would be highly selective; it would involve a judgment of the economic value of particular activities and discrimination as between one form of trade and another.
      On that basis I should say that the trading activities of the Sao Paulo Company of Brazil—which, we understand, is merely a glorified estate agency or

      491
      property-owning company—would not be high on the list of the Chancellor's priorities if he were looking at the first of the alternatives, namely, to exempt particular kinds of profit from overseas activities. So the Chancellor has rejected that alternative. The Royal Commission felt that there were great difficulties about it and preferred the method which the Chancellor has now adopted.
      The general economic arguments have been canvassed pretty fully and there is little that one can add to them, other than to go on asking questions and providing the best possible answers upon all the available evidence. The big question is: Does the economy of the country need this tax concession? Will it benefit our balance of payments in the manner anticipated? Is it essential to encourage capital investment overseas, at a time when restraints are still put upon capital investment at home? These are all factors which we have to weigh in our minds.
      Britain cannot earn her living wholly or even mainly from profits earned overseas; we have still to do a great deal here to earn our living, and that can be done only if our industries at home are modernised, re-equipped and put into the sort of shape which will enable them to compete in the markets of the world. There are growing fears that some sections, at least, of British industry will certainly have to modernise themselves and make themselves more efficient if they are to go into the European Free Trade Area with confidence that they will be able to maintain their position against competition from other European countries within that Free Trade Area. Before long some industries may regret the fact that they have not invested more of their profits in capital development.
      7.15 p.m.
      We have to hold the balance between the needs of overseas investment and the need for investment at home. The Chancellor himself will recall his regrets at not being able to restore investment allowances over the whole range of home investment, and at having to restrict that additional incentive to investment to a highly particular type of industry.
      In the course of the debate much has been said by way of questioning the doc
      492
      trine that this tax relief is necessary to enable us to undertake overseas trade activities in a bigger and bolder way, and to earn more of the national income through overseas trade activities. There are possible dangers, some of which were referred to by the Royal Commission itself. My hon. Friend the Member for Loughborough (Mr. Cronin) alluded indirectly to one of them, namely, the fact that when overseas territories knew what tax relief was being given in Britain to these overseas trade corporations they might feel that they could impose additional taxation upon them locally, and that we should therefore be transferring the benefit from the overseas trade corporations to the Exchequers of the areas in which they were operating. Those are possible dangers, which may mean that the overseas trade corporations will finish up little or no better than before, although the Chancellor has forgone very considerable revenue here in order to meet what he believes to be their needs.
      Our reservations upon the Clause must therefore express themselves in the traditional way. The major criticism of the method adopted by the Chancellor is that it will give this relief to overseas trade corporations who are already making big profits and doing very well, and who do not need this tax incentive or benefit to further their operations or to increase the scope of their activities.
      The Clause now stands before us for final judgment. When we consider the tax reliefs given here, without a convincing case having been made out for them and given in a highly concentrated form, mostly to those in the higher income brackets, and relate them to the need for tax reliefs generally at home, the Bill appears to be a very unbalanced one in the matter of providing relief for the hard-pressed taxpayer.
      But the Chancellor, in that engaging and—if I may say so without disrespect—juvenile way, says that all taxes are bad; that ours are worse than most; that they are all too high, and that as long as he is there he will pull them down. Never were such words from the Chancellor received with such wild enthusiasm—and never were comments made by a Chancellor made more wildly than were his. I must say that he knows how to

      493
      keep up the spirits of his supporters—which is one of the great qualifications of a Chancellor of the Exchequer. But the chickens will come home to roost, and the Chancellor will find that the relief given in the Clause will be looked at more critically by an intelligent community than he realises.
      Although many of the indirect benefits from this may be hard to discern, I hope that there will be those of us who will have the necessary application and penetration to find out the effect of all this upon the companies concerned and upon our national income and general prosperity. At present, we are so doubtful about it that we cannot support the Chancellor's proposals and we should prefer that the whole of Part IV were left aside for the moment so that it might be further examined in the light of the needs of the present situation. However, as the Chancellor has already confessed that he is a "whole-hogger", I do not suppose he will do any such thing, and there will be no alternative left for us but to register our opinion in the customary way and say that we do not like it and that we cannot go into the Lobby to support it.
      Sir Patrick Spens: As I heard the speech of the hon. Member for Sowerby (Mr. Houghton) and listened to hon. Members opposite retracting the good will expressed last year, and observed that even the most enthusiastic hon. Members opposite have continually voted against the Government, I was filled with regret. On the other hand, as was said by the hon. Member for Sowerby, the Chancellor is determined to go ahead. I wish that he was determined to go further ahead.
      The only comment I wish to make about this Clause is that it makes a distinction for the first time between trading and investment income, and in investment income, of course, is included the income from trading subsidiaries registered overseas. As I said last night, I am staking out a claim for the future. I hope the time will come when the income from trading subsidiaries overseas will be treated as trading income. From a practical point of view there is no difference whether one carries on trade through a branch or through a subsidiary company established overseas. For that reason, and from the trading
      494
      and practical point of view, it is really a theoretical difference which should not exist when the income is derived from an actual overseas trade corporation, or when it comes from a subsidiary corporation which exists wholly in order to assist the trade of a group of companies.
      I am grateful for the scheme. I think it bold and I believe it will be useful. I do not believe in these anxieties about how it will affect capital at home and that sort of thing. I think it necessary for the development of the trade of the country as a whole. I hope that it will meet the practical needs of businessmen and that these distinctions between strict overseas corporations and subsidiary companies, created or acquired for the purpose of carrying on part of the same trade of the same group of companies will he removed, and that ultimately the income will be treated as trading income, which of course it is.
      Mr. E. Fletcher: I am tempted to intervene because in his opening remarks the right hon. and learned Member for Kensington, South (Sir P. Spens) accused my hon. Friends of inconsistency between the line we adopted during the debate last year and the debate this year.
      Sir P. Spens: Less enthusiasm.
      Mr. Fletcher: I wish to deal with the accusation as I understand it because it has been made in other quarters. I am not content merely with going through the Lobbies every time the Division bell rings; I should like to express what I feel.
      I consider that there is no inconsistency between the support which I gave to the new Clause put on the Order Paper last year in the names of some of my hon. Friends, whereby the Chancellor was urged to introduce a measure of relief regarding companies engaged abroad in what, for the want of a better term, may be described as pioneering activities. I think that a genuine case was made out for that. It was that where companies, whether British. American or of any other nationality, trading and operating in an overseas country, were subject to local laws specially designed to give some attraction and advantage to pioneering efforts in that country, British companies found themselves at a manifest and obvious disadvantage compared with

      495
      those companies registered in other countries, whether America, Germany, France, Belgium, Holland or elsewhere.
      On those grounds, I think there is a case for removing from the British companies the discrimination under which they labour at present. It was with that objective that we put down the Clause last year, and it is with precisely the same objective that we have made similar proposals this year.
      I agree with my hon. Friend the Member for Sowerby (Mr. Houghton) that this Clause is the central feature of the Chancellor's first Budget. I do not wish to pay a compliment to the Chancellor on his Budget or any part of it. The right hon. Gentleman would not expect me to do so. We have to try, firstly, to form an objective judgment about whether or not this set of proposals is necessary; secondly, sensible; thirdly, equitable and fourthly, workable. I have read carefully both the majority and the minority Reports of the Royal Commission; I have read the observations of the Board of Inland Revenue and I have listened to the speeches made yesterday and today. I can appreciate how the difference of opinion arises, but I feel that the balance of argument and the whole of the weight of evidence available is against the proposals of the Chancellor.
      I am prepared, if necessary, to put aside the observations of the Board of Inland Revenue that they are unworkable and may lead to a great deal of evasion, anomalies and difficulties. After all, the Chancellor will be responsible for seeing that attempts at evasion, or to obtain undue advantage over and above what he intends to concede, are prevented, and that any loopholes are closed. We wish him success in his endeavours and we shall give him all possible assistance. But, surely, the real question is whether, in the interests of the country's economy, it is necessary at this stage to make such a vital and serious inroad into the principles of equality of taxation which have hitherto been one of the cardinal tenets of our fiscal policy.
      I am not persuaded that it is necessary. My experience is that under the present law British companies have not managed too badly in finding opportunities for overseas investment during the last few years. There are the opportuni
      496
      ties provided by forming subsidiary companies with managements abroad, and so on. Statistics show that in the last few years there has been a substantial amount of overseas investment on the part of British companies. From the point of view of the national economy that it is questionable whether the limited amount of capital which this country has available for investment should not be wholly concentrated in this country rather than permitting and, indeed, encouraging a large amount of it to be utilised to obtain tax benefits offered by this scheme.
      That is a matter of economic judgment, but with regard to the fiscal questions, the taxation questions, with which we are primarily concerned, what I think worries a great many people is that in this Finance Bill we are introducing a very serious precedent; we are discriminating between one kind of taxpayer and another. We are departing from the principle of treating all taxpayers and taxpaying companies alike.
      7.30 p.m.
      To introduce such a departure may well have serious repercussions. In any event, it is bound to create a great deal of heart-burning and a great deal of injustice on the part of those companies and shareholders in those companies who are not favoured by these concessions. They—particularly those engaged in export—might equally well stake out claims for differential and more beneficial treatment on the ground that by their industrial and commercial efforts, they are also making important contributions to the national economy. The danger is that once that principle is conceded, once it is conceded that the Chancellor of the Exchequer in framing his Budget proposals can discriminate in favour of one kind of taxpayer or against one class of company on the ground that the work which it is doing or the business enterprise in which it is engaged is of greater importance to the national economy, we are embarking on the slippery slope and are treading very dangerous ground.
      That is the major criticism of the Chancellor's proposal. As the Royal Commission pointed out, any proposal of this kind, by reducing taxation to the extent of £35 million, or perhaps very much more, on this particular class of companies engaged in this particular kind

      497
      of trade must inevitably produce as a corollary the effect that other taxpayers will have to bear an additional burden. Whether that additional burden falls on all other companies or has to be met by old-age pensioners, or produces the result that the Chancellor cannot accord reliefs and allowances of one kind and another which we think are more deserving, the fact remains that this relief to the extent of £35 million has to be found in some way or another by all other taxpayers. It is for these reasons, because I do not think that the case has been made out on fiscal ground, on workability or on grounds of national economy that I am opposed to these proposals.
      Mr. Jay: I do not know whether the Chancellor intends to say anything himself on this Clause, but before we part with it I wish to refer to one matter which has not been much discussed in these debates. That is the very considerable capital gains which the Chancellor has presented to the luckier shareholders in these companies as a result of this action in the Budget.
      My hon. Friend the Member for Sowerby (Mr. Houghton) said that the Chancellor did not like speaking of having given away revenue by his tax actions. I thought the Chancellor was being a little unkind to his last predecessor but one, the Lord Privy Seal, because the present Lord Privy Seal, in his Budgets of 1955, constantly referred to himself as having given away large amounts of revenue. Therefore, when the Chancellor casts aspersions on that conception, I am afraid he is again making attacks on his predecessor, the Lord Privy Seal, who is again in trouble in the office to which he has removed himself, or has been removed.
      This is a Clause which gives remission of Income Tax on the trading profits retained in the business of these overseas trade corporations, but at the same time imposes Income Tax on dividends paid to the shareholders of the companies. Presumably, the Chancellor must have realised that as a result it encourages the corporations to put profits to reserve and over a period of time that is bound to mean capital appreciation for the shareholders. I have a much higher opinion of the Inland Revenue than either the Chancellor or my hon. Friend the Member for Sowerby—although I do not
      498
      think either of them would get very far without it—but I propose in this case to rest my argument not so much on its authority as on that of the Financial Times.
      I do not know whether the Chancellor noticed it, but at the very beginning, on the publication of the Bill, the Financial Times pointed out that this provision would give some very agreeable capital appreciation to Surtax-payers in particular. On 1st May, after having described the way in which the concession would work, one of its first comments was:
      "Although this does increase the scope for higher dividends, there will be a clear incentive to retain profits to the greatest extent possible; the main investment appeal is to the surtax-payer interested in steady capital appreciation. Indeed, in so far as the general object of the proposals is to encourage the retention of profits, their most interesting investment implications are for surtax-payers. Not only are they likely…"
      That is the concessions—
      "to promote a steady rise in asset values, but distribution of liquidation (after the return of tax-free capital) will be subject only to income tax, not to surtax or profits tax."
      Perhaps the Chancellor thinks that is a minor effect of this concession, but, quite apart from the major effects in the rest of the Bill, a very attractive field for tax-free gains has been opened up. The Economist, on 4th May, also commented on the same point, rather more briefly:
      "As the concession encourages the growth of assets, its investment appeal is to the surtax-payer interested less in dividends than in capital appreciation."
      Of course, the behaviour of the Stock Exchange over the last few months has borne out, as one would have expected it would, the truth of these observations in the financial Press. There has been a remarkable rise in the shares of the companies which are believed, at any rate in the City, to be likely to gain substantially by this concession. To take one example, I do not know whether the Chancellor observed the behaviour of Unilevers ordinary shares, not merely in the weeks since the Budget, but, strangely enough, most notably in the weeks immediately preceding the Budget. It would appear that there were very confident expectations in the City, as with Entertainments Duty, that something of this kind was to be done. The rise in Unilever shares at the beginning of the year was one of about 50 per cent. That seems

      499
      "a bit steep", which is a Parliamentary expression, in this connection.
      Perhaps my hon. Friends were going a little too far in describing the Chancellor as reckless or frivolous, but I suppose he might say in the light-hearted, or light-headed, fashion in which he tosses these arguments aside, that the large profits might have been made by someone on the Stock Exchange who happened to have an idea that this would be put forward and be beneficial to Unilevers or some other company trading overseas but, "What does that matter? That is one of the minor consequences of this action."
      I do not think we can look at it quite as lightheartedly as that. This illustrates a principle which is of much more general application. We believe that these capital gains are much too easy to secure and are much too free of taxation already. We think that avenues for such tax-free gains should be limited rather than further opened up. It is true in the case not merely of overseas trade corporations but of companies manufacturing in this country that if we enable them to build up their capital by this process of reinvestment of existing profits we are practically bound over any long period to present capital gains which are at present tax-free to the private shareholder.
      For those reasons, we think that some method will have to be discovered of building up reserves and capital both for companies operating abroad such as we are now discussing and over the whole field of industry other than this method of self-financing, company saving or whatever one calls it, which, though very beneficial on the one hand in that it means national savings, is much less beneficial on the other in that it means capital gains for private shareholders.
      I should like to ask the Chancellor—I do not think he will deny that this has been one of the results of his action—whether he is quite happy about the effects of this discrimination in bringing to operators on the Stock Exchange such immediate benefits, which are, incidentally, nothing to do with overseas trading or extra capital employed in overseas trading but are immediate speculative benefits.
      The Chancellor of the Exchequer (Mr. Peter Thorneycroft): Perhaps I might say
      500
      a few words in conclusion on the debate on the Clause, if only because, as the hon. Member for Sowerby (Mr. Houghton) said, it is the effective central Clause of this group of proposals associated with the overseas trade corporations.
      It is a good Clause. I venture to think that it is an effective Clause which will make a considerable contribution to the building up of the reserves and the general investment in British companies trading overseas. I dare say that because of that the capital value of the companies will rise, but if—
      Mr. Jay: Discrimination.
      Mr. Thorneycroft:—one were to flinch from making tax reductions simply because in some circumstances there might be capital gain, one would have a sorry job as Chancellor of the Exchequer. There are not only capital gains in this matter. Many people will gain—the people who work for the companies, the territories overseas where they are situated, and the economy of this country. Whatever may be said about interim or short-term balance of payments, what is wanted is that we should have these trading operations carried on effectively, rightly capitalised, and investment put into them. As the hon. Member for Stechford (Mr. Roy Jenkins) very fairly said about that investment, one cannot invest a deficit. In the long run it depends on what we do here at home, how we build up surpluses, and matters of that kind.
      I am surprised to find the Labour Party hesitant about this investment. Hon. Members opposite have made a lot of it in their speeches in the country, particularly in regard to the Commonwealth, saying that a large proportion of the gross national product should be devoted to it. When they are presented with a practical proposition for reinforcing success—in many cases these are companies or operations which are already established and going ahead—and we give an opportunity to plough back profits free of tax, I should have thought that hon. Members opposite would have welcomed such a practical application of the very policies which they have in some measure advocated in the country.
      7.45 p.m.
      The right hon. Member for Battersea, North (Mr. Jay) thought that any form

      501
      of discrimination was abhorrent and should be avoided. Listening to him, I thought that the sternest minds in the Inland Revenue could not have bettered him in his approach to matters of this kind. He said that in no circumstances whatever would he put one taxpayer into a position in any way different from any other. It sounded all right at the time, but it did not fit in with some of the things we heard earlier when all kinds of discrimination between different types of trade and those in the Commonwealth and those outside it were being urged upon us. Moreover, in the case of investment allowance and so on I have heard discrimination urged as a positive virtue in trade matters. I do not urge that absolute consistency should be held all the way through, but some of the things which the right hon. Gentleman has said may be held a little against him.
      Mr. Jay: Surely the right hon. Gentleman will agree that some discrimination may be good and some bad.
      Mr. Thorneycroft: The right hon. Gentleman was going a little further than
      that. He was the high priest of non-discrimination. No form of discrimination at all was to be allowed. All I am asking for is a little of the broader, more liberal view which the right hon. Member has put forward.
      The right hon. Gentleman is right in saying that some discrimination can be good and some bad. The truth in this Clause and on the facts which confront us is that there is bound to be discrimination. There is discrimination today, but it is discrimination as between British companies trading overseas and their competitors. It is that discrimination which we seek to end or at least very much to mitigate. It is because we desire to end that discrimination against our British traders that we have incorporated these provisions in the Bill, and it is on those grounds that we ask the Committee to accept the Clause.
      Question put, That the Clause stand part of the Bill:—
      The Committee divided: Ayes 229, Noes 178.

      Division No. 149.]

      AYES

      [7.46 p.m.

      Agnew, Sir Peter

      Cooper-Key, E. M.

      Hall, John (Wycombe)

      Aitken, W. T.

      Cordeaux, Lt.-Col. J. K.

      Harris, Frederic (Croydon, N.W.)

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

      Corfield, Capt. F. V.

      Harris, Reader (Heston)

      Amery, Julian (Preston, N.)

      Craddock, Beresford (Spelthorne)

      Harvey, Sir Arthur Vere (Macclesfd)

      Amory, Rt. Hn. Heathcoat (Tiverton)

      Crowder, Sir John (Finchley)

      Harvey, John (Walthamstow, E.)

      Arbuthnot, John

      Crowder, Petre (Ruislip—Northwood)

      Heald, Rt. Hon. Sir Lionel

      Armstrong, C. W.

      Cunningham, Knox

      Heath, Rt. Hon. E. R. C.

      Ashton, H.

      Currie, G. B. H.

      Henderson, John (Cathcart)

      Atkins, H. E.

      Dance, J. C. G.

      Henderson-Stewart, Sir James

      Baldock, Lt.-Cmdr. J. M.

      Davidson, Viscountess

      Hesketh, R. F.

      Baldwin, A. E.

      D'Avigdor-Goldsmid, Sir Henry

      Hicks-Beach, Maj. W. W.

      Balniel, Lord

      Deedes, W. F.

      Hill, Rt. Hon. Charles (Luton)

      Barber, Anthony

      Dodds-Parker, A. D.

      Hill, Mrs. E. (Wythenshawe)

      Barlow, Sir John

      Doughty, C. J. A.

      Hill, John (S. Norfolk)

      Barter, John

      Drayson, G. B.

      Hirst, Geoffrey

      Baxter, Sir Beverley

      du Cann, E. D. L.

      Holland-Martin, C. J.

      Bell, Philip (Bolton, E.)

      Dugdale, Rt. Hn. Sir T. (Richmond)

      Holt, A. F.

      Bell, Ronald (Bucks, S.)

      Eden, J. B. (Bournemouth, West)

      Hope, Lord John

      Bevins, J. R. (Toxteth)

      Elliott, R.W.(N'Castle upon Tyne, N.)

      Hornby, R. P.

      Bidgood, J. C.

      Farey-Jones, F. W.

      Hornsby-Smith, Miss M. P.

      Birch, Rt. Hon. Nigel

      Finlay, Graeme

      Horobin, Sir Ian

      Bishop, F. P.

      Fisher, Nigel

      Howard, Hon. Greville (St. Ives)

      Black, C. W.

      Fletcher-Cooke, C.

      Howard, John (Test)

      Body, R. F.

      Foster, John

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

      Bossom, Sir Alfred

      Fraser, Sir Ian (M'cmbe & Lonsdale)

      Hughes Hallett, Vice-Admiral J.

      Bowen, E. R. (Cardigan)

      Freeth, Denzil

      Hurd, A. R.

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

      Gammans, Lady

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

      Braine, B. R.

      Garner-Evans, E. H.

      Hutchison, Sir James (Scotstoun)

      Brooman-White, R. C.

      George, J. C. (Pollok)

      Hutchison, Michael Clark (E'b'gh, S.)

      Bryan, P.

      Glover, D.

      Hylton-Foster, Rt. Hon. Sir Harry

      Bullus, Wing Commander E. E.

      Godber, J. B.

      Iremonger, T. L.

      Burden, F. F. A.

      Gomme-Duncan, Col. Sir Alan

      Irvine, Bryant Godman (Rye)

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

      Goodhart, Philip

      Jenkins, Robert (Dulwich)

      Carr, Robert

      Gower, H. R.

      Jennings, J. C. (Burton)

      Cary, Sir Robert

      Graham, Sir Fergus

      Johnson, Dr. Donald (Carlisle)

      Channon, Sir Henry

      Grant, W. (Woodside)

      Johnson, Eric (Blackley)

      Chichester-Clark, R.

      Grant-Ferris, Wg Cdr. R. (Nantwich)

      Johnson, Howard (Kemptown)

      Clarke, Brig. Terence (Portsmth, W.)

      Green, A.

      Joynson-Hicks, Hon. Sir Lancelot

      Cole, Norman

      Grimond, J.

      Keegan, D.

      Cooke, Robert C.

      Grosvenor, Lt.-Col. R. G.

      Kerby, Capt. H. B.

      Cooper, A. E.

      Gurden, Harold

      Kerr, Sir Hamilton

      Kershaw, J. A.

      Nugent, G. R. H.

      Stanley, Capt. Hon. Richard

      Kimball, M.

      Oakshott, H. D.

      Stevens, Geoffrey

      Lagden, G. W.

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

      Steward, Harold (Stockport, S.)

      Lambton, Viscount

      Osborne C.

      Storey, S.

      Lancaster, Col. C. C.

      Page, R. G.

      Studholme, Sir Henry

      Leather, E. H. C.

      Pannell, N. A. (Kirkdale)

      Summers, Sir Spencer

      Leavey, J. A.

      Partridge, E.

      Sumner, W. D. M. (Orpington)

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

      Peyton, J. W. W.

      Taylor, Sir Charles (Eastbourne)

      Legh, Hon. Peter (Petersfield)

      Pickthorn, K. W. M.

      Teeling, W.

      Lindsay, Hon. James (Devon, N.)

      Pike, Miss Mervyn

      Temple, John M.

      Lindsay, Martin (Solihull)

      Pilkington, Capt. R. A.

      Thomas, Leslie (Canterbury)

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

      Pitt, Miss E. M.

      Thompson, Kenneth (Walton)

      Lucas, P. B. (Brentford & Chiswick)

      Pott, H. P.

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

      Lucas-Tooth Sir Hugh

      Powell, J. Enoch

      Thorneycroft, Rt. Hon. P.

      McAdden, S. J.

      Price, Henry (Lewisham, W.)

      Thornton-Kemsley, C. N.

      Macdonald, Sir Peter

      Raikes, Sir Victor

      Tilney, John (Wavertree)

      Mackeson, Brig. Sir Harry

      Ramsden, J. E.

      Turton, Rt. Hon. R. H.

      Mackie, J. H. (Galloway)

      Rawlinson, Peter

      Tweedsmuir, Lady

      McLaughlin, Mrs. P.

      Redmayne, M.

      Vane, W. M. F.

      Maclean, Fitzroy (Lancaster)

      Remnant, Hon. P.

      Vaughan-Morgan, J. K.

      McLean, Neil (Inverness)

      Renton, D. L. M.

      Vickers, Miss Joan

      Macmillan, Rt. Hn. Harold (Bromley)

      Rippon, A. C. F.

      Wade, D. W.

      Macmillan, Maurice (Halifax)

      Robinson, Sir Roland (Blackpool, S.)

      Wakefield, Edward (Derbyshire, W.)

      Macpherson, Niall (Dumfries)

      Rodgers, John (Sevenoaks)

      Wall, Major Patrick

      Maddan, Martin

      Roper, Sir Harold

      Ward, Rt. Hon. G. R. (Worcester)

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

      Ropner, Col, Sir Leonard

      Ward, Dame Irene (Tynemouth)

      Maitland, Hon. Patrick (Lanark)

      Russell, R. S.

      Webbe, Sir H.

      Manningham-Buller, Rt. Hn. Sir R.

      Schofield, Lt.-Col. W.

      Whitelaw, W. S. I.

      Markham, Major Sir Frank

      Scott-Miller, Cmdr. R.

      Williams, Paul (Sunderland, S.)

      Marlowe, A. A. H.

      Sharples, R. C.

      Wills, G. (Bridgwater)

      Marshall, Douglas

      Shepherd, William

      Woollam, John Victor

      Mathew, R.

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

      Yates, William (The Wrekin)

      Mawby, R. L.

      Smithers, Peter (Winchester)

      Milligan, Rt. Hon. W. R.

      Smyth, Brig. Sir John (Norwood)

      TELLERS FOR THE AYES:

      Nabarro, G. D. N,

      Spearman, Sir Alexander

      Colonel J. H. Harrison and Mr. Hughes-Young.

      Neave, Airey

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

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

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

      NOES

      Ainsley, J. W.

      Fraser, Thomas (Hamilton)

      Lee, Miss Jennie (Cannock)

      Allaun, Frank (Salford, E.)

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

      Lewis, Arthur

      Allen, Arthur (Bosworth)

      Gibson, C. W.

      Lindgren, G. S.

      Allen, Scholefield (Crewe)

      Gooch, E. G.

      Logan, D. G.

      Awbery, S. S.

      Gordon Walker, Rt. Hon. P. C.

      MacColl, J. E.

      Bacon, Miss Alice

      Greenwood, Anthony

      McInnes, J.

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

      Grey, C. F.

      McKay, John (Wallsend)

      Benson, G.

      Griffiths, David (Rother Valley)

      MacMillan, M. K. (Western Isles)

      Beswick, Frank

      Griffiths, Rt. Hon. James (Llanelly)

      MacPherson, Malcolm (Stirling)

      Blackburn, F.

      Hale, Leslie

      Mahon, Simon

      Blenkinsop, A.

      Hall, Rt. Hn. Glenvil (Colne Valley)

      Mallalieu, E. L. (Brigg)

      Blyton, W. R.

      Hamilton, W. W.

      Mann, Mrs. Jean

      Boardman, H.

      Hannan, W.

      Marquand, Rt. Hon. H. A.

      Bottomley, Rt. Hon. A. G.

      Hastings, S.

      Mellish, R. J.

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

      Hayman, F. H.

      Messer, Sir F.

      Bowles, F. C.

      Healey, Denis

      Mikardo, Ian

      Boyd, T. C.

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

      Mitchison, G. R.

      Brockway, A. F.

      Hobson, C. R. (Keighley)

      Monslow, W.

      Brown, Thomas (Ince)

      Houghton, Douglas

      Moody, A. S.

      Burton, Miss F. E.

      Howell, Charles (Perry Barr)

      Morris, Percy (Swansea, W.)

      Champion, A. J.

      Hughes, Cledwyn (Anglesey)

      Moyle, A.

      Chapman, W. D.

      Hughes, Emrys (S. Ayrshire)

      Mulley, F. W.

      Clunie, J.

      Hughes, Hector (Aberdeen, N.)

      Noel-Baker, Rt. Hon. P. (Derby, S.)

      Coldrick, W.

      Hunter, A. E.

      Oliver, G. H.

      Collick, P. H. (Birkenhead)

      Hynd, H. (Accrington)

      Oram, A. E.

      Collins, V.J.(Shoreditch & Finsbury)

      Hynd, J. B. (Attercliffe)

      Orbach, M.

      Corbet, Mrs. Freda

      Irving, Sydney (Dartford)

      Oswald, T.

      Cove, W. G.

      Janner, B.

      Owen, W. J.

      Craddock, George (Bradford, S.)

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

      Padley, W. E.

      Cronin, J. D.

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

      Palmer, A. M. F.

      Davies, Ernest (Enfield, E.)

      Jenkins, Roy (Stechford)

      Pannell, Charles (Leeds, W.)

      Davies, Harold (Leek)

      Johnson, James (Rugby)

      Pargiter, G. A.

      Deer, G.

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

      Parker, J.

      de Freitas, Geoffrey

      Jones, David (The Hartlepools)

      Parkin, B. T.

      Delargy, H. J.

      Jones, Jack (Rotherham)

      Paton, John

      Dodds, N. N.

      Jones, J. Idwal (Wrexham)

      Pearson, A.

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

      Jones, T. W. (Merioneth)

      Peart, T. F.

      Edwards, Rt. Hon. John (Brighouse)

      Kenyon, C.

      Pentland, N.

      Evans, Albert (Islington, S.W.)

      Key, Rt. Hon. C. W.

      Popplewell, E.

      Fernyhough, E.

      King, Dr. H. M.

      Prentice, R. E.

      Fienburgh, W.

      Ledger, R. J.

      Price, Philips (Gloucestershire, W.)

      Fletcher, Eric

      Lee, Frederick (Newton)

      Probert, A. R.

      Forman, J. C.

      Proctor, W. T.

      504

      505

      Pryde, D. J.

      Sparks, J. A.

      White, Mrs. Eirene (E. Flint)

      Randall, H. E.

      Steele, T.

      White, Henry (Derbyshire, N.E.)

      Rankin, John

      Stewart, Michael (Fulham)

      Wilcock, Group Capt. C. A. B.

      Redhead, E. C.

      Stonehouse, John

      Wilkins, W. A.

      Rhodes, H.

      Stones, W, (Consett)

      Willey, Frederick

      Roberts, Goronwy (Caernarvon)

      Strachey, Rt. Hon. J.

      Williams, Rev. Llywelyn (Ab'tillery)

      Robinson, Kenneth (St. Pancras, N.)

      Swingler, S. T.

      Williams, Ronald (Wigan)

      Rogers, George (Kensington, N.)

      Sylvester, G. O.

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

      Ross, William

      Taylor, John (West Lothian)

      Williams, W. R. (Openshaw)

      Royle, C.

      Thomson, George (Dundee, E.)

      Willis, Eustace (Edinburgh, E.)

      Shinwell, Rt. Hon. E.

      Thornton, E.

      Wilson, Rt. Hon. Harold (Huyton)

      Short, E. W.

      Tomney, F.

      Winterbottom, Richard

      Simmons, C. J. (Brierley Hill)

      Ungoed-Thomas, Sir Lynn

      Woof, R. E.

      Skeffington, A. M.

      Viant, S. P.

      Yates, V. (Ladywood)

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

      Warbey, W. N.

      Slater, J. (Sedgefield)

      Wells, Percy (Faversham)

      TELLERS FOR THE NOES:

      Sorensen, R. W.

      West, D. G.

      Mr Holmes and Mr. J. T Price.

      Soskice, Rt. Hon. Sir Frank

      Wheeldon, W. E.

      Clause ordered to stand part of the Bill.

    Clause 23.—(DIVIDENDS PAID OUT OF EXEMPT TRADING INCOME: INCOME TAX CHARGE.)
    Mr. Powell: I beg to move, in page 18, line 26, after "Schedule D", to insert:
    "for the year of assessment in which the dividend becomes due".
    This is little more than a drafting Amendment. The subsection as it stands makes it clear that dividends will be charged at the standard rate for the year of assessment in which they fall due. It perhaps does not sufficiently make it clear that they will be charged in the year in which the dividend falls due at that rate. It is simply to clarify that that this Amendment, and the two which follow and hang with it, are put forward.
    Amendment agreed to.
    Further Amendment made: In page 18, line 29, leave out first "the" and insert "that".—[Mr. Powell.]
    Amendment proposed: In page 18, line 29, leave out from "year" to end of line.—[Mr. Powell.]
    Mr. Mitchison: I am very glad to see that the hon. Gentleman is tidying up his drafting. I have to do mine from time to time, too.
    Amendment agreed to.
    Mr. Roy Jenkins: I beg to move, in page 18, line 34, to leave out subsections (2) and (3).
    Unlike the previous Amendments, Sir Norman, this is more than a drafting Amendment. Were it carried out, it would have some fairly large consequences, and I am glad to see that its importance is recognised by the presence of the Government Chief Whip, the first time for quite a period in the course of our deliberations. The purpose of the
    506
    Amendment is to withdraw the exemption from Income Tax which the Bill gives to distributions of dividends to non-resident shareholders.
    This is a fairly difficult issue and one about which, like some of the others that we have considered yesterday and today, the Royal Commission found some difficulty in making up its mind. I give it freely to the Financial Secretary that the majority, the rather doubtful majority of the Royal Commission which reported on this point, did come down eventually in favour of granting the exemption given under the Bill, but it did so with a good deal of hesitancy and the bringing forward of some arguments on the other side. I certainly think that the arguments on the other side are of some force, and ought to be considered by the Committee. We are, after all, putting non-resident shareholders in United Kingdom O.T.C.s in an extraordinarily favourable position when we give, as it were, this double concession.
    To take the rather extreme but in no way impossible case of a shareholder resident in Bermuda holding shares in a company registered in London but operating in Kuwait, this shareholder, as far as I can see, would escape any tax of any sort on all the profits earned by the company and any distributions which were made to him. It is an extraordinarily favourable position in the modern world for anyone to be in, and it is a position, of course, that might well encourage certain large shareholders in O.T.C.s to emigrate.
    8.0 p.m.
    When the Chancellor introduced his Budget, the Surtax concessions were at times presented in such a form as to suggest that the Chancellor had had to introduce them in order to drag most valuable

    507
    members of the community out of the emigration queues where they were waiting to clamber aboard ships and aircraft leaving for Canada or wherever it might be; the concessions were introduced only just in time, it was suggested, apparently, in order to prevent this great wave of emigration which would, so it was argued, have been most damaging to the interests of this country.
    It is a little curious that the same Finance Bill which enshrines these Surtax provisions, presented to a very large extent as having been brought forward in order to counter this move towards emigration, should contain a provision which, certainly so far as a shareholder in an O.T.C. is concerned, would give a very great incentive to undertake precisely that act of emigration which was regarded as so undesirable in the case of other Surtax payers. I do not know whether the Government would counter that argument by saying that, on the whole, in their view shareholders in O.T.C.s are not particularly desirable citizens whom they would particularly wish to keep in the country. It would be a possible argument, but I think a slightly dangerous one, and I should be a little surprised if the Financial Secretary were to use it. But if he is not prepared to use it, there seems to be a good deal of contradiction in the Government's approach to these matters.
    Apart from those matters, it can be argued that there should be a certain liability—I am not for the moment discussing what it should be—to United Kingdom tax even where a company operates in Kuwait and the shareholder lives in Bermuda. After all, if someone wants to have a company registered in the City of London or elsewhere in this country and enjoy the benefits of British protection, the protection of British company law and, presumably, in certain circumstances, of British prestige, British influence and of the British Armed Forces overseas, there ought to be some liability to United Kingdom tax. To breach that principle completely and say that it is possible for a shareholder to draw dividends from a company registered in the United Kingdom but in no possible way incur any liability to United Kingdom tax is going altogether too far in the granting of exemptions.
    No doubt, the main Government argument in favour of the exemption will be
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    that it encourages foreign shareholders to invest in United Kingdom resident O.T.C.s and thereby encourages the flow of capital, not perhaps towards this country, but towards United Kingdom registered companies. Precisely where does this argument lead? The difficulty is immediately apparent in my hesitation about saying "towards this country", because, if we want foreign capital to flow into United Kingdom companies, the question arises whether we want it to flow in exclusively to companies operating overseas. Do we want to give foreign resident shareholders an enormous incentive, if they are going to invest in a London registered company, to do it in one which on no account trades anywhere in the United Kingdom? Is there a case for giving to, shall we say, the United States shareholder an enormous incentive to invest in a company registered in London which owns cotton mills in India rather than in one which owns cotton mills in Lancashire? Yet that is the very thing which this new incentive is introducing by the Clause as it stands.
    I am a little sceptical altogether about what is the advantage to this country of encouraging companies whose connections with this country are really so tenuous as to be almost non-existent. We are asked to embrace the principle that the existence and development of a company operating entirely overseas, owned, it is suggested, to as large an extent as possible—because we want to encourage foreign shareholders—by people almost entirely not resident in this country, is of enormous advantage to our economy. The only connection which such a company has with this country is that it happens to have its seat of control in London or elsewhere in the country. Curiously enough, when we get to that point, we are then told by the right hon. and learned Gentleman the Member for Kensington, South (Sir P. Spens) and by other hon. Gentlemen opposite that even that connection with this country is of itself of no importance and that the company should be quite free to move its seat of control if it wants to do so.
    I am a little doubtful, as I say, about the advantage of encouraging companies whose connection with this country is so tenuous as really to be almost nonexistent. I hope, therefore that the Financial Secretary, when he comes to reply, will apply himself closely, as he

    509
    has done in all the debates in which he has taken part, I think, to the points put to him. I hope he will try to explain what is the reason for this excessively favourable treatment of non-resident shareholders. Why should he wish to encourage shareholders in O.T.C.s to emigrate? Why is it reasonable that someone should be in the position of paying no tax at all on the operations of the company from which he draws his income? Why is it desirable that there should be this incentive for foreign capital to go exclusively into companies operating overseas as opposed to those operating in this country? Is it reasonable that, in the case of a company registered in England and enjoying the protection of the laws of this country and of the power and prestige of the British Government, there should be no contribution, in all the circumstances, towards those services?
    Mr. Chapman: I share with my hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) considerable doubts about this part of the Clause. I have one particular question which I shall put to the Financial Secretary, and I hope that he will be good enough to find an answer to it. Later in my speech, I want to come back to consider this question of encouraging the richer taxpayer generally to emigrate, and I shall have a few words to say about the sort of "Noel Coward" case which is in all our minds. There is, however, as far as I can see, another and a beautiful way of possible avoidance in this Clause, and, from my own researches. I cannot see that the existing legislation has a chance of stopping it. If it has, I shall be very glad indeed to know.
    The Clause makes clear, and we know in any event, that in tax law a person is also a company; but it is made clear further that it is possible under the Clause for a foreign company to be exempt if it holds shares in an O.T.C. Just as a foreign resident is exempt from the payment of tax on the dividends distributed by an O.T.C., so would a foreign company be exempt from paying tax on dividends on shares in a British O.T.C.
    In that case, if I were a rich taxpayer who wished to get the advantage of non-residence and to get tax exemption on my
    510
    holdings in an overseas trade corporation, what is there to stop me from, say, setting up a £50 private company in Bermuda which would, in effect, have my holdings of shares in an O.T.C.? Then, if I wished it could accumulate funds for me in Bermuda. They would never be remitted back here. Therefore, I should not be taxed on them on a remittance basis as I would if they were sent to this country. They could be accumulated for me there and I could still be a resident of this country—I should not be a non-resident person. I should not have personally to emigrate. I should merely have a private company which had emigrated on my behalf. I should then get all the benefits of the Clause.
    It would be a very nice loophole, if it existed, for many rich men simply to deposit their securities abroad and get some nice tax-free dividends on them. I thought that this loophole would possibly be blocked by Section 36 of the 1951 Finance Act, which controls the emigration of companies, but try as I may throughout the whole of that Section, I cannot find that it covers the case.
    As far as I can see, that Section, which prohibits the emigration of companies, does not prohibit, so to speak, the emigration of personal holdings to a foreign country, which would then be held abroad instead of being held in this country. I should be pleased if the Economic Secretary could tell me any more, but as far as I can see, the loophole still remains.
    Let me now return to the general issues as set out by my hon. Friend the Member for Stechford. What is also very surprising is the definition of "emigration". My hon. Friend suggested that people would be tempted to emigrate, but that is not quite so, as, I think, my hon. Friend would be the first to agree. If I am a rich man who wishes to get the benefit of the Clause, I do not have to emigrate to a foreign country in any permanent sense. What I have to do is to keep myself abroad sufficiently under the Schedule D rules, which are quite clear on this matter. I should not come home for more than six months in any year. I probably should not maintain a permanent place of abode, or the Inland Revenue would become suspicious again. I must not even, in periods of less than six months of the year, make my visits too frequently. If I were to start coming home for three or four

    511
    months at a time in about four consecutive years, the Inland Revenue might begin to say that I was resident. These are not terribly difficult conditions to impose on these people.
    If I were a rich man and wanted a beautifully easy tax-free set of dividends on which to live, I could very nicely winter every year in Bermuda or some pleasant foreign country. I could come home for at least two months every year to arrange my affairs, or possibly three months. I should miss a year occasionally in order to fulfil the requirements of the Inland Revenue. As far as I can see, like Mr. Noel Coward but, perhaps, in a more agile way, I should be avoiding tax and I should become non-resident for the purpose of the subsection.
    8.15 p.m.
    It is very bad indeed—I do not say this in any partisan class sense—that we should now be offering a tax-free bonus to the richer members of the community who can afford to winter abroad for nine months in every year and simply come home to arrange their business affairs for two or three months in most years. That is precisely what the subsection does. I do not have to emigrate or change my nationality. I simply have to be abroad for a sufficient portion of every year. The position is more dangerous, therefore, than even my hon. Friend pointed out. Emigration as defined within the meaning of the subsection is nothing very strong.
    Then, there is the final and general point raised by my hon. Friend about the way in which persons who are investing in British overseas trade corporations are to some extent getting protection for their shareholdings and to that extent ought to be paying United Kingdom tax. The Royal Commission dithered on this issue, quite unjustifiably, I thought. Some of its remarks were really not very good arguments. As regards these non-residents and their holdings in British companies, the Royal Commission said, in paragraph 693:
    "their source enjoys the benefit of United Kingdom protection and therefore the charge to domestic tax is justified as an equivalent for the protection. It is true that the investor in a United Kingdom company has the security of our domestic legislation which governs the administration of companies: and in another sense such a company can expect that its interests overseas will be the concern of Your Majesty's Government."
    512
    Those are quite formidable, tangible things.
    We are encouraging a section of foreign nationals to invest in British companies. They invest in British companies precisely because of the security, stability and protection of our laws and the way in which our tax system and our political system protects any investment that is properly made. There is no likelihood of unjustifiable and arbitrary confiscation of their assets. All these benefits are British assets which we are to some extent conferring on these people. [Interruption.] Do hon. Members opposite not consider that they are tangible?
    Mr. A. E. Cooper: Has the hon. Member read the Labour Party's manifesto on nationalisation?
    Mr. Chapman: We are not talking about whether, in fact, there is nationalisation. When there is nationalisation, for example, there is proper compensation and a stable Parliamentary system by which it is carried through. If the hon. Member does not believe I am right, he cannot expect foreign investors to invest in British companies. He cannot have it both ways.
    The justification for the subsection that is advanced from the other side of the Committee is that our British system encourages people to invest in British companies. Now, hon. Members opposite are saying that the British system does not encourage people to invest in British overseas trade corporations. Which way round does the hon. Member for Ilford, South (Mr. Cooper) want it?
    Mr. Cooper: We are not saying anything of the sort. What we are saying is that in the event of a return of the Labour Party to Government, if the speeches of hon. and right hon. Members opposite are to be believed, investments in transport and steel will be taken over without any compensation whatever.
    Mr. Chapman: I am quite willing to argue the facts of those cases at any time that the hon. Member cares to choose. What he must bear in mind, however, is that despite the fact that nationalisation takes place in this country, much to my satisfaction, it nevertheless has not been any substantial discouragement to foreign investors to invest in our overseas trade operations. That is because of the

    513
    stability that the House of Commons applies to the whole way in which the matter is effected, and because of the guarantees which the system gives of fairness of treatment. The hon. Member really cannot have it both ways. He cannot have the Government putting forward the Clause as a way in which foreign investments will be attracted and, on the other hand, say that our system is not likely to attract those investments anyway.
    Mr. Mitchison: On the assumption that many people will read the observations just made by the hon. Member for Ilford, South (Mr. Cooper), I should like to say that they are quite untrue.
    Mr. Chapman: I am grateful to my hon. and learned Friend the Member for Kettering (Mr. Mitchison), but I frankly admit that I am more interested in sticking to the Clause and the real arguments that are being put forward on both sides of the Committee than in going into the byways into which the hon. Member for Ilford, South would lead me.
    After all, these non-resident shareholders are getting something quite tangible—a great deal of protection and a guarantee when they invest in a British company. It is quite proper and quite important that our fiscal system should say that these people who are getting these benefits should make some contribution through taxation towards them. Otherwise, why do not they invest somewhere else? If they do not want the benefits that Britain can afford them why do not they take their investments elsewhere?
    When we come back to the argument about the justification of attempts to attract foreign capital into our overseas trade corporations, the final point is that it can still be done in a way that is quite satisfactory. It is a way that has been bothering the right hon. and learned Member for Kensington, South (Sir P. Spens) all through our debates. It is the way of attracting capital to these firms via an overseas registered subsidiary, and then they would be free from the British code of taxation.
    As the right hon. and learned Member and I and other hon. Members have pointed out, a large part of this kind of attraction of foreign capital is going on through foreign registered subsidiaries and not through the sort of subsidiary
    514
    that is likely to be an overseas trade corporation within the meaning of the Bill. I see no particular reason for suddenly bringing them all back through the British fiscal system as overseas trade corporations, unless they are willing to pay to some extent for the stability, and protection that Britain affords them in making their investments here.
    Mr. Powell: The general effect of overseas trade corporation status is that a company though registered in this country, is, for the purposes of the Income Tax Acts, treated as if it were non-resident. A shareholder, who is not a resident of this country, who has shares in a non-resident company does not pay any United Kingdom Income Tax. Therefore, prima facie, since we are according to overseas trading corporations the position of a non-resident company, the consequence to a shareholder who is non-resident should follow, namely, that he does not pay United Kingdom Income Tax on his dividends.
    I was strengthened in the feeling that this is the natural consequence by one of the last remarks made by the hon. Member for Northfield (Mr. Chapman), who pointed out that what is attracting foreign investment into foreign registered companies as compared with companies registered in this country is the advantage they have of avoiding United Kingdom tax thereby; and it is an underlying purpose of this part of the Bill that we do not want companies to be at a disadvantage in any respect just because they are registered in this country.
    On general principles, and arising from the general purposes of this part of the Bill, I should have thought it a natural consequence that the non-resident shareholder should not pay United Kingdom Income Tax. As the hon. Member for Stechford (Mr. Roy Jenkins) pointed out, this point was considered by the Royal Commission. It came to the conclusion that on the whole, this was the right solution. For example, at the end of paragraph 692 of its Report, it said:
    "the non-resident shareholder seems to have a fair case for exemption of his dividends on general grounds."
    That is as well as on economic grounds The Report concluded:
    "We do not think it necessary to say more than this, that the adoption of any scheme for

    515
    exempting company overseas profits from United Kingdom tax would raise directly the question of taxing dividends of the non-resident shareholder; and that whatever may have been true of the past, the case for their taxation today has worn very thin."
    There is a further consideration besides the general logical position, and one that was not considered by the Royal Commission. It is a reason that is really decisive.
    Most, though not all, of our double taxation relief agreements provide that United Kingdom Income Tax shall not be imposed upon a foreign resident beyond the taxation imposed upon the company from which the profits are drawn. That being so, it would clearly be a breach of the spirit, if not of the letter, of these double taxation agreements that a non-resident should bear tax upon his dividends from a company whose profits, unless and until they are distributed, are not subject to United Kingdom Income Tax. For this company the overseas trade corporation is in a quite different position from that of the ordinary British registered company which bears Income Tax on its profits whether it distributes them or not. Therefore, if we did not make this provision in subsection (2) we should be involved in a breach of a whole range of our double taxation agreements, and that is not a position we could well contemplate.
    The hon. Member for Stechford directed all his arguments towards subsection (2), but of course, the Amendment, perhaps merely consequentially and as a matter of drafting, proposes also to omit subsection (3).
    Mr. Mitchison: It has to, because subsection (3) is simply a provision for the purposes of subsection (2).
    Mr. Powell: Oh, no. It is necessary for me to point out the importance of subsection (3). The effect of subsection (3), which would not be achieved if it were not within this Clause, is an effect to which I know many hon. Members of this Committee attach great importance. That is, that it should be possible to switch the profits of one overseas trade corporation to assist in building the business of another O.T.C. in the same group. Without this subsection that would not be possible. Although I realise that the proposal to omit this subsection was consequential, I thought it was worth while to point out its effect.
    Mr. Jenkins: As my hon. and learned Friend said, subsection (3) in its present form could not stand without subsection (2), but the Financial Secretary is certainly correct in thinking that the burden of the Amendment is to remove subsection (2). If the hon. Gentleman would give an undertaking that he would put in subsection (3) in a different form, that would be satisfactory to us.
    Mr. Powell: Anyhow, we are all clear that we want the effect of subsection (3), which is to enable overseas trade corporations within the same group to be able to use their profits anywhere within the group without incurring United Kingdom Income Tax in the process.
    The hon. Member for Northfields put two specific avoidance cases to me. The first was of a United Kingdom resident shareholder in an overseas trade corporation who transferred his holding in it to a company registered overseas in a country where local tax was low or nonexistent, so as to be able to get the benefit of this subsection.
    Mr. Chapman: While he remains resident.
    8.30 p.m.
    Mr. Powell: While he remains resident in this country. I think the hon. Gentleman will find that possibility is stopped by Section 412 of the Income Tax Act, 1952. Perhaps if I simply read the rubric of that Section, it will be sufficient for the present purpose. The Section contains:
    "Provisions for preventing avoidance of Income Tax by transactions resulting in the transfer of income to persons abroad."
    In this case the income of a shareholder is transferred to the supposed Bermudan company abroad for avoidance purposes.
    Mr. E. Fletcher: In the case posed by my hon. Friend there would be no transfer for the avoidance of tax, there would be a capital investment made in a Bermudan company. That company, being a foreign company for the purposes of this subsection, would derive all the benefits of the accumulation of profits in, for example, the Kuwait company. When there was a remittance to the United Kingdom company, the Bermudan company would not be subject to any tax. As a result, in the case posed, the

    517
    individual who started with an investment in the Bermudan company would accumulate a great deal of capital.
    Mr. Powell: Yes, but for the purposes of the avoidance device it would be necessary for the United Kingdom shareholder in the overseas trade corporation to transfer his holdings in the O.T.C. to the Bermudan company. That would be the start of it, and it is that transaction which is prevented by the Section to which I have drawn attention.
    Mr. Chapman: I am sorry I did not find that one; I only found the 1951 Act. It says specifically, if it is proved to be for tax avoidance. There may be many ways round that one too. Does it prohibit completely the transfer of stocks and shares owned merely for the purpose of tax avoidance?
    Mr. Powell: I have, perhaps rightly, suffered for the sin of quoting a side title in order to save the time of the Committee. If the hon. Gentleman will consult the Section he will find that it prevents the initial transaction upon which the whole avoidance device would rest.
    He posited a second case where the taxpayer himself went abroad so as to become non-resident and thus not liable to pay Income Tax upon his dividends from an O.T.C. It is true that a person who renders himself non-resident can avoid United Kingdom Income Tax on any income arising outside the United Kingdom, and consequently, if one accepts my earlier logic, upon income arising from a company treated as non-resident. In the instance which he gave—a certain playwright, who has been mentioned more than once in these debates—of course that playwright escapes United Kingdom Income Tax only upon his non-United Kingdom earnings.
    To sum up, I would therefore put it to the Committee that it is consistent with the general effect and purpose of this part of the Bill—and is, indeed, necessary because of our double taxation arrangements—that we should have the provisions in subsection (2). I hope that the hon. Member for Stechford will not think the worse of British registered companies trading overseas because they happen to have a certain number of non-resident shareholders. It was probably
    518
    an unintentional hyperbole, but I did not think that they deserved to be described on that account as "companies whose connection with this country is so tenuous as to be almost non-existent."
    I think we must treat these overseas trade corporations as a group, and accept the logic of non-resident shareholders in those corporations not paying United Kingdom Income Tax.
    Mr. Mitchison: I wonder whether the Financial Secretary would be kind enough to answer a question which puzzles me. Subsection (2) refers to a person not resident in the United Kingdom and it provides for his getting certain refunds of Income Tax. It then has a proviso which reads:
    "that this subsection shall not apply where the person owning the shares in the Overseas Trade Corporation is"
    —I omit various words—
    "resident in the United Kingdom".
    Mr. Powell: The hon. and learned Gentleman should not omit those words.
    Mr. Mitchison: Very well. I will put them in. It reads:
    "Provided that this subsection shall not apply where the person owning the shares in the Overseas Trade Corporation is a company which is a subsidiary of a principal company and that principal company—(a) is resident in the United Kingdom…."
    Would the Financial Secretary explain to me what is contemplated? First of all, we have an overseas trade corporation. Then we have a subsidiary of a principal company. Is the idea that that subsidiary should not be resident in the United Kingdom? Then we have a third person, which is a principal company resident in the United Kingdom. What sort of practical point has the hon. Gentleman in mind? I wish it could be explained because I find it very baffling, and I am not at all certain that I like the provision.
    Mr. Powell: The effect of the proviso is this. So far we have been considering a non-resident shareholding company in an overseas trade corporation, but if that non-resident shareholding company were itself the subsidiary—let us say the mere puppet of a United Kingdom company—the practical effect would be that a United Kingdom company or a United Kingdom resident could be drawing the tax-exempt profits of an overseas trade corporation by

    519
    drawing them through a non-resident shareholder. It is to prevent this method of avoidance that the case where the non-resident company is a subsidiary of the United Kingdom principal is ruled out.
    Mr. Mitchison: Is not that altogether too easy?—It depends finally on the dummy company the Financial Secretary knows what I mean—being the subsidiary. Supposing that two or three companies, perhaps engaged in a similar trade, have a dummy company of this sort; it is not a subsidiary of any one of them and they will accordingly be able to extract tax-free income although it is not intended that they should. I say that it is not intended that they should because if it were the subsidiary of one of them they would not get it. But all they have to do is to combine, the three of them, and to put up a dummy between them, and they will get the benefit. I should like to know what is the answer to that. I expect that there is one.
    Mr. Powell: I will certainly pursue that point.
    Amendment negatived.
    Mr. Powell: I beg to move in page 19, line 9, to leave out from "Kingdom" to the end of line 10.
    This point follows on directly from that which I have been discussing with the hon. and learned Member for Kettering (Mr. Mitchison). It is necessary that the case of a United Kingdom resident principal company should be ruled out even where that United Kingdom principal company is itself an overseas trade corporation. There need be no connection between this overseas trade corporation and the original overseas trade corporation from whose trading profits the dividends are drawn. There is no reason why a United Kingdom company which happens to be an overseas trade corporation on other grounds should profit by the avoidance device, which the proviso is intended to prevent, more than any other kind of United Kingdom company. It is for that reason that the words are required out of the subsection.
    Mr. Mitchison: That appears to follow, but the extreme complexity of these arrangements confirms my suspicions that evasion will prove to be only too easy.
    Amendment agreed to.
    Mr. Stevens: I beg to move, in page 19, line 15, at the end to insert:
    "and that subsection as so applied to dividends on shares owned by an Overseas Trade Corporation shall have effect as if the proviso were omitted".
    This is an extremely difficult Amendment to move shortly and clearly. The purpose of the Clause as it stands is to ensure that if a dividend is paid out of untaxed profits to a shareholder who is not resident in the United Kingdom and if there is deduction of tax, the non-resident shareholder shall be entitled to repayment of Income Tax. However, we have just been discussing the proviso in subsection (2) which has now been amended by the omission of paragraph (b).
    The situation now arises that where an overseas trade corporation has more than one subsidiary company, each of which is an overseas trade corporation, but where the parent company of the parent O.T.C. is not itself an overseas trade corporation, then that parent company of the string of overseas trade corporations will not, as the Bill is drafted, be able to reclaim the tax deducted from the dividends.
    I do not think that that follows through the entire intention of this part of the Bill. It seems to cut across the intention which is apparent in the Bill. In such a case one O.T.C. should be able to switch funds to another O.T.C., and the Amendment puts that detail right. I hope that the Amendment is as clear to the Committee as I hope it is to me.
    Mr. Powell: These words are, in fact, necessary for the reason my hon. Friend has given, and I recommend the Committee to insert them.
    Mr. Mitchison: I wish that the Financial Secretary would be a little more explicit. I listened very carefully, but I am afraid that with my limited intelligence I did not see why the words were necessary and I am somewhat afraid that there may be other people who will not see why they are necessary. What is the real reason for inserting these words? They seem to amount to this, that the subsection as applied to dividends on shares owned by an overseas trade corporation shall have effect as if the proviso were omitted. What is the difference between putting these words in and leaving them out?
    Mr. Powell: The position is that there is a grandparent company which is registered in the United Kingdom, but which is not an overseas trade corporation; there is a parent company which is an overseas trading corporation and a child company which is an overseas trade corporation.
    8.45 p.m.
    What we want to make possible is transfers of funds without liability to United Kingdom Income Tax between the parent company and the children O.T.C.s, and the fact that they happen to have a grandparent which is not an overseas trading corporation, that is to say, a principal company resident in the United Kingdom, is no reason why they should be excluded in that case from the benefits of switching funds. It is because the proviso to subsection (2), as that subsection is applied by subsection (3), would cut out this process in the case where there happens to be a non-O.T.C. resident grandparent company that these words are necessary.
    Mr. Mitchison: This sounds to me a very queer family, and the more I hear about it, the queerer it sounds. I see the point, but it seems to me, on the other hand, to be something that is open to a good deal of misuse. I cannot see why this string of companies should be treated in this special way, or that there is any real need for this proviso, but there it is, and we leave it at that. We shall have to consider afterwards what this subsection looks like as a whole with these Amendments, and we may have to revert to it at a later stage.
    Amendment agreed to.
    Clause, as amended, ordered to stand part of the Bill.

    Clause 24.—(INCOME TAX CHARGE IN RESPECT OF EXEMPT TRADING INCOME IN OTHER CASES.)
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    Mr. Mitchison: We are in a little procedural difficulty here. We cannot, of course, at this stage discuss the Sixth Schedule, and this Clause does no more
    than incorporate it in the Bill, but we do not like the Sixth Schedule. We have quite a number of objections to it, and we therefore do not propose to allow this Clause to pass without taking a vote on it in order to register in anticipation the objections which we are going to make to the Sixth Schedule when we come to it.
    Mr. Chapman: I want to say how very glad I was to hear my hon. and learned Friend the Member for Kettering (Mr. Mitchison) say that. I saw an expression of surprise on the face of the Financial Secretary, and I suppose he is thinking that because the Sixth Schedule to which I will not refer in detail, makes grants or loans to individuals liable to tax and deals with distributions on winding-up and so on, he is surprised that we should be voting against it.
    I want to tell the hon. Gentleman that one of the things that annoys us intensely, for example, is that Surtax is going to be excluded on winding-up. Further on, when we come to other provisions, we find that certainly Profits Tax is excluded. Thirdly, and much more important than the other two, I do not believe that the provisions of the Sixth Schedule are at all watertight. I do not want to be out of order by discussing them now, but when we have to go into something like four and a half pages of close type in a Parliamentary Bill in order to put in some anti-avoidance provisions, it makes us realise how very complex the matter is, and how easy evasion is probably going to be for the people who specialise in that sort of thing. When we come to discuss the Sixth Schedule we shall have some suggestions to make as to how that evasion is likely to take place. The very complexity shows how difficult it is to check all these loopholes. I rose only to say how surprised I was to see the Financial Secretary register shock when we said that we would divide. There are very good reasons why we should do so.
    Question put, That the Clause stand part of the Bill:—
    The Committee divided: Ayes 227. Noes 176.

    Division No. 150.]

    AYES

    [8.51 p.m.

    Agnew, Sir Peter

    Amory, Rt. Hn. Heathcoat (Tiverton)

    Atkins, H. E.

    Aitken, W. T.

    Arbuthnot, John

    Baldock, Lt.-Cmdr. J. M.

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

    Armstrong, C. W.

    Baldwin, A, E.

    Amery, Julian (Preston, N.)

    Ashton, H.

    Balniel, Lord

    Barber, Anthony

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

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

    Barlow, Sir John

    Henderson, John (Cathcart)

    Osborne, C.

    Barter, John

    Henderson-Stewart, Sir James

    Page, R. G.

    Baxter, Sir Beverley

    Hesketh, R. F.

    Pannell, N. A. (Kirkdale)

    Bell, Philip (Bolton, E.)

    Hicks-Beach, Maj, W. W.

    Partridge, E.

    Bell, Ronald (Bucks, S.)

    Hill, Rt. Hon. Charles (Luton)

    Peyton, J. W. W.

    Bidgood, J. C.

    Hill, Mrs. E. (Wythenshawe)

    Pickthorn, K. W. M.

    Birch, Rt. Hon. Nigel

    Hill, John (S. Norfolk)

    Pike, Miss Mervyn

    Bishop, F. P.

    Hirst, Geoffrey

    Pilkington, Capt. R. A.

    Black, C. W.

    Holland-Martin, C. J.

    Pitt, Miss E. M.

    Body, R. F.

    Holt, A. F.

    Pott, H. P.

    Bossom, Sir Alfred

    Hope, Lord John

    Powell, J. Enoch

    Bowen, E. R. (Cardigan)

    Hornby, R. P.

    Price, Henry (Lewisham, W.)

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

    Hornsby-Smith, Miss M. P.

    Profumo, J. D.

    Braine, B. R.

    Horobin, Sir Ian

    Raikes, Sir Victor

    Brooman-White, R. C.

    Howard, Hon. Greville (St. Ives)

    Ramsden, J. E.

    Bryan, P.

    Howard, John (Test)

    Rawlinson, Peter

    Bullus, Wing Commander E. E.

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

    Redmayne, M.

    Burden, F. F. A.

    Hughes Hallett, Vice-Admiral J.

    Rees-Davies, W. R.

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

    Hughes-Young, M. H. C.

    Remnant, Hon. P,

    Carr, Robert

    Hurd, A. R.

    Renton, D. L. M.

    Cary, Sir Robert

    Hutchison, Michael Clark (E'b'gh, S.)

    Ridsdale, J. E.

    Channon, Sir Henry

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

    Rippon, A. G. F.

    Chichester-Clark, R.

    Hutchison, Sir James (Scotstoun)

    Robinson, Sir Roland (Blackpool, S.)

    Clarke, Brig. Terence (Portsmth, W.)

    Hylton-Foster, Rt. Hon. Sir Harry

    Rodgers, John (Sevenoaks)

    Cooke, Robert

    Iremonger, T. L.

    Roper, Sir Harold

    Cordeaux, Lt.-Col. J. K.

    Irvine, Bryant Godman (Rye)

    Ropner, Col. Sir Leonard

    Corfield, Capt. F. V.

    Jenkins, Robert (Dulwich)

    Russell, R, S.

    Craddock, Beresford (Spelthorne)

    Jennings, J. C. (Burton)

    Schofield, Lt.-Col. W.

    Crowder, Sir John (Finchley)

    Johnson, Dr. Donald (Carlisle)

    Scott-Miller, Cmdr. R.

    Crowder Petre (Ruislip—Northwood)

    Johnson, Eric (Blackley)

    Sharples, R. C.

    Cunningham, Knox

    Joynson-Hicks, Hon. Sir Lancelot

    Shepherd, William

    Currie, G. B. H.

    Keegan, D.

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

    Dance, J. C. C.

    Kerby, Capt. H. B.

    Smithers, Peter (Winchester)

    Davidson, Viscountess

    Kerr, Sir Hamilton

    Smyth, Brig. Sir John (Norwood)

    Davies, Rt. Hn. Clement (Montgomery)

    Kershaw, J. A.

    Spearman, Sir Alexander

    D'Avigdor-Goldsmid, Sir Henry

    Kimball, M.

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

    Deedes, W. F.

    Kirk, P. M.

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

    Dodds-Parker, A. D.

    Lagden, G. W.

    Stanley, Capt. Hon. Richard

    Doughty, C. J. A.

    Leather, E. H. C.

    Stevens, Geoffrey

    Drayson, G. B.

    Leavey, J. A.

    Steward, Harold (Stockport, S.)

    du Cann, E. D. L.

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

    Storey, S.

    Dugdale, Rt. Hn. Sir T. (Richmond)

    Legh, Hon. Peter (Petersfield)

    Studholme, Sir Henry

    Eden, J. B. (Bournemouth, West)

    Lindsay, Hon. James (Devon, N.)

    Summers, Sir Spencer

    Elliott. R. W. (N'castle upon Tyne, N.)

    Lindsay, Martin (Solihull)

    Sumner, W. D. M. (Orpington)

    Errington, Sir Eric

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

    Taylor, Sir Charles (Eastbourne)

    Farey-Jones, F. W.

    Lucas, P. B. (Brentford & Chiswick)

    Teeling, W.

    Fell, A.

    Lucas-Tooth, Sir Hugh

    Temple, John M.

    Fletcher-Cooke, C.

    McAdden, S. J.

    Thomas, Leslie (Canterbury)

    Foster, John

    Macdonald, Sir Peter

    Thompson, Kenneth (Walton)

    Fraser, Sir Ian (M'cmbe & Lonsdale)

    Mackeson, Brig. Sir Harry

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

    Freeth, Denzil

    Mackie, J. H. (Galloway)

    Thorneycroft, Rt. Hon. P.

    Gammans, Lady

    McLaughlin, Mrs. P.

    Thornton-Kemsley, C. N.

    Garner-Evans, E. H.

    Maclean, Fitzroy (Lancaster)

    Tilney, John (Wavertree)

    George, J. C. (Pollok)

    McLean, Neil (Inverness)

    Turton, Rt. Hon. R. H.

    Glover, D.

    Macmillan, Maurice (Halifax)

    Tweedsmuir, Lady

    Gomme-Duncan, Col. Sir Alan

    Macpherson, Niall (Dumfries)

    Vane, W. M. F.

    Goodhart, Philip

    Maddan, Martin

    Vaughan-Morgan, J. K.

    Gower, H. R.

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

    Vickers, Miss Joan

    Graham, Sir Fergus

    Maitland, Hon. Patrick (Lanark)

    Wade, D. W.

    Grant, W. (Woodside)

    Manningham-Buller, Rt. Hon. Sir R.

    Wakefield Edward (Derbyshire, W.)

    Grant-Ferris, Wg Cdr. R. (Nantwich)

    Markham, Major Sir Frank

    Wall, Major Patrick

    Green, A.

    Marshall, Douglas

    Ward, Rt. Hon. C. R. (Worcester)

    Grimston, Sir Robert (Westbury)

    Mathew, R.

    Ward, Dame Irene (Tynemouth)

    Grosvenor, Lt.-Col. R. G.

    Maudling, Rt. Hon. R.

    Webbe, Sir H.

    Gurden, Harold

    Mawby, R. L.

    Whitelaw, W. S. I.

    Hall, John (Wycombe)

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

    Williams, Paul (Sunderland, S.)

    Harris, Frederic (Croydon, N.W.)

    Milligan, Rt. Hon. W. R.

    Wills, G. (Bridgwater)

    Harris, Reader (Heston)

    Mott-Radclyffe, Sir Charles

    Woollam, John Victor

    Harrison, Col. J. H. (Eye)

    Nabarro, G. D. N.

    Harvey, Sir Arthur Vere (Macclesfd)

    Neave, Airey

    TELLERS FOR THE AYES:

    Harvey, John (Walthamstow, E.)

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

    Mr. Oakshott and Mr. Finlay.

    Heald, Rt. Hon. Sir Lionel

    Nugent, G. R. H.

    NOES

    Ainsley, J. W.

    Baird, J.

    Blyton, W. R.

    Allaun, Frank (Salford, E.)

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

    Boardman, H.

    Allen, Arthur (Bosworth)

    Benson, G.

    Bottomley, Rt. Hon. A. G.

    Allen, Scholefield (Crewe)

    Beswick, Frank

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

    Awbery, S. S.

    Blackburn, F.

    Bowles, F. G.

    Bacon, Miss Alice

    Blenkinsop, A.

    Boyd, T. C.

    524

    525

    Brockway, A. F.

    Janner, B.

    Price, J. T. (Westhoughton)

    Brown, Thomas (Ince)

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

    Price, Philips (Gloucestershire, W.)

    Burton, Miss F. E.

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

    Probert, A. R.

    Champion, A. J.

    Jenkins, Roy (Stechford)

    Proctor, W. T.

    Chapman, W. D.

    Johnson, James (Rugby)

    Pryde, D. J.

    Clunie, J.

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

    Randall, H. E.

    Coldrick. W.

    Jones, David (The Hartlepools)

    Rankin, John

    Collick, P. H. (Birkenhead)

    Jones, Jack (Rotherham)

    Redhead, E. C.

    Collins, V. J. (Shoreditch & Finsbury)

    Jones, J. Idwal (Wrexham)

    Rhodes, H,

    Corbet, Mrs. Freda

    Jones, T. W. (Merioneth)

    Roberts, Goronwy (Caernarvon)

    Cove, W. G.

    Kenyon, C.

    Rogers, George (Kensington, N.)

    Craddock, George (Bradford, S.)

    Key, Rt. Hon. C. W.

    Ross, William

    Cronin, J. D.

    King, Dr. H. M.

    Royle, C.

    Crossman, R. H. S.

    Lawson, G. M.

    Short, E. W.

    Davies, Harold (Leek)

    Ledger, R. J.

    Skeffington, A. M.

    Deer, G.

    Lee, Frederick (Newton)

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

    de Freitas, Geoffrey

    Lee, Miss Jennie (Cannock)

    Slater, J. (Sedgefield)

    Delargy, H. J.

    Lewis, Arthur

    Sorensen, R. W.

    Dodds, N. N.

    Lindgren, G. S

    Soskice, Rt. Hon. Sir Frank

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

    Logan, D. G.

    Sparks, J. A.

    Edelman, M.

    MacColl, J. E.

    Steele, T.

    Edwards, Rt. Hon. John (Brighouse)

    McInnes, J.

    Stewart, Michael (Fulham)

    Evans, Albert (Islington, S.W.)

    McKay, John (Wallsend)

    Stonehouse, John

    Fernyhough, E.

    MacMillan, M. K. (Western Isles)

    Stones, W. (Consett)

    Flenburgh, W.

    MacPherson, Malcolm (Stirling)

    Strachey, Rt. Hon. J.

    Fletcher, Eric

    Mahon, Simon

    Swingler, S. T.

    Fraser, Thomas (Hamilton)

    Mallalieu, E. L. (Brigg)

    Sylvester, G. O.

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

    Mann, Mrs. Jean

    Taylor, John (West Lothian)

    Gibson, C. W.

    Marquand, Rt. Hon. H. A.

    Thomson, George (Dundee, E.)

    Gooch, E. C.

    Mellish, R. J.

    Thornton, E.

    Gordon Walker, Rt. Hon. P. C.

    Messer, Sir F.

    Tomney, F.

    Greenwood, Anthony

    Mikardo, Ian

    Ungoed-Thomas, Sir Lynn

    Grey, C. F.

    Mitchison, G. R.

    Viant, S. P.

    Griffiths, David (Rother Valley)

    Monslow, W.

    Warbey, W. N.

    Griffiths, Rt. Hon. James (Llanelly)

    Moody, A. S.

    Wells, Percy (Faversham)

    Hale, Leslie

    Morris, Percy (Swansea, W.)

    West, D. G.

    Hall, Rt. Hn. Glenvil (Colne Valley)

    Moyle, A.

    Wheeldon, W. E.

    Hamilton, W. W.

    Mulley, F. W.

    White, Mrs. Eirene (E. Flint)

    Hastings, S.

    Noel-Baker, Rt. Hon. P. (Derby, S.)

    White, Henry (Derbyshire, N.E.)

    Hayman, F. H.

    Oliver, G. H.

    Wilcock, Group Capt. C. A. B.

    Healey, Denis

    Oram, A. E.

    Wilkins, W. A.

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

    Orbach, M.

    Willey, Frederick

    Hobson, C. R. (Keighley)

    Oswald, T.

    Williams, Rev. Llywelyn (Ab'tillery)

    Holmes, Horace

    Padley, W. E.

    Williams, Ronald (Wigan)

    Houghton, Douglas

    Palmer, A. M. F.

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

    Howell, Charles (Perry Barr)

    Pannell, Charles (Leeds, W.)

    Williams, W. R. (Openshaw)

    Hughes, Cledwyn (Anglesey)

    Pargiter, G. A.

    Willis, Eustace (Edinburgh, E.)

    Hughes, Emrys (S. Ayrshire)

    Parker, J.

    Wilson, Rt. Hon. Harold (Huyton)

    Hughes, Hector (Aberdeen, N.)

    Parkin, B. T.

    Winterbottom, Richard

    Hunter, A. E.

    Peart, T. F.

    Woof, R. E.

    Hynd, H. (Accrington)

    Pentland, N.

    Yates, V. (Ladywood)

    Hynd, J. B. (Attercliffe)

    Popplewell, E.

    Irving, Sydney (Dartford)

    Prentice, B. E.

    TELLERS FOR THE NOES:

    Mr. Pearson and Mr. Simmons.

    Clause Ordered to stand part of the Bill.
    Clause 25 Ordered to Stand part of the Bill

    Clause 26.—(EXEMPTION OF TRADING INCOME FROM THE PROFITS TAX.)
    9.0 p.m.
    Mr. Powell: I beg to move, in page 21, line 12, at the end to insert:
    (3) Where in computing for the purposes of the profits tax the profits from a trade or business carried on by any person there is to be included a dividend or a part of a dividend which is to be so regarded as paid out of exempt trading income, then for the purposes of Part XIII of the Income Tax Not, 1952, as it applies for the allowance of credit against the profits tax such part, if any, of the taxes falling to be taken into account under the last foregoing section in the allowance of credit against income tax chargeable by reference to that exempt trading income as remains after the allowance of credit against that income tax
    526
    shall be deemed to have been paid by that person in respect of profits of which the dividend, or the part of the dividend, represents the amount remaining after payment of the said part of the taxes.
    The Deputy-Chairman (Major Sir William Anstruther-Gray): This Amendment can be considered with the following Amendment to page 21, line 12, in the name of the hon. Member for Langstone (Mr. Stevens).
    Mr. Powell: This Amendment deals with the case of a United Kingdom company which is not an overseas trade corporation and is a shareholder in an overseas trade corporation. In the normal case a United Kingdom company drawing dividends from a United Kingdom company trading overseas would get the benefit of credit for foreign tax both against

    527
    Income Tax and against Profits Tax paid by the other company. Where, however, the United Kingdom company trading overseas is an overseas trade corporation, that overseas trade corporation is exempt by reason of the provisions of Part IV from Profits Tax, but the company drawing the dividend will have to pay the profits tax instead.
    The effect, therefore, would be that apart from the Amendment the non-O.T.C. shareholding company would be unable to obtain credit against its Profits Tax for any foreign tax still outstanding after it had been applied against the Income Tax payable on the dividend by the overseas trade corporation. In other words, this is to enable a United Kingdom company which receives a dividend to be in the same position when it receives a dividend from an O.T.C. as it would have been had that company not been an overseas trade corporation. It still secures that there will be credit against United Kingdom Profits Tax for any outstanding foreign tax for which credit has not been allowed.
    Mr. Mitchison: Not for the first time is Pelion put on Ossa, but in this case that seems to be logical. We do not necessarily accept the position about Profits Tax, but that will not really arise under this Amendment.
    Mr. Stevens: I only rise to thank my hon. Friend the Financial Secretary. When I read the Bill there seemed quite clearly to be an anomaly here and I am grateful to his right hon. Friend and mine for recognising an anomaly and taking steps to put it right.
    Amendment agreed to.
    Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.
    Mr. Jay: This is a rather important Clause which carries out the major reduction in Profits Tax which the Chancellor is making. I should like, briefly, to make clear why we on this side of the Committee still have some doubts about the main purpose of this Clause.
    Hon. Members opposite have rather taken the line throughout these debates that the Chancellor is making some reduction in taxation of profits. They think any reduction in taxation of profits is a
    528
    good thing and, therefore, are all in favour of it without inquiring too carefully into what he is doing. What he is really doing is to give this substantial concession of £35 million—a big part of which is through Profits Tax—to a certain group of companies, and just because he is deciding to give the concession in this way it follows that other companies and other taxpayers will have to pay more. I see the right hon. and learned Member for Kensington, South (Sir P. Spens) shaking his head. It is no good his doing that. As a matter of logic, unless this action in some other way increases the revenue available, and nobody has argued that it does, what I say must be true.
    Sir P. Spens: That is the whole difference between us. All the way through our discussions right hon. and hon. Members opposite have assumed that no good whatever will follow from the increase in trade resulting from these Clauses. My hon. Friends and I take the view that a great deal of extra revenue will come. The argument of hon. Gentlemen opposite is a fallacy which has been put forward dozens of times.
    Mr. Jay: The Chancellor makes the same assumptions as we do, because he has not allowed in his Budget for any increased revenue resulting from this change. The only logical assumption—
    Sir P. Spens: It will not be immediate; it will come in the future.
    Mr. Jay:—is that the Chancellor has taken a decision—it is legitimate if he thinks it is right—that this relief shall be concentrated in this way.
    The Chancellor's argument, often repeated, is that it is necessary to put the firms trading overseas on a level with their competitors. Incidentally, he and the Financial Secretary have used a slightly different argument when we have asked who are the competitors. The Chancellor told us that they are foreign companies competing with British firms in these territories. The Financial Secretary told us that they are subsidiaries of British companies which are non-resident in the areas concerned. It is not quite the same argument, but no doubt the Chancellor could say that the British companies will be in competition with both.
    I do not think that we have sufficiently carefully analysed what is supposed to be

    529
    the competitive disadvantage from which British companies are at present suffering. It is alleged that they are paying higher taxation. That does not mean that their costs are not the same and that they are not selling at the same competitive price as the firms with which they are competing. So far as we know, and so far as the argument goes, they are on a level in terms of costs and prices. All that is alleged is that out of the profits made a rather larger share is taken by the British Exchequer than by the treasury authorities of other countries.
    What this amounts to is an argument that these firms should be enabled to build up capital tax free and to finance their expansion by that method rather than by borrowing, subject to interest payments, from outside. I agree with the Chancellor that to this extent, if they are unable to expand interest free, they are at a disadvantage compared with competitors paying a much lower rate of taxation. What seems to us to he curious about the concession is that that argument could be applied equally well to a British firm manufacturing in this country and exporting all over the world in competition with all sorts of other companies. I think that the right hon. and learned Member for Kensington, South would agree that it could be used by a company manufacturing in the United Kingdom and competing here with goods imported from a firm in Japan, the United States or Germany.
    Therefore, if the Chancellor's argument really is that it is unfair that a British firm should not be able to build up new capital interest free when its competitor is able to do so, it does not seem to me that that argument applies any more forcibly to the companies trading overseas in the same area as their competitors than it does to any British firm which is exporting or is competing with foreign firms in this country or anywhere else in the world. Therefore, I would have thought—and this is really our quarrel with the proposal—that if the Chancellor had decided that he had £35 million to give away—as the Lord Privy Seal used to say, but as the Chancellor now says we must not say—it would have been better and fairer to have concentrated the relief, or the assistance, or whatever it is called, over the whole field of industry which, by and large, is competing with foreign firms either in the home market
    530
    or in exports in one part of the world or another.
    I ask the Committee to recognise that what the Chancellor has decided to do is to concentrate the £35 million in this way on this rather narrowly, as it seems to me, and arbitrarily chosen group of firms. He could have taken another decision. He could have decided to use this relief to re-establish the investment allowance over the whole field of British industry. That would have had two advantages. First, it would have encouraged investment at home—which is something that we want—as well as investment abroad. Secondly, the investment allowance has the great merit over this other method that the Exchequer relinquishes revenue only when the firm actually carries out investment in new productive assets. If the Chancellor adopts the present method, a firm gets the relief even though it may use the undistributed profits to invest in securities and not in any expansion of productive capacity at all.
    For both those reasons, I should have thought it could have been strongly argued that it would have been better to re-introduce the investment allowance rather than to take this rather special and arbitrary measure. It is for those reasons that we are still unconvinced—given that there was this sum of money to use as a stimulus or a shot in the arm, or whatever the Chancellor likes to call it, to British overseas trade—that this was the best and most economic use to make of it.
    Mr. Birch: I do not think that I will follow the right hon. Gentleman the Member for Battersea, North (Mr. Jay) into all the various permutations and combinations of the way in which the money which is available for tax reliefs might have been used. He started his speech by saying that if this tax remission were made, other people would have to pay more, but what we have to look at is the difference between the short run and the long run.
    Clearly, as was announced in the Budget, in the short-run this will cost money. We believe that, in the long run, it will bring money in. We are, as it were, casting our bread upon the waters, and we think that it will return to us after not too many days—
    Mr. Jay: To complete that argument, could the right hon. Gentleman just tell us in what form this money is to flow back to the Exchequer?
    Mr. Birch: It will flow back through the increase in our exports, as we believe, and the profits overseas which will, in the long run, be distributed here.
    The right hon. Gentleman sought to show that there was a difference between my right hon. Friend the Chancellor and my hon. Friend the Financial Secretary as to whom the remission was enabling firms to compete with. Clearly, the answer is both, as he suggested. It will enable the British-registered company to compete better both with the foreign companies and with British companies registered overseas. As we have several times stated, one of the objects of the exercise is to retain companies registered here so far as we can, because we believe that in the long run—and in the short run, for that matter—it is better for our exports.
    The right hon. Gentleman went on to cast some doubt on the proposition that the competitive power of these overseas trade corporations might be improved by the taxation reliefs they had. I must say that that was not the argument put in an earlier debate on the Free Trade Area. What is certainly true, as he went on to show, is that it does enable companies, as is the object, to build up their reserves more easily. Therefore, not in the short run but in the long run, it does enable them to compete more than they would otherwise do.
    The right hon. Gentleman then introduced the argument again really, in effect, to say that it would be just as logical to remit taxation on companies operating here as on O.T.Cs. I do not think that that is altogether logical, because a foreign company working here is subject to British taxation. One is comparing like with like, the companies paying the same taxation. What we are seeking to do is to bring about a situation where a British registered company can compete on equal terms with companies abroad paying the taxation which obtains in those countries.
    Mr. Jay: If a British company is exporting, for instance, to Italy, and selling there in competition with an Italian firm, and if the Italian firm is paying a lower level of taxation, could not exactly the same argument be used?
    Mr. Birch: If I may say so, it is not quite the same thing. Of course, we have an efficient economy here, and it is perfectly true that we can export to countries with lower taxation; that is partly owing to the fact that we are a very highly organised country with very highly skilled labour, and so forth. What I was saying is that we are trying to compare like with like. If one is operating in a country in competition with other firms operating in that country, one ought to be on level terms with them.
    Question put, That the Clause, as amended, stand part of the Bill:—
    The Committee divided: Ayes 226, Noes 176.

    Division No. 151.]

    AYES

    [9.17 p.m.

    Agnew, Sir Peter

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

    Dugdale, Rt. Hn. Sir T. (Richmond)

    Aitken, W. T.

    Braine, B. R.

    Eden, J. B. (Bournemouth, West)

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

    Bullus, Wing Commander E. E.

    Elliott, R. W. (N'castle-on-Tyne, N.)

    Amery, Julian (Preston, N.)

    Burden, F. F. A.

    Errington, Sir Eric

    Amory, Rt. Hn. Heathcoat (Tiverton)

    Cary, Sir Robert

    Farey-Jones, F. W.

    Arbuthnot, John

    Channon, Sir Henry

    Fell, A.

    Armstrong, C. W.

    Chichester-Clark, R.

    Finlay, Graeme

    Ashton, H.

    Clarke, Brig. Terence (Fortsmth, W.)

    Fletcher-Cooke, C.

    Atkins, H. E.

    Cooke, Robert

    Foster, John

    Baldock, Lt.-Cmdr. J. M.

    Cordeaux, Lt.-Col. J. K.

    Fraser, Sir Ian(M'cmbe & Lonsdale)

    Baldwin, A. E.

    Corfield, Capt. F. V.

    Freeth, Denzil

    Balniel, Lord

    Craddock, Beresford (Spelthorne)

    Gammans, Lady

    Barber, Anthony

    Crowder, Sir John (Finchley)

    Garner-Evans, E. H.

    Barlow, Sir John

    Crowder, Petre (Ruislip—Northwood)

    George, J. C. (Pollok)

    Barter, John

    Cunningham, Knox

    Glover, D.

    Baxter, Sir Beverley

    Currie, G. B. H.

    Gomme-Duncan, Col. Sir Alan

    Bell, Philip (Bolton, E.)

    Danoe, J. C. G.

    Goodhart, Philip

    Bell, Ronald (Bucks, S.)

    Davidson, Viscountess

    Gower, H. R.

    Bidgood, J. C.

    Davies, Rt. Hon. Clement (Montgomery)

    Graham, Sir Fergus

    Birch, Rt. Hon. Nigel

    D'Avigdor-Goldsmid, sir Henry

    Grant, W. (Woodside)

    Bishop, F. P.

    Deedes, W. F.

    Grant-Ferris, Wg Cdr. R.(Nantwich)

    Black, C. W.

    Dodds-Parker, A. D.

    Green, A.

    Body, R. P.

    Doughty. C. J. A.

    Grimston, Sir Robert (Westbury)

    Bossom, Sir Alfred

    Drayson G. B.

    Grosvenor, Lt.-Col. R. G.

    Bowen, E. R. (Cardigan)

    du Cann, E. D. L.

    Gurden, Harold

    Hall, John (Wycombe)

    Lindsay, Martin (Solihull)

    Renton, D. L. M.

    Harris, Frederic (Croydon, N.W.)

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

    Ridsdale, J. E.

    Harris, Reader (Heston)

    Lucas, P. B. (Brentford A Chiswick)

    Rippon, A. G. F.

    Harrison, Col. J. H. (Eye)

    Lucas-Tooth, Sir Hugh

    Robinson, Sir Roland (Blackpool, S.)

    Harvey, Sir Arthur Vere (Macclesfd)

    McAdden, S. J.

    Rodgers, John (Sevenoaks)

    Harvey, John (Walthamstow, E.)

    Macdonald, Sir Peter

    Roper, Sir Harold

    Heald, Rt. Hon. Sir Lionel

    Mackeson, Brig. Sir Harry

    Ropner, Col. Sir Leonard

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

    Mackie, J. H. (Galloway)

    Russell, R. S.

    Henderson, John (Cathcart)

    McLaughlin, Mrs. P.

    Schofield, Lt.-Col. W.

    Henderson-Stewart, Sir James

    Maclean, Fitzroy (Lancaster)

    Scott-Miller, Cmdr. R.

    Hesketh, R. F.

    McLean, Neil (Inverness)

    Sharples, R. C.

    Hicks-Beach, Maj. W. W.

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

    Shepherd, William

    Hill, Rt. Hon. Charles (Luton)

    Macmillan, Maurice (Halifax)

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

    Hill, Mrs. E. (Wythenshawe)

    Macpherson, Niall (Dumfries)

    Smithers, Peter (Winchester)

    Hill, John (S. Norfolk)

    Maddan, Martin

    Smyth, Brig. Sir John (Norwood)

    Hirst, Geoffrey

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

    Spearman, Sir Alexander

    Holland-Martin, C, J.

    Maitland, Hon. Patrick (Lanark)

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

    Holt, A. F.

    Manningham-Buller, Rt. Hn. Sir R.

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

    Hope, Lord John

    Markham, Major Sir Frank

    Stanley, Capt. Hon. Richard

    Hornby, R. P,

    Marshall, Douglas

    Stevens, Geoffrey

    Hornsby-Smith, Miss M. P.

    Mathew, R.

    Steward, Harold (Stockport, S.)

    Horobin, Sir Ian

    Maudling, Rt. Hon. R.

    Storey, S.

    Howard, Hon. Greville (St. Ives)

    Mawby, R. L.

    Studholme, Sir Henry

    Howard, John (Test)

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

    Summers, Sir Spencer

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

    Milligan, Rt. Hon. W. R.

    Sumner, W. D. M. (Orpington)

    Hughes Hallett, Vice-Admiral J.

    Mott-Radclyffe, Sir Charles

    Taylor, Sir Charles (Eastbourne)

    Hughes-Young, M. H. C.

    Nabarro, G, D. N.

    Teeling, W.

    Hurd, A. R.

    Neave, Airey

    Temple, John M.

    Hutchison, Michael Clark (E'b'gh, S.)

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

    Thomas, Leslie (Canterbury)

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

    Nugent, G. R. H.

    Thompson, Kenneth (Walton)

    Hutchison, Sir James (Scotstoun)

    Oakshott, H. D.

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

    Hylton-Foster, Rt. Hon. Sir Harry

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

    Thorneycroft, Rt. Hon. P.

    Iremonger, T. L.

    Osborne, C.

    Thornton-Kemsley, C. N.

    Irvine, Bryant Godman (Rye)

    Page, R. G.

    Tilney, John (Wavertree)

    Jenkins, Robert (Dulwich)

    Panned, N. A. (Kirkdale)

    Turton, Rt. Hon. R. H.

    Jennings, J. C. (Burton)

    Partridge, E.

    Tweedsmuir, Lady

    Johnson, Dr. Donald (Carlisle)

    Peyton, J. W. W.

    Vane, W. M. F.

    Johnson, Eric (Blackley)

    Pickthorn, K. W. M.

    Vaughan-Morgan, J. K.

    Joynson-Hicks, Hon. Sir Lancelot

    Pike, Miss Mervyn

    Vickers, Miss Joan

    Keegan, D.

    Pilkington, Capt. R. A.

    Wade, D. W.

    Kerby, Capt. H. B.

    Pitt, Miss E. M.

    Wakefield, Edward (Derbyshire, W.)

    Kerr, Sir Hamilton

    Pott, H. P.

    Wall, Major Patrick

    Kershaw, J. A.

    Powell, J. Enoch

    Ward, Rt. Hon. G. R. (Worcester)

    Kimball, M.

    Price, Henry (Lewisham, W.)

    Ward, Dame Irene (Tynemouth)

    Kirk, P. M.

    Profumo, J. D.

    Webbe, Sir H.

    Lagden, G. W.

    Raikes, Sir Victor

    Whitelaw, W. S. I.

    Leather, E. H. C.

    Ramsden, J. E.

    Williams, Paul (Sunderland)

    Leavey, J. A.

    Rawlinson, Peter

    Wills, G. (Bridgwater)

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

    Redmayne, M.

    Woollam, John Victor

    Legh, Hon. Peter (Petersfield)

    Rees-Davies, W. R.

    TELLERS FOR THE AYES:

    Lindsay, Hon. James (Devon, N.)

    Remnant, Hon. P.

    Mr. Bryan and Mr. Brooman-White.

    NOES

    Ainsley, J. W.

    Corbet, Mrs. Freda

    Hamilton, W. W.

    Allaun, Frank (Salford, E.)

    Cove, W. G.

    Hastings, S.

    Allen, Arthur (Bosworth)

    Craddock, George (Bradford, S.)

    Hayman, F. H.

    Allen, Scholefield (Crewe)

    Cronin, J. D.

    Healey, Denis

    Awbery, S. S.

    Crossman, R. H. S.

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

    Bacon, Miss Alice

    Davies, Harold (Leek)

    Hobson, C. R. (Keighley)

    Baird, J.

    Deer, G.

    Holmes, Horace

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

    de Freitas, Geoffrey

    Houghton, Douglas

    Benson, G.

    Delargy, H. J.

    Howell, Charles (Perry Barr)

    Beswick, Frank

    Dodds, N. N.

    Hughes, Cledwyn (Anglesey)

    Blackburn, F.

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

    Hughes, Emrys (S. Ayrshire)

    Blenkinsop, A.

    Edelman, M.

    Hughes, Hector (Aberdeen, N.)

    Blyton, W. R.

    Edwards, Rt. Hon. John (Brighouse)

    Hunter, A. E.

    Boardman, H.

    Evans, Albert (Islington, S.W.)

    Hynd, H. (Accrington)

    Bottomley, Rt. Hon. A. G.

    Fernyhough, E.

    Hynd, J. B. (Attercliffe)

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

    Fienburgh, W.

    Irving, Sydney (Dartford)

    Bowles, F. G.

    Fletcher, Eric

    Janner, B.

    Boyd, T. C.

    Fraser, Thomas (Hamilton)

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

    Brookway, A. F.

    Caitskell, Rt. Hon. H. T. N.

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

    Brown, Thomas (Ince)

    Gibson, C. W.

    Jenkins, Roy (Stechford)

    Burton, Miss F. E.

    Gooch, E. G.

    Johnson, James (Rugby)

    Champion, A. J.

    Gordon Walker, Rt. Hon. P. C.

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

    Chapman, W. D.

    Greenwood, Anthony

    Jones, David (The Hartlepools)

    Chetwynd, G. R.

    Grey, C. F.

    Jones, J. Idwal (Wrexham)

    Clunie, J.

    Griffiths, David (Rother Valley)

    Jones, T. W. (Merioneth)

    Coldrick, W.

    Griffiths, Rt. Hon. James (Llanelly)

    Kenyon, C.

    Collick, P. H. (Birkenhead)

    Hale, Leslie

    Key, Rt. Hon. C. W.

    Collins, V. J.(Shoreditch & Finsbury)

    Hall, Rt. Hon. Glenvil (Colne Valley)

    King, Dr. H. M.

    534

    535

    Lawson, G. M.

    Padley, W. E.

    Stonehouse, John

    Ledger, R. J.

    Palmer, A. M. F.

    Stones, W. (Consett)

    Lee, Frederick (Newton)

    Pannell, Charles (Leeds, W.)

    Strachey, Rt. Hon. J.

    Lee, Miss Jennie (Cannock)

    Parker, J.

    Swingler, S. T.

    Lewis, Arthur

    Parkin, B. T.

    Sylvester, G. O.

    Lindgren, G. S.

    Peart, T. F.

    Taylor, John (West Lothian)

    Logan, D. G.

    Pentland, N.

    Thomson, George (Dundee, E.)

    MacColl, J. E.

    Popplewell, E.

    Thornton, E.

    McInnes, J.

    Prentice, R. E.

    Tomney, F.

    McKay, John (Wallsend)

    Price, J. T. (Westhoughton)

    Ungoed-Thomas, Sir Lynn

    MacMillan, M. K. (Western Isles)

    Price, Philips (Gloucestershire, W.)

    Viant, S. P.

    MacPherson, Malcolm (Stirling)

    Probert, A. R.

    Warbey, W. N.

    Mahon, Simon

    Proctor, W. T.

    Wells, Percy (Faversham)

    Mallalieu, E. L. (Brigg)

    Pryde, D. J.

    West, D. G.

    Mann, Mrs. Jean

    Randall, H. E.

    Wheeldon, W. E.

    Marquand, Rt. Hon. H. A.

    Rankin, John

    White, Mrs. Eirene (E. Flint)

    Mellish, R. J.

    Redhead, E. C,

    White, Henry (Derbyshire, N.E.)

    Messer, Sir F.

    Rhodes, H.

    Wilcock, Group Capt. C. A. B.

    Mikardo, Ian

    Roberts, Goronwy (Caernarvon)

    Wilkins, W. A.

    Mitchison, G. R.

    Rogers, George (Kensington, N.)

    Willey, Frederick

    Monslow, W.

    Ross, William

    Williams, Rev. Llywelyn (Ab'tillery)

    Moody, A. S.

    Royle, C.

    Williams, Ronald (Wigan)

    Morris, Percy (Swansea, W.)

    Short, E W.

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

    Moyle, A.

    Skeffington, A. M.

    Williams, W. R. (Openshaw)

    Mulley, F. W.

    Slater, Mrs. H (Stoke, N.)

    Willis, Eustace (Edinburgh, E.)

    Noel-Baker, Rt. Hon. P. (Derby, S.)

    Slater, J. (Sedgefield)

    Wilson, Rt. Hon. Harold (Huyton)

    O'Brien, Sir Thomas

    Sorensen, R. W.

    Winterbottom, Richard

    Oliver, G. H.

    Soskice, Rt. Hon. Sir Frank

    Woof, R. E.

    Oram, A. E.

    Sparks, J. A.

    Yates, V. (Ladywood)

    Orbach, M.

    Steele, T.

    Oswald, T.

    Stewart, Michael (Fulham)

    TELLERS FOR THE NOES:

    Mr. Pearson and Mr. Simmons.

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

    Clause 27.—(ANNUAL DETERMINATION OF STATUS, AND PROVISIONS ON CHANGES OF STATUS.)
    Mr. Powell: I beg to move, in page 21, line 43, at the end, to insert:
    Provided that a company shall qualify as an Overseas Trade Corporation for any such year if it only fails to comply with the requirements specified in any of the foregoing paragraphs because it, or a company which is its subsidiary company, has only recently been formed, or is about to be or is being wound up, and, consequently, is not carrying on a trade outside the United Kingdom.
    This is a very minor Amendment, designed to deal with the case of a company which is formed or wound up during the tax year. It is a requirement for qualifying in such circumstances as an overseas trade corporation that, among other things, the company shall he carrying on trade outside the United Kingdom during the whole time that it is in existence. It will be obvious that where a company is being wound up or is just starting, one could not guarantee that it was actually conducting trade abroad either on the last day before it ceased to exist or on the first day after it came into existence. Therefore, without this proviso it might be prevented on a purely technical ground from qualifying and getting the benefit of subsection (1, a). It is to rectify that doubt that the proviso is felt to be
    necessary and I suggest that it be added to the subsection.
    Amendment agreed to.
    Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.
    Mr. Houghton: Clause 27 (2) appears to give to the Commissioners of Inland Revenue certain discretionary powers to deal with companies which have slipped up. It says that
    "If it appears to the Commissioners of Inland Revenue that a company would have the necessary qualifications so as to qualify as an Overseas Trade Corporation for a period but for some event over which the company had no control or some act done by the company inadvertently and that no material advantage, was obtained by the company from that event or from its act, then for the purposes of this section that event or act shall, if the Commissioners of Inland Revenue in their discretion so direct, be disregarded."
    This seems to me to be a new and unusual power given to the Commissioners and we should invite the Financial Secretary to throw some light upon it.
    Section 66 of the Income Tax Act, 1952, deals with errors and omissions and things of that kind and the rights of the taxpayer to rectify them but, as far as I know, none of the provisions of that Section enables the taxpayer to say, "I am awfully sorry but I inadvertently did something which has put me at a disadvantage according to the Income Tax Act. I really had no idea

    537
    that I was doing it and up to now have had no material advantage. Will you please disregard it? "We ought to know what are the conditions under which the Commissioners of Inland Revenue would be able to exercise this discretionary power.
    9.30 p.m.
    Then again, under Section 66, in the event of the Commissioners rejecting a plea for rectification from a taxpayer, ho has certain rights of appeal to the Special Commissioners. The Committee will be reluctant to give discretionary powers to the Commissioners of Inland Revenue which may have the appearance of manipulating the law or allowing the taxpayer to manipulate the law. I am sure there is no ulterior motive in the subsection, and I have the utmost confidence in the Commissioners of Inland Revenue—at least, on everything except establishment matters. They, I am sure, will exercise these powers with discretion, but will this be fair to other taxpayers? What are the circumstances in which a taxpayer would inadvertently do something which he would be justified in asking to be disregarded?
    Is it that this box of tricks in Part IV of the Bill is so complex, so full of pitfalls and stumbling blocks that at the end of this labyrinth there must be the comforting arms of the Commissioners of Inland Revenue, who will put him right if he stumbles through the dark thing? We want to know whether that is the object of this subsection.
    After all, most overseas trade corporations will be littered with chartered accountants, astute solicitors, ingenious advisers of every kind and ilk, and they will not be without sure guidance through all the traps in Part IV of the Bill. In fact, the great worry of the Commissioners of Inland Revenue is that there are so many ingenious taxpayers who are able to employ at high professional fees the most astute and imaginative professional advice which will open up all the loopholes, create those that are not there to begin with and, in the end, draw a coach and horses through it, and when the Commissioners of Inland Revenue have seen the money draining away for four or five years then the Chancellor does something about it.
    538
    I really think that this is so unusual that the Committee should have a full explanation of what it is intended to do. For instance, why does a company that does something inadvertently, and derives no material advantage from it, have to be put right? Why has the discretion of the Commissioners of Inland Revenue to be sought unless it is to put something right which will lead to an advantage to the taxpayer?
    We do not want to give discretionary powers to the Administration which may be exercised in a way which this Committee and the House would not approve, and to which other taxpayers may object. I hope that the Financial Secretary will have reassurances to give upon this point, and explanations of the type of case that the Clause is put there to help. Otherwise we shall he bound to regard this with such repugnance that we must vote against it. If there is need for something of this kind, it should be put on a statutory basis, or at least the authority to exercise the discretion should be a body to which the taxpayer could go in the full light of day and have his case heard in a judicial manner.
    The Commissioners of Inland Revenue, as I have said more than once, have the care and maintenance of the Income Tax Acts. They are part of the bureaucracy to administer one of our most complicated tax codes and they are therefore, as a rule, not an appellate body. Usually the appeal is to the General Commissioners and from them in certain circumstances to the Special Commissioners or to appeal tribunals or to the courts. I think we ought to know more about this provision. We ought to have definite assurances that it is intended for a proper purpose and that it can rarely be used, and then only in manner which would receive public approval.
    Mr. Powell: I think all sides of the Committee approve that the conditions on which companies shall enjoy the status of overseas trade corporations shall be very narrowly and tightly drawn so as, in particular, to avoid giving a preference to one person trading and making profits in the United Kingdom as against another; and, amongst other places, these conditions are to be found in Clause 21, which has been added to the Bill. The concept is that a number of resident companies,

    539
    by fulfilling the conditions in Clause 21—the type of company to which the purpose of this part of the Bill is directed—will gain the status of overseas trade corporations and will in future trade under those equal terms with their competitors which this Part of the Bill provides for them.
    If there were not this provision to which the hon. Member for Sowerby (Mr. Houghton) drew attention, then on a strict intepretation of Clause 21 a single and even inadvertent action in contravention of any of the requirements, for example of Clause 21—I will give an example in a moment—would in strict law disqualify that company for the whole of that tax year from the status which it enjoyed, was intended to enjoy, and thought it was remaining qualified to enjoy. It is therefore clearly necessary that we should prevent a merely technical slip from having an effect which, given the general policy, no one intends.
    Let us suppose that an overseas trade corporation is taking over a cargo free on board which it is to dispose of in its overseas trading field. Let us suppose that that ship is held up by some trouble and that the cargo, perhaps perishable, is nevertheless, after coming into the possession of the overseas trade corporation, disposed of, perhaps by the company's agents in the United Kingdom. Although that action might involve loss rather than gain to the company, under Clause 21 it would technically disqualify that company from overseas trade corporation status for the whole of that year. It is that type of irrelevant and accidental breach of the conditions, particularly of Clause 21, to which this subsection is directed.
    Consequently, I can readily give the assurance which the hon. Member asked me to give. This provision is intended both to be rarely used and to be used only in cases where there can be no question of the company deliberately seeking a double advantage—the advantage of a company treated as an overseas trade corporation and the advantage of trading in contravention of some of the requirements for an O.T.C.
    If it is to be dealt with in the manner which the circumstances require, this is obviously a matter in which a discretion has to be given to the Commissioners of Inland Revenue who, ex hypothesi, will
    540
    be entirely au fait with the trading proceedings of the company in question and will be in a position to judge the bearing of this act or event upon the trading position of the company.
    I therefore suggest to the Committee that although, as the hon. Member for Sowerby said, and I accept it, this is a new and unusual power which we are here entrusting to the Commissioners of Inland Revenue, it is sensible and convenient and one without which the purpose of the Bill as a whole might in some entirely meritorious cases be frustrated.
    Mr. Harold Wilson: The reply the Financial Secretary has given to my hon. Friend the Member for Sowerby (Mr. Houghton) will be regarded in many parts of the Committee as rather extraordinary. He said that because of the possibility of inadvertence it was necessary in these cases for the Commissioners of Inland Revenue to be able to exercise their discretion. That is almost without precedent in Income Tax law and administration.
    The Committee and the Committees in previous years have always been very much on guard against any provisions allowing too much discretion to the tax authorities. Perhaps we have debated this far more in terms of the Board of Customs and Excise than in terms of the Board of Inland Revenue. I remember hon. Members in several parts of the Committee on a previous Finance Bill two or three years ago expressing very grave concern in connection with that very technical subject called "uplift" in which the word "mainly" or "substantially" was used. It was left in the hands of the Board of Customs and Excise. The Paymaster-General, who had something to do with those matters at that time, may recall that debate. It is very strange that this discretion is given in this way to the Board of Inland Revenue.
    The Financial Secretary did not take up the point of my hon. Friend when he asked in what previous cases this has been done. My hon. Friend with his vast experience of Income Tax law finds it difficult to put his finger on any similar case. I remember hearing a very distinguished tax lawyer a couple of years ago when I was having a general discussion who said to me. "Of course, your job in the House of Commons would be

    541
    a great deal easier if instead of having all these vast Finance Bills and consolidation Measures you just said that Income Tax shall be paid in those cases where the Board of Inland Revenue considers it right that it should be paid. "I told him that that was something of an exaggeration and I think that I was justified in saying so when one looks at the extent to which the Board of Inland Revenue is restricted and confined in the cases in which it can tax and disallow tax.
    The Financial Secretary is one who, unlike the Chancellor, on the whole wants these provisions tight, but one wonders where this will all end. Are we to have new Measures covering the whole of Income Tat and Profits Tax legislation where there are hard cases and where some chap has fallen foul of the law in some small particular where the Board of Inland Revenue shall have the power to overlook it? Is that to be a new and very important hole which will be drilled below the Revenue water line in some subsequent Finance Bill? Perhaps the Financial Secretary will assure us that the Government do not have that in mind.
    In other cases where a hard luck story is produced the Revenue would never dream of accepting it and would say that it could not accept it because of the law of the land. I might mention one or two parallel cases. I am not pleading for the Revenue to have a right of discretion in these hard luck cases, but I am saying that since taxpayers have to meet the requirements of the law in every other case known to us, I do not know why there should be discrimination in this case.
    As an illustration, I could refer to subventions under Section 20 of the 1953 Act. It might be that because of inadvertence a particular exchange of shares did not take place quite on the right day; it might have been thought to have been done, but not have been properly sealed or something like that, and with no gain or financial advantage resulting from the inadvertence. Perhaps they were a day late, and therefore the subsidiary or associated company did not come into the group for E.P.L., or whatever it was. That might well happen, and it probably has happened but the Board of Inland Revenue have no power at all to give a certificate of inadvertence or whatever is
    542
    required under the new procedure, and, we should say, quite rightly.
    9.45 p.m.
    There are all sorts of hard cases in the field of social insurance, and every one of us knows from experience of his own constituency cases of men injured a day or two early. In my own constituency, a man was killed two days before the passage of the National Insurance (Industrial Injuries) Bill, and, therefore ruled out from benefit. We may say that it is hard luck for a man to be killed a day or two early, and all that sort of argument might apply. The same thing applies in the case of widows whose husbands died under the appropriate age. But no one has ever suggested that the Ministry of National Insurance should have the power to grant a dispensation, and I am glad to see that my hon. Friend the Member for Ince (Mr. T. Brown) is here, because he knows it so well.
    Here is a case where it is not a question of pure bad luck but of frank mismanagement. These companies have the benefit of the most highly-paid lawyers and accountants to advise them, and if they bring cargoes into the country which they should not have brought, they should know that by doing so they put themselves outside the reliefs given by this Bill. In the sort of case which I have mentioned, the subvention case, where the Revenue hardens its heart, and rightly so, it applies the law as the law is laid down by this House in past Finance Bills.
    To take another case rather nearer to the sort of thing we are talking about in Part IV of this Bill, let us consider the case where a company—and this sort of case has been mentioned many times this week—has established by one means or another a non-resident company overseas. It has appointed a local board of directors, or has seen to the appointment of a local board of controlling directors, to fulfil the local laws of the country in question. The whole of the shares are held by the British parent company, but, because control is purely shareholding control, even though they may have acted in a sense in terrorem, because this board of directors can be sacked at a moment's notice by the shareholders, even so, the Revenue have always accepted in such cases, provided that the local board of management does exercise management, that it is a non-resident company

    543
    outside the tax jurisdiction of this country.
    We know that the services of the greatest lawyers and accountants have been used in order to ensure that the Revenue never has any excuse for suggesting that in such cases that a non-resident company is in any way controlled, and that is why every letter that goes out to them is drafted in terms suggested by lawyers. For instance, they never tell the local board of management to do anything. They say, "We suggest for your consideration that you might consider doing so and so", or "This is a matter which we should like you to consider." Of course, the local board of directors knows all the time that they are being told to do it, and that if they did go against the parent company, in due course they could be discharged under the shareholders' control.
    Nevertheless, in accordance with the law, long established for 75 years or more, the Board of Inland Revenue says that if there is no control in this country, then it is a non-resident company and it is outside tax jurisdiction. But let us suppose that by inadvertence, perhaps when the director looking after this sort of business is on his summer holidays or may be listening to a debate in the House of Commons about overseas trading corporations, and he is not there, some junior person, inadvertently and without authority, perhaps sends a letter to this overseas board of management and says "It is our view that you should do so and so", or "You had better buy this or sell that", or "You are charging too much for these materials you are exporting overseas." I do not think that any gain comes to the company from that one act, but the Board would not be empowered—and I think rightly so—to waive the conditions of the Income Tax Acts in such a case. It is inadvertent, and it is only one small slip or accident. There is no direct gain to the company therefrom, but in that case inadvertence is a matter which is heavily punished, and the company might then be regarded as not being a non-resident company.
    In this case, however, from the illustration given by the Financial Secretary, if there is this act of inadvertence and this little accident or slip-up, from which, as a consequence of the law, the company
    544
    should lose its status, the Board of Inland Revenue is empowered to be generous and overlook this little fault. We hope that the Financial Secretary is right in thinking that it will always be easy to spot the case of sheer inadvertence, and to distinguish that case from the case where a deliberate act has taken place.
    But just as hon. Members on this side of the Committee feel that this part of the Bill puts an impossibly heavy load upon those having to operate a complicated system, and just as we think that the already heavily strained Inland Revenue system is being given almost impossible tasks of decision, so I think that the Financial Secretary is adding to those difficulties once he admits this principle of inadvertence and lays upon inspectors of taxes and the Board of Inland Revenue this very difficult task of having to decide whether a particular chance arrival of an allegedly perishable cargo is a piece of inadvertence or a deliberate act for the sake of some immediate gain.
    Once the Clause is accepted, if there is such a chance arrival there is no doubt that the firm concerned or its accountants and lawyers will say, "We should like the Board of Inland Revenue to exercise its waiver in this respect". The Board, with such information as it has, will then have to decide, one way or the other, whether this was a piece of inadvertence, and whether there was any gain from this shipment. This will put a very heavy load upon the Board. It will greatly increase the burden upon the staff. I hope that the Government will think about this matter again. As far as we know they are creating an entirely new precedent. If not, perhaps the Financial Secretary can tell us of other cases where the Board has this power of discretion.
    We hope that the Government will agree to think again about this question and will put the law with regard to overseas trade corporations upon exactly the same basis as the law applying to other taxpayers. If not, by being overgenerous in this case the hon. Gentleman will be creating unfairness in all those cases where taxpayers have to suffer because they make some little slip, and where, because they fail to conform with some quite small cedilla of the law, they are landed with a heavy tax payment.

    545
    Surely the hon. Gentleman will agree to re-examine this question and to put this part of the law upon the same basis as that with which we have become familiar through previous Finance Bills.
    Question put, That the Clause, as amended, stand part of the Bill:—
    The Committee divided: Ayes 227. Noes 176.

    Division No. 152.]

    AYES

    [954 p.m.

    Agnew, Sir Peter

    Graham, Sir Fergus

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

    Aitken, W. T.

    Grant, W. (Woodside)

    Maitland, Hon. Patrick (Lanark)

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

    Grant-Ferris, Wg Cdr. R. (Nantwich)

    Manningham-Buller, Rt. Hn. Sir R.

    Amery, Julian (Preston, N.)

    Green, A.

    Markham, Major Sir Frank

    Amory, Rt. Hn. Heathcoat (Tiverton)

    Crimston, Sir Robert (Westbury)

    Marlowe, A. A. H.

    Arbuthnot, John

    Grosvenor, Lt.-Col. R. G.

    Marshall, Douglas

    Armstrong, C. W.

    Gurden, Harold

    Mathew, R.

    Ashton, H.

    Hall, John (Wycombe)

    Maudling, Rt. Hon. R

    Atkins, H. E.

    Harris, Frederic (Croydon, N.W.)

    Mawby, R. L.

    Baldock, Lt.-Cmdr. J. M.

    Harris, Reader (Heston)

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

    Baldwin. A. E.

    Harrison, Col. J. H. (Eye)

    Milligan, Rt. Hon. W. R.

    Balniel, Lord

    Harvey, Sir Arthur Vere (Macclesfd)

    Mott-Radclyffe, Sir Charles

    Barber, Anthony

    Harvey, John (Walthamstow, E.)

    Nabarro, G. D. N.

    Barlow, Sir John

    Heald, Rt. Hon. Sir Lionel

    Neave, Airey

    Barter, John

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

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

    Baxter, Sir Beverley

    Henderson, John (Cathcart)

    Nugent, G. R. H.

    Bell, Philip (Bolton, E.)

    Henderson-Stewart, Sir James

    Oakshott, H. D.

    Bell, Ronald (Bucks, S.)

    Hesketh, R. F.

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

    Bidgood, J. C.

    Hicks-Beach, Maj. W. W.

    Osborne, C.

    Biggs-Davison, J. A.

    Hill, Rt. Hon. Charles (Luton)

    Page, R. G.

    Birch, Rt. Hon. Nigel

    Hill, Mrs. E. (Wythenshawe)

    Pannell, N. A. (Kirkdale)

    Bishop, F. P.

    Hill, John (S. Norfolk)

    Partridge, E.

    Black, C. W.

    Hirst, Geoffrey

    Peyton, J. W. W.

    Body, R. F.

    Holland-Martin, C. J.

    Pickthorn, K. W. M.

    Bossom, Sir Alfred

    Holt, A. F.

    Pike, Miss Mervyn

    Bowen, E. R. (Cardigan)

    Hope, Lord John

    Pilkington, Capt. R. A.

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

    Hornby, R. P.

    Pitt, Miss E. M.

    Braine, G. R.

    Hornsby-Smith, Miss M. P.

    Powell, J. Enoch

    Brooman-White, R. C.

    Horobin, Sir Ian

    Price, Henry (Lewisham, W.)

    Bryan, P.

    Howard, Hon. Greville (St. Ives)

    Profumo, J. D.

    Bullus, Wing Commander E. E.

    Howard, John (Test)

    Raikes, Sir Victor

    Burden, F. F. A.

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

    Ramsden, J. E.

    Cary, Sir Robert

    Hughes Hallett, Vice-Admiral J.

    Rawlinson, Peter

    Channon, Sir Henry

    Hughes-Young, M. H. C.

    Redmayne, M.

    Chichester-Clark, R.

    Hurd, A. R.

    Rees-Davies, W. R.

    Clarke, Brig. Terence (Portsmth, W.)

    Hutchison, Michael Clark (E'b'gh, S.)

    Remnant, Hon. P.

    Cooke, Robert

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

    Renton, D. L. M.

    Cooper-Key, E. M.

    Hutchison, Sir James (Scotstoun)

    Ridsdale, J. E.

    Cordeaux, Lt.-Col. J. K.

    Hylton-Foster, Rt. Hon. Sir Harry

    Robinson, Sir Roland (Blackpool, S.)

    Corfield, Capt. F. V.

    Iremonger, T. L.

    Rodgers, John (Sevenoaks)

    Craddock, Beresford (Spelthorne)

    Irvine, Bryant Godman (Rye)

    Roper, Sir Harold

    Crowder, Sir John (Finchley)

    Jenkins, Robert (Dulwich)

    Ropner, Col. Sir Leonard

    Crowder, Petre (Ruislip—Northwood)

    Jennings, J, C. (Burton)

    Russell, R. S.

    Cunningham, Knox

    Johnson, Dr. Donald (Carlisle)

    Schofield, Lt.-Col. W.

    Currie, G. B. H.

    Johnson, Eric (Blackley)

    Scott-Miller, Cmdr. R.

    Dance, J. C. G.

    Joynson-Hicks, Hon. Sir Lancelot

    Sharples, R. C.

    Davidson, Viscountess

    Keegan, D.

    Shepherd, William

    Davies. Rt. Hn. Clement (Montgomery)

    Kerby, Capt. R. B.

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

    D'Avigdor-Goldsmid, Sir Henry

    Kerr, Sir Hamilton

    Smithers, Peter (Winchester)

    Deedes, W. F.

    Kershaw, J. A.

    Smyth, Brig. Sir John (Norwood)

    Dodds-Parker, A. D.

    Kimball, M.

    Spearman, Sir Alexander

    Doughty, C. J. A.

    Kirk, P. M.

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

    Drayson, G. B.

    Lagden, G. W.

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

    du Cann, E. D. L.

    Lancaster, Col. C. G.

    Stanley, Capt. Hon. Richard

    Dugdale, Rt. Hn. Sir T. (Richmond)

    Leather, E. H. C.

    Stevens, Geoffrey

    Eden, J. B. (Bournemouth, West)

    Leavey, J. A.

    Steward, Harold (Stockport, S.)

    Elliott, R. W. (N'castle upon Tyne, N.)

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

    Storey, S.

    Errington, Sir Eric

    Lindsay, Hon. James (Devon, N.)

    Studholme, Sir Henry

    Farey-Jones, F. W.

    Lindsay, Martin (Solihull)

    Summers, Sir Spencer

    Fell, A.

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

    Sumner, W. D. M. (Orpington)

    Finlay, Graeme

    Lucas, P. B. (Brentford & Chiswick)

    Taylor, Sir Charles (Eastbourne)

    Fisher, Nigel

    Lucas-Tooth, Sir Hugh

    Teeling, W.

    Fletcher-Cooke, C.

    McAdden, S. J.

    Temple, John M.

    Foster, John

    Macdonald, Sir Peter

    Thomas, Leslie (Canterbury)

    Fraser, Sir Ian (M'cmbe & Lonsdale)

    Mackeson, Brig. Sir Harry

    Thompson, Kenneth (Walton)

    Freeth, Denzil

    Mackie, J. H. (Galloway)

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

    Gammans, Lady

    McLaughlin, Mrs. P.

    Thorneycroft, Rt. Hon. P.

    Garner-Evans, E. H.

    Maclean, Fitzroy (Lancaster)

    Thornton-Kemsley, C. N.

    George, J. C. (Pollok)

    McLean, Neil (Inverness)

    Tilney, John (Wavertree)

    Clover, D.

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

    Gomme-Duncan, Col. Sir Alan

    Macmillan, Maurice (Halifax)

    Turton, Rt. Hon. R. H.

    Goodhart, Philip

    Macpherson, Niall (Dumfries)

    Tweedsmuir, Lady

    Gower, H. R.

    Maddan, Martin

    Vane, W. M. F.

    Vickers, Miss Joan

    Ward, Dame Irene (Tynemouth)

    Woollam, John Victor

    Wade, D. W.

    Webbe, Sir H.

    Wall, Major Patrick

    Whitelaw, W. S. I.

    TELLERS FOR THE AYES:

    Ward, Rt. Hon. G. R. (Worcester)

    Wills, G. (Bridgwater)

    Mr. Legh and Mr. E. Wakefield.

    NOES

    Ainsley, J. W.

    Healey, Denis

    Pannell, Charles (Leeds, W.)

    Allaun, Frank (Salford, E.)

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

    Pargiter, G. A.

    Allen, Arthur (Bosworth)

    Hobson, C. R. (Keighley)

    Parker, J.

    Allen, Scholefield (Crewe)

    Holmes, Horace

    Parkin, B. T.

    Awbery, S. S.

    Houghton, Douglas

    Peart, T. F.

    Bacon, Miss Alice

    Howell, Charles (Perry Barr)

    Pentland, N.

    Baird, J.

    Hughes, Cledwyn (Anglesey)

    Popplewell, E.

    Bellenger, Rt. Hon. F. J.

    Hughes, Emrys (S. Ayrshire)

    Prentice, R. E.

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

    Hughes, Hector (Aberdeen, N.)

    Price, J. T. (Westhoughton)

    Benson, G.

    Hunter, A. E.

    Price, Philips (Gloucestershire, W.)

    Beswisk, Frank

    Hynd, H. (Accrington)

    Probert, A. R.

    Blackburn, F.

    Hynd, J. B. (Attercliffe)

    Proctor, W. T.

    Blenkinsop, A.

    Irving, Sydney (Dartford)

    Pryde, D. J.

    Blyton, W. R.

    Janner, B.

    Randall, H. E.

    Boardman, H.

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

    Rankin, John

    Bottomley, Rt. Hon. A. G.

    Redhead, E. C.

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

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

    Rhodes, H.

    Bowles, F. G

    Jenkins, Roy (Stechford)

    Roberts, Goronwy (Caernarvon)

    Boyd, T. C.

    Johnson, James (Rugby)

    Rogers, George (Kensington, N.)

    Brockway, A. F.

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

    Ross, William

    Brown, Rt. Hon. George (Belper)

    Jones, David (The Hartlepools)

    Royle, C.

    Brown, Thomas (Ince)

    Jones, J. Idwal (Wrexham)

    Short, E. W.

    Burton, Miss F. E.

    Jones, T. W. (Merioneth)

    Skeffington, A. M.

    Champion, A. J.

    Kenyon, C.

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

    Chapman, W. D.

    Key, Rt. Hon. C. W.

    Slater, J. (Sedgefield)

    Chetwynd, G. R.

    King, Dr. H. M.

    Sorensen, R. W.

    Clunie, J.

    Lawson, G. M.

    Soskice, Rt. Hon. Sir Frank

    Coldrick, W.

    Ledger, R. J.

    Sparks, J. A.

    Collick, P. H. (Birkenhead)

    Lee, Frederick (Newton)

    Steele, T.

    Collins, V. J.(Shoreditch & Finsbury)

    Lee, Miss Jennie (Cannock)

    Stewart, Michael (Fulham)

    Corbet, Mrs. Freda

    Lewis, Arthur

    Stonehouse, John

    Craddock, George (Bradford, S.)

    Lindgren, G. S.

    Stones, W. (Consett)

    Cronin, J. D.

    Logan, D. G.

    Strachey, Rt. Hon. J.

    Crossman, R. H. S.

    MacColl, J. E.

    Swingler, S. T.

    Davies, Harold (Leek)

    McInnes, J.

    Sylvester, G. O.

    Deer, G.

    McKay, John (Wallsend)

    Taylor, John (West Lothian)

    de Freitas, Geoffrey

    MacMillan, M. K. (Western Isles)

    Thomson, George (Dundee, E.)

    Delargy, H. J.

    MacPherson, Malcolm (Stirling)

    Thornton, E.

    Dodds, N. N.

    Mahon, Simon

    Tomney, F.

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

    Mallalieu, E. L. (Brigg)

    Ungoed-Thomas, Sir Lynn

    Edelman, M.

    Mann, Mrs. Jean

    Viant, S. P.

    Edwards, Rt. Hon. John (Brighouse)

    Marquand, Rt. Hon. H. A.

    Warbey, W. N.

    Evans, Albert (Islington, S.W.)

    West, D. G.

    Fernyhough, E.

    Mellish, R. J.

    Wheeldon, W. E.

    Flenburgh, W.

    Messer, Sir F.

    White, Mrs. Eirene (E. Flint)

    Fletcher, Eric

    Mikardo, Ian

    White, Henry (Derbyshire, N. E.)

    Fraser, Thomas (Hamilton)

    Mitchison, G. R.

    Wilcock, Group Capt. C. A. B.

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

    Monslow, W.

    Wilkins, W. A.

    Gibson, C. W.

    Moody, A. S.

    Willey, Frederick

    Gooch, E. G.

    Morris, Percy (Swansea, W.)

    Williams, Rev. Llywelyn (Ab'tillery)

    Gordon Walker, Rt. Hon. P. C.

    Moyle, A.

    Williams, Ronald (Wigan)

    Greenwood, Anthony

    Mulley, F. W.

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

    Grey, C. F.

    Noel-Baker, Rt. Hon. P. (Derby, S.)

    Williams, W. R. (Openshaw)

    Griffiths, David (Rother Valley)

    O'Brien, Sir Thomas

    Wilson, Rt. Hon. Harold (Huyton)

    Griffiths, Rt. Hon. James (Llanelly)

    Oliver, G. H.

    Winterbottom, Richard

    Hale, Leslie

    Oram, A. E.

    Woof, R. E.

    Hall, Rt. Hn. Glenvil (Colne Valley)

    Orbach, M.

    Yates, V. (Ladywood)

    Hamilton, W. W.

    Oswald, T.

    Hastings, S.

    Padley, W. E.

    Hayman, F. H.

    Palmer, A. M. F.

    TELLERS FOR THE NOES:

    Mr. Pearson and Mr. Simmons.

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

    Clause 28.—(ADJUSTMENT OF PRICE ON TRANSACTIONS BETWEEN AN OVER -SEAS TRADE CORPORATION AND A PERSON TRADING IN THE UNITED KINGDOM.)
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    Mr. Gordon Walker: We regard this Clause as a bad one. It will add lush, fresh fields of tax avoidance to our fiscal system. The purport of the Clause is to create artificial conditions under which it is pretended that two companies which are really one and the same are trading at arms length. It is trying to create artificial conditions—which do exist between distinct and separate companies—between a parent company and its hived-off subsidiary. The whole idea is that the Clause will stop phoney subterfuge prices being charged between one of the companies and the other.
    On the Second Reading of the Finance Bill on 7th May the Financial Secretary said that the present powers of the Commissioners of Inland Revenue contained in Section 469 of the Income Tax Act, 1952, are expanded by Clause 28. He said:
    "The Commissioners will in fact find this power easier to exercise than their present power under Section 469…"—[OFFICIAL REPORT, 7th May, 1957; Vol. 569, c. 817.]
    I do not think that when he said that the hon. Gentleman could have taken into account that we were to have at our disposal the memoranda of the Board of Inland Revenue, because they deal with this precise point. At any rate, I do not think the hon. Gentleman would have said that with such ease, assurance and complacency.
    A good deal has been said about the proper rôle of the Board of Inland Revenue in our affairs, and its views. Every hon. Member agrees that the views of the Board are not very important or very decisive where matters of policy are involved. Governments and the House of Commons must decide matters of policy, advised by officials, but only advised by them. But when the Board of Inland Revenue begins to talk about details of administration and the administration and enforcement of a Clause like Clause 28, then what it says begins to be fairly weighty, and it cannot be just brushed off, as the Chancellor did the
    550
    other day. They are arguments which must be met and faced.
    It is no good the Financial Secretary simply contradicting what the Commissioners said. That is what he did in his Second Reading speech. The arguments have to be met. In paragraph 14 of Memorandum No. 109 the Commissioners refer to Section 469 of the 1952 Act. In paragraph 15 they say that cases under the Section are rare and that
    …there have been thirty-seven in the three years in which the Section has operated."
    That remark was made in 1954. I suppose there have been a small number since.
    The Commissioners said that:
    …the main purpose of the Section was in terrorem."
    That is a different picture from what the hon. Gentleman gave us on Second Reading. The Commissioners said that:
    "…it serves its purpose by deterring groups of companies from invoicing goods to each other at prices which are blatantly fictitious, but it is not, and cannot be, used as authority for challenging invoice prices"—
    the very opposite to what the hon. Gentleman said—
    "which do not look unreasonable, notwithstanding that variations in price may have a very marked effect on profits and, therefore, on tax liability."
    I ask the hon. Gentleman to take account of this in his reply, because it absolutely contradicts what he said. This is not a view; it is the Board of Inland Revenue giving the history of the administration of Section 469. The Commissioners say in paragraph 16:
    "It must not, therefore, be imagined that we have by experience built tip any body of practice which would help us in administering a scheme on the lines proposed."
    That is, on the lines of Clause 28. They add:
    "In the case of many classes of export, there will exist no independent merchants"—
    This refers to the fictitious pretence of trading at arm's length—
    "and as the rate of profit to turnover varies considerably according to the nature of the commodity there will not even be a theoretical basis for computing the merchanting profit."
    The memorandum says in conclusion that claims will be made under the Act when there are special reasons why the price is a little different from what might be expected, and that such claims will be impossible to check.

    551
    This is the absolute controversion of what the hon. Gentleman said, and unless he can put up counter-arguments these statements of the Board will hold the field. What the hon. Gentleman told us on Second Reading was that Section 469 was frightfully important and was being extended, but the Board of Inland Revenue says that it is not very important and, if extended, would be unenforceable. What reasons can the hon. Gentleman give for accepting what he told us as against what the Board of Inland Revenue is telling us—not about its views on policy and on the theory of taxation but actually giving an account of the administration of a Section of the Act which it has been administering for a number of years.
    If Clause 28 is, as we think, and as the Board of Inland Revenue seems to think, unenforceable, then, of course, the whole of this part of the Bill becomes unenforceable—including Clause 21, which tries to enforce f.o.b. prices. If all that is unenforceable we shall get into terrible trouble, sooner or later, with the G.A.T.T. and with O.E.E.C. We shall be breaking all their rules, and only pretending to keep them by Clauses which sound pretty, look nice, but are unenforceable.
    The whole of this part of the Bill, particularly as exports are brought in, is really a subterfuge; pretending that people are different from what they really are, that they are trading differently from the way in which they are really trading, and pretending they are charging prices different from those that they are charging in reality. There is no way, says the Board of Inland Revenue, of enforcing it. We therefore regard this Clause as extremely bad, phoney and fictitious.
    Mr. Birch: I am sorry that the right hon. Gentleman thinks that this is a bad Clause, as he has not tried to amend it, but it is, of course, a very important Clause indeed, because it is designed not only to prevent the syphoning away of profits to a place where they would not be taxed, but to meet the accusation that the overseas trade corporation conception might lead to a concealed export subsidy.
    The right hon. Gentleman quoted to a certain extent from the memorandum prepared by the Board of Inland Revenue—
    Mr. Roy Jenkins: Is there no element of export subsidy in the concession?
    Mr. Birch: No.
    Mr. Jenkins: Then what is the point of extending it to exporting companies?
    Mr. Birch: It is not an export subsidy. If an exporting company buys goods at the same price f.o.b. as any other foreign company can buy them, there is no export subsidy. We have had that out already. Quite clearly there is not one.
    The right hon. Gentleman quoted the Board of Inland Revenue as saying that there is no point in challenging something that does not look unreasonable. That seems a very sensible thing to say. As far as Section 469 of the Income Tax Act 1952 goes, it is perfectly true that there have not been many cases where adjustments of prices have actually been made, but there are two reasons for that. One is that there may not have been many attempts at evasion. Secondly, of course, under Section 469 as it is drawn, the powers are much less great than under this Clause.
    There are two differences between that Section and this Clause. First, the Clause extends the provision; that is to say the company is not to be under control and is not to be a foreign company. The reason for not making it a controlled company is that there may be cases in which a consortium may be formed by two or three companies for the purpose of setting up an overseas trade corporation, and it might be possible there to syphon away profits. We have, therefore, specifically cut out the condition of control. The second way in which it is easier under the Clause than under Section 469 is that, ex hypothesi, these overseas trade corporations are resident companies, and their accounts can, and will be examined. It is not, I think, really beyond the powers of the Inland Revenue, when examining accounts of companies, to have a fairly good idea whether cheating is going on or not.
    Mr. Gordon Walker: Examining the books of all O.T.C.s?
    10.15 p.m.
    Mr. Birch: All O.T.C.s are resident in this country, and their accounts are open to examination if necessary. It is far

    553
    easier to enforce this Clause than to enforce Section 469, because one has control over both sets of accounts.
    We believe that the Clause can be made to work and will be worked. We think it a pity to express doubts upon the ability of the Inland Revenue to carry it through.
    Mr. Chapman: If I may say so, this is really very unsatisfactory. When all is said and done, the right hon. Gentleman the Economic Secretary has tried to deal in about three minutes with a great deal of closely reasoned argument and evidence adduced by the Commissioners of Inland Revenue, wherein they say, quite frankly, that they have no experience in this sort of field. The Commissioners say:
    "It may, as a matter of theory, be necessary to rewrite a company's accounts and to substitute for prices at which goods are actually invoiced other figures based on market prices. In fact, cases of this kind are rare."
    In other words, the Inland Revenue is saying from the start, "We have had no experience of this sort of thing". A little further on, referring to principles, the Memorandum says:
    "If their actual application had to be checked closely on a large scale, there would be much difficulty in particular cases".
    These are sentences which I just put at the side of those already quoted by my right hon. Friend to show that the Inland Revenue is saying, quite bluntly, that we are entering upon a completely new field, and the Revenue has really not had to go into books, and vouchers or be involved in rewriting company's accounts, almost on a fictitious basis. That is, in fact, what will have to happen under the Clause.
    The Economic Secretary dismisses that in a few sentences in about three minutes. It is not good enough. I know that my hon. Friend the Member for Sowerby (Mr. Houghton) has been saying that we must not take too much account of what the Inland Revenue says, but he was not talking about this sort of section in the comments of the Inland Revenue. He will, I am sure, get up in a minute and say that this is precisely the kind of point on which the Inland Revenue is to be regarded, not disregarded. He was saying that the Revenue must not make policy and principle for us, but I am sure he will say that, when it comes to knowing something about how to evade tax, the Com
    554
    missioners of Inland Revenue can tell us a good deal about what is going on in this country today.
    Mr. E. Partridge: Is the hon. Gentleman saying that the Inland Revenue has had no experience? If so, then let us give it some.
    Mr. Chapman: Perhaps the hon. Member for Battersea, South (Mr. Partridge) is one of those who wants a lot of people to escape the tax net in order to teach a few lessons to the Inland Revenue. I think it would be better not to start on the exercise at all. I am anxious to preserve the nation's revenue.
    The argument and evidence put is very formidable indeed. It points to examples of companies, for example, where, when it comes to re-writing figures on more or less a fictitious basis, there is no basis of comparison. They are unique, producing a unique product. Who is to know what is the arms-length trade in a unique product more or less confined to one particular firm producing it for export? This sort of thing should not be dismissed in a minute or two, as the right hon. Gentleman is trying to do.
    How is the Inland Revenue to set about its job? After all, as I understand it at the moment, there are only very rarely-used powers in the Commissioner of Inland Revenue to enforce the actual production of vouchers, invoices and all the rest. The powers of the inspector at the moment are confined to the production of books and accounts. To go much further into the privately kept papers of the individual firm requires special authorisation by the Commissioners.
    What we want to know is whether there will be a willingness on the part of the Commissioners to use powers of this sort to ferret out what will doubtless be the attempts at evasion in cases like this. We want assurance that there will be energy in application and that even our fears are shared by the Government Front Bench. I have a feeling that the right hon. Gentleman, like his right hon. Friend this afternoon, is dismissing all this by saying, "It will not happen. We can leave it. These are wild imaginings of the Opposition and on those grounds we need not worry about it." We on this side want some effective answers to the people who know what tax evasion is when they have put before us ideas and

    555
    suggestions about how it will go on unless there is more thorough enforcement than is apparently the case at the moment. I regard the Minister's reply as totally unsatisfactory and I hope we shall divide against the Clause.
    Mr. E. Fletcher: I support what my hon. Friend the Member for Northfield (Mr. Chapman) has said. It is inescapable that the Clause will fail completely to deal with the evil which it is intended to meet. The possibility is admitted that there will be traders who adopt false and fictitious prices for their exports of commodities. The attempt is made by the Clause to give the Inland Revenue power to deal with those people, but the Inland Revenue has admitted that it has no experience of dealing with such cases.
    The Treasury has failed completely in attempting to deal with the problem. The Inland Revenue has admitted that it has no experience whatever in dealing with this kind of problem in applying Section 469 of the Income Tax Act. It confesses that it does not understand how to do it and has not done it.
    If the Chancellor really wants to cure the difficulty, let me tell him that the people who have had considerable experience of this matter are the Commissioners of Customs and Excise, because they have had to deal with precisely this problem in reverse in connection with imports. There are plenty of cases in which English subsidiary companies of foreign parent firms, or, vice versa, try to import goods into this country at unduly low prices to avoid Customs duties. Therefore, the Commissioners of Customs and Excise have had considerable experience in detecting this kind of abuse and dealing with it. They are, however, as the Chancellor should know if he has looked at the Customs Consolidation Act, given wide powers.
    If the Chancellor is serious in attempting to check the practice in connection with exports, which is only the same operation in reverse, he should not have applied Section 469 of the Income Tax Act but should make sure that the Commissioners of Inland Revenue have the same powers as the Commissioners of Customs and Excise in dealing with imports. Everybody will recognise that nothing like the same power is being given to the Commissioners of Inland Revenue. The Chancellor will find that, however well-intentioned he may be in trying to
    556
    prevent this kind of abuse, it will almost inevitably take place and the Inland Revenue authorities will be unable to cope with it. For that reason, we oppose the Clause.
    Mr. Roy Jenkins: My hon. Friend the Member for Islington, East (Mr. Fletcher) has made an extremely valuable suggestion and certainly added to the information at our disposal in considering this matter, which is more than can be said for the speech of the Economic Secretary, who dealt with the matter in the most perfunctory way. It is quite clear from the course of our debates that when we have replies from the Economic Secretary they are much more perfunctory than those we get from the Financial Secretary. When we get replies from the Chancellor, of course, they are just breathless and reckless, but have a certain engaging quality of their own. We should like to have more replies from the Chancellor. We value them when they come, even though we do not altogether agree with them.
    It has emerged quite clearly that of the Treasury trio, unsupported, rather unusually, on any occasion by a Law Officer, despite the extremely complicated nature of this legislation, the only one of the three who has any real feeling for dealing with avoidance and the possibility of evasion is the Financial Secretary. Yet when we come to deal with a Clause which is the main anti-avoidance provision, it is odd that the Financial Secretary should not speak about it and that the Economic Secretary, who joins with the Chancellor in not being concerned about avoidance, being a "hundred percenter" or whatever it is, should get up and give this extremely perfunctory answer.
    I should have thought that it was common ground on both sides of the Committee that the views of the Inland Revenue were extremely relevant on this matter. Last night we had a good deal of dispute as to what extent, on matters of policy, we should take account of the views of the Inland Revenue, but when we are dealing with technical, administrative and anti-avoidance problems, I have no doubt, and I hope that my hon. Friend the Member for Sowerby (Mr. Houghton) would agree with me, that the views of the Inland Revenue carry a great deal of weight.

    557
    It is no good the Economic Secretary pretending that we are dealing with a different problem here and that Clause 28 is something qualitatively different from the Section of the 1952 Income Tax Act under which the Inland Revenue had previously proceeded, because quite clearly a great part of the views that the Inland Revenue put forward in Memorandum 109 referred to what it could or could not do under a particular piece of legislation. It referred quite clearly to the extreme difficulty of anybody in any practical sense making a judgment as to what was a fair arm's length price between a manufacturing company and an exporting company.
    The Inland Revenue referred to it in quite forceful language. It developed it by saying that the problem was exacerbated by the fact that in just those exports which were and are expanding most rapidly it yeas most difficult to make such a decision, because they were essentially specialised products where there can be, by their very nature, no past practice by which to go and by which to make a
    decision on what is a market price. I certainly think, therefore, that in view of the extremely unsatisfaotory, perfunctory and brief reply by the Economic Secretary, and in view of the importance of the issue, we on this side of the Committee are bound to express our disapproval by voting against the Clause.
    The Clause, of course, is better than nothing, but it is highly unsatisfactory. In view of the fact that we were told by the Financial Secretary, when the Bill was first introduced, that the avoidance provisions were of great importance and had been most carefully worked out, and yet when we come to examine them in detail nothing is said in support of them except some few brief sentences by the Economic Secretary, we have no recourse, unless we have a further and more satisfactory reply from the Government, but to vote against the Clause.
    Question put, That the Clause stand part of the Bill:—
    The Committee divided: Ayes 215, Noes 160.

    Division No. 153.]

    AYES

    [10.29 p.m.

    Agnew, Sir Peter

    Crowder, Petre (Rulslip—Northwood)

    Harvey, John (Walthamstow, E.)

    Aitken, W. T.

    Cunningham, Knox

    Heald, Rt. Hon. Sir Lionel

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

    Currie, G. B. H.

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

    Amery, Julian (Preston, N.)

    Dance, J. C. C.

    Henderson, John (Cathcart)

    Amory, Rt. Hn. Heathcoat (Tiverton)

    Davidson, Viscountess

    Henderson-Stewart, Sir James

    Arbuthnot, John

    Davies, Rt. Hn. Clement (Montgomery)

    Hesketh, R. F.

    Armstrong, C. W.

    D'Avigdor-Goldsmid, Sir Henry

    Hill, Rt. Hon. Charles (Luton)

    Ashton, H.

    Deedes, W. F.

    Hill, Mrs. E. (Wythenshawe)

    Atkins, H. E.

    Dodds-Parker, A. D.

    Hill, John (S. Norfolk)

    Baldock, Lt.-Cmdr. J. M.

    Doughty, C. J. A.

    Hirst, Geoffrey

    Baldwin, A. E.

    Drayson, G. B.

    Holland-Martin, C. J.

    Balniel, Lord

    du Cann, E. D. L.

    Holt, A. F.

    Barber, Anthony

    Dugdale, Rt. Hn. Sir T.(Richmond)

    Hope, Lord John

    Barlow, Sir John

    Eden, J. B. (Bournemouth, West)

    Hornby, R. P.

    Barter, John

    Elliott, R.W.(N'castle-upon. Tyne, N.)

    Hornsby-Smith, Miss M. P.

    Baxter, Sir Beverley

    Errington, Sir Eric

    Horobin, Sir Ian

    Bell, Philip (Bolton, E.)

    Farey-Jones, F. W.

    Howard, Hon, Greville (St. Ives)

    Bell, Ronald (Bucks, S.)

    Fell, A.

    Howard, John (Test)

    Bidgood, J. C.

    Finlay, Graeme

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

    Biggs-Davison, J. A.

    Fisher, Nigel.

    Hughes, Hallett, Vice-Admiral J.

    Birch, Rt. Hon. Nigel

    Fletcher-Cooke, C.

    Hurd, A. R.

    Bishop, F. P.

    Fraser, Sir Ian (M'cmbe & Lonsdale)

    Hutchison, Michael Clark (E'b'gh. S.)

    Black, C. W.

    Freeth, Denzil

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

    Body, R. F.

    Gammans, Lady Ann Muriel

    Hylton-Foster, Rt. Hon, Sir Harry

    Bossom, Sir Alfred

    Garner-Evans, E. H.

    Iremonger, T. L,

    Bowen, E. R. (Cardigan)

    George, J. C. (Pollok)

    Irvine, Bryant Godman (Rye)

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

    Glover, D.

    Jenkins, Robert (Dulwich)

    Braine, B. R.

    Goodhart, Philip

    Jennings, J. C. (Burton)

    Brooman-White, R. C.

    Gower, H. R.

    Johnson, Dr. Donald (Carlisle)

    Bryan, P.

    Graham, Sir Fergus

    Johnson, Eric (Blackley)

    Bullus, Wing Commander E. E.

    Grant-Ferris, Wg. Cdr. R.(Nantwich)

    Joynson-Hicks, Hon. Sir Lancelot

    Burden, F. F. A.

    Green, A.

    Keegan, D.

    Channon, Sir Henry

    Grimond, J.

    Kerr, Sir Hamilton

    Chichester-Clarke, R.

    Grimston, Sir Robert (Westbury)

    Kershaw, J. A.

    Clarke, Brig. Terence (Portsmth, W.)

    Grosvenor, Lt.-Col. R. G.

    Kimball, M.

    Cooke, Robert

    Gurden, Harold

    Kirk, P. M.

    Cooper-Key, E. M.

    Hall, John (Wycombe)

    Lagden, G. W.

    Cordeaux, Lt.-Col. J. K.

    Harris, Frederic (Croydon, N.W.)

    Leavey, J. A.

    Corfield, Capt. F. V.

    Harris, Reader (Heston)

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

    Craddock, Beresford (Spelthorne)

    Harrison, Col. J. H. (Eye)

    Legh, Hon. Peter (Petersfield)

    Crowder, Sir John (Finchley)

    Harvey, Sir Arthur Vere (Macclesfd)

    Lindsay, Martin (Solihull)

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

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

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

    Lucas, P. B. (Brentford & Chiswick)

    Osborne, C.

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

    Lucas-Tooth, Sir Hugh

    Page, R. G.

    Stanley, Capt. Hon. Richard

    McAdden, S. J.

    Pannell, N. A. (Kirkdale)

    Stevens, Geoffrey

    Macdonald, Sir Peter

    Partridge, E.

    Steward, Harold (Stockport, S.)

    Mackeson, Brig. Sir Harry

    Peyton, J. W. W.

    Storey, S.

    Mackie, J. H. (Galloway)

    Piokthorn, K. W. M.

    Studholme, Sir Henry

    McLaughlin, Mrs. P.

    Pike, Miss Mervyn

    Summers, Sir Spencer

    Maclean, Fitzroy (Lancaster)

    Pilkington, Capt. R. A.

    Sumner, W. D. M. (Orpington)

    McLean, Neil (Inverness)

    Pitt, Miss E. M.

    Taylor, Sir Charles (Eastbourne)

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

    Powell, J. Enoch

    Teeling, W.

    Macmillan, Rt. Hn. Harold (Bromley)

    Price, Henry (Lewisham, W.)

    Temple, John M.

    Macmillan, Maurice (Halifax)

    Profumo, J. D.

    Thompson, Kenneth (Walton)

    Maddan, Martin

    Raikes, Sir Victor

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

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

    Rawlinson, Peter

    Thorneycroft, Rt. Hon. P.

    Maitland, Hon. Patrick (Lanark)

    Redmayne, M.

    Thornton-Kemsley, C. N.

    Manningham-Buller, Rt. Hn. Sir R.

    Rees-Davies, W. R.

    Turton, Rt. Hon. R. H.

    Markham, Major Sir Frank

    Remnant, Hon. P.

    Tweedsmuir, Lady

    Marlowe, A. A. H.

    Renton, D. L. M.

    Vane, W. M. F.

    Marshall, Douglas

    Ridsdale, J. E.

    Vickers, Miss Joan

    Mathew, R.

    Rippon, A. G. F.

    Wade, D. W.

    Maudling, Rt. Hon. R.

    Robinson, Sir Roland (Blackpool, S.)

    Wakefield, Edward (Derbyshire, W.)

    Mawby, R. L.

    Rodgers, John (Sevenoaks)

    Wall, Major Patrick

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

    Roper, Sir Harold

    Ward, Rt. Hon. G. R. (Worcester)

    Milligan, Rt. Hon. W. R.

    Ropner, Col. Sir Leonard

    Ward, Dame Irene (Tynemouth)

    Mott-Radclyffe, Sir Charles

    Russell, R. S.

    Webbe, Sir H.

    Nabarro, G. D. N.

    Schofield, Lt.-Col. W.

    Whitelaw, W. S. I.

    Neave, Airey

    Sharpies, R. C.

    Woollam, John Victor

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

    Shepherd, William

    Nugent, G. R. H.

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

    TELLERS FOR THE AYES:

    Oakshott, H. D.

    Smithers, Peter (Winchester)

    Mr. Wills and Mr. Hughes-Young.

    Ormsby-Gore, Rt. Hon. W. D.

    Spearman, Sir Alexander

    NOES

    Allaun, Frank (Salford, E.)

    Griffiths, David (Rother Valley)

    Mellish, R J.

    Allen, Arthur (Bosworth)

    Griffiths, Rt. Hon. James (Llanelly)

    Mikardo, Ian

    Allen, Scholefield (Crewe)

    Hale, Leslie

    Mitchison, G. R.

    Awbery, S. S.

    Hall, Rt. Hn. Glenvil (Colne Valley)

    Moody, A. S,

    Bacon, Miss Alice

    Hamilton, W. W.

    Morris, Percy (Swansea, W.)

    Baird, J.

    Hastings, S.

    Moyle, A.

    Bellenger, Rt. Hon. F. J.

    Hayman, F. H.

    Mulley, F. W.

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

    Healey, Denis

    Noel-Baker, Rt. Hon. P. (Derby, S.)

    Benson, G.

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

    O'Brien, Sir Thomas

    Beswick, Frank

    Hobson, C. R. (Keighley)

    Oliver, G. H.

    Blackburn, F.

    Holmes, Horace

    Oram, A. E.

    Blenkinsop, A.

    Houghton, Douglas

    Orbach, M.

    Blyton, W. R.

    Howell, Charles (Perry Barr)

    Oswald, T.

    Boardman, H.

    Hughes, Emrys (S. Ayrshire)

    Padley, W. E.

    Bottomley, Rt. Hon. A. G.

    Hughes, Hector (Aberdeen, N.)

    Palmer, A. M. F.

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

    Hunter, A, E.

    Pannell, Charles (Leeds, W.)

    Bowles, F. G.

    Hynd, H. (Accrington)

    Pargiter, G. A.

    Boyd, T. C.

    Hynd, J. B. (Attercliffe)

    Parker, J.

    Brockway, A. F.

    Irving, Sydney (Dartford)

    Parkin, B. T.

    Brown, Rt. Hon. George (Belper)

    Janner, B.

    Pearson, A.

    Brown, Thomas (Ince)

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

    Peart, T. F.

    Burton, Miss F. E.

    Jeger, George (Goole)

    Pentland, N.

    Champion, A. J.

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

    Popplewell, E.

    Chapman, W. D.

    Jenkins, Roy (Stechford)

    Prentice, R. E.

    Chetwynd, G. R.

    Johnson, James (Rugby)

    Price, J.T. (Westhoughton)

    Clunie, J.

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

    Price, Philips (Gloucestershire, W.)

    Coldrick, W.

    Jones, David (The Hartlepools)

    Probert, A. R.

    Collick, P. H. (Birkenhead)

    Jones, J. Idwal (Wrexham)

    Proctor, W. T.

    Collins, V. J. (Shoreditch & Finsbury)

    Jones, T. W. (Merioneth)

    Pryde, D. J.

    Corbet, Mrs. Freda

    Kenyon, C.

    Randall, H. E.

    Craddock, George (Bradford, S.)

    Key, Rt. Hon. C. W.

    Redhead, E. C.

    Cronin, J. D.

    Lawson, G. M.

    Rhodes, H.

    Crossman, R. H. S.

    Ledger, R, J,

    Rogers, George (Kensington, N.)

    Davies, Harold (Leek)

    Lee, Frederick (Newton)

    Ross, William

    Deer, G.

    Lee, Miss Jennie (Cannock)

    Royle, C.

    Delargy, H. J.

    Lewis, Arthur

    Short, E. W.

    Dodds, N. N.

    Lindgren, G. S.

    Skeffington, A. M.

    Edelman, M.

    Logan, D. G.

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

    Edwards, Rt. Hon. John (Brighouse)

    Sorensen, R. W.

    Evans, Albert (Islington, S. W.)

    MacColl, J. E.

    Soskice, Rt. Hon. Sir Frank

    Fienburgh, W.

    McInnes, J.

    Sparks, J. A.

    Fletcher, Eric

    McKay, John (Wallsend)

    Stewart, Michael (Fulham)

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

    MacMillan, M. K. (Western Isles)

    Stonehouse, John

    Gibson, C. W.

    MacPherson, Malcolm (Stirling)

    Stones, W. (Consett)

    Gooch, E. G.

    Mahon, Simon

    Strachey, Rt. Hon. J.

    Gordon Walker, Rt. Hon. P. C.

    Mallalieu, E. L. (Brigg)

    Taylor, John (West Lothian)

    Greenwood, Anthony

    Mann, Mrs. Jean

    Thomson, George (Dundee, E.)

    Grey, C. F.

    Marquand, Rt. Hon. H, A.

    Thornton, E.

    560

    561

    Tomney, F.

    Wilcock, Croup Capt. C. A. B.

    Woof, R. E.

    Ungoed-Thomas, Sir Lyn

    Williams, Rev, Llywelyn (Ab'tillery)

    Yates, V. (Ladywood)

    Warbey, W. N.

    Williams, Ronald (Wigan)

    Younger, Rt. Hon. K.

    West, D. G.

    Williams, Rt. Hon. (Don Valley)

    Wheeldon, W. E.

    Williams, W. R. (Openshaw)

    TELLERS FOR THE NOES:

    White, Mrs. Eirene (E. Flint)

    Wilson, Rt. Hon. Harold (Huyton)

    Mr. Simmons and Mr. Wilkins.

    White, Henry (Derbyshire, N. E.)

    Winterbottom, Richard

    Clause ordered to stand part of the Bill.

    Clause 29.—(TRANSFER OF PART OF TRADE TO CORPORATION OWNED BY TRANS FERORS.)
    Mr. Powell: I beg to move, in page 22, line 46, after "holds", to insert:
    "either directly or through a company or companies, or partly directly and partly through a company or companies".
    The Deputy-Chairman (Sir Gordon Touche): I think it would be convenient to discuss with this Amendment the remaining other Amendments to the Clause with the exception of the Amendment in page 23, line 28, and that in page 23, line 44.
    Mr. Powell: This Clause deals with the technical machinery of the process that we have become accustomed to describe in these debates as "hiving off". It deals with it in the case where the company hived off is to be virtually a fully owned subsidiary of the parent company. As subsection (1) is drafted, however, provision is not made for the case where it might be desired, instead of hiving off the trading company directly, to set up a holding company subordinate to which there would be two or more overseas trade corporations.
    The Amendment covers the case where the trading companies formed by hiving off will be the fully owned subsidiaries, whether directly or partly directly or indirectly or partly indirectly, of the principal company. There is no practical difference, but it enables a structure to be set up embodying a holding company, thus making possible the switch of resources between Overseas Trade Corporations through a parent holding Overseas trade corporation
    Mr. Mitchison: The Financial Secretary keeps talking about these obscene litters as overseas trade corporations. I cannot see why there should be so many special provisions for doing things indirectly through a series of holding companies and the like. We were told earlier in the discussion that this was a first venture, and whenever we come to anything about the structure of companies the Government appear ready
    to involve themselves in a mass of complications, and in spite of it to omit some of the more obvious points about subsidiaries, to one of which I had occasion to call the Financial Secretary's attention a short time ago. But complexity as such has no terrors for him. On the other hand, when it is a question of putting up a smoke-screen about some fictitious prices, only the simplest machinery is used, as being, I suppose, easier for the foreigners concerned in G.A.T.T. to understand and easier at the same time for those who are to be engaged in these transactions to no good purpose to find their way through.
    I do not see why it is necessary to have a provision of this sort and why the advantages of the following subsections of the Clause should be extended beyond what is at the moment obvious and beyond what is necessary to give a fair trial to a new set-up in this matter. I cannot help feeling that the more O.T.Cs., parents, grandparents, uncles, aunts and what-nots of an O.T.C. that the Financial Secretary thinks about, the more pleasure it no doubt gives him, but the more complicated he makes the net and the easier to find holes in it. T therefore somewhat mistrust this Amendment.
    Frankly, all of us, including the Board of Inland Revenue, have so little idea of how the whole of this Part will work and how many means and what means will be found by those who wish to do so of getting the advantages without incurring the conditions that I do not feel able to ask my right hon. and hon. Friends to divide on a small point of this sort, but I am bound to say that I do not see the need of the Amendment.
    Mr. Ram Arbuthnot: I rise for a moment to say "Thank you" to my right hon. Friend and to the Financial Secretary for having accepted in substance through this Amendment the purport of the Amendment which my hon. Friends and I have on the Order Paper. We are extremely grateful, and we feel that through this Amendment my right hon. Friend has righted what might

    563
    have been a wrong to people who came in this category.
    Amendment agreed to.
    Further Amendments made: In page 23, line 2, at end insert:
    "or
    (b) the person carrying on a trade is a company and, as part of a scheme of reconstruction, part of the trade is transferred to an Overseas Trade Corporation and, as part of that scheme, a third company comes to hold either directly or through a company or companies, or partly directly and partly through a company or companies, not less than ninety-five per cent. of the shares in the first-mentioned company and in the Overseas Trade Corporation."
    In line 28, leave out "or are".
    In line 44, after "of", insert "the part of".
    In page 24, leave out lines 15 to 17 and insert:
    (5) In determining for the purposes of this section whether a person holds not less than ninety-five per cent. of the shares in a company, the provisions of Part I of the Fourth Schedule to the Finance Act. 1938, shall apply, taking references to ordinary share capital as including references to other kinds of share capital, and, where the share capital consists of more than one class of share, this section shall apply only if that person.—[Mr. Powell.]
    Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.
    10.45 p.m.
    Mr. Mitchison: I regard this sort of Clause as capable of classification in various ways. It may be understandable, it may be incomprehensible, it may be understandable with difficulty but capable of only one meaning, and it may be understandable with difficulty and capable of a rich variety of meanings. I am inclined to think with some hesitation that this Clause comes into the fourth category, probably understandable with difficulty but capable of a rich variety of meanings.
    The same applies with increasing force to the additions we have just made. I cannot view with any interest or approval in a scheme of this kind the supposed necessity for complications of this sort. If this is to be a workable scheme and workable without the prospect of comprehensive evasion, it ought to be possible to make it a great deal more simple than the Clause makes it in these matters.
    When we do get to the tolerably clear and easy provisions they are demonstrably unworkable, not only from their
    564
    nature but from the report we have had on them from the Board of Inland Revenue. This kind of Clause and the further complications which the Chancellor's own Amendments have made at this stage simply make me think that this is too complicated to work properly, but not by any means too complicated for people to get round if they want.
    Question put and agreed to.
    Clause, as amended, ordered to stand part of the Bill.
    Clause 30 ordered to stand part of the Bill.

    Clause 31.—(POWER TO MAKE REGULATIONS.)
    Sir P. Spens: I beg to move, in page 25, to leave out lines 43 and 44.
    The Clause gives the Commissioners of Inland Revenue powers by Statutory Instrument to make regulations to deal with this part of the Bill. The second power which is given to them is the power to extend the time within which assessments may be made. I am moving the Amendment because, whatever other powers the Commissioners have, the time for making assessments ought to remain the ordinary statutory time. It is true that the Government have put down an Amendment which will enable them to do it only with the consent of the House of Commons, but all the same on previous occasions we have resisted the power of the Board of Inland Revenue to extend the time for assessments. I strongly take the view that if the statutory period is not sufficient, then the fault is that of the Commissioners and nobody else.
    Mr. Mitchison: I hope that the Government will not be so weak-kneed as to accept the Amendment. We have already passed a Clause, quite unprecedented, giving the same Commissioners the power to remit mistakes which did not result in any great benefit for the company. After that quite remarkable innovation in the law of Income Tax, that little reversion in financial matters to the Statutes of Henry VIII, it is remarkable for the right hon. and learned Gentlemen of the Tory Party to boggle at a little thing like this.
    The right hon. and learned Gentleman used language which implied that a positive Resolution would be required, but the following Amendment is in the opposite sense, and it gives the House

    565
    an opportunity of praying against one of these orders if it thinks it unreasonable. While I view with certain suspicion the grant of unfettered discretion, even upon a comparatively small scale, to the Commissioners—which is what we had a short time ago—this kind of thing leaves me much less bothered, and I can see no particular reason why the Commissioners have not had this power. One never knows what the Government will accept nowadays, but I suppose that it is a fair inference from the next Amendment that they will not accept this one, so perhaps I need not say more.
    Mr. Powell: I find that my right hon. and learned Friend's arguments have made more impression upon me than they evidently have upon the hon. and learned Member for Kettering (Mr. Mitchison). It is quite true, as my right hon. and learned Friend said, that the period within which assessments can be made—fixed by Statute—is a very important safeguard of the subject. The idea behind the paragraph which the Amendment seeks to delete was that cases can arise—as has been mentioned earlier—where an overseas trade corporation, in a particular year, might claim to have put itself out of court as an overseas trade corporation where that was an advantage to it, and that claim might well disclose the fact that throughout the whole of the period in which it had been treated as an overseas trade corporation—which might have been for more than six years—it had been enjoying that status without any right to it.
    I hope that the provisions which my right hon. Friend proposes to introduce to prevent overseas trade corporations from disqualifying themselves at will in order to gain a tax advantage, however, will be sufficient to meet the point in mind, and I therefore recommend the Committee to accept the view that paragraph (b) is unnecessary and should fall away.
    Amendment agreed to.
    Mr. Powell: I beg to move, in page 26, line 11, at the end to add:
    (3) A statutory instrument containing regulations made under this section shall be subject to annulment in pursuance of a resolution of the House of Commons.
    The matters which, by subsection (1), the Commissioners are to be given the power to regulate by Statutory Instru
    566
    ment, will certainly include matters which ought not to be settled by them without the power of the House to negative them. The Amendment therefore makes Regulations made under subsection (1) subject to negative Resolution in the House.
    Amendment agreed to.
    Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.
    Mr. Mitchison: The wisdom of what the Government have done by accepting the first of the two Amendments to the Clause will depend entirely upon the efficacy of the Amendments they propose to make, which will be to the effect of preventing people using the qualifications in the Clause to come in and out of the status of overseas trade corporations—for those were the Amendments to which the Financial Secretary referred. Those Amendments, as he told us earlier, will give the Commissioners power to investigate the intentions of the companies concerned, which means, in fact, the intentions of the directors of those companies. It seems to me a very remarkable view of the value of individual liberty to object to a time of assessment—as was the objection in this case—and, at the same time, to accept the principle and the practice that the Commissioners are going to inquire into intentions in a matter of this sort. I should have thought that it was not advisable to have it depend entirely on matters of intention, and that to omit what has been omitted today simply on the strength of that will prove a serious mistake.
    As with so much of this part of the Bill, we get the same thing. Late at night the Government themselves drill an even larger hole than already exists in the sieve which the scheme contemplates. It happens regularly every night. If we went on for a few nights more, it would simply mean that there would be a few more holes in the sieve. The Government then cheerfully say "It will come out all right in the end." I dare say it will, but for whom? Whether it will be for the Revenue or for some of the Government's friends in the City of London, I do not know.
    Question put and agreed to.
    Clause, as amended, ordered to stand part of the Bill.

    Clause 32.—(DEFINITION OF TRADING INCOME AND INVESTMENT INCOME.)
    Mr. Powell: I beg to move, in page 26, line 33, to leave out subsections (3) and (4), and to add:
    (3) Where the Overseas Trade Corporation receives from another company which is also an Overseas Trade Corporation a dividend on shares in that other Overseas Trade Corporation or a grant or loan in a case where under paragraph 1 or paragraph 2 of the Sixth Schedule to this Act the recipient is to be deemed for the purposes of Income Tax Acts to have received a payment equal to so much of the grant or loan as is under the provisions of the Fifth Schedule to this Act to be regarded as paid out of exempt trading income, and—

    (a) either Overseas Trade Corporation is a subsidiary company of the other Overseas Trade Corporation, or

    (b) both Corporations are subsidiary companies of the same principal company which is also an Overseas Trade Corporation, the dividend, grant or loan shall, so far as it is to be regarded as paid out of exempt trading income, constitute trading income of the recipient.

    The Deputy-Chairman (Sir Gordon Touche): It will probably be convenient to discuss at the same time the Amendment in the name of the hon. Member for Dover (Mr. Arbuthnot), in page 26, line 33, to leave out subsections (3) and (4), and to add:
    (3) Where the Overseas Trade Corporation is a principal company and one or more subsidiaries of the Corporation are themselves Overseas Trade Corporations, any dividend on shares in any one of those subsidiaries paid either to the principal company or to any one of such subsidiaries, and any grant or loan which under paragraph 1 or paragraph 2 of the Sixth Schedule to this Act is to be deemed to represent a dividend paid to or by the principal company or to or by any one of such subsidiaries, shall so far it is to be regarded under the provisions of the Fifth Schedule to this Act as paid out of exempt trading income, constitute trading income of the recipient.
    Mr. Powell: The present subsections (3) and (4) have the effect respectively that where a subsidiary O.T.C. pays a dividend to a principal O.T.C. or where a principal O.T.C. makes a grant or loan to a subsidiary O.T.C., the resources received are treated as the trading income of the recipient and, therefore, attract the exemption conferred by O.T.C. status.
    However, that leaves a third, and important, case out of account, namely where the payment or transfer occurs not via the principal company but directly
    568
    between subsidiaries. There is, clearly, no reason why that direct transfer should be penalised when the indirect transfer is to be permitted without going through the hoop of United Kingdom Income Tax. That result can be achieved and the wording can be simplified by the substitution of the new subsection.
    Mr. Mitchison: This is another of the experiments in the curious family of O.T.C.s so dear to the heart of the Financial Secretary. This one sounds a bit more sensible than the last lot. The complication of a scheme of this kind is the best comment on its practicability and the best comment on the possibilities of evasion that it necessarily prevents. If the Financial Secretary at this stage has been able to think up all these possibilities, how many more possibilities will he have been able to think up next year?
    Mr. Arbuthnot: Once again, I thank my right hon. Friend for the way in which he has met the case we have sought to meet in our Amendments.
    Amendment agreed to.
    Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.
    11.0 p.m.
    Mr. du Cann: I wish to ask the Financial Secretary a question relating to subsection (2, b). I should be grateful if he could give the reason for the inclusion of the words "without security".
    I appreciate that they may be written so as to exclude from the provisions of the Clause the benefits which arise therefrom, but when we were discussing Clause 21 I pointed out that it was the usual practice of certain Australian companies and agency companies to lend money in certain cases without security. It would seem on the face of it—thinking of those companies and of those companies alone, although I appreciate that other considerations may be involved—a little illogical and unreasonable that what has been ordinary commercial practice should involve such companies in some difficulties under this Clause. If my hon. Friend could explain. I should be most appreciative.
    Mr. Powell: As my hon. Friend knows, the question here is what falls within the ambit of trading and what within the ambit of investment. Any income

    569
    arising from the lending of money would be classified as investment income, and the purpose of these words is merely to make it clear that the income arising from the lending of money is investment income, even when the money is lent without security.
    Question put and agreed to.
    Clause, as amended, ordered to stand part of the Bill.

    Clause 33.—(INTERPRETATION OF PART IV.)
    Mr. Mitchison: I beg to move, in page 27, line 17, at the end, to insert:
    "recognised market" means a market declared by an order of the Board of Trade for the time being in force to be a recognised market for the purposes of this Part of this Act.
    The Deputy-Chairman: I think that it would be convenient if this Amendment were discussed with that in page 27, line 22, at the end to insert:
    (2) No order shall be made by the Board of Trade under the last foregoing subsection except with the consent of the Treasury and an order so made shall be in the form of a statutory instrument and subject to annulment by a resolution of the Commons House of Parliament
    Mr. Mitchison: Yes, Sir Gordon.
    These two Amendments are designed, first of all, to give some practical sense to the phrase "recognised market" by giving the Board of Trade, with the consent of the Treasury, power to declare by Order what a recognised market is. If the Committee wants a precedent for that, there is a very rough one in the "recognised stock exchange" defined in the same sort of way in the Prevention of Frauds Act, though, naturally enough, there is no Treasury consent required in that case. The second effect of the two Amendments is that when the Board does declare that, it has to do it in the form of a Statutory Order, and that Order shall be subject to annulment.
    The phrase "recognised market" occurs in Clause 21 (1), and it is highly important in connection with the sale of commodities—either, as the Bill originally stood, commodities produced abroad by an overseas trade corporation or, as the Bill now stands, commodities of the kind produced abroad by an overseas trade corporation.
    The object of the reference to a "recognised market" is to limit the sales
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    here to sales through agents or brokers of a market of that kind in this country, and not to allow an overseas trade corporation to go beyond that and have what one may call some particular selling or some more elaborate selling. I would say at once that I can think of quite a number of instances where there obviously is a recognised market, but I come to all sorts of cases where it is much more doubtful whether there is or is not a recognised market.
    The very large question, of course, is what does "recognised" mean. Does it mean recognised in the trade in question? Does it mean recognised by the general public? Does it mean recognised in some form or another by the tax authorities? If it has the latter meaning, then I cannot see how they have had to consider the question before. Therefore I rather reject that one.
    What is the real object of having a "recognised market" of this kind? It is, as I understand it, to bring the sales into the category of a type of sale made in tolerably large numbers, in tolerably similar conditions, made, perhaps, according to the rules of some trade association, made in some tolerably well-known place, and not up and down the country—things of that sort are intended. There are all sorts of difficulties. Take the last point I mentioned. It is true that if one is looking for a particular centre for sales, say, of cotton or tea, one can find it, but if one looked for a particular centre for timber, I think it would be a great deal harder to find it.
    Is there, or is there not, in those circumstances a "recognised market," both for tea and cotton on the one hand, and for timber on the other? Then again, what is the sphere of a "recognised market"? Is it a "recognised market" if it is controlled by one or two concerns and the price is more or less dictated by them—altered from time to time, no doubt, in relation to the demand—but still very much a one-man matter? Take a metal like copper: what is the position there? The right hon. Gentleman, the Chancellor of the Exchequer, has forgotten more about this than I have ever known, because he has recently been President of the Board of Trade, but I wonder if he would tell us whether or not there is a "recognised market" in copper, and if it is a sort of open market of the kind he wishes to recognise here, or if it is a

    571
    matter that is largely regulated by a few large copper producers.
    What about diamonds? I am not in the habit of buying them myself, because I cannot afford to do so, but the right hon. Gentleman is. [HON. MEMBERS: "Oh!".] If it is diamonds that we are considering, is there or is there not a "recognised market"? I have always understood that one goes round to a body called the diamond corporation, or something like that, and that it sells one diamonds. On the other hand, I am told that there are a lot of dealers. I always see a delightful picture of men in bowler hats, walking about in Hatton Garden with little bags carrying diamonds worth millions of pounds. I have never met any of them, and have not been to Hatton Garden very often, and then never for the purpose of business but merely because it happened to be between one place and another, but I should like to know whether there is a "recognised market" in diamonds.
    These overseas trade corporations may have to deal with all kinds of other things, and the picture is altogether fascinating. But this is the distinction that will make a difference to very many of these bodies—whether they do or do not get the advantages supposed to be offered them under this part of the Bill. Therefore, it is exceedingly important and, indeed, a vital decision. More than that, it is up to them to do it right, because if they do not, we will have the awful possibility, disclosed to us a short time ago, that they will discover that when they were dealing in toothpicks, or whatever it was, in what they thought was a recognised market, they had in fact been dealing in toothpicks in an unrecognised market, and for that reason for six years past they had been getting an advantage to which they were not entitled. It is not satisfactory that so much should turn on such a vague phrase, and I have come to the conclusion that the Government themselves do not know what they mean by it.
    I suggest that if there is to be any other ground of decision than the convenience of particular people who choose to say that something is a recognised market, the Board finding no particular
    572
    reason to deny it, the matter ought not to be decided so much by definition in the Bill—I recognise that one cannot properly do that since it is something so changeable and various—as by a power in the Board of Trade to decide it. After all, the Board of Trade is the body for this purpose, to say what is or what is not a recognised market.
    I earnestly hope that the right hon. Gentleman the Chancellor will accept the Amendment, and not view with too much horror and suspicion the entry of his old friend the Board of Trade into a Finance Bill. There is, after all, something so august about the Treasury that it really knows nothing, except everything; for that reason, it is better to have the more specialised knowledge of another Department brought to bear upon the matter.
    Mr. Birch: I am grateful to the hon. and learned Gentleman for moving the Amendment. He has made a very reasonable point. I think that there should be some closer definition of what the term means. We do not want to accept his actual form of words, but we should like to consider the matter further, before Report. It clearly is the duty of the Board of Trade to draw up the list, in consultation, of course, with the Treasury. Whether the device of a Statutory Instrument is rather too ponderous a one, I do not know, but if the hon. and learned Gentleman would be good enough to withdraw the Amendment, we will consider the matter and raise it again on Report.
    Mr. H. Wilson: We are all grateful to the right hon. Gentleman the Economic Secretary for what he has just said. This is a very glaring, if minor, gap in the Bill. My hon. and learned Friend has put the arguments, and I need not repeat them. It is very difficult to know in certain marginal cases whether there is a recognised market or not. We know that some markets are simply the result of a number of chaps getting together over the telephone, buying and selling. I imagine that, in most cases, those would be excluded from the list the Government have in mind.
    What we are particularly anxious to ensure, so far as I can see from the Bill, is that there should be a definite and

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    more or less predetermined price, established by quotations from the market and Press, and all the rest of it, so that there is no possibility of an overseas corporation selling to any associated company at a price which might or might not be a result of the famous "arms' length" business. My hon. and learned Friend did mention one or two special examples. I hope that when we come to the Report stage, the Government spokesman will, in addition to producing an Amendment, give some information on the kind of markets which will be included and those which will be excluded. Copper was mentioned. There is a copper market, of course, and we know that prices are fixed from time to time, a few weeks ahead, by the two principal Rhodesian companies.
    Further, I should be glad if the right hon. Gentleman the Chancellor and his hon. and right hon. Friends would look at the expression "recognised market" in relation to bulk buying. If I am right in assuming that the reason for this is to ensure that the price for the goods is determined quite outside the control of any parent companies at home. it being an ascertainable and independent fixed price, there is, of course, also the matter of bulk buying to be considered. I do not want, certainly at this time of night, to get into an argument about any possible resumption of bulk buying in certain of these commodities, though before very long, I think, the Chancellor will find that he really cannot encourage Commonwealth trade, as I am sure he would like to do, except by a resumption of bulk buying. But, in case that should happen, it should be made quite clear that the term "recognised market" would include a Government or other form of buying agency.
    There is, as far as I know, one commodity which is still bulk bought by the Government in this country, namely jute. Does the jute control constitute a recognised market for the purpose of this Clause? I think that the Government would have to agree that the existence of a jute control fulfils the conditions perfectly. I should be glad if the Chancellor would look at this point and, if necessary, make certain that "recognised market" includes an independent bulk buying authority.
    574
    We welcome the fact that the Chancellor has made this small concession, and if it is the wish of the Committee, we shall be glad to withdraw the Amendment.
    Mr. Mitchison: May I thank the Economic Secretary, and beg to ask leave to withdraw the Amendment?
    Amendment, by leave, withdrawn.
    11.15 p.m.
    Mr. Stevens: I beg to move, in page 27, line 25, to leave out "more than one half" and to insert "one half or more."
    This proposal is not as trivial as it might appear. A subsidiary company is defined in as one of which more than one half of its ordinary share capital is owned by another company. It is the fact that in certain cases local pressures or regulations make it impossible for a company to obtain 51 per cent. or more of its share capital. I think that the words should be "one half or more." It is true that this might mean that a company might be a subsidiary of two parent companies at one and the same time. I do not think that would be of any particular significance in this context, because then any dividends received from the subsidiary company would be trading income in the pockets of both parent companies.
    I hope that the Chancellor will be able to accept the Amendment.
    Mr. Mitchison: I hesitate to say that I hope the Government will not accept the Amendment, because when I do, they always accept it. Perhaps it would be better not to say anything, but my feelings are sufficiently strong to allow valour on this occasion to outrun prudence.
    I earnestly hope that the Government will not accept the Amendment. When the Committee discussed Clause 32, we agreed that some of the advantages there depended on a subsidiary company really and truly being a subsidiary company, and that it might lead to very dangerous and difficult consequences if one could have a company—to take the instance I gave at the time—which was owned by three companies together.
    The whole framework of this scheme is so tied up with a subsidiary having its natural mien—that of a company owned

    575
    and controlled by another company—that to open this particular door would be much too dangerous. I hope that the Government will not knock a second large hole in the sieve at this late hour of the night and in this particularly dangerous way.
    Mr. Powell: I am sure that my hon. Friend the Member for Langstone (Mr. Stevens) appreciates the importance of the definition of a subsidiary company. It is important for two reasons; for the reason mentioned by the hon. and learned Member for Kettering (Mr. Mitchison), that it is essential that there should be real control between the principal and the subsidiary companies, and also because it is essential to ensure that the holding of the principal company in the subsidiary is for trading, and not merely for investment purposes. The definition is, therefore, one which we have to scrutinise very carefully. My hon. Friend has indicated that there may be cases where local requirements would not permit a 51 per cent. holding while they would permit a 50 per cent. holding, though in the circumstances that would give the same degree of practical control and would still be a trading holding as much as if it were 51 per cent.
    My right hon. Friend would like to take the opportunity of the interval between this stage and Report for examining in detail cases of that kind with a view to ascertaining how they might best be met, and I hope my hon. Friend will feel, in view of this assurance, that he would be justified at this stage in withdrawing his Amendment.
    Mr. Mitchison: If that is going to happen, it just shows the result of allowing valour to outrun discretion. I am sure the Financial Secretary would not have said what he has said if I had not suggested that he should not say it. Now that we are to have that arrangement, we shall have to wait and see what emerges, but I would ask the Financial Secretary at the same time to consider the possibility, for the reason that he himself gave, that in the majority of cases there ought to be more and not less than a 51 per cent. control, and to consider also whether the natural meaning of a subsidiary is not something rather more than bare control when what is required to do is to
    576
    differentiate between investment and trading.
    I do not expect the hon. Gentleman to do anything about it. I am just asking him to think a little more. We seriously recognise that he has done a lot of thinking about this Bill; a little more thinking would be very good for him.
    Mr. Stevens: On behalf of my hon. Friends and myself, I must express our very deep sense of gratitude to the hon. and learned Member for Kettering (Mr. Mitchison) for his very helpful interjection which has had such happy results with my hon. Friend the Financial Secretary, in view of whose assurance I most decidedly beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Clause ordered to stand part of the Bill.
    Clause 34 ordered to stand part of the Bill.
    To report Progress and ask leave to sit again.—[Mr. P. Thorneycroft.]
    Committee report Progress: to sit again Tomorrow.

    SUPERANNUATION [MONEY]
    Resolution reported,
    That, for the purposes of any Act of the present Session to make further provision as to gratuities payable in respect of persons employed in the civil service of the State otherwise than in an established capacity and as to the application of the Superannuation Acts to persons entering the civil service of the State after having been in other employment, it is expedient to authorise—
    1 Any increase in the sums payable under any enactment out of moneys provided by Parliament which is attributable—

    (a) to any amendment of section thirty-nine of the Superannuation Act, 1949, as respects gratuities payable in the case of persons dying, retiring or removed from their employment on or after the fifteenth day of May, nineteen hundred and fifty-seven,

    (b) to amendments of the Superannuation Acts in relation to persons who, after having been employed by a body or organisation the income of which was wholly or partly derived from moneys provided by Parliament have, whether before or after the passing of the said Act, been taken into the civil service of the State where, in the opinion of the Treasury, their employment by that body or organisation was of the same nature and for the same purpose as their employment in the service of the State,

    577

    (c) to any provision authorising the reckoning of service in a temporary capacity with the Imperial War Graves Commission before the thirtieth day of September, nineteen hundred and thirty-four, as being for the purposes of the Superannuation Acts employment in an unestablished capacity within the meaning of section three of the Superannuation Act, 1935.

    2. Any payments into the Exchequer.
    Resolution agreed to.

  SUPERANNUATION BILL
  Considered in Committee.
  [Sir GORDON TOUCHE in the Chair]

  SUPERANNUATION BILL

    Clause 1.—(GRATUITIES FOR PERSONS SERVING IN UNESTABLISHED OR PART -TIME CAPACITIES IN THE CIVIL SERVICE.)
    Motion made, and Question proposed. That the Clause stand part of the Bill.
    11.25 p.m.
    Mr. Douglas Houghton: I wish to refer to subsection (3) of this Clause and once more to express my regret that the Chancellor of the Exchequer has not been able to agree to an earlier date than 15th May, 1957, for this new scale of gratuities to temporary staffs of the Civil Service which was recommended by the Priestley Commission on the Civil Service in 1955.
    The right hon. Gentleman knows that an understanding has been reached on the Civil Service National Whitley Council which would preclude me, as Chairman of the Staff Side of the Whitley Council, from moving any Amendment to the Bill in Committee without a breach of that understanding. That, however, would not have precluded any of my hon. Friends doing so had they wished, but we have tried to keep to that understanding and I am not doing any more than expressing regret that the right hon. Gentleman was not able to do something more generous in this matter of the effective date.
    Since the Bill has been before the House, I have received many letters from ex-temporary civil servants who have been discharged in recent months and who are bitterly disappointed that they are not brought within the scope of the Bill. They naturally looked for
    578
    ward, when they saw the recommendations of the Royal Commission in the autumn of 1955, to an early implementation of those recommendations. They understood, not with complete accuracy, that all the recommendations of the Priestley Commission were in one package and were being adopted comprehensively and as a whole. But those of us who were close to these negotiations understood the distinction, which might he merely technical or real, between those recommendations of the Commission which it was within the power of the Treasury to apply without legislation and those which required this Bill to give effect to them.
    There is no more to be said. We either do a thing or we do not in a matter of this kind. There is no close argument to be used as to why there should be an earlier effective date than a later one It just is the fact that the recommendations were made when they were, and it is regrettable that they were not given earlier effect. I acknowledge, however—I want to be quite fair to the right hon. Gentleman the Chancellor; we have full confidence in his fairness in these matters—that the Bill has come somewhat earlier than his predecessor gave us to understand might be the case, and we are grateful that he has found time to bring the Bill forward this Session and to ask the House to deal with it.
    I think that that is a fair acknowledgment of the fact that we have the Bill before us tonight. To that extent, probably, the recommendations of the Commission are beginning earlier than they would have done if the Bill had been introduced later, and certainly earlier, probably, than if the Bill had been introduced in the next Session. I know the wretched administrative difficulties that dog one in all these matters, whether in reforms or otherwise.
    I know the difficulty of going back and finding people who have left and of going into their entitlement to these gratuities after they have departed, but a measure of retrospection to the date of the Commission's actual Report or thereabouts would not have provided half the difficulty which we have had in trying to deal fairly with people who have gone out of the Civil Service in the past. I do not wish to detain the Committee a moment longer. I have put

    579
    this on the record. We shall certainly co-operate in completing the passage of the Bill through the House at the earliest possible moment.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.
    Clauses 2 to 5 ordered to stand part of the Bill.
    Bill reported, without Amendment; read the Third time and passed.

    ADJOURNMENT
    Resolved, That this House do now adjourn.—[Mr. Hughes-Young.]
    Adjourned accordingly at twenty-nine minutes to Twelve o'clock.

KENYA
  Mr. L. J. Crickmar (Claims)
  Mr. L. J. Crickmar (Claims)
  Tribal Police
  Tribal Police
  Land Consolidation Scheme (Terminated Leases)
  Land Consolidation Scheme (Terminated Leases)
  Education Expenditure
  Education Expenditure
HOME DEPARTMENT
  Murders (Statistics)
  Murders (Statistics)
  Cross-Channel Day Trips
  Cross-Channel Day Trips
  Young Offenders (Attendance Centres)
  Young Offenders (Attendance Centres)
  Police Dogs, Metropolitan Area
  Police Dogs, Metropolitan Area
  Rodi and Weinenberger (Great Britain) Ltd.
  Rodi and Weinenberger (Great Britain) Ltd.
  Foreign Nationals (Business Activities)
  Foreign Nationals (Business Activities)
  Civil Defence (Radioactivity)
  Civil Defence (Radioactivity)
  Telephone Communications (Interception)
  Telephone Communications (Interception)
COMMONWEALTH RELATIONS
  Economic Development
  Economic Development
  Major L. Newman
  Major L. Newman
EDUCATION
  School Fees
  School Fees
  Holton-le-Clay Village School
  Holton-le-Clay Village School
  School Meals, West Ham
  School Meals, West Ham
  Head Mistress (Dismissal)
  Head Mistress (Dismissal)
  Technical Colleges (Teachers)
  Technical Colleges (Teachers)
  Girls (Science Courses)
  Girls (Science Courses)
  Kingsbury (Community Centre)
  Kingsbury (Community Centre)
  School Holidays
  School Holidays
TRADE AND COMMERCE
  Canary Islands Tomatoes
  Canary Islands Tomatoes
  Cotton Goods (Imports)
  Cotton Goods (Imports)
  Detergents (Gift Schemes)
  Detergents (Gift Schemes)
  Cotton Board (Chairmanship)
  Cotton Board (Chairmanship)
AGRICULTURE, FISHERIES AND FOOD
  River Severn Banks (Erosion)
  River Severn Banks (Erosion)
  Milk
  Milk
  Wheat Crop
  Wheat Crop
  Dressed Seed Corn (Toxic Chemicals)
  Dressed Seed Corn (Toxic Chemicals)
MINISTRY OF HEALTH
  Accidents in the Home (Memorandum)
  Accidents in the Home (Memorandum)
  Lung Cancer and Smoking
  Lung Cancer and Smoking
GERMANY
  Reunification
  Reunification
  Defence
  Defence
  EGYPT (DETAINED BRITISH NATIONALS)
  EGYPT (DETAINED BRITISH NATIONALS)
  UNITED NATIONS (DISARMAMENT SUB-COMMITTEE)
  UNITED NATIONS (DISARMAMENT SUB-COMMITTEE)
TELEPHONE SERVICE
  Subscribers' Accounts
  Subscribers' Accounts

Preamble
The House met at half past two of the clock, The EARL OF DROGHEDA on the Woolsack.
Prayers

LONDON COUNTY COUNCIL (MONEY) BILL
2.36 p.m.
Read 2ª, and referred to the Committee on Unopposed Bills.

PORTSLADE AND SOUTHWICK OUTFALL SEWERAGE BOARD BILL
Read 2ª, and referred to the Committee on Unopposed Bills.

ABERDEEN HARBOUR (SUPER- ANNUATION) ORDER CON- FIRMATION BILL
BAIRD TRUST ORDER CONFIRMATION BILL
GLASGOW CORPORATION ORDER CONFIRMATION BILL
KILMARNOCK CORPORATION ORDER CONFIRMATION BILL
Read 3ª (according to Order), and passed.

EGGS (GUARANTEED PRICES) ORDER, 1957
2.38 p.m.
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL ST. ALDWYN)THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL ST. ALDWYN) moved, That the Eggs (Guaranteed Prices) Order, 1957, reported from the Special Orders Committee on Tuesday the 4th of June, be approved. The noble Earl said: My Lords, this Order makes arrangements for providing guaranteed prices and an assured market for eggs through the British Egg Marketing Board. The Order will replace an existing Order, also made under Section 4 of the Agriculture Act, 1947, giving authority for the Government's, present interim arrangements
428
which have operated since rationing and price control of eggs ended.
The Board has now been set up, and will start exercising its marketing functions from 30th June. In future, as with milk and wool, the guarantee will be to the Board and not to individual producers. The level and conditions of the guarantee are, of course, determined each year at the Annual Review. The detailed financial arrangements under which the Board will administer the guarantees will be set out in an Agreement between the Ministers concerned and the Board, and copies of the Agreement will later be made available in the Printed Paper Office. The present Order merely lays down the following procedure for determining each year how much is due from the Exchequer to the Board to implement the guarantees.
At each Annual Review, Ministers will determine, for hen and duck eggs, the standards of eggs to be eligible for guarantee and:—

(a) a guaranteed price per dozen;

(b) an estimate of the average selling price per dozen for the coming year; and

(c) a rate of subsidy (which will be the difference between the guaranteed price and the estimated average selling price).

The Board will then be paid this rate on each dozen eggs which it buys.
The Order also provides for arrangements which give the Board an incentive to get the best out of the market. Differences between the average selling price estimated at the beginning of the year and the actual average selling price ascertained at the end of the year will be shared between the Board and the Exchequer. The Board will bear or keep the first twopence a dozen on any difference there is, but if the actual average selling price is more than twopence below the estimate, the Exchequer will make up 90 per cent. of the excess deficiency and, if the actual price is more than twopence above the estimate, the Exchequer will get back half of the excess.
As the Government will have been operating the guarantee for the first three months of the current financial year, the results of our operations during this

429
period will have to be taken into account in determining what is due to the Board or to the Exchequer at the end of the year under this risk-sharing arrangement. The Order contains transitional provisions to cover this point and also provides for financial adjustments to be made when the Board takes over from the Government. After this the Board will be answerable to the producers for the way in which they market eggs. They will buy all the hen eggs which pass through packing stations and will themselves determine the prices at which they buy eggs from producers. The Government will no longer be fixing these prices.
The Board have said that they do not at present propose to make any substantial change in the physical channels through which eggs are marketed, but subject to the limitations imposed by the financial agreement between the Board and the Government, they will nevertheless be free to use their powers under the Egg Marketing Scheme to market eggs as they think best. The Board are certainly taking over a tricky job at a difficult time, but I am sure that, supported by the producers who voted it in by such an overwhelming majority, it will tackle the problems in front of it with energy and resolution. I am sure your Lordships will join with me in wishing it every success. I beg to move.
Moved, That the Eggs (Guaranteed Prices) Order, 1957, reported from the Special Orders Committee on Tuesday, June 4, be approved.—(Earl St. Aldwyn.)
2.42 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, we thank the noble Earl for his explanation of this Order which to the ordinary citizen, as I am sure he will agree, must appear somewhat complicated. When I look at the three separate calculations that have to be made in the course of dealing with the matter, it makes me think that most G.C.E. candidates would be almost forced to turn to some algebraic terms or symbols in their endeavours to find a proper answer. Certainly I find great difficulty in making an estimate of the result of these adjustments. I think that it is a pity the farming community have to labour under this kind of complicated mathematical problem.
430
However, the first thing one ought to say about the Egg Order, which is the first to be introduced since the new Egg Marketing Board began operating, is that we must heartily wish the Board success in their operations in what is obviously a difficult period for them. The fears of many people of whether commodities of this kind will be brought into the new agreements that may come out of the European Common Market discussions must remain until a final settlement of that question is reached. For reasons good to themselves, the Ministry have felt bound to utter words of general discouragement. Eggs are apparently under a black cloud, because producers are producing too many and the Ministry want production reduced. Therefore, the spirit in which these new mathematical processes through which settlements will be made will be worked out is fundamental.
If your Lordships will look at paragraph 5 of the Order—very interesting to me—you will see that it reads:
"At the end of each year the average selling price of hen eggs and duck eggs respectively for that year shall be ascertained by the Ministers in accordance with arrangements agreed with the Board or in default of agreement in accordance with such principles as the Ministers shall decide."
I think that one is fairly entitled to ask the Government whether that means that the general discouragement of egg production is to be helped forward by the fact that the Minister will have absolute control of the price of eggs; because there is no appeal to arbitration, or anything of that kind, if there is disagreement between the Egg Marketing Board and the Minister on this matter. I should like a word from the noble Earl on that point, because all those engaged in farming who are affected by the tendency to discourage further production of eggs, and also of pigs and milk, will be looking to see what happens under this Order as some sort of guide to the spirit in which these commodities will be administered under Government schemes in the future. I was going to ask some rather complicated mathematical questions about the working of the adjustments, but I think that the generalisation made by the noble Earl on the calculations is sufficient for the present. We shall have to watch with interest exactly how the first set of adjustments work out.
LORD GRANTCHESTER: My Lords, before the noble Earl replies, may I ask whether he can form any estimate of the cost to the taxpayer in the first year of this arrangement?
EARL HOWE: My Lords, before the Minister replies, may we have some assurance from the point of view of the consumer? Does it mean that we are going to get our eggs more cheaply?
EARL ST. ALDWYN: My Lords, may I deal with the two last points first? I am afraid that at the moment I cannot give the estimate for the ensuing year. A provisional estimate was made last November which put the figure at somewhere about £30 million. I appreciate that that may not be an entirely realistic figure to-day, but I am afraid that I cannot at present give the noble Lord anything more accurate than that.
LORD GRANTCHESTER: My Lords, does the noble Earl think it right to give these blank cheques in the present financial difficulties of the country?
EARL ST. ALDWYN: My Lords, it is not a question of a blank cheque. There will have to be a Supplementary Estimate which will be available for discussion by your Lordships.
LORD GRANTCHESTER: My Lords, the expense is incurred first and the Supplementary Estimate is put forward afterwards. Is that not the wrong way round?
EARL ST. ALDWYN: My Lords, I do not think that it would be quite the wrong way round, because I anticipate that the Supplementary Estimate will be available before the original Estimate has been entirely consumed. The noble Earl, Lord Howe, asked whether we were going to have cheaper eggs. I would point out to him that, at their present price, eggs are probably the best value of any commodity on the market to-day, and I hope that he is not suggesting that we should hope to see even cheaper eggs. They are cheaper in proportion to other forms of food than they were before the war.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, arising out of that answer, may I ask the noble Earl whether it is not a fact that, owing to supplies from elsewhere coming into this country, eggs have been at such a low
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retail price in the last few months that they have been sold in the shops at below their actual cost of production in this country? I am sure that noble Lords who have asked questions on this point do not want to reduce labour costs.
EARL ST. ALDWYN: My Lords, it is true, as the noble Viscount says, that the retail price has been exceptionally low and near the actual cost of production, but that is not due to excessive importation. It has been due to excessive home production.
LORD REA: My Lords, may I ask a supplementary question, following that of the noble Earl, Lord Howe? The noble Earl, Lord St. Aldwyn, said that the producers had given their overwhelming support to this measure. Can we have it from him that the Government consulted the consumers, or is that going to be left to a General Election?
EARL ST. ALDWYN: As the noble Lord is fully aware, we have not had a referendum of consumers on the matter, but I can assure him that we considered the consumers' interests just as carefully as those of the producers.
VISCOUNT ALEXANDER OF HILLSBOROUGH: Is it not a fact that under the Marketing Acts proper inquiries have been held, at which representations could be made?
EARL ST. ALDWYN: As the noble Viscount says, there has been a public inquiry, where representations were made, and although some opposition by certain sections was put up, it was not overwhelming. The noble Viscount asked me earlier about paragraph 5 of the Order. I am sure he will appreciate that the guaranteed price, which is (shall I say?) a in his algebraical problem, is fixed at the Annual Review. I can assure him that the last words of the paragraph which refer to the Minister's discretion do not conceal any intention to do anything prejudicial to the interests of the industry. They are inserted merely to cover occasions where the Minister disagrees with the Board's estimate and he cannot, in fairness to the Exchequer and the nation, agree with them. I can assure the noble Viscount that there is no intention of using this power to deprive the egg producers of what they would be justified in thinking they would get as a result of the reduction.
2.52 p.m.
EARL JOWITT: My Lords, I believe in this policy. I do not believe that there is a complete divergence between the interests of the consumer and the interests of the producer. I believe that the policy the Government are pursuing is right, and that the producer should be given a fair return for what he does. In that way, we best consult the interests of the consumer. However, I am rather concerned at the answer which the noble Earl gave about the estimated cost of this scheme. He seemed to think that, just because a Supplementary Estimate is required, therefore the matter is effectively under Parliamentary control. But if a policy is adopted, and it then turns out that a Supplementary Estimate is required to carry out that policy, really the House is not free. Its hands are bound; it has adopted the policy, and it is difficult not to pass the Supplementary Estimate. I think that to produce an Estimate, which he says may be £32 million—and heaven alone knows how much it will be! it may be more or less; we have not the least idea—is the wrong way to set about the nation's housekeeping. The only answer is: "Well, you know, whatever it does cost, there will have to be a Supplementary Estimate." Well, there will. And, in practice, whatever the Supplementary Estimate comes to, it will have to be approved to give effect to this policy. As I say, I believe this to be the right policy—I have never believed in the simple dictum of "Set the people free!"; and this is the policy which my Party adopted a long time ago—but I venture to express my feeling, in the present financial condition of the country, against the Minister's getting up and saying: "We do not know in the least what this will cost, but it will be all right, because there will be a Supplementary Estimate some day."
EARL ST. ALDWYN: My Lords, I can assure the noble and learned Earl that we are not in any way complacent about this matter and at the last Annual Review we considerably reduced the guaranteed price for eggs with the intention of discouraging production, and thus reducing the Exchequer liability in this matter. I would refer him to an answer which my right honourable friend gave in another place. He said [OFFICIAL REPORT, Commons, Vol. 570 (No. 112), col. 865]:
"I think, however, that it would he right to warn producers now that, unless there is
434
some major change in circumstances between now and next February, a further reduction in the level of the guarantee, within the long-term assurances, must be expected."
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I think the point on Parliamentary procedure which my noble and learned friend raised is an important one. I should like to ask whether, in fact, the Supplementary Estimate referred to is one which arises under the past system of dealing with this subsidy for eggs and which probably will not arise in the case of this new Order. First of all, there is to be an Estimate, and as there is now a Marketing Board operating between the producers and the Government they will themselves make their own adjustment with the Minister of Agriculture, either by receiving what is too low under the Estimate or by themselves paying back to the Ministry what is found to have been too much.
EARL ST. ALDWYN: I think the noble Viscount is quite correct in his assumption.
On Question, Motion agreed to.

FERTILISERS (UNITED KINGDOM) SCHEME, 1957
2.56 p.m.
EARL ST. ALDWYN: My Lords, this scheme extends for a further year the arrangements for the payment of fertiliser subsidy. I beg to move.
Moved, That the Draft Fertilisers (United Kingdom) Scheme, 1957, reported from the Special Orders Committee on Tuesday, June 4, be approved.—(Earl St. Aldwyn.)
On Question, Motion agreed to.

WHITE FISH AND HERRING INDUSTRIES (CONVERSION GRANTS) SCHEME, 1957
EARL ST. ALDWYN: My Lords, this scheme implements the provisions made for conversion grants in the White Fish and Herring Industries Act, 1957, which your Lordships considered before the Easter Recess. I beg to move.
Moved, That the White Fish and Herring Industries (Conversion Grants) Scheme, 1957, reported from the Special

435
Orders Committee on Tuesday the 4th of June, be approved.—(Earl St. Aldwyn.)
On Question, Motion agreed to.
House adjourned during pleasure and resumed by The LORD CHANCELLOR.

ABERDEEN CORPORATION ORDER CONFIRMATION BILL
Brought from the Commons; read 1ª, and (pursuant to the Private Legislation Procedure (Scotland) Act, 1936) deemed to have been read 2ª and reported from the Committee.

MATRIMONIAL CAUSES (JURISDICTION) BILL [H.L.]
2.58 p.m.
Order of the Day for the Second Reading read.
LORD MESTON: My Lords, I beg to move the Second Reading of this Bill. It is exactly 100 years ago since divorce was handed over to the jurisdiction of the civil courts, and in that century there has been a good deal of change in the law and practice relating to nullity and dissolution of marriage. Coming immediately to modern times, we all remember the admirable Report of the Royal Commission. In that Report there were some non-controversial recommendations, and one of them relates to the jurisdiction in connection with the various matters which are dealt with by this Bill. I ought to say that this Bill is based upon those recommendations, but does not follow them precisely in every detail. In order to allay any possible fears, I would point out that the Bill does not create any new grounds for divorce, nor does it extend any existing grounds for divorce. In non-technical language, the main object of the Bill is to help the limping marriage. In some cases people are regarded as divorced in one country and as married in another. That is hardly a state of affairs which is satisfactory, either in morals or in law.
Coming to the Bill itself, I would say that Clause 1 deals with the instances where an English court may hear a divorce petition. At present a petition for divorce may be presented where the parties are domiciled in England. Since
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husband and wife are in this respect considered as one, the domicile of a husband and a wife is always the same. To alleviate this hardship two concessions are made by Section 18 of the Matrimonial Causes Act, 1950. In one of these cases, after three years' residence in England a wife may present a petition. The present Bill widens the jurisdiction so as to confer power on the courts to hear petitions if both parties are resident in this country, but only to grant a decree if the personal—that is to say, the domestic—law governing the parties has power to grant a decree. Let me give your Lordships an example. If A and B are Italians residing but not domiciled in England, the English court will be able, under the Bill, to hear the petition; but since Italy has no divorce laws, no decree can be granted in England. This is the effect of the proviso to paragraphs (c) and (d) of Clause 1 of the Bill.
I wish to emphasise the fact that this Bill expressly avoids allowing this country to be a dumping ground for broken marriages which cannot be validly dissolved elsewhere. Let me give your Lordships a positive example of the operation of Clause 1. H and W are Ruritanians—may I say that Ruritania is an imaginary country—living in England. The marriage breaks up, and the wife seeks to get a divorce in England. The court will have jurisdiction under Clause 1, but the proviso to that clause states that the court will give her a divorce only if by Ruritanian law—that is, her personal law—a Ruritanian court has power to grant a decree for cruelty, desertion, adultery, and so forth. To put the matter in a nutshell, the idea of the Bill is to transpose, as it were, the Ruritanian court to England, in order to make it unnecessary for the wife to go to the expense of proceeding in Ruritania.
Clause 2 deals with the dissolution of a marriage where a spouse is presumed to be dead. I respectfully submit that no possible harm can be done by substituting residence for domicile as the basis of jurisdiction in this rather rare type of case. Clause 3 of the Bill deals with nullity, and merely states the existing Common Law position. Clause 4, in paragraphs (a), (b) and (c), deals with voidable marriages. These are mostly concerned with the ground of wilful refusal to consummate a marriage.

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It states the Common Law position with slight modifications in paragraph (b). It is comparable to Clause 1 (c) of the Bill. Paragraph (d) of Clause 4 of the Bill is new, but there is reason to believe that this is not entirely unacceptable. In fact, in 1955 there was a decision of the High Court in Northern Ireland which supported the principle. That paragraph provides, in effect, that a petition for the annulment of a marriage alleged to be voidable may be presented to the court where the marriage was celebrated in England.
Clause 5 of the Bill gives a new remedy. At present, the principle of law is that there is unity of domicile as between husband and wife. That is effected by the wife taking the same domicile as the husband. I appreciate the fact that this is one of the fundamental principles of our law, and anybody who tries to change a fundamental principle is in the same position as the man who spoke disrespectfully of the Equator—I never knew what happened to him, but I am quite sure he was never seen again. At all events, I have taken the bull by the horns, so to speak, and the Bill provides that for the limited purpose of jurisdiction in divorce and nullity a wife can have a separate domicile. She is to have a separate domicile if, but for the fact, she would be domiciled in England.
To take an example, Mrs. Jones is married to a Utopian, and they live and become domiciled in Utopia. I may tell your Lordships that Utopia is a country which one has never seen but of which one has only heard. Subsequently they part, and Mrs. Jones returns to England to her family, intending never to go back to Utopia. As the law stands at present she remains, during her husband's lifetime, domiciled in Utopia, and if Utopia has no divorce she cannot, by virtue of her residence, take the benefit of Clause 1, paragraphs (c) and (d), of the Bill, because only one of the parties is resident here, unless, of course, the parties last resided together in England. This provision of the Bill will, in effect, take the place of the existing three years' ordinary residence rule which is to be found in Section 18 of the Matrimonial Causes Act, 1950. The Utopian wife can thus establish the jurisdiction of the English court under Clause 1 (a) of the Bill and obtain a decree on grounds allowable
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under English law, irrespective of what Utopia might say.
Part II of the Bill is, so to speak, the reverse side of the picture. If Mrs. Jones obtains a divorce in Utopia, is she a divorced woman according to English law? Until 1953 an English court would only recognise a foreign decree if, at the time of the petition, that foreign court had jurisdiction in the eyes of English law—that is to say, it was necessary that the parties should be domiciled in Utopia at the time of the petition. However, an extension of that principle was provided by the Court of Appeal in 1953 in the case of Travers v. Holley, which stated that if an English court took jurisdiction on the basis that immediately before the husband deserted the wife he was domiciled in England, the English courts would recognise a decree of a foreign court, where the foreign court took jurisdiction for substantially the same reasons.
Part II of the Bill sets out the identical terms of Part I, except that Part II deals with the situation of a foreign court which pronounces a decree on the same, or substantially similar, grounds as an English court. If it has done so, then the decree of the foreign court will be recognised in this country. Clause 10 of the Bill deals with the type of extra-judicial divorce, usually religious, as a decree by the Mohammedan Talak-nama or the Jewish Ghet. Clause 10 seeks to enact the Common Law position. The English court is to recognise such a divorce, but not if the marriage was celebrated in England.
In conclusion, I will say only this. It is not for me to say what the courts of the country feel or do not feel about a certain matter, but, reading the cases, one has the suspicion that the courts are frequently embarrassed in not being able to grant a decree on account of various technical obstructions. There is the difference between "void" and "voidable". There are cases where domicile is the basis of jurisdiction, and cases where residence is the basis of jurisdiction. There is endless ground for argument and the spending of money—which, of course, is a good thing, except for the unfortunate public. I am not suggesting for a moment that this Bill deals with a matter of the highest importance. But it does try to clear up the complicated position which exists to-day in the lives

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of an appreciable number of unhappy people. With that modest view of the matter, I beg to recommend it to your Lordships' House.
Moved, That the Bill be now read 2ª.—(Lord Meston.)
3.10 p.m.
LORD MERRIMAN: My Lords, as I am likely to become somewhat deeply involved in the problems raised by this Bill, I think I ought to say a word or two about it. I should like to begin by expressing my admiration for the full and scholarly way in which the Royal Commission dealt with this rather thorny and difficult problem. If rumour speaks truly, the noble and learned Lord, Lord Keith of Avonholm, had as much to do with it as anybody. I should also like to express my admiration for the courage of the noble Lord, Lord Meston, in tackling this matter and introducing this Bill.
As has been said already, the Bill mainly follows the code which the Royal Commission set out as a synopsis of their recommendations. But the code itself was simply intended as what might be called the skeleton framework for a Bill, and I am very strongly advised that a good deal more elaboration and draftsmanship would be required before this Bill could be really made workable. I am particularly anxious not to appear in any way to be indulging in captious criticism and, if I call attention in the Bill to one or two omissions or departures from the code set out in the Report, it will only be by way of leading up to what I hope may be a constructive suggestion.
The first one to which I want to call attention is this. In Clause 1 of the Bill there is a proviso with regard to divorce in cases where the jurisdiction is, to put it shortly, founded merely on residence, and the qualification is that the personal rights of the spouses would give them similar rights in their own law. That is, quite bluntly, expressly intended by the Commission to be repeated in connection with nullity suits as well as with divorce, but that repetition does not appear on the face of the Bill.
Then Clause 3 (3) deals with cases of nullity otherwise than because of lack of formality—that is, cases of nullity where there is some serious defect. It is declared in the Commission's code that the
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marriage shall be declared null and void if it is invalid by the personal law of one or other of the parties. In other words, if either of them has a personal law which will not bring what is wanted, the decree cannot be pronounced; but to that there is a most important exception in the proviso. It is that
"a marriage which was celebrated elsewhere than in England or Scotland shall not be declared void if it is valid according to the law of the country in which the parties intended…to make their matrimonial home, and such intention has…been carried out."
That would obviously be a very important extension of the jurisdiction, and one which would help a great many people; yet it is omitted from the Bill. I ought to say that the reason for that particular extension is fully set out in a series of clauses in the Report, which are, I think, numbered 886 to 891.
Finally, with regard to a matter which the noble Lord, Lord Meston, specifically mentioned, the acquisition by a separated wife of a separate domicile, there is the proviso that, if she had been a single woman, the courts would have been likely to hold that she had an English domicile. That, again, has been omitted from the Bill. Those, so far as for the moment it is necessary to go, are all the omissions. On the other side, there are one or two points which have been added in the Bill and for which I can find no warranty in the Report. One is in Clause 4 (d), where jurisdiction in nullity is given solely on the ground that the marriage was celebrated in England. I know that there has been some judicial controversy about this question in times past, but, so far as I can see, this provision is completely outside any recommendation which the Royal Commission made. Another addition which I confess I cannot understand is in Clause 10, that, where the court is enjoined to recognise as valid any grounds of divorce which are recognised by the personal law of the parties, an exception is made in the case of a marriage celebrated in England. As I say, I am not pointing out these matters merely from the point of view of captious criticism, but to lead to the suggestion that it is essential that the Bill should be redrafted, as I think, from top to toe.
There is one other notable respect in which this Bill departs from the recommendations, and certainly from the inten-

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tions, of the Royal Commission. In Clause 12 (3) it is laid down that:
"This Act shall not extend to Scotland or Northern Ireland."
If there is one thing that is plain on the face of the recommendations of the Royal Commission, it is that their avowed object is to diminish and not to increase what the noble Lord, Lord Meston, has called "limping marriages", where a party is divorced in one country and is left married in the other. One prolific source of "limping marriages" is the traditional conflict between the strict application of the law of domicile, in its most rigid form, on which this country, with certain statutory exceptions to which the noble Lord, Lord Meston, referred, has insisted during the whole of the last hundred years.
On the other hand, there is the conception elsewhere that a divorce depends either on nationality or on residence, or on both. If the object is to try to produce some sort of uniformity over the world at large, surely, at any rate, the United Kingdom should be united in itself. I cannot imagine any way to create greater confusion than to pass separate legislation with regard to England, leaving Scotland and Northern Ireland out of it. Here, I am certainly not going to trespass on the peculiar jurisdiction and knowledge of my noble and learned friend Lord Keith of Avonholm, but I do not think that this particular defect would be remedied merely by taking the word "not" out of Clause 12 (3) and saying that the Bill "shall apply to Scotland and Northern Ireland." After all, in Scotland they have their own legal terminology, and I am quite confident that any draftsman would say that it would be necessary to have regard to that in covering the application of this Bill to Scotland.
The suggestion I should like to make about this Bill is this. I hope that your Lordships will give it a Second Reading—it certainly will have my voice. But having given some illustrations of the necessity for redrafting the whole Bill, I think that if the Lord Chancellor could arrange to place at the disposal of the promoter of the Bill the Parliamentary draftsman, with a view to complete redrafting de novo of a comprehensive Bill; and if the noble Lord, Lord Meston, when the time comes, would withdraw
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the present Bill, although it has obtained a Second Reading, and substitute the revised Bill, say in the next Session, the most desirable end which we all want would be attained in the simplest and best way.
3.20 p.m.
LORD KEITH OF AVONHOLM: My Lords, I personally welcome this Bill, first of all, as a constructive attempt, and I think for the first time, to secure by legislation a greater comity among nations in the recognition of divorces and annulments of marriage; and secondly, because it recognises important work done in this field by the Royal Commission on Marriage and Divorce. As has been said by both noble Lords who have spoken, there are too many limping marriages in the world to-day—cases where people are regarded as married or divorced id one country and as not married or not divorced in another. Even as between England and Scotland to-day, as the law stands it is possible, where the wife in a marriage has been resident in England and has secured a divorce in England, for that divorce to be not recognised in Scotland. Accordingly, one finds a couple divorced in England, who will not be regarded as divorced in Scotland.
This is a quite ridiculous position, but it is a position which can arise, as I see it, as the law stands to-day in Scotland; although perhaps the reverse would not apply if a divorce was obtained in Scotland in similar circumstances, and the question whether it was a valid divorce in England came to be considered. I think in England the English courts would probably say that it was a good divorce, but I am not at all satisfied that the reverse position holds in Scotland. Then again, a French woman who has resided in England for three years may obtain a divorce from her husband, a Frenchman, on the ground of insanity. But that divorce will not be recognised in France because France does not recognise divorce on the ground of insanity. Those are just examples of what are called "limping marriages." Many others may be adduced. I am not going to weary your Lordships by further illustrations; those are two illustrations of what may happen.
The Bill may not remove all such anomalies, but it goes a long way. Part I introduces certain rules as to when the

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English courts may exercise jurisdiction in the case of persons whom for the moment I will call foreigners (they may not be all foreigners; some may be English people not domiciled in England, but domiciled somewhere else) and may grant a divorce to them. But the great point about this—this is the point that was made and recommended by the Royal Commission—is that, where such a divorce is granted, regard shall be paid to the personal law of these foreigners; and divorce would not be granted by the English courts unless the law of England and the law of the person concerned would allow such a divorce to be granted. We hope that the introduction of such a basis of jurisdiction in this country would secure, or might be more likely to secure, recognition by other countries of divorces given in this country in such circumstances.
On the other hand, in Part II of the Bill a greater liberality in the recognition of divorces granted by other countries is introduced. For instance, if this Bill were to go through, the courts here would recognise divorces granted abroad on the ground or on the basis of the nationality of the parties to the divorce. As many of your Lordships know, at the present time a divorce granted abroad on the ground of nationality will not receive recognition by the courts of this country. That is one matter in regard to which Part II of the Bill introduces what, if it were to go through, would be, as I think, a valuable and important reform. For these reasons I would support the Second Reading of this Bill. I think it is sound in principle. It may be only a beginning, but it is at any rate a beginning.
I agree, however, with what my noble and learned friend, Lord Merriman, has said: that the Bill suffers from grave defects in draftsmanship and from certain omissions. In my opinion, it does not really go far enough, and if it goes to Committee I hope to see it considerably amended and improved. It certainly does not fully carry out the recommendations of the Royal Commission. Certain points have been indicated by my noble and learned friend on that matter. One of them was with regard to Clause 3 of the Bill. Subsection (3) of that clause is as follows:
"If the marriage is alleged to be void on a ground other than that of lack of formalities,
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such issue shall be determined in accordance with the personal law or laws of the parties at the time of the marriage."
In my view, that is a sound principle, but if carried out without any qualification it may lead to grave injustice.
I take the illustration of a Dane domiciled in Denmark who has married his divorced wife's sister. I will assume that the divorced wife's sister is an Englishwoman and is domiciled in England at the time of the marriage. As your Lordships are aware, under the present law it is not lawful for a man to carry through a marriage with his divorced wife's sister. But if the marriage that I am assuming were carried out in Denmark or in Paris, or probably in any other country in Europe, certainly in some cases it would be a perfectly lawful marriage; and if the parties thereafter, or at least the wife, without ever having put a foot in England again, went off to Denmark and lived and died there, the marriage would be regarded as a perfectly valid marriage. That would be the seat of the marriage and the children would be lawful children of the marriage. But if a question should arise with regard to the legitimacy of these children with a view to succession to some English estate, at the present time the English courts would have to hold that the children were illegitimate and were deprived of their succession as lawful children.
It was from that point of view that there was introduced by the Royal Commission a qualification upon this general rule which my noble and learned friend who preceded me has read but which I should like to read again. It is in paragraph 891 of the Report of the Royal Commission and is as follows:—
"We recommend, therefore, that where a marriage is alleged to be void on a ground other than that of lack of formalities, that issue should be determined in accordance with the personal law or laws of the parties at the time of the marriage"
That is what the Bill says as at present drafted. Then there follows in the Report this proviso:
"provided that a marriage which was celebrated elsewhere than in England or Scotland should not be declared void if it is valid according to the law of the country in which the parties intended at the time of the marriage to make their matrimonial home and such intention has in fact been carried out."
That is a very important qualification upon the terms of Clause 3 (3), and is a

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proviso which I should certainly hope, and would strongly move, would be added to the Bill if it receives a Second Reading and goes to Committee. There is a similar omission on slightly different lines from Clause 4 of the Bill. My noble and learned friend has already referred to that, and I do not propose to go over the point again.
There are many other points of omission. I would refer, in particular, to the reference in Part II of the Bill to oversea decrees. That does not cover Scotland, but, so far as I can see, the operative parts of the Bill would cover Scotland. I entirely endorse what my noble and learned friend Lord Merriman has said: that it would be really quite absurd to have a Bill of this kind if there were not at any rate a corresponding Bill on identical lines for Scotland, or an omnibus Bill which included England, Scotland and Northern Ireland. There is, and can be, no difference in the principles to be applied as between these countries. There are no peculiarities of Scots law which would preclude Scotland from being brought into a code such as is envisaged in this Bill; and in my opinion it would be an absolutely essential requirement that Scotland should in some way be brought into a code such as is proposed by this Bill.
There are other clauses of the Bill which suffer from serious defects. Clause 11, for instance, is not really intelligible to me—but I pass over these matters. There are certain recommendations of the Royal Commission which have not been included—recommendations, for instance, in matters of evidence, in facilitating the admission of evidence in cases of divorce; and there is a recommendation which I think is rather important in the Lord Chancellor's Private International Law Committee which was set up and which dealt with the rules to be applied in the ascertainment of domicile. I believe that these also should be included in a Bill of this kind. I do not propose, however, to take up your Lordships' time on these matters at this stage: they can be dealt with on Committee. As at present advised, however, I should be prepared to support a Second Reading of this Bill as a Bill that is very necessary and based upon sound principles.
3.35 p.m.
LORD CHORLEY: My Lords, before the noble and learned Viscount gives us the view of Her Majesty's Government on this Bill I should like to add a few words in support of it and in support of what has been said by earlier speakers. Obviously the matter is one of substantial importance. The noble Lord, Lord Meston, has explained that the substantive law of divorce is in no way concerned in the terms of this Bill, but, of course, the jurisdiction which the English courts accept over petitions for divorce and nullity is often a matter of great importance, and, as a result of what I think is generally agreed as the narrow view which the English courts took when divorce was introduced in the Matrimonial Causes Act, 1857, of the way in which they would found their jurisdiction, a great deal of hardship has been caused over a number of years.
The English courts had had no experience of dealing with this kind of thing because before that time divorce had to go through Parliament on the basis of a legislative enactment. Corning to handle this new problem—as the noble Lord, Lord Meston, has in effect described—the English courts had to apply, in regard to all cases involving conflict of laws, the English concept of domicile which had been laid down in earlier cases of a quite different kind and which, introduced to this subject and applied in the rather rigid way in which it has been applied over the last century, has undoubtedly led to great hardship, as I believe everybody agrees.
That appeared clearly from the evidence given before the Royal Commission, and as a result the Royal Commission made these definite proposals—proposals directed to bringing the English procedure in regard to divorce and nullity cases more into line with that which has been followed in almost all other civilised countries; and the object of this Bill, which is a very important one, is really to bring our procedural system into line with that of other countries. It seems to me and to many other people that it is high time that this was done, and I hope, therefore, that Her Majesty's Government will be able to say that they recommend your Lordships to give this Bill a Second Reading. At the same time, however, I find myself very thoroughly in support of what has been said by the noble and

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learned Lords, the President of the Divorce Court and Lord Keith of Avonholm, who have given so much thought to this matter.
There are parts of this Bill which I, as (I hope) an ordinarily competent lawyer, find it exceedingly difficult to understand. Clause 10, which has been referred to, seems to me to be doing not what it was explained by the noble Lord, Lord Meston, it should do—dealing with Mohammedan and Jewish marriages—but going far beyond that so as to cancel out what is provided in an earlier part of the Bill; and similar criticisms which have been advanced by noble and learned Lords seem full of weight. It would be a pity if this really important topic were not handled by an expert draftsman. The noble Lord, Lord Meston, himself referred to the fact that on a number of points in the Bill he himself felt that the draftsmanship was far from satisfactory. I should like to add my voice to those of the noble and learned Lords in saying that while it is to be hoped that Her Majesty's Government will accept the principle of this Bill, it is hoped at the same time that they will lend the services of one of their expert draftsmen in order that in the Committee stage the Bill may be properly handled and a very respectable piece of legislation may go on to the Statute Book.
3.38 p.m.
EARL JOWITT: My Lords, before the noble and learned Viscount on the Woolsack speaks, may I make this suggestion? I take it, subject to what he may say, that we shall give this Bill a Second Reading; but we shall not, of course, commit it to-day. I believe I am right in my recollection that it is open to the House to commit a Bill to a Select Committee. It seems to me that the matters involved in this Bill are so technical and difficult that it might be convenient not to settle it to-day but to consider that procedure in order that noble Lords who have the vast experience of the two noble and learned Lords sitting on the Cross-Benches to-day and noble Lords in a similar kind of position may have a chance of considering the Bill. Then, of course, subject to what they say, the Bill would go through in the ordinary way. I do not expect an answer now, but I thought it would not be out of place if I pointed out that it is open,
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even though this is a Public Bill, to adopt that particular procedure with regard to a measure so highly complicated and technical as this one.
3.40 p.m.
THE LORD CHANCELLOR: My Lords, my first duty is to apologise to my noble friend Lord Meston for not being here for the first few sentences of his speech. I hope that he will forgive me. I had another public duty, and I got here as soon as I could. I think I heard most of what he had to say. I wish to make clear that this Bill, in the opinion of the Government, and, of course, of myself, deals with a most important problem, and I repeat the congratulations that have already been tendered to my noble friend Lord Meston for having prepared the Bill and raised the problem in your Lordships' House.
The Bill is intended to give effect with some modifications, which have been mentioned, and to which I will return, to the recommendations made by the Royal Commission on Marriage and Divorce in Part XII of their Report about the problems of private international law involved in ascertaining the basis on which the courts should assume jurisdiction in matrimonial causes and in giving recognition to foreign decrees. I respectfully agree with my noble and learned friend Lord Merriman that the recommendations of the Royal Commission are set out in a most admirable and scholarly way. But there are nearly a hundred paragraphs and they require (I am sure Lord Meston will agree) most careful consideration and reconsideration before they can be put into a legislative form, though the Royal Commission were good enough to frame a draft code which appears in Appendix IV at page 394 of the Report. That is, as it is bound to be, rather a skeleton matter which, again, requires consideration before an ultimate form can be found. But that there is a problem to be dealt with is, in my view, beyond any doubt and dispute, and if I may just put it shortly to your Lordships it may be some advantage to those who want to consider it further.
So far as the basis of jurisdiction recognised by the English and Scottish courts is concerned, the old principle which in divorce cases required the petitioner to be domiciled in this country at the commencement of the proceedings has now

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to some extent been departed from, particularly by the alteration made in 1949 which enabled a woman ordinarily resident for three years in this country to present a petition notwithstanding that her husband was domiciled elsewhere outside the United Kingdom. While this was a beneficial provision so far as women resident in this country were concerned, objection has been taken to it on the ground that it tends to increase the number of "limping marriages"—that, as your Lordships have heard, means marriages which are recognised in one country though dissolved in another. Moreover, the fact that the Matrimonial Causes Act contains no provision for the recognition of foreign divorce decrees is another factor tending towards the creation of limping marriages, because courts in this country and in Scotland have hitherto broadly refused to recognise decrees not granted, or not recognised as valid, by the courts of the country of domicile. I agree with Lord Meston as to the importance of the Travers v. Holley case. The Scottish courts have not, so far as I am aware, taken a similar view.
May I put it this way—I apologise to my noble and learned friend Lord Keith of Avonholm for summarising one hundred paragraphs in a very few words. The main effect of the Royal Commission's recommendations can be briefly summarised by saying that the Commission thought that in deciding whether or not to grant a decree the courts in this country should have greater regard to the personal law of the parties concerned, that being either the law of the country of domicile or of the country of nationality, as the case may be. It is suggested that the court should grant a decree only on grounds regarded as sufficient not only by the law of England or Scotland, but also by the parties' personal law. That is, as I understand it, what is stated in paragraphs 828 to 831 of the Report. If this were done there would be no objection to the court's assuming jurisdiction in any case in which either, first of all, the petitioner is in England at the commencement of the proceedings and the place where the parties to the marriage last resided together was England; or, secondly, the parties are both resident in England at the commencement of the proceedings. This is, in substance, the effect of Clause 1 of the Bill.
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As your Lordships have heard to-day from my two noble and learned friends—and Lord Chorley, I think, agreed—while Lord Meston's Bill attempts to give effect to part of the recommendations of the Royal Commission, in so doing it raises a number of difficulties. I agree with my noble and learned friend Lord Merriman, that the most important of these, perhaps, is that the Bill is limited to England, but it is clear that any alteration on the basis of the court's jurisdiction and the grounds on which foreign decrees are to be recognised should also apply to Scotland as well as to Northern Ireland. Let me hasten to say with regard to Northern Ireland that I think the procedure should be that we should enable the Northern Ireland Parliament to legislate on the subject, as was done in a similar context in 1949.
Apart from that, there are a number of other points of substance on which the Bill departs from the recommendations of the Royal Commission, where again, in my view, the recommendations of the Royal Commission are to be preferred. My noble and learned friends have given examples of this, and I do not think it would be a profitable use of your Lordships' time if I were to repeat and complete the list. Your Lordships have heard enough to realise that there are important points which, in my view, must be considered.
That brings me to the matter of what we should do. I agree with everyone who has spoken that we ought to give a Second Reading to the Bill. As I have said, I think that there are two broad aspects where it must be reconsidered—first, that of bringing the United Kingdom into line; and, secondly, the various points where it would have been better, I believe, to adhere closely to the recommendations of the Commission. I think that the Bill requires careful examination. The method I had in mind—and I would say to the noble and learned Earl, Lord Jowitt, that this does not exclude consideration of his suggestion—is that your Lordships might think it profitable to have a considerable period before Committee stage, because part of the value of the noble Lord's Bill is that it brings this subject into public discussion and thereby collects views which might not otherwise be expressed. I thought that on

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Committee stage we might carefully consider the problems, some of which have been adumbrated by noble Lords and myself to-day. I want your Lordships to understand that I am anxious to give any help I can to my noble friend Lord Meston in improving the Bill.
When we have discussed it, I think that we should then be in a position to make up our minds whether the Bill, at this stage in the Session, and knowing that there is another place, would be the best instrument for getting these reforms into operation, or whether the noble Lord might then consider whether he would redraft the Bill and introduce a new measure in the next Session, which, in the ordinary way, would start in November of this year. Of course, as noble Lords who have been Ministers will understand, I cannot give at once the guarantee of the assistance of Parliamentary counsel, but I want your Lordships to know that I am most sympathetic and anxious to help in this matter and I will put it to my colleagues in that way.
I think that by this method we might at the beginning of next Session get a Bill which would command general assent in your Lordships' House and which would meet all the points which have been made from every part of the House to-day. I want to say again that this suggestion does not mean that my noble friend Lord Meston has conducted an unprofitable exercise in introducing this Bill. We are really grateful to him for doing it. I believe that we can examine this matter profitably as well as carefully, and eventually in the next Session the noble Lord may be able to produce a Bill which will command general assent. I hope that your Lordships will consider what I have said, give the Bill a Second Reading, and allow for delay before the Committee stage; and in the meantime I will consider what the noble and learned Earl, Lord Jowitt, has said. At the moment, I am disposed to think that it is not necessary to hold the matter up so long as he suggests. May I put it this way for his consideration? When we have seen what comes out of the Committee stage, let us then have a look at the proposal he has put forward. I hope that I have grasped and expressed the sense of your Lordships' House. I am
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sure that I speak for all noble Lords in expressing our gratitude to my noble friend Lord Meston for the service he has done.
3.54 p.m.
LORD MESTON: My Lords, I should like to thank the noble and learned Viscount the Lord Chancellor very much for the kind and friendly remarks which he has made about the Bill and about my humble effort in this direction. I should like to thank also all noble Lords, of enormous experience, who have spoken in support of the Second Reading of the Bill. I will not take up any more time, but will say that I respectfully agree with everything that has been said by the noble and learned Viscount about future procedure. I am prepared to fall into line and do anything which he regards as suitable in the circumstances. I should like to thank the Government and your Lordships for giving this rather technical subject such a fair and patient hearing, and I now leave the Bill in your Lordships' hands.
On Question, Bill read 2ª, and committed to a Committee of the Whole House.

SMOKING AND LUNG CANCER
3.55 p.m.
THE MINISTER OF STATE, SCOTTISH OFFICE (LORD STRATHCLYDE): My Lords, I beg leave of the House to interrupt our Business to enable me to make a statement on the subject of lung cancer and smoking similar to that which is now being made in another place.
In their Annual Report, and more particularly in their special report on tobacco smoking and cancer of the lung (which will be available in the Printed Paper Office at 5 o'clock this evening), the Medical Research Council have advised the Government that the most reasonable interpretation of the very great increase in deaths from lung cancer in males during the past twenty-five years is that a major part of it is caused by smoking tobacco, particularly heavy cigarette smoking. The Council point to the evidence derived from investigations in many countries in support of this conclusion, in particular to identification of several carcinogenic substances in tobacco smoke.

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The Government feel that it is right to ensure that this latest authoritative opinion is brought effectively to public notice, so that everyone may know the risks involved in smoking. The Government consider that these facts should be made known to all those with responsibility for health education. The Minister of Education included in his recently published Handbook for Teachers on Health Education advice about the dangers of smoking and he is circulating copies of this statement to local education authorities and education authorities generally. Corresponding action will be taken by the Scottish Education Department in Scotland. The Government now propose to bring these views to the notice of the local health authorities who are concerned under Statute in the prevention of illness and who are responsible for health education as a means of prevention. Local health authorities will be asked to take appropriate steps to inform the general public and in this task they will have the assistance of the Central and Scottish Councils for Health Education. Once the risks are known, everyone who smokes will have to measure them and make up his or her own mind, and must be relied upon as a responsible person to act as seems best.
The Medical Research Council are at present supporting an extensive programme of work designed to discover the way in which tobacco smoke exerts its effect and the relative importance of other factors, such as atmospheric pollution, which may also play a part in the causation of lung cancer. The recent expansion of this programme has been greatly assisted by a substantial grant made in 1954 by a leading group of tobacco manufacturers. On the advice of my right honourable friend the Minister of Health's predecessor, the present Minister of Labour, this sum was given to the Medical Research Council with complete discretion as to the choice of research projects to be supported and to the publication of results.
The work at present in progress consists largely of chemical and biological studies of the many different constituents of tobacco smoke and atmospheric pollution. In addition, surveys of the rôle of atmospheric pollution and of specific industrial hazards in the causation of the disease are being undertaken. Work along these lines is being supported in
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many centres in different parts of the country and the Council have also established as part of their own organisation three new research groups in Exeter, London and Sheffield, where long-term studies of different aspects of the problem are being carried out. Every opportunity will be taken by the Medical Research Council to pursue any promising new lines of research which may become apparent.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, we are obliged to the noble Lord for making a similar statement to that made on behalf of the Government in another place. No one can afford to underestimate the importance of the statement that has been made. Of course, the wording, as I look at it now (the noble Lord was kind enough to furnish me with a copy of the statement), wants careful examination before one draws any final conclusion. The Medical Research Council have apparently
"advised the Government that the most reasonable interpretation of the very great increase in deaths from lung cancer in males during the past twenty-five years is that a major part of it"—
those are important words—
"is caused by smoking tobacco, particularly heavy cigarette smoking."
I am always very doubtful about the word "reasonable" when it is included in a matter like this. There have been many arguments in the courts from time to time as to the proper interpretation to put on the word "reasonable". But the conclusion by the Medical Research Council that "a major part" of the increase has been due to tobacco smoking is a much more serious question.
It is apparent, too, that the steps the Government may quite properly be taking to see that this information is broadcast in educational circles, and the like, must have certain reactions. The first thought I have is for the workers in the tobacco industry. That is a large and important industry in the country in which a great deal of employment is given. Surely it is a matter for some consideration by the Government as to whether any steps can be taken to deal with any marked increase of redundancy that may become apparent in that industry. As to those who have large investments in the tobacco industry, I am afraid

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there would be no possibility of providing any adequate remedy for a reduction of their capital assets.
I hope your Lordships will not think it an impertinence if I say that I personally do not feel so alarmed about it as perhaps some people think I should. I am now seventy-two years of age. I have been smoking for fifty-eight years—I started very young. I have smoked a lot of cigarettes; I have smoked even more pipe tobacco; and when opportunity has afforded I have smoked plenty of cigars. I imagine that I should be described by most medical officers as a very heavy smoker. I am a little concerned when I think of all the other contingent factors in the general life of man which may contribute at least as much, if not more in some cases, to the development of cancer, a disease about which we still know far too little for us to be confident of known and efficient remedies. But, as I say, for myself I am not greatly alarmed about it. On the other hand, if it is finally proved that there is a definite contribution to lung cancer by smoking, then I think the Government are quite right to circulate the information in the widest possible sense, and the Minister of Education (who has just come into the Chamber) has apparently already taken some steps in the matter—there will be no quarrel with that. In the meantime, I hope that some inquiries will be made by the Minister of Labour, who obviously was interested in this matter previously as Minister of Health, to see what kind of effect there might be in the way of redundancy in the tobacco industry and to make such provisions as can be thought of.
LORD STRATHCLYDE: My Lords, I can assure the noble Viscount that the Minister of Labour will watch the situation most carefully.

MATRIMONIAL PROCEEDINGS (MAGISTRATES' COURTS) BILL [H.L.]
4.6 p.m.
THE LORD CHANCELLOR: My Lords, I beg leave to introduce a Bill to consolidate the Summary Jurisdiction (Separation and Maintenance) Acts, 1895 to 1949, and related enactments, with corrections and improvements made under the Consolidation of Enactments
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(Procedure) Act, 1949. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read 1ª.—(The Lord Chancellor.)
On Question, Bill read 1ª, and to be printed.

HOUSING AND TOWN DEVELOPMENT (SCOTLAND) BILL
4.7 p.m.
Order of the Day for the Second Reading read.
LORD STRATHCLYDE: My Lords, I rise to move the Second Reading of this Bill. It is a Bill of very definite importance to Scotland, and I commend it to your Lordships. The Bill is in two main parts. The first, which gives effect to revised rates of subsidy for new houses built by local authorities, is designed to put housing finance in Scotland on a more rational basis. The second breaks new ground and sets out a code of provisions, chiefly relating to matters of administrative machinery, for dealing with the overspill problem. I shall say something about each of these two parts of the Bill in turn. A subsidiary part of the Bill proposes a number of miscellaneous amendments of the Housing (Scotland) Acts, but I do not think that at this stage I need detain your Lordships with them, although I shall be happy to answer any questions that may be raised.
Your Lordships will remember that the Housing Subsidies Act, 1956, reduced the subsidies payable for houses built by local authorities in England and Wales; and since that Act was passed the general needs subsidy has been abolished, except in the case of one-bedroom houses. The new subsidy provisions contained in Part I of the Bill now before us are framed on a basis which has full regard to the different circumstances in Scotland and the requirements of the housing problem that yet remains, not least the urgent problem of overspill.
The Bill makes provision for a basic subsidy of £24 a house for sixty years. This will be available for all houses built to meet approved needs. By this I mean houses provided to rehouse people living in unfit or overcrowded houses, or to house those who are sharing houses and need homes of their own, and those who

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need houses on grounds of ill-health or disability. And my right honourable friend the Secretary of State is, of course prepared to consider any other category of genuine housing need that may be put to him by a local authority.
Under the Bill higher rates of subsidy will be payable for special needs, particularly a subsidy of £42 a year for sixty years for houses provided under overspill agreements and of £30 a year for houses provided, under approved arrangements, to meet the urgent needs of incoming industry. There is also a special subsidy for houses in high blocks of flats, calculated on the footing that the Exchequer will carry two-thirds of the additional tender cost over that of ordinary houses. The existing additional subsidies will be continued for houses built by local authorities in remote areas or for the agricultural population.
The new subsidy structure was framed in the light of the facts given in the Report of the Working Party on Housing Subsidies in Scotland, published at the end of July, 1956, the Working Party, consisting of representative officials appointed by my right honourable friend, so far as the Scottish Office was concerned, and by the three local authority associations. In determining the new subsidies, we have been guided by two straightforward principles: first, that subsidies should not be given to those who do not need them: and, secondly, that no one in genuine need of a house should be asked to pay more rent than he can reasonably afford. With these two considerations in mind—and against the background of the facts brought out in the Report of the Working Party, such as that the average rent of a local authority house in Scotland varied between £11 and £18 a year, while the average earner's income was £450—we came to the conclusion that Exchequer subsidies for housing should no longer be related to the cost of building a new house, but that any subsidy received by local authorities in future should be regarded as a further contribution towards the total pool of Exchequer subsidies at their disposal.
The fact is that the large bulk of local authority houses were built when costs were much lower than they are to-day, and the annual charges which the local authorities have to meet on these houses
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are small in comparison with the annual charges on new houses. On the other hand, there has been a very material rise in wages and earnings, as also in the majority of other sources of income, and it is scarcely reasonable that the tenant of a pre-war local authority house should continue to pay the, comparatively, very low rent that was thought appropriate before the war.
Many local authorities have, in fact, been charging extremely low rents, and balancing their housing accounts at the expense of the ratepayers as a whole by requiring a heavy contribution from the rates. I think it right that I should give to your Lordships some examples in that connection In the county of Lanark, the average local authority rent is £8 15s. 7d. per annum, and the charge the ratepayers have to meet is £25 5s. 7d. In the county of Ayr the rent is £10 1s. 10d., and the charge which the ratepayers have to bear is £24 19s. 0d. In Stirling county the average rent is £8 13s. 10d. and the amount the ratepayers have to find, £35 16s. 10d. Even in the City of Glasgow the rent charged is £15 5s. 0d., as against £21 5s. 0d. which the ratepayers are called upon to contribute towards the economic rent.
Under the Bill local authorities will no longer be required to pay a fixed amount per house from the rates, since the statutory rate contribution is abolished by Clause 5. This means that they will be free to decide for themselves how much of the total of their housing expenditure is to be met by the tenants by way of rent and how much by the ratepayers by way of the housing rate.
The new rates of subsidy are framed on the assumption that the net rents of local authority houses in Scotland will rise over the next few years to an average of £39 a year, or 15s. a week, on all existing houses. This hardly seems unreasonable when one considers that the average level of earnings was £450 per year in 1956, as brought out in the Working Party's Report. And it has to be remembered that there are two or more earners in at least two houses out of five. We are not suggesting for one minute that the individual tenant must pay more rent than he can reasonably afford. What we do say is that there must be some limit to the burden falling on the taxpayer and the ratepayer, and

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that this can be brought about by a more rational rent policy. There are, of course, families with incomes under the average, but hardship in any individual case can be avoided by a scheme of rent rebates.
I put it to your Lordships that, given a fair rent policy, including provision for rent rebates, the subsidies provided in the Bill will enable most local authorities that are still faced with an urgent housing task to go ahead, at least until 1961, without financial difficulty. We believe that there should be no falling off in the output of houses in these districts, and it remains the Government's policy that the local authorities concerned should press on with their programmes as quickly as possible. It may be that some local authorities will be able to show that they are faced with an urgent housing problem which they are not in a financial position to tackle unaided. In appropriate cases my right honourable friend will be ready to consider asking the Scottish Special Housing Association, within the limits of its annual programme, to come to the aid of these authorities by building a number of houses without any charge on the local rates.
I acknowledge that the provisions of Part I of the Bill have given rise to many protests, but this is to be expected when subsidy reductions are proposed. Many of the protests that have been made failed to fake account of the fact that the local authorities have at their disposal a large pool of Exchequer subsidies on their existing houses built at a time when costs and interest rates were much lower than they are at present. It is our conviction that the new subsidy proposals will put housing finance in Scotland on a sounder and healthier footing.
The main problem now dominating the field of Scottish housing is what has come to be known as "overspill". This is recognised in Part I of the Bill by the provision of a specially favourable rate of housing subsidy. Now I turn to Part II of the Bill. Part II is wholly devoted to the creation of new means for dealing with the problem, which arises principally because, as Glasgow's crowded central areas are cleared and redeveloped with houses up to modern standards, and with reasonable density of population, it will ultimately be necessary to provide homes outside the city boundaries for 300,000 people.
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The congestion in the City of Glasgow is unparalleled anywhere in this country and, I believe, anywhere in the Western World. There are some 700,000 people living within the three square miles in the centre of the City. The highest densities, where there are up to 700 people per acre over an area of eighteen acres, are generally accompanied by the lowest housing standards, and in the long run the only solution is to clear away the old houses, and the factories with which they are inextricably mixed up, and to build modern houses in their place—which can rarely provide accommodation for anything like the same total number of people; and in any event no reasonable person would desire that it should.
My right honourable friend the Secretary of State has approved the Gorbals redevelopment plan as a first step in this process, and the Corporation have a number of other schemes at various stages of preparation. This is a truly massive task and we wish them success in carrying it out. Altogether, the Corporation have built over 40,000 houses since the war, most of them in large new schemes on the outer fringes of the city. But in about two years or so virtually all the possible housing sites will have been exhausted. Homes will have to be found outside the city not only for the families that, even now, are still without homes of their own, but also for the families who must be displaced by redevelopment. The two new towns of East Kilbride and Cumbernauld will make a substantial contribution. Already, almost 5,000 houses have been built at East Kilbride, and about half of these have been let to Glasgow families. Among the recent tenancies the proportion is higher, and we hope that it will continue to rise. At Cumbernauld building is just about to start—indeed, my right honourable friend is to cut the first sod in the housing scheme at Cumbernauld to-morrow morning. It is intended that 14,000 of the 15,000 houses to be built there should go to Glasgow families.
Another new town to assist Glasgow at the right time is not ruled out, but the Government are convinced that the best way to supplement the efforts of the existing new towns at present is by enabling other local authorities to lend a hand. Part II of the Bill provides the framework necessary to enable fruitful

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partnerships to be created between Glasgow and other authorities on these lines. The Bill contemplates that an "exporting authority" (that is, an authority with a recognised overspill problem) will arrange for meeting their needs in three ways. One way is for the exporting authority to use the powers they already possess under the Housing Acts to build houses outside their district. The overspill Exchequer housing subsidy of £42 a year would be forthcoming for a development of this kind which was of substantial size and was clearly detached from the built-up district of the exporting authority. But operations of this kind by one authority in the district of another are not easy, and we should be unwise to expect too much to be done in this way.
Another way of meeting overspill requirements is for an exporting authority to enter into an overspill agreement with a receiving authority, under which the receiving authority would undertake to provide a specified number of houses to be let to people coming from the exporting area. The essential features of overspill agreements are dealt with, as your Lordships will see, in Clause 9. The receiving authority must get a payment for each house of at least £14 a year for at least ten years from the exporting authority, and this is in addition to the Exchequer subsidy of £42 a year. The tenants of the houses would have to be acceptable to both the receiving and the exporting authority—to the former, as being likely to fit into the new community in terms of qualifications for the right kind of employment, and in other respects; and to the latter, as being persons whose tenancy of the new houses will contribute to solving the overspill problem. Co-operation between the two authorities will be essential, with a degree of give and take on both sides.
A third method of providing houses for overspill is through the medium of the Scottish Special Housing Association. The Government intend to give a prominent place to overspill needs in determining where the Association should build in carrying out their future programmes. Receiving areas for overspill building by the Association will be selected in the light of the financial situation of the receiving authorities concerned, but it is not intended that the Association should
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take over the whole job of overspill building in any particular area. It will accordingly be a standard condition that the receiving authority should build a number of overspill houses at least equal to the number provided by the Association. Houses provided by the Association in this way will form a valuable bonus of new rateable valuation to assist the receiving authority in meeting the additional expenditure incurred by them in undertaking overspill development.
While housing is the primary purpose of overspill development, it is by no means the only essential. Where an overspill development comprises any substantial number of houses, whether they are provided by a receiving authority, the exporting authority, the Scottish Special Housing Association or a combination of these agencies, special arrangements may be necessary in advance of buildings for the basic services of water supply and sewerage, and special provision will have to be made in the course of development for the setting aside of land for shops, factories and other places of employment, schools, recreation grounds and other social requirements.
To this end, Clause 10 provides a procedure by way of a town development scheme. This type of scheme, which will be prepared by the receiving authority in consultation with the local planning authority—if that is a different body—and will not become effective until approved by the Secretary of State, has three main purposes. In the first place, it rearranges the powers and duties of the local authorities concerned so as to enable houses, water supply and sewerage services to be provided as efficiently and economically as possible. Secondly, it serves as a blueprint for the whole development, in that it indicates the areas of land proposed for the various kinds of non-housing development which will have to be provided in order to round off the community. But while it will indicate that particular parts of the area are proposed for schools, recreation grounds and so on, it cannot in itself oblige the authority responsible for any of these services to carry out the proposed development. The position of these authorities will continue to be governed by the appropriate existing statutes.
The third purpose of a town development scheme is to provide a means by

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which Exchequer grant can be made available in respect of certain kinds of expenditure incurred by a receiving authority. The acquisition of land and the installation of main water supply and sewerage services represent the principal services on which the main expenditure is expenditure of a capital nature which has to be incurred in advance of the erection of overspill houses and the receipt of rates from these houses. Accordingly, these are the items which Clause 14 of the Bill selects for the purpose of Exchequer grant.
The basis of grant will be laid down in regulations to be made by the Secretary of State after consultation with the local authority association. The awkward period for a receiving authority is the first few years, when there is little new income in the shape of rates levied on new valuation created in the course of the development. Accordingly, we propose to adjust the grant in such a way that the maximum relief is given at this stage and to do this by drawing up a kind of income and expenditure account year by year for each town development scheme. The intention is that the Exchequer should contribute three-quarters of the resulting deficit year by year leaving the remaining one-quarter to be met by the receiving authority, less any contribution the exporting authority have bound themselves to make under the overspill agreement.
There remains the problem of securing that there is enough employment near at hand for the overspill population. I am sure that your Lordships will agree that this problem is fundamental and that the degree of success we achieve in the whole operation will be in large measure dependent on the attraction of suitable industry to the reception areas. This is not something which can be achieved by legislation, and, although the Bill contains certain important provisions to which I shall refer in a moment, success will depend on the creation of a flexible administrative procedure which will enable full and timely co-operation between the interested Government Departments, the exporting authority, the receiving authorities and the interested industrial firms.
The Bill helps in three ways. The first is Clause 17, which relates to an exporting authority who have incurred an
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obligation in connection with the rehousing of industry displaced in the course of redevelopment. This clause will enable the exporting authority to discharge that obligation by arranging for the displaced industry to be offered facilities within or near the general neighbourhood of an overspill development. Then as regards the provision of industrial sites, any receiving authority—including a small burgh—operating a town development scheme will have power to acquire and develop land for industry. Any charges falling upon the receiving authority from expenditure which they incur on the acquisition and the preliminary development of industrial sites will be one of the elements attracting grant under Clause 14.
Then, Clause 25 enables the receiving authority to construct factory premises for letting or sale in all suitable cases, and not, as at present, only outside the scheduled Development Areas. The important thing to remember here is that the overspill process will be closely linked with the redevelopment carried out in the City of Glasgow. We believe that priority of consideration in the dispersal of industry should be given to those industrial firms whose premises will be displaced by redevelopment, and who will in any case have to secure new sites and new buildings. Such firms will receive compensation for the loss of their existing premises, which will, in practice, represent the present market value of these premises plus compensation for disturbance.
While one must be cautious about generalisations in matters of this kind, the conclusion reached after careful interdepartmental study and consultation with the Inland Revenue Valuation Department is that the compensation payable for displacement will, in a considerable proportion of cases, go a long way to provide the funds needed for re-establishment. Not all of the displaced firms can operate successfully at a distance from the heavy industries established on Clydeside, but we believe that a sufficient number could do so.
There will be attractions in moving to areas where good living conditions are being provided for workers formerly living in Glasgow; and to assist this process the Government have authorised the Corporation to spend £250,000 a year on the

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advance purchase of industrial premises which will be affected by redevelopment, where the firms concerned are proposing to move to an overspill reception area or a new town. The Corporation will get an Exchequer grant of 50 per cent. on the annual deficit arising from loan charges on this expenditure under the existing Planning Acts. As redevelopment goes ahead in Glasgow there will be a steady flow of acquisition of industrial premises. Already since the £250,000 offer was made in February two of the largest firms in the Gorbals area, employing together over 600 workers, have asked the Corporation to purchase their premises now in order to allow them to get ahead with their plans for resettlement.
The procedure we envisage is that, on being approached by such firms, the Corporation will arrange discussions with them and with the Scottish Controller of the Board of Trade. The Controller will have at his disposal all the information about sites, services and factory building costs in the new towns and the other receiving areas where overspill housing is being planned. He will be able to recommend the firms to any one or other of the areas and to discuss their requirements with the New Town Development Corporation or the receiving authority concerned.
When the firm has selected an area or a site it will either itself build with the compensation it gets for its old premises or with other capital procured from private sources, or it may ask the New Town Development Corporation or local receiving authority to help. The help which the Development Corporation or receiving authority can give may range from the offer of a factory site to the actual construction of the factory either for leasing to the firm or for disposal on amortisation terms.
The Board of Trade are prepared to arrange for Scottish Industrial Estates Limited to put their knowledge and experience at the service of receiving authorities contemplating the promotion of industrial development as part of their contribution to the relief of Glasgow's overspill. This arrangement should be of particular value to the smaller authorities who may feel the need for a guide, philosopher and friend in their initial ventures into what will be for most of
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them an entirely new field. The part which Scottish Industrial Estates will be able to play in any particular case will depend on the scale and character of the industrial development required as well as on the circumstances of the receiving authority, and any outlay incurred by Scottish Industrial Estates will be defrayed by the authority. The main task of Scottish Industrial Estates will, of course, still be to cater for new industries coming into the Scottish Development Area to relieve unemployment, and this must remain their primary and pre-dominant function.
We cannot hope to solve the overspill problem in one generation, and its solution cannot be secured by the Secretary of State alone or by the exporting authority or by the receiving authorities. Full and frank co-operation on all sides will be needed. The present Bill makes such co-operation practicable, and I, personally, am confident that with a continuation on all sides of the good will which has already been shown, conditions will soon be created in which steady progress can be made. Anyone who is as closely associated with the City of Glasgow as myself must feel strongly as to the need for the Bill and the importance of making it work, and it is with all sincerity that I commend it to your Lordships. I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read 2ª.—(Lord Strathclyde.)
4.38 p.m.
LORD MATHERS: My Lords, when the noble Lord opposite brings a Bill before this House he always makes a clear exposition of its terms. I think I can say on behalf of all of us that he has excelled himself to-day in the way in which he has presented this Bill. There are difficulties about it, but certainly he has explained clearly what the Bill is intended to carry into effect.
The Bill is complicated and, as we saw from the discussions in another place, it seems to be admitted to be experimental. Indeed, I think that could be read into part of what the noble Lord said in the speech that he has just delivered. This Bill was the subject of keen debate in another place and there was some uncertainty, even on the part of Government supporters, about its provisions. I believe that there is justification for the

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feeling of some doubt about how the arrangements, financial and otherwise, embodied in the Bill will work out in practice. Part I of the Bill makes drastic changes in the rates of Exchequer subsidies to local authorities payable after August 1 of this year. No doubt there is justification for examining the subsidy position, but to do justice and, at the same time, prevent hardship upon individuals would require practically an individual means test, a principle which would be repugnant to Her Majesty's Government and local authorities alike.
Whatever different local authorities may think of the provisions as set out in the Bill, and as they have no doubt been explained to representatives by Government spokesmen, I feel that there must arise differences of opinion in the working out of the arrangements as between authority and authority. The case of the City of Glasgow seems particularly odd. Under the overspill arrangements, that great industrial capital of Scotland is to lose ratepayers and industry in the working out of the Government's plans, yet Glasgow is called upon to pay £14 per house to each authority to which her citizens are transferred as industrial workers. This comes at a time when Glasgow is still struggling to meet her continuing need for houses—a need which not only continues but, I understand, even increases. But I should not be talking about Glasgow: that I should leave to my noble friend Lord Greenhill, who has so much more knowledge and experience of that great City.
It appears that the Bill is not designed to help in non-development areas. Surely some arrangement of that kind should be made as a matter of course for the development of industry in areas to which overspill population is to be transferred. I believe that experience will prove the wisdom of what has been urged by my right honourable and honourable friends in another place in this regard and that Her Majesty's Government may have cause to regret their failure to accept some of the advice proffered to Ministers. As I read this Bill, there is a kind of artificial atmosphere about it. It is not as if the conditions of its application are already to any extent in existence. Fresh conditions are apparently to be created
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and then dealt with. How else can we describe the intention to provide factories which it is hoped will be taken up by industrialists who will require workers to be transferred from the old city areas to new districts where it is hoped work will become available? Many personal problems will arise in such transfers. It will require skilful planning to coordinate the work and the supply of workers, and I do not envy Her Majesty's Government their task in achieving this desirable end.
It has been clearly demonstrated that Her Majesty's Government are determined to pursue the course mapped out by the Bill and it would be churlish of me to predict failure. Certainly I have no wish to do so, for I believe that some good may come out of the Bill and I desire every ounce of that possibility to be secured. In any case, the responsibility is that of Her Majesty's Government and they are entitled to reap any reward the Bill may bring. On the other hand, in the event of the Bill proving unpopular, as well it may, who am I to worry about the fate that is in store for Her Majesty's Government when next they face the electorate? Believing opposition to be futile, I shall not impede the passage of the Bill in any way. It will receive a Second Reading and will become an Act of Parliament. We shall watch with interest to see how it works out in practice.
4.45 p.m.
THE EARL OF DUNDEE: My Lords, I am grateful to the noble Lord, the Minister of State, for his clear explanation of this Bill, whose progress in another place has, no doubt, been followed by most of your Lordships. The Bill is really three separate Bills, two of which are of major importance to Scotland, combined into one measure, but it has already been very exhaustively discussed by Scottish Members of another place, who seem to have pretty well exhausted themselves as well as the Bill in doing so, and I do not think it is necessary to add much to what has been said there.
The first part of the Bill deals with subsidies and consequently with rents, and this has given rise to a violent controversy in another place and in the country, but I propose to say nothing on that subject except this: all our Scottish

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housing legislation for the last forty years has resulted in anomalies of such extraordinary dimensions that they probably had to be straightened out sooner or later. One can go on disputing indefinitely how much of the cost of these subsidised municipal houses ought to be borne by the occupiers, how much by the occupiers of other houses, some of which may be under-rented and some fully rented, and how much by the housing pool which every local authority ought to have.
It is easy to find numerous examples of families earning very large incomes living in the most modern type of council house, paying an absurdly uneconomic rent, at the expense of other people who are earning very much less; and it is no doubt possible to find examples on the other side. But whoever may have to pay a bit more and whoever may have to pay a bit less, I do not think Part I of this Bill will have any adverse effect on housing progress in Scotland or on our endeavours to abolish slums and overcrowding; and it is upon that subject that I should like to say one or two words.
I think that the housing record in Scotland of the present Government is a good record. From the end of 1951 to the end of 1956 we have built 187,000 houses in Scotland. That is an average of about 38,000 a year, which is exactly double the average for the previous six years, from the end of the war until 1951, when the annual average was only 19,000; and it is 50 per cent. higher than the record which we achieved before the war, in 1938. In some parts of Scotland, though not in all parts, we are almost in sight of the time when there will be no more slums and no serious overcrowding. But we are not in sight of that goal—indeed, we are nowhere near it—in the City of Glasgow, and it is the special problem of Glasgow which Part II of this Bill is primarily intended to meet. The pre-war housing record of the Glasgow Town Council was utterly lamentable. In order to get rid of their slums and overcrowding in twenty years, the Glasgow Town Council would have needed, in the 1930s, to build at the rate of 10,000 houses a year; and had they built on the same scale as the most progressive housing authorities in Scotland in proportion to their population and rateable value, they would have built more than that. But the peak figure,
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which they reached in 1934, was only 4,000; and after 1934, when all other Scottish local authorities were increasing their programmes, Glasgow's figure fell to something between 2,000 and 3,000—an absolutely miserable figure which was hardly enough even for normal replacement, so that no real progress at all was made.
During the war no building, of course, was possible. After the war, Glasgow was faced with an astronomical deficiency in housing, and now, on the Second Reading of this Bill in another place, the Secretary of State for Scotland stated that he hoped Glasgow's present output of 5,000 houses a year would not be reduced. By this time, I should have thought that 5,000 houses was a good deal less than half what Glasgow ought to be building in order to keep pace with the rest of Scotland. But the problem is not only one of numbers, it is also one of space, and we are told in this Bill that there will soon be no more room for any more new houses in Glasgow and that 300,000 inhabitants of Glasgow are unable to be rehoused within the city at all, so that they will have to become emigrants. They are now officially described as "an overspill".
I hope that this estimate of 300,000 is not too low, but, having been concerned in one way or another with the Scottish housing problem for about twenty-seven years, I feel bound to say that I have never yet heard any official statement of the housing requirements in Scotland which did not prove to have greatly underestimated the true dimensions of the problem. However, let us take this official figure of 300,000 people who have to emigrate, who have to get themselves "spilt" out of Glasgow. How long is it going to take to do it? The new town of East Kilbride was started after the war in order to receive surplus population of Glasgow. Five thousand houses have been built there. Until this afternoon, my information was that only 1,500 of those had been occupied by families from Glasgow. But my noble friend Lord Strathclyde, in his speech just now, told us that half of them had been occupied by Glasgow emigrants. That would be 2,500, which is a little better, but, of course, not much out of 300,000.
I am sure that many of the receiving authorities will do their best to help. I

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was particularly glad to hear my noble friend say that half the houses would be built by the Scottish Special Housing Association, a most excellent body in the establishment of which Mr. Walter Elliot and the late Lord Clydesmuir played prominent parts. It is a body which has done fine work, but which has never been used by Scottish local authorities to anything like the extent to which it ought to have been used. But these receiving authorities have their own problems, and I am afraid they will not be keen to be "spilt on" to a really uncomfortable extent. I can hardly see as many as 300,000 people being received within a reasonable period of time.
There is also the question of moving the industries on which these people now depend for their livelihood. How long is all that going to take? I have nothing whatever to say against the provisions of Part II of the Bill; I entirely support them, and I hope that they will be applied very successfully. But it seems to me that we shall be fairly lucky if the Bill, as it stands now in Part II, succeeds in solving 20 per cent. of the problem within the next twenty years. We can, if we choose, resign ourselves to the perpetuation in Glasgow of some of the worst slums in Europe for the rest of our own lives. But if we do not choose to resign ourselves to this prospect, and if Glasgow cannot any longer expand outwards, the only alternative is that Glasgow should expand upwards in order to rehouse not, of course, the whole but at least some of these 300,000 people.
I am not a particular admirer of skyscrapers though they can be very imposing buildings. I should not, I think, particularly like to live in a skyscraper myself, though I do know a good many people who like living in them. But it is not a question between skyscrapers and cottages; I think it is a question between skyscrapers and slums. To live in a flat in the twentieth storey of some megalithic block of residential apartments may not be entirely in accord with all our conceptions of ideal family life, but surely it is better than living in a leaky and worm-eaten single room with a growing family of children, and with a mother-in-law as well, sharing a common lavatory with twenty or thirty other people at the head of the common stair. Surely it is better to live in a skyscraper than to live like
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that. And these conditions are going to continue for the rest of our lives unless something more is done than is contemplated at the present time. I know very well that the building of very large residential blocks of great altitude is extremely expensive. But is it not also going to be very expensive to scrap all the industries on which these 300,000 people depend and rebuild them again fifty or a hundred miles further away?
In the proceedings on this Bill in the other place, a week or two ago, the Secretary of State announced (I think my noble friend referred to it again just now) that authority had been given to Glasgow to spend £250,000 to acquire and demolish two small factories which employed 600 people. I suppose that 600 employed persons might represent a total population of about 1,000 persons including children. If it is going to cost £250,000 to destroy the livelihood of 1,000 people before it is reconstructed elsewhere, it will then cost £75 million to destroy the livelihood of 300,000 people before that livelihood is reconstructed elsewhere, and the reconstruction, of course, is going to cost a lot more. Would it not be better to spend some of this money on rehousing not all of these people but as many as you can where they are now, and not destroying the industries, which was done in Vienna before the war and has also been done in New York?
Clause 3 of this Bill provides that:
"In respect of any approved house which is a flat contained in a block of flats the major part of which, as determined by the Secretary of Slate, is of six or more storeys…"
the Secretary of State may give an additional grant consisting of two thirds of the additional cost over the normal cost of an ordinary house. I think that that is a very good provision, but I doubt if it is good enough to induce an authority like the Glasgow Town Council to go in for a really bold and imaginative policy of building the type of residential blocks of enormous size which are really required to meet this problem. And I wonder what the effect on our national finances would be if we were to give the whole of the additional cost instead of only two-thirds, and try to induce the Glasgow Town Council to go in for a really bold and imaginative policy in high building. I would not suggest that this should be done all over Scotland. Indeed, I do not think the question would arise

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in any other part of Scotland. But Part II of the Bill is especially designed to give special financial assistance to the special problem of Glasgow housing. It seems to me that in the long run this would not cost any more than the long and painful process of negotiating with all the receiving authorities and scrapping and removing all these numerous industries from one place to another.
In any political discussion on the housing problem it is usual for everybody to try to put the blame for the present state of affairs on to somebody else. I am not particularly interested in blaming anybody for the present state of affairs, which is constantly done in another place and at political meetings, although I think that if anybody is to be blamed, the miserable housing record for the Glasgow Town Council for the last twenty-five years certainly cannot escape criticism. However that may be, the fact is now that Glasgow is the lame duck which we have all to try to help. We cannot be content to solve our problem everywhere else and to leave it unsolved in Glasgow. I would not have made the suggestion which I have made if this Bill did not propose special measures of financial assistance to deal with the Glasgow housing problem which I think would be equally expensive and which I think would take far too long. My noble friend spoke about not doing it in one generation; but are we going to be content with that? In spite of the progress which has been made, the last generation did not solve the Scottish housing problem. It must be solved in this generation. We cannot leave it to be solved by our grandchildren.
5.2 p.m.
LORD POLWARTH: My Lords, other noble Lords have dealt with aspects of the Bill which concern housing and housing subsidies, but I think that it would be wrong if no Member of the House were to say something about its impact on industry in Scotland. First, we must all welcome any effort to deal with this appalling problem, of which a number of your Lordships are so well aware and of which we have heard to-day. Of course this is first a housing Bill—it abounds in jargon, such as "overspill", "exporting authorities", "receiving authorities", and so forth. But do not let this blind us to the fact that we are
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not dealing simply with the problem of housing; we are dealing with an immense human problem.
As the noble Lord, Lord Strathclyde, has told us, the Bill envisages the removal of some 300,000 people from the centre of Glasgow—that is, one-fifth of the population of Glasgow and 6 per cent. of the whole population of Scotland. It does not affect only them: it affects their homes; it affects their jobs and their family relationships. That is the measure of the importance and also the complexity of the problem with which the Bill sets out to deal. In fact it is nothing less than a major surgical operation that is proposed on the heart of the Scottish industrial economy. It is no use thinking only of providing so many cubic feet of housing accommodation, and so many square feet of garden, in new areas. We have to consider the economic consequences of what is proposed in the Bill. It reflects on the industry and commerce on which all these people depend for their jobs. It was Adam Smith who said that
"Man is a difficult baggage to transport."
That remark has been borne out time and again when efforts have been made to secure major movements of population and industry.
Industry is an even less transportable baggage. This Bill makes provision for the transport of industry, but I wonder if those responsible for drawing it up realised the difficulties involved. In the Glasgow area, industry is remarkably varied. It has a variety that is the result not of chance but of logical development over decades—indeed, over centuries. Your Lordships will have read this morning of the placing of orders for £80 million worth of tankers. Over one-third of these ships are to be built on the Clyde. That does not involve only shipbuilders; it involves steelmakers, makers of machinery, pipes, valves, wires, furnishings, and all manner of things. In fact, this is a vast interwoven industrial complex and the movement of many of the individual firms out of this area may be difficult, or even impossible. Some of the industries are easily moved, but there are those that have been more recently attracted—the lighter industries, which it is highly desirable to have in order to diversify the economy. It is not these industries that we wish to move.

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The noble Lord, Lord Strathclyde spoke of the consultations that had taken place between various Government Departments on the adequacy of compensation and the effect it will have on the movement of industry. I think that we ought to know more about the nature of these consultations and the results obtained from them, because it seems to me that this is the key point in the whole question of the movement of industry. I think that it will not be just a question of consulting industry as a whole, chambers of commerce and bodies such as that, but a question of most detailed survey of many individual firms and companies. Unless that survey is completed and made available for general study, we may well go off in the wrong direction at the start.
The alternative to moving industry out into the areas to which the population is going to be moved is to try to attract new industry to establish itself in these new areas of population. To some extent that is highly desirable, but if we do this we run the risk of starving the industries that remain behind in the congested area of their labour force. There is a third possibility—that of finding employment for the population that has been moved to travel back daily to work in the city. Those who are familiar with the position in London will agree, I am sure, that the less this occurs the better. I believe that, somehow, the solution to the problem of finding employment for people moved out is to be found in a combination of these three methods. Undoubtedly some people will travel back to the city—they will have to. Clearly, new industries must be attracted to these new areas, and certainly selected established industries must be encouraged to move out. This process must be not a brutal, uprooting of them from their surroundings and connections, but a delicate transplanting. Putting it bluntly, people have to be moved. If, on the one hand, we move people and find that we cannot move industry, we shall find dreadful complications. If, on the other hand, we move people and force industry to move, we run into other equally dreadful complications.
In whatever way industry is to be provided, one of the major factors will be the availability of factories. The success of the policy of the development areas is proof of the truth of this—in particular,
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the work of Scottish Industrial Estates in providing factories since the war. I am glad to hear that the experience of this body is to be made available to local authorities: they will find it of the greatest use.
We see provision in the Bill for compensation for factories moved. Of course there are the existing powers of local planning authorities to build factories, but in the past these powers have been used sparingly, and mostly to build small factories. I am glad, therefore, to see these additional powers to local authorities who are not planning authorities to build factories and to such authorities inside development areas, as well as those outside.
I do not believe that these powers alone are going to achieve the desired result. Recently my noble friend Lord Bilsland drew attention in this House to the Government's distribution of industry policy—or, as I am afraid some of us felt, perhaps, their lack of policy. I think we felt that the good work done under the Distribution of Industry Act was coming to a standstill through the virtual cessation of the provision of new factories under that Act. I am not going to revert to that subject to-day, except to say that an active and enlightened distribution of industry policy is an essential complement to this Bill, both in order to reverse these intolerable conditions which have arisen over the past years in Glasgow, and also to ensure that never again is a future generation faced with such a problem as that with which we are faced to-day.
I congratulate Her Majesty's Government on their courage in facing up to the facts, so far as they do in this Bill. I am glad they realise that the solution of the trouble does not lie simply in the provisions of the Bill. It lies, as the noble Lord, Lord Strathclyde, has said, in the active and energetic co-operation of all concerned—of individual companies and firms in industry, chambers of commerce and trade unions. It lies, particularly, at the door of the Corporation of Glasgow and the local authorities in the receiving areas, to get together and make the Bill work. Local authorities in Scotland, as indeed, I think, elsewhere, are particularly jealous of their own rights—and rightly so; but there will have to be much give and take. Above all, as I see it, this

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stands or falls on the policy of the Government for the distribution of industry. Let us earnestly hope that the co-operation of all parties will be forthcoming, for without it this part of the measure will be an empty shell.
5.12 p.m.
VISCOUNT STONEHAVEN: My Lords, I propose to confine my remarks to the rather smaller provisions of this Bill. I am not an expert on the housing problems of Glasgow, but I feel it should be recognised that, although the housing needs of Glasgow are a major item, there are other districts in Scotland which also have housing problems; and this Bill covers those needs and makes certain provisions for them. Part I of the Bill I consider a courageous and realistic approach to a very difficult problem, and I should like to add my congratulations to Her Majesty's Government on that score.
In the Explanatory Memorandum to the Bill one of the purposes set out is to amend certain provisions of the Housing Acts; and Part III makes a number of miscellaneous amendments to the Housing (Scotland) Act, 1950. Among these amendments is the First Schedule of Part II, and it seems to me to make a somewhat half-hearted attempt to "get after" the local authorities who have been laggardly or backward in applying the provisions of the 1950 Act as regards repairs and improvements. The position, however, seems to me to require a little elucidation. I have not warned the noble Lord who is to reply that I was going to ask this question, and I can hardly expect an answer to-day, although he may be able to give one. It has been frequently stated that in these matters, persuasion is far better than compulsion, and with that I entirely agree.
I am informed (although it may be wrong) that the Department of Health in Scotland are not intervening when a grant is reduced, or is not given on the full scale, because they have no powers or no official knowledge of the fact. If that is so, and if that state of affairs is to be continued, I should like to know how the noble Lord intends to persuade local authorities that everybody's interest is better met by a more liberal interpretation of the Government's requirements. On those lines, I would suggest that
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merely causing the local authority to supply to the applicant in writing reasons why a grant has been refused, or cut down, is not much use, unless a copy of that information is sent to the Secretary of State; and at the moment the amendment does not provide for that. Possibly that may not be the way to do it, but I feel that a little explanation might be useful on that point.
Just to draw your Lordships' attention to the fact that this Bill is not all persuasive, Clause 16 (2) provides a means whereby Her Majesty's Government can enforce their will in the overspill agreements, and such like, by various arrangements. So that obviously they contemplate putting their advice over. That being so, I rather feel that there is no reason why that should not also apply in these other cases. Various Amendments have been moved many times before. I think in this case they have now been met, to a certain extent, although not, in my view, sufficiently.
The other point I wish to speak upon for a short time is the payment of improvement grants and of voluntary alienation or sale. As I am informed, in Scotland the official view is that in the case of any alienation, either voluntary or by sale, it is mandatory on the local authority to demand repayment of the outstanding amount of the grants. In England, I am told, local authorities adopt the view that these provisions are discretionary only. Whether that is the case, or whether there is a difference in the law, I do not know; but, in practice, that is what they do in England, and it is not what they do in Scotland, and Scotland is thereby placed in a more unfavourable position.
It might be argued that someone who receives a grant and carries out the improvement has got something for nothing, and has therefore increased the value of his property; and that when he sells it, he sells it at an enhanced value. But one has only to do some work under these grants to realise that that is not so, because before the owner can receive a grant the statutory requirement is that he must let that house for a specified number of years—I think twenty years—to an agricultural worker. If it is let to an agricultural worker, the maximum rent which can be recovered in respect of that

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house is 6s. a week. As the house, unimproved, is worth 2s. 6d. a week, the net gain in rent which the owner is allowed to recover is 3s. 6d. a week, or £9 a year, which represents something of the order of 2½ to 3 per cent. In most cases, if the owner gets a grant of £400 (and we have no trouble at all in getting full grants) it means that he has to spend £800, which means that he has to find the other £400, possibly by borrowing; and if he borrows the money, he has to pay something of the order of 6 per cent. interest. Anyone can see that such an owner is well down by improving his property.
If, on the other hand, he improves his property on a lesser scale—he can put in a bathroom for sanitation, or a hot water supply, to the requirements of the local council for a sum of £250—he gets no grant at all. Even then he is still down; and therefore it seems to me unreasonable that in Scotland the unexpired amount of land should be demanded back when it is not in England, because in point of fact whatever he does, whether he receives the land or whether he does not, the owner is still "down on the deal" if he improves his property. That is not an encouraging thing for housing. I just mention that point in passing, and hope that I may be able to receive an answer. As I say, I did not warn the noble Lord that I was going to raise it, so I cannot expect an answer.
To my mind, it is a pity that no provision is made (this may not be an appropriate place for doing so) for reasonable grants for retirement houses. By that, I mean that the people who live in Glasgow are not all working, and when they retire they have still to live somewhere. The retired people must live in housing which is already short and, obviously, if means can be provided whereby that position can be alleviated, it will help the main problem. I agree that it is a minor aspect, but it is, I think, worthy of consideration. An extraordinary number of old people have built houses to retire in, and if a grant of somewhere in the region of £600 or £700 were produced for private building of those houses, under the control of the local authority, I believe that a large number of houses would be built out of these crowded areas, such as in the area in which I live, where it is happening
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without any help at all. It would happen a great deal more if a realistic and helpful grant could be produced, and I believe we should get greater value for money than with a great deal of the subsidised local government housing which these people are now occupying. I should like to leave that thought with the noble Lord, in the hope of receiving an answer to some of these points, and I wish him well with this Bill.
5.23 p.m.
THE EARL OF MANSFIELD: My Lords, like the noble Viscount, Lord Stonehaven, I think it desirable to express the fact that, important as Glasgow and the Clyde Valley are—and I fear I must return to them later—they are not all Scotland; and the housing problem is not confined merely to the urban areas of the West of Scotland. We have an acute agricultural and small town problem as well all over the West of the country. I would start by asking the noble Lord, Lord Strathclyde, if he can give me an assurance that in Clause 2 (2) (c), where grants for agricultural houses are mentioned, that, for the purpose of the grants, "agriculture" includes forestry. That is very important, particularly in the Highland areas, where the Forestry Commission often approach the county councils asking for the houses to be built for their special requirements.
Even before this Bill was ever mooted, my own county council were seriously considering having to reduce their rate of building houses simply because of the ever-growing seriousness of the rate position. It is one of the best administered counties in Scotland, and one which used to have about the lowest rates. We have found those rates going up every few years to an extent which is really alarming. Although, naturally, no one likes to have an increase of rent—and the increases under this Bill are bound to be serious in some cases—the fact has to be faced that the position of the local authorities is becoming a perfectly intolerable one; and it will get worse if they are to go on supplying an unending succession of new houses for the rents they have been receiving up to the present time. It just cannot be done without a complete dislocation of local finance. For that reason, Her Majesty's Government have

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been absolutely right, as well as courageous, in tackling this thorny and unpopular problem, just as they were over the question of the Rent Act.
In the case of my own county we have to some extent improved our position by making full use of the grants for the improvement of the older houses. I entirely agree with the noble Viscount, Lord Stonehaven, that pressure should be put upon those county councils—of whom Ayrshire and West Lothian are striking examples in the wrong direction—who give little, if any, encouragement to the reconstruction of old houses. In my own area, we have dealt with a large number of these houses, and although they may not be new, they are in many respects much better than many of the new houses, either because they are of substantial construction or because what was wrong with them before—the lack of modern conveniences—has been put right.
I must, I fear, for the last few minutes of my speech, return to the subject of Glasgow, and I would urge Her Majesty's Government to pay particular attention to the words of my noble friend Lord Dundee in regard to the provision of multi-storey, if not skyscraper, blocks of flats. By the very nature of Glasgow, there must always be a large number of people whose work must be on or near the Clyde. Glasgow owes its prosperity if not its very existence, to the fact that the Clyde is there. If a large number of people are to work about that river, on shipbuilding and shipping and all the other ancillary industries, it is obvious, if we are to avoid an appalling congestion on the roads, that many of them will have to live near their work. It will not help Glasgow much if the new towns like East Kilbride and Cumbernauld are to be merely dormitories, from which every day vast numbers of people travel by road and rail into Glasgow. It must be remembered that Glasgow lacks the excellent system of electric railways which alone makes transport in and out of London tolerable for the millions who travel there every day.
For that reason, I hope most earnestly that in this reconstruction of the central portion of Glasgow—those eighteen acres, with their 700 people to the acre, and a very much larger acreage where conditions are still very much overcrowded,
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though not so bad—provision will be made for the housing of a large proportion of those people who will have to work on or near the Clyde.
From another angle, which has not been mentioned to-day, this perpetual extension into the country has one serious result—that is, the diminution of the by no means large amount of first-class agricultural land in Scotland. Year after year we hear all over the country of the way in which good agricultural land is—quite necessarily, admittedly—converted to bricks and mortar or to roads. For example, when there was a new double highway being built between Perth and Dundee (which is by no means complete) we were told that for every mile of the doubling of that highway fourteen acres of first-class agricultural land were to be sacrificed. I myself have had to give up to the housing needs of Perth a considerable acreage of the finest land of Scotland. I did so without protest; it had to go, because there was nowhere else for the houses to be built.
At the same time, we need to make every possible effort to see that our housing takes place in the urban areas which are already non-agricultural, rather than allow this continual diminution of our meagre agricultural resources. And where it is essential to take land far outside the town, attempts should be made to make use of areas which are of inferior agricultural value. I know, for example, that in a certain English town in the Eastern Counties great indignation was caused when their overspill was put out into new suburbs on excellent land in East Anglia, whereas only two or three miles away was semi-derelict land reclaimed from the marshes which would have done equally well for housing and there would have been no loss to agriculture.
This is an excellent Bill and Her Majesty's Government are to be congratulated on it. Every speaker who has addressed us to-day has made it clear that he appreciates, as the Government do, that the problems of our Scottish housing are very difficult indeed. They will not be entirely solved by this Bill, but the Bill will go some considerable way to dealing with what is probably the worst problem that Scotland has to face or will have to face for many years to come.
5.31 p.m.
LORD GREENHILL: My Lords, ably and clearly as the noble Lord, Lord Strathclyde, has stated his case on behalf of the Government on this Bill, I am afraid I shall be bound, in spite of the harmonious speeches to which we have listened, to introduce a slightly discordant note, because I do not think that this is a good Bill; nor do I accept the reasons given by the Government for the measure that is being submitted to us to-day. Indeed, I rather feel as the Undersecretary of State in the course of his Second Reading speech said, that this was, I think, the fifth part of a scheme to regularise the position in regard to subsidies and housing, and that he thought that this was a good thing to do. My own view is that this is part of a well-recognised pattern to try to increase the cost of living in houses for the people in this country.
It is not many weeks ago since noble Lords were being asked by Government spokesmen to accept as a fact that the supply of houses was now almost satisfying the demand and that therefore we could look forward comparatively soon to a state of affairs in which there would no longer be the scarcity of which we have heard so much to-day. Basing their action upon that view, what the Government said was, "We can now decontrol a number of the houses and charge bigger rents than the tenants have been in the habit of paying, and thus enable those poor investors in property to derive some little benefit from the investments of the past of which they have been so long deprived." My own feeling is that this is all part of a pattern to make the people pay more for their housing accommodation that they have been paying up to now.
This Bill, as has already been admitted by noble Lords opposite, is really two Bills in one, if we ignore Part III: one dealing with a particular problem, the problem of Glasgow's overspill, and the other dealing with subsidies, which is in a sense a finance part. Because of what the noble Earl, Lord Dundee, has said, I should like to say this: from my own experience within the local authority for a fair number of years, I do not think that Glasgow has been at fault in its housing policy in all the years that I have known it, because the present administration of Glasgow
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began in 1933 with an inheritance which then was of the meanest kind. Speaking for myself, I would say that Glasgow's housing problem is insoluble. It is the kind of thing one does not like to reconcile oneself to, but my personal view is that Glasgow's housing problem is insoluble as far as Glasgow is concerned, and the only thing that can be done to deal with that problem, if the Government are really concerned about housing, is for them to take over the job themselves and to provide the necessary money for the necessary dispersal, if you like, of the present population.
The noble Earl, Lord Dundee, has apparently overlooked the fact that in 1946 the late Sir Patrick Abercrombie drew up a very detailed plan for the whole of the Clyde Valley area. That plan was in great detail. It is also known that the city architect of Glasgow issued a report containing some fifty-six pages on that plan, criticising it on the grounds that the population of Glasgow was not catered for within the area of Glasgow. He went into great detail showing how he would have dealt with the problem had he been allowed to do so. He put forward a plan; the plan was not accepted. There have been a couple of city architects since and nothing better has been produced. The noble Earl is also aware that this Gorbals plan, which the noble Lord, Lord Strathclyde, has pressed and which the Secretary of State has accepted and approved of, is one which has also received criticism in the current number of the Scottish Economic Journal in which not the idea itself is condemned but the fact that this is the largest undertaking of its kind, and somewhat extravagant in cost, though perhaps wholly necessary, into which the Corporation itself has gone. I express no opinion about that, but I want to warn the noble Earl, Lord Dundee, that these things are not so easily solved. It is all very well to say that the solution lies in having skyscrapers for the housing of your people—
THE EARL OF DUNDEE: I do not think that that is the only solution.
LORD GREENHILL: I should hope not; but even as the major part of the solution I should be inclined to say that it is not the best thing to do. If the noble Earl has seen, as he must have seen, conditions in the Knightshill and Blackhill

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areas with their tall tenements, he will realise at once that it would be destroying any amenities the city may have had in order to accommodate the people. But suppose, for the sake of argument, that we were trying to work out the Government's policy and that we admitted that 300,000 of the poulation had to be moved out, what guarantee have we that some of those who were moved out would not be replaced by incomers and so leave their numbers more or less stationary? Because you could not get rid of your population as easily as that. Indeed, the noble Lord, Lord Polwarth, said in a very statesmanlike way, "This is not an easy problem to solve. You cannot bulldoze a population. They are human beings. You cannot compel them to work where you want them to work. You have to think of what they, too, want to do."It is not a problem that can be solved within ten years or, as the noble Lord admitted, within a generation. It is a kind of gradual problem; you must take time to solve it.
Let us assume for the moment that the Government will try by means of this Bill to apply a remedy—a partial remedy if you like—towards this very big problem, and let us look at the subsidy suggestions that have been made. My own view is that, underlying the series of Acts that we have recently had to deal with, the main concern has been a financial one, and I am wondering whether the Treasury are not exercising, for reasons which are understandable, a greater amount of pressure than we have been accustomed to in recent years. Indeed, one wonders whether this is not a kind of attempt to introduce deflation by experiment. We know what the danger is; we do not need to know what to do to avoid inflation if we can. But is this the way to achieve it?
Take the subsidy problem. The Government have discovered a number of different kinds of needs. It would be amusing, if it were not rather depressing, to find that there are approved needs—there is £24 per house for that, because that is merely for rehousing from unfit houses, from overcrowding in shared rooms, or for those who are held to be unfortunately disabled, and so on. The Government then say that they are prepared to consider specially hard cases. Then there is the second kind of need, which they call an urgent need. There is
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£30 per house for that. That is to cater for incoming industries which it is desired to attract by this extra subsidy. Then there are special needs to deal with the overspill, for which £42 per house is provided. Then there are exceptional needs. That does not involve a question of subsidy at all, because the Special Housing Association will assist the authorities and build whole houses for them. The Government has already warned the authorities that they must not expect too many houses from that source, but they are there if necessary. Then there is the need for high flats, a point which the noble Earl, Lord Dundee, stressed, whereby if you build above a certain number of storeys you provide extra accommodation.
Let us face this problem with some degree of appreciation of what is involved. Local authorities do not want to have their finances upset by not being able to meet their housing requirements, and I must admit that I was rather pleased to note that Glasgow was not the worst city in Scotland in charging lower rents than it ought to do. But the noble Lord himself would be the first to admit that economic rents cannot be expected from any authority because even with the Government contribution, even with the compulsory rate contribution, we are still left with a deficit which would entail demands upon tenants to bring their rents to an economic level. While it may be true that £39 would be the average rent if the full rent were charged, the noble Lord himself would be the first to admit that people cannot be expected to pay the difference between what they are now paying and the £39, except in that it is spread over a number of years so that people could gradually become accustomed to the heavier burdens they were asked to meet.
In Glasgow, as the noble Lord is probably well aware, the rate of interest which the Corporation charge to the housing department is not the current rate of interest, because Glasgow has its own Loan Fund—a sort of bank—and it charges the department the appropriate rate. This is how it works out at the moment. The rate of interest charged on capital borrowings for the year ended May 31, 1956, was £3 11s. 10d. per cent.; the average rate which was paid on the mortgages borrowed from the public was £3 13s. 1d.—in other words, it would appear as though it should be paying

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more than it is charging for its mortgage moneys. That is accounted for by the fact that not all moneys are borrowed on mortgage—some are on short term, and they are able to charge a lower rate to the department than is current just now. The noble Lord is also aware that, although at the moment the rate is below rates currently being charged, the higher rates now being charged for moneys borrowed to-day would have to be reflected in future rates.
There is another point that I should like to make, with just a little caution. As the noble Lord pointed out, Glasgow is not charging an economic rent and is making the ordinary ratepayer pay part of the subsidy which the council tenant enjoys. I myself feel that Glasgow Corporation ought, and should, consider bringing that figure a little more into keeping with what is appropriate to-day, because I do not think that one can wholly justify a position in which 9·47d. represents the statutory rate contribution, whereas the deficiency—that is, the extra money rated for—comes to 2s. 0·75d. That, I think, ought to be equalised and brought more into line.
I appreciate that I have taken more time than I should have, but there is one thing more that I should like to say before I sit down. I see no reason why the Government, in charging local authorities rates of interest upon the money they are prepared to borrow, must charge what is more or less the current rate. I see no reason why there should not be a differential interest rate for particular purposes—in this case particularly for housing. If that were done, then I think that local authorities would feel considerably relieved from the burdens from which they are now suffering. There will be a Committee stage on this Bill, and there I should like to deal with Clause 15, with which I will not trouble the House at this moment.
5.47 p.m.
LORD STRATHCLYDE: My Lords, I am most grateful to all noble Lords who have taken part in our discussion on the Second Reading of this important Bill. I should like to say to those noble Lords who called attention to the fact that Glasgow is in Scotland, that surely all of us in this House know Scotland. Everyone realises that to be the fact. Nevertheless,
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this Bill is dealing with a situation which exists in industrial Scotland, and principally in the City of Glasgow. Therefore, Part II of the Bill must be related particularly to the circumstances which exist there. So far as Part I of the Bill is concerned, that is applicable to Scotland as a whole.
The noble Lord, Lord Mathers, said that as a result of the drastic changes which are taking place in these subsidies, if justice were to be done and hardship were to be prevented it would call for an individual means test. I do not for one moment believe that. If the noble Lord would be good enough to look at the Report of the Working Party on housing subsidies and see the comparison between the rents paid in England and those paid in Scotland, I am almost inclined to think that he would feel slightly ashamed of the constant grumbling there is about paying anything like a reasonable rent for a house in Scotland. The noble Lord also spoke of the failure of the Government to accept the advice which had been offered to them in another place in relation to an Amendment moved by a right honourable gentleman, which Amendment would have allowed any receiving area to be scheduled as a development area under the Distribution of Industry Act, and in that way, I assume, to qualify for Board of Trade financial help. Well, it was rejected, particularly for one reason: that any area can be scheduled if there is likely to be a special danger of unemployment; and therefore, if that is so, it would not seem that the advice offered was necessary.
As the noble Lord said, there will be many personal problems, because we are dealing here with the human element, and we should be careful, in all we do, to consider both their wishes and feelings. But I believe, with the noble Lord, that some good will come out of the Bill. The noble Lord said it was the responsibility of Her Majesty's Government. No, my Lords! It is not the entire responsibility of Her Majesty's Government: it is the responsibility of the local authorities, both the exporting authority and the receiving authority; and it is the responsibility of industry and of every citizen in this country where overspill exists to see that they do their best to make it work. I do not think that on this Her Majesty's Government have

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anything to fear at the next General Election. They have done something which no Government for nearly thirty years have had the courage to tackle, even when they knew perfectly well in their hearts, and had had it proved by facts, that many things were crying to be put right in Scotland. Time and again Governments shirked that issue; and that applies, too, to the Party to which the noble Lord belongs.
The noble Earl, Lord Dundee, I was glad to hear, did not consider that the Bill would have any adverse effect on housing. Nor do I believe that it will. He spoke of the pre-war housing record of Glasgow, which is a matter on which I prefer not to touch—I do not think it really comes into the Bill. But it is a very slow job, clearing out slums and putting houses in their place. Anyone who has been engaged upon that, as the noble Lord, Lord Greenhill, has been, will be able to tell your Lordships just how difficult it is to arrange to decant a population before pulling down their houses and getting a place in which to put them. It is a difficult matter indeed, and I do not want to say anything which would make people imagine that what faces the City of Glasgow is anything at all easy.
I hope that the noble Earl did not misunderstand my remarks about the Scottish Special Housing Association. He spoke about that Association as going to build half the houses. They will do that only where there is reason for them to be employed in view of the financial circumstances of the importing authority, and then only within the limits of their programme, which is laid down from year to year. As to the claims of building upwards, from models I have seen the Corporation are going to build very high blocks of buildings over all the new development area. I, too, wish that I could say it was possible that this terrific problem could be solved within a generation. The noble Earl said that it must be; but, frankly, I do not know how it can be. The task of building houses for 300,000 people from one city and redeveloping that city at the same time, all within a generation, is something that rather staggers the imagination.
The noble Lord, Lord Polwarth, spoke of the need for an active and enlightened
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distribution of industry. I submit to him that he will find in this Bill a scheme for the active and enlightened distribution of industry. I cannot think that this scheme has been worked out other than as the result of examining the whole situation in regard to the removal of industry—that is, redistribution of industry—from Glasgow to these new reception areas. In doing so, we have taken note of what has happened elsewhere and have tried to meet the objections which have occurred in those places. The noble Lord said that no other generation should again be faced with a like situation. I would pray noble Lords, and other people also, to consider the circumstances under which our great industrial cities came to be built. Our forefathers are constantly accused of being mean people who demanded great sums of money for their land, with the result that people had to be herded together. That is not true. The fact of the matter is that there was then no means of transport and people had to live near to their work.
A NOBLE LORD: Blame the Industrial Revolution.
LORD STRATHCLYDE: Whether or not there was an Industrial Revolution, people then had to live near their work because there was no transport.
The noble Viscount, Lord Stonehaven, asked me about improvement grants. That is a subject for a housing debate, rather than a debate upon a Bill of this nature; but one of the reasons why repayment of improvement grants has to be asked where the conditions are not met—and one of the reasons why there should not be an appeal to the Secretary of State—is that that money is local authority money. It is money advanced by the local authority for the improvement of houses within their own area, and it would be rather awkward if the Secretary of State had to decide whether or not money was to be paid back. But, in any case, whoever obtains an improvement grant for the improvement of his house does it in the knowledge of the conditions, and my own view is that these conditions should be adhered to.
I have noted the suggestion of the noble Viscount, Lord Stonehaven, that there should be a grant for private building of houses for the aged. At the same time,

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there are constant complaints that the Government are already spending too much money—
VISCOUNT STONEHAVEN: My Lords, would the noble Lord allow me to interrupt him for a moment? The point I tried to make was that this was not a question of complying with conditions, but that where a local authority refuse a grant, or give a grant of less than 50 per cent., the position, as I now understand it, is that the applicant can request the local authority to give their reason; and the local authority must then reply to the applicant, in writing, stating the reason. The suggestion I make is that that would be ineffective unless the Secretary of State also had the information, otherwise he could not give any recommendation or advice upon the matter.
LORD STRATHCLYDE: My Lords, I thank the noble Lord for enlightening me, but the answer is the same. The money is local authority money, and they are therefore entitled to give 50 per cent., or any other amount, or none at all. I do not argue whether it is right or wrong, but that is the situation.
The noble Earl, Lord Mansfield, asked me, in relation to Clause 2 (2), whether "agriculture" includes forestry. The answer is, Yes. I would just refer the noble Lord to Section 184 of the 1950 Act, where agricultural population and agriculture are defined, for the purpose of subsidy, as including workers engaged in afforestation. The noble Earl suggested that places like East Kilbride and Cumbernauld were not much good from the point of view of reducing travel. What we are trying to do is to build up a balanced community in these places, which will avoid travelling. We are trying to see that a balanced community is the result of any movement of overspill. I can also assure the noble Earl that the Government do everything in their power
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to see that agricultural land is not used for purposes other than agriculture.
The noble Lord, Lord Greenhill, and I, of course, do not see eye to eye on this matter at all. He says that our recent Acts have been all of one pattern—to make people pay more for houses. But should people not pay the just price for the article? Does the noble Lord contend for one moment that a rent of £8 a year for a house in Lanarkshire is a reasonable payment for the accommodation provided, or even a rent of £15 a year in Glasgow? Does the noble Lord really consider that people who can pay for houses should be subsidised by other people? I think it is one of the most iniquitous things I know. I think it is reasonable to require that a reasonable rent should be charged in all cases. As I said in my speech, those who can pay ought to pay; those who have a housing need and cannot pay should have their housing needs supplied for them. I do not believe that anyone should be subsidised unless in need. Let me say that, in my opinion, there is no need at all for any great charge on the rates for housing in the City of Glasgow. I say that in view of the facts produced in the report of the Working Party to which I have referred. My Lords, I have endeavoured, to the best of my ability, to answer the various points which have been put to me in the course of the debate. I trust that your Lordships will now give this Bill a Second Reading.
On question, Bill read 2ª, and committed to a Committee of the Whole House.

BUSINESS OF THE HOUSE
EARL FORTESCUE: My Lords, before we pass on to the next Business I should like to inform your Lordships that arrangements have been made so that any noble Lord who wants to have his dinner can get it here.

EGYPT: BRITISH SUBJECTS' LOSSES
6.3 p.m.
LORD KILLEARN LORD KILLEARN rose to draw attention to the continuing distress of British citizens expelled by order of Colonel Nasser from Egypt and deprived of resources held both in Egypt and in the United Kingdom; to urge upon Her Majesty's Government the need for decision to grant interim relief from United Kingdom resources to admitted claims pending a just and full final settlement; and to move for Papers. The noble Lord said: My Lords I rise to put before your Lordships' House the Motion standing in my name on the Order Paper. Before I get down to my main theme, may I register (and I feel sure I shall have the feeling of the House with me in this) an expression of the embarrassment in which we have been placed by being kept waiting here from 2.30 this afternoon until 6 o'clock by other business. I raised this matter once before and I have the record here. I raised it on April 30. I referred to the interests of the Private Member. I put a Question [OFFICIAL RFPORT, Vol. 203 (No. 61), col. 185]:
"To ask the Leader of the House whether the Standing Orders can be so altered as to prevent a debate on an important Motion being delayed by Bills and other matter placed in front of it on the Order Paper subsequent to the tabling of the Motion."
On that occasion I pointed out to your Lordships that on March 28 I could not get up to speak on a Resolution which I was moving until two-and-a-half hours after the House met on a Thursday afternoon. To-day—another Thursday—the House met at 2.30 and it is now past six o'clock. It is not fair to your Lordships to be kept waiting in this way on a matter of this importance. You have taken the trouble to come down here because of the importance of this matter. And what has happened? There has been a procedural affair which has held us up. I leave that matter in the hands of the House, but I submit it is one to which serious attention should be called. Having said that, I will pass to my main theme—the Motion before the House.
Before I left my home this morning, through the kindness of Lord Hailsham my attention was called to a little item of news in The Times. The date line is: "Cairo, June 26". The item is quite short. It reads:
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"The Egyptian Government to-night announced that it had decided to permit the arrival of a British Committee to survey the position of British property in Egypt sequestrated by the Government."
That was a Reuter message. I thought it well to bring that little item to the notice of your Lordships, because some of you may have missed it. I have taken advice in competent circles in this connection, because it struck me on the face of it as being possibly of some importance—we do not know, of course; it may be rather a red herring. I have taken opinion in competent circles and that opinion is to the effect that, in practice, desequestration would be next to impossible to implement, for the refugees' property has been disposed of, their homes no longer exist, in many cases the individuals have had to shift for themselves and many of them have gone to far distant lands. I brought that in only because I thought it right to do so. So far as I am aware neither the Government nor anyone else really knows exactly what the report means.
Now may I turn to my main theme? In Arabic there is a vernacular expression "Talta t'abtah" which, roughly interpreted, means: "Third time lucky". This is the third time that I find myself addressing your Lordships on this subject. I make no excuse for doing it a third time because the cause is so important and so just that one would be justified in putting it to your Lordships again; indeed, one would be justified in putting it an innumerable number of times until justice is obtained. I am encouraged by the Arabic expression which I have just quoted, and I only hope that it may prove true on this occasion. I hasten to add that there is also an Arabic proverb which means: "There are days of honey and there are days of onions". I only hope that, despite the lateness of the hour, this may prove to be a day of honey and not a day of onions.
The special reason I say that is this—and I come back once more now to April 30 when I raised the Question which I have mentioned in your Lordships' House. I feel that I am doing a courageous thing to-day because—it is true he spoke in a mood of jest—on that occasion the noble Earl, Lord Home, referring to me said [col. 186]
"May I say that we will take all steps available to us to see that he does lose a Division whenever he moves a Motion."

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The noble Earl qualified that later by saying:
"The noble Lord must not take what I said too seriously."
Nor do I take it too seriously. At the same time, I would point out that I am running against that declaration from the Front Bench which I would much rather not have seen recorded in Hansard.
Now to proceed with my main theme, may I first of all make a general observation. Like other Members of your Lordships' House I have spent many years in Government service under many Governments—since, I think, 1902, to be accurate. During much of that long period it was my privilege to serve abroad as representative of the Crown and the Government. My function was to do my best for my country and, coupled with that, to do my best for my local community. I spent twelve years in China, twelve years in Egypt and periods in other places. I can say with all sincerity that during that time I had many cases to deal with and many tricky negotiations to carry through—some successful and some not—but in my long career I have never had a more frustrating experience than trying to defend the interests of my own compatriots with our own Government.
Let me touch on the question of the timetable. These people were expelled about the beginning of November—that is to say, seven months ago—and since then I have moved two Motions in your Lordships' House and have asked innumerable questions. We had to ease up at the Easter and the Whitsun Recesses. On February 28, in one of these debates, we were told that it was unreasonable to expect the Government to formulate policy until they had done investigating, collating and collecting the claims, and that it would take six to eight weeks. Already these people had waited a long time and they were in great straits, as I shall bring out in a moment, but my noble friends and I decided that we would wait for those eight weeks. That brought us to May 23. It so happened that that synchronised with the debate on the Suez Canal on a Motion by the noble Marquess, Lord Salisbury, and my friends and I considered that we should be ill-advised to bring this question up in that debate
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because it would be liable to be submerged in much higher issues. I believe that we were right. That is how it comes about that this Motion is before your Lordships' House to-day, June 27.
May I touch on how this whole problem has developed? The seizure of the Canal took place at the end of July and the Anglo-French action followed—I thought too late, but that is neither here nor there. As a result of that action, Egypt took retaliatory action against our nationals. That took the form of the expulsion from Egypt of all British nationals and the seizure and sequestration of their property of every sort and kind. As we know, many of them were thrust out at the point of the bayonet and allowed to bring nothing out at all except £E15 in paper money. They had to leave everything behind. Truly their situation on arrival here was desperate.
Their arrival did awaken a certain amount of public interest and sympathy. I think that their plight would have provoked more public sympathy if their arrival had not coincided with the wave of public indignation over Hungary and that wonderful and noble response for the wretched Hungarians. I expect that that blunted the edge of public sympathy with these unfortunate co-nationals of our own. I cannot think of any other reason. But it is rather surprising that up to date the Press has not taken more active interest in the question, although lately there has been a burst of interest, along interesting lines—namely, that the attitude taken by the Government is indefensible and that the Government ought to do better.
Here I would pay all credit to the Government for having established the Colyton Committee. I am not throwing any bricks or criticism at the noble Lord, Lord Colyton. I believe that he has run his Board with the ability which we should expect from him, and they have given great relief to many cases of real hardship where people were in need of subsistence. But we have it on record, in the words of the noble Lord himself, that his mandate is limited and does not allow him to cope with the type of case I am talking about to-day, which involves a claim for financial compensation and restitution. His Committee cannot touch it. That is a great pity. When the Government formed this Board, which took

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the name of the Anglo-Egyptian Resettlement Board, I had hoped that they would have a far wider mandate and would be placed under a Minister. I believe that that would have saved much trouble and delay, much misunderstanding and much departmental bother.
In view of the length of time which has elapsed, are noble Lords seriously surprised that these wretched people are beginning to lose patience and suspect that the Government have been purposely dragging their feet? I do not say that they have, but it looks very like it. On top of this quite normal suspicion, when these people read in the papers that the British Government have agreed to release £20 million sterling from the credits due to Egypt in order that Egypt might settle currency difficulties with the Sudan—well, it is a bit odd, to put it mildly, is it not? I have seen the agreement between the Egyptians and the Sudanese and I can produce it for the noble Viscount afterwards if he likes. On top of that again there is a meeting in Rome of (I do not know what to call them) representatives of Britain and Egypt. Many of us were sceptical about what this meeting could produce, and what it did produce I do not know, except a report in the Press that another £6 million was to be released for some purpose which has never been explained to your Lordships, so far as I am aware. That is another thing which these people are at a loss to explain, and we cannot really be surprised that feeling is mounting high. I know that this House likes to have specific cases put before it. I have here five cases which I will read to your Lordships. They are headed: "Typical Cases of Distressed British Subjects now in the United Kingdom." Case No. 1 is as follows:
"Director of a private British company and manager of another; both now sequestrated and Egyptianised, and all assets seized. Expelled from Egypt with wife, and now in the United Kingdom without means. About to retire after 45 years in Egypt. All savings and investments to provide pension indemnity and insurance benefits banked in Egypt are now seized. House, car and all personal belongings lost. Now living precariously on a small grant from Resettlement Board, friends and ex gratia payments. Too old to seek re-employment."
Case No. 2:
"Middle aged man, manager in a British local private firm. Worked in Egypt 31 years. All accumulated savings lost. House, car and personal belongings seized. Deprived of means
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of livelihood and insurance benefits and compensation by decree. Now in the United Kingdom without means and, at his age, finding difficulty in getting employment."
Case No. 3:
"Director of British local company working and living in comfortable circumstances in Egypt. Married, with three children at school in England. All assets, home and personal possessions of himself and wife lost in Egypt. No means whatever outside Egypt. After 30 years abroad finding it exceedingly difficult to get employment to enable him to support himself and family. Now living on the generosity of family and small grants from Resettlement Board."
Case No. 4:
"Married man, 40 years, with two children, working partner of a prosperous family agency business in Egypt. The business now Egyptianised and its commercial activities as a British concern destroyed beyond restitution. This partner, who has lost his occupation, home and entire possessions, investments and bank deposits in Egypt, is now in the United Kingdom without employment or the means to educate his children. Is getting temporary aid from Resettlement Board. He has lost his all in Egypt and has no means outside that country."
I come back now to a case I quoted to your Lordships the first time I brought this matter before you on February 28, because I know the case personally. It refers to the matron of the Anglo-American hospital, a very worthy institution, in Cairo. I happen to have been President of the Hospital for twelve and a half years, so I know something about it. She was thrown out at half an hour's notice, with just what she stood up in plus, I think, £E15. Fortunately for her, she was obviously a highly-trained nurse, and she was offered, and has accepted, a temporary occupation in the nursing profession. I am very interested in the case. She took this occupation more or less by way of a refresher, because she still thinks that the time will come when she will be able to go back. Only this last week she was talking to me about that, and I am afraid I had to be rather discouraging. But it does show the right spirit. Apparently, there is a new arrangement, and these people are to be issued with £50 for clothing—though I am not quite sure about that. She, like many others, received a large supply of forms to sign; she was visited by the W.V.S., who were very friendly and helpful and suggested that she should apply for £50 outfit allowance. Her case now reads:
"Application acknowledged. Visited twice by W.V.S. Filled in more forms. Waited patiently for several weeks, but no £50."
She has received nothing else.
Lastly, there is the case that I also quoted the first time that I addressed your Lordships on this matter, that of the widow of the lawyer. She is still in very difficult circumstances:
"Lawyer's widow, who left Egypt prior to nationalisation of Canal, with all formalities for transfer of money completed. Not a case for the Resettlement Board"—
because she had already left—
"Still unable to cash Post Office Savings Bonds"—
I think she has £1,000 worth.
"After repeated visits to the Board,"—
that is the Resettlement Board—
"was told they were only prepared to put forward her case for a subsistence allowance. Nothing further has been heard."
My Lords, I quote these cases because they speak for themselves; and I hope that they prove my thesis, which is that this is not a fictitious movement, worked up, but is a genuine case of hardship and, as many of us feel, of British Government moral responsibility.
I would sum up my attitude by recording that certain things are unquestionably involved. First of all, national honour. Secondly, that it is an all-Party matter—it is not a question of Party differences. Thirdly, however much the Government may dislike it, there is a moral obligation. After all, nobody in his senses can pretend or claim that these unfortunate people had anything whatever to do with what the British Government did. Personally, I approve of what the Government did—but that is neither here nor there. It is impossible in any circumstances to make out a case that these unfortunate sufferers were in any way responsible for what overtook them. Lastly we should think of national credit—and I shall come to that in a moment.
I want to get the situation crystallised. I know that many of your Lordships have heard the story before, and that you will probably be (if I may use the expression) bored at hearing it again. However, it is no bad thing to have it crystallised afresh in the record. Therefore I would recapitulate the salient features—namely, that as a direct result of the action of Britain over the Suez Canal, all British subjects employed in Egypt were immediately discharged without notice; their legal rights, the rights of all British residents, to
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indemnification, to compensation, insurance benefits and pensions were cancelled by decree; and their entire assets, bank balances, savings and property were seized. They were barred by law from further employment in Egypt, and that law still applies. The wholesale dispossession of all British nationals was, and is, complete.
Deprived of their possessions and the means of livelihood, British subjects were forcibly expelled, and were allowed to take with them practically nothing. The assets of private firms and businesses and of all private individuals were sequestrated, liquidated or sold outright under harsh and ruthless conditions. British commercial and industrial activities have been entirely extinguished by Egyptian Government action. For those British subjects who had spent their lives in Egypt the loss in terms of cash and human suffering is incalculable, and the calamity that overwhelmed them is due directly to British Government action. Please mark, my Lords, that that is incontestable. Surely the responsibility for restitution and redress thus falls squarely on the British Government. That, to our mind, is really the kernel of the whole question.
As a side issue—and I feel I must just touch upon this—and on top of these disasters, those British subjects who believed that they had saved something from the wreckage in Egypt in the form of funds deposited with British banks in London, now find these accounts blocked and payment withheld. These restrictions apply also to the funds held physically in the United Kingdom by the banks for British schools, churches, and other charitable institutions, sequestrated in Egypt, but with obligations to meet in England. The need of those dependent upon them now cannot be met, as banks withhold the funds.
I should like for one moment to interpose that funds such as the funds for running the Victoria College of Alexandria (with which I have had in the past a great deal to do) and the Cathedral of Cairo (with which I was also closely connected) are affected by this situation. I do not know if I have mentioned it before, but I can do so again. Just after the war, all the Egyptians were grateful for what we had done, and they said: "You have only to ask and you may have

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it." After the war, I reminded them of this, and I collected from them and from the British community, who subscribed most generously, £650,000—which is not a mean sum. That was used for British educational and charitable purposes, hospitals and concerns of that sort. I myself was not going to have anything to do with the distribution, so I appointed a trust, and the trust put these funds in the hands of Barclays Bank. That was in 1946, or thereabouts. The bulk of this money has been used for the purposes for which it was subscribed, but there is a residue of between £67,000 and £70,000 which is over here Now this catastrophe comes along. Everybody is driven out. The teaching staff and clerical staff of the cathedral have been driven out, and they depend for a large part on this fund. One would suppose there would be no difficulty. The funds—or what is left of them—are here. One would think that the head of the community council committee would get them from the bank. But he is refused. To me, that is completely incomprehensible.
I put to the noble Viscount who is to reply certain questions on June 6 about National Savings Certificates. I did not understand his reply. I do not think he did—but that is a frightful thing to say about so eminent a lawyer, and he will probably rebut it with an oath.
THE MINISTER OF EDUCATION (VISCOUNT HAILSHAM): Not with an oath.
LORD KILLEARN: Anyway, he will rebut it. The normal mind finds it difficult to grapple with this question of banking niceties. The long and short of it is that the banks apparently require some form of indemnification—from the Government, I presume—which should be forthcoming without further delay. I will leave this matter to the noble Lord, Lord Gifford, who will perhaps deal with it in a more comprehensive way than I can. But the net result is that they cannot touch these funds, and individuals who have put their money into Savings Bonds cannot touch their money. Perhaps the noble Lord, Lord Gifford, will be able to elucidate the matter, or, at any rate, ask pertinent questions.
It is very late, and I have kept your Lordships longer than I intended. But what matters in all this? Surely, it is
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only one thing: to ensure prompt, effective financial restitution to these Suez victims. Is that not right? If that is right, as I see it it does not matter two jots where the funds come from. It is for the Government, who are responsible, in my view, to shoulder the responsibility. Whether it is by releasing blocked Egyptian credits or whether it is this or that, I would not know, but, surely it is high time that something of a practical and prompt nature was done to relieve the distress of these people. That brings me back to the terms of my Motion. It has occurred to me that if this type of distress—for it is distress—could be regarded as constituting hardship, as indeed it obviously is, through deprivation of all assets and possessions, so much the better. I do not think it matters under what heading this matter is treated. The Treasury may have their difficulties, but I throw that in simply as a passing thought. The thing is to get on with the job. Now I am going to resume my seat. But before I put the Motion formally before your Lordships, would noble Lords, would the Front Bench, would even the Treasury, perhaps remember that oft-quoted saying which, I believe, dates from 1510:
"There, but for the grace of God, go I."
My Lords I beg to move for Papers.
6.27 p.m.
VISCOUNT HAILSHAM: My Lords, I think it would probably be for the convenience of the House if I spoke comparatively early in the debate, and if, with the leave of the House—for otherwise I cannot do so—I responded to the arguments which are raised at the end of it as well. Ordinarily speaking, I think this would have been a debate which would have attracted the attention of my right honourable friend the Leader of the House, whom I am glad to see with me for the moment. But he is, as I expect your Lordships know, very much preoccupied at this time with obligations concerned with the Commonwealth Conference, and if your Lordships would be good enough to grant me the indulgence I have suggested I believe we can get along without insisting upon my noble Leader's attendance.
May I say at once how much I welcome a general debate on this topic. It is some time since I became responsible, as the Minister answering on behalf of

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the Treasury, for dealing with questions about this matter. But for some weeks now I have been conscious of the need for something more than question and answer, and for some time I have become uneasily aware that, because of the limitations from which I suffered in answering questions, we were getting at a certain element of cross-purposes with those of my noble friends who have interested themselves in this topic.
I feel perfectly certain that the whole House will share the concern which is felt for our fellow subjects who have been expelled and who have taken refuge from Egypt. I would wholeheartedly endorse the last sentiments expressed by my noble friend who has moved this Motion. We should all, in approaching this matter, start from the premise that, as he said in the earlier part of his speech, those people who have suffered acutely have done nothing themselves for which they can be blamed; and we should also start from the premise with which he concluded his speech: that in this disturbed, uncertain and convulsive century, there, but for what he described as the "Grace of God", would have gone any one of us who had happened to place his fortune and his life inside that particular territory. I wholeheartedly endorse that and feel sure that the House would share the indignation at their sufferings of which he spoke and the desire with which he was obviously animated to see their wrongs righted so far, and as quickly, as possible. I think we can quite clearly agree with all those things.
The Motion to which the noble Lord has invited the consideration of the House draws attention to the continuing distress of British citizens who find themselves in this position. It limits it, I think probably not intentionally, to those who are deprived of resources held both in Egypt and the United Kingdom. The distress, of course, is not limited to those who have been deprived of resources, although I would frankly concede that it includes them no less than the others. It urges the need for decision to grant an interim relief pending a just and full final settlement. Your Lordships may think that this last clause of the Motion contains the operative part.
I do not think your Lordships would desire me to be drawn into too detailed a
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description of what I should consider a just and final settlement would involve. I must, I think, interest myself primarily in the claim for interim relief, and I am hopeful that I may give a certain measure of satisfaction both to the noble Lord and to other noble Lords who desire to speak on this matter. I am hopeful, too, that the House will agree, and agree in all quarters, that, whatever the rights and wrongs of the Suez policy—and I know that the noble Lord who has just spoken took a view which was radically different from that of the Party opposite—there could be no justification for the seizure of the individual assets of individual citizens (I am glad to see the noble and learned Earl, Lord Jowitt, concur in that) and that even if such a justification could have been said to exist in November, there can be no justification for their continued retention now and no doubt that restoration ought to be the condition precedent to the resumption of ordinary trading relations.
I feel I must say this at the outset, since much that has been said by the noble Lord, and I daresay much that will be said during the course of this debate, may tend to obscure certain elementary facts and principles of international law in this matter. Even a prolonged and bitter war between two countries, such as that recently between Britain and Germany, does not, of necessity, justify the permanent expropriation of private property. Obviously, political, economic and military exigencies may suspend the right of individuals to the exercise of proprietary rights, but they still do not necessarily give the right of expropriation. A custodian of enemy property does not become in the ordinary course the owner of enemy property—even, as I say, in war. Consult whatever legal textbook you will and you will find this principle vindicated. Whatever may have vitiated or may vitiate still relations between Britain and Egypt, neither Government, so far as I know, maintains that a state of war exists at all. Such military operations as there were were over in a matter of days and the occupation in a matter of weeks.
Of course, there must be between Governments negotiations in cases of this kind; but it would, at least in my opinion, be disastrous, not merely to these claimants about whom we are talking to-day

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—and they are important enough—but to the whole fabric of civilised behaviour based on international law, if it were to go out from this House that principles evolved during the centuries were of no account and that the claims of individuals to the restoration of their identifiable property were to be used simply as bargaining counters in negotiations between the States. That would be an abhorrent conception. The Egyptian Government has indicated that it desires resumption of normal trade relations. Speaking for myself, I should like, as I have always urged from the moment of the "Cease Fire" that the relations of the two States should be governed by technical and objective considerations in the interests of the two peoples. But it can hardly be expected that trade, which depends on confidence, can be resumed without the recognition of the rights of individuals to their own admitted property. I do not myself despair that an elementary consideration of this kind will for ever be ignored.
I could not help noticing that, as the noble Lord said in introducing this Motion, in the centre page of The Times to-day there was the following paragraph:
"Cairo, June 26. The Egyptian Government to-night announced that it had been decided to permit the arrival of a British Committee to survey the position of British property in Egypt sequestrated by the Government."
That was the first I had heard of this piece of news, but I naturally desired to find out what there was behind it. I understand that the Egyptian Ministry of Foreign Affairs have in fact put a suggestion to the Swiss Embassy in Cairo that we should send one or two Government officials to Cairo to look into matters concerned with the sequestration of British property in Egypt. The situation is vague as to the exact scope of their investigation and we are asking for further details in order to assess the value of such a visit. I may say that this suggestion was not a reply to any British initiative.
It is true, as my noble friend said, that in many cases property can perhaps no longer be identified; in many cases it consisted of intangibles which perhaps have vanished and evaporated; but I, myself, should have thought that, provided we received satisfaction about the
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inquiries we are making, those considerations should not stand in the way of an investigation to discover what can and what cannot be restored or what must be left to a legitimate claim for compensation. I believe that that would probably be the feeling of your Lordships' House in this matter. I, myself, was deeply struck by a remark which I read yesterday of the noble Marquess, Lord Salisbury, when he was replying to the debate on March 28 [OFFICIAL REPORT, Vol. 202, col. 934]:
"…if by anything we did at present we prejudiced the final settlement of claims which might be owing, we should have done the refugees themselves no good at all."
I believe that that is a sentiment with which probably all Members of the House would agree.
However the continued delay in the negotiations for what my noble friend has called in his Motion a "just and final settlement" obviously affects the hardships of those who are awaiting with impatience the recognition of the claims which they cannot but regard as unanswerable. I feel that my noble friend is right in drawing attention in this connection to continued distress. Her Majesty's Government cannot but be affected by that hardship and that distress; and if the exigencies of the negotiations result in added hardship, as they must do if there is delay, as there has been delay through, as I would say, no fault of ours, obviously Her Majesty's Government must take that into account and would wish to do so. I myself would agree that hitherto the definition of hardship upon which we have been operating may have been unduly narrow. My noble friend to-day indicated to me the case which I think he mentioned in your Lordships' House, where the date on which one of the refugees had thought it wise to leave Egypt precluded her from coming within the operations of the Resettlement Board. I confess that it should not have been, but it was, a novel point to me, and I will undertake that that is considered by the authorities concerned.
But I would agree that even on broader grounds the definition of hardship that hitherto we have been operating on may well have been unduly narrow. This may have been because we were hoping for a more reasonable response in

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a shorter time as the result of our negotiation. Obviously I think we cannot be pressed to make concessions which would impinge upon our stand for what I, at any rate, regard as a legal and moral principle which we should be failing in our duty not to assert. But when I heard my noble friend Lord Killearn, argue, as he has done just now, that for a person in possession of considerable assets to be kept out of possession of those assets for an indeterminate and prolonged period of time, is in itself a degree of hardship, I must say that I was impressed by the substance of his argument. It seemed to me that there was a great deal of justice in the claim, and in one sense I would go even further than he did. I would say that quite obviously the extent of hardship and the degree of hardship suffered in such a case necessarily increases in proportion as the delay increases. So far as I know this is a point which has not been made so far in public debate in this connection, although it was, I confess, at one time in my own mind. Since I have had to administer in my Department a quite different scheme based on hardship, I have always thought that the expression should be given a wide and generous interpretation.
I think I know the general mind of my right honourable friend the Chancellor on this subject. I do not think that this afternoon I should be justified in giving a definite reply to the argument, and probably—at least I should hope—my noble friend would not press me to do so; but I feel that I know my right honourable friend's mind well enough to be certain that he would wish to take account of this viewpoint. Perhaps I should say no more at this particular stage, but I feel that this is a valuable point which has emerged from our discussions and one which should be pursued further before things are brought to a conclusion.
As I have said, my noble friend's Motion is framed to ask for interim relief pending a just and final settlement. In the light of what has been said by my noble friend I should not desire any hasty reply of mine to prejudice any interim relief which might be made available, and I hope that my noble friend who has moved this Motion would wish to be influenced by the same kind of
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consideration. If the matter is to be pursued in this spirit, as I hope it will be, I would appeal to my noble friend and to any who may be influenced by his advice, to co-operate with me in giving this valuable thought further consideration, and not to make things more difficult, as I am sure he does not desire to do, by pressing me before we have had time to take it into account. I would also make another suggestion in the same vein. I can assure your Lordships that the Government share your Lordships' concern in this matter and are sincerely trying to act in the best interests of those affected.
Before I deal in detail with the problem I should like to say this. I have been conscious in the past of some absence of liaison. I believe that I can assist in some, perhaps a good many, of the individual cases, and possibly in some classes of case, if noble Lords would put a few typical cases before me. My noble friend has mentioned some particular cases in his speech which emboldens me to refer to the matter. It may be that one could help if one knew the details of the people concerned and of the kinds of assets which they have lost. For instance, in one case my noble friend referred to Post Office bonds. There are two types of bond which may be involved. If he will get in touch with me to discuss which kind, it may be that I can help a little there. I hope that in any event noble Lords will feel that I am available should they wish to consult me on this matter, and if they agree with me that there are aspects of the matter which can be discussed more fully with the Minister or with my right honourable friend than in public debate, I hope that they will take advantage of my offer. I should also like to say that if any representative of the Cairo community wishes through either my noble friend or through me to get in touch with the Chancellor of the Exchequer or to approach me direct, I feel certain that there will be mutual advantage in a detailed and frank discussion of various aspects of the matter otherwise than in the storm and stress of debate on the Floor of the House.
In the meantime there are some general observations that I should like to make which I feel in fairness ought to be put on the record. Some, but not all, have

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been said before. They all need to be recorded as part of the background against which we view this matter. Noble Lords will know that about 6,000 British subjects have arrived here from Egypt. Some of them—I think even the majority—were unfamiliar even with the English language. They came with no money to a country where everyone, though a fellow countryman, was a stranger. Others have assets in this country; some have friends. Some more have assets which, for one reason or another, such as those to which my noble friend referred, they are unable to touch. There are also, of course, considerable business interests which are, strictly speaking, outside the terms of reference of this debate.
How have those been dealt with so far? I think that we must not forget in the first place that the vast majority needed immediate assistance in terms of money, employment and housing—this group, of course, includes both those with assets which they left behind and those without. I feel certain that we have been right in dealing with this in advance of any other. I am glad my noble friend spoke so kindly of the decision of the Government to set up a Resettlement Board and of the work of my noble friend Lord Colyton in administering that Board. The Board has been dispensing assistance recently at the rate of £200,000 per month. I do not think that this in itself has been ungenerous, although of course I should be the first to concede that it does not help with the specific problem with which my noble friend was largely pre-occupied and with which we also are concerned this afternoon.
It is however, none the less directly relevant to the discussion, since my noble friend has referred to continuing distress and asks in his Motion for interim relief based on possession of assets. In order to gauge the necessity for this we must realise the extent of the interim relief available without regard to frozen assets. Even if this were not the case, I feel that the House would desire to know from me the extent to which relief regardless of assets has been made available. The Board have so far made 4,500 initial payments of £50 to adults, and £25 in respect of children. It has accommodated 2,507 in hostels. With the Ministry of Labour it has helped to place or has placed in work about 1,092.
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The Board is progressively providing housing and is subscribing as a donation £300 to every local authority which makes certain accommodation available, and up to £500 to individuals as a deposit to building societies. It has paid full maintenance allowance to, I believe, 550, and supplementary allowance, to supplement earnings, to 177 more. It has paid furnishing giants to 215. It provides grants of up to £750 and loans of £2,000 to enable suitable claimants to set up in business It reckons, in conjunction with the Australian authorities, to provide passages and voyage expenses of considerably more than 1,000 individuals to go to Australia, and I should like here to give thanks to the Australian Government for their generosity, help and sympathy. Some have also been helped to go to Canada, Brazil, the Lebanon and other countries.
Local educational authorities have, of course, coped with educational problems, as it is their duty to do. In addition, 44 pupils have been assisted to remain at independent schools where they had already been placed, 7 students are at various colleges of further education and 71 at various training courses. In addition, after employment a final resettlement grant of between £750 and, I believe, £1,000 for a family is available, to find accommodation and furniture before the refugee is signed off the books of the Board. It is against this background that we must look at the problem of compensation for lost assets. I should like, in passing, to agree with my noble friend that the coincidence of the flow of refugees from Egypt and that from Hungary probably proved to be a disadvantage to the former.
I now turn to compensation for lost assets. A certain amount has already been done here. As my noble friend knows, advances are already made to former pensioners of the Egyptian Government, if necessary to the full amount of pension due, and this relief has recently been extended to private pensioners whose pensions have been stopped as a result of recent events in Egypt. These grants are dealt with by the Board from public funds. Next, there is the problem of employees of contractors engaged in work on the Suez Base. These were among the first to make and to press their claims, and here again I can, I

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think, give the House some assurance. Her Majesty's Government recognise their special obligation towards these men as being virtually the employers in whose service the men remained until the last moment; and they are already proceeding to make advances ex gratia, of which I will give details to any noble Lord who is interested. I think it will be found that those advances are not ungenerous.
The next group of claimants were those who brought Egyptian notes from Port Said with a Consul's certificate. In pursuance of a promise made by the noble Marquess, Lord Salisbury, on March 28 last, these have now been recouped in full to the amount of £65,000. We now come to a group of claimants in whom the noble Lord, Lord Killearn, has shown special interest—namely, the holders of National Savings Certificates. As I have tried to indicate, apparently without success, from what the noble Lord has said this afternoon in the last question he asked of me, National Savings Certificates held by British subjects who have been expelled from Egypt are in a class quite distinct from other Government securities.
In the first place, unlike most other Government securities, National Savings Certificates are payable at any time on short notice. This means that they give rise to a direct obligation on the part of the Government to repay the fund represented by the certificates—that is to say, they are not in the same position as a Government security not yet mature for repayment. In the second place, the obligation to repay is to the registered holder, and to no one else; and the Government are therefore entitled to honour their obligation quite independently of the right to possession of the relevant certificate as a piece of paper. National Savings Certificates cannot be charged or hypothecated in any way, and cannot, for instance, be used to secure an overdraft. It follows that they are valueless in the hands of anyone but the registered holder. Further, the Government are authorised to repay in certain circumstances independently of the possession of certificates.
Some misgivings seem to have been caused by the fact that some claimants have not possession of their books. They may be in the hands of the bank. Possession of the book is not necessary.
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Accordingly, to holders of National Savings Certificates I say: send us particulars of your holding. Identify the holding and the amount. Give the name and address in which you were registered, and produce whatever evidence you can of identity with the registered holder. If you have the certificate, produce it. If not, explain what has happened to it, if you can. In many, perhaps in all, cases it may be possible to pay these certificates in full without any real delay. I made this offer before, but I fear that inadequate use has been made of it. We have received only twenty-eight applications for encashment in respect of certificates which were left behind in Egypt. All these have already been met. I hope to receive more as a result of this debate, with the co-operation, where possible, of my noble friends.
The next class of case is where a refugee has assets physically in this country and lodged with a British bank or held by the British branch of a bank carrying on business in Egypt, on behalf of its Egyptian branch. These assets may consist of securities (Government or commercial), valuables, or other property. I would say that I could not in this case draw a distinction between Government securities in this class and other securities. Government securities are not mature for payment, and, in consequence, no obligation to cash them arises. What the refugee, not unreasonably, desires is to obtain possession of these securities in order to sell them on the market and so turn them into cash.
Here I must remind the House (and I hope I shall be supported by learned and noble Lords opposite and elsewhere) that the primary questions in this class of case arise between the customer and the banker. If a British banker refuses access to his British customer of the customer's own assets physically available in this country, then, in my judgment, he withholds permission at his own risk, and he does so presumably only after taking legal advice that, for some reason, the customer's claim cannot be sustained. I am not aware of any action by Her Majesty's Government which causes that withholding. There may be many good reasons on the merits of which I would say nothing—there may be a set-off or an overdraft, or a charge of some kind on the assets. The British branch may not be in a position to ascertain or verify the

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state of the account. On the other hand, there may be some general ground, and I understood from what my noble friend said in his speech to-day that a general kind of attitude may have been adopted.
In a supplementary question to me the other day, my noble friend indicated that he had been advised that British courts would not recognise Egyptian penal legislation. I expressly declined to comment upon this, except to say that in each case both sets of parties would do well to take legal advice, I do not think it is reasonable to press the Government, at this stage, and before the parties have ascertained what their legal rights may be, to make a general proposal. It may be that the banks are liable in some cases. Where this is so, no question arises. There may also be cases where a special defence on the merits exists. In other cases, the parties may differ as to the effect of the general law or the exchange control regulations, or of the appropriate law applicable to the contract or its performance. It would not be right for me to anticipate the result of possible litigation here.
I would say, however, that, before a case is to be made for some specific action on the part of the Government limited to this class of asset, there must be some good reason to suppose that the banks are not liable to their customers to restore the customers' own property, and there must be some clear case for Government intervention in the matter in the interests of the parties. I must say that I think it is strange that a test case has not yet been started, though I should be the last to encourage litigation. I would not myself, though sorely tempted to do so say what I think as to some of the considerations which I know are passing through the minds of the parties. Then there is the case where the assets are held in banks in Egypt or Egyptian branches of British banks. In this case there are also questions which might be the subject of litigation between banker and customer.
That brings me to the final classes of case. There are a number of assets in Egypt, some identifiable, some lost beyond recall or sequestrated by the Egyptian Government and destroyed. Some will consist in businesses whose good will can never wholly be restored. On the other hand, some will be quite
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easily identifiable assets which, if the Egyptian Government would remove the sequestration, could be restored tomorrow. Two cases were mentioned by the noble Lord. There are cases of houses which have been sequestrated, and they must still be there. There are also assets of limited companies. I do not think it is possible for me to enumerate all the possibilities—only generalities can be made. It is precisely here that Her Majesty's Government must recognise the urgent need of many of those whose properties have been unjustly removed from them.
Our attitude is that, even on the assumptions which the Egyptian Government felt themselves entitled to make, their action cannot now be justified, either in morality or in law. Our claim is that they should be restored, or compensation paid. I would recognise the need for an interim settlement, but I imagine that those who themselves have suffered most would be the first to tell us that if their chances of recovering identifiable property, or a substantial part of it, were jeopardised by pressing a claim now against the British Government, they would wish to hold their hands, even at the cost of some hardship, and trust to temporary interim relief such as the British Government may make without prejudice to the just and final settlement mentioned in the Motion which we all would most earnestly desire to see.
That is my view, and I think it is the view of the Government. If I may say so, by way of summary, I think we have advanced a considerable distance as the result of these discussions, and I think the new argument which has been raised by my noble friend, and legitimately raised, has helped to make that advance. This new point, as I understand, was based on the view that the definition of hardship recognised as the basis of interim relief hitherto has been unduly restricted and might well be extended to include hardship suffered by the owners of assets who are being kept from their property for a period unduly prolonged by what we regard as the unreasonable attitude of the Egyptian Government. I believe that the point is well worth exploring, and I hope that we may have the opportunity of exploring it. I would, if I may, before I sit down, appeal to my noble friend to

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consider whether that opportunity could not best be pursued by private discussion of the kind I have indicated.
7.16 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, we have listened this afternoon with great interest, and I am sure with a good deal of sympathy in all parts of the House, to the case put by Lord Killearn upon his Motion. Obviously, there are hardships existing which no one in this House, and I believe no one in the country, would wish to see continuing. I do not propose to go into any of the details which the noble Lord, Lord Killearn, has submitted to the House in support of his Motion. I will only say that we at any rate have considerable sympathy with him in his effort to obtain this help from the Government.
We have listened also to an able speech coming from a very able legal mind. We all appreciate the submissions which Lord Hailsham makes to the House from time to time, but I should like to say to him that it is clear that he knew from the beginning that on this occasion he had a difficult case with which to deal. We have never yet had any real answer to the case which was put by the Leader of the Opposition in another place during the debate on May 15. My right honourable friend then said (OFFICIAL REPORT, Commons, Vol. 570 (No. 109), col. 415):
"Can we also have an assurance that the British Government now accept full responsibility to indemnify all those British subjects who have suffered severe losses in Egypt personally and in relation to their property? It really is quite unreasonable that the Government who placed them in this position should not be prepared to face the responsibility to pay them back."
That is the point that has not been answered. Mr. Gaitskell went on:
"Of course the Government are entitled to claim what they can from Egypt. But we cannot be sure for the reasons I have given that such claims will, in fact, be substantiated, and if they are not substantiated then we on this side of the House say that the Government opposite must accept full responsibility for this matter."
Now those of us who have been interested in the matter have been waiting ever since that speech was made to get something like a real assurance to the people involved and an answer to the point put by the Leader of the Opposition in
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another place. I am bound to say that, try as he did (and he certainly tried very hard), the noble and learned Viscount does not seem to have met us on that point.
There were clearly personal feelings on his part which seemed to take him somewhat closer to the point of view of Lord Killearn. I listened with great interest and appreciation to what he said about his own personal view: that probably up till now too narrow a view had been taken of certain questions of hardship. But he was quite unable—I am not complaining; he is in a difficult position, answering for a Department other than his own—to give any assurance to the noble Lord or to the House that a wider margin would now be given to the consideration of hardship. Therefore, from that point of view, as yet we are still in the position of having no real reply, though I would say (and I am sure Lord Killearn would say also) that we greatly appreciate the personal view expressed on the matter by the noble and learned Viscount.
When I listened to the very long list of items which have been dealt with, and for which I am sure we are all grateful, I could not help feeling that we should need to read Hansard carefully in order to see what it all amounts to. It is very necessary that we should do that. Perhaps when the noble Viscount replies he will be able to tell the House how much of that long category of cases goes right back to last August, or whether they have all been since the actions of the Egyptian Government at the beginning of November last year. I shall be interested to know about that, because the Board, which was in possession of private funds and of some aid which the Government granted, had certainly been dealing with a number of cases spread over both periods. I should like to have some clarification of that point.
The submissions of the noble Lord, Lord Killearn, have been so important and have come at so late an hour in the Sitting and the ground covered by the noble Viscount has been so wide, that I do not think that it would be wise for us to try to come to a final conclusion on the matter. I cannot speak for the noble Lord, Lord Killearn, about what he will say in answer to the appeal made to him by the noble Viscount, but I would say

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that we are exceedingly nervous when the plea is put up that nobody would wish action to be taken by the Government to indemnify certain people in the interim period if that were to interfere with the final settlement.
There are one or two points on which I should like to make my position clear. I have not the slightest sympathy with the action of Nasser in the many cases in which he has dealt so unreasonably with British subjects and their property. Nor do we wish to raise any criticism of the noble Viscount's submissions on international law, as based on the precedents in previous conflicts between nations. Here, again, I want carefully to read what the noble Viscount said on this aspect of the matter. I am certain that in all cases we ought to stand upon our rights. But when I come to think of the people who are in this country—and in this country only because of the military démarche made by this Government at the end of October and the beginning of November last year—then it seems to me quite unreasonable that eight months afterwards we should still be having to debate and haggle about the general principle of whether the Government should accept liability.
Could I ask one or two questions? It is getting late; I ought to have been miles away from here already, and I shall have to go very soon. On top of the details which the noble Viscount gave in his speech and which we are going to examine, cannot we have a fuller report from the Board than we have had yet, dealing with these matters, say, up to the middle of July, before we rise? Could we not have an undertaking from the Government tonight that a definite answer will be given to the House, before we rise for the Long Recess, on the general principle of accepting liability in the matter—a question which we are pressing and which has, in my view, never yet been answered? I do not think that that is an unreasonable request to make. If we could get assurances on that point, I should not be inclined to ask my noble friends to divide on this Motion at the present time. I think that those who are interested, not only in this House but outside, are entitled to a much more definite statement of what is being done and of what can still be done if the general principle that we ask for is admitted by the Government.
7.25 p.m.
THE MARQUESS OF SALISBURY: My Lords, my purpose in rising to intervene in this debate is to support, briefly but most wholeheartedly, the plea for more generous treatment by Her Majesty's Government of our fellow-countrymen who are now refugees from Egypt which has been so eloquently urged by the noble Lord, Lord Killearn, in the speech in which he introduced his Motion. In view of the late hour, for which we are not responsible, I do not propose to go into any of those points of detail which were mentioned by the noble Viscount, Lord Hailsham, in the latter part of his speech. I am sure that we are all most grateful to him for the full information that he has given the House.
I should like, if I may, to take the broad issues which all of us, Government and everybody else, must equally face. In dealing with these, I do not propose to suggest—it would be foolish to do so—that Her Majesty's Government alone are responsible for the unhappy position which has arisen regarding these people. Of course, that is not so. I am sure that we should all agree with the noble Viscounts, Lord Hailsham and Lord Alexander of Hillsborough, that nothing can excuse or justify the action of Colonel Nasser in sequestrating the property of individuals in Egypt, who are not in any way responsible for their own or any other Government. That, I think, is clear. At the same time, that is not to say that Her Majesty's Government have no responsibility, not merely for the relief of these people but for the restitution of the assets of our own citizens in foreign lands who have been unjustly penalised by events in these countries.
We have heard to-day, as in earlier debates, heartrending stories about the plight of these unhappy people, many of whom previously were in very comfortable circumstances, and many of whom have now been deprived of all they possessed and are reduced to what amounts very nearly to dependence on charity. I am sure that the Government, equally with us, would agree that that is a deplorable situation, for which none of us can repudiate all responsibility or concern—and I think that that was the impression created, so far as I can see, by an Answer which was given in another place yesterday by the Minister of State for the Foreign Office, about which I am

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rather sorry the Minister of Education did not say anything this afternoon. Previous to that, the position (in fact, I announced it myself, with the approval of all the Departments concerned) was that claims were being registered at the Foreign Office, a process which, it was estimated, if I remember right, would take about six or eight weeks; and that then, when the total amount of claims had been received, it would be possible for the Government to consider and, I hoped, decide on further policy with regard to the claims. That was the statement which I myself made to your Lordships' House.
But we are now told by the Minister of State—and I quote his words; I think that I am allowed to do that, though said in another place, because he was speaking for the Government [OFFICIAL REPORT, Commons, Vol. 572 (No. 128), col. 187]:
"The amount of claims by British nationals arising from this and other actions of the Egyptian Government can only be known when British assets in Egypt have been desequestrated and owners have had access to their property."
That is entirely different from the answer which I was empowered to give only such a short time ago. In my view, it puts off any action by Her Majesty's Government with regard to compensation to these British nationals who have suffered so much absolutely to the Greek Kalends. Indeed, the Minister of State made it perfectly clear, in an answer to a supplementary question which followed the main Question, that Her Majesty's Government were unlikely to recognise any responsibility at all at any time for their fellow-countrymen, these people who have been largely ruined as a result of recent events in Egypt. The present position, he said, quite bleakly and frankly, was the
"result of the action of the Egyptian Government and not of Her Majesty's Government."
That clearly was not merely an "off-the-cuff" remark by a Minister who was being heavily pressed in the House, such as we have known in the past. It represented, I think, what he believed to be the settled policy of the Government, for something very much of the same kind was said in an official letter sent by the Foreign Office to one
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of the claimants who pressed for an early settlement of his claim, which I believe was quoted by the noble Lord, Lord Killearn, in an earlier debate. I would quote this afternoon only one sentence from that letter. This is what it says:
"There can be no question of Her Majesty's Government paying compensation for losses which may have been inflicted by the Egyptian authorities."
That seems to me to imply that the matter of compensation was merely one between the Egyptian Government and the British subjects in question, and that Her Majesty's Government are not directly concerned at all. I must confess that if that is the meaning—and I do not want in any way to misinterpret the position of the Government—many of us would find that position quite impossible to accept.
We may be told that that was the position adopted by previous Governments in regard to the claims of British nationals arising from earlier disputes, such as the First and Second World Wars, to take two obvious examples. I agree that a defence could be put up for such an attitude in cases where, as in those two wars, the injury to their nationals flowed entirely from action taken by the other party to the dispute—and by that I mean the German invasion of Belgium in the First World War, and the German invasion of Poland in the Second World War, which started the conflicts. But that is not true in the present case. The sequestration of assets of British nationals in Egypt, with, I suppose, the exception of those who were affected in their shareholdings of the Suez Canal itself, did not follow Colonel Nasser's seizure of the Canal, but followed on our landing in Egypt.
I do not for one moment suggest that that proves that our action in landing in Egypt was wrong. On the contrary, as your Lordships know, I believed at the time that our action was right, and I believe that at the present time, too. But that does not alter the fact, in my mind, that our action, however right it may have been, involved casualties; and that among the main casualties were these British nationals in Egypt, who had assets there, and whose assets were, in fact, sequestrated. Directly as a result of our action, those people suffered severe

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hardship, and it is, in my view, morally right that we should face up to that fact.
I believe it is right, too, that we should recognise, as the noble Lord, Lord Killearn, properly stressed this afternoon, that, in its fullest sense, hardship inflicted does not mean merely the inability to buy the necessities of life: lodging, food, clothing and so on—or even education for one's children. In a wider sense, it clearly includes deprivation of those assets which constituted the basis of one's former standard of life, whatever that standard may have been. I was therefore particularly glad to hear the noble Viscount, Lord Hailsham, speaking with all the authority of the Government, say that he felt there was some substance in the point which the noble Lord, Lord Killearn, had made, and that he by no means rejected the possibility of widening the meaning of the term "hardship" to include the deprivation of assets; and that he would give an assurance to the House—though, of course, without any prejudice whatever—that he would bring that possibility to the notice of his colleagues for their consideration. I hope and believe that this particular proposal of the noble Lord, Lord Killearn, if properly followed up, and if it can be adopted by Her Majesty's Government, may well lead to a sensible narrowing of the gap which at present divides us on this question.
I do not say, especially in view of what was said yesterday by the Minister of Stale at the Foreign Office, that that will by any means entirely bridge that gap. I confess that I, like, I expect, many of my noble friends, should have felt much happier if the noble Viscount, Lord Hailsham, had found it possible to say—and I still cannot see why he could not—that Her Majesty's Government would propose to lake a much firmer line with the Egyptian Government. After all, we are not without substantial means of pressure which we could exert against them. Egypt has considerable assets frozen here in Britain, and she badly needs the use of those assets. They might remain frozen until some agreement of a kind satisfactory to us might be reached.
But having said that, I would add that I feel strongly that we must recognise that the assurance which has been given to-day by the noble Viscount, Lord
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Hailsham, on behalf of Her Majesty's Government, to submit for the consideration of his colleagues this important point that has been raised by the noble Lord, Lord Killearn, regarding a wider interpretation of the word "hardship", does introduce a new element into our discussion. And I personally hope that the noble Lord, Lord Killearn, having received that assurance, will give the Government a chance to see whether some temporary arrangement, at any rate, might be reached on those lines which would be satisfactory both to Her Majesty's Government and to the claimants. There is also the announcement to which the noble Lord, Lord Killearn referred, of some statement by the Egyptian Government regarding further discussion on the subject of claims, which might, I should have thought, further incline the noble Lord in the same direction.
But, equally—and this is the last thing I want to say—I hope that if the noble Lord, Lord Killearn, does find it possible to take that course, the Government will not regard his action as constituting any weakening in his point of view, or the point of view of those who agree with him on this particular issue. It would, I believe, be very unwise for any of us to underestimate the intensity of feeling which exists in many quarters throughout the country on this issue. The ordinary man and woman in the street, whether or not they approved of the action that was taken by the late Government last year, all expect justice to be done to their fellow-citizens who have suffered as the result of that action. I am certain that they will want some satisfactory answer on this point from the Government, and they will want it quickly.
I hope, therefore, that if, as I say, the noble Lord, Lord Killearn, agrees to give the Government the time which they ask for consideration of this new point that has been raised, they, for their part, will not ask for too long; and that they will recognise that much more must be done than has yet been achieved. Otherwise, I am fairly certain that when the question comes to be re-examined here at an early date—and I hope it will be very early—the House, which so often reflects accurately the views of the country, will express its indignation in no uncertain manner.
7.39 p.m.
LORD GIFFORD: My Lords, the general considerations of this grave and important matter have been put to your Lordships so well by the noble Marquess, Lord Salisbury, that I shall not attempt to speak further about them. I will confine myself to dealing with the specific points with regard to securities and so forth, in which I have specially interested myself throughout this series of debates. I would only say this. Eight months have now gone by since these people were thrown out of Egypt and suffered disaster—and "disaster" is the only word one can use for their situation. Until to-day I think all of us have felt completely frustrated, because we have had no encouragement at all from Government speakers. To-day, my noble friend Lord Hailsham has given us a glimmer of hope that a more sympathetic attitude is going to be adopted.
Now, if I may, I will make two or three suggestions which I hope will help my noble friend and the Government to deal with some of these matters which are outstanding. Some time ago Barclays Bank D.C.O. submitted a memorandum to the Treasury dealing with the subject. They were then asked to bring in other banks and submit a joint memorandum on the problems which were arising with their customers. Barclays Bank got together the other banks, and this memorandum was submitted through the Bank of England to the Treasury. It has now been in their hands for over a month, so there is no doubt that the Government are fully aware of the various problems in respect of different kinds of security—as the noble Viscount has rightly said, some of them physically in Egypt, and some of them in the banks in this country. It seems to me that there is one quite simple way in which a great deal of this distress can be alleviated. I believe that there are certain classes of security about which the Government could say, "We will give an indemnity to the bank concerned if they make advances to their customers on the security of the scrip that they hold"—such things as Government Stock, and so forth.
VISCOUNT HAILSHAM: Would the noble Lord say what exactly is keeping the banks back from giving their customers their own property?
LORD GIFFORD: The noble Viscount himself has said that there are many obscure legal problems, and the banks are afraid that if they make advances against these securities they may be sued by, possibly, the Egyptian Government, or other people, and will suffer loss as a result of having made these advances. I do not think that the danger is very great, and I believe that it would cost the Government nothing to give an indemnity to the banks in a large number of cases.
EARL JOWITT: May I ask a question? Is that in cases where the man who claims the money has lost the documents of title? If he has the documents of title, I cannot see what right the bank have not to pay him. If he has not got the documents, then, of course, the question of an indemnity arises—I quite follow that. Is that the case the noble Lord has in mind?
LORD GIFFORD: As I understand it, in many cases they are people who subscribed to war funds, very often at the request of the noble Lord, Lord Killearn, and took up large quantities of War Loan and Government Stock, and that sort of thing. They bought it through the branch of the bank in Egypt, and the scrip is now held at the head office in London in a blocked account. They are unable either to obtain these securities or to obtain any advance against them.
VISCOUNT HAILSHAM: The noble Lord used the expression, "blocked account." So far as I know, whatever block is on the account, it is not blocked by the British Government.
LORD GIFFORD: It seems to me that the noble Viscount is adopting a very extraordinary attitude over this matter. The British Government asked the banks to submit a memorandum which was put into their hands a month ago. I am not a banker, and I am not in a position to-day to deal technically with this matter. But surely it cannot be beyond the bounds of possibility, if Treasury officials and high officials of these banks get together round the table with good will, that some modus vivendi can be worked out quickly, so that these people can get advances on their securities or, in certain cases, have their securities released so that they can sell them and get the money which they badly need.
I was rather amazed at the noble Viscount's remarks about Savings Certificates, because it seems to me that he

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was putting forward as a new suggestion the very suggestion which the noble Lord, Lord Killearn, himself made a few weeks ago. I am glad to hear that apparently holders of Savings Certificates can cash them, provided they can prove their title to them.
VISCOUNT HAILSHAM: I am sorry to interrupt the noble Lord again, but I was only repeating, if I may say so, the suggestion which I had made in answer to a principal question from my noble friend the last time he asked me a question. I tried to give the answer then, and I gave it more fully to-day—more fully, of course, than I was able to then.
LORD GIFFORD: So far as I know, there are still holders of these certificates who have not yet been able to get their money.
VISCOUNT HAILSHAM: The noble Lord should have listened to my speech. The reason why they have not got their money, so far as I know, is that they have not asked anybody for it.
LORD KILLEARN: I think the difficulty has been that the actual books, or whatever they are called, were in the physical possession of the Egyptians. The moment they were handed over by the Egyptians to their rightful owners, the rightful owner could proceed across the street, present it across the Post Office counter, and, I believe, in accordance with the terms, on the appropriate notice, the Post Office has to pay. But in order to do that, owners must have physical possession of the pieces of paper. In certain cases they had; in others, they had not. There was some difficulty in getting delivery of these certificates. I understand, as a matter of fact, that the situation has now been considerably alleviated.
VISCOUNT HAILSHAM: I tried to explain in my speech—and I think the noble Lord will find it in Hansard—that the lack of possession of the actual book was not a fatal bar to getting the cash, because the right to the cash is based upon the registration of the holder in the books of the Government, and not upon the possession of the book. The position is, as I understand it, that, in the ordinary course, the Government insist upon the production of the book as evidence of title or evidence of identity. But I was explaining in my speech that that was not necessary in this case, if only the other course would be adopted.
LORD GIFFORD: I hope that this matter of Savings Certificates has been cleared up. The noble Viscount kindly said that if the noble Lord, Lord Killearn, or myself, could find any cases where people have not been able to get their money, he would look into it.
LORD KILLEARN: The poor lawyer's widow, whom I quoted, apparently has £1,000 of Post Office Bonds. I do not know which issue or what Post Office Bonds they are. But she has, among other things, £36,000 over and above the Post Office Bonds—that is the phrase she uses. She cannot get them from the bank. She cannot get the other money, because it is blocked. She has used up the £884 which she had when she arrived here, and she has not a "bean" in her pocket, if I may lapse into the vernacular.
VISCOUNT HAILSHAM: There is a difference between Government securities which are not mature for payment, and National Savings Certificates, which can be cashed I hope that that distinction will be borne in mind. I also asked my noble friend to give me particulars of the issue of the Bonds.
LORD KILLEARN: That I will gladly do.
LORD GIFFORD: I have just been informed that somebody present in this House at this time, who has two accounts in this country, one in London and one in Edinburgh, both of which are blocked, is limited to drawing £100 at stated internals.
VISCOUNT HAILSHAM: Not by the Government.
LORD GIFFORD: I know. But, surely, it is one of the things which the Government could discuss with the banks. That is what I have tried to say many times over. It is no good the noble Viscount saying that it is not the Government who are doing the blocking.
The other matter that I should like to bring to his notice is that the British Communities Association, an organisation of which the noble Viscount is well aware, have put forward a very carefully thought out scheme for graduated advances against assets. It is a moderate scheme, and I hope that Her Majesty's Government will consider it carefully because I think it may well prove the answer to the more liberal attitude which they

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are proposing. I should like to thank the noble Viscount particularly for one thing, a matter which I personally raised—that is, the honouring of the Egyptian pounds which were brought out from Suez. I think the noble Viscount said the figure was £65,000.
VISCOUNT HAILSHAM: Yes.
LORD GIFFORD: That has been redeemed, and I am sure that those people from Suez will be duly grateful. I do not intend to detain your Lordships any longer. We have a glimmer of hope to-day. I do not know what the noble Lord, Lord Killearn, intends to do, but I think he would be well advised to give the Government that time for which they have asked. But I think it must be clearly understood that if, in a fortnight of three weeks' time, we do not get real satisfaction, we must take action and go into the Division Lobby.
7.52 p.m.
LORD BALFOUR OF INCHRYE: My Lords, in the briefest manner I should like to support my noble friend Lord Killearn, because, after all, it has taken eight months and three debates, with the victims of Nasser's aggression on British property still deprived and still suffering, to get in a most sympathetic speech from the noble Viscount an admission that there has been a lagging behind by Her Majesty's Government in the definition of hardship and an advance by Her Majesty's Government towards the suggestion made by my noble friend Lord Killearn. So I think that, as the noble Viscount said, the House and the Government can be grateful to the noble Lord for giving Her Majesty's Government the opportunity to achieve that much advance.
The prospects of any final settlement for these victims depend on intergovernmental negotiations not yet started, undoubtedly protracted and of a doubtful finish. It is as well to realise one point which has not been stressed in this debate: that for the majority of these victims their Egyptian lives are over. They will not go back and it is no good negotiating on the basis of an expectation that these people will be able to resume their lives there. Many of them are of an age when they could not start again, and those of an age who could start
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again have in many cases had their physical assets removed. Only yesterday I saw a letter from an Egyptian official now looking after a previously British business, soliciting British customers in this country on behalf of the Egyptian authorities who have taken over that particular business.
The other point I should like to make is that, like the noble Marquess, Lord Salisbury, I was gravely disturbed at the expression by the Minister of State yesterday in another place when, in reply to a question as to the ruin of the individuals in Egypt and whether the Government had got to accept responsibility or not, he said [OFFICIAL REPORT, Commons, Vol. 572 (No. 128), col. 188]:
"We do not accept responsibility for this."
That is a very definite repudiation, and quite different in word, and I believe in spirit, from what we have had to-day from my noble friend Lord Hailsham and from what we have had from Ministers in this House on previous occasions. There is a great disparity of view. It is, I know, impossible, or it would be very unwise and unfair, to ask one Minister of Her Majesty's Government to repudiate another, but, by inference, I should like the noble Viscount, Lord Hailsham, when he comes to reply, to make it quite clear that Her Majesty's Government take the sympathetic attitude, and not the attitude of repudiation. I would entreat the Government to do that, because when we refer to what happened in another place yesterday it takes away in our minds a good deal of the hopeful feeling raised by the noble Viscount, Lord Hailsham.
I should like to support also what my noble friend Lord Salisbury said: that this is a position that disturbs a far wider circle than those affected, and that it is to be hoped that Her Majesty's Government appreciate the strength of public opinion on a situation that reflects on all of us of every Party—not only those in the Administration but those who support the Administration in this and in another place—so long as it is allowed to continue. These people want justice; they do not want charity; and we must be careful of that fact in the extension of any definition of hardship to the point that we can compensate for assets—an extension which I hope Her Majesty's Government will accept and interpret

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liberally. Let us be quite sure that we regard it as justice and not charity, which is being given to those people.
I trust your Lordshsips will allow me to say this in conclusion. It seems to me, as a comparatively new Member of the House, that your Lordships' House is held in high esteem in the country, first because of the freedom of expression, secondly, because of the integrity of purpose, and, thirdly, because of the determination to have justice. We can serve notice tonight on Her Majesty's Government that there will be no let-up on this matter until justice prevails. I hope that the noble Lord, Lord Killearn, will not press this Motion to a Division tonight but will think of taking steps immediately to put a Motion back on the Order Paper in two or three weeks' time, so that the Government have an opportunity between now and then to implement that helpful and hopeful attitude shown by the noble Viscount, Lord Hailsham. Then, when we come back, we shall, having served notice, be able to withdraw that Motion with feelings of relief and gratitude that justice has been done.
7.58 p.m.
THE EARL OF LUCAN: My Lords, I can assure your Lordships that I shall not be guilty of any repetition, but I should like to say that it seems to me that in this subject we are treading on very difficult ground. The ground is shifting all the time between our feet and between one debate and another. Just think: a few months ago we were told that a memorandum on the subject of blocked accounts was going to be taken to the Treasury and discussed. We know that that meeting with the officials duly took place at some time at the end of April, but, unless I misunderstood the noble Viscount who spoke, there was no outcome of that meeting. Again, we were told repeatedly that what was holding up action was the collection of the claims at the Foreign Office. It was reasonable to suppose that, once the total amount claimed by these British subjects was known, it would then be possible for the Government to start their approaches to the Egyptian Government to get restitution. But what do we hear now? The Minister yesterday shifted his ground entirely and said that there was no question of the claims of British nationals being known until they had been allowed to go
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back to Egypt and recover their property. Surely, that is an impossible situation, and is a complete change of ground.
The noble Viscount told us that he felt that a resumption of normal trade relations with Egypt must depend on Egypt's restitution and restoration of the assets they have claimed. But he went on to advise the claimants against taking any action or pressing their claims, because, as I understood him, if I may paraphrase it not quite accurately, any concession that might injure the legal and moral principle of the wrongness of Egyptian action should be avoided. That seems to me a most extraordinary doctrine. If, through no fault of his own, a British subject is injured by a foreign Power, do Her Majesty's Government divest themselves of responsibility for making good that damage? The noble Marquess who spoke just now referred to the moral responsibility of Her Majesty's Government. Whatever Ministers may say, I am sure that that is where opinion in the country places moral responsibility for the situation of these claimants.
The question of blocked accounts has been mentioned. I think it has been mentioned in several different senses. With regard to the blocked accounts in the English banks, we understand that the Government's suggestion is that the legality of the bank's action should be tested by action brought by private individuals or institutions. The other aspect of blocked accounts was raised in another place not long ago. I should like to quote a sentence or two from the speech of the Foreign Secretary on May 16, when, referring to the Egyptian Government's assets in this country, he said [OFFICIAL REPORT, Commons, Vol. 570 (No. 110) col. 585]:
"The blocked accounts are our security for the claims of British subjects against the Egyptian Government. We have no intention of whittling away that position. The House can be sure of that."
Does not that demolish the idea that by pressing the claims of the British nationals, it would injure the strength of our case against Egypt? It seems quite beyond reason that the Government should take their present attitude. I should like to remind them that all the people for whom we are appealing are British subjects. They hold British passports and, if I remember rightly, on the inside of the cover of a British passport

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Her Majesty's Foreign Secretary calls on all British officials to give the holder all the help of which he may be in need. That is a thing which Her Majesty's Government might well remember.
8.5 p.m.
LORD LLOYD: My Lords, my intervention in this debate will be exceedingly brief. All I want to say, in the first place, is that I believe this has been a useful debate and I think we owe a debt to my noble friend Lord Killearn. If it has done nothing else, the debate has cleared away a certain amount of confusion; and I hope it has also made the position clear to Her Majesty's Government how my noble friend, and I think those of us who support him, feel about this matter. Whatever the legalistic view may be—and I do not dispute that it may well be legalistically true that the claims of these people lie against Colonel Nasser—speaking for myself, and, I believe, for all my noble friends who have spoken in this sense this afternoon, I think we all feel that we, severally and individually, and the British nation as a whole, owe these people a debt of honour and we cannot just accept the purely legalistic view.
I was rather encouraged by the remarks of the noble Viscount, Lord Hailsham, this evening to think that the Government had shifted rather in their attitude to this matter. But there is still, to my mind, a certain doubt as to where, ultimately, the Government stand in this matter. We have had these conflicting statements, one in another place and the general impression which was created by the speech of the noble Viscount this afternoon. At any rate, there is one issue which has been brought to the surface and on which the views of your Lordships' House have been demonstrated. I venture to say that I think those views were overwhelmingly in favour of the sentiment that we have here laid upon us a debt of honour which we cannot repudiate. I think that was the general sense of your Lordships' House.
Secondly, I would say that the debate has been useful because it has again brought to the surface a number of complicated matters on which there still appears to be an enormous amount of confusion. There is the whole question of the frozen assets; why the banks are
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unwilling to release them; and whether anything can be done to help these people to get their assets. The noble Viscount who replied rather suggested in his speech that anybody in this situation ought to take his bank to court and have a test case. But I must remind your Lordships that most of these people are destitute, and the services of people like the noble Viscount are, quite rightly, extremely expensive.
VISCOUNT HAILSHAM: May I say at once that any member of the Bar, including myself, whilst I was practising, who was on the roster for legal aid, would have given his services without charge to a client who was destitute, and without any kind of expense whatever to such a client.
LORD LLOYD: I am glad to hear that; I spoke in error and I withdraw my remark. I personally should still like to have enough money to engage the noble Viscount.
Apart from that, there is the question of the banks, a matter which has been discussed this afternoon. I understand that the situation is different again. I understand that the reason why the banks are not prepared to release these assets is because they are frightened of paying twice. They are frightened that these assets are the assets of the branch in Egypt which has been nationalised by Colonel Nasser; and they are frightened that if they release the assets they will be sued in the Egyptian courts for the money. Therefore, they want an indemnity for the individuals concerned. Again, these people are unable to provide the indemnity. I do not know whether that is right or not, but here is a matter which has been discussed now for months and months and, judging by the debate to-day, there still seems to be considerable confusion. If, as the result of this afternoon's debate, we can get somewhere nearer to a solution to this problem, again something will be achieved.
I should like personally to thank the noble Viscount for what was a most helpful speech. I am sure that my noble friend Lord Killearn would be right at this stage to withdraw his Motion and to enter into discussions with the noble Viscount and others to see whether something more cannot be done in the way of interim help. I think that is all that I

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need say. I hope that in the circumstances my noble friend will withdraw his Motion.
8.9 p.m.
VISCOUNT HAILSHAM: My Lords, I can reply only by leave of the House and I hope that I may do so extremely briefly. In the absence of the noble Viscount who leads the Opposition, perhaps I may inform him, through his Chief Whip, that I should like to answer the queries which he has raised by letter, after consultation, because I do not think his questions can be answered straight away. There was one question raised about the possibility of having a full report before the Recess from the Colyton Committee. I should not like to answer that, but I am sure that his request for an answer will be taken account of, and I will seek, if I can, to write him a letter as shortly as may be.
Secondly, in view of the very pleasant tone of the speeches which have been made, I do not think I should answer many of them in any great detail, because I do not wish in any way to disturb the harmony of these proceedings. I was at pains to point out in my speech that the Motion was confined to interim relief, pending a just and final settlement, and I explicitly disclaimed any personal desire to inquire into what a final and just settlement might involve. It was in order to advance the cause of interim relief that I made the particular suggestion I did, which I hope and believe has met with a friendly reception.
I thought that my noble friend Lord Salisbury made rather heavy weather of the reply of my right honourable friend to his kinsman in another place. I am not sure that the Rules of Order of this House are not partly to blame. I must say that this is the first time that this matter has been brought to my attention. The noble Marquess felt himself entitled, and barely entitled, to read out the answer, but apparently felt under no obligation to look at the Question to which the Answer referred. I do not know whether I may be breaking the Rules of Order of this House, but I shall try not to do so by reading out only the last phrase of the question to which the answer referred. The questioner had asked [OFFICIAT REPORT, Commons, Vol. 572 (No. 128), col. 187]:
"As these individuals have all been ruined as a result of the action taken by Her Majesty's
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Government, surely the Government have a responsibility whether they recover from the Egyptian Government or not?"
I should have thought the most enthusiastic supporters of the refugees from Egypt would not have claimed that the British Government had a responsibility if the claimants recovered from the Egyptian Government. Perhaps I had better not take that matter any further, but it seems to me that when one is dealing with a supplementary question and answer in another place, one has to be very careful to read these things in their context. As I have explained to the House, I had not previous knowledge of this, so perhaps we can leave it there for a moment.
I would say, in all fairness to the noble Earl, Lord Lucan, who spoke recently, that although I can understand the attitude about a final settlement adopted by my noble friend Lord Salisbury, I think that when he noble Earl reads in cold print what he said to your Lordships this afternoon, he will see that he has gone beyond any kind of doctrine which anybody could seriously suggest was the responsibility of the Government. I am sure he will find, when he reads Hansard, that what was said was that whenever the property of a British subject was injured by a foreign Government, the British Government should make it up to him. I am sure that, on reflection, the noble Earl will not wish to justify that. Even in the palmiest days of Lord Palmerston that would not have been put forward as a serious doctrine.
To my noble friend Lord Salisbury I would say that, while I recognise what he says, my own feeling is that it is probably a novel doctrine that in order to give rise to an obligation on the part of the Government one first had to make a political judgment as to whether damage flowed directly from an action of the Government or some other Government. I doubt whether, in the long run, that would be in the interests of British subjects. The last thing I should suggest is that Her Majesty's Government owed no responsibility in any case where a British subject had suffered damage. The area of dispute, if there is one, would be limited to the point of time at which that responsibility arose and the way in which the responsibility should be discharged. At the moment we are seeking to discharge our responsibility by bringing

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home to the Egyptians the iniquity of continuing a sequestration which was never justified—if any situation could conceivably arise in which sequestration was justified—and I believe we are right in doing so.
The noble Marquess urged upon us a firm line, and that is what we are trying to take. And I am perfectly sure, from the little I have had to do with these unfortunate refugees, that their public spirit would be equal to helping us in this respect. I hope very much that my noble friend Lord Killearn will be able to accede to the appeal of the noble Marquess. I certainly will do my best to see that any discussions which take place bear some fruit. I fully recognise that my noble friend is entitled to further discussion on this matter, and should he feel desirous of having a debate at a later date, before the Summer Recess, or if he feels that there is anything more to say after the discussions have taken place, I imagine that that can be arranged through the usual channels.
I was going to suggest the adjournment of the debate, but I am told by those who understand the Rules of this House better than I do that this would impose on my noble friend an oath of silence, which I am not anxious to enforce. If, therefore, he would consent to withdraw his Motion, I should not, speaking for Her Majesty's Government, take it amiss if another Motion found its place on the Order Paper, and I should be willing to lend such small influence as I possess to finding an early date for it at a suitable occasion before we rise for the Summer Recess. I hope that, by that time, either discussion will prove unnecessary or that we may record that further advances have been made.
8.18 p.m.
LORD KILLEARN: My Lords, I am very grateful for what the noble and learned Viscount has said. Before I come down to bedrock, may I say that I fully support what has been said by the noble Lords, Lord Salisbury and Lord Balfour of Inchrye, about these curious
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and rather conflicting (as between another place and here) statements by the Minister of State for the Foreign Office. I am not going to press the noble and learned Viscount to explain away what his colleague said, but there is a very odd discrepancy, and a rather shaking one, between the two statements. I am very glad that both the noble Marquess, Lord Salisbury, and the noble Lord, Lord Balfour of Inchrye, called attention to what the Minister of State has said. It is true, as the noble and learned Viscount has pointed out, that the statement was in answer to a supplementary question but it shook me a bit. I do not propose to say anything more on that, except that we are all very glad that both noble Lords called attention to this discrepancy.
It is now past eight o'clock, and I want to thank all noble Lords who have had the patience to come and stay here so long to listen to this debate. I know that in many instances noble Lords have missed trains and put out their arrangements, and have gone to immense pains. I am most grateful to them all. To come now to the point, the noble and learned Viscount has made a suggestion which centres round the word "hardship". I shall study very carefully in Hansard what he has said. I think noble Lords would be well advised to do so. The noble and learned Viscount also suggested that in the circumstances I might be prepared to withdraw my Motion, on condition that it could be put down again later on, and I gladly respond to that suggestion. I should make clear that it is on condition (if I may make a condition) that this subject shall come up again in a fortnight's time. I have been so bold as to earmark a date—Tuesday, July 16. The Chief Whip, I believe, is "in" on this, so, if that suggestion has the approval of the Front Bench, I would now propose, by leave of the House, to withdraw my Motion, and I will to-night transfer the same Motion to Tuesday, July 16.
Motion for Papers, by leave, withdrawn.
House adjourned at twenty minutes past eight o'clock.